Document:

exv10w11

 

Exhibit 10.11

     LEASE AGREEMENT 

(of
a Part of the Premises)

Yerevan City

April twelfth two thousand and five

This Lease Agreement is made between “VIASPHERE TECHNOPARK” Closed Joint Stock
Company, with its juridical address at Arshakunyats 41, Yerevan , Republic of Armenia,
represented by its Authorized Representative Khachatour Khachikyan (Passport No. AB0596300,
issued on September 20, 1997, by 005, with residence address at 24 A. Hovhannisyan Street,
apt. 9Yerevan, Republic of Armenia, herein the “Lessor” and “SONICS ARMENIA HOLDINGS, INC.” ,
with its juridical address at 1098 Alta Avenue, Suite 101, Mountain View, California 94043,
as represented by its Authorized Representative Edith Khachatourian ( US citizen, Passport
No. 054086677, issued by the San Francisco Passport Agency,, on 28.03.1995, temporary
residing at 10 Tumanyan Street, apt.
30, Yerevan, Armenia) herein the “Lessee”, on the following subject:

1. Subject of the Agreement

	 	1.1	 	According to this Agreement the Lessor is obliged to provide the Lessee,
for temporary use, with the property defined in paragraph 1.2, for corresponding
rental fee.
	 
	 	1.2	 	The Lessor is obliged to provide the Lessee with a part of the production
area located at Arshakunyats 41, Yerevan 375026, Republic of Armenia, according
to the space layout part of the 1st floor of administrative building,
which occupies 256,3 (two hundred fifty six point three) square meter space,
hereinafter the “Premises”, (the floor plan of the premises is attached as
Appendix A).
	 
	 	 	 	(The entire territory space consists of: buildings — 10952,2 square meter;
entrance -159,2 square meter; warehouse — 1002,0 square meter; guard post -
5.6 square meter; fence — 322,0 square meter; rented land — 0,1949 hectare;
own land — 1,8148 hectare).
	 
	 	1.3	 	The Premises belongs to the Lessor by property right, which is evidenced
by the following documents: Property Certificate No 982178, issued on
10-07-2003 by “Erebuni” Regional Department of Real Estate Cadastre State
Committee at RA Government.
	 
	 	1.4	 	The Property should be provided to the Lessee within
one day after signing
this Agreement, under the acceptance and deliver act.
	 
	 	1.5	 	During the term of this Agreement, income received by the Lessee as result
of the Premises use, is the property of the Lessee.
	 
	 	1.6	 	The Lessor assures that the Premises defined in paragraph 1.2 of this
Agreement is not sold; mortgaged; leased or provided for free use or otherwise
encumbered; that it is not a subject of court trial, is not under arrest, which
is verified by Statement No AA 179686 issued on March 28, 2005
by “Erebuni” Regional Department of Real Estate Cadastre State Committee at RA
Government.
	 
	 	1.7	 	Transfer of property right for the leased Property to another entity is
not a ground to terminate or amend this Agreement, except for the case provided
under point 12 of this agreement

2. Term and Rent. Lessor leases the Premises for a term of 3 (three) years, commencing on March
31, 2005 (thirty first of March, two thousand five) and terminating on March 31, 2008 (thirty
first of
March, two thousand eight), or sooner as provided herein.

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The Lessee shall pay rent in the amount of 625,000 (six hundred twenty five thousand) Armenian
Drams, that includes VAT. per month, payable in advance within the first week of each month for
that month’s rental. Upon the execution of this Lease Agreement, Lessee shall pay to Lessor the
first month’s rent, plus three months security deposit in the amount of 1,875,000 (one million
eight hundred seventy five thousand) Armenian Drams within seven (7) bank days after signing the
Lease Agreement. The above-mentioned three-months security deposit shall cover rental fee for
three months preceding the Lease termination date. If the time period preceding the Lease
termination date is lesser than 3 months or the Lease is terminated by any reason prior to the
Lease termination date, then the Lessor shall return to the Lessee the security deposit or the
remaining balance thereto within 2 (two) months upon the termination of the Lease.

Lessee shall pay rent in the amount of 750,000 (seven hundred fifty thousand) drams that includes
VAT once the number of the Lessee’s employees exceeds 15 persons, commencing on the month
following the month when the head count of the Lessee’s employees exceeds 15 persons.

Lessee shall have the right to renew this agreement for an additional term by notifying ninety
(90) days prior to the expiration date set forth above. The terms of the extended term shall be as
the parties may agree at the time Lessee notifies Lessor of its intention to renew.

3. Use of Premises. Lessee shall use and occupy the Premises for the purposes of the Lessee’s
Armenia Branch ( registered on 14.12.2004, Registration No. 273.060.03932, located at 34 Abovyan
Street, Suite 7, Yerevan, Armenia) as a general office and production space. The premises shall be
used for no other purpose. The lessor has the right to lease the above mentioned Premises for
office use. Lessee and its employees and invitees shall adhere to the Rules of Traffic set forth
on Exhibit C attached hereto.

4. Care and Maintenance of Premises and Contents. Lessee acknowledges that the premises are in
good order and repair, as indicated herein. Lessee is obligated to, at its cost, maintain the
Premises and property in good condition, including windows, electrical wiring, plumbing, air
conditioning and heating installations and any other property, structures and equipment leased
here under Exhibit B. Lessee shall surrender the leased Premises and property at termination
hereof, in as same condition as received, normal wear and tear excepted.

Upon notice to Lessee, Lessor shall have the right to, at any time, place property at the
Premises, such as systems, equipment, furniture, and other furnishings, owned by Lessor, and at
termination hereof, remove the property from the Premises.

Lessor shall be responsible for all repairs, except for those required to the roof, exterior
walls, structural foundations, and floor structure, as well as cases set out under point 13 of
this agreement.

5. Alterations. Lessees shall not, without first obtaining the written consent of Lessor, make any
alterations, additions, or improvements, in, to or about the premises. Construction improvements
made by Lessee without the Lessor’s consent which are inseparable from the building shall become
the property of Lessor upon termination or expiration of this Lease.

6. Ordinances and Statutes. Lessee shall comply with all statutes, ordinances and requirements of
all

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municipal, state and federal authorities now in force, or which may hereafter be in force,
pertaining to the premises, occasioned by or affecting the use thereof by Lessee.

7. Assignment and Subletting. Lessee shall not assign this lease or sublet any portion of the
premises without prior written consent of the Lessor. Any such assignment or subletting without
consent shall be void and, at the option of the Lessor, may terminate this lease.

8. Utilities. Lessor shall provide electricity service 24 hours a day at l00kWatt hour, and water
service 24 hours a day. . Lessee shall make timely payments for electricity, telephone and other
service bills, used by Lessee, directly to the suppliers of corresponding services.

9. Entry and Inspection. Lessee shall permit Lessor or Lessor’s authorized representatives to
enter upon the premises at reasonable times and upon reasonable notice, for the purposes of
inspecting the same. Lessee shall also permit Lessor at any time within ninety (90) days prior to
the expiration of this lease, to place upon the premises any usual “To Let” or “For Lease” signs,
and permit persons desiring to lease the same to inspect the premises thereafter.

Lessor shall make reasonable efforts to mitigate any interference with Lessee’s business
activities.

10. Indemnification of Lessor. Except in the case of Lessor’s own intention, recklessness or
negligence, Lessor shall not be liable for any damage or injury to Lessee, or any other person, or
to
any property, occurring on the demised premises or any part thereof, and Lessee agrees to hold
Lessor
harmless from any claim for damages, no matter how caused.

11. Insurance. Lessee, at its expense, shall insure the Property from the damage and destruction
with
minimum coverage of $200,000.00 (two hundred thousand US Dollars) at the Insurance Company
selected by Lessee. The clause may be modified to mutually acceptable terms.

Lessee shall provide Lessor with a Certificate of Insurance showing Lessor as additional insured.
The
Certificate shall provide for a ten-day written notice to Lessor in the event of cancellation or
material change of coverage.

12. Eminent Domain. If the premises or any part thereof or any estate therein, or any other part
of the building materially affecting Lessee’s use of the premise, shall be taken by eminent
domain, this lease shall terminate on the date when title vests pursuant to such taking. The rent,
and any additional rent, shall be apportioned as of the termination date, and any rent paid for
any period beyond that date shall be repaid to Lessee within 3 (three) days upon the termination
of this agreement. Lessee shall not be entitled to any part of the award for such taking or any
payment in lieu thereof, but Lessee may file a claim for any taking of fixtures and improvements
owned by Lessee, and for moving expenses.

13. Destruction of Premises. In the event of a partial destruction of the premises during the term
hereof, from any cause, Lessor shall forthwith repair the same, provided that such repairs can be
made within ninety (90) days under existing governmental laws and regulations, but such partial
destruction shall not terminate this lease, except that Lessee shall be entitled to a proportionate
reduction of rent while such repairs are being made, based upon the extent to which making the
repairs cannot be made within ninety (90) days, Lessor, at his option, may make the same within a
reasonable time, this lease continuing in effect with the rent proportionately abated as aforesaid,
and in the event that Lessor shall not elect to make such repairs which cannot be made within
ninety (90) days, this lease may be terminated at the option of either party.

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14. Force Majeure. .

The Parties do not bear liabilities for the non-performance of their obligations under this
agreement whether fully or partially, for the period of the delay, if it is resulting from Force
Majeure, which occurred after the execution of this agreement and which the Parties could not
foresee or prevent. Force Majeure shall mean earthquake, floods, fire, war or other act of civil
or military authority, civil disturbance or disobedience, Acts issued by the governmental bodies
etc, which disable the performance of the obligations under this agreement.

15. Lessor’s Remedies on Default. If Lessee defaults in the payment of rent, or any additional
rent, or defaults in the performance of any of the other covenants or conditions hereof, Lessor
may give Lessee notice of such default and if Lessee does not cure any such default within 30
days, after the giving of such notice (or if such other default is of such nature that it cannot
be completely cured within such period, if Lessee does not commence such curing within such 30
days and thereafter proceed with reasonable diligence and in good faith to cure such default),
then the Lease shall terminate effective on the date immediately following the 30 day cure period.
On the date specified in such notice the term of this lease shall terminate, and Lessee shall then
quit and surrender the premises to Lessor. If this lease shall have been so terminated by Lessor,
Lessor may at any time thereafter resume possession of the premises by any lawful means and remove
Lessee or other occupants and their effects. Any failure to enforce any term shall be deemed a
waiver.

