Document:

EXHIBIT 10.34

 

EXECUTION COPY

 

THIS SUBORDINATED SECURITY
AGREEMENT IS SUBJECT TO THE SUBORDINATION AGREEMENT (THE “SUBORDINATION
AGREEMENT”), DATED AS OF THE DATE HEREOF, AMONG THE GRANTOR, THE SENIOR LENDER AND
FONDS DE SOLIDARITÉ DES TRAVAILLEURS DU QUÉBEC (F.T.Q.)

 

SUBORDINATED
SECURITY AGREEMENT

 

SUBORDINATED SECURITY AGREEMENT dated as of September 21,
2009 (this “Security Agreement”), between NEXSAN CORPORATION, a corporation duly
organized and validly existing under the laws of Delaware (the “Grantor”), and Fonds de solidarité des travailleurs
du Québec (F.T.Q.) (the “Secured Party”).

 

WHEREAS, on the date hereof, the Grantor issued and
delivered that certain 12% Secured Note in the original principal amount of
$3,600,000 (the “Note”) dated September 21, 2009 to the Secured Party
(the “Loan”).

 

WHEREAS, to induce the Secured Party to extend the
Loan, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantor has agreed to grant a
security interest in the Collateral (as hereinafter defined) as security for
the Secured Obligations (as so defined).

 

Accordingly, the parties hereto agree as follows:

 

Section 1.                                            Definitions, Etc.

 

1.01                          (a)                                   Unless otherwise defined herein, all capitalized terms
used in this Security Agreement that are defined in the Note shall have the
respective meanings assigned to them in the Note.

 

(b)                                 Certain Uniform Commercial Code Terms. 
As used herein, the terms “Accession”, “Account”, “As-Extracted
Collateral”, “Chattel Paper”, “Commodity Account”, “Commodity
Contract”, “Deposit Account”, “Document”, “Electronic
Chattel Paper”, “Equipment”, “Fixture”, “General
Intangible”, “Goods”, “Instrument”, “Inventory”, “Investment
Property”, “Letter-of-Credit Right”, “Payment Intangible”, “Proceeds”,
“Promissory Note”, “Software” and “Tangible Chattel Paper”
have the respective meanings set forth in Article 9 of the NYUCC, and the
terms “Certificated Security”, “Entitlement Holder”, “Financial
Asset”, “Instruction”, “Securities Account”, “Security”,
“Security Certificate”, “Security Entitlement” and “Uncertificated
Security” have the respective meanings set forth in Article 8 of the
NYUCC.

 

1.02                           Additional
Definitions.  In addition, as used herein:

 

“Casualty Event” means, with respect to any property of
any Person, any loss of or damage to, or any condemnation or other taking of,
such property for which such Person receives insurance proceeds, or proceeds of
a condemnation award or other compensation.

 

“Collateral” has the meaning assigned to such
term in Section 3.

 

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“Copyright
Collateral” means all Copyrights of the Grantor, whether now owned or
hereafter acquired by the Grantor, including each Copyright identified in
Schedule 1.4.1 of the Certificate of Representations and Warranties.

 

“Copyrights”
means all copyrights, copyright registrations and applications for copyright
registrations, including all renewals and extensions thereof, all rights to
recover for past, present or future infringements thereof and all other rights
whatsoever accruing thereunder or pertaining thereto.

 

“Credit
Documents” means collectively, this Security Agreement, the Note and any
other document or instrument now existing or hereafter entered into that relates
thereto (including any promissory note evidencing any thereof, and any document
or instrument providing for the grant of a lien upon any property of the
Grantor as collateral security for the obligations of the Grantor in respect
thereof).

 

“Default”
means any of the following events: (a) the occurrence or continuance of an
Event of Default as defined under Article 4 of the Note, (b) the
default by the Grantor in the performance of any other obligation, covenant,
term or provision contained in this Security Agreement, and such default shall
continue unremedied for a period of 30 days or more after the earlier to occur
of (1) the Grantor receiving written notice of such default from the
Secured Party or (2) the discovery by the Grantor of such default.

 

“Foreign
Subsidiary” means any subsidiary of the Grantor with respect to which the
Secured Party determines that a pledge of more than 66-2/3% of the total number
of shares of voting stock of such subsidiary would result in material adverse
tax consequences under Section 956 of the Code.

 

“Initial
Pledged Shares” means the Shares of each Issuer beneficially owned by the
Grantor on the date hereof and identified in Annex 2.

 

“Intellectual
Property” means, collectively, all Copyright Collateral, all Patent Collateral
and all Trademark Collateral, together with (a) all inventions, processes,
production methods, proprietary information, know-how and trade secrets; (b) all
licenses or user or other agreements granted to the Grantor with respect to any
of the foregoing, in each case whether now or hereafter owned or used; (c) all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter manufactured;
(e) all accounting information and all media in which or on which any
information or knowledge or data or records may be recorded or stored and all
computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances, certifications
and approvals of governmental agencies now or hereafter held by the Grantor;
and (g) all causes of action, claims and warranties now or hereafter owned
or acquired by the Grantor in respect of any of the items listed above.

 

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“Issuers” means, collectively, (a) the respective Persons identified on
Annex 2 under the caption “Issuer”, (b) any other Person that shall at any time be a subsidiary of
the Grantor, and (c) the issuer of any equity securities hereafter owned
by the Grantor.

 

“Motor
Vehicles” means motor vehicles,
tractors, trailers and other like property, if the title thereto is governed by
a certificate of title or ownership.

 

“Note” has the meaning specified in the
recitals hereto.

 

“NYUCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York.

 

“Patent
Collateral” means all Patents of the
Grantor, whether now owned or hereafter acquired by the Grantor, including each
Patent identified in Schedule 1.4.1 of the Certificate of Representations
and Warranties, and all income, royalties, damages and payments now or
hereafter due and/or payable under or with respect thereto.

 

“Patents” means all patents and patent applications, including the inventions
and improvements described and claimed therein together with the reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, all income, royalties, damages and payments now or hereafter due
and/or payable with respect thereto, all damages and payments for past or
future infringements thereof and rights to sue therefor, and all rights
corresponding thereto throughout the world.

 

“Person” means any individual, corporation, company, voluntary association,
partnership, limited liability company, joint venture, trust, unincorporated
organization or government (or any agency, instrumentality or political
subdivision thereof).

 

“Pledged
Shares” means, collectively, (i) the
Initial Pledged Shares and (ii) all other Shares of any Issuer now or
hereafter owned by the Grantor, together in each case with (a) all
certificates representing the same, (b) all shares, securities, moneys or
other property representing a dividend on or a distribution or return of
capital on or in respect of the Pledged Shares, or resulting from a split-up,
revision, reclassification or other like change of the Pledged Shares or
otherwise received in exchange therefor, and any warrants, rights or options
issued to the holders of, or otherwise in respect of, the Pledged Shares, and (c) without
prejudice to any provision of any of the Credit Documents prohibiting any merger or consolidation
by an Issuer, all Shares of any successor entity of any such merger or
consolidation.

 

“Representations
and Warranties Certificate” means the certificate executed on the date hereof by the Grantor in
favor of the Secured Party containing additional representations and warranties made by
the Grantor.

 

“Secured
Obligations” means, collectively, the
obligations of the Grantor to the Secured Party in respect of the principal of
and interest on any loan or other extension of credit under the Note made by
the Secured Party to the Grantor, and all other amounts from time to time owing
to the Secured Party now or hereafter existing whether direct or indirect,
absolute or contingent by the Company under the Credit Documents, together with
in each case interest thereon and expenses related thereto, including any
interest or expenses accruing or arising after the 

 

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commencement of any case
with respect to the Grantor under the United States Bankruptcy Code or any
other bankruptcy or insolvency law (whether or not such interest or expenses
are allowed or allowable as a claim in whole or in part in such case).

 

“Senior Lender” means Comerica Bank, and its successors
and assigns.

 

“Shares” means shares of capital stock of a
corporation, limited liability company interests, partnership interests and other
ownership or equity interests of any class in any Person.

 

“Subordinated Security
Agreement” means
the Subordinated Security Agreement dated as of November 2, 2006 between, inter
alia, the Grantor and VantagePoint Venture Partners IV (Q),
L.P., in its capacity as collateral agent thereunder.

 

“Subordination Agreement” has the meaning specified in the legend
hereto.

 

“Trademark
Collateral” means all Trademarks of the
Grantor, whether now owned or hereafter acquired by the Grantor, including each
Trademark identified in Schedule 1.4.1 of the Certificate of
Representations and Warranties, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.  Notwithstanding the foregoing, the Trademark
Collateral does not and shall not include any Trademark that would be rendered
invalid, abandoned, void or unenforceable by reason of its being included as
part of the Trademark Collateral.

 

“Trademarks” means all trade names, trademarks and service marks, logos, trademark
and service mark registrations, and applications for trademark and service mark
registrations, including all renewals of trademark and service mark
registrations, all rights to recover for all past, present and future
infringements thereof and all rights to sue therefor, and all rights
corresponding thereto throughout the world.

 

Section 2.                                            Representations
and Warranties.  The Grantor represents and warrants to
the Secured Party that:

 

2.01                           Organizational
Matters; Enforceability, Etc.  The Grantor is duly organized, validly existing and in
good standing under the laws of the State of Delaware.  The execution, delivery and performance of
this Security Agreement, and the grant of the security interests pursuant
hereto, (a) are within the Grantor’s corporate powers and have been duly
authorized by all necessary corporate or other action, (b) do not require
any consent or approval of, registration or filing with, or any other action
by, any governmental authority or court, except for (i) such as have been
obtained or made and are in full force and effect and (ii) filings and
recordings in respect of the security interests created pursuant hereto, (c) will
not violate any applicable law or regulation or the certificate of
incorporation or by-laws of the Grantor or any order of any governmental
authority or court binding upon the Grantor or its property, (d) will not
violate or result in a default under any material indenture, agreement or other
instrument binding upon the Grantor or any of its assets, or give rise to a
right thereunder to require any payment to be made by any such person, and (e) except
for the security interests created pursuant hereto, will not result in the
creation or imposition of any lien, charge or encumbrance on any asset of the
Grantor.

 

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This
Security Agreement has been duly executed and delivered by the Grantor and
constitutes, a legal, valid and binding obligation of the Grantor, enforceable
against the Grantor in accordance with its terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditors’ rights and
(b) the application of general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

 

Neither
the Grantor nor any of its subsidiaries is an “investment company” as defined
in, or subject to regulation under, the Investment Company Act of 1940.

 

2.02                           Title.  The Grantor is the sole beneficial owner of the Collateral and no lien
exists upon the Collateral (and no right or option to acquire the same exists
in favor of any other Person) other than (a) the security interest created
or provided for herein, which security interest constitutes a valid perfected
lien on the Collateral, (b) the liens granted pursuant to the Subordinated
Security Agreement, (c) the liens granted to the Senior Lender and (d) the
liens (if any) expressly permitted by the Credit Documents.

