Document:

Exhibit
10.15

 

 

November
9, 2006

 

 

Melissa
Cruz

8
Wampanoag Drive

Acton,
MA

 

 

Dear Melissa:

 

This
letter confirms your separation from employment with BladeLogic, Inc. (the “Company”). This letter also proposes
an agreement between you and the Company.

 

The
Company shall provide you with the right to continue group medical and dental
insurance coverage after the termination of your employment under the law known
as “COBRA.”  The terms for that
opportunity will be set forth in a separate written notice. The termination of
other benefits will be addressed in separate correspondence. Basically, your
eligibility to participate in any other employee benefit plans and programs of
the Company ceases on or after the termination of your employment in accordance
with applicable benefit plan or program terms and practices.

 

You
shall also have the right to exercise any and all vested options that you hold
to purchase common stock of the Company through your last day of employment,
pursuant to and subject to the terms of any and all applicable stock option
plans and agreements.

 

Regardless of whether you enter into this Agreement
you are obligated, among other things, to comply with the post-employment
confidentiality, non-competition and nonsolicitation and other provisions set
forth in the September 6, 2005 offer letter (“Offer Letter”) and the
Employee Noncompetition Nondisclosure and Developments Agreement dated
September 7, 2005 (“Noncompetition Agreement”).

 

The
terms set forth above will not be affected by whether or not you agree to the
terms set forth below.

 

The
remainder of this letter proposes an agreement (the “Agreement”) between
you and the Company. The purpose of this Agreement is to establish an amicable
arrangement for ending your employment relationship, including releasing the
Company and related persons or entities from any claims and permitting you to
receive separation pay and related benefits.

 

 

If you
agree to the terms of this Agreement, you acknowledge that you are entering
into this Agreement voluntarily. By entering into this Agreement, you
understand that the Company is not admitting in any way that it violated any
legal obligation that it owed to you.

 

With
those understandings, you and the Company agree as follows:

 

1.                                       Separation
from Employment

 

This
confirms that your employment with the Company will end effective on
January 31, 2007, provided however, the
Company may, in its sole discretion, elect to extend the date your employment
ends to a date on or before February 28, 2007 by providing you with written
notice of such extension on or before December 31, 2006. For purposes of this
Agreement, the “Separation Date” shall be the date your employment at
the Company actually ends. You recognize that actively working and continuing
to use your best efforts to perform services on behalf of the Company through
the Separation Date is a material term of this Agreement.

 

You
confirm that you have resigned from any and all other positions that you hold
with the Company as an officer, director or otherwise effective on the Separation
Date. You further confirm that you have resigned from any and all positions
that you hold with any subsidiary or affiliate of the Company, including,
without limitation, any employee benefit plan, effective on the Separation Date.

 

The
Company presently intends to employ you at least through January 31, 2007. Notwithstanding
the foregoing, in the event that, prior to the Separation Date, your employment
is terminated by the Company for “cause,” as that term is defined in the Offer
Letter, the Company will not be required to: 
pay Severance Benefits or Bonus, modify the vesting schedule of Your
Stock Options (as defined below) or release you from the Company’s claims. The
remaining provisions of this Agreement will remain in full force and effect.

 

The
Company is not obligated to pay Severance Benefits or Bonus or  modify the vesting schedule of Your Stock
Options (as defined below) before (i) this Agreement becomes fully effective,
and (ii) you have signed the General Release attached hereto as Exhibit A (the “General
Release”) within seven days after the Separation Date and returned the signed
General Release to the Company’s General Counsel.

 

2.                                       Severance
Benefits

 

(a)           Severance
Pay. The Company shall pay you severance pay (“Severance Pay”)
consisting of salary continuation at your final base salary rate of $175,000 per
year effective for the six month period from the date immediately following the
Separation Date (the “Severance Pay Period”). The Company shall pay you
Severance Pay on its regular payroll dates applicable to your position with the
Company, provided that the
Company is not obligated to provide you

 

2

 

with Severance Pay
before (i) this Agreement becomes effective, and (ii) you have signed the
General Release and returned it to the Company’s General Counsel.

 

(b)           Health
Benefits. Your rights and obligations under COBRA are explained in a
separate letter to you describing your medical and dental insurance continuation
rights under COBRA. To continue your medical and dental insurance coverage, you
must elect COBRA continuation coverage. If you elect COBRA continuation
coverage and provided you and
your beneficiaries remain eligible for COBRA continuation coverage, the Company
shall continue to pay for medical and dental insurance premiums for coverage of
you and your beneficiaries to the same extent as if you had remained employed
to the end of the Severance Pay Period. You will be responsible for the
remaining portion of such coverage as if you remained employed. You hereby
authorize the deduction of the portion for which you are responsible from your
Severance Pay. If you elect COBRA continuation coverage, you may continue
coverage for yourself and any beneficiaries after the end of the Severance Pay
Period at your own expense for the remainder of the COBRA period, to the extent
you and they remain eligible.

 

3.                                       Bonus

 

Within
seven (7) days of the Company’s receipt of the General Release, the Company
shall pay you prorata bonus compensation reflective of the Company’s assessment
of your and the Company’s performance during the first quarter of the Company’s
current fiscal year in accordance with the Company’s 2007 Executive
Compensation Plan. Such bonus payment shall be in lieu of any bonus payment for
which you may have otherwise been eligible.

 

4.                                       Stock
and Stock Options

 

You acknowledge and agree that, (i) you hold 135,000
shares of common stock, issued pursuant to a November, 2005 Stock Restriction
Agreement and which became fully vested on October 3, 2006 (“Vested Shares”),
(ii) you hold a Nonqualified Stock Option (the “Nonqualified Stock
Option”) to purchase 30,000 shares of the Company’s common stock pursuant
to the 2001 Stock Option and Grant Plan
(“Stock Option Plan”) and the November 15, 2005 NonQualified Stock
Option Agreement  (“NQO Agreement”)
at the per share exercise price of $.80; (iii) you hold an Incentive Stock Option
(the “Incentive Stock Option”) to purchase 375,000 shares of the Company’s
common stock pursuant to the Stock Option Plan and the November 15, 2005 Incentive
Stock Option Agreement (“ISO Agreement”) at the per share exercise price
of $.80 (collectively, the Nonqualified Stock Option and the Incentive Stock Option
are “Your Stock Options”); (iv) other
than the Vested Shares and Your Stock Options, you do not own and have never owned (in each case, of
record or beneficially) any rights to acquire any shares of capital stock of
the Company (whether pursuant to stock options, warrants or any other rights to
acquire shares of capital stock of the Company); and (v) you do not own
and have never owned (in each case, of record or beneficially) any other shares
of beneficial interests of the Company.

 

3

 

In
consideration for, among other terms, your entering into and not revoking this
Agreement, and contingent upon signing and returning the General Release within
the time frames set forth in this Agreement, the Company shall modify the
Incentive Stock Option in accordance herewith. As of the date hereof, the
Non-Qualified Stock Option is hereby canceled and shall be of no further force
or effect as of the date hereof. You acknowledge that the following sets forth the
modified and accelerated vesting schedule, as mutually agreed upon, with respect
to the Incentive Stock Option and supersedes any vesting schedule set forth in
the ISO Agreement:

 

On
November 30, 2006, you shall vest in 22,500 shares under the Incentive Stock
Option. In the event that the Company does not extend the Separation Date into
February 2007 pursuant to this Agreement, you shall vest in an additional
90,000 shares under the Incentive Stock Option on the Separation Date. Alternatively,
in the event that the Company does extend the Separation Date into February
2007 pursuant to this Agreement, you shall vest in an additional 101,250 shares
under the Incentive Stock Option on the Separation Date.

 

The
exercise period under the Incentive Stock Option shall be for ninety (90) days
from the Separation Date, as set forth in the ISO Agreement. All of the
Incentive Stock Options that are not subject to the vesting described above
shall lapse as of the Separation Date, shall not become exercisable, and shall
be canceled as of such date.

 

5.                                       Tax
Treatment

 

The
Company shall undertake to make deductions, withholdings and tax reports with
respect to payments and benefits under this Agreement to the extent that it
reasonably and in good faith determines that it is required to make such
deductions, withholdings and tax reports. Payments under this Agreement shall
be in amounts net of any such deductions or withholdings. Nothing in this
Agreement shall be construed to require the Company to make any payments to
compensate you for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.

 

6.                                       Return
of Property

 

On the
Separation Date, you will confirm that, to the best of your knowledge, you have
returned to the Company all Company property, including, without limitation,
computer equipment, software, keys and access cards, credit cards, files and
any documents (including computerized data and any copies made of any
computerized data or software) containing information concerning the Company,
its business or its business relationships (in the latter two cases, actual or
prospective). You also commit to
deleting and finally purging any duplicates of files or documents that may
contain Company information from any computer or other device that remains your
property after the Separation Date. In the event that you discover that
you continue to retain any such property after the Separation Date, you shall
return it to the Company immediately.

 

4

 

7.                                       Confidential
Information

 

You
understand and agree that you have been employed in a position of confidence
and trust and have had access to information concerning the Company that the
Company treats as confidential and the disclosure of which could negatively
affect the Company’s interests (“Confidential Information”). Confidential
Information includes, without limitation, confidential financial information;
business forecasts; inventions; improvements and other intellectual property;
trade secrets; know-how; designs, processes or formulae; confidential software;
marketing or sales information or plans; customer lists; and business plans,
prospects and opportunities. You agree that you shall not use or disclose any
Confidential Information at any time without the written consent of the Company.
These obligations supplement and in no way diminish your confidentiality
obligations pursuant to the Noncompetition Agreement.

