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EXHIBIT 10.08    
  

 
 

BLUE SHIELD
  CONTROLLED AFFILIATE LICENSE AGREEMENT
  APPLICABLE TO LIFE INSURANCE COMPANIES
  (Includes revisions adopted by Member Plans through their November 16, 2000 meeting)    
  

    This agreement by and among Blue Cross and Blue Shield Association ("BCBSA") Greater Georgia Life Insurance
Company ("Controlled Affiliate"), a Controlled Affiliate of the Blue Shield Plan(s), known as WellPoint Health
Networks Inc. ("Plan"). 

WHEREAS,
BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service marks; 

WHEREAS,
the Plan and the Controlled Affiliate desire that the latter be entitled to use the BLUE SHIELD and BLUE SHIELD Design service marks (collectively the "Licensed Marks") as service marks and
be entitled to use the term BLUE SHIELD in a trade name ("Licensed Name"); 

NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows: 

    1.  GRANT OF LICENSE

    Subject
to the terms and conditions of this Agreement, BCBSA hereby grants to the Controlled Affiliate the exclusive right to use the licensed Marks and Names in connection with and
only in connection with those life insurance and related services authorized by applicable state law, other than health care plans and related services (as defined in the Plan's License Agreements
with BCBSA) which services are not separately licensed to Controlled Affiliate by BCBSA, in the Service Area served by the Plan, except that BCBSA reserves the right to use the Licensed Marks and Name
in said Service
Area, and except to the extent that said Service Area may overlap the area or areas served by one or more other licensed Blue Shield Plans as of the date of this License as to which overlapping areas
the rights hereby granted are non-exclusive as to such other Plan or Plans and their respective Licensed Controlled Affiliates only. Controlled Affiliate cannot use the Licensed Marks or
Name outside the Service Area or, anything in any other license to Controlled Affiliate notwithstanding, in its legal or trade name. 

    2.  QUALITY CONTROL

    A.  Controlled
Affiliate agrees to use the Licensed Marks and Name only in relation to the sale, marketing and rendering of authorized products and further agrees to be
bound by the conditions regarding quality control shown in Exhibit A as it may be amended by BCBSA from time-to-time. 

Amended as of November 17, 1994

1

 

    B.  Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon reasonable notice, review and inspect the manner and method
of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name. 

    C.  Controlled
Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by Plan or by BCBSA) a report to Plan and BCBSA
demonstrating Controlled Affiliate's compliance with the requirements of this Agreement including but not limited to the quality control provisions of Exhibit A. 

    D.  As
used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner that it is subject to the bona fide control of a Plan or
Plans. Absent written approval by BCBSA of an alternative method of control, bona fide control shall mean the legal authority, directly or indirectly through wholly-owned subsidiaries: (a) to
select members of the Controlled Affiliate's governing body having not less than 51% voting control thereof; (b) to exercise operational control with respect to the governance thereof; and
(c) to prevent any change in its articles of incorporation, bylaws or other governing documents deemed inappropriate. In addition, a Plan or Plans shall own at least 51% of any
for-profit Controlled Affiliate. If the Controlled Affiliate is a mutual company, the Plan or its designee(s) shall have and maintain, in lieu of the requirements of items (a) and
(c) above, proxies representing 51% of the votes at any meeting of the policyholders and shall demonstrate that there is
no reason to believe this such proxies shall be revoked by sufficient policyholders to reduce such percentage below 51%. 

    3.  SERVICE MARK USE

    Controlled
Affiliate shall at all times make proper service mark use of the Licensed Marks, including but not limited to use of such symbols or words as BCBSA shall specify to protect
the Licensed Marks, and shall comply with such rules (applicable to all Controlled Affiliates licensed to use the Marks) relative to service mark use, as are issued from
time-to-time by BCBSA. If there is any public reference to the affiliation between the Plan and the Controlled Affiliate, all of the Controlled Affiliate's licensed services in
the Service Area of the Plan shall be rendered under the Licensed Marks. Controlled Affiliate recognizes and agrees that all use of the Licensed Marks by Controlled Affiliate shall inure to the
benefit of BCBSA. 

    4.  SUBLICENSING AND ASSIGNMENT

    Controlled
Affiliate shall not sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, the rights granted 

2

 

hereunder and any such act shall be voidable at the option of Plan or BCBSA. This Agreement and all rights and duties hereunder are personal to Controlled Affiliate. 

    5.  INFRINGEMENTS

    Controlled
Affiliate shall promptly notify Plan and BCBSA of any suspected acts of infringement, unfair competition or passing off which may occur in relation to the Licensed Marks.
Controlled Affiliate shall not be entitled to require Plan or BCBSA to take any actions or institute any proceedings to prevent infringement, unfair competition or passing off by third parties.
Controlled Affiliate agrees to render to Plan and BCBSA, free of charge, all reasonable assistance in connection with any matter pertaining to the protection of the Licensed Marks by BCBSA. 

    6.  LIABILITY INDEMNIFICATION

    Controlled
Affiliate hereby agrees to save, defend, indemnify and hold Plan and BCBSA harmless from and against all claims, damages, liabilities and costs of every kind, nature and
description which may arise as a result of Controlled Affiliate's rendering of health care services under the Licensed Marks. 

    7.  LICENSE TERM

    The
license granted by this Agreement shall remain in effect for a period of one (1) year and shall be automatically extended for additional one (1) year periods upon
evidence satisfactory to the Plan and BCBSA that Controlled Affiliate meets the then applicable quality control standards, unless one of the parties hereto notifies the other party of the termination
hereof at least sixty (60) days prior to expiration of any license period. 

    This
Agreement may be terminated by the Plan or by BCBSA for cause at any time provided that Controlled Affiliate has been given a reasonable opportunity to cure and shall not effect
such a cure within thirty (30) days of receiving written notice of the intent to terminate (or commence a cure within such thirty day period and continue diligent efforts to complete the cure
if such curing cannot reasonably be completed within such thirty day period). By way of example and not for purposes of limitation, Controlled Affiliate's failure to abide by the quality control
provisions of Paragraph 2, above, shall be considered a proper ground for cancellation of this Agreement. 

3

 

    A.  Controlled Affiliate shall no longer comply with Standard No. 1 (Organization and Governance) of Exhibit A or, following an opportunity to cure, with
the remaining quality control provisions of Exhibit A, as it may be amended from time-to-time; or 

    B.  Plan
ceases to be authorized to use the Licensed Marks; or 

    C.  Appropriate
dues for Controlled Affiliate pursuant to item 8 hereof, which are the royalties for this License Agreement are more than sixty (60) days
in arrears to BCBSA. 

    Upon
termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all use of the Licensed Marks including any use in its
trade name. 

    In
the event of any disagreement between Plan and BCBSA as to whether grounds exist for termination or as to any other term or condition hereof, the decision of BCBSA shall control,
subject to provisions for mediation or mandatory dispute resolution in effect between the parties. 

    Upon
termination of this Agreement, Licensed Controlled Affiliate shall immediately notify all of its customers that it is no longer a licensee of the Blue Cross and Blue Shield
Association and provide instruction on how the customer can contact the Blue Cross and Blue Shield Association or a designated licensee to obtain further information on securing coverage. The written
notification required by this paragraph shall be in writing and in a form approved by the Association. The Association shall have the right to audit the terminated entity's books and records to verify
compliance with this paragraph. 

    8.  DUES

    Controlled
Affiliate will pay to BCBSA a fee for this license in accordance with the following formula: 

	•
	An
annual fee of five thousand dollars ($5,000) per license, plus

	•
	.05%
of gross revenue per year from branded group products, plus

	•
	.5%
of gross revenue per year from branded individual products plus

	•
	.14%
of gross revenue per year from branded individual annuity products. 
Amended as of November 20, 1997

4

The
foregoing percentages shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® license are issued to the same entity. In the event that any
License period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under this formula will be calculated, billed and paid in arrears. 

    Plan
will promptly and timely transmit to BCBSA all dues owed by Controlled Affiliate as determined by the above formula and if Plan shall fail to do so, Controlled Affiliate shall
pay such dues directly. 

    9.  JOINT VENTURE

    Nothing
contained in this Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between Plan and Controlled Affiliate or between
either and BCBSA. 

    9A.  VOTING

    For
all provisions of this Agreement referring to voting, the term "Plans' shall mean all entities licensed under the Blue Cross License Agreement and/or the Blue Shield License
Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted
votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For
all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless six (6) or more Plans fail to cast
weighted votes in favor of the question. 

    10.  NOTICES AND CORRESPONDENCE

    Notices
regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to the last known address of each other
party, marked respectively to the attention of its President and, if any, its General Counsel. 

Amended as of June 16, 2000

4a

(The
next page is page 5) 

    11.  COMPLETE AGREEMENT

    This
Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amended by a writing executed by all parties. 

    12.  SEVERABILITY

    If
any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such finding shall in no way effect the remaining obligations of the parties hereunder and
the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is to provide the parties with the benefits of this Agreement. 

    13.  NONWAIVER

    No
waiver by BCBSA of any breach or default in performance on the part of the Controlled Affiliate or any other licensee of any of the terms, covenants or conditions of this Agreement
shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants or conditions. 

    14.  GOVERNING LAW

    This
Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois. 

IN
WITNESS WHEREOF, the parties have caused this License Agreement to be executed, effective as of the date of last signature written below. 

	Greater Georgia Life Insurance Company:	 	 
	

By:	
 	

/s/ HUGH J. STEDMAN   
 Hugh J. Stedman	
 	

 
	

Date:	
 	

3-15-01
	
 	

 
	
 WellPoint Health Networks Inc.:	
 	

 
	

By:	
 	

/s/ LEONARD D. SCHAEFFER   
 Leonard D. Schaeffer	
 	

 
	

Date:	
 	

3-15-01
	
 	

 
	
BLUE CROSS AND BLUE SHIELD ASSOCIATION	
 	

 
	

By:	
 	

/s/ ROGER G. WILSON   
 Roger G. Wilson	
 	

 
	

Date:	
 	

3-15-01
	
 	

 

5

EXHIBIT A
  CONTROLLED AFFILIATE LICENSE STANDARDS

LIFE INSURANCE COMPANIES

Page 1 of 2 

PREAMBLE  

    The standards for licensing Life Insurance Companies (Life and Health Insurance companies, as defined by state statute) are established by BCBSA and are
subject to change from time-to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted
vote of all Plans. Each Licensed Plan is required to use a standard controlled affiliate license form provided by BCBSA and to cooperate fully in assuring that the licensed Life Insurance Company
maintains compliance with the license standards. 

    An
organization meeting the following standards shall be eligible for a license to use the Licensed Marks within the service area of its sponsoring Licensed Plan to the extent and the
manner authorized under the Controlled Affiliate License applicable to Life Insurance Companies and the principal license to the Plan. 

Standard 1—Organization and Governance  

    The LIC shall be organized and operated in such a manner that it is controlled by a licensed Plan or Plans which have, directly or indirectly: 1) not
less than 51% of the voting control of the LIC; and 2) the legal ability to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the LIC
with which it does not concur; and 3) operational control of the LIC. 

    If
the LIC is a mutual company, the Plan or its designee(s) shall have and maintain, in lieu of the requirements of items 1 and 2 above, proxies representing at least 51% of the votes
at any policyholder meeting and shall demonstrate that there is no reason to believe such proxies shall be revoked by sufficient policyholders to reduce such percentage below 51%. 

Standard 2—State Licensure  

    The LIC must maintain unimpaired licensure or certificate of authority to operate under applicable state laws as a life and health insurance company in each
state in which the LIC does business. 

CONTROLLED AFFILIATE LICENSE STANDARDS

LIFE INSURANCE COMPANIES

Page 2 of 2 

Standard 3—Records and Examination  

    The LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a timely and accurate basis, such records and reports regarding the LIC as may be
required in order to establish compliance with the license agreement. The LIC and its sponsoring licensed Plan(s) shall permit BCBSA to examine the affairs of the LIC and shall agree that BCBSA's
board may submit a written report to the chief executive officer(s) and the board(s) of directors of the sponsoring Plan(s). 

Standard 4—Mediation  

    The LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA mediation and mandatory dispute resolution processes, in lieu of a
legal action between or among another licensed controlled affiliate, a licensed Plan or BCBSA. 

Standard 5—Financial Responsibility  

    The LIC shall maintain adequate financial resources to protect its customers and meet its business obligations. 

EXHIBIT 2  

 Membership Standards
  Page 1 of 4 

Preamble 

    The
Membership Standards apply to all organizations seeking to become or to continue as Regular Members of the Blue Cross and Blue Shield Association. Any organization seeking to
become a Regular Member must be found to be in substantial compliance with all Membership Standards at the time membership is granted and the organization must be found to be in substantial compliance
with all Membership Standards for a period of two (2) years preceding the date of its application. If Membership is sought by an entity which controls or is controlled by one or more Plans,
such compliance shall be determined on the basis of compliance by such Plan or Plans. 

    The
Regular Member Plans shall have authority to interpret these Standards. Compliance with any Membership Standard may be excused, at the Plans' discretion, if the Plans agree that
compliance with such Standard would require the Plan to violate a law or governmental regulation governing its operation or activities. 

    A
Regular Member Plan that operates as a "Shell Holding Company" is defined as an entity that assumes no underwriting risk and has less than 1% of the consolidated enterprise assets
(excludes investments in subsidiaries) and less than 5% of the consolidated enterprise general and administrative expenses. 

    A
Regular Member Plan that operates as a "Hybrid Holding Company" is defined as an entity that assumes no underwriting risk and has either more than 1% of the consolidated enterprise
assets (excludes investments in subsidiaries) or more than 5% of the consolidated enterprise general and administrative expenses. 

