Document:

EXHIBIT
4.29

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE
LAW.

WARRANT TO PURCHASE STOCK

	
  

  	
  Corporation:

  	
   

  	
  TRAFFIC.COM, INC., a Delaware corporation

  
	
   

  	
  Number of Shares:

  	
   

  	
  26,087

  
	
   

  	
  Class of Stock:

  	
   

  	
  Common Stock

  
	
   

  	
  Initial Exercise Price:

  	
   

  	
  $4.60 per share

  
	
   

  	
  Issue Date:

  	
   

  	
  August 28, 2006

  
	
   

  	
  Expiration Date:

  	
   

  	
  August 28, 2013

  

 

THIS WARRANT CERTIFIES THAT,
for good and valuable consideration, the receipt of which is hereby
acknowledged, SQUARE 1 BANK
or its permitted assignee (“Holder”) is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the “Shares”) of
the corporation (the “Company”)
at the initial exercise price per Share (the “Warrant
Price”) all as set forth above and as adjusted pursuant to
Article 2 of this warrant, subject to the provisions and upon the terms and
conditions set forth in this warrant.

ARTICLE 1

EXERCISE

1.1          Method of Exercise. 
Holder may exercise this warrant by delivering this warrant and a duly
executed Notice of Exercise in substantially the form attached as Appendix 1 to
the principal office of the Company.  Unless Holder is exercising the conversion
right set forth in Section 1.2, Holder shall also deliver to the Company a
check for the aggregate Warrant Price for the Shares being purchased.

1.2          Conversion Right. 
In lieu of exercising this warrant as specified in Section 1.1, Holder
may from time to time convert this warrant, in whole or in part, into a number
of Shares determined by dividing (a) the aggregate fair market value of the
Shares or other securities otherwise issuable upon exercise of this warrant
minus the aggregate Warrant Price of such Shares by (b) the fair market value
of one Share.  The fair market value of
the Shares shall be determined pursuant to Section 1.4.

1.3          Intentionally Omitted.

1.4          Fair Market Value. 
The fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company’s stock into which the Shares are
convertible) reported for the business day on which Holder delivers its Notice
of Exercise to the Company.  If, in the
future, the Shares are not regularly traded in a public market, the Board of
Directors of the Company shall determine fair market value in its reasonable
good faith judgment.

1.5          Delivery of Certificate and New Warrant.  Promptly after Holder exercises or converts
this warrant, the Company shall deliver to Holder certificates for the Shares
acquired and, if this warrant has not been fully exercised or converted and has
not expired, a new warrant representing the Shares not so acquired (in exchange
for this warrant document).

1.6          Replacement of Warrants.  On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this warrant,
the Company at its expense shall execute and deliver, in lieu of this warrant,
a new warrant of like tenor.

 1
 

 

1.7          Repurchase
on Sale, Merger, or Consolidation of the Company.

1.7.1        “Acquisition.”  For the purpose of this warrant, “Acquisition”
means (a) any sale, license, or other disposition of all or substantially all
of the assets (including intellectual property) of the Company, or (b) any
reorganization, consolidation, merger or sale of the voting securities of the
Company or any other transaction where the holders of the Company’s securities
before the transaction beneficially own less than 50% of the outstanding voting
securities of the surviving entity after the transaction.

1.7.2        Assumption
of Warrant.  If upon the
closing of any Acquisition the successor entity assumes the obligations of this
warrant, then this warrant shall be exercisable for the same securities, cash,
and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing.  The Warrant Price shall be adjusted
accordingly.  The Company shall use
reasonable efforts to cause the surviving corporation to assume the obligations
of this warrant.

1.7.3        Nonassumption.  If upon the closing of any Acquisition the
successor entity does not assume the obligations of this warrant and Holder has
not otherwise exercised this warrant in full, then this warrant shall be deemed
to have been automatically converted pursuant to Section 1.2, effective
simultaneously with such closing, and thereafter Holder shall participate in
the Acquisition on the same terms as other holders of the same class of
securities of the Company.