16. Early Termination. :

The Lease may be terminated early under this agreement and in cases provided by the RA legislation.
If Lessee unilaterally terminates this agreement prior to its term within the first year of the
Lease term based on the grounds not specified under this agreement and the RA legislation, then it
shall be liable for the entire balance of the Lease for the year which exceeds the security
deposit provided under Point 2 of the Lease. In other cases, Lessee shall, at its unilateral
request, at early termination hereof, give 90 days’ prior notice to Lessor.

17. Attorney’s Fees. In case suit should be brought for recovery of the premises, or for any sum
due hereunder, or because of any act which may arise out of the possession of the premises, by
either party, the prevailing party shall be entitled to all costs incurred in connection with such
action, including reasonable attorney’s fees. Any action brought hereunder shall be commenced in
the Courts of the Republic of Armenia, in Yerevan. The Laws and Regulations of the Republic of
Armenia shall apply.

18. Notices. Any notice which either party may, or is required to give, shall be in writing to
Lessee at the premises and to Lessor at the address shown below , or at such other places as may
be designated by the parties from time to time.

19. Heirs, Assigns, Successors. This lease is binding upon and inures to the benefit of the heirs,
successors in interest to the parties.

20. Dispute Settlement. Disputes emerged in connection with this Agreement should be settled by
mutual agreement, otherwise the settlement will be submitted for investigation by corresponding RA
Court.

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21. Concluding Provisions.

21.1 All expenses connected with notarization of this Agreement and the state registration of the
rights arising from this Agreement are covered by the Lessee.

21.2 The foregoing constitutes the entire agreement between the parties and may be modified only
in writing signed by both parties. The following Exhibits, if any, have been made a part of this
lease before the parties’ execution hereof.

21.3 This Agreement is made in Armenian, in four copies, which have equal juridical force, one of
which is kept in Shengavit Notary office of Yerevan, Republic of Armenia, the remaining copies are
handed to the parties at “Erebuni” Regional Department of Real Estate Cadastre State Committee at
RA Government for registration within thirty days.

Lessor: “Viasphere Technopark” CJSC

/s/ Khachatour Khachikyan Authorized

Representative

Lessee: “Sonics Armenia Holdings, Inc.” (Armenian Branch Office)

/s/
Edith Khachatourian

Authorized Representative

April twelfth, two thousand and five

This Agreement is ratified by Anahit Minasyan, notary of Shengavit notary region, Yerevan,
Republic of Armenia. The parties signed the Agreement in my presence. The identity, authority
and title of the persons signing this Agreement, as well as authority and property rights of
juridical persons or their representatives are verified.

According to Article 611 of RA Civil Code, rights emerging from this Agreement are subject to
registration at “Erebuni” Regional Department of Real Estate Cadastre State Committee at the RA
Government

	 	 	 	 	 
	 

	 	Registered in register 1873	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 	 	State duty and service fee is charged, according to the RA Laws on “State Duty” and on
“Notary”.

Notary

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EXHIBIT A

LESSEE PREMISES

Lessee’s premises is located on the first floor of the administrative building. 

The floor plan is
attached as Attachment A

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EXHIBIT B

(Lease Agreement /of a part of Premises/, as of 12.04.05)

Condition of the leased Premises and property in the Premises

	1.	 	Carpet laid on the floor in worn-out condition.
	 
	2.	 	Ceiling in a normal condition with lighting appliances.
	 
	3.	 	Walls painted in good condition.
	 
	4.	 	Tables for computers — 25
	 
	5.	 	Chairs with wheels — 15
	 
	6.	 	Soft chairs — 7
	 
	7.	 	Air conditioners — 8
	 
	8.	 	Windows (double sided and isolated) of aluminum profiles with jalousies — 15
	 
	9.	 	Doors of aluminum profiles
	 
	10.	 	Window-sills; wooden and laminated
	 
	11.	 	Clothes tree; wooden and laminated — 6
	 
	12.	 	Separate electricity supply network with separated WhM.
	 
	13.	 	Toilet in good condition — 1 set (wash basin and closet)
	 
	14.	 	Table for copier — 1

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EXHIBIT C

(Lease Agreement /of a party of Premises/, as of 12.04.05)

Rules of entry and exit for the employee and guests of the Lessee

	1.	 	The employee of the Lessee must wear identification badges with photo on the territory of the
Lessor.
	 
	2.	 	The temporary visitors of the Lessee (students, etc) must wear temporary identification
badges.
	 
	3.	 	For other visitors, the Lessor’s Security Service provides with visitor’s badges as well VIP
visitor’s badges.
	 
	4.	 	After 6:00 p.m. on workdays and on non-working days the visitors, who have no identification
badges, can enter the territory only upon the receipt of the Lessee’s managerial staff
consent by the guards, whose list to be provided to the Lessor separately
	 
	5.	 	The employee of neither the Lessor nor the Lessee has the right to enter the other party’s
territory (except the commonly used area of the territory) without having/presenting special
permission.
	 
	6.	 	The staff of the Lessee has the right to park their personal cars (no more than 4 units) on
the territory of the Lessor 24-hours a day (without any additional payment) on the spots
assigned by the Lessor. In some cases the parking spots may be changed upon the request of
the Lessor . The owners of the cars (except the General Director ) may not take outsiders
into the territory of the Lessor on their cars without appropriate permission.
	 
	7.	 	There shall be no smoking in the Lessee’s Premises.

8exv10w12a

 

Exhibit 10.12A

Partners for Growth

Term Loan and Security Agreement

	 	 	 
	Borrower:

	 	Sonics, Inc.
	Address:

	 	1098 Alta Avenue, Suite 101, Mountain View, CA 94043
	 
	 	 
	Date:

	 	May 26, 2005

THIS TERM LOAN AND SECURITY AGREEMENT is entered into on the above date between PARTNERS FOR
GROWTH, L.P. (“PFG”), whose address is 180 Pacific Avenue, San Francisco, CA 94111 and the borrower
named above (“Borrower”), whose chief executive office is located at the above address (“Borrower’s
Address”). The Schedule to this Agreement (the “Schedule”) being signed by the parties
concurrently, is an integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 7 below.)

1. LOANS.

     1.1 Loans. PFG will make a loan to Borrower (the “Loan”) in the amount shown on the
Schedule, provided no Default or Event of Default has occurred and is continuing.

     1.2 Interest. All Loans and all other monetary Obligations shall bear interest at the rate
shown on the Schedule, except where expressly set forth to the contrary in this Agreement.
Interest shall be payable monthly, on the first day of each month for interest accrued in the prior
month.

     1.3 Fees. Borrower shall pay PFG the fees shown on the Schedule, which are in addition to
all interest and other sums payable to PFG and are not refundable.

     1.4 Loan Requests. Unless the Schedule specifies the Loan to be disbursed in full on the
date hereof, to obtain a Loan, Borrower shall make a request to PFG by facsimile or telephone.
Loan requests may also be made by Borrower by email, but the same shall not be deemed made until
PFG acknowledges receipt of the same by email or otherwise in writing. Loan requests received after
12:00 Noon Pacific time will not be considered by PFG until the next Business Day. PFG may rely on
any telephone request for a Loan given by a person whom PFG believes in good faith is an authorized
representative of Borrower, and Borrower will indemnify PFG for any loss PFG suffers as a result of
that reliance.

     1.5 Late Fee. If any payment of accrued interest for any month is not made within five
business days after the date a bill therefor is sent by PFG to Borrower, or if any payment of
principal or any other payment is not made within five Business Days after the date due, Borrower
shall pay PFG a late payment fee equal to 5% of the amount of such late payment. The provisions of
this paragraph shall not be construed as PFG’s consent to Borrower’s failure to pay any amounts
when due, and PFG’s acceptance of any such late payments shall not restrict PFG’s exercise of any
remedies arising out of any such failure.

2. SECURITY INTEREST.

     2.1 Grant of Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to PFG a security interest in all of the following
(collectively, the “Collateral”): all right, title and interest of Borrower in and to all of the
following, whether now owned or hereafter arising or acquired and wherever located: all Accounts;
all Inventory; all Equipment; all Deposit Accounts; all General Intangibles (including without
limitation all Intellectual Property); all Investment Property; all Other Property; and any and all
claims, rights and interests in any of the above, and all guaranties and security for any of the
above, and all substitutions and replacements for, additions, accessions, attachments, accessories,
and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties) of, any and all of the above, and all Borrower’s books
relating to any and all of the above. The grant of a security interest shall not include and the
term “Collateral” shall not include any Equipment financed by a third party that is subject to a
lien otherwise permitted pursuant to clauses (i) and (ii) of Permitted liens, if the grant of a
security interest therein pursuant to this Agreement would be prohibited by the agreement creating
such lien or would

 

	 	 	 	 	 
	 

	 	Partners for Growth
	 	Loan and Security Agreement                    

constitute an event of default thereunder. PFG agrees to execute any instruments or document
to evidence the intent of the foregoing.

     2.2 [INTENTIONALLY LEFT BLANK]

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

     In order to induce PFG to enter into this Agreement and to make Loans, Borrower represents and
warrants to PFG as follows, and Borrower covenants that the following representations will continue
to be true, and that Borrower will at all times comply with all of the following covenants,
throughout the term of this Agreement and until all Obligations have been paid and performed in
full:

     3.1 Corporate Existence and Authority. Borrower is and will continue to be, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation.
Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have
been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their
terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) do
not violate Borrower’s Fifth Amended and Restated Certificate of Incorporation, or Borrower’s
by-laws, each as amended, or any law or any material agreement or instrument which is binding upon
Borrower or its property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any agreement or instrument which is binding upon Borrower or its
property.