 

2.03                           Names, Etc.  The full and correct legal name, type of organization, jurisdiction of
organization, organizational ID number (if applicable) and mailing address of
the Grantor as of the date hereof are correctly set forth in Annex 1.  Said Annex 1 correctly specifies the place of
business of the Grantor or, if the Grantor has more than one place of business,
the location of the chief executive office of the Grantor.

 

2.04                           Changes in Circumstances.  The Grantor has not (a) within the period of four
months prior to the date hereof, changed its location (as defined in Section 9-307
of the NYUCC), (b) except as specified in Annex 1, heretofore changed its
name, or (c) heretofore become a “new debtor” (as defined in Section 9-102(a)(56)
of the NYUCC) with respect to a currently effective security agreement
previously entered into by any other Person.

 

2.05                           Pledged Shares.  The Initial Pledged Shares constitute (a) 100% of
the issued and outstanding Shares of each Issuer other than a Foreign
Subsidiary beneficially owned by the Grantor on the date hereof, whether or not
registered in the name of the Grantor and (b) in the case of each Issuer
that is a Foreign Subsidiary, (i) 65% of the issued and outstanding shares
of voting stock of such Issuer and (ii) 100% of all other issued and
outstanding shares of capital stock of whatever class of such Issuer
beneficially owned by the Grantor on the date hereof, in each case whether or
not registered in the name of the Grantor. 
Annex 2 correctly identifies, as at the date hereof, the respective
Issuers of the Initial Pledged Shares and (in the case of any corporate Issuer)
the respective class and par value of such Shares and the respective number of
such Shares (and registered owner thereof) represented by each such
certificate.

 

The
Initial Pledged Shares are, and all other Pledged Shares in which the Grantor
shall hereafter grant a security interest pursuant to Section 3 will be, (i) duly
authorized, validly existing, fully paid and non-assessable (in the case of any
Shares issued by a corporation) and (ii) duly issued and outstanding (in
the case of any equity interest in any other entity), and none of such Pledged
Shares are or will be subject to any contractual restriction, or any
restriction under the charter, by-laws, partnership agreement or other
organizational instrument of the respective Issuer thereof, upon the transfer
of such Pledged Shares (except for any such 

 

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restriction contained herein
or in the Note, the Subordination Agreement or the Subordinated Security
Agreement and any subordination agreement related thereto, or under such
organizational instruments).

 

2.06                           Promissory
Notes.  As of the date hereof, the Grantor is not the
beneficiary of any Promissory Notes.

 

2.07                           Intellectual Property.  Schedules 1.4.1, 1.4.2, 1.4.4 and 1.4.6 of the Certificate of
Representations and Warranties, respectively, set forth a complete and correct
list of all copyright registrations, patents, patent applications, trademark
registrations and trademark applications owned by the Grantor on the date
hereof.

 

Except pursuant to licenses and other user agreements
entered into by the Grantor in the ordinary course of business and as listed on
Schedules 1.4.6 and 1.4.11 of the Certificate of Representations and
Warranties, the Grantor has done nothing to authorize or enable any other
Person to use any Copyright, Patent or Trademark listed in Schedules 1.4.1,
1.4.2, 1.4.4 and 1.4.6 of the Certificate of Representations and Warranties,
and all registrations listed in said Schedules 1.4.1, 1.4.2, 1.4.4 and 1.4.6
are, except as noted therein, in full force and effect.

 

To
the Grantor’s knowledge, (i) except as set forth in said Schedules 1.4.1,
1.4.2, 1.4.4 and 1.4.6, there is no violation by others of any right of the
Grantor with respect to any Copyright, Patent or Trademark listed in said
Schedules 1.4.1, 1.4.2, 1.4.4 and 1.4.6, respectively, and (ii) the
Grantor is not infringing in any respect upon any Copyright, Patent or
Trademark of any other Person; and no proceedings alleging such infringement
have been instituted or are pending against the Grantor and no written claim
against the Grantor has been received by the Grantor, alleging any such
violation, except as may be set forth in said Schedules 1.4.1, 1.4.2, 1.4.4 and
1.4.6.

 

The
Grantor does not own any Trademarks registered in the United States of America
to which the last sentence of the definition of Trademark Collateral applies.

 

2.08                           Deposit
Accounts and Securities Accounts.  Schedule 1.3.6 of the Representations and
Warranties Certificate sets forth a complete and correct list of all Deposit
Accounts, Securities Accounts and Commodity Accounts of the Grantor on the date
hereof.

 

2.09                           Commercial Tort
Claims.  Schedule 1.3.5 of the Representations and
Warranties Certificate sets forth a complete and correct list of all commercial
tort claims of the Grantor in existence on the date hereof.

 

Section 3.                                            Collateral.  As collateral security for the payment in full when
due (whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations, the Grantor hereby pledges and grants to the Secured Party as
hereinafter provided a security interest in all of the Grantor’s right, title
and interest in, to and under the following property, in each case whether
tangible or intangible, wherever located, and whether now owned by the Grantor
or hereafter acquired and whether now existing or hereafter coming into existence
(all of the property described in this Section 3 being collectively
referred to herein as “Collateral”):

 

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(a)                                  all Accounts:

 

(b)                                 all As-Extracted Collateral;

 

(c)                                  all Chattel Paper;

 

(d)                                 all Deposit Accounts;

 

(e)                                  all Documents;

 

(f)                                    all Equipment;

 

(g)                                 all Fixtures;

 

(h)                                 all General Intangibles;

 

(i)                                     all Goods not covered by the other clauses of this Section 3;

 

(j)                                     the Pledged Shares;

 

(k)                                  all Instruments, including all Promissory Notes;

 

(l)                                     all Intellectual Property;

 

(m)                               all Inventory;

 

(n)                                 all Investment Property not covered by other clauses of this Section 3, including all Securities,
all Securities Accounts and all Security Entitlements with respect thereto and
Financial Assets carried therein, and all Commodity Accounts and Commodity
Contracts;

 

(o)                                 all Letter-of-Credit Rights;

 

(p)                                 all commercial tort claims, as defined in Section 9-102(a)(13) of
the NYUCC,
arising out of the events described in Schedule 1.3.5 of the
Representations and Warranties Certificate;

 

(q)                                 all other tangible and intangible personal property whatsoever of the Grantor; and

 

(r)                                    all Proceeds of any of the Collateral, all Accessions to and
substitutions and
replacements for, any of the Collateral, and all offspring, rents, profits and
products of any of the Collateral, and, to the extent related to any
Collateral, all books, correspondence, credit files, records, invoices and
other papers (including all tapes, cards, computer runs and other papers and
documents in the possession or under the control of the Grantor or any computer
bureau or service company from time to time acting for the Grantor),

 

IT BEING UNDERSTOOD,
HOWEVER, that (A) in the case of any of the foregoing that consists of
general or limited partnership interests in a general or limited partnership,
the security interest hereunder shall be deemed to be created only to the
maximum extent permitted under the applicable organizational instrument
pursuant to which such partnership is formed, (B) in no event shall the
security interest granted under this Section 3 attach to any lease,
license, contract, 

 

7

 

property rights or
agreement to which the Grantor is a party (or to any of its rights or interests
thereunder) if the grant of such security interest would constitute or result
in either (i) the abandonment, invalidation or unenforceability of any
right, title or interest of the Grantor therein or (ii) in a breach or
termination pursuant to the terms of, or a default under, any such lease,
license, contract, property rights or agreement (other than to the extent that
any such term would be rendered ineffective by Section 9-406, 9-407, 9-408
or 9-409 of the Uniform Commercial Code as in effect in the relevant jurisdiction),
and (C) the security interest created hereby in Shares constituting voting
stock of any Issuer that is a Foreign Subsidiary shall be limited to that
portion of such voting stock that does not exceed 65% of the aggregate issued
and outstanding voting stock of such Issuer.

 

Section 4.                                            [Reserved].

 

Section 5.                                            Further
Assurances; Remedies.  In furtherance of the grant of the
security interest pursuant to Section 3, the Grantor hereby agrees with
the Secured Party as follows:

 

5.01                           Delivery and
Other Perfection.  The Grantor shall promptly from time to
time give, execute, deliver, file, record, authorize or obtain all such
financing statements, continuation statements, notices, instruments, documents,
agreements or consents or other papers as may be necessary or desirable in the
judgment of the Secured Party to create, preserve, perfect, maintain the
perfection of or validate the security interest granted pursuant hereto or to
enable the Secured Party to exercise and enforce its rights hereunder with respect
to such security interest, and without limiting the foregoing, shall:

 

(a)                                  if any of the Pledged Shares, Investment Property or Financial Assets
constituting part of the Collateral are received by the Grantor, forthwith (x) deliver
to the Secured Party the certificates or instruments representing or evidencing
the same, duly endorsed in blank or accompanied by such instruments of
assignment and transfer in such form and substance as the Secured Party may
reasonably request, all of which thereafter shall be held by the Secured Party,
pursuant to the terms of this Security Agreement, as part of the Collateral and
(y) take such other action as the Secured Party may reasonably deem
necessary or appropriate to duly record or otherwise perfect the security interest
created hereunder in such Collateral;

 

(b)                                 promptly from time to time deliver to the Secured Party any and all
Instruments constituting part of the Collateral (other than the share
certificates of Nexsan Technologies Incorporated), endorsed and/or accompanied
by such instruments of assignment and transfer in such form and substance as
the Secured Party may request; provided that so long as no Default shall have
occurred and be continuing, the Grantor may retain for collection in the
ordinary course any Instruments received by the Grantor in the ordinary course
of business and the Secured Party shall, promptly upon request of the Grantor,
make appropriate arrangements for making any Instrument delivered by the
Grantor available to the Grantor for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent requested by the
Secured Party, against trust receipt or like document);

 

(c)                                  promptly from time to time enter into such control agreements, each in
form and substance reasonably acceptable to the Secured Party, as may be
required to perfect the security interest created hereby in any and all Deposit
Accounts, Investment Property, Electronic 

 

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Chattel
Paper and Letter-of-Credit Rights, and will promptly furnish to the Secured
Party true copies thereof;

 

(d)                                 promptly from time to time upon the request of the Secured Party,
execute and deliver such short-form security agreements as the Secured Party
may reasonably deem necessary or desirable to protect the interests of the
Secured Party in respect of that portion of the Collateral consisting of
Intellectual Property;

 

(e)                                  promptly upon request of the Secured Party, cause the Secured Party to
be listed as the lienholder on any certificate of title or ownership covering
any Motor Vehicle (other than Motor Vehicles constituting Inventory) and within
120 days of such request deliver evidence of the same to the Secured Party;

 

(f)                                    keep full and accurate books and records
relating to the Collateral, and stamp or otherwise mark such books and records
in such manner as the Secured Party may reasonably require in
order to reflect the security interests granted by this Security Agreement; and

 

(g)                                 permit representatives of the Secured Party, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, and permit representatives of
the Secured Party to be present at the Grantor’s place of business to receive
copies of communications and remittances relating to the Collateral, and
forward copies of any notices or communications received by the Grantor with
respect to the Collateral, all in such manner as the Secured Party may require.