	Standard 1:	 	A Plan's Board shall not be controlled by any special interest group, and shall act in the interest of its Corporation in providing cost-effective health care services to its customers. A Plan shall maintain a governing
Board, which shall control the Plan, composed of a majority of persons other than providers of health care services, who shall be known as public members. A public member shall not be an employee of or have a financial interest in a health care
provider, nor be a member of a profession which provides health care services.
	 	 	Amended as of November 19, 1998

EXHIBIT 2  

 Membership Standards
  Page 2 of 4 

	

Standard 2:	
 	

A Plan shall furnish to the Association on a timely and accurate basis reports and records relating to compliance with these Standards and the License Agreements between the Association and the Plans. Such reports and records are the
following:
	

 	
 	

A.	
 	

BCBSA Membership Information Request;
	

 	
 	

B.	
 	

Biennial trade name and service mark usage material, including disclosure material under Standard 7;
	

 	
 	

C.	
 	

Changes in the governance of the Plan, including changes in a Plan's Charter, Articles of Incorporation, or Bylaws, changes in a Plan's Board composition, or changes in the identity of the Plan's Principal Officers;
	

 	
 	

D.	
 	

Quarterly Financial Report, Semi-annual "Managed Care Organizations Risk-Based Capital (MCO-RBC) Report" as defined by the NAIC, Combined Annual Financial Forecast, Annual Certified Audit Report, Insurance Department Examination Report, Annual
Statement filed with State Insurance Department (with all attachments), Plan, Subsidiary and Affiliate Report; and
	

 	
 	

 	
 	

•	
 	

Plans that are a Shell Holding Company as defined in the Preamble hereto are required to furnish only a calendar year-end "Managed Care Organizations Risk-Based Capital (MCO-RBC) Report" as defined by the NAIC.

Amended as of November 16, 2000

EXHIBIT 2  

 Membership Standards
  Page 3 of 4 

	

 	
 	

E.	
 	

Quarterly Enrollment Report, Semi-Annual Benefit Cost Management Report and Member Touchpoint Measures Index (MTM) starting 12/31/00 and semi-annually thereafter; and
	

 	
 	

 	
 	

•	
 	

Plans that are a Shell Holding Company as defined in the Preamble hereto are not required to furnish any items identified in Paragraph E.
	

Standard 3:	
 	

A Plan shall be operated in a manner that provides reasonable financial assurance that it can fulfill its contractual obligations to its customers.
	

Standard 4:	
 	

A Plan shall be operated in a manner responsive to customer needs and requirements.
	

Standard 5:	
 	

A Plan shall effectively and efficiently participate in each national program as from time to time may be adopted by the Member Plans for the purposes of providing portability of membership between the Plans and ease of claims processing for
customers receiving benefits outside of the Plan's Service Area.
	

 	
 	

Such programs are applicable to Blue Cross and Blue Shield Plans, and include:
	

 	
 	

A.	
 	

Transfer Program;
	 	 	B.	 	Inter-Plan Teleprocessing System (ITS);
	 	 	C.	 	BlueCard Program; and
	 	 	D.	 	Electronic Claims Routing Process

Amended as of November 16, 2000  

 EXHIBIT 2  

 Membership Standards
  Page 4 of 4 

	

Standard 6:	
 	

In addition to requirements under the national programs listed in Standard 5: Participation in National Programs, a Plan shall take such action as required to ensure its financial performance in programs and contracts of an inter-Plan nature or where
the Association is a party.
	

Standard 7:	
 	

A Plan shall make adequate disclosure in contracting with third parties and in disseminating public statements of (i) the structure of the Blue Cross and Blue Shield System, (ii) the independent nature of every Plan, and (iii) the
Plan's financial condition.
	

Standard 8:	
 	

A Plan shall cooperate with the Association's Board of Directors and its Plan Performance and Financial Standards Committee in the administration of the Plan Performance Response Process and in addressing Plan performance problems identified
thereunder.
	

Standard 9:	
 	

A Plan shall obtain a rating of its financial strength from an independent rating agency approved by the Association's Board of Directors for such purpose.
	

Standard 10:	
 	

During each year, a Plan and its Controlled Affiliate(s) engaged in providing licensable services (excluding Life Insurance and Charitable Foundation Services) shall use their best efforts in the designated Service Area to promote and build the value
of the Blue Cross and Blue Shield Marks.
	

Standard 11	
 	

Neither a Plan nor any Larger Controlled Affiliate shall cause or permit an entity other than a Plan or a Licensed Controlled Affiliate thereof to obtain control of the Plan or Larger Controlled Affiliate or to acquire a substantial portion of its
assets related to licensable services.

Amended as of June 18, 1999  

EXHIBIT 3  

 GUIDELINES WITH RESPECT TO USE OF

LICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL ACCOUNTS
  Page 1 of 3 

    1.  The
strength of the Blue Cross/Blue Shield National Accounts mechanism, and the continued provision of cost effective, quality health care benefits to National
Accounts, are predicated on locally managed provider networks coordinated on a national scale in a manner consistent with effective service to National Account customers and consistent with the
preservation of the integrity of the Blue Cross/Blue Shield system and the Licensed Marks. These guidelines shall be interpreted in keeping with such ends. 

    2.  A
National Account is an entity with employee and/or retiree locations in more than one Plan's Service Area. Unless otherwise agreed, a National Account is deemed
located in the Service Area in which the corporate headquarters of the National Account is located. The Control Plan of a National Account is the Plan in whose Service Area the National Account is
located. A participating ("Par") Plan is a Plan in whose Service Area the National Account has employee and/or retiree locations, but in which the National Account is not located. 

    3.  The
National Account Guidelines enunciated herein below shall be applicable only with respect to the business of new National Accounts acquired after
January 1, 1991. 

    4.  Control
Plans shall utilize National Account identification cards complying with then currently effective BCBSA graphic standards in connection with all National
Accounts business to facilitate administration thereof, to minimize subscriber and provider confusion, and to reflect a commitment to cooperation among Plans. 

    5.  Disputes
among Plans and/or BCBSA as to the interpretation or implementation of these Guidelines or as to other National Accounts issues shall be submitted to
mediation and mandatory dispute resolution as provided in the License Agreement. For two years from the effective date of the License Agreement, however, such disputes shall be subject to mediation
only, with the results of such mediation to be collected and reported in order to establish more definitive operating parameters for National Accounts business and to serve as ground rules for future
binding dispute resolution. 

EXHIBIT 3  

Page 2 of 3 

    6.  The
Control Plan may use the BlueCard Program (as defined by IPOC) to deliver benefits to employees and non-Medicare eligible retirees in a
Participating Plan's service area if an alternative arrangement with the Participating Plan cannot be negotiated. The Participating Plan's minimum servicing requirement for those employees and
non-Medicare retirees in its service area is to deliver benefits using the BlueCard Program. Account delivery is subject to the policies, provisions and procedures of the BlueCard Program. 

    7.  For
provider payments in a Participating Plan's area (on non-BlueCard claims), payment to the provider may be made by the Participating Plan or the
Control Plan at the Participating Plan's option. If the Participating Plan elects to pay the provider, it may not withhold payment of a claim verified by the Control Plan or its designated processor,
and payment must be in conformity with service criteria established by the Board of Directors of BCBSA (or an authorized committee thereof) to assure prompt payment, good service and minimum confusion
with providers and subscribers. The Control Plan, at the Participating Plan's request, will also assure that measures are taken to protect the confidentiality of the data pertaining to provider
reimbursement levels and profiles. 

    8.  For
claim payments in a Participating Plan's area (on non-BlueCard claims), Participating Plans are strongly encouraged, but not required, to pass along
to the Control Plan part or all of local provider discounts and differentials for use by the Control Plan in negotiating financial arrangements with National Accounts. However, since the size, basis,
form and use of local differentials can vary substantially among Plans and also by individual National Account characteristics, the degree and form of any discount or differential passed along to the
Control Plan shall be strictly a matter of negotiated contractual agreement between a Participating Plan and the Control Plan and may also vary from one National Account to another. In order to
facilitate the quotation of national account pricing and the offering of a variety of National Account delivery systems, all Plans are strongly encouraged to periodically publish to other Plans and
the BCBSA their National Account contracting policies with respect to the handling of differentials. 

    The
Control Plan, in its financial agreements with a National Account, is expected to reasonably reflect the aggregate amount of differentials passed along to the Control Plan by all
Participating Plans in a National Account. The exact form and substance of this may vary from one National Account to another and shall be a matter of 

Amended as of June 14, 1996  

 EXHIBIT 3  

Page 3 of 3 

explicit
negotiation and contractual relationship between the National Account and the Control Plan. The specifics in an agreement between the Control Plan and the National Account may vary in form
(e.g., a guaranteed offset against retentions, or a direct pass through, or a guaranteed aggregate percentage discount, or no pass back at all, etc.), and the Control Plan has the responsibility and
the Authority to negotiate precise arrangements. However, irrespective of the final arrangements between the Control Plan and the National Account, a Participating Plan's liability for passing along
differentials shall be limited to the contractual agreement the Participating Plan has with the Control Plan on a specific National Account. 

    9.  Other
than in contracting with health care providers or soliciting such contracts in areas contiguous to a Plan's Service Area in order to serve its subscribers or
those of its licensed Controlled Affiliate residing or working in its Service Area, a Control Plan may not use the Licensed Marks and/or Name, as a tag line or otherwise, to negotiate directly with
providers outside its Service Area. 

EXHIBIT 4  

 GOVERNMENT PROGRAMS AND CERTAIN OTHER USES
  Page 1 of 2 

    1.  A
Plan and its licensed Controlled Affiliate may use the Licensed Marks and Name in bidding on and executing a contract to serve a Government Program, and in
thereafter communicating with the Government concerning the Program. With respect, however, to such contracts entered into after the 1st day of January, 1991, the Licensed Marks and Name will not be
used in communications or transactions with beneficiaries or providers in the Government Program located outside a Plan's Service Area, unless the Plan can demonstrate to the satisfaction of BCBSA's
governing body that such a restriction on use of the Licensed Marks and Name will jeopardize its ability to procure the contract for the Government Program. As to both existing and future contracts
for Government Programs, Plans will discontinue use of the Licensed Marks and Name as to beneficiaries and Providers outside their Service Area as expenditiously as circumstances reasonably permit.
Effective January 1, 1995, except as provided in the first sentence above, all use by a Plan of the Licensed Marks and Name in Government Programs outside of the Plan's Service Area shall be
discontinued. Incidental communications outside a Plan's Service Area with resident or former resident beneficiaries of the Plan, and other categories of necessary incidental communications approved
by BCBSA, are not prohibited. 

    2.  In
connection with activity otherwise in furtherance of the License Agreement, a Plan may use the Licensed Marks and Name outside its Service Area in the following
circumstances which are deemed legitimate and necessary and not likely to cause consumer confusion: 

	a.
	sending
letterhead, envelopes, and similar items for administrative purposes which do not solicit the sale of health care plans and related services;

	b.
	distributing
business cards other than in marketing and selling;

	c.
	contracting
with health care providers or soliciting such contracts in areas contiguous to a Plan's Service Area in order to serve its subscribers or those of its licensed
Controlled Affiliate residing or working in its service area;

	d.
	issuing
a small sign containing the legal name or trade name of the Plan or its licensed Controlled Affiliate for display by a provider to identify the latter as a participating
provider of the Plan or Controlled Affiliate; 

EXHIBIT 4  

1 Page 2 of 2 

	e.
	advertising
in publications or electronic media solely to persons for employment;

	f.
	advertising
in print, electronic or other media which serve, as a substantial market, the Service Area of the Plan or licensed Controlled Affiliate, provided that no Plan may
advertise outside its Service Area on the national broadcast and cable networks and that advertisements in national print media are limited to the smallest regional edition encompassing the Service
Area;

	g.
	advertising
by direct mail where the addressee's zip code plus 4 includes, at least in part, the Plan's Service Area or that of a licensed Controlled Affiliate. 

EXHIBIT 5  

 MEDIATION AND MANDATORY DISPUTE RESOLUTION (MMDR) RULES  

    The Blue Cross and Blue Shield Plans ("Plans") and the Blue Cross Blue Shield Association ("BCBSA") recognize and acknowledge that the Blue Cross and Blue
Shield system is a unique nonprofit and for-profit system offering cost effective health care financing and services. The Plans and BCBSA desire to utilize Mediation and Mandatory Dispute
Resolution ("MMDR") to avoid expensive and time-consuming litigation that may otherwise occur in the federal and state judicial systems. Even MMDR should be viewed, however, as methods of
last resort, all other procedures for dispute resolution having failed. Except as otherwise provided in the License Agreements, the Plans, their
Controlled Affiliates and BCBSA agree to submit all disputes to MMDR pursuant to these Rules and in lieu of litigation. 

1.  Initiation of Proceedings  

    A.  Pre-MMDR Efforts  

    Before
filing a Complaint to invoke the MMDR process, the CEO of a complaining party, or his/her designated representative, shall undertake good faith efforts with the other side(s)
to try to resolve any dispute. 

    B.  Complaint  

    To
commence a proceeding, the complaining party (or parties) shall provide by certified mail, return receipt requested, a written Complaint to the BCBSA Corporate Secretary (which
shall also constitute service on BCBSA if it is a respondent) and to any Plan(s) and/or Controlled Affiliate(s) named therein. The Complaint shall contain: 

	i.
	identification
of the complaining party (or parties) requesting the proceeding;

	ii.
	identification
of the respondent(s);

	iii.
	identification
of any other persons or entities who are interested in a resolution of the dispute;

	iv.
	a
full statement describing the nature of the dispute;

	v.
	identification
of all of the issues that are being submitted for resolution; 

Amended as of November 21, 1996

	vi.
	the
remedy sought;

	vii.
	a
statement as to whether the complaining party (or parties) elect(s) first to pursue Mediation;

	viii.
	any
request, if applicable, that one or more members of the Mediation Committee be disqualified from the proceeding and the grounds for such
request;

	ix.
	any
request, if applicable, that the matter be handled on an expedited basis and the reasons therefor; and

	x.
	a
statement signed by the CEO of the complaining party affirming that the CEO has undertaken efforts, or has directed efforts to be undertaken, to
resolve the dispute before resorting to the MMDR process. 