     3.2 Name; Trade Names and Styles. As of the date hereof, the name of Borrower set forth in
the heading to this Agreement is its correct name, as set forth in its Fifth Amended and Restated
Certificate of Incorporation, as amended. Listed in the Representations are all prior names of
Borrower and all of Borrower’s present and prior trade names as of the date hereof. Borrower shall
give PFG 30 days’ prior written notice before changing its name or doing business under any other
name. Borrower has complied, and will in the future comply, in all material respects, with all
laws relating to the conduct of business under a fictitious business name, if applicable to
Borrower, except where a failure to do so would interfere with Borrower’s right or ability to bring
suit to collect Accounts or could reasonably be expected to result in a Material Adverse Change.

     3.3 Place of Business; Location of Collateral. As of the date hereof, the address set forth
in the heading to this Agreement is Borrower’s chief executive office. In addition, as of the date
hereof, Borrower has places of business and Collateral located only at the locations set forth in
the Representations. Borrower will provide PFG prompt written notice upon opening any additional
place of business, changing its chief executive office, or moving any of the Collateral to a
location other than Borrower’s Address or one of the locations set forth in the Representations,
except that Borrower may maintain sales offices in the ordinary course of business at which not
more than a total of $25,000 fair market value of Equipment is located.

     3.4 Title to Collateral; Perfection; Permitted Liens.

          (a) Borrower is now, and will at all times in the future be, the sole owner of all the
Collateral, except for items of Equipment which are leased to Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Subject to the rights of the Senior Lender, PFG now
has, and will continue to have, a first-priority perfected and enforceable security interest in all
of the Collateral, subject only to the Permitted Liens, and Borrower will at all times defend PFG
and the Collateral against all claims of others.

          (b) Borrower has set forth in the Representations all of Borrower’s Deposit Accounts, and
Borrower will give PFG five Business Days advance written notice before establishing any new
Deposit Accounts and, subject to the rights of the Senior Lender, will cause the institution where
any such new Deposit Account is maintained to execute and deliver to PFG a control agreement in
form sufficient to perfect PFG’s security interest in the Deposit Account and otherwise
satisfactory to PFG in its good faith business judgment.

          (c) In the event that Borrower shall at any time after the date hereof have any commercial
tort claims against others, which it is asserting, and in which the potential recovery exceeds
$100,000, Borrower shall promptly notify PFG thereof in writing and provide PFG with such
information regarding the same as PFG shall request (unless providing such information would waive
the Borrower’s attorney-client privilege). Such notification to PFG shall constitute a grant of a
security interest in the commercial tort claim and all proceeds thereof to PFG, and Borrower shall
execute and deliver all such documents and take all such actions as PFG shall request in connection
therewith.

-2-

 

	 	 	 	 	 
	 

	 	Partners for Growth
	 	Loan and Security Agreement                    

          (d) None of the Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a lessee under any
real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s
right to remove any Collateral from the leased premises (other than Borrower’s security system).
Whenever any Collateral is located upon premises in which any third party has an interest, Borrower
shall, whenever requested by PFG, use commercially reasonable efforts to cause such third party to
execute and deliver to PFG, in form acceptable to PFG, such waivers and subordinations as PFG shall
specify in its good faith business judgment. Borrower will keep in full force and effect, and will
comply with all material terms of, any lease of real property where any of the Collateral now or in
the future may be located, except to the extent that the failure to comply could not reasonably be
expected to result in a Material Adverse Change.

     3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good working
condition (ordinary wear and tear excepted), and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise PFG in writing of any material loss or damage
to the Collateral where the fair market value of such Collateral exceeds $100,000.

     3.6 Books and Records. Borrower has maintained and will maintain at Borrower’s Address
complete and accurate books and records, comprising an accounting system in accordance with GAAP
(except for the absence of footnotes with respect to unaudited financial statements and subject to
normal year-end adjustments).

     3.7 Financial Condition, Statements and Reports. All financial statements now or in the
future delivered to PFG have been, and will be, prepared in conformity with GAAP (except for the
absence of footnotes with respect to unaudited financial statements and subject to normal year-end
adjustments) and now and in the future will fairly present the results of operations and financial
condition of Borrower in all material respects, in accordance with GAAP (except for the absence of
footnotes with respect to unaudited financial statements and subject to normal year-end
adjustments), at the times and for the periods therein stated. Between the last date covered by
any such statement provided to PFG and the date hereof, there has been no Material Adverse Change.

     3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed (or made
provisions to timely file for an extension), and will timely file, all required tax returns and
reports, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by Borrower, except to the
extent that noncompliance could reasonably be expected to result in a Material Adverse Change.
Borrower may, however, defer payment of any of the foregoing which are contested by Borrower in
good faith, provided that Borrower (i) contests the same by appropriate proceedings promptly and
diligently instituted and conducted, (ii) notifies PFG in writing of the commencement of, and any
material development in, such proceedings, to the extent the amount in controversy is $100,000 or
more, and (iii) posts bonds or takes any other steps required to keep the same from becoming a lien
upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower’s prior tax years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present
and future pension, profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any material liability of Borrower, including any
material liability to the Pension Benefit Guaranty Corporation or its successors or any other
governmental agency.

     3.9 Compliance with Law. Borrower has, to the best of its knowledge, complied, and will
comply, in all material respects, with all provisions of all foreign, federal, state and local laws
and regulations applicable to Borrower, including, but not limited to, those relating to Borrower’s
ownership of real or personal property, the conduct and licensing of Borrower’s business, and all
environmental matters, except to the extent that noncompliance could reasonably be expected to
result in a Material Adverse Change.

     3.10 Litigation. Except as set forth in the Representations, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower’s knowledge) threatened
against or affecting Borrower in any court or before any governmental agency (or any basis therefor
known to Borrower) which could reasonably be expected to result, either separately or in the
aggregate, in any Material Adverse Change. Borrower will promptly inform PFG in writing of any
claim, proceeding, litigation or investigation in the future threatened or instituted against
Borrower involving any single claim of $100,000 or more, or involving $250,000 or more in the
aggregate.

     3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for lawful business
purposes. Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation U of
the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will
be used to purchase or carry any “margin stock” or to extend credit to others for the purpose of
purchasing or carrying any “margin stock.”

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     3.12 No Default. At the date hereof, no Default or Event of Default has occurred, and no
Default or Event of Default will have occurred after giving effect to any Loans being made
concurrently herewith.

4. ADDITIONAL DUTIES OF BORROWER.

     4.1 Financial and Other Covenants. Borrower shall at all times comply with the financial and
other covenants set forth in the Schedule.

     4.2. Remittance of Proceeds. Subject to the rights of the Senior Lender, and if a Default of
Event of Default has occurred and is continuing, (i) all proceeds arising from the disposition of
any Collateral (other than Borrower’s licensing of certain Collateral in the ordinary course of
business) shall be delivered, in kind, by Borrower to PFG in the original form in which received by
Borrower not later than the following Business Day after receipt by Borrower, to be applied to the
Obligations in such order as PFG shall determine, and (ii) Borrower agrees that it will not
commingle proceeds of Collateral with any of Borrower’s other funds or property, but will hold such
proceeds separate and apart from such other funds and property and in an express trust for PFG,
except as set forth above, and subject to the rights of the Senior Lender. Nothing in this Section
limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

     4.3 Insurance. Borrower shall at all times insure all of the tangible personal property
Collateral and carry such other business insurance, with insurers reasonably acceptable to PFG, in
such form and amounts as PFG may reasonably require and as are customary and in accordance with
standard practices for Borrower’s industry and locations, and Borrower shall provide evidence of
such insurance to PFG. All such insurance policies shall name PFG as an additional loss payee, and
shall contain a lenders loss payee endorsement in form reasonably acceptable to PFG. Upon receipt
of the proceeds of any such insurance, subject to the rights of the Senior Lender, PFG shall apply
such proceeds in reduction of the Obligations as PFG shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and is continuing, PFG
shall release to Borrower such insurance proceeds. If Borrower fails to provide or pay for any
insurance, PFG may, but is not obligated to, obtain the same at Borrower’s expense. Borrower shall
promptly deliver to PFG copies of all material reports made to insurance companies.

     4.4 Reports. Borrower, at its expense, shall provide PFG with the written reports set forth
in the Schedule, and such other written reports with respect to Borrower (including budgets,
projections, operating plans and other financial documentation), as PFG shall from time to time
specify in its good faith business judgment.

     4.5 Access to Collateral, Books and Records. At reasonable times, and upon at least three
(3) Business Day’s notice, PFG, or its agents, shall have the right to inspect the Collateral, and
the right to audit and copy Borrower’s books and records. The foregoing inspections and audits
shall be at Borrower’s expense and the charge therefor shall be $750 per person per day (or such
higher amount as shall represent PFG’s then current standard charge for the same), plus reasonable
out-of-pocket expenses. Notwithstanding the foregoing, if no Default or Event of Default has
occurred and is continuing, (a) Borrower shall not be required to disclose to PFG any document or
information (i) where disclosure is prohibited by applicable law or any agreement binding on
Borrower, or (ii) is subject to attorney-client or similar privilege or constitutes attorney work
product, and (b) no such inspection or audit described in this Section shall occur at Borrower’s
cost more than once in any 12 month period, unless the next preceding inspection or audit revealed
inaccuracies or deficiencies in Borrower’s books or records or resulted in an adjustment to the
same (other than de minimis).

     4.6 Registration of Intellectual Property Rights. Borrower will register with the United
States Patent and Trademark Office or the United States Copyright Office its Intellectual Property
within 30 days of the date of this Agreement, and additional Intellectual Property rights developed
or acquired including revisions or additions to any product before the sale or licensing of the
product to any third party, in each case, to the extent that Borrower, in its reasonable business
judgment, deems it appropriate to so register such Intellectual Property. Borrower will (i) to the
extent that Borrower, in its reasonable business judgment, deems it appropriate, protect, defend
and maintain the validity and enforceability of the Intellectual Property, (ii) promptly advise PFG
in writing of material infringements and (iii) to the extent that Borrower, in its reasonable
business judgment, deems it appropriate, not allow any Intellectual Property to be abandoned,
forfeited or dedicated to the public without PFG’s written consent, which consent shall not be
unreasonably withheld.