 

5.02                           Other Financing Statements or Control. 
Except as otherwise permitted under the Credit Documents, the Grantor
shall not (a) file or suffer to be on file, or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to any of the Collateral in which the Secured Party is
not named as the sole secured party, or (b) cause or permit any Person
other than the Secured Party to have “control” (as defined in Section 9-104,
9-105, 9-106 or 9-107 of the NYUCC) of any Deposit Account, Electronic Chattel
Paper, Investment Property or Letter-of-Credit Right constituting part of the
Collateral.

 

5.03                           Preservation of Rights. 
The Secured Party shall not be required to take steps necessary to
preserve any rights against prior parties to any of the Collateral.

 

5.04                           Special Provisions Relating to Certain
Collateral.

 

(a)                                  Pledged Shares.

 

(i)                                     The Grantor will cause the Pledged Shares to constitute at all times (1) 100%
of the total number of Shares of each Issuer other than a Foreign Subsidiary
then outstanding owned by the Grantor and (2) in the case of any Issuer
that is a Foreign Subsidiary, 65% of the total number of shares of voting stock
of such Issuer and 100% of the total number of shares of all other classes of
capital stock of such Issuer then issued and outstanding owned by the Grantor.

 

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(ii)                                  So long as no Default shall have occurred and be continuing, the
Grantor shall have the right to exercise all voting, consensual and other
powers of ownership pertaining to the Pledged Shares for all purposes not
inconsistent with the terms of this Security Agreement, the Credit Documents or
any other instrument or agreement referred to herein or therein, provided that the
Grantor agrees that it will not vote the Pledged Shares in any manner that is
inconsistent with the terms of this Security Agreement, the Credit Documents or
any such other instrument or agreement; and the Secured Party shall execute and
deliver to the Grantor or cause to be executed and delivered to the Grantor all
such proxies, powers of attorney, dividend and other orders, and all such
instruments, without recourse, as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the rights and powers that it is
entitled to exercise pursuant to this Section 5.04(a)(ii).

 

(iii)                               Unless and until a Default shall have occurred and be
continuing, the Grantor shall be entitled to receive and retain any dividends,
distributions or proceeds on the Pledged Shares paid in cash out of earned
surplus.

 

(iv)                              If a Default shall have occurred and be
continuing, whether or not the Secured Party
exercises any available right to declare any Secured Obligations due and
payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Security Agreement, the Credit Documents or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Pledged Shares shall be paid directly to the Secured Party
as part of the Collateral, subject to the terms of this Security Agreement,
and, if the Secured Party shall so request in writing, the Grantor agrees to
execute and deliver to the Secured Party appropriate additional dividend,
distribution and other orders and documents to that end, provided that
if such Default is cured, any such dividend or distribution theretofore paid to
the Secured Party shall, upon request of the Grantor (except to the extent
theretofore applied to the Secured Obligations), be returned by the Secured
Party to the Grantor.

 

(b)                                 Intellectual Property.

 

(i)                                     For the purpose of enabling the Secured Party to exercise rights and
remedies under Section 5.05 at such time as the Secured Party shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, the Grantor hereby grants to the Secured Party upon the occurrence of
a Default, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to the Grantor)
to use, assign, license or sublicense any of the Intellectual Property now
owned or hereafter acquired by the Grantor, wherever the same may be located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.

 

(ii)                                  Notwithstanding anything contained herein to the contrary, but subject
to any provision of the Credit Documents that limit the rights of the Grantor
to dispose of its property, so long as no Default shall have occurred and be
continuing, the Grantor will be permitted to exploit, use, enjoy, protect,
license, sublicense, assign, sell,

 

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dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Grantor.  In furtherance
of the foregoing, so long as no Default shall have occurred and be continuing,
the Secured Party shall from time to time, upon the request of the Grantor,
execute and deliver any instruments, certificates or other documents, in the
form so requested, that the Grantor shall have certified are appropriate in its
judgment to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to clause (i) immediately
above as to any specific Intellectual Property).  Further, upon the payment in full of all of
the Secured Obligations, or earlier expiration of this Security Agreement or
release of the Collateral, the Secured Party shall grant back to the Grantor
the license granted pursuant to clause (i) immediately above.  The exercise of rights and remedies under Section 5.05
by the Secured Party shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Grantor in accordance with the first
sentence of this clause (ii).

 

(c)                                  Chattel Paper. 
The Grantor will (i) deliver to the Secured Party each original of
each item of Chattel Paper at any time constituting part of the
Collateral, and (ii) cause each such original and each copy thereof to
bear a conspicuous legend, in form and substance reasonably satisfactory to the
Secured Party, indicating that such Chattel Paper is subject to the security
interest granted hereby and that purchase of such Chattel Paper by a Person
other than the Secured Party without the consent of the Secured Party would
violate the rights of the Secured Party.

 

5.05                         Remedies.

 

(a)                                  Rights and Remedies Generally upon Default. 
If a Default shall have occurred and is continuing, the Secured Party
shall have all of the rights and remedies with respect to the Collateral of a
secured party under the NYUCC (whether or not the Uniform Commercial Code is in
effect in the jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted, including the right, to the fullest extent permitted by law, to
exercise all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Secured Party were the sole and absolute owner thereof
(and the Grantor agrees to take all such action as may be appropriate to give
effect to such right); and without limiting the foregoing:

 

(i)                                     the Secured Party in its discretion may,
in its name or in the name of the Grantor or otherwise, demand, sue for,
collect or receive any money or other property at any time payable or
receivable on account of or in exchange for any of the Collateral, but shall be
under no obligation to do so;

 

(ii)                                  the Secured Party may make any reasonable
compromise or settlement deemed desirable with respect to any of the Collateral
and may extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;

 

(iii)                               the Secured Party may require the Grantor to notify
(and the Grantor hereby authorizes the Secured Party so to notify) each account
debtor in respect 

 

11

 

of any Account,
Chattel Paper or General Intangible, and each obligor on any Instrument,
constituting part of the Collateral that such Collateral has been assigned to
the Secured Party hereunder, and to instruct that any payments due or to become
due in respect of such Collateral shall be made directly to the Secured Party
or as it may direct (and if any such payments, or any other Proceeds of
Collateral, are received by the Grantor they shall be held in trust by the
Grantor for the benefit of the Secured Party and as promptly as possible
remitted or delivered to the Secured Party for application as provided herein);

 

(iv)                              the Secured Party may require the Grantor to assemble the Collateral at
such place or places, reasonably convenient to the Secured Party and the
Grantor, as the Secured Party may direct;

 

(v)                                 the Secured Party may require the Grantor to cause the Pledged Shares
to be transferred of record into the name of the Secured Party or its nominee
(and the Secured Party agrees that if any of such Pledged Shares is transferred
into its name or the name of its nominee, the Secured Party will thereafter
promptly give to the Grantor copies of any notices and communications received
by it with respect to such Pledged Shares); and

 

(vi)                              the Secured Party may sell, lease, assign or otherwise dispose of all
or any part of the Collateral, at such place or places as the Secured Party
deems best, and for cash or for credit or for future delivery (without thereby
assuming any credit risk), at public or private sale, without demand of
performance or notice of intention to effect any such disposition or of the
time or place thereof (except such notice as is required by applicable statute
and cannot be waived), and the Secured Party or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Grantor, any such demand, notice and right or
equity being hereby expressly waived and released.  In the event of any sale, assignment, or
other disposition of any of the Trademark Collateral, the goodwill connected
with and symbolized by the Trademark Collateral subject to such disposition
shall be included.  The Secured Party
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned.

 

The Proceeds of each
collection, sale or other disposition under this Section 5.05, including
by virtue of the exercise of any license granted to the Secured Party in Section 5.04(b),
shall be applied in accordance with Section 5.09.

 

The provisions of this Section 5.05(a) will
in all cases be subject to the terms of the Subordination Agreement and the
Subordinated Security Agreement and any subordination agreement related
thereto.

 

(b)                                 Certain
Securities Act Limitations.  The Grantor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and
applicable state 

 

12

 

securities laws, the Secured Party may be compelled,
with respect to any sale of all or any part of the Collateral, to limit purchasers
to those who will agree, among other things, to acquire the Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof.  The Grantor acknowledges
that any such private sales may be at prices and on terms less favorable to the
Secured Party than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable manner
and that the Secured Party shall have no obligation to engage in public sales
and no obligation to delay the sale of any Collateral for the period of time
necessary to permit the issuer thereof to register it for public sale.

 

(c)                                  Notice.  The Grantor
agrees that to the extent the Secured Party is required by applicable law to
give reasonable prior notice of any sale or other disposition of any
Collateral, ten business days’ notice shall be deemed to constitute reasonable
prior notice.

 

5.06                           Deficiency.  If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Grantor shall remain liable for
any deficiency.

 

5.07                           Locations; Names, Etc.  Without at least 30 days’
prior written notice to the Secured Party, the Grantor shall not (i) change
its location (as defined in Section 9-307 of the NYUCC), (ii) change
its name from the name shown as its current legal name on Annex 1, or (iii) agree
to or authorize any modification of the terms of any item of Collateral
that would result in a change thereof from one Uniform Commercial Code category
to another such category (such as from a General Intangible to Investment
Property), if the effect thereof would be to result in a loss of perfection of,
or diminution of priority for, the security interests created hereunder in such
item of Collateral, or the loss of control (within the meaning of Section 9-104,
9-105, 9-106 or 9-107 of the NYUCC) over such item of Collateral.

 

5.08                           Private Sale.  The Secured Party shall incur no liability as
a result of the sale of the Collateral, or any part thereof, at any private
sale pursuant to Section 5.05 conducted in a commercially reasonable
manner.  The Grantor hereby waives any
claims against the Secured Party arising by reason of the fact that the price
at which the Collateral may have been sold at such a private sale was less than
the price that might have been obtained at a public sale or was less than the
aggregate amount of the Secured Obligations, even if the Secured Party accepts
the first offer received and does not offer the Collateral to more than one
offeree.

 

5.09                           Application of Proceeds.  Except as otherwise herein
expressly provided and except as provided below in this Section 5.09, the
Proceeds of any collection, sale or other realization of all or any part of the
Collateral pursuant hereto, and any other cash at the time held by the Secured
Party under Section 4 or this Section 5, shall be applied by the
Secured Party:

 

First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable out-of-pocket costs
and expenses of the Secured Party and the fees and expenses of its agents and
counsel, and all expenses incurred and advances made by the Secured Party in
connection therewith;

 

13

 

Next, to the payment in full of the Secured
Obligations, in such order as the Secured Party shall in its sole discretion
determine; and

 

Finally, to the payment to the Grantor, or its
successors or assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining.

 

5.10                           Attorney-in-Fact.  Without limiting any rights or powers granted
by this Security Agreement to the Secured Party while no Default has occurred
and is continuing, upon the occurrence and during the continuance of any
Default the Secured Party is hereby appointed the attorney-in-fact of the
Grantor for the purpose of carrying out the provisions of this Section 5
and taking any action and executing any instruments that the Secured Party may
deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an
interest.  Without limiting the
generality of the foregoing, so long as the Secured Party shall be entitled
under this Section 5 to make collections in respect of the Collateral, the
Secured Party shall have the right and power to receive, endorse and collect
all checks made payable to the order of Grantor representing any dividend,
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same.