ARTICLE 2

ADJUSTMENTS TO THE SHARES

2.1          Adjustments to Warrant. In the event that there is any
stock dividend that is paid on the, or any stock split, reverse stock split,
combination, reclassification, exchange or substitution of Shares, or any other
increase in the number of outstanding Shares without receipt of consideration
by the Company, then  the total number
and/or class of securities subject to this warrant and the Exercise Price of
the warrant shall be appropriately adjusted, in the same manner as the
Administrator of the Company’s 2005 Long Term Incentive Plan, in its sole
discretion, adjusts the Company’s outstanding employee stock options, in order
to prevent dilution or enlargement of Holder’s rights under this warrant.  The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property.  The new warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to
the Warrant Price and to the number of securities or property issuable upon
exercise of the new warrant.  The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

2.2          Certificate as to Adjustments.  Upon each adjustment of the Warrant Price,
the Company at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based.  The Company shall, upon written request,
furnish Holder a certificate setting forth the Warrant Price in effect upon the
date thereof and the series of adjustments leading to such Warrant Price.

2.3          Fractional Shares. 
No fractional Shares shall be issuable upon exercise or conversion of
the Warrant and the Number of Shares to be issued shall be rounded down to the
nearest whole Share.  If a fractional
share interest arises upon any exercise or conversion of the Warrant, the
Company shall eliminate such fractional share interest by paying Holder amount
computed by multiplying the fractional interest by the fair market value of a
full Share.

 2
 

 

 

ARTICLE 3

REPRESENTATIONS AND COVENANTS OF THE COMPANY

3.1          Representations and Warranties.  The Company hereby represents and warrants to
the Holder as follows:

(a)           The initial Warrant
Price referenced on the first page of this warrant is not greater than the fair
market value of the Shares as of the date of this warrant.

(b)           All Shares which
may be issued upon the exercise of the purchase right represented by this
warrant, and all securities, if any, issuable upon conversion of the Shares,
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions
on transfer provided for herein or under applicable federal and state
securities laws.

(c)           The Company’s
capitalization table attached to this warrant is true and complete as of the
Issue Date.

3.2          Notice of Certain Events.  The Company shall provide Holder with not
less than 10 days prior written notice, including a description of the material
facts surrounding, any of the following events: 
(a) declaration of any dividend or distribution upon its common stock,
whether in cash, property, stock, or other securities and whether or not a
regular cash dividend; (b) offering for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights; (c) effecting any reclassification or recapitalization
of common stock; or (d) the merger or consolidation with or into any other
corporation, or sale, lease, license, or conveyance of all or substantially all
of its assets, or liquidation, dissolution or winding up.

3.3          Information Rights. 
So long as the Holder holds this warrant and/or any of the Shares, the
Company shall deliver to the Holder, promptly after mailing, copies of all
communiques to the shareholders of the Company.

ARTICLE 4

MISCELLANEOUS

4.1          Term: Exercise Upon Expiration.  This warrant is exercisable in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above.  If this warrant has not
been exercised prior to the Expiration Date, this warrant shall be deemed to
have been automatically exercised on the Expiration Date by “cashless”
conversion pursuant to Section 1.2.

4.2          Legends.  This
warrant and the Shares (and the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) shall be imprinted with a legend in
substantially the following form (or in such other form as Holder and the
Company may mutually agree upon):

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

4.3          Compliance with Securities Laws on Transfer.  This warrant and the Shares issuable upon
exercise of this warrant (and the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) may not be transferred or assigned in
whole or in part without compliance with applicable federal and state securities
laws by the transferor and the transferee. 
The Company shall not require Holder to provide an opinion of counsel if
the transfer is to an affiliate of Holder or if there is no material question
as to the availability of current information as referenced in Rule 144(c),
Holder represents that it has complied with Rule 144 (d) and (e) in reasonable
detail, the selling broker represents that it has compiled with Rule 144(f),
and the Company is provided with a copy of Holder’s notice of proposed sale.