 

8.                                       Noncompetition
Nondisclosure and Developments Agreement

 

You acknowledge
that and agree that the Noncompetition Agreement you entered into with the
Company is full force and effect and is hereby incorporated by reference. Any
breach of the Noncompetition Agreement shall be deemed a material breach of
this Agreement. You acknowledge and agree that the restrictions set forth in the
Noncompetition Agreement are intended to protect the Company’s interest in its
Confidential Information and established employee, customer and supplier
relationships and goodwill. You agree that such restrictions are reasonable and
appropriate for this purpose.

 

9.                                       Release
of Your Claims

 

In
consideration for, among other terms, the payments and benefits described in
Section 2, 3 and 4, to which you acknowledge you would otherwise not be
entitled, you voluntarily release and forever discharge the Company, its
affiliated and related entities, its and their respective predecessors,
successors and assigns, its and their respective employee benefit plans and
fiduciaries of such plans, and the current and former officers, directors,
shareholders, employees, attorneys, accountants and agents of each of the
foregoing in their official and personal capacities (collectively referred to
as the “Releasees”) generally from all claims, demands, debts, damages
and liabilities of every name and nature, known or unknown (“Claims”)
that, as of the date when you sign this Agreement, you have, ever had, now
claim to have or ever claimed to have had against any or all of the Releasees. This
release includes, without limitation, all Claims:

 

•                  relating
to your employment by and the decision to terminate your employment with the
Company;

•                  of
wrongful discharge;

•                  of
breach of contract;

•                  of
retaliation or discrimination under federal, state or local law (including,
without limitation, Claims of age discrimination or retaliation under the Age
Discrimination in Employment

 

5

 

Act, Claims of
disability discrimination or retaliation under the Americans with Disabilities
Act, and Claims of discrimination or retaliation under Title VII of the Civil Rights Act of 1964);

•                  under
any other federal or state statute;

•                  of
defamation or other torts;

•                  of
violation of public policy;

•                  for
wages, bonuses, incentive compensation, stock, stock options, vacation pay or
any other compensation or benefits; and

•                  for
damages or other remedies of any sort, including, without limitation,
compensatory damages, punitive damages, injunctive relief and attorney’s fees;

 

provided,
however, that this release shall not affect your vested rights under the
Company’s Section 401(k) plan or your rights under this Agreement, the
Vested Shares or Your Stock Options.

 

You
agree that you shall not accept damages of any nature, other equitable or legal
remedies for your own benefit, attorney’s fees, or costs from any of the
Releasees with respect to any Claim released by this Agreement. As a material
inducement to the Company to enter into this Agreement, you represent that you
have not assigned to any third party and you have not filed with any agency or
court any Claim released by this Agreement.

 

10.                                 Release
of the Company’s Claims

 

In
consideration for, among other terms, your release of Claims pursuant to
Section 9, the Company voluntarily releases and forever discharges you
generally from all Claims that, as of the date when the Company signs this
Agreement, the Company has, ever had, now claims to have or ever claimed to
have had against you which relate to good faith acts or omissions by you during
the course of your employment with the Company undertaken or not undertaken in
the reasonable belief that such acts or omissions were in the best interests of
the Company.

 

11.                                 Confidentiality
of Agreement

 

You
agree to keep information relating to the negotiation of and terms of this Agreement
(“Agreement-Related Information”) in the strictest confidence and not
reveal, unless legally compelled to do so, any Agreement-Related Information to
any persons except your spouse, your attorney and your financial advisors, and
to them only provided that they first agree for the benefit of the Company to
keep Agreement-Related Information confidential. Nothing in this Section 11
shall be construed to prevent you from disclosing Agreement-Related Information
to the extent required by a lawfully issued subpoena or duly issued court
order; provided that you provide
the Company with advance written notice and a reasonable opportunity to contest
such subpoena or court order.

 

6

 

12.                                 Nondisparagement

 

You agree not to make any
disparaging statements concerning the Company or any of its affiliates or
current or former officers, directors, shareholders, employees or agents. You
further agree not to take any actions or conduct yourself in any way that would
reasonably be expected to affect adversely the reputation or goodwill of the
Company or any of its or their affiliates or any of its current or former
officers, directors, shareholders, employees or agents. The Company shall
instruct Steve Walske, Dev Ittycheria, Vijay Manwani, Peter Gyenes, David
Tabors, Robert Goodman, Mark Terbeek, John McMahon, Vance Loiselle and Jefferey
Liotta (the “Named Individuals”) not to make disparaging statements about you
and not to  conduct themselves in any way
that would reasonably be expected to affect adversely your reputation or
goodwill. These nondisparagement obligations shall not in any way affect your
obligation or the obligations of the above-referenced persons to testify
truthfully in any legal proceeding.

 

13.                                 Communications
Concerning Your Separation

 

If asked about the circumstances of your separation
of employment with the Company, you shall respond that you resigned to pursue other opportunities and
shall not make any further comment about your employment separation. The
Company shall instruct  the Named Individuals  to respond to any inquiries about the
ending of your employment by stating that you resigned to pursue other
opportunities and not to make any further comment about your employment
separation. Nothing in this Section 13 shall be construed to prohibit you or
any of the above-referenced persons from testifying truthfully in any legal
proceeding or providing truthful information in response to a request from a
governmental agency.

 

14.                                 Information
Concerning Actual, Potential or Alleged Financial Irregularities

 

You
represent that you are not aware of any actual, potential or alleged financial
irregularities concerning the Company.

 

15.                                 Future
Cooperation

 

You
agree to cooperate reasonably with the Company and all of its affiliates
(including its and their outside counsel) in connection with the contemplation,
prosecution and defense of all phases of existing, past and future litigation
about which the Company believes you may have knowledge or information. You
further agree to make yourself available at mutually convenient times during
and outside of regular business hours as reasonably deemed necessary by the
Company’s counsel. The Company shall not utilize this Section 15 to require you
to make yourself available to an extent that would unreasonably interfere with
full-time employment responsibilities that you may have. You agree to appear
without the necessity of a subpoena to testify truthfully in any legal
proceedings in which the Company calls you as a witness. In exchange for the
cooperation required above, the Company agrees to compensate you at the rate of
$87.50/hour for time spent performing your obligations under this Section, said
amount being

 

7

 

the hourly
rate of your final salary with the Company, provided
that your right to such compensation shall not apply to time spent in
activities that could have been compelled pursuant to a subpoena, including
testimony and related attendance at depositions, hearings or trials. The
Company further agrees to pay the foregoing compensation within thirty (30)
days of your submission of an invoice for your services under this Section.

 

16.                                 Suspension
or Termination of Payments

 

In the
event that you fail to comply with your obligations under Sections 6, 7, 8, 11,
12, 13 or 15 of this Agreement, in addition to any other legal or equitable
remedies it may have for such breach the Company shall have the right to
terminate or suspend its payments to you and the additional vesting of Your Stock
Options under this Agreement. The termination or suspension of such payments or
vesting in the event of such breach by you will not affect your continuing
obligations under this Agreement.

 

17.                                 Legal
Representation

 

This
Agreement is a legally binding document and your signature will commit you to
its terms. You acknowledge that you have been advised to discuss all aspects of
this Agreement with your attorney, that you have carefully read and fully
understand all of the provisions of this Agreement and that you are voluntarily
entering into this Agreement.

 

18.                                 Absence
of Reliance

 

In
signing this Agreement, you are not relying upon any promises or
representations made by anyone at or on behalf of the Company.

 

19.                                 Enforceability

 

If any
portion or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then
the remainder of this Agreement, or the application of such portion or
provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.

 

20.                                 Waiver

 

No
waiver of any provision of this Agreement shall be effective unless made in
writing and signed by the waiving party. The failure of any party to require
the performance of any term or obligation of this Agreement, or the waiver by
any party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.

 

8

 

21.                                 Enforcement

 

(a)           Jurisdiction.
You and the Company hereby agree that the Superior Court of the Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts shall have the exclusive jurisdiction to consider any matters related
to this Agreement, including without limitation any claim for violation of this
Agreement. With respect to any such court action, you (i) submit to the
jurisdiction of such courts, (ii) consent to service of process, and (iii)
waive any other requirement (whether imposed by statute, rule of court or
otherwise) with respect to personal jurisdiction or venue.

 

(b)           Relief.
You agree that it would be difficult to measure any harm caused to the Company
that might result from any breach by you of your promises set forth in Sections
6, 7, 8, 11, 12, 13 or 15, and that in any event money damages would be an
inadequate remedy for any such breach. Accordingly, you agree that if you
breach, or propose to breach, any portion of your obligations under Sections 6,
7, 8, 11, 12, 13 or 15, the Company shall be entitled, in addition to all other
remedies it may have, to an injunction or other appropriate equitable relief to
restrain any such breach, without showing or proving any actual damage to the
Company and without the necessity of posting a bond. In the event that the
Company prevails in any action to enforce Sections 6, 7, 8, 11, 12, 13 or 15,
then you also shall be liable to the Company for attorney’s fees and costs
incurred by the Company in enforcing such provision(s). In addition, in the
event that you breach any portion of Section 8, you agree that the restrictions
of the Noncompetition Agreement shall remain in effect for the period of such
breach notwithstanding the period of one (1) year set forth above and you
further agree that the same restrictions shall apply for a period of one (1)
year commencing effective upon the cessation of any such breach.

 

22.                                 Governing
Law; Interpretation

 

This
Agreement shall be interpreted and enforced under the laws of the Commonwealth
of Massachusetts, without regard to conflict of law principles. In the event of
any dispute, this Agreement is intended by the parties to be construed as a
whole, to be interpreted in accordance with its fair meaning, and not to be
construed strictly for or against either you or the Company or the “drafter” of
all or any portion of this Agreement.