 

5.11                           Perfection and Recordation.  The Grantor authorizes the
Secured Party to file Uniform Commercial Code financing statements describing
the Collateral as “all assets” or “all personal property and fixtures” of the
Grantor (provided that no such description shall be deemed to modify the
description of Collateral set forth in Section 3).

 

5.12                           Termination.  When all Secured Obligations shall have been
paid in full, this Security Agreement shall terminate, and the Secured Party
shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the order
of the Grantor and to be released and canceled all licenses and rights referred
to in Section 5.04(b).  The Secured
Party shall also, at the expense of the Grantor, execute and deliver to the
Grantor upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the Grantor to
effect the termination and release of the liens on the Collateral as required
by this Section 5.12.

 

5.13                           Further Assurances.  The Grantor agrees that, from time to time
upon the written request of the Secured Party, the Grantor will execute and
deliver such further documents and do such other acts and things as the Secured
Party may reasonably request in order fully to effect the purposes of this
Security Agreement.  The Secured Party
shall release any lien covering any asset that has been disposed of in
accordance with the provisions of the Credit Documents.

 

Section 6.                                            Miscellaneous.

 

6.01                           Notices.  All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at the “Address for Notices” specified beneath its name on the
signature pages hereto or, as to any party, at such other address as shall
be designated by such party in a notice to each other party.  Except as otherwise provided in this Security
Agreement, all such communications shall be deemed to have been 

 

14

 

duly
given when transmitted by telecopier or personally delivered or, in the case of
a mailed notice, upon receipt, in each case given or addressed as aforesaid.

 

6.02                           No Waiver.  No failure on the part of Secured Party to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power
or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. 
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

 

6.03                           Amendments, Etc.  The terms of this Security Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
the Grantor and the Secured Party.

 

6.04                           Expenses.  The Grantor agrees to reimburse the Secured
Party for all reasonable costs and expenses incurred by it (including the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including all manner of participation in or other involvement with (w) performance
by the Secured Party of any obligations of the Grantor in respect of the
Collateral that the Grantor has failed or refused to perform, (x) bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings,
or any actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral, and for the care
of the Collateral and defending or asserting rights and claims of the Secured
Party in respect thereof, by litigation or otherwise, including expenses of
insurance, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 6.04, and all such costs and expenses shall be
Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 3.

 

6.05                           Successors and Assigns. 
This Security Agreement shall be binding upon and inure to the benefit
of the respective successors and assigns of the Grantor and the Secured Party
(provided that the Grantor shall not assign or transfer its rights or
obligations hereunder without the prior written consent of the Secured Party).

 

6.06                           Counterparts.  This Security Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument and either of the parties hereto may execute this
Security Agreement by signing any such counterpart.

 

6.07                           Governing Law; Submission to
Jurisdiction; Etc.

 

(a)                                  Governing Law. 
This Security Agreement shall be construed in accordance with and governed by the law of the State of New York.

 

(b)                                 Submission to Jurisdiction. 
The Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York sitting
in New York County and of the United States District Court of the Southern
District of New York, and any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Security Agreement, or for recognition 

 

15

 

or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Security Agreement shall affect any right that the Secured Party may otherwise
have to bring any action or proceeding relating to this Security Agreement
against the Grantor or its properties in the courts of any jurisdiction.

 

(c)                                  Waiver of Venue. 
The Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Security
Agreement in any court referred to in paragraph (b) of this
Section.  Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

 

(d)                                 Service of Process. 
Each party to this Security Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01.  Nothing in this Security Agreement will
affect the right of any party to this Security Agreement to serve process in
any other manner permitted by law.

 

6.08                           WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

6.09                           Captions.  The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Security Agreement.

 

6.10                           Agents and Attorneys-in-Fact.  The Secured Party may employ
agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.

 

6.11                           Severability.  If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in favor of the Secured
Party in order to carry out the intentions of the parties hereto as nearly as
may be 

 

16

 

possible
and (b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.

 

[SIGNATURE PAGES FOLLOW]

 

17

 

IN WITNESS WHEREOF, the parties hereto have caused
this Security Agreement to be duly executed and delivered as of the day and
year first above written.

 

	
   

  	
  NEXSAN CORPORATION,

  
	
   

  	
  as Grantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gene Spies

  
	
   

  	
  Name: 

  	
  Gene Spies

  
	
   

  	
  Title: 

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  
	
   

  	
  Nexsan Corporation

  555 St. Charles Drive, Suite 202

  Thousand Oaks, CA 91360

  Telephone: 805-418-2700

  Facsimile: 805-418-2799

  
	
   

  	
   

  
	
   

  	
  With a copy that shall
  not constitute notice to:

  Fenwick & West LLP

  801 California Street

  Mountain View, CA 94041

  Attn: Jeffrey Vetter, or in his absence, William Schreiber

  Telephone: 650-335-8500

  Facsimile: 650-938-5200

  

 

[SIGNATURE
PAGE – SECURITY AGREEMENT]

 

 

	
   

  	
  FONDS DE SOLIDARITÉ DES
  TRAVAILLEURS DU QUÉBEC (F.T.Q.), as
  Secured Party

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Alain Denis

  
	
   

  	
  Name:

  	
  Alain Denis

  
	
   

  	
  Title:

  	
  Director — Information Technology and Telecommunications

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  
	
   

  	
  Fonds de solidarité des
  travailleurs du Québec (F.T.Q.)

  Suite 200

  545 Cremazie East

  Montreal, Quebec

  Canada

  H2M 2W4

  
	
   

  	
   

  
	
   

  	
  Attention:
  Vice-president, legal affairs

  Fax No.: 514-383-2500

  Telephone No.: 514-383-8383

  

 

[SIGNATURE
PAGE – SECURITY AGREEMENT]

 

 

ANNEX 1

 

FILING DETAILS

 

	
  Name

  	
   

  	
  Type of

  Organization

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Organizational

  ID # (if any)

  	
   

  	
  Mailing

  Address

  
	
  Nexsan Corporation

  	
   

  	
  Corporation

  	
   

  	
  Delaware

  	
   

  	
  13-4149478

  	
   

  	
  555 St. Charles Drive, Suite 202, Thousand Oaks, California
  91360

  

 

Annex 1 to Security Agreement

 

 

ANNEX 2

 

PLEDGED SHARES

 

ISSUERS
OF PLEDGED SECURITIES

 

	
  Grantor

  	
   

  	
  Issuer

  
	
  Nexsan Corporation

  	
   

  	
  Nexsan Technologies Inc.

  
	
  Nexsan Corporation

  	
   

  	
  Nexsan Technologies Limited.

  
	
  Nexsan Corporation

  	
   

  	
  Springtek Limited

  
	
  Nexsan Corporation

  	
   

  	
  6360246 Canada Inc.

  

 

PLEDGED
SECURITIES

 

	
  Issuer Name

  	
   

  	
  Issued To

  	
   

  	
  Certificate

  Number

  	
   

  	
  Number

  of 

  Shares/

  Units

  	
   

  	
  Class of

  Shares/Units

  	
   

  	
  Percentage of

  Outstanding

  Shares/Units

  held by

  Pledgor

  	
   

  	
  Percentage of

  Outstanding

  Shares/Units

  pledged by

  Pledgor

  
	
  Nexsan Technologies Inc.

  	
   

  	
  Nexsan Corporation

  	
   

  	
   

  	
   

  	
  100

  	
   

  	
  Common Stock, par value $0.01

  	
   

  	
  100

  	
  %

  	
  100%

  
	
  Nexsan Technologies Limited

  	
   

  	
  Nexsan Corporation

  	
   

  	
  17

  18

  19

  20

  	
   

  	
  15,556

  28,888

  21,000

  39,000

  	
   

  	
  44,444 Ordinary Shares, par value1.00; 60,000 Preference Shares, par
  value 1.00

  	
   

  	
  100

  	
  %

  	
  65% (28,888 Ordinary Shares represented by Certificate 18; 39,000
  Preference Shares represented by Certificate 20)

  
	
  Springtek Limited

  	
   

  	
  Nexsan Corporation

  	
   

  	
  10

  11

  	
   

  	
  32,175

  17,325

  	
   

  	
  Ordinary Shares par value 1.00

  	
   

  	
  100

  	
  %

  	
  65% (31,275 shares represented by Certificate 10)

  
	
  6360246 Canada Inc.

  	
   

  	
  Nexsan Corporation

  	
   

  	
  CS-1

  CS-3

  CS-4

  CS-5

  	
   

  	
  100

  2,000,000 

  151,023 

  3,994,943

  	
   

  	
  Common Shares, no par value

  	
   

  	
  100

  	
  %

  	
  65% (3,994,343 shares represented by Certificate CS-5)

  

 

Annex 2 to Security AgreementEXHIBIT 10.35

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

NEXSAN TECHNOLOGIES INCORPORATED

 

 

AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT

 

This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
is entered into as of July 28, 2009, by and between COMERICA BANK (“Bank”)
and NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

A.                                   Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of March 31,
2004, as amended from time to time (collectively, the “Prior Agreement”).

 

B.                                     Borrower
and Bank wish to amend and restate the Prior Agreement.  This Agreement sets forth the terms on which
Bank will advance credit to Borrower, and Borrower will repay the amounts owing
to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.                                       DEFINITIONS
AND CONSTRUCTION.

 

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

 

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

 

2.                                       LOAN
AND TERMS OF PAYMENT.

 

2.1                                Credit
Extensions.

 

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

 

(b)                                Advances
Under Revolving Line.

 

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

 

(ii)                                 Form of
Request.  Whenever Borrower desires
an Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. Pacific time (1:00 p.m. Pacific time for wire
transfers), on the Business Day that the Advance is to be made.  Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit C.
Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a Responsible
Officer, or without instructions if in Bank’s discretion such Advances are necessary
to meet 

 

1

 

Obligations which have become due and remain
unpaid.  Bank shall be entitled to rely
on any telephonic notice given by a person who Bank reasonably believes to be a
Responsible Officer or a designee thereof, and Borrower shall indemnify and
hold Bank harmless for any damages or loss suffered by Bank as a result of such
reliance.  Bank will credit the amount of
Advances made under this Section 2.1(b) to Borrower’s deposit
account.

 

2.2                                Overadvances.  If the aggregate amount of the outstanding
Advances exceeds the lesser of the Revolving Line or the Borrowing Base at any
time, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.

 

2.3                                Interest
Rates, Payments, and Calculations.

 

(a)                                 Interest
Rates.

 

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

 

(b)                                Late
Fee; Default Rate.  If any payment is
not made within ten (10) days after the date such payment is due, Borrower
shall pay Bank a late fee equal to the lesser of (i) 5% of the amount of
such unpaid amount or (ii) the maximum amount permitted to be charged
under applicable law.  All Obligations
shall bear interest, from and after the occurrence and during the continuance
of an Event of Default, at a rate equal to 5 percentage points above the
interest rate applicable immediately prior to the occurrence of the Event of
Default.