 3
 

 

 

4.4          Transfer Procedure. 
Subject to the provisions of Section 4.3, Holder may transfer all or
part of this warrant or the Shares issuable upon exercise of this warrant (or
the securities issuable, directly or indirectly, upon conversion of the Shares,
if any) by giving the Company notice of the portion of the warrant being
transferred setting forth the name, address and taxpayer identification number
of the transferee and surrendering this warrant to the Company for reissuance
to the transferee(s) (and Holder, if applicable).  No surrender or reissuance shall be required
if the transfer is to an affiliate of Holder.

4.5          Notices.  All
notices and other communications from the Company to the Holder, or vice versa,
shall be deemed delivered and effective when given personally or mailed by
first-class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company or the Holder, as the case may be, in
writing by the Company or such Holder from time to time.  All notices to the Holder shall be addressed
as follows:

	
  

  	
  Square 1 Bank

  
	
   

  	
  Attn: Warrant Administrator

  
	
   

  	
  406 Blackwell Street, Suite 240

  
	
   

  	
  Crowe Building

  
	
   

  	
  Durham, NC 27701

  

 

4.6          Amendments.  This
warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.

4.7          Attorneys’ Fees. 
In the event of any dispute between the parties concerning the terms and
provisions of this warrant, the party prevailing in such dispute shall be
entitled to collect from the other party all costs incurred in such dispute,
including reasonable attorneys’ fees.

 4
 

 

 

4.8          Governing Law. 
This warrant shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to its principles
regarding conflicts of law.

	
  

  	
  TRAFFIC.COM, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  Andrew Maunder /s/

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Andrew Maunder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: 

  	
  CFO

  	
   

  

 

 5

 

 

APPENDIX 1

NOTICE
OF EXERCISE

1.             The undersigned
hereby elects to purchase ______________ shares of the ______________ stock of TRAFFIC.COM, INC. pursuant to the terms of
the attached warrant, and tenders herewith payment of the purchase price of
such shares in full.

2.             The undersigned
hereby elects to convert the attached warrant into shares in the manner
specified in the warrant.  This
conversion is exercised with respect to ______________ of the shares covered by
the warrant.

[Strike paragraph that does not apply.]

3.             Please issue a
certificate or certificates representing said shares in the name of the
undersigned or in such other name as is specified below:

Square 1 Bank

Attn:  Warrant Administrator

406 Blackwell Street,
Suite 240

Crowe Building

Durham, NC 27701

4.             The undersigned
represents it is acquiring the shares solely for its own account and not as a
nominee for any other party and not with a view toward the resale or
distribution thereof except in compliance with applicable securities laws.

SQUARE 1 BANK
or Registered Assignee

	
   

  	
   

  
	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [DATE]

  	
   

  
	
  (Date)Exhibit
10.26

TRAFFIC.COM, INC.

LOAN AND SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT is entered into as
of  August 28, 2006, by and between
Square 1 Bank (“Bank”) and TRAFFIC.COM, 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, all capitalized
terms shall have the definitions set forth on Exhibit A.  Any term used in the Code and not defined
herein shall have the meaning given to the term in the Code.

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

2.             LOAN AND TERMS OF PAYMENT.

2.1          Credit
Extensions.

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

(b)           Advances
Under Revolving Line.

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

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

(iii)         Letter of Credit Sublimit.  Subject to the availability under the
Revolving Line, and in reliance on the representations and warranties of
Borrower set forth herein, at any time and 

 2
 

 

from time to time from the date hereof through the
Business Day immediately prior to the Revolving Maturity Date, Bank shall issue
for the account of Borrower such Letters of Credit as Borrower may request by
delivering to Bank a duly executed letter of credit application on Bank’s
standard form; provided, however, that the outstanding and undrawn amounts
under all such Letters of Credit (i) shall not at any time exceed the Letter of
Credit Sublimit, and (ii) shall be deemed to constitute Advances for the
purpose of calculating availability under the Revolving Line.  Any drawn but unreimbursed amounts under any
Letters of Credit shall be charged as Advances against the Revolving Line. All
Letters of Credit shall be in form and substance acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank’s form
application and letter of credit agreement. 
Borrower will pay any standard issuance and other fees that Bank
notifies Borrower it will charge for issuing and processing Letters of Credit.