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

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     4.8 Amendment of Restated Certificate. Within the earlier to occur of ninety (90) days or
Borrower’s Next Equity Financing, Borrower shall (i) effect an amendment to or waiver of the terms
of its Fifth Amended and Restated Certificate of Incorporation so as to render the issue to PFG of
a warrant to purchase its Series C Preferred Stock or Next Equity Financing Stock (of approximately
even date herewith and issued in connection herewith) (the “Warrant”) lawful in all respects under
Borrower’s constitutional documents and stockholder agreements and (ii) procure that the issue of
the Warrant and its exercise or conversion is not deemed to constitute the issue of “Additional
Stock” under such Fifth Amended and Restated Certificate (as may be further amended for such
purpose).

     4.9 Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not,
without PFG’s prior written consent (which shall be a matter of its good faith business judgment),
do any of the following:

          (i) merge or consolidate with another corporation or entity, except where (i) Borrower is the
surviving entity and(ii) no Event of Default has occurred and is continuing or would result from
such action during the term of this Agreement. A Subsidiary may merge or consolidate into another
Subsidiary of Borrower or into Borrower;

          (ii) acquire any assets, except in the ordinary course of business, or make any Investments
other than Permitted Investments;

          (iii) enter into any other transaction outside the ordinary course of business (other than as
expressly permitted by the other provisions of this Section 5.7) (for the avoidance of doubt,
equipment financing referred to in clause (ii) of Permitted Liens shall be deemed in the ordinary
course of business);

          (iv) sell or transfer any Collateral (including without limitation and sale or transfer of
Collateral which is then leased back by Borrower), except for (A) the sale of Inventory in the
ordinary course of Borrower’s business, and except for the sale of obsolete, worn-out or unneeded
Equipment in the ordinary course of business, (B) the making of Permitted Investments, (C) the
granting of Permitted Liens, (D) the making of Permitted Distributions, (E) the non-exclusive
licensing of Intellectual Property in the ordinary course of business, and (F) sales or transfers
not otherwise permitted in this subsection (iv) which are in the ordinary course of business and in
the aggregate do not exceed $25,000 in any fiscal year;

          (v) except as disclosed in the Representations on the date hereof, store any Inventory or
other Collateral with any warehouseman or other third party, unless there is in place a bailee
agreement in such form as PFG shall specify in its good faith business judgment;

          (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis;

          (vii) except as disclosed in the Representations on the date hereof, make any loans of any
money or other assets, other than Permitted Investments;

          (viii) incur any Indebtedness, other than Permitted Indebtedness;

          (ix) guarantee or otherwise become liable with respect to the obligations of another party or
entity, except for endorsements of negotiable instruments for deposit or collection in the ordinary
course of business and other guarantee obligations of Subsidiaries made in the ordinary course of
business;

          (x) pay or declare any dividends on Borrower’s stock (except for dividends payable solely in
stock of Borrower);

          (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s
stock, except for repurchases of stock from consultants, former employees and directors in the
ordinary course of business;

          (xii) engage, directly or indirectly, in any business other than the businesses currently
engaged in by Borrower or reasonably related thereto;

          (xiii) open any Deposit Accounts except for Deposit Accounts existing on the date hereof
unless there is a Deposit Account control agreement in effect in favor of PFG (subject to the
rights of the Senior Lender), provided that Borrower may (A) open maintain foreign Deposit Accounts
with no more than $375,000 in the aggregate at any time without a Deposit Account control agreement
in effect in favor of PFG, and (B) maintain a Deposit Account at Lehman Bros. with a Deposit
Account control agreement in effect in favor of PFG so long as the balance in such account is at no
time more than $95,000; or

          (xiv) dissolve or elect to dissolve.

Transactions permitted by the foregoing provisions of this Section are only permitted if no Default
or Event of Default would occur as a result of such transaction.

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     4.10 Litigation Cooperation. Should any third-party suit or proceeding be instituted by or
against PFG with respect to any Collateral or relating to Borrower, Borrower shall, without expense
to PFG, make available Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that PFG may deem them reasonably necessary in order to prosecute or defend
any such suit or proceeding.

     4.11 Changes. Borrower agrees to notify PFG in writing of any changes in the information set
forth in the Representations.

     4.12 Further Assurances. Borrower agrees, at its expense, on request by PFG, to execute all
documents and take all actions, as PFG, may, in its good faith business judgment, deem necessary or
useful in order to perfect and maintain PFG’s perfected first-priority security interest in the
Collateral (subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement. Without limiting the foregoing, Borrower agrees that upon PFG’s
request, Borrower shall cause Borrower’s Subsidiaries to execute a guarantee of the Obligations and
such other documents or instruments, such as a guarantor security agreement and pledge of the stock
held in its Subsidiaries, as PFG may reasonably require, and shall permit and facilitate PFG’s
perfection of a security interest in the assets of such Subsidiaries. PFG agrees to not make such
request if the asset value of such Subsidiaries remains at the nominal levels existing on the date
hereof.

5. TERM.

     5.1 Maturity Date. This Agreement shall continue in effect until the maturity date set forth
on the Schedule (the “Maturity Date”), subject to Sections 5.2 and 5.3 below.

     5.2 Early Termination. This Agreement may be terminated prior to the Maturity Date as
follows: (i) if specifically permitted in the Schedule, by Borrower, effective three Business Days
after written notice of termination is given to PFG; or (ii) by PFG at any time after the
occurrence and during the continuance of an Event of Default, without notice, effective
immediately; or (iii) upon conversion in whole of the Loan, as and to the extent permitted in the
Schedule.

     5.3 Payment of Obligations. On the Maturity Date or on any earlier effective date of
termination, Borrower shall pay and perform in full all Obligations, whether evidenced by
installment notes or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable. Notwithstanding any termination of this Agreement, all of PFG’s
security interests in all of the Collateral and all of the terms and provisions of this Agreement
shall continue in full force and effect until all Obligations have been paid and performed in full;
provided that PFG may, in its sole discretion, refuse to make any further Loans after termination.
No termination shall in any way affect or impair any right or remedy of PFG, nor shall any such
termination relieve Borrower of any Obligation to PFG, until all of the Obligations have been paid
and performed in full. Upon (i) indefeasible payment and performance in full of all the
Obligations or (ii) termination of this Agreement by conversion of the Loan as contemplated in
5.2(iii) and discharge of any Obligations not converted, PFG shall promptly terminate its financing
statements with respect to the Borrower and deliver to Borrower such other documents as may be
required to fully terminate PFG’s security interests.

6. EVENTS OF DEFAULT AND REMEDIES.

     6.1 Events of Default. The occurrence of any of the following events shall constitute an
“Event of Default” under this Agreement, and Borrower shall give PFG immediate written notice
thereof:

          (a) Any warranty, representation, statement, report or certificate made or delivered to PFG by
Borrower or any of Borrower’s officers, employees or agents, now or in the future, including the
Representations and any additional representations and warranties set forth in the Schedule, shall
be untrue or misleading in a material respect when made or deemed to be made; or

          (b) Borrower shall fail to pay any Loan or any interest thereon or any other monetary
Obligation within three (3) Business Days after the date due; or

          (c) Borrower shall fail to comply with any of the financial covenants set forth in the
Schedule, or shall breach any of the provisions of Section 4.9 hereof, or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured, or shall fail to permit PFG to
conduct an inspection or audit as provided in Section 4.5 hereof or shall fail to provide PFG with
the reports and notices required under Section 6 of the Schedule within one Business Day after the
date due; or

          (d) Borrower shall fail to perform any other non-monetary Obligation, which failure is not
cured within ten (10) Business Days after the date due or notice thereof is given;
provided, however, that if the default cannot by its nature be cured within the ten
(10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then Borrower shall have
an additional reasonable period (which shall not in any case exceed thirty (30) days) to attempt to
cure such default, and within such reasonable time period

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the failure to have cured such default shall not be deemed an Event of Default (provided that no
Loans will be made during such cure period);or

          (e) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within twenty (20) days after
the occurrence of the same; or

          (f) any default or event of default occurs under any obligation secured by a Permitted Lien,
which is not cured within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or

          (g) Borrower breaches any material contract or obligation, which has resulted or reasonably
may be expected to result in a Material Adverse Change; or

          (h) Dissolution, termination of existence, insolvency or business failure of Borrower; or
appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment
for the benefit of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect, or Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance
or similar law; or

          (i) the commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 45 days after the date commenced; or

          (j) revocation or termination of, or limitation or denial of liability upon, any guaranty of
the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any
guarantor of any of the Obligations under any bankruptcy or insolvency law; or

          (k) revocation or termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind pledged by any third
party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or
commencement of proceedings by or against any such third party under any bankruptcy or insolvency
law; or

          (l) Borrower makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations (other than as permitted in the applicable subordination
agreement), or if any Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or

          (m) there shall be a change in the record or beneficial ownership of an aggregate of more than
25% of the outstanding shares of stock of Borrower, in one or more transactions, compared to the
ownership of outstanding shares of stock of Borrower in effect on the date hereof, except in
connection with a public offering or venture capital placement of Borrower’s securities) without
the prior written consent of PFG;

          (n) Borrower shall fail to timely comply with Section 4.8 hereof; or

          (o) a Material Adverse Change shall occur.

PFG may cease making any Loans hereunder during any of the cure periods provided above, and
thereafter if an Event of Default has occurred and is continuing.