The
complaining party (or parties) shall file and serve with the Complaint copies of all documents which the party (or parties) intend(s) to offer at the Arbitration Hearing and a statement
identifying the witnesses the party (or parties) intend(s) to present at the Hearing, along with a summary of each witness' expected testimony. 

    C.  Answer  

    Within
twenty (20) days after receipt of the Complaint, each respondent shall serve on the BCBSA and on the complaining party (or parties) and on the Chairman of the Mediation
Committee; 

	i.
	a
full Answer to the aforesaid Complaint;

	ii.
	a
statement of any Counterclaims against the complaining party (or parties), providing with respect thereto the information specified in
Paragraph 1.B., above;

	iii.
	a
statement as to whether the respondent elects to first pursue Mediation;

	iv.
	any
request, if applicable, that one or more members of the Mediation Committee be disqualified from the proceeding and the grounds for such
request; and

	v.
	any
request, if applicable, that the matter be handled on an expedited basis and the reasons therefor. 

The
respondent(s) shall file and serve with the Answer or by the date of the Initial Conference set forth in Paragraph 3.B., below, copies of all documents which the respondent(s) intend(s) to
offer at the Arbitration Hearing and a statement identifying the witnesses the party (or parties) intend(s) to present at the Hearing, along with a summary of each witness' expected testimony. 

    D.  Reply To Counterclaim  

    Within
ten (10) days after receipt of any Counterclaim, the complaining party (or parties) shall serve on BCBSA and on the responding party (or parties) and on the Chairman of
the Mediation Committee, a Reply to the Counterclaim. Such Reply must provide the same information required by Paragraph 1.C. 

2.  Mediation  

    A.  Mediation Committee  

    To
facilitate the mediation of disputes between or among BCBSA, the Plans and/or their Controlled Affiliates, the BCBSA Board has established a Mediation Committee. Mediation may be
pursued in
lieu of or in an effort to obviate the Mandatory Dispute Resolution process, and all parties are strongly urged to exhaust the mediation procedure. 

    B.  Election To Mediate  

    If
any party elects first to pursue Mediation, and if it appears to the Corporate Secretary that the dispute falls within the jurisdiction of the Mediation Committee, as set forth in
Exhibit 5-A hereto, then the Corporate Secretary will promptly furnish the Mediation Committee with copies of the Complaint, Answer, Counterclaim and Reply to Counterclaim, and
other documents referenced in Paragraph 1, above. 

    C.  Selection of Mediators  

    The
parties shall promptly attempt to agree upon: (i) the number of mediators desired, not to exceed three mediators; and (ii) the selection of the mediator(s) who may
include members of the Mediation Committee and/or experienced mediators from an independent entity to mediate all disputes set forth in the Complaint and Answer (and Counterclaim and Reply, if any).
In the event the parties cannot agree upon the number of mediators desired, that number shall default to three. In the event the parties cannot agree upon the selection of mediator(s), the Chairman
will select the mediator(s), at least one of which shall be an experienced mediator from an independent entity, consistent with the provisions set forth in this Paragraph. No member of the Mediation
Committee who is a representative of any party to the Mediation may be 

selected to mediate the dispute. The Chairman shall also endeavor not to select as a mediator any member of the Mediation Committee whom a party has requested to be disqualified. If, after due regard
for availability, expertise, and such other considerations as may best promote an expeditious Mediation, the Chairman believes that he or she must consider for selection a member of the Mediation
Committee whom a party has requested to be disqualified, the other members of the Committee eligible to be selected to mediate the dispute shall decide the request for disqualification. By agreeing to
participate in the Mediation of a dispute, a member of the Mediation Committee represents to the party (or parties) thereto that he or she knows of no grounds which would require his or her
disqualification. 

    D.  Binding Decision  

    Before
the date of the Mediation Hearing described below, the Corporate Secretary will contact the party (or parties) to determine whether they wish to be bound by any recommendation
of the selected
mediators for resolution of the disputes. If all wish to be bound, the Corporate Secretary will send appropriate documentation to them for their signatures before the Mediation Hearing begins. 

    E.  Mediation Procedure  

    The
Chairman shall promptly advise the parties of a scheduled Mediation Hearing date. Unless a party requests an expedited procedure, or unless all parties to the proceeding agree to
one or more extensions of time, the Mediation Hearing set forth below shall be completed within forty (40) days of BCBSA's receipt of the Complaint. The selected mediators, unless the parties
otherwise agree, shall adhere to the following procedure: 

	i.
	Each
party must be represented by its CEO or other representative who has been delegated full authority to resolve the dispute. However, parties may
send additional representatives as they see fit.

	ii.
	By
no later than five (5) days prior to the date designated for the Mediation Hearing, each party shall supply and serve a list of all
persons who will be attending the Mediation Hearing, and indicate who will have the authority to resolve the dispute.

	iii.
	Each
party will be given one-half hour to present its case, beginning with the complaining party (or parties), followed by the other
party or parties. The parties are free to structure their presentations as they see fit, using oral statements or direct examination of witnesses. However, neither cross-examination nor questioning of
opposing representatives will be 

permitted.
At the close of each presentation, the selected mediators will be given an opportunity to ask questions of the presenters and witnesses. All parties must be present throughout the Mediation
Hearing. The selected mediators may extend the time allowed for each party's presentation at the Mediation Hearing. The selected mediators may meet in executive session, outside the presence of the
parties, or may meet with the parties separately, to discuss the controversy. 

	iv.
	After
the close of the presentations, the parties will attempt to negotiate a settlement of the dispute. If the parties desire, the selected
mediators, or any one or more of the selected mediators, will sit in on the negotiations.

	v.
	After
the close of the presentations, the selected mediators may meet privately to agree upon a recommendation for resolution of the dispute which
would be submitted to the parties for their
consideration and approval. If the parties have previously agreed to be bound by the results of this procedure, this recommendation shall be binding upon the parties.

	vi.
	The
purpose of the Mediation Hearing is to assist the parties to settle their grievances short of mandatory dispute resolution. As a result, the
Mediation Hearing has been designed to be as informal as possible. Rules of evidence shall not apply. There will be no transcript of the proceedings, and no party may make a tape recording of the
Mediation Hearing.

	vii.
	In
order to facilitate a free and open discussion, the Mediation proceeding shall remain confidential. A "Stipulation to Confidentiality" which
prohibits future use of settlement offers, all position papers or other statements furnished to the selected mediators, and decisions or recommendations in any Mediation proceeding shall be executed
by each party.

	viii.
	Upon
request of the selected mediators, or one of the parties, BCBSA staff may also submit documentation at any time during the proceedings. 

    F.  Notice Of Termination Of Mediation  

    If
the Mediation cannot be completed within the prescribed or agreed time period due to the lack of cooperation of any party, as determined by the selected mediators, or if the
Mediation does not result in a final resolution of all disputes at the Mediation Hearing or within forty (40) days after the Complaint was served, whichever comes first, any party or any one of
the selected mediators may so notify the Corporate Secretary, who shall promptly issue a Notice of termination of mediation to all parties, to the selected mediators, and to the MDR Administrator,
defined below. Such notice shall serve to bring the Mediation to an end and to initiate Mandatory Dispute Resolution. Upon agreement of all parties and the selected mediators, the Mediation process
may continue at the same time the MDR process is invoked. The Notice described above would serve to initiate the MDR proceeding and would not terminate the proceedings. 

3.  Mandatory Dispute Resolution (MDR)  

    If all parties elect not to first pursue Mediation, or if a notice of termination of Mediation is issued as set forth in Paragraph 2.F., above, then the
unresolved disputes set forth in any Complaint and Answer (and Counterclaim and Reply, if any) shall be subject to MDR. 

    A.  MDR Administrator  

    The
Administrator shall be an independent entity such as the Center for Public Resources, Inc. or Endispute, Inc., specializing in alternative dispute resolution. The
Administrator shall be designated initially, and may be changed from time to time, by the affirmative vote of a majority of the Plans present and voting and a majority of the total then current
weighted vote of all the Plans present and voting. 

    B.  Initial Conference  

    Within
five (5) days after a Notice of Termination has issued, or within five (5) days after the time for filing and serving the Reply to any Counterclaim if the parties
elect first not to mediate, the parties shall confer with the Administrator to discuss selecting a dispute resolution panel ("the Panel"). This Initial Conference may be by telephone. The parties are
encouraged to agree to the composition of the Panel and to present that agreement to the Administrator at the Initial Conference. If the parties do not agree on the composition of the Panel by the
time of the Initial Conference, or by any extension thereof agreed to by all parties and the Administrator, then the Panel Selection Process set forth in subparagraph C shall be followed. 

Amended September 21, 2000  

    C.  Panel Selection Process  

    The
Administrator shall designate at least seven potential arbitrators. The exact number designated shall be sufficient to give each party at least two peremptory strikes. Each party
shall be permitted to strike any designee for cause and the Administrator shall determine the sufficiency thereof in its sole discretion. The Administrator will designate a replacement for any
designee so stricken. Each party shall then be permitted two peremptory strikes. From the remaining designees, the Administrator shall select a three member Panel. The Administrator shall set the
dates for exercising all strikes and shall complete the Panel Selection Process within fifteen (15) days of the Initial Conference. Each Arbitrator shall be compensated at his or her normal
hourly rate or, in the absence of an established rate, at a reasonable hourly rate to be promptly fixed by the Administrator for all time spent in connection with the proceedings and shall be
reimbursed for any travel and other reasonable expenses. 

    D.  Duties Of The Arbitrators  

    The
Panel shall promptly designate a Presiding Arbitrator for the purposes reflected below, but shall retain the power to review and modify any ruling or other action of said
Presiding Arbitrator. Each Arbitrator shall be an independent Arbitrator, shall be governed by the Code of Ethics for Arbitrators in Commercial Disputes, appended as Exhibit "5-B" hereto,
and shall at or prior to the commencement of any Arbitration Hearing take an oath to that effect. Each Arbitrator shall promptly disclose in writing to the Panel and to the parties any circumstances,
whenever arising, that might cause doubt as to such Arbitrator's compliance, or ability to comply, with said Code of Ethics, and, absent resignation by such Arbitrator, the remaining Arbitrators shall
determine in their sole discretion whether the circumstances so disclosed constitute grounds for disqualification and for replacement. With respect to such circumstances arising or coming to the
attention of a party after an Arbitrator's selection, a party may likewise request the Arbitrator's resignation or a determination as to disqualification by the remaining Arbitrators. With respect to
a sole Arbitrator, the determination as to disqualification shall be made by the Administrator. 

    There
shall be no ex parte communication between the parties or their counsel and any member of the Panel. 

    E.  Panel's Jurisdiction And Authority  

    The
Panel's jurisdiction and authority shall extend to all disputes between or among the Plans, their Controlled Affiliates, and/or BCBSA, except for those disputes excepted from
these MMDR procedures as set forth in the License Agreements. 

    With the exception of punitive or treble damages, the Panel shall have full authority to award the relief it deems appropriate to resolve the parties' disputes, including monetary
awards and injunctions, mandatory or prohibitory. The Panel has no authority to award punitive or treble damages except that the Panel may allocate or assess responsibility for punitive or treble
damages assessed by another tribunal. Subject to the above limitations, the Panel may, by way of example, but not of limitation: 

	i.
	interpret
or construe the meaning of any terms, phrase or provision in any license between BCBSA and a Plan or a Controlled Affiliate relating to the
use of the BLUE CROSS® or BLUE SHIELD® service marks.

	ii.
	determine
whether BCBSA, a Plan or a Controlled Affiliate has violated the terms or conditions of any license between the BCBSA and a Plan or a
Controlled Affiliate relating to the use of the BLUE CROSS® or BLUE SHIELD® service marks.

	iii.
	decide
challenges as to its own jurisdiction.

	iv.
	issue
such orders for interim relief as it deems appropriate pending Hearing and Award in any Arbitration. 

    It
is understood that the Panel is expected to resolve issues based on governing principles of law, preserving to the maximum extent legally possible the continued integrity of the
Licensed Marks and the BLUE CROSS/BLUE SHIELD system. The Panel shall apply federal law to all issues which, if asserted in the United States District Court, would give rise to federal question
jurisdiction, 28 U.S.C. § 1331. The Panel shall apply Illinois law to all issues involving interpretation, performance or construction of any License Agreement or Controlled Affiliate
License Agreement unless the agreement otherwise provides. As to other issues, the Panel shall choose the applicable law based on conflicts of law principles of the State of Illinois. 

    F.  Administrative Conference And Preliminary Arbitration Hearing  

    Within ten (10) days of the Panel being selected, the Presiding Arbitrator will schedule an Administrative Conference to discuss scheduling of the
Arbitration Hearing and any other matter appropriate to be considered including: any written discovery in the form of requests for production of documents or requests to admit facts; the identity of
any witness whose deposition a party may desire and a showing of exceptional good cause for the taking of any such deposition; the desirability of bifurcation or other separation of the issues; the
need for and the type of record of conferences and hearings, including the need for transcripts; the need for expert witnesses and how expert testimony should be presented; the appropriateness of
motions to dismiss and/or for full or partial summary judgment; consideration of stipulations; the desirability of presenting any direct testimony in writing; and the necessity for any
on-site inspection by the Panel. 