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

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

2.3          Interest
Rates, Payments, and Calculations.

(a)           Interest
Rate for Advances. 
Except as set forth in Section 2.3(b), the Advances shall bear interest,
on the outstanding daily balance thereof, at a variable rate equal to 0.50%
above the Prime Rate.

(b)           Late Fee; Default Rate.  If any payment is not made within 10 days
after the date such payment is due, Borrower shall pay Bank a late fee equal to
the lesser of (i) 5% of the amount of such unpaid amount or (ii) the maximum
amount permitted to be charged under applicable law.  All Obligations shall bear interest, from and
after the occurrence and during the continuance of an Event of Default, at a rate
equal to 4 percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.

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

(d)           Computation.  In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime 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 360 day year for the actual
number of days elapsed.

2.4          Crediting Payments.  Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies, except
that to the extent Borrower uses the Advances to purchase Collateral, Borrower’s
repayment of the Advances shall apply on a “first-in-first-out” basis so that
the portion of the Advances used to purchase a particular item of 

 3
 

 

Collateral shall be paid in the chronological order
the Borrower purchased the Collateral. 
After the occurrence of an Event of Default, Bank shall have the right,
in its sole discretion, to immediately apply any wire transfer of funds, check,
or other item of payment Bank may receive to conditionally reduce Obligations,
but such applications of funds shall not be considered a payment on account
unless such payment is of immediately available federal funds or unless and
until such check or other item of payment is honored when presented for
payment.  Notwithstanding anything to the
contrary contained herein, any wire transfer or payment received by Bank after
12:00 noon 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.  A fee in the amount of $10,000 was paid by
Borrower to Bank prior to the date hereof, which fee shall be considered a
facility fee hereunder.  Such fee shall
be nonrefundable;

(b)           Unused Fee.  A fee equal to 0.25% of the
difference between the amount then available under the Revolving Line and the
average daily balance outstanding thereunder during the then current quarterly
period hereunder, paid quarterly in arrears on an annualized basis, which shall
be nonrefundable; and

(c)           Bank Expenses.  On the Closing Date, all Bank Expenses
incurred through the Closing Date (provided that Bank expenses for legal fees
shall not exceed $20,000 on the Closing Date if there have been two turns or less
of substantial revisions of the Loan Documents), and, after the Closing Date,
all Bank Expenses, as and when they become due.

2.6          Term.  This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force and
effect for so long as any Obligations remain outstanding or Bank has any
obligation to make Credit Extensions under this Agreement.  Notwithstanding the foregoing, 1) 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; and 2) Borrower shall have the right to
terminate this Agreement at any time with 30 days prior written notice to Bank
so long as there are no Obligations then outstanding and there is no continuing
Event of Default.

3.             CONDITIONS OF LOANS.

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

(a)           this Agreement;

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

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

(d)           agreement to
provide insurance;

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

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

 4
 

 

(g)           an audit of the
Collateral, the results of which shall be satisfactory to Bank;

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

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

(j)            a Warrant in form
and substance satisfactory to Bank; and

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

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

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

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

4.             CREATION OF SECURITY INTEREST.

4.1          Grant of Security Interest.  Borrower grants and pledges to Bank a
continuing security interest in the Collateral to secure prompt repayment of
any and all Obligations and 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 later-acquired Collateral. 
Borrower also hereby agrees to not sell, transfer, assign, mortgage,
pledge, lease, grant a security interest in, or encumber any of its intellectual
property except for Permitted Liens and Permitted Transfers.  Notwithstanding any termination, Bank’s Lien
on the Collateral shall remain in effect for so long as any Obligations are
outstanding.