 

23.                                 Entire
Agreement

 

This
Agreement constitutes the entire agreement between you and the Company. This
Agreement supersedes any previous agreements or understandings between you and
the Company including without limitation, the Offer Letter, provided however, the
ISO Agreement, the NQO Agreement and the Stock Option Plan (all as modified herein
with respect to the vesting of Your Stock Options), the Indemnification
Agreement you entered into with the Company and the Noncompetition Agreement, remain in
full force and effect.

 

9

 

24.                                 Time
for Consideration; Effective Date

 

You
have the opportunity to consider this Agreement for twenty-one (21) days before
signing it. To accept this Agreement, you must return a signed original of this
Agreement so that it is received by the undersigned at or before the expiration
of this twenty-one (21) day period. If you sign this Agreement within less than
twenty-one (21) days of the date of its delivery to you, you acknowledge by
signing this Agreement that such decision was entirely voluntary and that you
had the opportunity to consider this Agreement for the entire twenty-one (21)
day period. You acknowledge and agree that any modifications to this Agreement
will not restart the twenty one day period that began on October 31, 2006. For
the period of seven (7) days from the date when this Agreement becomes fully
executed, you have the right to revoke this Agreement by written notice to the
undersigned. For such a revocation to be effective, it must be delivered so
that it is received by the undersigned at or before the expiration of the seven
(7) day revocation period. This Agreement shall not become effective or
enforceable during the revocation period. This Agreement shall become effective
on the first business day following the expiration of the revocation period
(the “Effective Date”).

 

25.                                 Counterparts

 

This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be taken to be an original, but all of which
together shall constitute one and the same document.

 

Please
indicate your agreement to the terms of this Agreement by signing and returning
to me the original of this letter within the time period set forth above.

 

	
  Very truly yours,

  
	
   

  
	
  BLADELOGIC,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Dev Ittycheria

  	
   

  	
  11/9/2006

  	
   

  
	
   

  	
  Dev
  Ittycheria

  	
  Date

  
	
   

  	
  President
  and CEO

  	
   

  
					

 

 

You
are advised to consult with an attorney before signing this Agreement.  The foregoing is agreed to and accepted
by:

 

	
  /s/ Melissa Cruz

  	
   

  	
  11/9/2006

  	
   

  
	
  Melissa
  Cruz

  	
  Date

  

 

10

 

EXHIBIT A

 

General Release

 

In
consideration for, and as a condition to receiving the payments and benefits
described in Sections 2, 3 and 4 of the October 31, 2006 Separation Agreement (“Separation
Agreement”) to which you acknowledge you would otherwise not be entitled, you
voluntarily release and forever discharge the Company, its affiliated and
related entities, its and their respective predecessors, successors and
assigns, its and their respective employee benefit plans and fiduciaries of
such plans, and the current and former officers, directors, shareholders,
employees, attorneys, accountants and agents of each of the foregoing in their
official and personal capacities (collectively referred to as the “Releasees”)
generally from all claims, demands, debts, damages and liabilities of every
name and nature, known or unknown (“Claims”) that, as of the date when
you sign this General Release, you have, ever had, now claim to have or ever
claimed to have had against any or all of the Releasees. This release includes,
without limitation, all Claims:

 

•                  relating
to your employment by and the decision to terminate your employment with the
Company;

•                  of
wrongful discharge;

•                  of
breach of contract;

•                  of
retaliation or discrimination under federal, state or local law (including,
without limitation, Claims of age discrimination or retaliation under the Age
Discrimination in Employment Act, Claims of disability discrimination or
retaliation under the Americans with Disabilities Act, and Claims of
discrimination or retaliation under Title
VII of the Civil Rights Act of 1964);

•                  under
any other federal or state statute;

•                  of
defamation or other torts;

•                  of
violation of public policy;

•                  for
wages, bonuses, incentive compensation, stock, stock options, vacation pay or
any other compensation or benefits; and

•                  for
damages or other remedies of any sort, including, without limitation,
compensatory damages, punitive damages, injunctive relief and attorney’s fees;

 

To
receive payments and benefits pursuant to the Separation Agreement, you must
sign and return this General Release within the seven (7) day period that
immediately follows the Separation Date, as defined in the Separation Agreement.
You are advised to consult with an attorney before signing this General Release.

 

The
foregoing is agreed to and accepted by:

 

	
   

  	
   

  	
   

  
	
  Melissa
  Cruz

  	
  DateExhibit 10.17

 

BLADELOGIC,
INC.

 

LOAN AND
SECURITY AGREEMENT

 

 

This
LOAN AND SECURITY AGREEMENT is entered into as of July 22, 2004, by and between
COMERICA BANK (“Bank”) and BLADELOGIC, INC. (“Borrower”).

 

RECITALS

 

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

 

AGREEMENT

 

The
parties agree as follows:

 

1.                                       DEFINITIONS
AND CONSTRUCTION.

 

1.1                                 Definitions.
As used in this Agreement, the following terms shall have the following
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 property (including, without limitation,
the licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower’s Books relating to any of
the foregoing.

 

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

 

“Affiliate”
means, with respect to any Person, any Person that 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. For purposes of this definition, “control”
of a Person means the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through
the ownership of voting securities, by contract or otherwise.

 

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

 

“Borrower’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 (i) Five Hundred Thousand Dollars ($500,000), plus
(ii) eighty percent (80%) of Eligible Accounts, as determined by Bank with
reference to the most recent Borrowing Base Certificate delivered by Borrower,
provided that such percentage may be revised by Bank based on the results of
the initial Collateral audit.

 

“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.

 

“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

 

1

 

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.

 

“Closing
Date” means the date of this Agreement.

 

“Code”
means the California Uniform Commercial Code.

 

“Collateral”
means the property described on Exhibit A attached hereto.

 

“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 or provided 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 designed to protect
such 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 for the
benefit of Borrower hereunder.

 

“Daily
Balance” means the principal amount of the Credit Extensions owed at the end of
a given day.

 

“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 5.4; provided, that standards of eligibility may
be fixed and revised from time to time by Bank in Bank’s reasonable judgment
based on the results of a recent Collateral audit and upon notification thereof
to Borrower in accordance with the provisions hereof. Unless otherwise agreed
to by Bank, Eligible Accounts shall not include the following:

 

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

 

(b)                                 Accounts
with respect to an account debtor, twenty-five percent (25%) of whose Accounts
the account debtor has failed to pay within ninety (90) days of invoice date,
except as approved by Bank on a case-by-case basis in its discretion;

 

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

 

(d)                                 Accounts
with respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, bill and hold, pre-billed receivables, advanced
billings (excluding in the case of pre-billed

 

2

 

receivables and advanced
billings, receivables relating to maintenance contracts and contracts for
professional services) or other terms by reason of which the payment by the
account debtor may be conditional;

 

(e)                                  Accounts
with respect to which the account debtor is an Affiliate of Borrower;

 

(f)                                    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;

 

(g)                                 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 or any department, agency, or instrumentality 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);

 

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

 

(i)                                     Accounts
with respect to an account debtor, including Subsidiaries and Affiliates, whose
total obligations to Borrower exceed twenty-five percent (25%) of all Accounts
(the “Concentration Limit”), to the extent such obligations exceed the
aforementioned percentage (provided that the Concentration Limit shall be
thirty-five percent (35%) for Accounts with respect to which the account debtor
has issued publicly traded debt currently having an investment grade rating
from either Standard & Poor’s Corporation or Moody’s Investors
Service), except as approved in writing by Bank;

 

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

 

(k)                                  Accounts
the collection of which Bank reasonably determines to be doubtful.

 

“Eligible
Foreign Accounts” means Accounts with respect to which the account debtor does
not have its principal place of business in the United States and (i) that
are supported by one or more letters of credit in an amount and of a tenor, and
issued by a financial institution, acceptable to Bank, or (ii) with
respect to which the account debtor has issued publicly traded debt currently
having an investment grade rating from either Standard & Poor’s
Corporation or Moody’s Investors Service; or (iii) that Bank approves on a
case-by-case basis.

 

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

 

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

 

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

 

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

 

“Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase
price of property or services, including without limitation reimbursement and
other obligations with respect to surety bonds and letters of credit,
(b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

 

“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

 

3

 

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;

 

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

 

(g)                                 All
proceeds and products of the foregoing, including without limitation all
payments under insurance or any indemnity or warranty payable in respect of any
of the foregoing.

 

“Inventory”
means all present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or at any time hereafter owned by or in the custody or possession, actual or
constructive, of Borrower, including such inventory as is temporarily out of
its custody or possession or in transit and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower’s Books relating to any of the
foregoing.

 

“Investment”
means any beneficial ownership of (including stock, partnership 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.

 

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

 

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

 

“Lockbox”
has the meaning set forth in Section 2.8.

 

“Material
Adverse Effect” means a material adverse effect on (i) the business operations
or condition (financial or otherwise) of Borrower and its Subsidiaries taken as
a whole or (ii) the ability of Borrower to repay the Obligations or otherwise
perform its obligations under the Loan Documents.

 

4

 

“Negotiable
Collateral” means all of Borrower’s present and future letters of credit of
which it is a beneficiary, notes, drafts, instruments, 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.

 

“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 this Agreement or any instrument or agreement now or hereafter
executed in connection herewith.

 

“Permitted
Indebtedness” means:

 

(a)                                  Indebtedness
of Borrower in favor of Bank arising under this Agreement or any other Loan
Document or under any other agreement or document between Borrower and Bank,
and any extensions, renewals or refinancings thereof;

 

(b)                                 Indebtedness
existing on the Closing Date and disclosed in the Schedule, and any extensions,
renewals or refinancings thereof;

 

(c)                                  Indebtedness
secured by a lien described in clause (c) of the defined term “Permitted
Liens,” provided (i) such Indebtedness does not exceed the lesser of the
cost or fair market value of the property financed with such Indebtedness and
(ii) the principal amount of such Indebtedness does not exceed in the
aggregate at any given time (A) $750,000 plus (B) the principal amount
of any such Indebtedness in existence as of the Closing Date and disclosed on
the Schedule, and any extensions, renewals, or refinancings thereof (provided
the principal amount does not exceed the cap set forth in this subsection); and

 

(d)                                 Subordinated
Debt, and any extensions, renewals or refinancings thereof provided that the
principal amount thereof does not increase.