    G.  Discovery  

	i.
	Requests for Production of Documents:  All requests for the production of documents
must be served as of the date of the Administrative Conference as set forth in Paragraph 3.F., above. Within twenty (20) days after receipt of a request for documents, a party shall
produce all relevant and non-privileged documents to the requesting party. In his or her discretion, the Presiding Arbitrator may require the parties to provide lists in such detail as is
deemed appropriate of all documents as to which privilege is claimed and may further require in-camera inspection of the same.

	ii.
	Requests for Admissions:  Requests for Admissions may be served up to 21 days
prior to the Arbitration Hearing. A party served with Requests For Admissions must respond within twenty (20) days of receipt of said request. The good faith use of and response to Requests for
Admissions is encouraged, and the Panel shall have full discretion, with reference to the Federal Rules of Civil Procedure, in awarding appropriate sanctions with respect to abuse of the procedure.

	iii.
	Depositions:  As a general rule, the parties will not be permitted to take
deposition testimony for discovery purposes. The Presiding Arbitrator, in his or her sole discretion, shall have the authority to permit a party to take such deposition testimony upon a showing of
exceptional good cause, provided that no deposition, for discovery purposes or otherwise, shall exceed three (3) hours, excluding objections and colloquy of counsel.

	iv.
	Expert witness(es):  If a party intends to present the testimony of an expert witness
during the oral hearing, it shall provide all other parties with a written statement setting forth the information required to be provided by Fed. R. Civ. P. 26(b)(4)(A)(i) prior to the
expiration of the discovery period.

	v.
	Discovery cut-off:  The Presiding Arbitrator shall determine the date on
which the discovery period will end, but the discovery period shall not exceed forty-five (45) days from its commencement, without the agreement of all parties.

	vi.
	Additional discovery:  Any additional discovery will be at the discretion of the
Presiding Arbitrator. The Presiding Arbitrator is authorized to resolve all discovery disputes, which resolution will be binding on the parties unless modified by the Arbitration Panel. If a party
refuses to comply with a decision resolving a discovery dispute, the Panel, in keeping with Fed. R. Civ. P. 37, may refuse to allow that party to support or oppose designated claims or defenses,
prohibit that party from introducing designated matters into evidence or, in extreme cases, decide an issue submitted for resolution adversely to that party. 

    H.  Panel Suggested Settlement/Mediation  

    At
any point during the proceedings, the Panel at the request of any party or on its own initiative, may suggest that the parties explore settlement and that they do so at or before
the conclusion of the Arbitration Hearing, and the Panel shall give such assistance in settlement negotiations as the parties may request and the Panel may deem appropriate. Alternatively, the Panel
may direct the parties to 

endeavor to mediate their disputes as provided above, or to explore a mini-trial proceeding, or to have an independent party render a neutral evaluation of the parties' respective
positions. The Panel shall enter such sanctions as it deems appropriate with respect to any party failing to pursue in good faith such Mediation or other alternate dispute resolution methods. 

    I.  Subpoenas On Third Parties  

    Pursuant
to, and consistent with, the Federal Arbitration Act, 9 U.S.C. § 9 et seq., a party may request the issuance of a
subpoena on a third party, to compel testimony or documents, and, if good and sufficient cause is shown, the Panel shall issue such a subpoena. 

    J.  Arbitration Hearing  

    An
Arbitration Hearing will be held within thirty (30) days after the Administrative Conference if no discovery is taken, or within thirty (30) days after the close of
discovery, unless all parties and the Panel agree to extend the Arbitration Hearing date, or unless the parties agree in writing to waive the
Arbitration Hearing. The parties may mutually agree on the location of the Arbitration Hearing. If the parties fail to agree, the Arbitration Hearing shall be held in Chicago, Illinois, or at such
other location determined by the Presiding Arbitrator to be most convenient to the participants. The Panel will determine the date(s) and time(s) of the Arbitration Hearing(s) after consultation with
all parties and shall provide reasonable notice thereof to all parties or their representatives. 

    K.  Arbitration Hearing Memoranda  

    Twenty
(20) days prior to the Arbitration Hearing, each party shall submit to the other party (or parties) and to the Panel an Arbitration Hearing Memorandum which sets forth
the applicable law and any argument as to any relevant issue. The Arbitration Hearing Memorandum will supplement, and not repeat, the allegations, information and documents contained in or with the
Complaint, Answer, Counterclaim and Reply, if any. Ten (10) days prior to the Arbitration Hearing, each party may submit to the other party (or parties) and to the Panel a Response Arbitration
Hearing Memorandum which sets forth any response to another party's Arbitration Hearing Memorandum. 

    L.  Notice For Testimony  

    Ten
(10) days prior to the Arbitration Hearing, any party may serve a Notice on any other party (or parties) requesting the attendance at the Arbitration Hearing of any
officer, employee or director of the other party (or parties) for the purpose of providing noncumulative testimony. If a party fails to produce one of its officers, employees or directors whose
noncumulative testimony during the Arbitration Hearing is reasonably requested by an adverse party, the Panel may refuse to allow that party to support or oppose designated claims or defenses,
prohibit that party from introducing designated matters into evidence or, in extreme cases, decide an issue submitted for mandatory dispute resolution adversely to that party. This Rule may not be
used for the purpose of burdening or harassing any party, and the Presiding Arbitrator may impose such orders as are appropriate so as to prevent or remedy any such burden or harassment. 

    M.  Arbitration Hearing Procedures  

	i.
	Attendance at Arbitration Hearing:  Any person having a direct interest in the
proceeding is entitled to attend the Arbitration Hearing. The Presiding Arbitrator shall otherwise have the power to require the exclusion of any witness, other than a party or other essential person,
during the testimony of any other witness. It shall be discretionary with the Presiding Arbitrator to determine the propriety of the attendance of any other person.

	ii.
	Confidentiality:  The Panel and all parties shall maintain the privacy of the
Arbitration Proceeding. The parties and the Panel shall treat the Arbitration Hearing and any discovery or other proceedings or events related thereto, including any award resulting therefrom, as
confidential except as otherwise
necessary in connection with a judicial challenge to or enforcement of an award or unless otherwise required by law. 

	iii.
	Stenographic Record:  Any party, or if the parties do not object, the Panel, may
request that a stenographic or other record be made of any Arbitration Hearing or portion thereof. The costs of the recording and/or of preparing the transcript shall be borne by the requesting party
and by any party who receives a copy thereof. If the Panel requests a recording and/or a transcript, the costs thereof shall be borne equally by the parties.

	iv.
	Oaths:  The Panel may require witnesses to testify under oath or affirmation
administered by any duly qualified person and, if requested by any party, shall do so.

	v.
	Order of Arbitration Hearing:  An Arbitration Hearing shall be opened by the recording
of the date, time, and place of the Arbitration Hearing, and the presence of the Panel, the parties, and their representatives, if any. The Panel may, at the beginning of the Arbitration Hearing, ask
for statements clarifying the issues involved. 

Unless
otherwise agreed, the complaining party (or parties) shall then present evidence to support their claim(s). The respondent(s) shall then present evidence supporting their defenses and
Counterclaims, if any. The complaining party (or parties) shall then present evidence supporting defenses to the Counterclaims, if any, and rebuttal. 

Witnesses
for each party shall submit to questions by adverse parties and/or the Panel. 

The
Panel has the discretion to vary these procedures, but shall afford a full and equal opportunity to all parties for the presentation of any material and relevant evidence. 

	vi.
	Evidence:  The parties may offer such evidence as is relevant and material to the
dispute and shall produce such evidence as the Panel may deem necessary to an understanding and resolution of the dispute. Unless good cause is shown, as determined by the Panel or agreed to by all
other parties, no party shall be permitted to offer evidence at the Arbitration Hearing which was not disclosed prior to the Arbitration Hearing by that party. The Panel may receive and consider the
evidence of witnesses by affidavit upon such terms as the Panel deems appropriate. 

The
Panel shall be the judge of the relevance and materiality of the evidence offered, and conformity to legal rules of evidence, other than enforcement of the attorney-client privilege and the work
product protection, shall not be necessary. The Federal Rules of Evidence shall be considered by the Panel in conducting the Arbitration Hearing but those rules shall not be controlling. All evidence
shall be taken in the presence of the Panel and all of the parties, except where any party is in default or has waived the right to be present. 

Settlement
offers by any party in connection with Mediation or MDR proceedings, decisions or recommendations of the selected mediators, and a party's position papers or statements furnished to the
selected mediators shall not be admissible evidence or considered by the Panel without the consent of all parties. 

	vii.
	Closing of Arbitration Hearing:  The Presiding Arbitrator shall specifically inquire
of all parties whether they have any further proofs to offer or witnesses to be heard. Upon receiving negative replies or if he or she is satisfied that the record is complete, the Presiding
Arbitrator shall declare the Arbitration Hearing closed with an appropriate notation made on the record. Subject to being reopened as provided below, the time within which the Panel is required to
make the award shall commence to run, in the absence of contrary agreement by the parties, upon the closing of the Arbitration Hearing. 

With
respect to complex disputes, the Panel may, in its sole discretion, defer the closing of the Arbitration Hearing for a period of up to thirty (30) days after the presentation of proofs in
order to permit the parties to submit post-hearing briefs and argument, as the Panel deems appropriate, prior to making an award. 

For
good cause, the Arbitration Hearing may be reopened for up to thirty (30) days on the Panel's initiative, or upon application of a party, at any time before the award is made 

    N.  Awards  

    An
Award must be in writing and shall be made promptly by the Panel and, unless otherwise agreed by the parties or specified by law, no later than thirty (30) days from the
date of closing the Arbitration Hearing. If all parties so request, the Award shall contain findings of fact and conclusions of law. The Award, and all other rulings and determinations by the Panel,
may be by a majority vote. 

    Parties
shall accept as legal delivery of the Award the placing of the Award or a true copy thereof in the mail addressed to a party or its representative at its last known address or
personal service of the Award on a party or its representative. 

    Awards
are binding only on the parties to the Arbitration and are not binding on any non-parties to the Arbitration and may not be used or cited as precedent in any other
proceeding. 

    After
the expiration of twenty (20) days from initial delivery, the Award (with corrections, if any) shall be final and binding on the parties, and the parties shall undertake
to carry out the Award without delay. 

    Proceedings
to confirm, modify or vacate an Award shall be conducted in conformity with and controlled by the Federal Arbitration Act. 9 U.S.C. § 1,  et seq. 

    O.  Return Of Documents  

    Within
sixty (60) days after the Award and the conclusion of any judicial proceedings with respect thereto, each party and the Panel shall return any documents produced by any
other party, including all copies thereof. If a party receives a discovery request in any other proceeding which would require it to produce any documents produced to it by any other party in a
proceeding hereunder, it shall not produce such documents without first notifying the producing party and giving said party reasonable time to respond, if appropriate, to the discovery request. 

4.  Miscellaneous  

    A.  Expedited Procedures  

    Any
party to a Mediation may direct a request for an expedited Mediation Hearing to the Chairman of the Mediation Committee, to the selected Mediators, and to all other parties at any
time. The Chairman of the Mediation Committee, or at his or her direction, the then selected Mediators, shall grant any request which is supported by good and sufficient reasons. If such a request is
granted, the Mediation shall be completed within as short a period as practicable, as determined by the Chairman of the Mediation Committee or, at his or her direction, the then selected Mediators. 

    Any
party to an Arbitration may direct a request for expedited proceedings to the Administrator, to the Panel, and to all other parties at any time. The Administrator, or the
Presiding Arbitrator if the Panel has been selected, shall grant any such request which is supported by good and sufficient reasons. If such a request is granted, the Arbitration shall be completed
within as short a time as practicable, as determined by the Administrator and/or the Presiding Arbitrator. 

    B.  Temporary Or Preliminary Injunctive Relief  

    Any
party may seek temporary or preliminary injunctive relief with the filing of a Complaint or at any time thereafter. If such relief is sought prior to the time that an Arbitration
Panel has been selected, then the Administrator shall select a single Arbitrator who is a lawyer who has no interest in the subject matter of the dispute, and no connection to any of the parties, to
hear and determine the request for temporary or preliminary injunction. If such relief is sought after the time that an Arbitration Panel has been selected, then the Arbitration Panel will hear and
determine the request. The request for temporary or preliminary injunctive relief will be determined with reference to the temporary or preliminary injunction standards set forth in Fed. R. Civ. P.
65. 

    C.  Defaults And Proceedings In The Absence Of A Party  

    Whenever
a party fails to comply with the MDR Rules in a manner deemed material by the Panel, the Panel shall fix a reasonable time for compliance and, if the party does not comply
within said period, the Panel may enter an Order of default or afford such other relief as it deems appropriate. Arbitration may proceed in the event of a default or in the absence of any party who,
after due notice, fails to be present or fails to obtain an extension. An Award shall not be made solely on the default or absence of a party, but the Panel shall require the party who is present to
submit such evidence as the Panel may require for the making of findings, determinations, conclusions, and Awards. 

    D.  Notice  

    Each
party shall be deemed to have consented that any papers, notices, or process necessary or proper for the initiation or continuation of a proceeding under these rules or for any
court action in connection therewith may be served on a party by mail addressed to the party or its representative at its last known address or by personal service, in or outside the state where the
MDR proceeding is to be held. 

    The
Corporate Secretary and the parties may also use facsimile transmission, telex, telegram, or other written forms of electronic communication to give the notices required by these
rules. 

    E.  Expenses  

    The
expenses of witnesses shall be paid by the party causing or requesting the appearance of such witnesses. All expenses of the MDR proceeding, including compensation, required
travel and other reasonable expenses of the Panel, and the cost of any proof produced at the direct request of the Panel, shall be borne equally by the parties and shall be paid periodically on a
timely basis, unless they agree otherwise or unless the Panel in the Award assesses such expenses, or any part thereof against any party (or parties). In exceptional cases, the Panel may award
reasonable attorneys' fees as an item of expense, and the Panel shall promptly determine the amount of such fees based on affidavits or such other proofs as the Panel deems sufficient. 

    F.  Disqualification Or Disability Of A Panel Member  

    In
the event that any Arbitrator of a Panel with more than one Arbitrator should become disqualified, resign, die, or refuse or be unable to perform or discharge his or her duties
after the commencement of MDR but prior to the rendition of an Award, and the parties are unable to agree upon a replacement, the remaining Panel member(s): 

	i.
	shall
designate a replacement, subject to the right of any party to challenge such replacement for cause.

	ii.
	shall
decide the extent to which previously held hearings shall be repeated. 