4.2          Perfection of Security Interest.  Borrower authorizes Bank to file at any time
financing statements, continuation statements, and amendments thereto that (i)
either specifically describe the Collateral or describe the Collateral as all
assets of Borrower of the kind pledged hereunder, and (ii) contain any other
information required by the Code for the sufficiency of filing office
acceptance of any financing statement, continuation statement, or amendment,
including whether Borrower is an organization, the type of organization and any
organizational identification number issued to Borrower, if applicable.  Any such financing statements may be signed
by Bank on behalf of Borrower, as provided in the Code, and may be filed at any
time in any jurisdiction whether or not Revised Article 9 of the Code is then
in effect in that jurisdiction.  Borrower
shall from time to time endorse and deliver to Bank, at the request of Bank,
all Negotiable Collateral and other documents that Bank may reasonably request,
in form satisfactory to Bank, to perfect and continue perfected Bank’s security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.  Borrower shall have possession of the
Collateral, except where expressly otherwise provided in this Agreement or where
Bank chooses to perfect its security interest by possession in addition to the
filing of a financing statement.  Where
Collateral is in possession of a third party bailee, Borrower shall take such
steps as Bank reasonably requests for Bank to (i) obtain an acknowledgment, in
form and substance satisfactory to Bank, of the bailee that the bailee 

 5
 

 

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

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

5.             REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants as follows:

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

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

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

5.4          Intellectual Property.  Borrower is the sole owner of its patents,
trademarks, copyrights and other intellectual property, except for
non-exclusive licenses granted by Borrower to its customers in the ordinary
course of business.  To the best of
Borrower’s knowledge, each of Borrower’s patents, trademarks and copyrights is
valid and enforceable, and no part of its intellectual property has been judged
invalid or unenforceable, in whole or in part. 
Except as set forth in the Schedule or except as otherwise disclosed to
Bank in writing. there are no claims which have been made by third parties
regarding Borrower’s intellectual property and alleged violations of the rights
of such third parties, except to the extent such claim would not reasonably be
expected to cause a Material Adverse Effect.

5.5          Name; Location of Chief Executive
Office.  Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact 

 6
 

 

legal name is as set forth in the first paragraph of
this Agreement.  The chief executive
office of Borrower is located in the Chief Executive Office State at the
address indicated in Section 10 hereof.

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

5.7          No Material Adverse Change in
Financial Statements. 
All consolidated and (if applicable) consolidating financial statements
related to Borrower and any Subsidiary that are delivered by Borrower to Bank
fairly present in all material respects Borrower’s consolidated and (if
applicable) consolidating financial condition as of the date thereof and
Borrower’s results of operations for the periods then ended.  There has not been a change in the financial
condition of Borrower since the date of the most recent of such financial
statements submitted to Bank which could reasonably be expected to have a
Material Adverse Effect.  There has not
been a change in the consolidated or (if applicable) in the consolidating
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank which could reasonably be expected to
have a Material Adverse Effect.

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

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

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

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

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

5.13        Full Disclosure.  No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank taken together with all such certificates and written statements furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order 

 7
 

 

to make the statements contained in such certificates
or statements not misleading, it being recognized by Bank that the projections
and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results.

6.             AFFIRMATIVE COVENANTS.

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

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

6.2          Financial Statements, Reports,
Certificates.  Borrower
shall deliver to Bank:  (i) as soon as
available, but in any event within 45 days after the end of each calendar
quarter, a company prepared consolidated and (if applicable) consolidating
balance sheet and income statement prepared in accordance with GAAP covering
Borrower’s operations during such period, in a form reasonably acceptable to
Bank and certified by a Responsible Officer; (ii) as soon as available, but in
any event within 90 days after the end of Borrower’s fiscal year, audited
consolidated and (if applicable) consolidating financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an opinion
which is unqualified or otherwise consented to in writing by Bank on such
financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (iii) if applicable, copies of all statements,
reports and notices sent or made available generally by Borrower to its
security holders or to any holders of Subordinated Debt and all reports on
Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages
or costs to Borrower or any Subsidiary of $250,000 or more; (v) promptly upon
receipt, each management letter prepared by Borrower’s independent certified public
accounting firm regarding Borrower’s management control systems; and (vi) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.