 

(e)                                  Indebtedness
on account of current liabilities (other than for borrowed money) incurred in
the normal and ordinary course of business; and

 

(f)                                    Indebtedness
in respect of (i) taxes, assessments, governmental charges or levies and
claims for labor, materials and supplies, either not yet delinquent or being
contested in good faith by appropriate proceedings, (ii) judgments or
awards which have been in force for less than the applicable appeal period so
long as execution is not levied thereunder or in respect of which the Borrower
or any Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review in a manner reasonably satisfactory to Bank and in
respect of which a stay of execution shall have been obtained pending such
appeal or review and for which adequate reserves have been established to the
extent required by generally accepted accounting principles, and
(iii) endorsements made in connection with the deposit of items for credit
or collection in the ordinary course of business.

 

“Permitted
Investment” means:

 

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

 

(b)                                 Investments
of Borrower in Subsidiaries in an aggregate amount of up to $750,000 per year;

 

5

 

(c)                                  Investments
consisting of loans to employees of Borrower and its Subsidiaries not exceeding
an aggregate principal amount of $300,000 at any one time outstanding plus
accrued interest with respect thereto; and

 

(d)                                 (i) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one (1) year from
the date of acquisition thereof, (ii) commercial paper maturing no more
than one (1) 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) certificates of deposit maturing no
more than one (1) year from the date of investment therein issued by Bank and
(iv) Bank’s money market accounts.

 

“Permitted
Liens” means the following:

 

(a)                                  Any
Liens existing on the Closing Date and disclosed in the Schedule and Liens
arising under this Agreement and/or the other Loan Documents or otherwise
created in favor of Bank;

 

(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
with respect to which an adequate reserve has been established to the extent
required by GAAP;

 

(c)                                  Liens
(including without limitation, capital leases, conditional sales, contracts and
all other title retention or deferred purchase price devices) (i) upon or
in any equipment or licensed software which was not financed by Bank acquired
or held by Borrower or any of its Subsidiaries to secure the purchase price of
such equipment or licensed software or indebtedness incurred solely for the
purpose of financing the acquisition of such equipment or licensed software, or
(ii) existing on such equipment or licensed software 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 or
licensed software;

 

(d)                                 Deposits
or pledges made in connection with, or to secure payment of, workmen’s
compensation, unemployment insurance, old age pensions or other social
security; liens in respect of judgments or awards to the extent such judgments
or awards are permitted as Indebtedness by the provisions of paragraph (f)
of the definition of “Permitted Indebtedness”; and liens to secure claims for
labor, material or supplies, either not yet delinquent or being contested in
good faith by appropriate proceedings.

 

(e)                                  Liens
in the nature of zoning restrictions, easements, and rights or restrictions of
record on the use of real property which do not materially detract from the
value of such property or impair its use in the business of the owner or
lessee.

 

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

 

(g)                                 Liens
arising by operation of law to secure landlords, lessors or renters under
leases or rental agreements made in the ordinary course of business and
confined to the premises or property rented.

 

(h)                                 Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (a) through (g)
above, to the extent such extension, renewal or refinancing is permitted under
the definition of “Permitted Indebtedness.”

 

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

 

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

 

6

 

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

 

“Revolving
Facility” means the facility under which Borrower may request Bank to issue
Advances, as specified in Section 2.1(a) hereof.

 

“Revolving
Line” means one or more credit extensions in an aggregate principal amount of
up to Five Million Dollars ($5,000,000).

 

“Revolving
Maturity Date” means April 30, 2006.

 

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

 

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

 

“Subsidiary”
means any corporation, company or partnership in which (i) any general
partnership interest or (ii) more than 50% of the stock or other units of
ownership 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.

 

1.2                                 Accounting
Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP and all calculations made hereunder shall be
made in accordance with GAAP. When used herein, the terms “financial statements”
shall include the notes and schedules thereto.

 

2.                                       LOAN
AND TERMS OF PAYMENT.

 

2.1                                 Credit
Extensions.

 

Borrower
promises to pay to the order of Bank, in lawful money of the United States of
America, the aggregate unpaid principal amount of all Credit Extensions made by
Bank to Borrower hereunder. Borrower shall also pay interest on the unpaid
principal amount of such Credit Extensions at rates in accordance with the
terms hereof.

 

(a)                                  Revolving
Advances.

 

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

 

(ii)                                  Whenever
Borrower desires an Advance, Borrower will notify Bank by facsimile transmission
or telephone no later than 3:30 p.m. Eastern time  on the Business Day prior to the Business
Day that the Advance is to be made. Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit B
hereto. Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a Responsible
Officer, or without instructions if in Bank’s discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid after the
lapse of any applicable cure period. Bank shall be entitled to rely on any
telephonic notice

 

7

 

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(a) to Borrower’s deposit account.

 

2.2                                 Overadvances.
If the aggregate principal 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 - Advances. Except as set forth in Section 2.3(b), the
outstanding principal amount of the Advances shall bear interest, on the
outstanding Daily Balance thereof, at a rate equal to one half percent (0.50%)
above the Prime Rate.

 

(b)                                 Late
Fee; Default Rate. If any payment is not made within ten (10) days after
the date such payment is due, at the option of Bank, Borrower shall pay Bank a
late fee equal to the lesser of (i) five percent (5%) of the amount of
such unpaid amount or (ii) the maximum amount permitted to be charged
under applicable law. At the option of Bank, the outstanding principal amount
of the Advances shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to three (3) 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 Business Day of each
month during the term hereof. After the occurrence and during the continuance
of an Event of Default, Bank may charge all Periodic Payments and Bank Expenses
against any of Borrower’s deposit accounts. To the extent permitted by
applicable law, any interest not paid when due (after lapse of any applicable
cure period) shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder. All payments shall be free and clear of any taxes, withholdings,
duties, impositions or other charges, to the end that Bank will receive the
entire amount of any Obligations payable hereunder, regardless of source of
payment.

 

(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 Rate is changed, by an amount equal to such
change in the Prime Rate. All interest chargeable under the Loan Documents
shall be computed on the basis of a three hundred sixty (360) day year for the
actual number of days elapsed.

 

2.4                                 Crediting
Payments. So long as no Event of Default shall exist, 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 and during the
continuance of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but 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 3:30 p.m. Eastern 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 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 or before the Closing Date, a Facility Fee equal to $12,500 (which
shall include attorneys’ fees and expenses incurred in connection with
closing), which shall be nonrefundable; and

 

(b)                                 Bank
Expenses. After the Closing Date, all Bank Expenses, including reasonable
attorneys’ fees and expenses, as and when they are incurred by Bank, provided
that Borrower shall not be responsible for any Bank Expenses pursuant to this
Agreement if there are no outstanding Credit Extensions under

 

8

 

this Agreement unless (i)
it has indicated to Bank that it intends to request the initial Credit
Extension (including without limitation a Collateral audit performed in
anticipation of the initial Credit Extension), or (ii) such Bank Expenses are
incurred in connection with actions requested or approved by Borrower,
including without limitation in connection with amendments, consents, or similar
documentation entered into between Bank and Borrower or requested by Borrower,
and termination of Bank’s Liens hereunder.

 

2.6                                 Additional
Costs. In case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):

 

(a)                                  subjects
Bank to any tax with respect to payments of principal or interest or any other
amounts payable hereunder by Borrower or otherwise with respect to the
transactions contemplated hereby (except for taxes on the overall net income of
Bank imposed by the United States of America or any state or political
subdivision thereof);

 

(b)                                 imposes,
modifies or deems applicable any deposit insurance, reserve, special deposit or
similar requirement against assets held by, or deposits in or for the account
of, or loans by, Bank; or

 

(c)                                  imposes
upon Bank any other condition with respect to its performance under this
Agreement, and the result of any of the foregoing is to increase the cost to
Bank, reduce the income receivable by Bank or impose any expense upon Bank with
respect to the Obligations, Bank shall notify Borrower thereof. Borrower agrees
to pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank’s calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error.

 

2.7                                 Term.
This Agreement shall become effective on the Closing Date and, subject to
Section 12.7, shall continue in full force and effect for so long as any
Obligations under this Agreement (other than contingent indemnification
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 under this
Agreement (other than contingent indemnification obligations) are outstanding. At
such time as all Obligations under this Agreement (other than contingent
indemnification obligations) have been repaid in full and Bank has no further
obligation to make Credit Extensions to Borrower hereunder, Bank will promptly
take such steps as are reasonably requested by Borrower in order to terminate
Bank’s Lien on the Collateral.

 

2.8                                 Lockbox.
Borrower shall, unless otherwise directed by Bank in writing, cause all
remittances made by any account debtor for any Accounts to be made to a lock
box (the “Lockbox”) maintained with Bank. Unless otherwise directed by Bank in
writing, all invoices and other instructions submitted by Borrower to an
account debtor relating to Account payments shall designate the Lockbox as the
place to which such payments shall be made. Establishment of the Lockbox shall
be a condition precedent to the extension of any Advance under the Revolving
Line.