 

(c)                                 Payments.  Interest hereunder shall be due and payable
on the first calendar day of each month during the term hereof.  Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts or against the Revolving Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable hereunder.  Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

 

(d)                                Computation.  In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Referenced Rate (as
defined in the Addendum) is changed, by an amount equal to such change in the
Prime Referenced Rate.  All interest
chargeable under the Loan Documents shall be computed on the basis of a 360 day
year for the actual number of days elapsed.

 

2.4                                Crediting
Payments.  Prior to the occurrence of
an Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower
specifies.  After the occurrence of an
Event of Default, Bank shall have the right, in its sole discretion, to
immediately apply any wire transfer of funds, check, or other item of payment
Bank may receive to conditionally reduce Obligations, but such applications of
funds shall not be considered a payment on account unless such payment is of
immediately available federal funds or unless and until such check or other
item of payment is honored when presented for payment.  Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00
noon Pacific time shall be deemed to have been received by Bank as of the
opening of business on the immediately following Business Day.  Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and 

 

2

 

additional fees or interest, as the case may be, shall
accrue and be payable for the period of such extension.

 

2.5                                Fees.  Borrower shall pay to Bank the following:

 

(a)                                 Facility
Fee.  On the Closing Date, a fee
equal to $5,000 and on the one year anniversary of the Closing Date, a fee
equal to $5,000, each of which shall be nonrefundable;

 

(b)                                Unused
Fee.  A fee equal to 0.25% per annum
of the difference between (i) the amount then available under the
Revolving Line pursuant to section 2.1(b)(i), and (ii) the average daily balance
outstanding during the term hereof, paid quarterly in arrears, which shall be
nonrefundable.  The unused fee shall be
calculated based on a year of 360 days for the actual number of days elapsed;
and

 

(c)                                 Bank
Expenses.  On the Closing Date, all
Bank Expenses incurred through the Closing Date, and, after the Closing Date,
all Bank Expenses, as and when they become due.

 

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

 

3.                                       CONDITIONS
OF LOANS.

 

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

 

(a)                                 this
Agreement;

 

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

 

(c)                                 a
financing statement (Form UCC-1) naming Borrower as debtor;

 

(d)                                agreement
to provide insurance;

 

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

 

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

 

(g)                                a
recorded UCC-3 termination of the UCC-1 filed by ORIX Venture Finance LLC
against Borrower, recorded with the Delaware Secretary of State on July 23,
2005, file number 52261593;

 

(h)                                an
affirmation of guaranty, duly executed by Nexsan Corporation;

 

(i)                                    an
amendment to the Third Party Pledge Agreement, duly executed by Nexsan
Corporation;

 

3

 

(j)                                    current
financial statements, including audited statements for Borrower’s fiscal year
ended June 30, 2008, together with an unqualified opinion, company
prepared consolidated and consolidating balance sheets and income statements
for the most recently ended month in accordance with Section 6.2, and such
other updated financial information as Bank may reasonably request;

 

(k)                                 a
current Compliance Certificate in accordance with Section 6.2; and

 

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

 

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

 

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

 

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

 

4.                                       CREATION
OF SECURITY INTEREST.

 

4.1                                Grant
of Security Interest.  Borrower
grants and pledges to Bank a continuing security interest in the Collateral to
secure prompt repayment of any and all Obligations and to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents.  Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in later-acquired Collateral.  Borrower also hereby agrees to not sell,
transfer, assign, mortgage, pledge, lease, grant a security interest in, or
encumber any of its Intellectual Property other than sales of products or
non-exclusive licenses to distributors, resellers or other business partners in
the ordinary course of business. 
Notwithstanding any termination, Bank’s Lien on the Collateral shall
remain in effect for so long as any Obligations are outstanding.

 

4.2                                Perfection
of Security Interest.  Borrower
authorizes Bank to file at any time financing statements, continuation
statements, and amendments thereto that (i) either specifically describe
the Collateral or describe the Collateral as all assets of Borrower of the kind
pledged hereunder, and (ii) contain any other information required by the
Code for the sufficiency of filing office acceptance of any financing
statement, continuation statement, or amendment, including whether Borrower is
an organization, the type of organization and any organizational identification
number issued to Borrower, if applicable. 
Borrower shall from time to time endorse and deliver to Bank, at the
request of Bank, all Negotiable Collateral and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank’s security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.  Borrower shall have possession of the
Collateral, except where expressly otherwise provided in this Agreement or
where Bank chooses to perfect its security interest by possession in addition
to the filing of a financing statement. 
Where Collateral is in possession of a third party bailee, Borrower
shall take such steps as Bank reasonably requests for Bank to (i) obtain
an acknowledgment, in form and substance satisfactory to Bank, of the bailee
that the bailee holds such Collateral for the benefit of Bank, or (ii) obtain
“control” of any Collateral consisting of investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper (as such 

 

4

 

items and the term “control” are defined in Revised Article 9
of the Code) by causing the securities intermediary or depositary institution
or issuing bank to execute a control agreement in form and substance
satisfactory to Bank.  Borrower will not
create any chattel paper without placing a legend on the chattel paper
acceptable to Bank indicating that Bank has a security interest in the chattel
paper.  Borrower from time to time may
deposit with Bank specific cash collateral to secure specific Obligations;
Borrower authorizes Bank to hold such specific balances in pledge and to
decline to honor any drafts thereon or any request by Borrower or any other
Person to pay or otherwise transfer any part of such balances for so long as
the specific Obligations are outstanding.

 

4.3                                Right
to Inspect.  Bank (through any of its
officers, employees, or agents) shall have the right, upon reasonable prior
notice, from time to time during Borrower’s usual business hours but no more
than, unless an Event of Default has occurred and is continuing, (a) twice
a year if Advances are outstanding for two consecutive months during such year
or (b) once a year if Advances are not outstanding for two consecutive
months during such year, to inspect Borrower’s Books and to make copies thereof
and to check, test, and appraise the Collateral in order to verify Borrower’s
financial condition or the amount, condition of, or any other matter relating
to, the Collateral.  Notwithstanding the
foregoing, Bank shall conduct an audit after the Closing Date (the “Initial
Audit”) and shall also conduct an audit prior to making an Advance if more than
twelve months have passed since the date of the Initial Audit.

 

5.                                       REPRESENTATIONS
AND WARRANTIES.

 

Borrower represents and
warrants as follows:

 

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

 

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

 

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

 

5.4                                Intellectual
Property.  Borrower is the sole owner
of the Intellectual Property, except for licenses granted by Borrower to its
customers in the ordinary course of business or for licenses of Intellectual
Property used by Borrower in the ordinary course of Borrower’s business.  To the best of Borrower’s knowledge, each of
its material Copyrights, Trademarks and Patents is valid and enforceable, and
no part of the Intellectual Property has been judged invalid or unenforceable,
in whole or in part, and no claim has been made to Borrower that any part of
the Intellectual Property 

 

5

 

violates the rights of any third party except to the
extent such claim would not reasonably be expected to cause a Material Adverse
Effect.

 

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

 

5.6                                Litigation.  Except as set forth in the Schedule, there
are no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which a likely adverse decision
would reasonably be expected to have a Material Adverse Effect.  Notwithstanding the disclosure on the
Schedule of the pending lawsuit against Borrower, Bank does not waive any of
its rights or remedies under this Agreement in the event that any litigation
has a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

6.                                       AFFIRMATIVE
COVENANTS.

 

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

 

6.1                                Good
Standing and Government Compliance. 
Borrower shall maintain its and each of its Subsidiaries’ corporate
existence and good standing in the Borrower State, shall maintain qualification
and good standing in each other jurisdiction in which the failure to so qualify
would reasonably be expected to have a Material Adverse Effect, and shall
furnish to Bank the organizational identification number issued to Borrower by
the authorities of the state in which Borrower is organized, if
applicable.  Borrower shall meet, and
shall cause each Subsidiary to meet, the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA.  Borrower shall comply in all material
respects with all applicable Environmental Laws, and maintain all material
permits, licenses and approvals required thereunder where the failure to do so
would reasonably be expected to have a Material Adverse Effect.  Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules and
regulations to which it is subject, and shall maintain, and shall cause each of
its Subsidiaries to maintain, in force all licenses, approvals and agreements,
the loss of which or failure to comply with which would reasonably be expected
to have a Material Adverse Effect.

 

6.2                                Financial
Statements, Reports, Certificates. 
Borrower shall deliver to Bank: (i) as soon as available, but in
any event within 30 days after the end of each calendar month, a company
prepared consolidated and consolidating balance sheet and income statement
covering Borrower’s operations during such period, in a form reasonably
acceptable to Bank and certified by a Responsible Officer; (ii) as soon as
available, but in any event within 180 days after the end of Borrower’s fiscal
year, audited consolidated and consolidating financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an
opinion which is unqualified or otherwise consented to in writing by Bank on
such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (iii) if applicable, copies of all statements,
reports and notices sent or made available generally by Borrower to its
security holders or to any holders of Subordinated Debt and all reports on
Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly
upon receipt of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of $250,000 or more; (v) promptly upon
receipt, each management letter prepared by Borrower’s independent certified
public accounting firm regarding Borrower’s management control systems; and (vi) as
soon as available, but in any event within 30 days prior to each fiscal year
end of Borrower, Borrower’s annual forecast for the next year, in a form
reasonably acceptable to Bank, and such other budgets, sales projections,
operating plans or other financial information generally prepared by Borrower
in the ordinary course of business as Bank may reasonably request from time to
time.

 

(a)                                 Within
30 days after the last day of each month, Borrower shall deliver to Bank a
Borrowing Base Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto, together with aged listings by invoice date of
accounts receivable and accounts payable.

 

7

 

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

 

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

 

(d)                                Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and
appraise Collateral at Borrower’s expense, provided that, unless an Event of
Default has occurred and is continuing, such audits will be conducted no more
often than every (i) 6 months if Advances are outstanding for two
consecutive months during the current fiscal year and (ii) every 12 months
if Advances are not outstanding during at least two consecutive months during
the current fiscal year of Borrower, unless an Event of Default has occurred
and is continuing.  Notwithstanding the
foregoing, Bank after the Closing Date, Bank shall conduct the Initial Audit
and shall also conduct an audit prior to making an Advance if more than twelve
months have passed since the date of the Initial Audit.

 

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

 

6.3                                Inventory;
Returns.  Borrower shall keep all
Inventory in good and merchantable condition, free from all material defects
except for Inventory for which adequate reserves have been made.  Returns and allowances, if any, as between
Borrower and its account debtors shall be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist on the Closing
Date.  Borrower shall promptly notify
Bank of all returns and recoveries and of all disputes and claims involving
more than $250,000.

 

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

 

6.5                                Insurance.

 

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

 

(b)                                All
such policies of insurance shall be in such form, with such companies, and in
such amounts as reasonably satisfactory to Bank.  All policies of property insurance shall
contain a lender’s loss payable endorsement, in a form satisfactory to Bank,
showing 

 

8

 

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

 

6.6                                Primary
Depository.  Borrower and Nexsan
Corporation shall maintain, and shall cause each of their Subsidiaries to
maintain, all of their domestic United States depository, operating and
investment accounts with Bank.