    If
the remaining Panel members consider the proceedings to have progressed to a stage as to make replacement impracticable, the parties may agree, as an alternative to the
recommencement of the Mandatory Dispute Resolution process, to resolution of the dispute by the remaining Panel members. 

    In
the event that a single Arbitrator should become disqualified, resign, die, or refuse or be unable to perform or discharge his or her duties after the commencement of MDR but prior
to the rendition of an Award, and the parties are unable to agree upon a replacement, the Administrator shall appoint a successor, subject to the right of any party to challenge such successor for
cause, and the successor shall decide the extent to which previously held proceedings shall be repeated. 

    G.  Extensions of Time  

    Any
time limit set forth in these Rules may be extended upon agreement of the parties and approval of: (i) the Chairman of the Mediation Committee if the proceeding is then in
Mediation; (ii) the Administrator if the proceeding is in Arbitration, but no Arbitration Panel has been selected; or (iii) the Arbitration Panel, if the proceeding is in Arbitration and
the Arbitration Panel has been selected. 

    H.  Intervention  

    The
Plans, their Controlled Affiliates, and BCBSA, to the extent subject to MMDR pursuant to their License Agreements, shall have the right to move to intervene in any pending
Arbitration. A written motion for intervention shall be made to: (i) the Administrator, if the proceeding is in Arbitration, but no Arbitration Panel has been selected; or (ii) the
Arbitration Panel, if the proceeding is in Arbitration and the Arbitration Panel has been selected. The written motion for intervention shall be delivered to the BCBSA Corporate Secretary (which shall
also constitute service on the BCBSA if it is a respondent) and to any Plan(s) and/or Controlled Affiliate(s) which are parties to the proceeding. Any party to the proceeding can submit written
objections to the motion to intervene. The motion for intervention shall be granted upon good cause shown. Intervention also may be allowed by stipulation of the parties to the Arbitration proceeding.
Intervention shall be allowed upon such terms as the Arbitration Panel decides. 

    I.  BCBSA Assistance In Resolution of Disputes  

    The
resources and personnel of the BCBSA may be requested by any member Plan at any time to try to resolve disputes with another Plan. 

Amended September 21, 2000

    J.  Neutral Evaluation  

    The
parties can voluntarily agree at any time to have an independent party render a neutral evaluation of the parties' respective positions. 

    K.  Recovery of Attorney Fees and Expenses  

 Motions to Compel  

Nothwithstanding
any other provisions of these Rules, any Party subject to the License Agreements (for purposes of this Section L and all of its sub-sections only hereinafter
referred to collectively and individually as a "Party") that initiates a court action or administrative proceeding solely to compel adherence to these Rules shall not be determined to have violated
these Rules by initiating such action or proceeding. 

 Recovery of Fees, Expenses and Costs  

The
Arbitration Panel may, in its sole discretion, award a Party its reasonable attorneys' fees, expenses and costs associated with a filing to compel adherence to these Rules and/or reasonable
attorneys' fees, expenses and costs incurred in responding to an action filed in violation of these Rules; provided, however, that neither fees, expenses, nor costs shall be awarded by the Arbitration
Panel if the Party from which the award is sought can demonstrate to the Arbitration panel, in its sole discretion, that it did not violate these Rules or that it had reasonable grounds for believing
that its action did not violate these Rules. 

 Requests for Reimbursement  

For
purposes of this Section L, any Party may request reimbursement of fees, expenses and/or costs by submitting said request in writing to the Arbitration Panel at any time before an award is
delivered pursuant to Section 3-N hereof, with a copy to the Party from which reimbursement is sought, explaining why it is entitled to such reimbursement. The Party from which
reimbursement is sought shall have 20 days to submit a response to such request to the Arbitration Panel with a copy to the Party seeking reimbursement. 

Amended September 21, 2000

 
 

EXHIBIT 5-A    
  

 
 

MEDIATION COMMITTEE    
  

	REPORTS TO:	 	Board of Directors
	
CHARGE:	
 	

1. Develop and implement processes for resolving misunderstandings or disagreements between Plans or between Plans and the Association under the following circumstances:
	

 	
 	

    a.	
 	

Matters at issue regarding relationships between Plans or between Plans and the Association.
	

 	
 	

    b.	
 	

Matters at issue regarding relationships between Plans or between Plans and the Association.
	

 	
 	

    c.	
 	

Matters at issue under the Inter-Plan Bank, Reciprocity, and Transfer Programs.
	

 	
 	

    d.	
 	

Matters at issue regarding contractor selection or performance under the Medicare Part A Program.
	

 	
 	

2. Determination of equalization allowances and/or cost allowances under FEP shall not be considered by this Committee.
	
MEMBERSHIP:	
 	

Six to Eight
	
STAFF:	
 	

Senior Vice President and General Counsel

QuickLinks

EXHIBIT 10.08

BLUE SHIELD CONTROLLED AFFILIATE LICENSE AGREEMENT APPLICABLE TO LIFE INSURANCE COMPANIES (Includes revisions adopted by Member Plans through their November 16, 2000 meeting)

EXHIBIT 5-A

MEDIATION COMMITTEE<PAGE>

                                                                 EXHIBIT 10.32

                         CITIZENS BANK OF MASSACHUSETTS

                           LOAN AND SECURITY AGREEMENT
                                  (ALL ASSETS)

                                                  March 27, 2001

            1. SECURITY INTEREST. Webhire, Inc. a Delaware corporation
(hereinafter referred to as the "Borrower"), for valuable consideration, receipt
whereof is hereby acknowledged, hereby grants to Citizens Bank of Massachusetts,
a Massachusetts bank, the secured party hereunder (hereinafter called the
"Bank"), a continuing security interest in and to, and assigns to Bank, all
property of the Borrower including the following property of the Borrower,
wherever located and whether now owned or hereafter acquired:

            (a) all inventory, including all goods, merchandise, raw materials,
goods and work in process, finished goods, and other tangible personal property
now owned or hereafter acquired and held for sale or lease or furnished or to be
furnished under contracts of service or used or consumed in Borrower's business
(all hereinafter called the "Inventory");

            (b) all accounts (as defined in the Uniform Commercial Code,
hereinafter "Accounts"), contracts, contract rights, notes, bills, drafts,
acceptances, general intangibles (including without limitation registered and
unregistered tradenames, copyrights, customer lists, goodwill, computer
programs, computer records, computer software, computer data, trade secrets,
trademarks, patents, ledger sheets, files, records, data processing records
relating to any Accounts and all tax refunds of every kind and nature to which
Borrower is now or hereafter may become entitled to, no matter how arising),
instruments, documents, chattel paper, securities, security entitlements,
security accounts, investment property, deposit accounts, choses in action, and
all other debts, obligations and liabilities in whatever form, owing to Borrower
from any person, firm or corporation or any other legal entity, whether now
existing or hereafter arising, now or hereafter received by or belonging or
owing to Borrower, for goods sold by it or for services rendered by it, or
however otherwise same may have been established or created, all guarantees and
securities therefor, all right, title and interest of Borrower in the
merchandise or services which gave rise thereto, including the rights of
reclamation and stoppage in transit, all rights to replevy goods, and all rights
of an unpaid seller of merchandise or services (all hereinafter called the
"Receivables");

            (c) all machinery, equipment, fixtures and other goods (as defined
in Article 9 of the Uniform Commercial Code) whether now owned or hereafter
acquired by the Borrower and wherever located, all replacements and
substitutions therefor or accessions thereto and all proceeds thereof (all
hereinafter called the "Equipment");

            (d) the Pledged Cash; and

                                      -1-
<PAGE>

            (e) all proceeds and products of all of the foregoing in any form,
including, without limitation, all proceeds of credit, fire or other insurance,
and also including, without limitation, rents and profits resulting from the
temporary use of any of the foregoing (which, with Inventory, Receivables and
Equipment are all hereinafter called "Collateral").

            2. OBLIGATIONS SECURED; RELEASE OF PLEDGED CASH. (a) The security
interest granted hereby is to secure payment and performance of all debts,
liabilities and obligations of Borrower to Bank hereunder and also any and all
other debts, liabilities and obligations of Borrower to Bank of every kind and
description, direct or indirect, absolute or contingent, primary or secondary,
due or to become due, now existing or hereafter arising, whether or not such
obligations are related to the transactions described in this Agreement, by
class, or kind, or whether or not contemplated by the parties at the time of the
granting of this security interest, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, and includes obligations to perform acts and refrain
from taking action as well as obligations to pay money including, without
limitation, all interest, fees, charges, expenses and overdrafts, and also
including, without limitation, all obligations and liabilities which Bank may
incur or become liable for, on account of, or as a result of, any transactions
between Bank and Borrower including any which may arise out of any letter of
credit, acceptance or similar instrument or obligation issued or caused to be
issued pursuant to this Agreement (all hereinafter called "Obligations").

            (b) After the Conversion Event the Bank agrees to release the pledge
of the Pledged Cash.

            3. BORROWER'S PLACES OF BUSINESS, INVENTORY LOCATIONS AND RETURNS
POLICY. Borrower warrants that Borrower has no places of business other than
that shown at the end of this Agreement, unless other places of business are
listed on Schedule "A", annexed hereto, in which event Borrower represents that
it has additional places of business at those locations set forth on Schedule
"A".

            Borrower's principal executive office and the office where Borrower
keeps its records concerning its accounts, contract rights and other property,
is that shown at the end of this Agreement. All Inventory presently owned by
Borrower is stored at the locations set forth on Schedule "A".

            Borrower will promptly notify Bank in writing of any change in the
location of any place of business or the location of any Inventory or the
establishment of any new place of business or location of Inventory or office
where its records are kept which would be shown in this Agreement if it were
executed after such change.

            4. BORROWER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants that:

            (a) Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and shall hereafter
remain in good standing as a corporation in that state, and is duly qualified
and in good standing in every other state, and shall

                                      -2-
<PAGE>

hereafter remain duly qualified and in good standing, in which the failure to
qualify or become licensed can be reasonably be expected to have a material
adverse effect on the financial condition, business or operations of the
Borrower.

            (b) Borrower's exact legal name is as set forth in this Agreement
and Borrower will not undertake or commit to undertake any act which will result
in a change of Borrower's legal name, without giving Bank at least thirty (30)
days' prior written notice of the same.

            (c) The execution, delivery and performance of this Agreement, and
any other document executed in connection herewith, are within the Borrower's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of the Borrower's charter, bylaws or other incorporation papers, or of
any indenture or material agreement or undertaking to which the Borrower is a
party or by which it or any of its properties may be bound.

            (d) Borrower's Certificate of Incorporation and all amendments
thereto of Borrower have been duly filed and are in proper order. All capital
stock issued by Borrower and outstanding was and is properly issued and all
books and records of Borrower, including but not limited to its minute books,
bylaws and books of account, are accurate and up to date and will be so
maintained.

            (e) Borrower owns all of the assets reflected in the most recent of
Borrower's financial statements provided to Bank, except assets sold or
otherwise disposed of in the ordinary course of business since the date thereof,
and such assets together with any assets acquired since such date, including
without limitation the Collateral, are free and clear of any lien, pledge,
security interest, charge, mortgage or encumbrance of any nature whatsoever,
except (i) the security interests and other encumbrances (if any) listed on
Schedule "B" annexed hereto, (ii) those leases set forth on Schedule "C" annexed
hereto, (iii) those liens permitted pursuant to Section 14(g) of this Agreement,
or (iv) liens and security interests in favor of Bank.

            (f) Borrower has made or filed all tax returns, reports and
declarations relating to any material tax liability required by any jurisdiction
to which it is subject (any tax liability which may result in a lien on any
Collateral being hereby deemed material); has paid all taxes shown or determined
to be due thereon except those being contested in good faith and which Borrower
has, prior to the date of such contest, identified in writing to Bank as being
contested; and has made adequate provision for the payment of all taxes so
contested, so that no lien will encumber any Collateral, and in respect of
subsequent periods.

            (g) Borrower (i) is subject to no charter, corporate or other legal
restriction, or any judgment, award, decree, order, governmental rule or
regulation or contractual restriction which could reasonably be expected to have
a material adverse effect on its financial condition, business or prospects, and
(ii) is in compliance with its charter documents and bylaws, all contractual
requirements by which it or any of its properties may be bound and all
applicable laws, rules and regulations (including without limitation those
relating to environmental protection) other than laws, rules or regulations the
validity or applicability of which it is contesting in good faith or provisions
of any of the foregoing the failure to comply with which

                                      -3-
<PAGE>

cannot reasonably be expected to materially adversely affect its financial
condition, business or prospects or the value of any Collateral.

            (h) There is no action, suit, proceeding or investigation pending,
of which Borrower has received notice or, to Borrower's knowledge, threatened
against or affecting it or any of its assets before or by any court or other
governmental authority which, if determined adversely to it, would have a
material adverse effect on its financial condition, business or prospects or the
value of any Collateral.

            (i) Borrower is in compliance with ERISA; no Reportable Event has
occurred and is continuing with respect to any Plan; and it has no unfunded
vested liability under any plan. The word "Plan" as used in this Agreement means
any employee plan subject to Title IV of the Employee Retirement Income Security
Act of 1974 ("ERISA") maintained for employees of Borrower, any subsidiary of
Borrower or any other trade or business under common control with Borrower
within the meaning of Section 414(c) of the Internal Revenue Code of 1986 or any
regulations thereunder.

            5. LOANS AND OTHER FINANCIAL ACCOMMODATIONS.

            (a) From time to time upon Borrower's request, so long as the sum of
the aggregate principal amount of all loans outstanding and the requested loan
does not exceed the lesser of (i) the Borrowing Base (as defined below), or (ii)
the Credit Limit (as defined below), Bank shall make such requested loan,
provided that there has not occurred and is not continuing an Event of Default
or an event which, with notice or the lapse of time or both, would constitute an
Event of Default.