 

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;

 

9

 

(b)                                 a
certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Agreement;

 

(c)                                  UCC
National Form Financing Statement;

 

(d)                                 a
warrant to purchase stock;

 

(e)                                  agreement
to provide insurance;

 

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

 

(g)                                 current
financial statements of Borrower;

 

(h)                                 establishment
of the LockBox;

 

(i)                                     evidence
that Borrower has moved its accounts to Bank, as required pursuant to Section
6.7;

 

(j)                                     an
audit of the Collateral performed within the six (6) months preceding the date
of the initial Credit Extension, the results of which shall be reasonably
satisfactory to Bank; and

 

(k)                                  such
other documents, 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;

 

(b)                                 receipt
by Bank of all the reporting described in Section 6.3(a)(i) prepared as of the
end of the month preceding the date on which the Credit Extension is to be
made;

 

(c)                                  receipt
by Bank of the reporting described in Section 6.3(b) prepared on a current
basis; and

 

(d)                                 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 all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all Obligations and
in order 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 Collateral acquired after the date hereof. Borrower also
hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a
security interest in, or encumber any of the Intellectual Property, except for
licenses and sales of Intellectual Property in the ordinary course of Borrower’s
business.

 

10

 

4.2                                 Delivery
of Additional Documentation Required. Borrower shall from time to time
execute and deliver to Bank, at the request of Bank, all Negotiable Collateral,
all financing statements and other documents that Bank may reasonably request,
in form reasonably satisfactory to Bank, to perfect and continue the perfection
of Bank’s security interests in the Collateral and in order to fully consummate
all of the transactions contemplated under the Loan Documents.

 

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

 

5.                                       REPRESENTATIONS
AND WARRANTIES.

 

Borrower
represents and warrants as follows:

 

5.1                                 Due
Organization and Qualification. Borrower is a corporation duly existing
under the laws of its state of incorporation 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 be so qualified
or licensed would not have a material adverse effect on the business,
properties or financial condition of Borrower.

 

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 to which Borrower is a party or
by which Borrower is bound. Borrower is not in default under any material
agreement to which it is a party or by which it is bound.

 

5.3                                 No
Prior Encumbrances. Borrower has good and marketable title to, or leasehold
interest in, its property, free and clear of Liens, except for Permitted Liens.

 

5.4                                 Bona
Fide Eligible Accounts. The Eligible Accounts are bona fide existing
obligations. Other than receivables related to maintenance contracts and
contracts for professional services, the property and services giving rise to
such Eligible Accounts has been delivered or rendered to the account debtor or
to the account debtor’s agent for immediate and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.

 

5.5                                 Merchantable
Inventory. All Inventory is in all material respects of good and marketable
quality, free from all material defects, except for Inventory for which
adequate reserves have been made.

 

5.6                                 Intellectual
Property. Borrower is the sole owner of the Intellectual Property, except
for (i) non-exclusive licenses granted by Borrower to its customers in the
ordinary course of business and (ii) Intellectual Property licensed by
Borrower from third parties. Each of the 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 that any part of the
Intellectual Property violates the rights of any third party. Except as set
forth in the Schedule, Borrower’s rights as a licensee of intellectual property
do not give rise to more than twenty percent (20%) of its gross revenue in any
given month, including without limitation revenue derived from the sale,
licensing, rendering or disposition of any product or service. Except as set
forth in the Schedule, Borrower is not a party to, or bound by, any material
agreement relating to Intellectual Property that restricts the grant by
Borrower of a security interest in Borrower’s rights under such agreement.

 

5.7                                 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. The chief executive office of Borrower is located at the
address indicated in Section 10 hereof. All Borrower’s Inventory and

 

11

 

Equipment with a fair market value in excess $5,000 is located only at
the location set forth in Section 10 hereof and at the locations set forth in
the Schedule.

 

5.8                                 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 an adverse decision could have a Material
Adverse Effect.

 

5.9                                 No
Material Adverse Change in Financial Statements. All consolidated and
consolidating financial statements related to Borrower and any Subsidiary that
Bank has received from Borrower fairly present in all material respects
Borrower’s 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 the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.

 

5.10                           Solvency,
Payment of Debts. Borrower is solvent and able to pay its debts (including
trade debts) as they mature.

 

5.11                           Regulatory
Compliance. Borrower has met the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA, and no event has
occurred resulting from Borrower’s failure to comply with ERISA that could
result in Borrower’s incurring any material liability. 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 has not
violated any statutes, laws, ordinances or rules applicable to it, violation of
which could have a Material Adverse Effect.

 

5.12                           Environmental
Condition. Except as disclosed in the Schedule, none of Borrower’s
properties or assets has ever been used by Borrower or, to the best of Borrower’s
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in accordance with applicable law; to the best of Borrower’s
knowledge, none of Borrower’s properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
hazardous waste or hazardous substance disposal site, or a candidate for
closure pursuant to any environmental protection statute; no lien arising under
any environmental protection statute has attached to any revenues or to any
real or personal property owned by Borrower; and Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal, state or other governmental agency concerning any
action or omission by Borrower resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.

 

5.13                           Taxes.
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.

 

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

 

5.15                           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, the failure
to obtain which could have a Material Adverse Effect.

 

5.16                           Accounts.
Except as set forth on the Schedule, none of Borrower’s cash, cash equivalents,
or investments are maintained or invested with a Person other than Bank.

 

5.17                           Full
Disclosure. No representation, warranty or other statement made by Borrower
in any certificate or written statement furnished to Bank contains any untrue
statement of a material fact or omits to

 

12

 

state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.

 

6.                                       AFFIRMATIVE
COVENANTS.

 

Borrower
covenants and agrees 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. Borrower shall maintain its and each of its Subsidiaries’ legal
existence and good standing in its jurisdiction of organization and maintain
qualification in each jurisdiction in which it is required under applicable
law, except where the failure to maintain such qualification would not have a
Material Adverse Effect. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, in force all licenses, approvals and agreements, the
loss of which could have a Material Adverse Effect.

 

6.2                                 Government
Compliance. Borrower shall meet the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA within sixty (60)
days after the due date for such funding requirements. 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, noncompliance with
which could have a Material Adverse Effect.

 

6.3                                 Financial
Statements, Reports, Certificates.

 

(a)                                  Borrower
shall deliver the following to Bank, in each case at both the El Segundo and
the Boston addresses referenced in Section 10: 
(i) within forty five (45) days after the end of each quarter (or, if
there are any outstanding Credit Extensions under this Agreement, within thirty
(30) days after the end of each month) a company prepared consolidated balance
sheet and income statement covering Borrower’s consolidated operations during
such period, prepared in accordance with GAAP, consistently applied, in a form
acceptable to Bank and certified by a Responsible Officer and a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit
D hereto; (ii) as soon as available, but in any event within one
hundred fifty (150) days after the end of Borrower’s fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (iii) to the extent Borrower is a public company,
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,
if applicable, 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 Five Hundred Thousand Dollars ($500,000) or more; (v) on or
before the earlier of (A) the date such projections are approved by Borrower’s
Board of Directors and (B) March 1 of each fiscal year, financial projections
for Borrower for the forthcoming fiscal year, as approved by Borrower’s Board
of Directors; and (vi) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time.

 

(b)                                 If
there are any outstanding Credit Extensions under this Agreement, Borrower
shall deliver to Bank at both the El Segundo and the Boston addresses
referenced in Section 10, on a bi-weekly basis, a Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of Exhibit C
hereto, together with aged listings of accounts receivable and accounts
payable.

 

(c)                                  Bank
shall have a right from time to time hereafter to audit Borrower’s Accounts and
appraise Collateral, provided that (i) such audits will be conducted no more
often than every six (6) months unless an Event of Default has occurred and is
continuing and (ii) such audits will be conducted at Borrower’s expense only
after Borrower has requested the first Credit Extension (or indicated to Bank
that it intends to request such Credit Extension).

 

13

 

6.4                                 Inventory;
Returns. Borrower shall keep all Inventory in good and marketable
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 at the time of
the execution and delivery of this Agreement. Borrower shall promptly notify
Bank of all returns and recoveries and of all disputes and claims, where the
return, recovery, dispute or claim involves more than One Hundred Thousand
Dollars ($100,000).

 

6.5                                 Taxes.
Borrower shall make, and shall 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, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment
or deposit thereof; and Borrower will make, and will cause each Subsidiary to
make, timely payment or deposit of all material tax payments and withholding
taxes required of it by applicable laws, including, but not limited to, those
laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; 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.

 

6.6                                 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 insurance relating to Borrower’s
business, ownership and use of the Collateral 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 are reasonably satisfactory to Bank. All such policies of
property insurance shall contain a lender’s loss payable endorsement, in a form
satisfactory to Bank, showing Bank as an additional loss payee thereof, and all
liability insurance policies shall show the Bank as an additional insured and
shall specify that the insurer must give at least twenty (20) days notice to
Bank before canceling its policy for any reason. Upon Bank’s request, Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. Upon the occurrence and
during the continuance of an Event of Default, all proceeds payable under any
such policy shall, at the option of Bank, be payable to Bank to be applied on
account of the Obligations.

 

6.7                                 Accounts.
As of the date which is forty-five (45) days after the Closing Date and at all
times thereafter, Borrower shall maintain its principal depository, operating,
and investment accounts with Bank and/or Comerica Securities, Inc., which shall
include at least 90% of Borrower’s cash, cash equivalents, and investments in
the United States, measured on a consolidated basis.

 

6.8                                 Intellectual
Property Rights. Except to the extent that Borrower shall have determined
in its reasonable business judgment that such action is no longer necessary or
desirable in the conduct of its business, Borrower shall (i) protect, defend
and maintain the validity and enforceability of the trade secrets, Trademarks,
Patents and Copyrights, (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.