 

6.7                                Financial
Covenant.  Borrower shall at all
times maintain the following financial ratio:

 

(a)                                 Bank
Debt Liquidity Ratio.  A ratio of
Liquidity to all Indebtedness to Bank of at least 1.20 to 1.00.

 

6.8                                Registration
of Intellectual Property Rights.

 

(a)                                 Borrower
shall promptly register or cause to be registered (to the extent not already
registered) with the United States Patent and Trademark Office or the United
States Copyright Office, as the case may be, those registrable intellectual
property rights now owned or hereafter developed or acquired by Borrower, to
the extent that Borrower, in its reasonable business judgment, deems it
appropriate to so protect such intellectual property rights.

 

(b)                                Borrower
shall (i) protect, defend and maintain the validity and enforceability of
the trade secrets, Trademarks, Patents and Copyrights material to its business,
(ii) use commercially reasonable efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any material
Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to
the public without the written consent of Bank, which shall not be unreasonably
withheld.

 

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

 

7.                                       NEGATIVE
COVENANTS.

 

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

 

7.1                                Dispositions.  Convey, sell, lease, license, transfer or
otherwise dispose of (collectively, to “Transfer”), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, or move
cash balances on deposit with Bank to accounts opened at another financial
institution, other than Permitted Transfers.

 

7.2                                Change
in Name, Location, Executive Office, or Executive Management; Change in
Business; Change in Fiscal Year; Change in Control.  Change its name or the Borrower State or
relocate its

 

9

 

chief executive office without 30 days prior written notification to
Bank; replace its chief executive officer or chief financial officer without
written notification to Bank of such replacement within 15 days of such action;
engage in any business, or permit any of its Subsidiaries to engage in any
business, other than or reasonably related or incidental to the businesses
currently engaged in by Borrower; change its fiscal year end; have a Change in
Control.

 

7.3                                Mergers
or Acquisitions.  Merge or consolidate,
or permit any of its Subsidiaries to merge or consolidate, with or into any
other business organization (other than mergers or consolidations of a
Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any
of its Subsidiaries to acquire, all or substantially all of the capital stock
or property of another Person.

 

7.4                                Indebtedness.  Create, incur, assume, guarantee or be or
remain liable with respect to any Indebtedness, or permit any Subsidiary so to
do, other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.

 

7.5                                Encumbrances.  Create, incur, assume or allow any Lien with
respect to any of its property, including its Intellectual Property, or assign
or otherwise convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens, or covenant to any other Person that Borrower in the future will refrain
from creating, incurring, assuming or allowing any Lien with respect to any of
Borrower’s property, including Borrower’s Intellectual Property.

 

7.6                                Distributions.  Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except that Borrower may repurchase the stock of former
employees pursuant to stock repurchase agreements as long as an Event of
Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase.

 

7.7                                Investments.  Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so
to do, other than Permitted Investments, or maintain or invest any of its property
with a Person other than Bank or Bank’s Affiliates or permit any of its
Subsidiaries to do so unless such Person has entered into a control agreement
with Bank, in form and substance satisfactory to Bank, or suffer or permit any
Subsidiary to be a party to, or be bound by, an agreement that restricts such
Subsidiary from paying dividends or otherwise distributing property to
Borrower.

 

7.8                                Transactions
with Affiliates.  Directly or
indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower except (i) compensation arrangements existing on the
date hereof and other compensation arrangements in the ordinary course of
business and, (ii) for transactions that are in the ordinary course of
Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a
non-affiliated Person.

 

7.9                                Subordinated
Debt.  Make any payment in respect of
any Subordinated Debt, or permit any of its Subsidiaries to make any such
payment, except in compliance with the terms of such Subordinated Debt, or
amend any provision affecting Bank’s rights contained in any documentation
relating to the Subordinated Debt without Bank’s prior written consent.

 

7.10                          Inventory
and Equipment.  Other than (a) Inventory
(other than Evaluation/Warranty Inventory) with an aggregate book value of less
than $250,000 per location being assembled by contract manufacturers in the
ordinary course of business and (b) Evaluation/Warranty Inventory with an
aggregate book value of less than $100,000 per location, store the Inventory or
the Equipment with a bailee, warehouseman, or similar third party unless the
third party has been notified of Bank’s security interest and Bank (a) has
received an acknowledgment from the third party that it is holding or will hold
the Inventory or Equipment for Bank’s benefit or (b) is in possession of
the 

 

10

 

warehouse receipt, where negotiable, covering such Inventory or
Equipment.  Notwithstanding the
foregoing, the aggregate book value of all (x) Inventory (other than
Evaluation/Warranty Inventory) not subject to the preceding requirements shall
not exceed $500,000 at any time and (y) Evaluation/Warranty Inventory not
subject to the preceding requirements shall not exceed $500,000 at any
time.  Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment only at the
location set forth in Section 10 or at the locations set forth in the
Schedule and such other locations of which Borrower gives Bank prior written
notice and as to which Bank files a financing statement where needed to perfect
its security interest.

 

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

 

8.                                      EVENTS
OF DEFAULT.

 

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

 

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

 

8.2                                Covenant
Default.

 

(a)                                 If
Borrower fails to perform any obligation under Article 6 or violates any
of the covenants contained in Article 7 of this Agreement; or

 

(b)                                If
Borrower fails or neglects to perform or observe any other material term,
provision, condition, covenant contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and
Bank and as to any default under such other term, provision, condition or
covenant that can be cured, has failed to cure such default within 10 days
after Borrower receives notice thereof or any officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the 10 day period or cannot after diligent attempts by Borrower be cured
within such 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 30 days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default but no Credit Extensions will be made;

 

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

 

8.4                                Attachment.  If any material portion of Borrower’s assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any trustee, receiver or person acting in
a similar capacity and such attachment, seizure, writ or distress warrant or
levy has not been removed, discharged or rescinded within 10 days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the  

 

11

 

same is not paid within ten days after Borrower receives notice
thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been
posted pending a good faith contest by Borrower (provided that no Credit
Extensions will be made during such cure period);

 

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

 

8.6                                Other
Agreements.  If there is a default or
other failure to perform in any agreement to which Borrower is a party with a
third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness in an
amount in excess of $250,000 or that would reasonably be expected to have a Material
Adverse Effect;

 

8.7                                Subordinated
Debt.  If Borrower makes any payment
on account of Subordinated Debt, except to the extent the payment is allowed
under any subordination agreement entered into with Bank;

 

8.8                                Judgments.  If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least $250,000
shall be rendered against Borrower and shall remain unsatisfied and unstayed
for a period of 10 days (provided that no Credit Extensions will be made prior
to the satisfaction or stay of the judgment); or

 

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

 

8.10                          Guaranty.  If any guaranty of all or a portion of the
Obligations (a “Guaranty”) ceases for any reason to be in full force and effect,
or any guarantor fails to perform any obligation under any Guaranty or a
security agreement securing any Guaranty (collectively, the “Guaranty Documents”),
or any event of default occurs under any Guaranty Document or any guarantor
revokes or purports to revoke a Guaranty, or any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth in any Guaranty Document or in any certificate delivered to Bank in
connection with any Guaranty Document, or if any of the circumstances described
in Sections 8.3 through 8.9 occur with respect to any guarantor or any
guarantor dies or becomes subject to any criminal prosecution, or any
circumstances arise causing Bank, in good faith, to become insecure as to the
satisfaction of any of any guarantor’s obligations under the Guaranty
Documents.

 

9.                                      BANK’S
RIGHTS AND REMEDIES.

 

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

 

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

 

(b)                                Demand
that Borrower (i) deposit cash with Bank in an amount equal to the amount
of any Letters of Credit remaining undrawn, as collateral security for the
repayment of any future drawings under such Letters of Credit, and (ii) pay
in advance all Letter of Credit 

 

12

 

fees scheduled to be paid or payable over the remaining term of the
Letters of Credit, and Borrower shall promptly deposit and pay such amounts;

 

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

 

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

 

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

 

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

 

(g)                                Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral.  Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower’s labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank’s exercise of its rights under this Section 9.1,
Borrower’s rights under all licenses and all franchise agreements shall inure
to Bank’s benefit;

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

9.4                                Bank
Expenses.  If Borrower fails to pay
any amounts or furnish any required proof of payment due to third persons or
entities, as required under the terms of this Agreement, then Bank may do any
or all of the following after reasonable notice to Borrower: (a) make
payment of the same or any part thereof; (b) set up such reserves under
the Revolving Line as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of
the type discussed in Section 6.5 of this Agreement, and take any action
with respect to such policies as Bank deems prudent.  Any amounts so paid or deposited by Bank
shall constitute Bank Expenses, shall be immediately due and payable, and shall
bear interest at the then applicable rate hereinabove provided, and shall be
secured by the Collateral.  Any payments
made by Bank shall not constitute an agreement by Bank to make similar payments
in the future or a waiver by Bank of any Event of Default under this Agreement.

 

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

 

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

 

14

 

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

 

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

 

10.                                NOTICES.

 

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

 

	
  If to Borrower:

  	
   

  	
  Nexsan Technologies
  Incorporated 

  555 St. Charles Dr., Suite 202 

  Thousand Oaks, CA 91360

  Attn: Chief Financial
  Officer 

  FAX: (818) 936-0159

  
	
   

  	
   

  	
   

  
	
  If to Bank:

  	
   

  	
  Comerica Bank

  39200 Six Mile Road

  Livonia, MI 48152

  Attn: National
  Documentation Services

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Comerica Bank

  611 Anton Road, 4th Floor 

  Costa Mesa, CA 92626 

  Attn: Gary Reagan

  FAX: (714) 433-3249

  

 

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

 

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

 

This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State
of California, without regard to principles of conflicts of law.  Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa Clara, State of California. 
THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN
CIRCUMSTANCES.  TO THE EXTENT PERMITTED
BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL
BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION 

 

15

 

ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

 

12.                                JUDICIAL
REFERENCE PROVISION.

 

(a)                                 In
the event the Jury Trial Waiver set forth above is not enforceable, the parties
elect to proceed under this Judicial Reference Provision.

 

(b)                                With
the exception of the items specified in clause (c), below, any controversy,
dispute or claim (each, a “Claim”) between the parties arising out of or relating
to this Agreement or any other document, instrument or agreement between the
undersigned parties (collectively in this Section, the “Comerica Documents),
will be resolved by a reference proceeding in California in accordance with the
provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”),
or their successor sections, which shall constitute the exclusive remedy for
the resolution of any Claim, including whether the Claim is subject to the
reference proceeding.  Except as otherwise
provided in the Comerica Documents, venue for the reference proceeding will be
in the state or federal court in the county or district where the real property
involved in the action, if any, is located or in the state or federal court in
the county or district where venue is otherwise appropriate under applicable
law (the “Court”).