            (b) All loans shall bear interest and at the option of the Bank
shall be evidenced by and repayable in accordance with a revolving note drawn to
the order of Bank substantially the form of Exhibit 1 hereto (the "Note"), as
the same may hereafter be amended, supplemented or restated from time to time
and any note or notes issued in substitution therefor, but in the absence of the
Note shall be evidenced by Bank's records of loans and repayments as limited by
Section 7.

            Interest will be charged to Borrower at a fluctuating rate which is
the daily equivalent to a rate equal to the Prime Rate, or at such other rate
agreed on from time to time by the parties, upon any balance owing to Bank at
the close of each day and shall be payable (i) on the first day of each month in
arrears; (ii) on termination of this Agreement pursuant to Section 19 hereof;
(iii) on acceleration of the time for payment of the Obligations pursuant to
Section 15 hereof; and (iv) on the date the Obligations are paid in full. The
rate of interest payable by Borrower shall be changed effective as of that date
in which a change in the Prime Rate becomes effective. Interest shall be
computed on the basis of the actual number of days elapsed over a year of three
hundred sixty (360) days. The term "Prime Rate" as used herein and in any
supplement and amendment hereto shall mean the per annum rate of interest
announced from time to time by Bank at its offices in Boston, Massachusetts, as
its Prime Rate (or if Bank ceases to announce a rate so designated, any similar
successor rate designated by Bank), it being understood that such rate is a
reference rate and not necessarily the lowest rate of interest

                                      -4-
<PAGE>

charged by Bank. Interest shall be payable in lawful money of the United States
of America to Bank, or as Bank shall direct, without set-off, deduction or
counterclaim monthly, in arrears, on the first day of each month, commencing on
the first day of the month next succeeding the date hereof.

            (c) The term "Borrowing Base" as used herein shall mean the sum of
the following:

      I.    Prior to the Conversion Event:

            (i)   one hundred (100%) percent of the Pledged Cash.

      II.   After the Conversion Event:

            (i) one hundred (100%) percent of the Pledged Cash (if still pledged
      to the Bank), PLUS

            (ii) seventy (70%) percent of the unpaid face amount of Final Amount
      (as defined below) Qualified Accounts (as defined below) or such other
      percentage thereof as may from time to time be fixed by Bank upon notice
      to Borrower, if Bank determines in its reasonable judgment that there has
      been a change in circumstances relating to any or all Accounts from those
      circumstances in existence on or prior to the date hereof; PLUS

            (iii) the lesser of (x) One Million ($1,000,000.00) Dollars, or (y)
      fifty (50%) percent of the unpaid face amount of Deferred Amount (as
      defined below) Qualified Accounts or such other percentage thereof as may
      from time to time be fixed by Bank upon notice to Borrower, if Bank
      determines in its reasonable judgment that there has been a change in
      circumstances relating to any or all Accounts from these circumstances in
      existence on or prior to the date hereof.

but in no event shall the sum of all loans plus the sum of the aggregate amount
undrawn on all letters of credit and acceptances be in excess of the Credit
Limit. As used herein "Pledged Cash" shall mean the collected funds on deposit
at the Bank subject only to a first lien in favor of the Bank. As used herein
"Final Amount" shall mean those accounts for which payment is due and all
services have been performed all as shown on the Borrower's accounts receivable
aging in the column entitled "Final Amount." As used herein "Deferred Amount"
shall mean those accounts owed for internet-based services (such as Webhire
Recruiter) and/or software maintenance services offered on a subscription basis,
for which payment is due, but not all services have yet been performed all as
shown on the Borrower's accounts receivable aging in the column entitled
"Deferred Amount Schedule." A sample of the Borrower's accounts receivable aging
relied upon by Bank in establishing the Borrowing Base is attached as Exhibit 4.

            (d) The term "Credit Limit" as used herein shall mean an amount
equal to Three Million ($3,000,000.00) Dollars.

                                      -5-
<PAGE>

            (e) The term "Conversion Event" as used herein shall mean provided
no event has occurred or failed to occur (and such occurrence or failure to
occur is then continuing) which event is or solely with the passage of time or
giving of notice (or both) would constitute an Event of Default, the Borrower
has provided the Bank with satisfactory evidence that the Borrower has satisfied
the conditions described on Exhibit 3 annexed hereto.

            (f) Borrower hereby, authorizes and directs Bank, in Bank's sole
discretion (provided, however, Bank shall have no obligation to do so): (i) to
pay accrued interest as the same becomes due and payable pursuant to this
Agreement or pursuant to any note or other agreement between Borrower and Bank,
and to treat the same as a loan to Borrower, which shall be added to Borrower's
loan balance pursuant to this Agreement; (ii) to charge any of Borrower's
accounts under the control of Bank; or (iii) apply the proceeds of Collateral,
including, without limitation, payments on Accounts and other payments from
sales or lease of Inventory and any other funds to the payment of such items.
Bank shall promptly notify Borrower of any such charges or applications.

            (g) The Borrowing Base formula set forth above is intended solely
for monitoring purposes. The making of loans, advances, and credits by Bank to
the Borrower in excess of the above described Borrowing Base formula is for the
benefit of the Borrower and does not affect the obligations of Borrower
hereunder; all such loans constitute Obligations and must be repaid by Borrower
in accordance with the terms of this Agreement.

            (h) Borrower shall pay to Bank the principal amount of all loans as
follows:

                  (i) Borrowing Base Exceeded. Whenever the outstanding
            principal balance of all loans exceed the Borrowing Base, Borrower
            shall immediately pay to Bank the excess of the outstanding
            principal balance of the loans over the Borrowing Base.

                  (ii) Payment in Full on Termination. On termination of this
            Agreement, pursuant to Section 19 or acceleration of the obligations
            pursuant to Section 15, Borrower shall pay to Bank the entire
            outstanding principal balance of all loans and shall deliver to Bank
            cash collateral in an amount equal to the aggregate of (A) amounts
            then undrawn on all outstanding Letters of Credit issued pursuant to
            this Agreement for the account of the Borrower, and (B) the amount
            of all outstanding acceptances issued pursuant to this Agreement.

            (i) Bank may, at any time and from time to time, in its reasonable
judgment establish reserves against the Accounts of the Borrower. The amount of
such reserves shall be subtracted from Qualified Accounts when calculating the
amount of the Borrowing Base.

            (j) It is the intention of the parties hereto to comply strictly
with applicable usury laws, if any; accordingly, notwithstanding any provisions
to the contrary in this Agreement or any other documents or instruments executed
in connection herewith, in no event shall this Agreement or such documents or
instruments require or permit the payment, taking, reserving, receiving,
collecting or charging of any sums constituting interest under applicable laws
which

                                      -6-
<PAGE>

exceed the maximum amount permitted by such laws. If any such excess interest is
called for, contracted for, charged, paid, taken, reserved, collected or
received in connection with the Obligations or in any communication by Bank or
any other person to the Borrower or any other person, or in the event all or
part of the principal of the Obligations or interest thereon shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
collected, reserved, or received on the amount of principal actually outstanding
from time to time under this Agreement shall exceed the maximum amount of
interest permitted by applicable usury laws, if any, then in any such event it
is agreed as follows: (i) the provisions of this paragraph shall govern and
control, (ii) neither the Borrower nor any other person or entity now or
hereafter liable for the payment of the Obligations shall be obligated to pay
the amount of such interest to the extent such interest is in excess of the
maximum amount of interest permitted by applicable usury laws, if any, (iii) any
such excess which is or has been received notwithstanding this paragraph shall
be credited against the then unpaid principal balance hereof or, if the
Obligations have been or would be paid in full by such credit, refunded to the
Borrower, and (iv) the provisions of this Agreement and the other documents or
instruments executed in connection herewith, and any communication to the
Borrower, shall immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the maximum lawful
rate allowed under applicable laws as now or hereafter construed by courts
having jurisdiction hereof or thereof. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, collected,
reserved, or received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of the Obligations, including all
prior and subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, collected, reserved or received. The terms of
this paragraph shall be deemed to be incorporated in every Loan Document and
communication relating to the Obligations.

            (k) Unused Fee. In addition to any other fee or expense paid by the
Borrower on account of the Loans, the Borrower shall pay the Bank, an unused
facility fee of one-quarter of one (.25%) percent per annum on the average
monthly unused portion of the revolving credit based upon the Credit Limit which
unused facility fee shall be paid monthly.

            6. DEFINITION OF QUALIFIED ACCOUNT. The term "Qualified Account", as
used herein, means an Account owing to Borrower which met the following
specifications at the time it came into existence and continues to meet the same
until it is collected in full:

            (a) The Account is not more than ninety (90) days from the date of
the earlier of shipment or invoice thereof.

            (b) The Account arose from the performance of services (whether or
not the services have yet been performed) or an outright sale of goods by
Borrower, such goods have been shipped to the account debtor, and Borrower has
possession of, or has delivered to Bank, shipping and delivery receipts
evidencing such shipment.

                                      -7-
<PAGE>

            (c) The Account is not subject to any prior assignment, claim, lien,
or security interest, and Borrower will not make any further assignment thereof
or create any further security interest therein, nor permit Borrower's rights
therein to be reached by attachment, levy, garnishment or other judicial
process.

            (d) The Account is not subject to setoff, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt payment and
the account debtor has not complained as to his liability thereon and has not
returned any of the goods from the sale of which the Account arose.

            (e) The Account arose in the ordinary course of Borrower's business
and did not arise from the performance of services or a sale of goods to a
supplier or employee of the Borrower.

            (f) No notice of bankruptcy or insolvency of the account debtor has
been received by or is known to the Borrower.

            (g) The Account is not owed by an account debtor whose principal
place of business is outside the United States of America unless specifically
consented to by the Bank.

            (h) The Account is not owed by an entity which is a parent,
brother/sister, subsidiary or affiliate of Borrower.

            (i) The account debtor is not located in the State of New Jersey or
in the State of Minnesota, unless Borrower has filed and shall file all legally
required Notice of Business Activities Reports with the New Jersey Division of
Taxation or the Minnesota Department of Revenue, as the case may be.

            (j) The Account when aggregated with all of the Accounts of that
account debtor does not exceed thirty-five (35%) percent, or fifty (50%) percent
if pre-approved by the Bank, of the then aggregate of Qualified Accounts,
provided, however, this subsection shall not apply to investment-grade
customers, customers whose accounts are covered by satisfactory credit insurance
in favor of the Bank, or supported by a satisfactory letter of credit in favor
of the Bank.

            (k) The Account is not evidenced by a promissory note.

            (l) The Account did not arise out of any sale made on a bill and
hold, dating of more than thirty (30) days or delayed shipment basis.

            (m) The Account does not arise out of a progress billing prior to
completion of the order therefor.

            (n) Bank, in accordance with its normal credit policies, has not
deemed the Account to be unacceptable for any reason.

                                      -8-
<PAGE>

PROVIDED THAT if at any time twenty-five (25%) percent or more of the aggregate
amount of the Accounts due from any account debtor are unpaid in whole or in
part more than ninety (90) days from the respective earlier dates of shipment of
product or performance of services, or the date on which payment is due, from
and after such time none of the Accounts (then existing or hereafter arising)
due from such account debtor shall be deemed to be Qualified Accounts until such
time as all Accounts due from such account debtor are (as a result of actual
payments received thereon) no more than ninety (90) days from the earlier date
of shipment or invoice; Accounts payable by Borrower to an account debtor shall
be netted against Accounts due from such account debtor and the difference (if
positive) shall constitute Qualified Accounts from such account debtor for
purposes of determining the Borrowing Base (notwithstanding paragraph (d)
above); characterization of any Account due from an account debtor as a
Qualified Account shall not be deemed a determination by Bank as to its actual
value nor in any way obligate Bank to accept any Account subsequently arising
from such account debtor to be, or to continue to deem such Account to be, a
Qualified Account; it is Borrower's responsibility to determine the
creditworthiness of account debtors and all risks concerning the same and
collection of Accounts are with Borrower; and all Accounts whether or not
Qualified Accounts constitute Collateral.

            7. BANK'S REPORTS. After the end of each month, Bank will render to
Borrower a statement of Borrower's loan account with Bank hereunder, showing all
applicable credits and debits. Each statement shall be considered correct and to
have been accepted by Borrower and prima facie evidence in respect of all
charges, debits and credits of whatsoever nature contained therein under or
pursuant to this Agreement, and the closing balance shown therein, unless
Borrower notifies Bank in writing of any discrepancy within thirty (30) days
from the mailing by Bank to Borrower of any such monthly statement.

            8. CONDITIONS OF LENDING.

            (a) The obligation of Bank to make the initial loan hereunder shall
be subject to the condition precedent that Bank shall have received all of the
following, each in form and substance satisfactory to Bank:

                  (i) This Agreement, properly executed on behalf of Borrower.

                  (ii) The Note drawn to the order of Bank in the face amount of
      the Credit Limit.

                  (iii) A true and correct copy of any and all leases pursuant
      to which Borrower is leasing any real property, together with a landlord's
      consent and waiver with respect to the Massachusetts real property.

                  (iv) Except for searches in Massachusetts which shall be
      complete and satisfactory to the Bank, evidence of the commencement of
      searches of appropriate filing offices with respect (A) to state and
      federal tax liens, if any, in effect against Borrower, (B) financing
      statements filed and in effect against Borrower.

                                      -9-
<PAGE>

                  (v) The Bank has duly filed all financing statements necessary
      to perfect the security interests granted hereunder, to the extent the
      security interests are capable of being perfected by filing.

                  (vi) A certificate of the Secretary or an Assistant Secretary
      of the Borrower, certifying as to (A) the resolutions of the directors
      authorizing the execution, delivery and performance of this Agreement and
      related documents, (B) the Certificate of Incorporation and By-Laws of
      Borrower, and (C) the signatures of the officers or agents of Borrower
      authorized to execute and deliver this Agreement and other instruments,
      agreements and certificates, including loan requests, on behalf of
      Borrower.