 

14

 

7.                                       NEGATIVE
COVENANTS.

 

Borrower
covenants and agrees that, so long as any credit hereunder shall be available
and until payment in full of the outstanding Obligations or for so long as Bank
may have any commitment to make any Credit Extensions, Borrower will not do any
of the following:

 

7.1                                 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than: 
(i) Transfers of Inventory in the ordinary course of business;
(ii) Transfers of non-exclusive licenses and similar arrangements for the
use of the property of Borrower or its Subsidiaries in the ordinary course of
business; (iii) Transfers of worn-out or obsolete Equipment; (iv)
Transfers that do not in the aggregate exceed One Million Dollars ($1,000,000)
during any year in connection with a sale / leaseback of hard assets or
software licensed from a third party purchased by Borrower after the date of
this Agreement provided that (A) Borrower is in compliance with Section 7.4 and
subsection (c) of the defined term “Permitted Indebtedness” after the
consummation of such transaction and that (B) an Event of Default has not
occurred which is continuing and would not occur after giving effect to such
Transfer; or (v) Transfers as set forth in the Schedule.

 

7.2                                 Change
in Business; Change in Control or Executive Office. Engage in any business,
or permit any of its Subsidiaries to engage in any business, other than the
businesses currently engaged in by Borrower and any business substantially
similar or related thereto (or incidental thereto); or cease to conduct
business in the manner conducted by Borrower as of the Closing Date; or suffer
or permit a Change in Control; or without thirty (30) days prior written
notification to Bank, relocate its chief executive office or state of
incorporation or change its legal name; or without Bank’s prior written
consent, change the date on which its fiscal year ends.

 

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, or acquire,
or permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person, except that any Subsidiary may
merge with and into Borrower or another Subsidiary.

 

7.4                                 Indebtedness.
Create, incur, assume or be or remain liable with respect to any Indebtedness,
or permit any Subsidiary so to do, other than Permitted Indebtedness.

 

7.5                                 Encumbrances.
Create, incur, assume or suffer to exist any Lien with respect to any of its
property, or assign or otherwise convey any right to receive income, including
the sale of any Accounts, or permit any of its Subsidiaries to do so, except
for Permitted Liens. Except for agreements evidencing or relating to Permitted
Liens, agree with any Person other than Bank not to grant a security interest
in, or otherwise encumber, any of its property, or permit any Subsidiary to do
so.

 

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 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 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,

 

15

 

or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank’s
prior written consent.

 

7.10                           Inventory
and Equipment. Store the Inventory or the Equipment with a bailee,
warehouseman, or other 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 pledge possession of the warehouse receipt, where
negotiable, covering such Inventory or Equipment. Store or maintain any
Equipment or Inventory at a location other than the location set forth in
Section 10 of this Agreement and the other locations set forth in the Schedule.

 

7.11                           Compliance.
Become an “investment company” 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. Fail to meet the minimum
funding requirements of ERISA within sixty (60) days after the due date for
such funding requirements, permit a Reportable Event or Prohibited Transaction,
as defined in ERISA, to occur, fail to comply with the Federal Fair Labor
Standards Act or violate any law or regulation, which failure to comply with or
violation could have a Material Adverse Effect.

 

7.12                           Negative
Pledge Agreements. Permit the inclusion in any contract to which Borrower
becomes a party of any provisions that could restrict or invalidate the
creation of a security interest in any of Borrower’s property.

 

8.                                       EVENTS
OF DEFAULT.

 

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

 

8.1                                 Payment
Default. If Borrower fails to pay (i) the principal on the Obligations
when due, or (ii) interest on the Obligations when due and such failure shall
continue for a period of five (5) days, provided that within such five (5) day
cure period, the failure to pay shall not be deemed an Event of Default, but no
Credit Extensions will be made, or (iii) any fees or other Obligations when due
and such failure shall continue for a period of ten (10) Business Days,
provided that within such ten (10) Business Day cure period, such a failure to
pay shall not be deemed an Event of Default, but no Credit Extensions will be
made;

 

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 ten 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 ten day period or cannot after diligent attempts by Borrower be
cured within such ten day period, and such default is likely to be cured within
a reasonable time, then Borrower shall have an additional reasonable period
(which shall not in any case exceed 30 days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default but no Credit Extensions will be made;

 

8.3                                 Material
Adverse Change. If there occurs a material adverse change in Borrower’s
business or financial condition which could reasonably be expected to impair
the prospect of repayment of any portion of the Obligations;

 

16

 

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 thirty (30) 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 material portion of Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within thirty (30) 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 required
to 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 forty-five (45) 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 or by which it is bound resulting in a
right by a third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness for borrowed money in an amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000) or which could have a Material Adverse
Effect;

 

8.7                                 Subordinated
Debt. If Borrower makes any payment on account of Subordinated Debt, except
to the extent such 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 Two Hundred Fifty Thousand Dollars ($250,000)
shall be rendered against Borrower and shall remain unsatisfied and unstayed
for a period of ten (10) days, unless such judgment or judgments are covered by
insurance as to which coverage is undisputed (provided that no Credit
Extensions will be required to be made prior to the satisfaction or stay of
such 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.

 

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 prior 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 or by any of the other
Loan Documents, immediately due and payable (provided that upon the occurrence
of an Event of Default described in Section 8.5, all Obligations shall
become immediately due and payable without any action by Bank);

 

(b)                                 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;

 

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

 

(d)                                 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

 

17

 

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;

 

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

 

(f)                                    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;

 

(g)                                 Dispose
of the Collateral 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;

 

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

 

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

 

Bank
will give Borrower notice of any actions taken pursuant to this Section 9.1
within a reasonable period of time.

 

9.2                                 Power
of Attorney. Effective only upon the occurrence and during the continuance
of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of
Bank’s designated officers, or employees) as Borrower’s true and lawful
attorney to:  (a) send requests for
verification of Accounts or notify account debtors of Bank’s security interest
in the Accounts; (b) endorse Borrower’s name on any checks or other forms of
payment or security that may come into Bank’s possession; (c) sign Borrower’s
name on any invoice or bill of lading relating to any Account, drafts against
account debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to account debtors; (d) dispose of any Collateral; (e)
make, settle, and adjust all claims under and decisions with respect to
Borrower’s policies of insurance; (f) settle and adjust disputes and claims
respecting the accounts directly with account debtors, for amounts and upon
terms which Bank determines to be reasonable; and (g) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral; provided that regardless of whether
an Event of Default has occurred, Bank may exercise such power of attorney to
sign the name of Borrower on any documents necessary to perfect or continue the
perfection of Bank’s security interest in the Collateral to the extent Borrower
fails to do so within a reasonable period of time after written request by Bank.
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 Credit Extensions hereunder is terminated.

 

9.3                                 Accounts
Collection. At any time during the term of this Agreement, Bank may notify
any Person owing funds to Borrower of Bank’s security interest in such funds
and verify the amount of such Account. At any time after and during the
continuance of an Event of Default and upon request of Bank, 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.

 

18

 

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 a loan facility in Section 2.1 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 6.6 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. So long as Bank complies with reasonable banking
practices and applicable law (including without limitation the Code), Bank
shall not in any way or manner be liable or responsible for:  (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding
agency, or other person whomsoever. All risk of loss, damage or destruction of
the Collateral shall be borne by Borrower.

 

9.6                                 Remedies
Cumulative. Bank’s rights and remedies under this Agreement and the Loan
Documents 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.

 

9.7                                 Demand;
Protest. Except as expressly provided herein, Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Bank on which
Borrower may in any way be liable.

 

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, by 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:

  	
  BLADELOGIC, INC.

  
	
   

  	
  400 Fifth Avenue

  
	
   

  	
  Waltham, MA 02451

  
	
   

  	
  Attn: Dev Ittycheria,
  President and

  
	
   

  	
  Chief Executive Officer

  
	
   

  	
  FAX: (781) 465-6022

  
	
   

  	
   

  
	
  If to Bank:

  	
  Comerica Bank

  
	
   

  	
  2321 Rosecrans Ave.,
  Suite 5000

  
	
   

  	
  El Segundo, CA 90245

  
	
   

  	
  Attn: Manager

  
	
   

  	
  FAX: (310) 297-2291

  

 

19

 

	
   

  	
   

  
	
  with a copy to:

  	
  Comerica Bank

  
	
   

  	
  100 Federal Street,
  28th Floor

  
	
   

  	
  Boston, MA 02110

  
	
   

  	
  Attn: Bill Sweeney
  & James Demoy

  
	
   

  	
  FAX: (617) 757-6351

  

 

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. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

12.                                 GENERAL
PROVISIONS.

 

12.1                           Successors
and Assigns. This Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties; provided,
however, that neither this Agreement nor any rights hereunder may be assigned
by Borrower without Bank’s prior written consent, which consent may be granted
or withheld in Bank’s sole discretion. Bank shall have the right without the
consent of or prior 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, provided that Bank will give Borrower notice of
any such assignment, sale or transfer within a reasonable period of time.

 

12.2                           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 (other than Borrower) 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 as a result of or in
any way arising out of, following, or consequential to a breach by Borrower of
its obligations under this Agreement, or any other Loan Document (including
without limitation reasonable attorneys’ fees and expenses), except for losses
caused by Bank’s gross negligence or willful misconduct.

 

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

 

12.4                           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.

 

12.5                           Amendments
in Writing, Integration. Neither this Agreement nor the Loan Documents can
be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement and the Loan Documents, if any,
are merged into this Agreement and the Loan Documents.

 

20

 

12.6                           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.

 

12.7                           Survival.
All covenants, representations and warranties made in this Agreement shall
continue in full force and effect so long as any Obligations under this
Agreement (other than contingent indemnification obligations) remain
outstanding or Bank has any obligation to make Credit Extensions to Borrower. The
obligations of Borrower to indemnify Bank with respect to the expenses,
damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.

 

13.                                 REFERENCE
PROVISION.

 

If and only if the jury trial waiver set forth in
Section 11 of this Agreement is invalidated for any reason by a court of law,
statute or otherwise, the reference provisions set forth below shall be
substituted in place of the jury trial waiver. So long as the jury trial waiver
remains valid, the reference provisions set forth in this Section shall be
inapplicable.