 

(c)                                 The
matters that shall not be subject to a reference are the following: (i) nonjudicial
foreclosure of any security interests in real or personal property, (ii) exercise
of self-help remedies (including, without limitation, set-off), (iii) appointment
of a receiver and (iv) temporary, provisional or ancillary remedies
(including, without limitation, writs of attachment, writs of possession,
temporary restraining orders or preliminary injunctions).  This reference provision does not limit the
right of any party to exercise or oppose any of the rights and remedies
described in clauses (i) and (ii) or to seek or oppose from a court
of competent jurisdiction any of the items described in clauses (iii) and
(iv).  The exercise of, or opposition to,
any of those items does not waive the right of any party to a reference
pursuant to this reference provision as provided herein.

 

(d)                                The
referee shall be a retired judge or justice selected by mutual written
agreement of the parties.  If the parties
do not agree within ten (10) days of a written request to do so by any
party, then, upon request of any party, the referee shall be selected by the
Presiding Judge of the Court (or his or her representative).  A request for appointment of a referee may be
heard on an ex parte or expedited basis, and the parties agree that irreparable
harm would result if ex parte relief is not granted.  Pursuant to CCP § 170.6, each party shall
have one peremptory challenge to the referee selected by the Presiding Judge of
the Court (or his or her representative).

 

(e)                                 The
parties agree that time is of the essence in conducting the reference
proceedings.  Accordingly, the referee
shall be requested, subject to change in the time periods specified herein for
good cause shown, to (i) set the matter for a status and trial-setting
conference within fifteen (15) days after the date of selection of the referee,
(ii) if practicable, try all issues of law or fact within one hundred
twenty (120) days after the date of the conference and (iii) report a
statement of decision within twenty (20) days after the matter has been
submitted for decision.

 

(f)                                   The
referee will have power to expand or limit the amount and duration of
discovery.  The referee may set or extend
discovery deadlines or cutoffs for good cause, including a party’s failure to
provide requested discovery for any reason whatsoever.  Unless otherwise ordered based upon good
cause shown, no party shall be entitled to “priority” in conducting discovery,
depositions may be taken by either party upon seven (7) days written
notice, and all other discovery shall be responded to within fifteen (15) days
after 

 

16

 

service.  All disputes relating
to discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.

 

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

 

(h)                                The
referee shall be required to determine all issues in accordance with existing
case law and the statutory laws of the State of California.  The rules of evidence applicable to
proceedings at law in the State of California will be applicable to the
reference proceeding.  The referee shall
be empowered to enter equitable as well as legal relief, enter equitable orders
that will be binding on the parties and rule on any motion which would be
authorized in a court proceeding, including without limitation motions for
summary judgment or summary adjudication. 
The referee shall issue a decision at the close of the reference
proceeding which disposes of all claims of the parties that are the subject of
the reference.  Pursuant to CCP § 644,
such decision shall be entered by the Court as a judgment or an order in the
same manner as if the action had been tried by the Court and any such decision
will be final, binding and conclusive. 
The parties reserve the right to appeal from the final judgment or order
or from any appealable decision or order entered by the referee.  The parties reserve the right to findings of
fact, conclusions of laws, a written statement of decision, and the right to
move for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.

 

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

 

(j)                                    THE
PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY
A JURY.  AFTER CONSULTING (OR HAVING HAD
THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS OWN CHOICE, EACH PARTY
KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES
THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM
BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT
OR THE OTHER COMERICA DOCUMENTS.

 

13.                                GENERAL
PROVISIONS.

 

13.1                          Successors
and Assigns.  This Agreement shall
bind and inure to the benefit of the respective successors and permitted
assigns of each of the parties and shall bind all persons who become bound as a
debtor to this Agreement; provided, however, that neither this Agreement nor
any rights hereunder may be assigned by Borrower without Bank’s prior written
consent, which 

 

17

 

consent may be granted or withheld in Bank’s sole discretion.  Bank shall have the right without the consent
of or notice to Borrower to sell, transfer, negotiate, or grant participation
in all or any part of, or any interest in, Bank’s obligations, rights and
benefits hereunder.

 

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

 

13.3                          Time
of Essence.  Time is of the essence
for the performance of all obligations set forth in this Agreement.

 

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

 

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

 

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

 

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

 

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

 

13.9                          Amendment
and Restatement.  This Agreement
constitutes an amendment and restatement of the Prior Agreement, which Prior
Agreement is fully superseded and amended and restated in its 

 

18

 

entirety hereby; provided, however, that the Obligations governed by
the Prior Agreement shall remain outstanding and in full force and effect and
provided further that this Agreement does not constitute a novation of such
Obligations.  The Liens created pursuant
to the Prior Agreement and any other Loan Documents shall secure the
Obligations without interruption and with all priorities intact.

 

[Remainder of Page Intentionally Left Blank]

 

19

 

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

 

 

	
   

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gene Spies

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  GENE
  SPIES

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMERICA
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gary Reagan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  GARY
  REAGAN

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  

 

20

 

EXHIBIT A

 

DEFINITIONS

 

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

 

“Addendum” has the
meaning assigned in Section 2.3(a)(i).

 

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

 

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

 

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

 

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

 

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

 

“Borrowing Base” means an
amount equal to 80% of Eligible Accounts, as determined by Bank with reference
to the most recent Borrowing Base Certificate delivered by Borrower.

 

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

 

“Cash” means unrestricted
cash and cash equivalents.

 

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

 

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

 

“Closing Date” means the
date of this Agreement.

 

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

 

“Collateral” means the
property described on Exhibit B attached hereto and all Negotiable
Collateral to the extent not described on Exhibit B, except to the extent
any such property (i) is nonassignable by its terms without the consent of
the licensor thereof or another party (but only to the extent such prohibition
on transfer is enforceable 

 

1

 

under applicable law, including, without limitation,
Sections 9406 and 9408 of the Code), (ii) the granting of a security
interest therein is contrary to applicable law, provided that upon the
cessation of any such restriction or prohibition, such property shall automatically
become part of the Collateral, or (iii) constitutes the capital stock of a
controlled foreign corporation (as defined in the IRC), in excess of 65% of the
voting power of all classes of capital stock of such controlled foreign
corporations entitled to vote.

 

“Collateral State” means
the state or states where the Collateral is located, which is California.

 

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

 

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

 

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

 

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

 

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

 

(b)                                Credit
balances over 90 days;

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

(m)                              Retentions
and hold-backs.

 

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

 

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

 

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

 

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

 

“Evaluation/Warranty
Inventory” means Inventory used solely for warranty related purposes and
Inventory located at the sites of Borrower’s potential customers and being used
solely for evaluation purposes.

 

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

 

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

 

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

 

3

 

letters of credit, (b) all obligations evidenced
by notes, bonds, debentures or similar instruments, (c) all capital lease
obligations, and (d) all Contingent Obligations, if any.

 

“Initial Audit” has the
meaning assigned in Section 4.3.

 

“Insolvency Proceeding”
means any proceeding commenced by or against any Person or entity under any
provision of the United States Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.

 

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

 

(a)                                 Copyrights,
Trademarks and Patents;

 

(b)                                Any
and all trade secrets, and any and all intellectual property rights in computer
software and computer software products now or hereafter existing, created,
acquired or held;

 

(c)                                 Any
and all design rights which may be available to Borrower now or hereafter
existing, created, acquired or held;

 

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

 

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

 

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

 

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

 

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

 

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

 

“Letter of Credit” means
a commercial or standby letter of credit or similar undertaking issued by Bank
for the account of Borrower.

 

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

 

“Liquidity” means the sum
of Cash plus Eligible Accounts.

 

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

 

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

 

4

 

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

 

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

 

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

 

“Periodic Payments” means
all installments or similar recurring payments that Borrower may now or
hereafter become obligated to pay to Bank pursuant to the terms and provisions of
any instrument, or agreement now or hereafter in existence between Borrower and
Bank.

 

“Permitted Indebtedness”
means:

 

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

 

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

 

(c)                                 Indebtedness
not to exceed $250,000 in the aggregate in any fiscal year of Borrower secured
by a lien described in clause (c) of the defined term “Permitted Liens,”
provided such Indebtedness does not exceed the lesser of the cost or fair
market value of the equipment financed with such Indebtedness;

 

(d)                                Subordinated
Debt;

 

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

 

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

 

“Permitted Investment”
means:

 

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

 

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

 

(c)                                 Repurchases
of stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements (i) in an aggregate amount not to exceed
$250,000 in any fiscal year, provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the repurchases, or (ii) in
any amount where the consideration for the repurchase is the cancellation of
indebtedness owed by such former employees to Borrower regardless of whether an
Event of Default exists;

 

5

 

(d)                                Investments
accepted in connection with Permitted Transfers; and

 

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

 

“Permitted Liens” means
the following:

 

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

 

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

 

(c)                                 Liens
not to exceed $250,000 in the aggregate (i) upon or in any Equipment
(other than Equipment financed by an Advance) acquired or held by Borrower or
any of its Subsidiaries to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the acquisition or
lease of such Equipment, or (ii) existing on such Equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;

 

(d)                                Non-exclusive
licenses or sublicenses and (ii) exclusive licenses set forth on the
Schedule granted in the ordinary course of Borrower’s business and, with
respect to any licenses where Borrower is the licensee, any interest or title
of a licensor or under any such license or sublicense;

 

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

 

(f)                                   Liens
arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Sections 8.4 (attachment) or 8.8
(judgments).

 

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

 

(a)                                 Inventory
in the ordinary course of business;

 

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

 

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

 

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

 

6

 

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

 

“Prime Referenced Rate”
has the meaning assigned in the Addendum.

 

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

 

“Revolving Line” means a
Credit Extension of up to $5,000,000.

 

“Revolving Maturity Date”
means July 31, 2011.

 

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

 

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

 

“Subordinated Debt” means
any debt incurred by Borrower that is subordinated in writing to the debt owing
by Borrower to Bank on terms reasonably acceptable to Bank (and identified as
being such by Borrower and Bank).

 

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

 

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

 

7

 

	
  DEBTOR:

  	
   

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
  SECURED PARTY:

  	
   

  	
  COMERICA BANK

  

 

EXHIBIT B

 

COLLATERAL DESCRIPTION
ATTACHMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

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

 

(a)                                 all
accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts, documents
(including negotiable documents), equipment (including all accessions and
additions thereto), general intangibles (including payment intangibles and software),
goods (including fixtures), instruments (including promissory notes), inventory
(including all goods held for sale or lease or to be furnished under a contract
of service, and including returns and repossessions), investment property
(including securities and securities entitlements), letter of credit rights,
money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;

 

(b)                                all
common law and statutory copyrights and copyright registrations, applications
for registration, now existing or hereafter arising, in the United States of
America or in any foreign jurisdiction, obtained or to be obtained on or in
connection with any of the forgoing, or any parts thereof or any underlying or
component elements of any of the forgoing, together with the right to copyright
and all rights to renew or extend such copyrights and the right (but not the
obligation) of Secured Party to sue in its own name and/or in the name of the
Debtor for past, present and future infringements of copyright;

 

(c)                                 all
trademarks, service marks, trade names and service names and the goodwill
associated therewith, together with the right to trademark and all rights to
renew or extend such trademarks and the right (but not the obligation) of
Secured Party to sue in its own name and/or in the name of the Debtor for past,
present and future infringements of trademark;

 

(d)                                all
(i) patents and patent applications filed in the United States Patent and
Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation, the
inventions and improvements described and claimed therein, (ii) licenses
pertaining to any patent whether Debtor is licensor or licensee, (iii) income,
royalties, damages, payments, accounts and accounts receivable now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to sue in the name of Debtor
and/or in the name of Secured Party for past, present and future infringements
thereof, (v) rights corresponding thereto throughout the world in all
jurisdictions in which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and

 

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

 

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

 

1

 

EXHIBIT C

 

Form of Payment/Advance Form

 

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

 

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

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

DEADLINE FOR WIRE TRANSFERS IS 1:30 P.M., P.S.T.