                  (vii) A current certificate issued by the Secretary of State
      of the state of the Borrower's incorporation, certifying that Borrower is
      in compliance with all corporate organizational requirements of such
      state.

                  (viii) Evidence that Borrower is duly licensed or qualified to
      transact business in all jurisdictions in which the failure to qualify or
      become licensed can be reasonably be expected to have a material adverse
      effect on the financial condition, business or operations of the Borrower.

                  (ix) An opinion of counsel to the Borrower, addressed to Bank.

                  (x) Certificates of the insurance required hereunder, with all
      hazard insurance containing a lender's loss payable endorsement in favor
      of Bank.

                  (xi) A Pledge Agreement, properly executed by the Borrower
      granting the Bank a perfected first lien in and to the Pledged Cash.

                  (xii) Payment of the fees due through the date of the initial
      loan and expenses incurred by Bank through such date required to be paid
      by Borrower pursuant to this Agreement.

                  (xiii) A Borrowing Base Certificate which indicates that the
      Borrower has the necessary loan availability to pay all existing secured
      lenders.

                  (xiv) Such other documents, instruments and agreements as Bank
      may reasonably require.

            (b) The obligation of Bank to make each loan shall be subject to the
further conditions precedent on such date:

                  (i) the representations and warranties contained in Sections 3
      and 4 hereof are correct on and as of the date of such loan as though made
      on and as of such date, except to the extent that such representations and
      warranties relate solely to an earlier date; and

                                      -10-
<PAGE>

                  (ii) no event has occurred and is continuing, or would result
      from such loan which constitutes an Event of Default or which, with notice
      or the passage of time or both, would constitute an Event of Default.

            9. CAPITAL ADEQUACY.

            (a) If Bank shall reasonably determine that, after the date hereof,
the adoption of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank or its parent
corporation with any requirement or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:

                  (i) shall subject Bank or its parent corporation to any tax,
      duty or other similar charge with respect to the loans or the Note or
      shall change the basis of taxation of payments to Bank or its parent
      corporation of the Obligations or the principal of or interest on the
      loans or of any other amounts due under this Agreement in respect of the
      loans or the Note (except for any change in respect of any tax imposed on
      the overall income of Bank or its parent corporation); or

                  (ii) shall impose, modify or deem applicable any reserve,
      special deposit or similar requirement (including, without limitation, any
      such requirement imposed by the Board of Governors of the Federal Reserve
      System) against assets of, deposits with or for the account of, or credit
      extended by, Bank or its parent corporation or shall impose on Bank or its
      parent corporation any other condition affecting the loans or the Note;

and the result of any of the foregoing is to increase the cost to Bank or its
parent corporation of making or maintaining any loans, or to reduce the amount
of any sum received or receivable by Bank or its parent corporation under this
Agreement or the Note with respect thereto, by an amount deemed by Bank or its
parent corporation to be material, then upon demand by Bank, Borrower shall pay
to Bank such additional amount or amounts as will compensate Bank or its parent
corporation for such increased cost or reduction.

            (b) If Bank shall reasonably determine that the adoption after the
date hereof of any applicable law, rule or regulation regarding capital
adequacy, or any change therein after the date hereof, any change after the date
hereof in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank or its parent corporation with
any guideline or request issued after the date hereof regarding capital adequacy
(whether nor not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's or the Bank's parent corporation's capital as a consequence of the
loans or the Bank's obligations hereunder to a level below that which the Bank
or its parent corporation could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy and those of the Bank's parent corporation) by an amount
reasonably deemed to the Bank or its parent

                                      -11-
<PAGE>

corporation to be material, then from time to time on demand by the Bank, the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank or its parent corporation for such reduction.

            (c) Bank shall allocate such cost increases or reductions in its
returns among its customers reasonably and in good faith and on an equitable
basis. Notwithstanding anything to the contrary contained herein, the Borrower
shall not have any obligation to pay to the Bank amounts owing under this
section unless, at the time it requests such compensation, it is the policy or
general practice of the Bank to request compensation for comparable costs in
similar circumstances under other comparable loan agreements. Certificates of
the Bank sent to the Borrower from time to time claiming compensation under this
section, stating the reason therefor and setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to the Bank hereunder
shall be conclusive absent manifest error. In determining such amounts, the Bank
or its parent corporation may use any reasonable averaging and attribution
methods consistent with the other provisions of this section.

            10. COLLECTIONS; SET OFF; NOTICE OF ASSIGNMENT; EXPENSES; POWER OF
ATTORNEY.

            (a) Borrower will immediately, upon receipt of all checks, drafts,
cash and other remittances in payment of any Inventory sold or in payment or on
account of Borrower's accounts, contracts, contract rights, notes, bills,
drafts, acceptances, general intangibles, choses in action and all other forms
of obligations, deliver the same to Bank accompanied by a remittance report in
form specified by Bank. Said proceeds shall be delivered to Bank in the same
form received except for the endorsement of Borrower where necessary to permit
collection of items, which endorsement Borrower agrees to make. Bank will credit
(conditional upon final collection) all such payments against the principal or
interest of any loans secured hereby. The order and method of such application
shall be in the sole discretion of Bank and any portion of such funds which Bank
elects not to so apply shall be paid over from time to time by Bank to Borrower.
Bank will at all times have the right to require Borrower (i) to enter into a
lockbox arrangement with Bank for the collection of such remittances and
payments, or (ii) to maintain its primary deposit accounts at Bank, or, in the
alternative, at another financial institution which has agreed to accept drafts
drawn on it by Bank under a written depository transfer agreement with Bank and
to block Borrower's account and waive its rights as against such account.

            (b) Borrower or any guarantor hereby grant to Bank a lien, security
interest and right of setoff as security for all liabilities and Obligations to
Bank, whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity in the control of Citizens
Financial Group, Inc., or in transit to any of them. At any time, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or Obligation of Borrower or any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS

                                      -12-
<PAGE>

RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.

            (c) Bank may at any time, after the occurrence and during the
continuance of an Event of Default or an event which, with notice or the passage
of time or both, would constitute an Event of Default, notify account debtors
that Collateral has been assigned to Bank and that payments shall be made
directly to or as directed by Bank. Upon request of Bank at any time, Borrower
will so notify such account debtors and will indicate on all billings to such
account debtors that their Accounts must be paid directly to or as directed by
Bank. Bank shall have full power to collect, compromise, endorse, sell or
otherwise deal with the Collateral or proceeds thereof in its own name or in the
name of Borrower; provided that Bank shall comply with the provisions of Section
15(c).

            (d) Subject to the limitations set forth in the Bank's Commitment
Letter, dated March 8, 2001, to Borrower, Borrower shall pay to Bank within five
(5) days of demand any and all reasonable counsel fees and other reasonable
expenses incurred by Bank in connection with the preparation, interpretation,
enforcement, administration or amendment of this Agreement, or of any documents
relating thereto, and any and all reasonable expenses, including, but not
limited to, a collection charge on all Accounts collected, all attorneys' fees
and expenses, and all other expenses of like or unlike nature which may be
expended by Bank to obtain or enforce payment of any Account either as against
the account debtor, Borrower, or any guarantor or surety of Borrower or in the
prosecution or defense of any action or concerning any matter growing out of or
connected with the subject matter of this Agreement, the Obligations or the
Collateral or any of Bank's rights or interests therein or thereto, including,
without limiting the generality of the foregoing, any counsel fees or expenses
incurred in any bankruptcy or insolvency proceedings and all costs and expenses
incurred or paid by Bank in connection with the administration, supervision,
protection or realization on any security held by Bank for the debt secured
hereby, whether such security was granted by Borrower or by any other person
primarily or secondarily liable (with or without recourse) with respect to such
debt, and all costs and expenses incurred by Bank in connection with the
defense, settlement or satisfaction of any action, claim or demand asserted
against Bank in connection with the debt secured hereby, all of which amounts
shall be considered advances to protect Bank's security, and shall be secured
hereby. At its option, and without limiting any other rights or remedies, Bank
may at any time pay or discharge any taxes, liens, security interests or other
encumbrances at any time levied against or placed on any of the Collateral, and
may procure and pay any premiums on any insurance required to be carried by
Borrower, and provide for the maintenance and preservation of any of the
Collateral, and otherwise take any action reasonably deemed necessary to Bank to
protect its security and all amounts expended by Bank in connection with any of
the foregoing matters, including reasonable attorneys' fees, shall be considered
obligations of Borrower and shall be secured hereby.

            (e) Borrower does hereby make, constitute and appoint any officer or
agent of Bank as Borrower's true and lawful attorney-in-fact, with power to
endorse the name of Borrower or any of Borrower's officers or agents upon any
notes, checks, drafts, money orders, or other instruments of payment (including
payments payable under any policy of insurance on the

                                      -13-
<PAGE>

Collateral) or Collateral that may come into possession of Bank in full or part
payment of any amounts owing to Bank; to sign and endorse the name of Borrower
or any of Borrower's officers or agents upon any invoice, freight or express
bill, bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts, and any
instrument or documents relating thereto or to Borrower's rights therein; to
give written notice to such office and officials of the United States Post
Office to effect such change or changes of address so that all mail addressed to
Borrower may be delivered directly to Bank; granting upon Borrower's said
attorney full power to do any and all things necessary to be done in and about
the premises as fully and effectually as Borrower might or could do, and hereby
ratifying all that said attorney shall lawfully do or cause to be done by virtue
hereof. Neither Bank nor the attorney shall be liable for any acts or omissions
nor for any error of judgment or mistake, except for their gross negligence or
willful misconduct. This power of attorney shall be irrevocable for the term of
this Agreement and all transactions hereunder and thereafter as long as Borrower
may be indebted to Bank.

            11. FINANCING STATEMENTS. At the request of Bank, Borrower will join
with Bank in executing one or more Financing Statements pursuant to the Uniform
Commercial Code or other notices appropriate under applicable law in form
satisfactory to Bank and will pay the cost of filing the same in all public
offices wherever filing is deemed by Bank to be necessary or desirable. A
legible carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement. The Borrower authorizes the Bank to file a
financing statement describing the Collateral.

            12. BORROWER'S REPORTS.

            (a) After the Conversion Event, Borrower shall deliver to Bank,
within thirty (30) days of month end, a schedule in form and content
satisfactory to Bank describing the invoices issued by Borrower since the last
schedule submitted to Bank. The schedules to be provided under this subsection
are solely for the convenience of Bank in administering this Agreement and
maintaining records of the Collateral. Borrower's failure to provide Bank with
any such schedule shall not affect the security interest of Bank in such
Accounts.

            (b) Borrower shall cause all of its invoices, including the copies
thereof, to be printed and to bear consecutive numbers and shall prepare and
issue its invoices in such consecutive numerical order. If requested by Bank,
all copies of invoices not previously delivered to Bank shall be delivered to
Bank with each schedule of Accounts. Copies of all invoices which are voided or
canceled or which for any other reason do not evidence an Account shall be
included in such delivery. If any invoice or copy thereof is lost, destroyed or
otherwise unavailable, Borrower shall account in writing, in form satisfactory
to Bank, for such missing invoice.

            (c) Within thirty (30) calendar days after the end of each month or
on such other more frequent basis as may be required by Bank from time to time
after the occurrence of an Event of Default and while same is continuing,
Borrower shall submit to Bank an aging report in form satisfactory to Bank
showing the amounts due and owing on all Accounts according to Borrower's
records as of the close of such month or such shorter period as may reasonably
be

                                      -14-
<PAGE>

required by Bank from time to time after the occurrence of an Event of Default
and while same is continuing, together with such other information as Bank may
reasonably require. If Borrower's monthly aging reports are prepared by an
accounting service or other agent, Borrower hereby authorizes such service or
agent to deliver such aging reports and any other related documents to Bank.

            (d) Within thirty (30) calendar days after the end of each month or
on such other basis as may be required by Bank from time to time after the
occurrence of an Event of Default and while same is continuing, Borrower shall
submit to Bank an accounts payable aging report in form satisfactory to Bank
showing the amounts due and owing on all accounts payable according to
Borrower's records as of the close of such month or such shorter period as may
be reasonably required by Bank from time to time after the occurrence of an
Event of Default and while same is continuing, together with such other
information as Bank may reasonably require. If Borrower's monthly accounts
payable aging reports are prepared by an accounting service or other agent,
Borrower hereby authorizes such service or agent to deliver such accounts
payable aging reports and any other related documents to Bank.