 

(a)                                  Each
controversy, dispute or claim (each, a “Claim”) between the parties arising out
of or relating to this Agreement, any security agreement executed by Borrower
in favor of Bank in connection herewith, any note executed by Borrower in favor
of Bank in connection herewith, or any other document, instrument or agreement
executed by Borrower with or in favor of Bank in connection herewith
(collectively in this Section, the “Loan Documents”), other than (i) all
matters in connection with nonjudicial foreclosure of security interests in
real or personal property; or (ii) the appointment of a receiver or the
exercise of other provisional remedies (any of which may be initiated pursuant
to applicable law) that are not settled in writing within fifteen (15) days
after the date on which a party subject to the Loan Documents gives written
notice to all other parties that a Claim exists (the “Claim Date”) shall be
resolved by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
their successor sections (“CCP”), which shall constitute the exclusive remedy
for the resolution of any Claim concerning the Loan Documents, including
whether such Claim is subject to the reference proceeding. Except as set forth
in this section, the parties waive the right to initiate legal proceedings
against each other concerning each such Claim. Venue for these proceedings
shall be in the Superior Court in the County where the real property, if any,
is located or in a County where venue is otherwise appropriate under state law
(the “Court”). By mutual agreement, the parties shall select a retired Judge of
the Court to serve as referee, and if they cannot so agree within fifteen (15)
days after the Claim Date, the Presiding Judge of the Court (or his or her
representative) shall promptly select the referee. A request for appointment of
a referee may be heard on an ex parte or expedited basis. The referee shall be
appointed to sit as a temporary judge, with all the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to
the oath of office as provided for in Rule 244 of the California Rules of Court
(or any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP §170.6. Upon being selected, the referee shall (a) be requested
to set the matter for a status and trial-setting conference within fifteen (15)
days after the date of selection and (b) if practicable, try any and all issues
of law or fact and report a statement of decision upon them within ninety (90)
days of the date of selection. The referee will have power to expand or limit
the amount of discovery a party may employ. Any decision rendered by the
referee will be final, binding and conclusive, and judgment shall be entered
pursuant to CCP §644 in any court in the State of California having
jurisdiction. The parties shall complete all discovery no later than fifteen
(15) days before the first trial date established by the referee. The referee
may extend such period in the event of a party’s refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to “priority” in conducting
discovery. Either party may take depositions upon seven (7) days written
notice, and shall respond to requests for production or inspection of documents
within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of
the referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.

 

(b)                                 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 all
hearings, the order of presentation of

 

21

 

evidence, and all other
questions that arise with respect to the course of the reference proceeding. Except
for trial, all proceedings and hearings conducted before the referee shall be
conducted without a court reporter unless a party requests a court reporter. The
party making such a request shall have the obligation to arrange for and pay
for the court reporter. Subject to the referee’s power to award costs to the
prevailing party, the parties shall equally bear the costs of the court
reporter at the trial and the referee’s expenses.

 

(c)                                  The
referee shall determine all issues in accordance with existing California case
and statutory law. California rules of evidence applicable to proceedings at
law will apply to the reference proceeding. The referee shall be empowered to
enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that shall be binding upon
the parties. At the close of the reference proceeding, the referee shall issue
a single judgment at disposing of all the claims of the parties that are the
subject of the reference. The parties reserve the right (i) to contest or
appeal from the final judgment or any appealable order or appealable judgment
entered by the referee and (ii) to obtain findings of fact, conclusions of
laws, a written statement of decision, and (iii) to move for a new trial or a
different judgment, which new trial, if granted, shall be a reference
proceeding under this provision.

 

(d)                                 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 the reference procedure herein described will
be resolved and determined by arbitration conducted by a retired judge of the
Court, 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 as set forth in this Section shall apply to any such arbitration
proceeding.

 

{Remainder
of page intentionally left blank; signature page follows.}

 

22

 

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

 

	
   

  	
  BLADELOGIC, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary J. Ventor

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William Sweeney

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
						

 

23

 

	
  DEBTOR

  	
  BLADELOGIC, INC.

  
	
   

  	
   

  
	
  SECURED PARTY:

  	
  COMERICA BANK

  

 

EXHIBIT
A

 

COLLATERAL
DESCRIPTION ATTACHMENT

TO 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), goods
(including fixtures), instruments (including promissory notes), inventory
(including all goods held for sale or lease or to be furnished under a contract
of service, and including returns and repossessions), investment property
(including securities and securities entitlements), letter of credit rights,
money, and all of Debtor’s books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;
and

 

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

 

Notwithstanding the
foregoing, the Collateral shall not include: 
(i) any Intellectual Property (as defined in the Loan and Security
Agreement) or (ii) any property leased or otherwise acquired by Borrower
under any lease or other similar agreement or any rights of Borrower under any
such lease or other agreement (including without limitation, Borrower’s rights
under, and the property leased or otherwise acquired by Borrower pursuant to,
(A) that certain Master Lease Agreement, dated as of September 25,
2003, between Borrower and Heller Financial Leasing, Inc., a GE Capital
Company, and any and all Schedules delivered in connection therewith and
(B) that certain Loan and Security Agreement No. 20105, dated as of
March 22, 2002, between Borrower and Dominion Venture Finance L.L.C.), and
any extensions, renewals or refinancings thereof; provided, however, that the
Collateral shall include (i) all accounts and general intangibles that consist
of rights to payment and proceeds from the sale, licensing or disposition of
all or any part of, or rights in, the foregoing and (ii) any software licensed
by Borrower from a third party licensor which is financed by Bank (to the
extent permitted by the license agreement).

 

24

 

EXHIBIT
B

 

TECHNOLOGY
& LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

 

FORMULA
BASED LINES:  DEADLINE
FOR NEXT DAY PROCESSING IS 3:30 P.M. Eastern Time

DEADLINE FOR WIRE TRANSFERS IS 3:30 P.M. Eastern Time

 

	
  TO: Loan Analysis

  	
  DATE:

  	
   

  	
   

  	
  TIME:

  	
   

  
	
  FAX #: (650) 846-6840

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  FROM:

  	
  BLADELOGIC, INC.

  	
   

  	
  TELEPHONE REQUEST (For
  Bank Use Only):

  
	
   

  	
  Borrower’s Name

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  
	
  FROM:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signer’s
  Name

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature
  (Borrower)

  	
   

  	
   

  	
  Authorized Request
  & Phone #

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PHONE #:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Received by (Bank) &
  Phone #

  
	
  FROM ACCOUNT#:

  	
   

  	
   

  	
   

  	
   

  
	
  (please include Note
  number, if applicable)

  	
   

  	
   

  	
   

  	
   

  
	
  TO ACCOUNT #:

  	
   

  	
   

  	
   

  	
  Authorized Signature
  (Bank)

  
	
  (please include Note
  number, if applicable)

  	
   

  	
   

  	
   

  
							

 

	
  REQUESTED TRANSACTION
  TYPE

  	
   

  	
  REQUESTED DOLLAR AMOUNT

  	
   

  	
  For Bank Use
  Only

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRINCIPAL INCREASE*
  (ADVANCE)

  	
   

  	
  $

  	
   

  	
  Date Rec’d:

  	
   

  	
   

  
	
  PRINCIPAL PAYMENT
  (ONLY)

  	
   

  	
  $

  	
   

  	
  Time:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Comp. Status:

  	
  YES

  	
  NO

  
	
  OTHER INSTRUCTIONS:

  	
   

  	
   

  	
   

  	
  Status Date:

  	
   

  	
   

  
	
   

  	
   

  	
  Time:

  	
   

  	
   

  
	
   

  	
   

  	
  Approval:

  	
   

  	
   

  

 

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

 

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

 

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

 

	
  OUTGOING
  WIRE TRANSFER INSTRUCTIONS

  	
  Fed Reference Number

  	
  Bank Transfer Number

  
	
   

  	
   

  	
   

  
	
   

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

  
	
   

  
	
  *Beneficiary Name

  	
   

  
	
  *Beneficiary Account
  Number

  	
   

  
	
  *Beneficiary Address

  	
   

  
	
   Currency Type

  	
  US DOLLARS ONLY

  
	
  *ABA Routing Number (9
  Digits)

  	
   

  
	
  *Receiving Institution
  Name

  	
   

  
	
  *Receiving Institution
  Address

  	
   

  
	
  *Wire Account

  	
  $

  
				

 

25

 

EXHIBIT
C

 

BORROWING
BASE CERTIFICATE

 

	
  Borrower: BLADELOGIC,
  INC.

  	
  Lender: Comerica Bank

  
	
   

  	
   

  
	
  Commitment Amount:
  $5,000,000

  	
   

  

 

	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.

  	
  Accounts Receivable Book Value as of

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  2.

  	
  Additions (please explain on reverse)

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  3.

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.

  	
  Amounts over 90 days due

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.

  	
  Balance of 25% over 90 day accounts

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.

  	
  Concentration Limits

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.

  	
  Ineligible Foreign Accounts

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.

  	
  Governmental Accounts

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.

  	
  Contra Accounts

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.

  	
  Demo Accounts

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.

  	
  Intercompany/Employee Accounts

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.

  	
  Other (please explain on reverse)

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  14.

  	
  Eligible Accounts (#3 minus #13)

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  15.

  	
  LOAN VALUE OF ACCOUNTS (80% of #14 plus $500,000)

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.

  	
  Maximum Loan Amount

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   5,000,000

  	
   

  
	
   

  	
  17.

  	
  Total Funds Available [Lesser of #16 or #15]

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  18.

  	
  Present balance owing on Line of Credit

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
  19.

  	
  RESERVE POSITION (#17 minus #18)

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  

 

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

 

	
  BLADELOGIC, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer

  	
   

  
	
   

  	
   

  	
   

  

 

26

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  BLADELOGIC, INC.