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

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

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

 8
 

 

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

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

6.3          Inventory; Returns.  Borrower shall keep all Inventory (if any) in
good and merchantable condition, free from all material defects except for
Inventory for which adequate reserves have been made.  Returns and allowances, if any, as between
Borrower and its account debtors shall be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist on the Closing
Date.  Borrower shall promptly notify
Bank of all returns and recoveries and of all disputes and claims involving
more than $100,000.

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

6.5          Insurance.

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

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

6.6          Primary Depository.  On the Closing Date, Borrower shall have at
least $8,000,000 in accounts at Bank.  No
later than November 15, 2006, Borrower shall have transferred at least an
additional $10,000,000 to accounts at Bank. No later than December 15, 2006,
Borrower shall maintain its primary depository and operating accounts with Bank
and its primary investment accounts with Bank or Bank’s Affiliates.  Notwithstanding the foregoing, Borrower may
maintain a single account at PNC Bank not covered by an account control
agreement with a balance not to exceed $50,000.

 9

 

6.7          Financial Covenants. Borrower
shall at all times maintain the following financial ratios and covenants:
[Intentionally omitted]

6.8          Consent of Inbound Licensors.  Prior to entering into or becoming bound by
any license or agreement, failure of which to maintain in force and effect
could reasonably be expected to have a Material Adverse Effect, Borrower shall
provide written notice to Bank of the material terms of such license or
agreement with a description of its likely impact on Borrower’s business or
financial condition.

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

7.             NEGATIVE COVENANTS.

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

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

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

7.3          Mergers or Acquisitions.  Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person unless all outstanding Obligations are repaid in full and this Agreement
is terminated in connection with such transaction.

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

7.5          Encumbrances.  Create, incur, assume or allow any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.  Agree with any Person other than Bank not to
grant a security interest in, or otherwise encumber, any of its or covenant to
any other Person that Borrower in the future will refrain from creating,
incurring, assuming or allowing any Lien with respect to any of Borrower’s
property, 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 (i) repurchase the stock of
former employees pursuant to stock repurchase agreements as long as an Event of
Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase; and (ii) receive stock in lieu of the receipt of the
exercise price as part of a cashless exercise of stock options or warrants.

 10
 

 

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

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

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

7.10        Inventory and Equipment.  Store the Inventory (if any) or the Equipment
with a bailee, warehouseman, or similar third party unless the third party has
been notified of Bank’s security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Inventory (if any) or Equipment for Bank’s benefit or (b) is in possession of
the warehouse receipt, where negotiable, covering such Inventory (if any) or
Equipment.  Except for Inventory (if any)
sold in the ordinary course of business and except for such other locations as
Bank may approve in writing, Borrower shall keep the Inventory (if any) and
Equipment only at the location set forth in Section 10 and such other locations
of which Borrower gives Bank prior written notice and as to which Bank files a
financing statement where needed to perfect its security interest.

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

8.             EVENTS OF DEFAULT.

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

8.1          Payment Default.  If Borrower fails to pay any of the
Obligations within 3 days of the date when due;

8.2          Covenant Default.

(a)           If Borrower fails
to perform any obligation under Section 6.2, 6.4, 6.5, 6.6 or 6.7 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 failure to perform, violation or default under such other term, provision,
condition or covenant that can be cured, has failed to cure such default within
15 days after Borrower receives notice thereof or any officer of Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the 15 day period or cannot after diligent attempts by
Borrower be cured within such 15 day period, and such default is likely to be
cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed 30 days) to attempt to
cure such default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default but no Credit
Extensions will be made;

 11
 

 

8.3          Material Adverse Change.  If there occurs any circumstance or
circumstances which could reasonably be expected to have a Material Adverse
Effect;

8.4          Intentionally Omitted.

8.5          Attachment.  If any material portion of Borrower’s assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any trustee, receiver or person acting in
a similar capacity and such attachment, seizure, writ or distress warrant or
levy has not been removed, discharged or rescinded within 10 days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten days after Borrower receives notice thereof, provided that none of
the foregoing shall constitute an Event of Default where such action or event
is stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Credit Extensions will be made during such cure
period);