 

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

**Subject to 3 day advance notice.

 

	
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  #:

  	
  (650)
  846-6840

  	
   

  	
   

  	
   

  	
   

  

 

 

	
   

  	
  NEXSAN TECHNOLOGIES

  	
   

  	
  TELEPHONE REQUEST (For Bank
  Use Only):

  
	
  FROM:

  	
  INCORPORATED

  	
   

  	
   

  
	
   

  	
  Borrower’s Name

  	
   

  	
  The following person is
  authorized to request the loan

  
	
   

  	
   

  	
   

  	
  payment transfer/loan
  advance on the designated 

  
	
   

  	
   

  	
   

  	
  account and is know to me.

  
	
  FROM:

  	
  Authorized Signer’s Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  FROM:

  	
  Authorized Signature (Borrower)

  	
   

  	
  Authorized
  Requester & Phone #

  
	
   

  	
   

  	
   

  	
   

  
	
  PHONE #:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Received
  by (Bank) & Phone #

  
	
   

  	
   

  	
   

  	
   

  
	
  FROM ACCOUNT #:

  	
   

  	
   

  	
   

  
	
  please include Note number, if applicable)

  	
   

  	
  Authorized
  Signature (Bank)

  
	
   

  	
   

  	
   

  	
   

  
	
  TO ACCOUNT #:

  	
   

  	
   

  	
   

  
	
  please include Note number, if applicable)

  	
   

  	
   

  

 

 

	
  REQUESTED TRANSACTION TYPE

  	
  REQUESTED DOLLAR

  	
   

  	
  For Bank Use Only

  
	
  AMOUNT

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date Rec’d:

  
	
  PRINCIPAL INCREASE* (ADVANCE)

  	
  $

  	
   

  	
  Time:

  
	
  PRINCIPAL PAYMENT (ONLY)

  	
  $

  	
   

  	
  Comp. Status:       YES       NO

  
	
   

  	
   

  	
   

  	
  Status Date:

  
	
  OTHER INSTRUCTIONS:

  	
   

  	
   

  	
  Time:

  
	
   

  	
   

  	
   

  	
  Approval:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

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

 

1

 

EXHIBIT D

 

Form of Borrowing Base Certificate

 

	
  Borrower:  NEXSAN TECHNOLOGIES INCORPORATED

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Bank: Comerica Bank

  
	
  Commitment Amount:    $5,000,000

  	
   

  	
  Technology & Life
  Sciences Division

  
	
   

  	
   

  	
   

  	
   

  	
  Loan Analysis Department

  Five Palo Alto Square, Suite 800 

  3000 El Camino Real

  Palo Alto, CA 94306 

  Phone: (650) 846-6820 

  Fax: (650) 846-6840

  

 

	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.

  	
   

  	
  Accounts Receivable Book Value as of

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.

  	
   

  	
  Additions (please explain on reverse)

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.

  	
   

  	
  TOTAL ACCOUNTS RECEIVABLE AS OF
                    

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.

  	
   

  	
  Amounts over 90 days

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.

  	
   

  	
  Credit Balances over 90 days

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.

  	
   

  	
  Balance of 25% over 90 days

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.

  	
   

  	
  Concentration limits 25%

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.

  	
   

  	
  Foreign Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.

  	
   

  	
  Government Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.

  	
   

  	
  Contra Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.

  	
   

  	
  Promotion or Demo Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.

  	
   

  	
  Intercompany/Employee Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.

  	
   

  	
  Other (please explain below)

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.

  	
   

  	
  TOTAL
  ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  15.

  	
   

  	
  Eligible Accounts (#1-#14)

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.

  	
   

  	
  LOAN VALUE OF ACCOUNTS RECEIVABLE (80% of #15)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  17.

  	
   

  	
  Maximum Loan Amount

  	
   

  	
  $

  	
  5,000,000

  	
   

  	
   

  	
   

  
	
   

  	
  18.

  	
   

  	
  Total
  Funds Available (the lesser of #16 or #17)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  19.

  	
   

  	
  Outstanding under Sublimits (  )

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  20.

  	
   

  	
  Present balance outstanding on Line of Credit

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  21.

  	
   

  	
  Reserve Position (#18 minus #19 and #20)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  

 

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

 

	
  Comments:

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Rec’d
  By:

  	
   

  
	
  Authorized
  Signer

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
  Reviewed
  By:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  

 

1

 

EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

	
  Please send all Required
  Reporting to:

  	
   

  	
  Comerica Bank

  Technology & Life Sciences Division 

  Loan Analysis Department

  Five Palo Alto Square, Suite 800

  3000 El Camino Real

  Palo Alto, CA 94306 

  Phone: (650) 846-6820

  
	
  FROM:

  	
  NEXSAN TECHNOLOGIES

  	
   

  	
  Fax: (650) 848-6840

  
	
   

  	
  INCORPORATED

  	
   

  	
   

  

 

The undersigned authorized Officer of Nexsan
Technologies Incorporated (“Borrower”), hereby certifies that in accordance
with the terms and conditions of the Amended and Restated Loan and Security
Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in
complete compliance for the period ending
                                                                
with all required covenants, including without limitation the ongoing
registration of intellectual property rights in accordance with Section 6.8,
except as noted below and (i) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof.  Attached herewith
are the required documents supporting the above certification.  The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP) and
are consistently applied form one period to the next except as explained in an
accompanying letter or footnotes.

 

	
  REPORTING COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Company Prepared Monthly F/S

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Compliance Certificate

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  CPA Audited, Unqualified F/S

  	
   

  	
  Annually, within 180 days of FYE

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Borrowing Base Cert, A/R & A/P Agings

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Annual Business Plan

  	
   

  	
  Annually, within 30 days prior to FYE

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Audit

  	
   

  	
  Semi-annual if 2 consecutive months of Advances
  outstanding during fiscal year, if not, audits annually

  	
   

  	
  YES

  	
   

  	
  NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If Public:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10Q

  	
   

  	
  Quarterly, within 5 days of SEC filing (50 days)

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  10K

  	
   

  	
  Annually, within 5 days of SEC filing (95 days)

  	
   

  	
  YES

  	
   

  	
  NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total amount of Borrower’s cash and investments

  	
   

  	
  Amount:
  $                                            

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Total amount of Borrower’s cash and Investments
  maintained with Bank

  	
   

  	
  Amount:
  $                                            

  	
   

  	
  YES

  	
   

  	
  NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DESCRIPTION

  	
   

  	
  APPLICABLE

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Legal Action > $250,000

  	
   

  	
  Notify promptly upon notice
       

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Inventory Disputes > $250,000

  	
   

  	
  Notify promptly upon notice
       

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Cross default with other agreements > $250,000

  	
   

  	
  Notify promptly upon notice
       

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Judgments > $250,000

  	
   

  	
  Notify promptly upon notice
       

  	
   

  	
  YES

  	
   

  	
  NO

  

 

	
  FINANCIAL COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TO BE TESTED MONTHLY, UNLESS OTHERWISE NOTED:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Liquidity Ratio

  	
   

  	
  1.20:1:00

  	
   

  	
  :1.00

  	
   

  	
  YES

  	
   

  	
  NO

  

 

1

 

	
  OTHER COVENANTS

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  	
  COMPLIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Permitted Indebtedness for equipment leases

  	
   

  	
  <250,000

  	
   

  	
   

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Permitted Investments for stock repurchase

  	
   

  	
  <250,000

  	
   

  	
   

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Permitted Liens for equipment leases

  	
   

  	
  <250,000

  	
   

  	
   

  	
   

  	
  YES

  	
   

  	
  NO

  
	
  Permitted Transfers

  	
   

  	
  <250,000

  	
   

  	
   

  	
   

  	
  YES

  	
   

  	
  NO

  

 

Please Enter Below Comments Regarding Violations:

 

The Officer further acknowledges that at any time
Borrower is not in compliance with all the terms set forth in the Agreement,
including, without limitation, the financial covenants, no credit extensions
will be made.

 

	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Authorized Signer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Title

  	
   

  

 

2

 

Prime Referenced Rate Addendum To

Loan and Security Agreement

 

This Prime Referenced
Rate Addendum to Loan and Security Agreement (this “Addendum”) is entered into
as of July 28, 2009, by and between Comerica Bank (“Bank”) and Nexsan
Technologies Incorporated (“Borrower”). 
This Addendum supplements the terms of the Amended and Restated Loan and
Security Agreement dated as of July 28, 2009 (as the same may be amended,
modified, supplemented, extended or restated from time to time, collectively,
the “Agreement”).

 

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

 

a.                                      “Applicable
Margin” means one percent (1.00%) per annum.

 

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

 

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

 

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

 

divided by

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

a.                                      If
the adoption after the date hereof, or any change after the date hereof in, any
applicable law, rule or regulation (whether domestic or foreign) of any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank with any
request or directive (whether or not having the force of law) made by any such
authority, central bank or comparable agency after the date hereof: (a) shall
subject Bank to any tax, duty or other charge with respect to this Addendum or
any Obligations under the Agreement, or shall change the basis of taxation of
payments to Bank of the principal of or interest under this Addendum or any
other amounts due under this Addendum in respect thereof (except for changes in
the rate of tax on the overall net income of Bank or its LIBOR Lending Office
imposed by the jurisdiction in which Bank’s 

 

 

principal executive office or LIBOR Lending Office is
located); or (b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by Bank, or shall
impose on Bank or the foreign exchange and interbank markets any other
condition affecting this Addendum or the Obligations hereunder; and the result
of any of the foregoing is to increase the cost to Bank of maintaining any part
of the Obligations hereunder or to reduce the amount of any sum received or
receivable by Bank under this Addendum by an amount deemed by the Bank to be
material, then Borrower shall pay to Bank, within fifteen (15) days of Borrower’s
receipt of written notice from Bank demanding such compensation, such
additional amount or amounts as will compensate Bank for such increased cost or
reduction.  A certificate of Bank,
prepared in good faith and in reasonable detail by Bank and submitted by Bank
to Borrower, setting forth the basis for determining such additional amount or
amounts necessary to compensate Bank shall be conclusive and binding for all
purposes, absent manifest error.

 

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

 

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

 

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

 

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

 

 

	
  COMERICA
  BANK

  	
   

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Gary Reagan

  	
   

  	
  By:

  	
  /s/
  Gene Spies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Gary
  Reagan

  	
   

  	
  Name:

  	
  Gene
  Spies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  SVP

  	
   

  	
  Title:

  	
  Chief Financial Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}]]