  

 

The
undersigned authorized officer of BLADELOGIC, INC. hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in material
compliance for the period ending                               
with all required covenants except as noted below and (ii) 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 from one period to
the next except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial statements

  	
   

  	
  Quarterly within 45
  days (Monthly within 30 days if outstanding Credit Extensions)

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 150 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

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

  	
   

  	
  Bi-Weekly*

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Borrower’s financial
  projections for each fiscal year (Approved by Borrower’s Board of Directors)

  	
   

  	
  Earlier of (i) the date
  approved by the Board and (ii) March 1 of each fiscal year

  	
   

  	
  Yes

  	
   

  	
  No

  

 

*only required if
outstanding Credit Extensions

 

	
  Audit Reporting

  	
   

  	
  Scheduled

  	
   

  	
  Performed

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A/R Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  None

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Comments Regarding Exceptions:
  See Attached.

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
   

  	
  AUTHORIZED
  SIGNER

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  	
  AUTHORIZED
  SIGNER

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  TITLE

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status

  	
   

  	
  Yes

  	
  No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATE

  	
   

  	
   

  	
   

  	
   

  
											

 

27

 

CORPORATE
RESOLUTIONS TO BORROW

 

Borrower:                                        BLADELOGIC,
INC.

 

I, the
undersigned Secretary or Assistant Secretary of BLADELOGIC, INC. (the “Corporation”),
HEREBY CERTIFY that the Corporation is organized and existing under and by
virtue of the laws of the State of Delaware.

 

I
FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Certificate of Incorporation, as amended, and the
Restated Bylaws of the Corporation, each of which is in full force and effect
on the date hereof.

 

I
FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
(the “Resolutions”) were adopted.

 

BE IT
RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below: 

 

	
  NAMES

  	
   

  	
  POSITION

  	
   

  	
  ACTUAL SIGNATURES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

acting for and on behalf of this Corporation and as
its act and deed be, and they hereby are, authorized and empowered:

 

Borrow
Money. To borrow from time to time from Comerica Bank (“Bank”),
on such terms as may be agreed upon between the officers, employees, or agents
of the Corporation and Bank, such sum or sums of money as in their judgment
should be borrowed, without limitation.

 

Execute
Loan Documents. To execute and deliver to Bank that certain
Loan and Security Agreement dated as of July 22, 2004 (the “Loan Agreement”)
and any other agreement entered into between Corporation and Bank in connection
with the Loan Agreement, including any amendments, all as amended or extended
from time to time (collectively, with the Loan Agreement, the “Loan Documents”),
and also to execute and deliver to Bank one or more renewals, extensions,
modifications, refinancings, consolidations, or substitutions for the Loan
Documents, or any portion thereof.

 

Grant
Security. To grant a security interest to Bank in the
Collateral described in the Loan Documents, which security interest shall
secure all of the Corporation’s Obligations, as described in the Loan
Documents.

 

Warrants.
To issue Bank warrants to purchase the Corporation’s capital stock.

 

Further
Acts. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any and
all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or proper
in order to carry into effect the provisions of these Resolutions.

 

BE IT
FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect
at the time notice is given.

 

I
FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set forth opposite their respective names; that the
foregoing

 

1

 

Resolutions
now stand of record on the books of the Corporation; and that the Resolutions
are in full force and effect and have not been modified or revoked in any
manner whatsoever.

 

IN
WITNESS WHEREOF, I have hereunto set my hand on July 22, 2004, and attest that
the signatures set opposite the names listed above are their genuine
signatures.

 

	
   

  	
  CERTIFIED AND ATTESTED
  BY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  X

  	
   

  	
   

  
	
   

  	
   

  

 

2

 

USA
PATRIOT ACT

NOTICE

OF

CUSTOMER
IDENTIFICATION

 

IMPORTANT INFORMATION
ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

 

To
help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account.

 

WHAT
THIS MEANS FOR YOU:  when you open an
account, we will ask your name, address, date of birth, and other information
that will allow us to identify you. We may also ask to see your driver’s
license or other identifying documents.

 

 

COMERICA
BANK

Member
FDIC

 

ITEMIZATION
OF AMOUNT FINANCED

DISBURSEMENT
INSTRUCTIONS

Revolver

 

	
  Name(s): BLADELOGIC, INC.

  	
   

  	
  Date: July 22,
  2004

  	
   

  
	
   

  	
   

  	
   

  
	
  $

  	
   

  	
  credited to deposit
  account No.
                        
  when Advances are requested by Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Amounts paid to others
  on your behalf:

  
	
  $12,500

  	
   

  	
  to Comerica Bank for
  Loan Fee

  
	
  $

  	
   

  	
  to Comerica Bank for
  accounts receivable audit (estimate)

  
	
  $

  	
   

  	
  to

  
	
  $

  	
   

  	
  to

  
	
  $5,000,000

  	
   

  	
  TOTAL (AMOUNT FINANCED)

  

 

Upon consummation of this transaction, this document
will also serve as the authorization for Comerica Bank to disburse the loan
proceeds as stated above.

 

	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  

 

 

AGREEMENT
TO PROVIDE INSURANCE

 

	
  TO:

  	
  COMERICA BANK

  	
  Date: July 22, 2004

  
	
   

  	
  Attn: Deni M. Snider,
  MC 4770

  	
   

  
	
   

  	
  75 E. Trimble Road

  	
   

  
	
   

  	
  San Jose, CA 95131

  	
  Borrower: BLADELOGIC,
  INC.

  

 

In
consideration of a loan in the amount of $5,000,000, secured by all tangible
personal property (excluding intellectual property and Borrower’s rights under
equipment leases or similar agreements).

 

I/We
agree to obtain adequate insurance coverage to remain in force during the term
of the loan.

 

I/We
also agree to advise the below named agent to add Comerica Bank as lender’s
loss payable on the new or existing insurance policy, and to furnish Bank at
above address with a copy of said policy/endorsements and any subsequent
renewal policies.

 

I/We
understand that the policy must contain:

 

1.                                       Fire
and extended coverage in an amount sufficient to cover:

 

(a)                                  The
amount of the loan, OR

 

(b)                                 All
existing encumbrances, whichever is greater,

 

But
not in excess of the replacement value of the improvements on the real property.

 

2.                                       Lender’s
“Loss Payable” Endorsement Form 438 BFU in favor of Comerica Bank, or any
other form acceptable to Bank.

 

INSURANCE
INFORMATION

 

	
  Insurance Co./Agent

  	
  Telephone No.:

  
	
   

  	
   

  
	
  Agent’s Address:

  	
   

  

 

	
  Signature of Obligor:

  	
   

  
	
   

  	
   

  
	
  Signature of Obligor:

  	
   

  

 

	
  FOR BANK USE
  ONLY

  
	
   

  
	
  INSURANCE VERIFICATION:
  Date:

  	
   

  
	
   

  	
   

  
	
  Person Spoken to:

  	
   

  
	
   

  	
   

  
	
  Policy Number:

  	
   

  
	
   

  	
   

  
	
  Effective From:

  	
   

  	
   To:

  	
   

  
	
   

  	
   

  
	
  Verified by:

  	
   

  
									

 

 

COMERICA BANK

 

	
   

  	
  COMERICA BANK/BOSTON OFFICE

  
	
  Phone:(800) 413-4624

  	
  CLIENT AUTHORIZATION

  
	
  Fax(617) 757-6310

  	
   

  

 

General Authorization

 

I hereby authorize Comerica Bank to use my company
name, logo, and information relating to our banking relationship in its
marketing and advertising campaigns which is intended for Comerica Bank’s
customers, prospects and shareholders.

 

Comerica Bank will forward any advertising or article
including client for prior review and approval.

 

	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Printed Name

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BLADELOGIC, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  404 Wyman Street

  	
   

  
	
  Mailing Address

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Waltham, MA 02451

  	
   

  
	
  City, State, Zip Code

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (781) 487-6700

  	
   

  
	
  Phone Number

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (781)    -

  	
   

  
	
  Fax Number

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  E-Mail

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  July 22, 2004

  	
   

  
	
  Date

  	
   

  
			

 

 

	
  DEBTOR:

  	
  BLADELOGIC, INC.

  
	
   

  	
   

  
	
  SECURED PARTY:

  	
  COMERICA BANK

  

 

EXHIBIT
A

 

COLLATERAL
DESCRIPTION ATTACHMENT

TO UCC NATIONAL FORM FINANCING STATEMENT

 

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), goods
(including fixtures), instruments (including promissory notes), inventory
(including all goods held for sale or lease or to be furnished under a contract
of service, and including returns and repossessions), investment property (including
securities and securities entitlements), letter of credit rights, money, and
all of Debtor’s books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records; and

 

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

 

Notwithstanding the
foregoing, the Collateral shall not include: 
(i) any Intellectual Property (as defined in the Loan and Security
Agreement) or (ii) any property leased or otherwise acquired by Borrower
under any lease or other similar agreement or any rights of Borrower under any
such lease or other agreement (including without limitation, Borrower’s rights
under, and the property leased or otherwise acquired by Borrower pursuant to,
(A) that certain Master Lease Agreement, dated as of September 25,
2003, between Borrower and Heller Financial Leasing, Inc., a GE Capital
Company, and any and all Schedules delivered in connection therewith and
(B) that certain Loan and Security Agreement No. 20105, dated as of
March 22, 2002, between Borrower and Dominion Venture Finance L.L.C.), and
any extensions, renewals or refinancings thereof; provided, however, that the
Collateral shall include (i) all accounts and general intangibles that consist
of rights to payment and proceeds from the sale, licensing or disposition of
all or any part of, or rights in, the foregoing and (ii) any software licensed
by Borrower from a third party licensor which is financed by Bank (to the
extent permitted by the license agreement).

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