     6.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, and at
any time thereafter, PFG, at its option, and without notice or demand of any kind (all of which are
hereby expressly waived by Borrower), may do any one or more of the following: (a) Cease making
Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document;
(b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes PFG without judicial
process to enter onto any of Borrower’s premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a
custodian to remain on the premises in exclusive control thereof, without charge for so long as PFG
deems it necessary, in its good faith business judgment, in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that should PFG seek to
take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i)
any bond and any surety or security relating thereto required by any statute, court rule or
otherwise as an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession

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thereof; and
(iii) any requirement that PFG retain possession of, and not dispose of, any such Collateral
until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to PFG at places designated by PFG which are reasonably convenient to PFG and
Borrower, and to remove the Collateral to such locations as PFG may deem advisable; (e) Complete
the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for
such purpose and for the purpose of removal, PFG shall have the right to use Borrower’s premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge.
Borrower grants PFG a non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s Intellectual Property, advertising matter, or any similar property as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any Collateral and, in
connection with PFG’s exercise of its rights under this Section, Borrower’s rights under all
licenses and all franchise agreements inure to PFG’s benefit; (f) Sell, lease or otherwise dispose
of any of the Collateral, in its condition at the time PFG obtains possession of it or after
further manufacturing, processing or repair, at one or more public and/or private sales, in lots or
in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time
to time without notice other than oral announcement at the time scheduled for sale. PFG shall have
the right to conduct such disposition on Borrower’s premises without charge, for such time or times
as PFG deems reasonable, or on PFG’s premises, or elsewhere and the Collateral need not be located
at the place of disposition. PFG may directly or through any affiliated company purchase or lease
any Collateral at any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any
liability Borrower may have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale; (g) Demand payment of, and collect any Accounts and General
Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes PFG
to endorse or sign Borrower’s name on all collections, receipts, instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in PFG’s good faith business
judgment, to grant extensions of time to pay, compromise claims and settle Accounts and the like
for less than face value; (h) Exercise any and all rights under any present or future control
agreements relating to Deposit Accounts or Investment Property; and (i) Demand and receive
possession of any of Borrower’s federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable attorneys’ fees,
expenses, costs, liabilities and obligations incurred by PFG with respect to the foregoing shall be
added to and become part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any
of PFG’s rights and remedies, from and after the occurrence and during the continuance of any Event
of Default, the interest rate applicable to the Obligations shall be increased by an additional
four percent per annum (the “Default Rate”).

     6.3 Standards for Determining Commercial Reasonableness. Borrower and PFG agree that a sale
or other disposition (collectively, “sale”) of any Collateral which complies with the following
standards will conclusively be deemed to be commercially reasonable: (i) Notice of the sale is
given to Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of
the sale is published at least ten days before the sale in a newspaper of general circulation in
the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in
general, non-specific terms; (iii) The sale is conducted at a place designated by PFG, with or
without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and
6:00 p.m.; (v) Payment of the purchase price in cash or by cashier’s check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, PFG may (but is not obligated to)
direct any prospective purchaser to ascertain directly from Borrower any and all information
concerning the same. PFG shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.

     6.4 Power of Attorney. Upon the occurrence and during the continuance of any Event of
Default, without limiting PFG’s other rights and remedies, Borrower grants to PFG an irrevocable
power of attorney coupled with an interest, authorizing and permitting PFG (acting through any of
its employees, attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower, and at Borrower’s expense, to do any or all of the following, in
Borrower’s name or otherwise, but PFG agrees that if it exercises any right hereunder, it will do
so in good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower any
documents that PFG may, in its good faith business judgment, deem advisable in order to perfect and
maintain PFG’s security interest in the Collateral, or in order to exercise a right of Borrower or
PFG, or in order to fully consummate all the transactions contemplated under this Agreement, and
all other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any Account,
any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other lien, or assignment or
satisfaction of mechanic’s, materialman’s or other lien; (c) Take control in any manner of any cash
or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into PFG’s possession;
(d) Endorse all checks and other forms of remittances received by PFG; (e) Pay, contest or settle
any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (f)
Grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for

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less than face value and execute all releases and other documents in connection therewith; (g) Pay
any sums required on account of Borrower’s taxes
or to secure the release of any liens therefor, or both; (h) Settle and adjust, and give
releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor;
(i) Instruct any third party having custody or control of any books or records belonging to, or
relating to, Borrower to give PFG the same rights of access and other rights with respect thereto
as PFG has under this Agreement; and (j) Take any action or pay any sum required of Borrower
pursuant to this Agreement and any other Loan Documents. Any and all reasonable sums paid and any
and all reasonable costs, expenses, liabilities, obligations and attorneys’ fees incurred by PFG
with respect to the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations. In no event shall PFG’s rights under the foregoing power of attorney or
any of PFG’s other rights under this Agreement be deemed to indicate that PFG is in control of the
business, management or properties of Borrower.

     6.5 Application of Proceeds. All proceeds realized as the result of any sale of the
Collateral shall be applied by PFG first to the reasonable costs, expenses, liabilities,
obligations and attorneys’ fees incurred by PFG in the exercise of its rights under this Agreement,
second to the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as PFG shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to PFG for
any deficiency. If, PFG, in its good faith business judgment, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale of Collateral, PFG
shall have the option, exercisable at any time, in its good faith business judgment, of either
reducing the Obligations by the principal amount of purchase price or deferring the reduction of
the Obligations until the actual receipt by PFG of the cash therefor.

     6.6 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement,
PFG shall have all the other rights and remedies accorded a secured party under the Code and under
all other applicable laws, and under any other instrument or agreement now or in the future entered
into between PFG and Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by PFG of one or more of its rights or remedies shall not
be deemed an election, nor bar PFG from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of PFG to exercise any rights or remedies shall not operate as a
waiver thereof, but all rights and remedies shall continue in full force and effect until all of
the Obligations have been fully paid and performed.

7. DEFINITIONS. As used in this Agreement, the following terms have the following meanings:

     “Account Debtor” means the obligor on an Account.

     “Accounts” means all present and future “accounts” as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all accounts receivable and other sums owing to
Borrower.

     “Affiliate” means, with respect to any Person, a relative, partner, shareholder,
director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any
Person controlling, controlled by or under common control with such Person.

     “Business Day” means a day on which PFG is open for business.

     “Code” means the Uniform Commercial Code as adopted and in effect in the State of
California from time to time.

     “Collateral” has the meaning set forth in Section 2 above.

     “continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has occurred and has not
been either waived in writing by PFG or cured within any applicable cure period.

     “Conversion Stock” means the securities of Borrower into which the Loan is from time
to time convertible.

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

     “Default Rate” has the meaning set forth in Section 6.2 above.

     “Deposit Accounts” means all present and future “deposit accounts” as defined in the
California Uniform Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation all general and special bank accounts,
demand accounts, checking accounts, savings accounts and certificates of deposit.

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	 	Partners for Growth
	 	Loan and Security Agreement                    

     “Equipment” means all present and future “equipment” as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the foregoing.

     “Event of Default” means any of the events set forth in Section 6.1 of this Agreement.

     “Existing Guarantees” means the guarantees delivered by certain guarantors to Silicon
Valley Bank in connection with the Senior Debt and all of the Borrower’s obligations related
thereto.

     “GAAP” means generally accepted accounting principles consistently applied.

     “General Intangibles” means all present and future “general intangibles” as defined in
the California Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all Intellectual Property, payment
intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other
deposits, options to purchase or sell real or personal property, rights in all litigation presently
or hereafter pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption insurance), payments of
insurance and rights to payment of any kind.

     “good faith business judgment” means honesty in fact and good faith (as defined in
Section 1201 of the Code) in the exercise of PFG’s business judgment.

     “including” means including (but not limited to).

     “Indebtedness” means (a) indebtedness for borrowed money or the deferred purchase
price of property or services (other than trade payables arising in the ordinary course of
business), (b) obligations evidenced by bonds, notes, debentures or other similar instruments, (c)
reimbursement obligations in connection with letters of credit, and (d) capital lease obligations.

     “Intellectual Property” means all present and future: (a) copyrights, copyright
rights, copyright applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b) trade secret rights,
including all rights to unpatented inventions and know-how, and confidential information; (c) mask
work or similar rights available for the protection of semiconductor chips; (d) patents, patent
applications and like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the same; (e)
trademarks, servicemarks, trade styles, and trade names, whether or not any of the foregoing are
registered, and all 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 any such
trademarks; (f) computer software and computer software products; (g) designs and design rights;
(h) technology; (i) all claims for damages by way of past, present and future infringement of any
of the rights included above; and (j) all licenses or other rights to use any property or rights of
a type described above.

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

     “Investment” means any beneficial ownership interest in any Person (including any
stock, partnership interest or other equity or debt securities issued by any Person), and any loan,
advance or capital contribution to any Person.

     “Investment Property” means all present and future investment property, securities,
stocks, bonds, debentures, debt securities, partnership interests, limited liability company
interests, options, security entitlements, securities accounts, commodity contracts, commodity
accounts, and all financial assets held in any securities account or otherwise, and all options and
warrants to purchase any of the foregoing, wherever located, and all other securities of every
kind, whether certificated or uncertificated.

     “LIBOR” means the rate quoted by the Wall Street Journal (or such other nationally
recognized rate quoting service reasonably acceptable to PFG) for U.S. Dollar-denominated loans as
the London Interbank Offering Rate on the date hereof and the first business day of each calendar
quarter during the term of this Agreement.

     “Loan Documents” means, collectively, this Agreement, the Representations, and all
other present and future documents, instruments and agreements between PFG and Borrower, including,
but not limited to those relating to this Agreement, and all amendments and modifications thereto
and replacements therefor.

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	 	Partners for Growth
	 	Loan and Security Agreement                    

     “Material Adverse Change” means any of the following: (i) a material adverse change in
the business, operations, or financial or other condition of the Borrower, or (ii) a material
impairment of the prospect of repayment of any portion of the Obligations; or (iii) a material
impairment of the value or priority of PFG’s security interests in the Collateral.

     “Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to PFG,
whether evidenced by this Agreement or any note or other instrument or
document, or otherwise, including the Revolving Loan Agreement between Borrower and PFG of
even date herewith, whether arising from an extension of credit, opening of a letter of credit,
banker’s acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any participation by PFG in
Borrower’s debts owing to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney’s fees, expert witness fees, audit
fees, collateral monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under any other Loan
Documents.

     “Other Property” means the following as defined in the California Uniform Commercial
Code in effect on the date hereof with such additions to such terms as may hereafter be made, and
all rights relating thereto: all present and future “commercial tort claims” (including without
limitation any commercial tort claims identified in the Representations), “documents”,
“instruments”, “promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”,
“fixtures”, “farm products” and “money”; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the California Uniform Commercial Code.

     “Payment” means all checks, wire transfers and other items of payment received by PFG
for credit to Borrower’s outstanding Obligations.

     “Permitted Distributions” means:

          (i) the distribution of non-cash rights in connection with any stockholders’ rights plan.