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

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

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

8.9          Judgments.  If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least $250,000
shall be rendered against Borrower and shall remain unsatisfied and unstayed
for a period of 15 days (provided that no Credit Extensions will be made prior
to the satisfaction or stay of the judgment); or

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

9.             BANK’S RIGHTS AND REMEDIES.

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

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

(b)           Demand that
Borrower  (i) deposit cash with Bank in
an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings 

 12
 

 

under such Letters of Credit, and (ii) pay in advance
all Letter of Credit fees scheduled to be paid or payable over the remaining
term of the Letters of Credit, and Borrower shall promptly deposit and pay such
amounts;

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

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

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

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

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

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

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

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

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

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

 13
 

 

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

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

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

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

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

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

 14
 

 

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

10.          NOTICES.

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

	
  If to Borrower:

  	
   

  	
  TRAFFIC.COM, INC.

  
	
   

  	
   

  	
  841 Duportail Road, Suite 220

  
	
   

  	
   

  	
  Wayne, PA 19087

  
	
   

  	
   

  	
  Attn: Chief Financial Officer

  
	
   

  	
   

  	
  FAX: (610) 725-9700

  
	
   

  	
   

  	
   

  
	
  If to Bank:

  	
   

  	
  Square 1 Bank

  
	
   

  	
   

  	
  406 Blackwell
  Street, Suite 240

  
	
   

  	
   

  	
  Crowe Building

  
	
   

  	
   

  	
  Durham, NC 27701

  
	
   

  	
   

  	
  Attn: Manager

  
	
   

  	
   

  	
  FAX: (919)
  314-3080

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Square 1 Bank

  
	
   

  	
   

  	
  501 Kings Highway East

  
	
   

  	
   

  	
  Rm 108 Suite E210

  
	
   

  	
   

  	
  Fairfield, CT 06825

  
	
   

  	
   

  	
  Attn: Brad
  Steele, Senior Vice President

  
	
   

  	
   

  	
  FAX: (203)
  610-8102

  

 

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 North Carolina, without
regard to principles of conflicts of law. 
BANK AND BORROWER WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY
AND ALL OTHER COMMON LAW OR STATUTORY BASES. 
Borrower submits to the exclusive jurisdiction of the state and federal courts
located in the Counties of Durham or Wake, State of North Carolina.  If the jury waiver set forth in this Section
is not enforceable, then any dispute, controversy or claim arising out of or
relating to this Agreement or any of the transactions contemplated herein will
be finally settled by binding arbitration in Durham, North Carolina in
accordance with the then-current Commercial Arbitration Rules of the American
Arbitration Association by one arbitrator appointed in accordance with said
rules.  The arbitrator shall apply North
Carolina law to the resolution of any dispute, without reference to rules of
conflicts of law or rules of statutory arbitration.  Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.  Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this
paragraph.  The expenses of the
arbitration, including the arbitrator’s fees and expert witness fees, incurred
by the parties to the arbitration, may be awarded to the prevailing party, in
the discretion of the arbitrator, or may be apportioned between the parties in
any manner deemed appropriate by the arbitrator.  Unless and until the arbitrator decides that
one party is to pay for all (or a share) of such expenses, both parties shall
share equally in the payment of the 

 15
 

 

arbitrator’s fees as and when billed by the
arbitrator.

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

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 in connection with the
transactions contemplated by this Agreement; and (b) all losses or Bank
Expenses in any way suffered, incurred, or paid by Bank, its officers,
employees and agents as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under this
Agreement, or otherwise (including without limitation reasonable attorneys fees
and expenses), except for losses caused by Bank’s gross negligence or willful
misconduct.

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

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 remain outstanding or Bank has any obligation to make any Credit
Extension to Borrower.  The obligations
of Borrower to indemnify Bank with respect to the expenses, damages, losses,
costs and liabilities described in Section 12.2 shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Bank have run.

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

 16
 

 

party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.

 17

 

 

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

	
   

  	
   

  	
  TRAFFIC.COM, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Andrew Maunder

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SQUARE 1 BANK

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Peter Meath

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  VP

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]