          (ii) the conversion by Borrower of any of its convertible securities into other securities
pursuant to the term so such convertible securities or otherwise in exchange therefore, and
payments in cash for any fractional shares of such convertible securities; and

          (iii) any payments made on Indebtedness permitted under clause (vii) of the definition of
Permitted Indebtedness.

     “Permitted Indebtedness” means:

          (i) the Loan and other Obligations; and

          (ii) Indebtedness existing on the date hereof and shown on Exhibit A hereto;

          (iii) Subordinated Debt;

          (iv) Indebtedness owing to Senior Lender not to exceed the Senior Debt Limit specified in the
Schedule;

          (v) other Indebtedness secured by Permitted Liens;

          (vi) reimbursement obligations in respect of letters of credit in an aggregate face amount
outstanding not to exceed $100,000 at any time outstanding, which has been reported to PFG in
writing, and, in the case of reimbursement obligations to the Senior Lender in respect of letters
of credit which do not exceed the Senior Debt Limit (taking into account all other Indebtedness to
Senior Lender);

          (vii) Indebtedness to trade creditors, surety, appeal, indemnity, performance or other similar
bonds incurred in the ordinary course of business, consistent with past practices;

          (viii) Indebtedness arising from the Existing Guarantees;

          (ix) Indebtedness on credit card with Senior Lender; and

          (x) other unsecured indebtedness not to exceed $50,000 in aggregate at any one time.

     “Permitted Investments” are:

          (i) Investments (if any) shown on the Exhibit A and existing on the date hereof;

          (ii) marketable direct obligations issued or unconditionally guaranteed by the United States
or its agency or any State maturing within 1 year from its acquisition;

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	 	Partners for Growth
	 	Loan and Security Agreement                    

          (iii) commercial paper maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc;

          (iv) Investments in Subsidiaries (i) in the ordinary course of business, to the extent that:
(A) in the aggregate, Borrower does not invest more than $125,000 in any calendar month, and (B)
the funds invested are provided to the Subsidiaries solely
for the purpose of covering their ongoing operating expenses, and (ii) for the purposes of
establishing a wholly-owned Subsidiary of the Borrower; and

          (v) bank certificates of deposit issued maturing no more than 1 year after issue;

          (vi) investments consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business and (ii) to the extent in the
ordinary course of business consistent with past practice, loans to employees relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans agreements approved by the Borrower’s Board of Directors in an aggregate amount not more than
$100,000 in any fiscal year;

          (vii) 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;

          (viii) investments consisting of prepaid royalties and other customary credit extensions to
customers and suppliers who are not Affiliates, in the ordinary course of business;

          (ix) investments pursuant to investment policy guidelines approved or adopted by the
Borrower’s Board of Directors

          (x) investments permitted in Section 4.9(i);

          (xi) investments not otherwise expressly permitted herein, not in excess of $50,000 in the
aggregate in any fiscal year.

     “Permitted Liens” means the following:

          (i) purchase money security interests in specific items of Equipment;

          (ii) leases of specific items of Equipment;

          (iii) liens for taxes, fees, assessments or other government charges for levees, either not
delinquent or being contested in good faith by appropriate proceedings;

          (iv) additional security interests and liens consented to in writing by PFG, which consent may
be withheld in its good faith business judgment. PFG will have the right to require, as a condition
to its consent under this subparagraph (iv), that the holder of the additional security interest or
lien sign an intercreditor agreement on PFG’s then standard form, acknowledge that the security
interest is subordinate to the security interest in favor of PFG, and agree not to take any action
to enforce its subordinate security interest so long as any Obligations remain outstanding, and
that Borrower agree that any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement;

          (v) security interests being terminated substantially concurrently with this Agreement;

          (vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not delinquent;

          (vii) cash deposits or pledges of an aggregate amount reasonably necessary to secure the
payment of worker’s compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or performance bonds or
other obligations of a like nature incurred in the ordinary course of business;

          (viii) liens in favor of customs and revenue authorities which secure payment of customs
duties in connection with the importation of goods;

          (ix) statutory, common law or contractual liens of depository institutions or institutions
holding securities accounts (including rights of set-off) securing only customary charges and fees
in connection with such accounts;

          (x) liens in favor of Senior Lender securing an amount not in excess of the Senior Debt Limit;

          (xi) liens in arising from the Existing Guarantees;

          (xii) cash deposits provided in connection with Borrower’s credit card; and

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	 	Partners for Growth
	 	Loan and Security Agreement                    

          (xiii) liens incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i), (ii) or (vi) above,
provided that any extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.

     “Person” means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any agency or political
division thereof, or any other entity.

     “Representations” means the written Representations and Warranties provided by
Borrower to PFG referred to in the Schedule.

     “Senior Lender” has the meaning set forth in Section 8 of the Schedule.

     “Subordinated Debt” means debt incurred by Borrower subordinated to Borrower’s debt to
PFG (pursuant to a subordination agreement entered into between PFG, Borrower and the subordinated
creditor), on terms acceptable to PFG in its absolute discretion.

     “Subsidiaries” means those entities whose equity is owned by Borrower and disclosed in
the Representations.

     Other Terms. All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP, consistently applied. All
other terms contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.

8. GENERAL PROVISIONS.

     8.1 Confidentiality. PFG agrees to use the same degree of care that it exercises with
respect to its own proprietary information, to maintain the confidentiality of any and all
proprietary, trade secret or confidential information provided to or received by PFG from the
Borrower, which indicates that it is confidential, including business plans and forecasts,
non-public financial information, confidential or secret processes, formulae, devices and
contractual information, customer lists, and employee relation matters, provided that PFG may
disclose such information (i) to its officers, directors, employees, attorneys, accountants,
affiliates, participants, prospective participants, assignees and prospective assignees, provided
that PFG uses reasonable efforts to cause such third parties to agree to be subject to the
confidentiality provisions of this Section 8.1, and such other Persons to whom PFG shall at any
time be required to make such disclosure in accordance with applicable law or legal process, and
(ii) in its good faith business judgment in connection with the enforcement of its rights or
remedies after an Event of Default, or in connection with any dispute with Borrower or any other
Person relating to Borrower. The confidentiality agreement in this Section supersedes any prior
confidentiality agreement of PFG relating to Borrower.

     8.2 Interest Computation. In computing interest on the Obligations, all Payments received
after 12:00 Noon, Pacific Time, on any day shall be deemed received on the next Business Day.

     8.3 Payments. All Payments may be applied, and in PFG’s good faith business judgment reversed
and re-applied, to the Obligations, in such order and manner as PFG shall determine in its good
faith business judgment.

     8.4 Monthly Accountings. PFG shall provide Borrower monthly with an account of advances,
charges, expenses and payments made pursuant to this Agreement. Such account shall be deemed
correct, accurate and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by PFG), unless Borrower
notifies PFG in writing to the contrary within 60 days after such account is rendered, describing
the nature of any alleged errors or omissions.

     8.5 Notices. All notices to be given under this Agreement shall be in writing and shall be
given either personally, or by reputable private delivery service, or by regular first-class mail,
or certified mail return receipt requested, or by fax to the most recent fax number a party has for
the other party (and if by fax, sent concurrently by one of the other methods provided herein),
addressed to PFG or Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. All notices shall be deemed to
have been given upon delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two Business Days following
the deposit thereof in the United States mail, with postage prepaid, or on the first business day
of receipt during business hours in the case of notices sent by fax, as provided herein.

8.6 Severability. Should any provision of this Agreement be held by any court of competent
jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this
Agreement, which shall continue in full force and effect.

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	 	Partners for Growth
	 	Loan and Security Agreement                    

8.7 Integration. This Agreement and such other written agreements, documents and instruments as
may be executed in connection herewith are the final, entire and complete agreement between
Borrower and PFG and supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not set forth in this
Agreement or in other written agreements signed by the parties in connection herewith.

     8.8 Waivers; Indemnity. The failure of PFG at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other Loan Document shall not
waive or diminish any right of PFG later to demand and receive strict compliance therewith. Any
waiver of any default shall not waive or affect any other default, whether prior or subsequent, and
whether or not similar. None of the provisions of this Agreement or any other Loan Document shall
be deemed to have been waived by any act or knowledge of PFG or its agents or employees, but only
by a specific written waiver signed by an authorized officer of PFG and delivered to Borrower. To
the extent not prohibited by applicable law, Borrower waives the benefit of all statutes of
limitations relating to any of the Obligations or this Agreement or any other Loan Document, and
Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of
payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial
paper, instrument, account, General Intangible, document or guaranty at any time held by PFG on
which Borrower is or may in any way be liable, and notice of any action taken by PFG, unless
expressly required by this Agreement. Borrower hereby agrees to indemnify PFG and its affiliates,
subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold them
harmless from and against any and all claims, debts, liabilities, demands, obligations, actions,
causes of action, penalties, costs and expenses (including reasonable attorneys’ fees), of every
kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between PFG and Borrower, or any other matter, relating to Borrower or
the Obligations; provided that this indemnity shall not extend to damages proximately caused by
the indemnitee’s own gross negligence or willful misconduct. Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force and effect.

     8.9 No Liability for Ordinary Negligence. Neither PFG, nor any of its directors, officers,
employees, agents, attorneys or any other Person affiliated with or representing PFG shall be
liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or suffered by Borrower or any other party through the ordinary negligence of PFG, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated with or
representing PFG, but nothing herein shall relieve PFG from liability for its own gross negligence
or willful misconduct.

     8.10 Amendment. The terms and provisions of this Agreement may not be waived or amended,
except in a writing executed by Borrower and a duly authorized officer of PFG.

     8.11 Time of Essence. Time is of the essence in the performance by Borrower of each and
every obligation under this Agreement.

     8.12 Attorneys’ Fees and Costs. Borrower shall reimburse PFG for all reasonable attorneys’
fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable
costs incurred by PFG, pursuant to, or in connection with, or relating to this Agreement (whether
or not a lawsuit is filed), including, but not limited to, any reasonable attorneys’ fees and costs
PFG incurs in order to do the following: prepare and negotiate this Agreement and all present and
future documents relating to this Agreement; obtain legal advice in connection with this Agreement
or Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend
actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate
any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower’s books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce PFG’s security interest in, the Collateral; and otherwise
represent PFG in any litigation relating to Borrower. If either PFG or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its reasonable costs and attorneys’ fees, including (but not limited
to) reasonable attorneys’ fees and costs incurred in the enforcement of, execution upon or defense
of any order, decree, award or judgment. All attorneys’ fees and costs to which PFG may be
entitled pursuant to this Paragraph shall immediately become part of Borrower’s Obligations, shall
be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations.

     8.13 Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure
to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of
Borrower and PFG; provided, however, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of PFG, and any prohibited assignment shall
be void. No consent by PFG to any assignment shall release Borrower from its liability for the
Obligations.

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	 	Partners for Growth
	 	Loan and Security Agreement                    

     8.14 Joint and Several Liability. If Borrower consists of more than one Person, their
liability shall be joint and several, and the compromise of any claim with, or the release of, any
Borrower shall not constitute a compromise with, or a release of, any other Borrower.

     8.15 Limitation of Actions. Any claim or cause of action by Borrower against PFG, its
directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Loan Agreement, or any other Loan Document,
or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any
other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by PFG, its
directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted
by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by
the filing of a complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of a summons and
complaint on an officer of PFG, or on any other person authorized to accept service on behalf of
PFG, within thirty (30) days thereafter. Borrower agrees that such one-year period is a reasonable
and sufficient time for Borrower to investigate and act upon any such claim or cause of action.
The one-year period provided herein shall not be waived, tolled, or extended except by the written
consent of PFG in its sole discretion. This provision shall survive any termination of this Loan
Agreement or any other Loan Document.

     8.16 Paragraph Headings; Construction. Paragraph headings are only used in this Agreement
for convenience. Borrower and PFG acknowledge that the headings may not describe completely the
subject matter of the applicable paragraph, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term
or provision of this Agreement shall be construed strictly against PFG or Borrower under any rule
of construction or otherwise.

     8.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and transactions
hereunder and all rights and obligations of PFG and Borrower shall be governed by the laws of the
State of California. As a material part of the consideration to PFG to enter into this Agreement,
Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at PFG’s option, be litigated in courts located within California, and that the
exclusive venue therefor shall be San Francisco County; (ii) consents to the jurisdiction and venue
of any such court and consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.

     8.18 Mutual Waiver of Jury Trial. BORROWER AND PFG EACH HEREBY WAIVE THE RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS
AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN PFG AND BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF PFG OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH PFG OR BORROWER, IN ALL OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

	 	 	 	 	 	 	 	 	 
	Borrower:

	 	PFG:	 	 
	 
	 	 	 	 	 	 	 	 
	     SONICS, INC.	 	PARTNERS FOR GROWTH, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	     By

	 	/s/ Grant A. Pierce
	 	By
	 	/s/ Andrew W. Kahn
	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	President or Vice President
	 	Name:
	Andrew W. Kahn	 	 
	 
	 	 	 	 	 	 	 	 
	     By

	 	/s/ Drew Wingard	 	 	 	 	 	 
	 

	 	 

	 	Title:
	Manager, Partners for Growth, LLC	 	 
	 

	 	Secretary or Ass’t Secretary
	 	 	 	Its General Partner	 	 

Form Version: -4

Document Version -2

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Partners For Growth

Schedule to

Term Loan and Security Agreement

	 	 	 
	Borrower:

	 	Sonics, Inc.
	Address:

	 	1098 Alta Avenue, Suite 101, Mountain View, California 94043
	 
	 	 
	Date:

	 	May 26, 2005

This Schedule forms an integral part of the Loan and Security Agreement between PARTNERS FOR
GROWTH, L.P. and the above-borrower of even date.

1. LOAN (Section 1.1):

	 	 	 
	(a) Loan:

	 	The Loan shall consist of a term loan in the amount of $1,000,000, which shall
be disbursed in its entirety on the date hereof. The principal amount of the Loan shall be
repaid in its entirety on the Maturity Date, on which date the entire unpaid principal
balance of the Loan plus any and all accrued and unpaid interest shall be paid.
	 
	 	 
	(b) Prepayment:

	 	The Loan may not be prepaid in whole or in part.
	 
	 	 
	(c) PFG Conversion:

	 	At any time prior to the Maturity Date, PFG may at its option convert
the Loan (or any part thereof) into the Borrower’s next preferred equity (or convertible
debt) round of finance raising not less than $5,000,000 (inclusive of an amount not to
exceed $750,000 in inside debt that is converted into equity in such round of finance) (a
“Next Equity Financing”) at the issue price thereof. If the Next Equity Financing is not
completed within 3 months from the date hereof, the Loan (or any part thereof) may be
converted immediately upon notice by PFG from time to time into Borrower’s Series C
Preferred Stock at a conversion price of $0.50 per share (as adjusted). If a Next Equity
Financing is completed during the period between 3 months from the date hereof and 1 year
from the date hereof, PFG may, at its option, convert the Loan (or any part thereof) into
either Borrower’s Series C Preferred Stock at a conversion price of $0.50 per share (as
adjusted) or the securities issued in the Next Equity Financing at the price at which such
securities are sold to purchasers in such Next Equity Financing (such conversion prices
being referred to herein as the respective “Conversion Price”). PFG shall notify Borrower
whether it intends to
convert into Series C Preferred Stock or Next Equity

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	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	 	 
	 

	 	Financing
Stock within 30 days of the closing of a Next Equity Financing
(but shall in no event be required to convert at such time). Each
Conversion Price, and the securities issuable upon conversion, is
subject to adjustment for stock splits, combinations,
reclassifications and similar transactions. If (i) the Company
completes a public offering of its Common Stock, and (ii) all of
the Preferred stock of Borrower converts to Common Stock as part
of such public offering, and (iii) PFG does not exercise its
conversion option at such time, then the Loan shall cease to be
convertible into Series C Preferred Stock or Next Equity Financing
securities, as the case may be, and instead shall be convertible
(at such time as PFG may determine in its discretion) into the
Company’s Common Stock at the same ratio and upon the same basis
that such Loan was previously convertible into such Series C
Preferred Stock or Next Equity Financing securities, adjusted as
necessary in the event that the Series C Preferred Stock or the
Next Equity Financing securities are convertible into Common Stock
at other than a 1 to 1 ratio. PFG may exercise its right to
convert the Loan or part thereof by telecopying or otherwise
delivering an executed and completed notice specifying the portion
of the Loan to be converted into Borrower’s stock (a “Conversion
Notice”). Each date on which a Conversion Notice is telecopied or
delivered to the Company in accordance with the provisions hereof
shall be deemed a Conversion Date. Pursuant to the terms of the
Conversion Notice, the Company will procure the issue of stock
certificates for the Conversion Stock within five (5) business
days of the delivery of the Conversion Notice.
	 
	 	 
	(d) Borrower-Initiated 

      Conversion:
	 	 
	 
	 	 
	 

	 	If Borrower consummates a firm commitment underwritten public
offering of its Common Stock, Borrower may, at any time
thereafter, upon 5 days’ written notice, effect the conversion of
the Loan in its entirety (“Borrower Conversion Option”) if
the following conditions and limitations are satisfied:
	 
	 	 
	 

	 	(i) at the time Borrower notices a Borrower Conversion Option (a
“Borrower Conversion Notice”), there shall not have occurred and
be continuing any Event of Default under the Loan which has not,
for the purposes of the Borrower Conversion Option, been waived by
PFG; and
	 
	 	 
	 

	 	(ii) Borrower is current in its reports under the Securities
Exchange Act of 1934; and
	 
	 	 
	 

	 	(iii) for a period of 20 consecutive trading days prior to the
giving of the Borrower Conversion Notice, the Common Stock of
Borrower
shall have closed at a price greater than 300% of the Conversion
Price of the Loan; and

-2-

 

	 	 	 	 	 
	 

	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	 	 
	 

	 	(iv) at the time Borrower notices the Borrower Conversion Option,
the Common Stock to be issued to PFG may be then freely traded by
PFG without restriction either pursuant to a then-effective
registration statement applicable to such Common Stock or on an
unrestricted basis under Rule 144.
	 
	 	 
	 

	 	If the above conditions are satisfied and Borrower exercises the
Borrower Conversion Option, Borrower shall deliver the Common
Stock issuable upon such conversion within 2 business days of the
end of the 5-day period following Borrower’s notice of exercise of
the Borrower Conversion Option.
	 
	 	 
	(e) Cap on Return:

	 	If Borrower does not consummate a Next Equity Financing and PFG
converts the Loan into Borrower’s Series C Preferred Stock, upon a liquidation (or deemed
liquidation) of Borrower, once PFG has received liquidation consideration (inclusive of
any dividends paid to PFG prior to such liquidation) equal to 3 times the principal amount
of the Loan that is converted by PFG into Borrower’s Series C Preferred Stock, PFG shall
surrender such Series C Preferred Stock to Borrower and shall have no further rights
associated with such stock. PFG consents to Borrower affixing a legend to any certificates
representing Series C Preferred Stock held by PFG reflecting such contractual restriction.
	 
	 	 
	(f) Additional
Representations
and Warranties:

	 	Borrower represents and warrants that:
	 
	 	 
	 

	 	(i) Corporate Power; Authorization. Borrower has
all requisite corporate power and has taken all requisite
corporate action to execute and deliver this Agreement and to sell
and issue the Conversion Stock and to carry out and perform all of
its obligations hereunder. This Agreement has been duly
authorized, executed and delivered on behalf of Borrower and
constitutes its valid and binding agreement, enforceable in
accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to
or affecting the enforcement of creditors’ rights generally and
(ii) as limited by equitable principles generally. The person
executing this Agreement is a duly authorized officer of Borrower
with all necessary legal authority to bind Borrower generally and
with the specific legal authority to cause Borrower to enter into
this Agreement all other agreements and instruments to be executed
by Borrower in connection herewith.
	 
	 	 
	 

	 	(ii) Validity of Conversion Stock. The Conversion Stock,
when issued upon conversion of the Loan, will be validly
authorized and issued, fully paid and nonassessable. The issuance
and delivery of the Conversion Stock is not subject to preemptive
or any similar rights of

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	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	 	 
	 

	 	the stockholders of Borrower that have
not been waived or any liens or encumbrances except for
restrictions on transfer provided for herein or under applicable
federal and state securities laws; and when the Conversion Stock
is issued in accordance with this Agreement and such Conversion
Stock is converted into Common Stock, such securities will be, at
each such issuance, validly issued and outstanding, fully paid and
nonassessable and free of any liens or encumbrances except for
restrictions on transfer provided for herein or under applicable
federal and state securities laws.

2. INTEREST.

	 	 	 
	Interest Rate (Section 1.2):
	 	 
	 

	 	The Loan shall bear interest at a rate equal to LIBOR, measured
quarterly, plus three percent (3%). The indicative rate on the
date hereof until June 30, 2005 is [6.22%].
	 
	 	 
	 

	 	Interest shall be calculated on the date hereof and thereafter on
a calendar quarterly basis assuming a 360-day year and a year of
twelve months of 30 days each for the actual number of days
elapsed. Accrued interest for each month shall be payable monthly,
on the first day of each month for interest accrued during the
prior month.

3. FEES (Section 1.3):

	 	 	 
	Loan Fee:

	 	$17,500, payable concurrently herewith.

	 	 	 
	4. MATURITY DATE
	 	 
	          (Section 5.1):
	 	May 31, 2010.

5. FINANCIAL COVENANTS / OTHER COVENANTS

	 	 	 
	(Section 4.1):

	 	Borrower shall comply with each of the following covenants. Compliance shall be
determined as of the end of each month, except as otherwise specifically provided below:

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	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	(a)	 	Borrower shall use the
proceeds of any Next Equity Financing to repay the Senior
Debt such that after such repayment, there is not more than
$1,000,000 in Senior Debt outstanding (the “Senior Debt
Reduction”).
	 
	 	(b)	 	From and after the Senior
Debt Reduction, Borrower shall not permit the amount
outstanding under the Senior Debt at any time to exceed
$1,000,000.
	 
	 	(c)	 	During the period within
which the Loan may be converted, Borrower will at all times
have authorized and reserved, for the purpose of issue or
transfer upon conversion of the Loan, a sufficient number of
authorized but unissued shares of Conversion Stock, when and
as required to provide for the exercise of the rights
represented by PFG’s conversion right.
	 
	 	(d)	 	All shares of Conversion
Stock which may be issued upon the exercise of PFG’s right to
convert the Loan and all securities, if any, issuable upon
conversion of the Conversion Stock, shall, upon issuance, be
duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except
for restrictions on transfer provided for herein or under
applicable federal and state securities laws.
	 
	 	(e)	 	Attached as Appendix A to
this Schedule are capitalization tables reflecting (i) the
fully-diluted capitalization of Borrower on the date hereof,
and (ii) the pro forma capitalization of Borrower assuming
full subscription of the Series C-1 Preferred Stock upon the
terms as set forth in that certain term sheet dated May 9,
2005 between Borrower and certain of Borrower’s key
investors.

6. REPORTING / NOTICES.

      (Section 4.4):

Borrower shall provide PFG with the following:

	 	(a)	 	Monthly accounts receivable
agings, aged by invoice date, within 30 days after the end of
each month.
	 
	 	(b)	 	Quarterly schedules of
Royalty Revenues, within 30 days after the end of each
quarter, unless there has been a change during a quarter, and
in such event within 30 days of such change.
	 
	 	(c)	 	Monthly unaudited financial
statements, as soon as available, and in any event within 30
days after the end of each month.
	 
	 	(d)	 	Monthly Compliance
Certificates, within thirty days after the end of each month,
in such form as PFG shall reasonably specify, signed by the
Chief Financial Officer of Borrower,

-5-

 

	 	 	 	 	 
	 

	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	 	 	certifying that as of
the end of such month Borrower was in full compliance with
all of the terms and conditions of this Agreement, and
containing such other information as PFG shall reasonably
request.
	 
	 	(e)	 	Annual financial statements,
as soon as available, and in any event within 120 days
following the end of Borrower’s fiscal year, certified by,
and with an unqualified opinion of, independent certified
public accountants acceptable to PFG; provided, however, that
such opinion may contain a going concern as to the Borrower’s
ability to continue. If Borrower files a form 10-K with the
Securities and Exchange Commission and the same is available
within said period through EDGAR, this requirement will be
deemed satisfied.
	 
	 	(f)	 	Copies of all reports and
statements provided by Borrower to the Senior Lender at the
same time the same are provided to the Senior Lender.

     In the event that Borrower shall:

	 	(k)	 	declare or propose to declare
any dividend upon its capital stock, whether payable in cash,
property, stock or other securities and whether or not a
regular cash dividend, or
	 
	 	(l)	 	offer for sale any additional
shares of any class or series of Borrower’s capital stock or
securities exchangeable for or convertible into such capital
stock, or
	 
	 	(m)	 	effect or approve any
reclassification or recapitalization of the capital stock of
Borrower, including any subdivision or combination of its
outstanding capital stock, or consolidation or merger of
Borrower with, or sale of all or substantially all of its
assets to, another corporation, or to liquidate, dissolve or
wind up (including an assignment for the benefit of
creditors), or
	 
	 	(n)	 	offer holders of registration
rights the opportunity to participate in any public offering
of Borrower’s securities,

     then, in connection with such event, Borrower shall give to PFG:

	 	(o)	 	at least 10 days prior
written notice of the date on which the books of Borrower
shall close or a record shall be taken for such a dividend or
offer in respect of the matters referred to in (k), (l) or (n)
above, or for determining rights to vote in respect of the
matters referred to in (m) above; and

-6-

 

	 	 	 	 	 
	 

	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	(p)	 	in the case of the matters
referred to in (m) above, at least 10 days prior written
notice of the date when the same shall take place. Such notice
in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, the date on which
the holders of capital stock shall be entitled thereto and the
terms of such dividend, and such notice in accordance with
this clause (ii) shall also specify the date on which the
holders of capital stock shall be entitled to exchange their
capital stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation,
merger or sale, as the case may be, and the terms of such
exchange. Each such written notice shall be given by first
class mail, postage prepaid, addressed to PFG; and
	 
	 	(q)	 	in the case of the matter
referred to in (n) above, the same notice as is given or
required to be given to the holders of such registration
rights.

7. BORROWER INFORMATION:

Borrower represents and warrants that the information set forth in
the Representations and Warranties of the Borrower dated May 25,
previously submitted to PFG (the “Representations”) is true and
correct as of the date hereof.

8. ADDITIONAL PROVISIONS

	 	(a)	 	Senior Lender.

	 	(1)	 	Senior
Lender. As used herein, “Senior Lender” means
Silicon Valley Bank, and “Senior Loan Documents” means
all present and future documents instruments and
agreements entered into between Borrower and Senior
Lender or by third parties relating to Borrower and
Senior Lender.
	 
	 	(2)	 	Senior
Debt Limit. Borrower shall not permit the total
Indebtedness of Borrower to Senior Lender to exceed
$3,750,000 at any time outstanding (the “Senior Debt
Limit”), including, but not limited to, monies
borrowed by Borrower, interest on loans due from
Borrower, fees and expenses for which Borrower is
obligated, sums due from Borrower in connection with
issuance of commercial letters of credit, issuance of
forward contracts for foreign exchange reserve, and
any other

-7-

 

	 	 	 	 	 
	 

	 	Partners for Growth
	 	Schedule to Loan and Security Agreement          

	 	 	 	direct or indirect financial accommodation
Senior Lender may provide to Borrower); provided,
however, that after the Senior Debt Reduction, the
Senior Debt Limit shall be $1,000,000.
	 
	 	(3)	 	Senior
Loan Documents. Borrower represents and warrants
that it has provided PFG with true and complete copies
of all existing Senior Loan Documents, and Borrower
covenants that it will, in the future, provide PFG
with true and complete copies of any future Senior
Loan Documents, including without limitation any
amendments to any existing Senior Loan Documents.

	 	(b)	 	Deposit Accounts.
Concurrently, Borrower shall cause the banks and other
institutions where its Deposit Accounts are maintained to
enter into control agreements with PFG, in form and substance
satisfactory to PFG in its good faith business judgment and
sufficient to perfect PFG’s security interest in said Deposit
Accounts, subject to the security interest of the Senior
Lender. Said control agreements shall permit PFG, in its
discretion, to withdraw from said Deposit Accounts accrued
interest on the Obligations monthly (subject to the rights of
the Senior Lender); provided, however, that Borrower may (A)
open and maintain foreign Deposit Accounts with no more
than $125,000 in the aggregate at any time without a
Deposit Account control agreement in effect in favor of
PFG, and (B) maintain a Deposit Account at Lehman Bros.
with a Deposit Account control agreement in effect in favor
of PFG so long as the balance in such account is at no time
more than $95,000.

	 	 	 	 	 	 	 	 	 
	Borrower:	 	PFG:	 	 
	 
	 	 	 	 	 	 	 	 
	     SONICS, INC.	 	PARTNERS FOR GROWTH, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	     By

	 	/s/ Grant A. Pierce
	 	By
	 	/s/ Andrew W. Kahn	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	President or Vice President
	 	Name:
	 	Andrew W. Kahn	 	 
	 
	 	 	 	 	 	 	 	 
	     By

	 	/s/ Drew Wingard	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Secretary or Ass’t Secretary
	 	Title:
	 	Manager, Partners for Growth, LLC	 	 
	 

	 	 	 	 	 	Its General Partner	 	 

Form:  - 4

Version -2

-8-

 

Exhibit A to Loan and Security Agreement

Section 2.2—Specified Contracts which, to the extent provided in Section 2.2, are excluded from the
security interest granted to PFG and which are material to Borrower’s business or grant Borrower
rights in Intellectual Property which is licensed by the Borrower to its customers or incorporated
in products licensed or sold by the Borrower to its customers:

Section 7—“Permitted
Indebtedness”—Other Existing Permitted Indebtedness:

Section 7—“Permitted
Investments”—Other Existing Permitted Investments:

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