            (e) Borrower shall deliver to Bank all documents, as frequently as
indicated below, or at such other times as Bank may reasonably request, and all
other documents and information reasonably requested by Bank:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                               DOCUMENT                                                FREQUENCY DUE
--------------------------------------------------------------------------------------------------------------------------
<S>        <C>                                                      <C>
(i)        A Borrowing Base Certificate, including cash             After the Conversion Event Monthly within fifteen
           receipts, credit memos, sales, debit memos, the          (15) days after the end of each calendar month.
           unpaid loan balance, new borrowing requests and
           the adjusted loan balance
--------------------------------------------------------------------------------------------------------------------------
(ii)       List of names and addresses of account debtors           Annually, within sixty (60) days after the end of
           to whom Borrower has made sales during the               each fiscal year of Borrower
           previous fiscal year
--------------------------------------------------------------------------------------------------------------------------
(iii)      Reconciliation report, in form satisfactory to           Monthly within thirty (30) days after the end of
           Bank, showing all accounts, collections,                 each calendar month.
           payments, credits, and extensions since the
           preceding report
--------------------------------------------------------------------------------------------------------------------------
(iv)       Projections of Borrower's balance sheet,                 Annually, within thirty (30) days after the end of
           statement of profit and loss and cash flow               each fiscal year of the Borrower
           for the next succeeding fiscal year broken
           down on a month to month basis
--------------------------------------------------------------------------------------------------------------------------
(v)        A listing of the names and addresses of all              Annually, within sixty (60) days after the end of
           suppliers and vendors from whom Borrower has             each fiscal year of Borrower
           made purchases in excess of $5,000.00 during the
           previous fiscal year, together with a listing of
           any other suppliers or vendors from whom
           Borrower expects to make purchases
           during the succeeding fiscal year
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -15-
<PAGE>

<TABLE>
<S>        <C>                                                      <C>
--------------------------------------------------------------------------------------------------------------------------
(vi)       Notice of noncompliance with the                         Immediately upon learning of such
           provisions of this Agreement                             noncompliance, or if any representation or
                                                                    warranty contained herein was not true or accurate
                                                                    as of the date it was made or as of the date to
                                                                    which it relates
--------------------------------------------------------------------------------------------------------------------------
(vii)      Compliance Certificate in the form                       As soon as available and in any event within sixty
           annexed hereto as Exhibit 2                              (60) days after the close of each quarterly period
                                                                    of Borrower's fiscal year
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

            (f) Borrower will furnish Bank as soon as available, and in any
event within thirty (30) days after the close of each calendar month period of
its fiscal year, a balance sheet as of the end of such period, and a statement
of income and retained earnings for the period commencing at the end of the
previous fiscal year and ending with the end of such period, and a statement of
cash flows of the Borrower for the portion of the fiscal year ended with the
last day of such period, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the
previous fiscal year, and all prepared in accordance with generally accepted
accounting principles consistently applied, certified by the chief financial
officer of the Borrower (subject to year end adjustment).

            (g) Borrower will furnish Bank as soon as available, and in any
event within sixty (60) days after the close of each quarterly period of its
fiscal year, a balance sheet as of the end of such period, and a statement of
income and retained earnings for the period commencing at the end of the
previous fiscal year and ending with the end of such period, and a statement of
cash flows of the Borrower for the portion of the fiscal year ended with the
last day of such period, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the
previous fiscal year, and all prepared in accordance with generally accepted
accounting principles consistently applied, certified by the chief financial
officer of the Borrower (subject to year end adjustment).

            (h) Borrower will furnish Bank, annually, as soon as available, and
in any event within one hundred and five (105) days after the end of each fiscal
year of Borrower, a balance sheet as of the end of such fiscal year, and a
statement of income and retained earnings for such fiscal year, and a statement
of cash flows for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
the prior fiscal year, and all prepared in accordance with generally accepted
accounting principles consistently applied, accompanied by an opinion thereon
acceptable to Bank by independent public accountants selected by the Borrower
and reasonably acceptable to Bank.

            (i) Borrower will promptly, upon receipt thereof, deliver to Bank,
copies of any reports submitted to the Borrower by Borrower's independent public
accountants in connection with the examination of the financial statements of
the Borrower made by such accountants (the so-called "Management Letter").

                                      -16-
<PAGE>

            (j) After the Conversion Event, the Borrower shall deliver to the
Bank a Covenant Compliance Certificate in the form of Exhibit 2 indicating that
the Borrower is in compliance with this Agreement.

            (k) In addition to the foregoing, the Borrower promptly shall
provide Bank with such other and additional information concerning the Borrower,
the Collateral, the operation of the Borrower's business, and the Borrower's
financial condition, including financial reports and statements, as Bank may
from time to time reasonably requested from the Borrower. All financial
information provided Bank by the Borrower shall be prepared in accordance with
generally accepted accounting or auditing principles (as applicable) applied
consistently in the preparation thereof and with prior periods to fairly reflect
the financial conditions of the Borrower at the close of, and its results of
operations for, the periods in question.

                                      -17-
<PAGE>

            13. GENERAL AGREEMENTS OF BORROWER

            (a) Borrower agrees to keep all the Collateral insured with coverage
and in amounts not less than that usually carried by one engaged in a like
business and in any event not less than that reasonably required by Bank with
loss payable to Bank and Borrower, as their interests may appear, hereby
appointing Bank as attorney for Borrower in obtaining, adjusting, settling and
canceling such insurance and endorsing any drafts. As further assurance for the
payment and performance of the Obligations, Borrower hereby assigns to Bank all
sums, including returns of unearned premiums, which may become payable under any
policy of insurance on the Collateral and Borrower hereby directs each insurance
company issuing any such policy to make payment of such sums directly to Bank.

            (b) Bank or its agents have the right to inspect the Collateral and
all records pertaining thereto at reasonable intervals to be determined by Bank
and without hindrance or delay.

            (c) Although, as above set forth, Bank has a continuing security
interest in all of Borrower's Collateral and in the proceeds thereof, Borrower
will at all times maintain as the minimum security hereunder a Borrowing Base
not less than the aggregate unpaid principal of all loans made hereunder and if
Borrower fails to do so, Borrower will immediately make the necessary reduction
in the unpaid principal amount of said loans so that the loans outstanding
hereunder do not in the aggregate exceed the Borrowing Base.

            (d) Borrower will at all times keep accurate and complete records of
Borrower's Inventory, Accounts and other Collateral, and Bank, or any of its
agents, shall have the right to call at Borrower's place or places of business
at reasonable intervals to be determined by Bank, and without hindrance or
delay, to inspect, audit, check, and make extracts from any copies of the books,
records, journals, orders, receipts, correspondence which relate to Borrower's
Accounts, and other Collateral or other transactions, between the parties
thereto and the general financial condition of Borrower and Bank may remove any
of such records temporarily for the purpose of having copies made thereof.
Borrower shall pay to Bank all reasonable audit fees plus all travel and other
reasonable expenses incurred in connection with any such audit.

            (e) Borrower will maintain a standard and modem system of accounting
which enables Borrower to produce financial statements in accordance with
generally accepted accounting principles and maintain records pertaining to the
Collateral that contain information as from time to time may be reasonably
requested by Bank.

            (f) Borrower will maintain its corporate existence in good standing
and comply in all material respects with all material laws and regulations of
the United States or of any state or states thereof or of any political
subdivision thereof, or of any governmental authority which may be applicable to
it or to its business.

            (g) Borrower will pay all real and personal property taxes,
assessments and charges and all franchises, income, unemployment, old age
benefits, withholding, sales and other

                                      -18-
<PAGE>

taxes assessed against it, or payable by it at such times and in such manner as
to prevent any penalty from accruing or any lien or charge from attaching to its
property; provided that nothing herein shall prohibit any "permitted protest" as
set forth in Section 14(f).

            (h) Bank may in its own name or in the name of others communicate
with account debtors in order to verify with them to Bank's satisfaction the
existence, amount and terms of any Accounts.

            (i) This Agreement may but need not be supplemented by separate
assignments of Accounts and if such assignments are given the rights and
security interests given thereby shall be in addition to and not in limitation
of the rights and security interests given by this Agreement.

            (j) If any of Borrower's Accounts arise out of contracts with the
United States or any department, agency, or instrumentality thereof, Borrower
will immediately notify Bank thereof in writing and execute any instruments and
take any steps required by Bank in order that all monies due and to become due
under such contracts shall be assigned to Bank and notice thereof given to the
Government under the Federal Assignment of Claims Act.

            (k) If any of Borrower's Accounts should be evidenced by promissory
notes, trade acceptances, or other instruments for the payment of money,
Borrower will immediately deliver same to Bank, appropriately endorsed to Bank's
order and, regardless of the form of such endorsement, Borrower hereby waives
presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto.

            (l) Borrower will promptly pay when due all taxes and assessments
upon the Collateral or for its use or operation or upon this Agreement, or upon
any note or notes evidencing the Obligations, and will, at the request of Bank,
promptly furnish Bank the receipted bills therefor; provided that nothing herein
shall prohibit any "permitted protest" as set forth in Section 14(f). At its
option, Bank may discharge taxes, liens or security interests or other
encumbrances at any time levied or placed on the Collateral, may pay for
insurance on the Collateral and may pay for the maintenance and preservation of
the Collateral. Borrower agrees to reimburse Bank on demand for any payments
made, or any expenses incurred by Bank pursuant to the foregoing authorization,
and upon failure of the Borrower so to reimburse Bank, any such sums paid or
advanced by Bank shall be deemed secured by the Collateral and constitute part
of the Obligations.

            (m) Borrower will immediately notify Bank upon receipt of
notification of any potential or known release or threat of release of hazardous
materials, hazardous waste, hazardous or toxic substance or oil from any site
operated by Borrower or of the incurrence of any expense or loss in connection
therewith or with the Borrower's obtaining knowledge of any investigation,
action or the incurrence of any expense or loss by any governmental authority in
connection with the assessment, containment or removal of any hazardous material
or oil for which expense or loss the Borrower may be liable. As used herein, the
terms "hazardous waste," "hazardous or toxic substance," "hazardous material" or
"oil" shall have the same meanings as defined and used in any of the following
(the "Acts"): the Comprehensive Environmental

                                      -19-
<PAGE>

Response, Compensation and Liability Act of 1980, 42 USC Sections 9601-9657, as
amended by the Superfund Accounts and Reauthorization Act of 1986; the Federal
Resource Conservation, and Recovery Act, 42 USC Sections 6901 et seq,; the
Hazardous Materials Transportation Act, 49 USC Sections 1801 et seq,; the Toxic
Substances Control Act, 15 USC Sections 2601 et seq,; the Federal Water
Pollution Control Act, 33 USC Sections 1251 et seq.; the Clean Air Act, 42 USC
Sections 741 et seq,; the Clean Water Act, 33 USC Section 701; the Safe Drinking
Water Act, 42 USC Sections 300(f)- 300(j); M.G.L.A. c. 21E (Massachusetts Oil
and Hazardous Material Release Prevention Act); M.G.L.A. c. 21C (Massachusetts
Hazardous Waste Management Act); and/or the regulations adopted and publications
promulgated pursuant to any of the Acts, as the same may be amended from time to
time.

            (n) Except for Bank's gross negligence or willful misconduct,
Borrower will indemnify and save Bank harmless from all loss, costs, damage,
liability or expenses (including, without limitation, court costs and reasonable
attorneys' fees) that Bank may sustain or incur by reason of defending or
protecting this security interest or the priority thereof or enforcing the
Obligations, or in the prosecution or defense of any action or proceeding
concerning any matter growing out of or in connection with this Agreement and/or
any other documents now or hereafter executed in connection with this Agreement
and/or the Obligations and/or the Collateral. This indemnity shall survive the
repayment of the Obligations and the termination of Bank's agreement to make
loans available to Borrower and the termination of this Agreement.

            (o) At the option of Bank, Borrower will furnish to Bank, from time
to time, within five (5) days after the accrual in accordance with applicable
law of Borrower's obligation to make deposits for F.I.C.A. and withholding taxes
and/or sales taxes, proof satisfactory to Bank that such deposits have been made
as required.

            (p) Should Borrower fail to make any of such deposits or furnish
such proof then Bank may, in its sole and absolute discretion, (a) make any of
such deposits or any part thereof, (b) pay such taxes, or any part thereof, or
(c) setup such reserves as Bank, in its judgment, shall deem necessary to
satisfy the liability for such taxes. Each amount so deposited or paid shall
constitute an advance under the terms hereof, repayable on demand with interest,
as provided herein, and secured by all Collateral and any other property at any
time pledged by Borrower with Bank. Nothing herein shall be deemed to obligate
Bank to make any such deposit or payment or setup such reserve and the making of
one or more of such deposits or payments or the setting-up of such reserve shall
not constitute (i) an agreement on Bank's part to take any further or similar
action, or (ii) a waiver of any default by Borrower under the terms hereof.

            (q) All advances by Bank to Borrower under this Agreement and under
any other agreement constitute one general revolving fluctuating loan, and all
indebtedness of Borrower to Bank under this and under any other agreement
constitute one general Obligation. Each advance to Borrower hereunder or
otherwise shall be made upon the security of all of the Collateral held and to
be held by Bank. It is distinctly understood and agreed that all of the rights
of Bank contained in this Agreement shall likewise apply, insofar as applicable,
to any modification of or supplement to this Agreement and to any other
agreements between Bank and Borrower. Any default of this Agreement by Borrower
shall constitute, likewise, a default by Borrower of any other existing
agreement with Bank, and any default by Borrower of any other

                                      -20-
<PAGE>

agreement with Bank shall constitute a default of this Agreement. The entire
Obligation of Borrower to Bank shall become due and payable upon termination of
this Agreement.

            (r) Intentionally Deleted.

            (s) Borrower will, at its expense, upon request of Bank promptly and
duly execute and deliver such documents and assurances and take such actions as
may be necessary or desirable or as Bank may request in order to correct any
defect, error or omission which may at any time be discovered or to more
effectively carry out the intent and purpose of this Agreement and to establish,
perfect and protect Bank's security interest, rights and remedies created or
intended to be created hereunder. Without limiting the generality of the above,
Borrower will join with Bank in executing financing and continuation statements
pursuant to the Uniform Commercial Code or other notices appropriate under
applicable Federal or state law in form satisfactory to Bank and filing the same
in all public offices and jurisdictions wherever and whenever requested by Bank.

            (t) Borrower shall perform any and all further steps requested by
Bank to perfect Bank's security interest in Inventory, such as leasing
warehouses to Bank or its designee, placing and maintaining signs, appointing
custodians, maintaining stock records and transferring Inventory to warehouses.
A physical listing of all Inventory, wherever located, shall be taken by
Borrower at least annually and whenever requested by Bank if one or more of the
Events of Default exist.

            (u) Borrower hereby grants to Bank for a term to commence on the
date of this Agreement and continuing thereafter until all debts and Obligations
of any kind or character owed to Bank are fully paid and discharged, a
non-exclusive irrevocable royalty-free license in connection with Bank's
exercise of its rights hereunder, to use, apply or affix any trademark, trade
name logo or the like and to use any patents, in which the Borrower now or
hereafter has rights, which license may be used by Bank upon and after the
occurrence of any one or more of the Events of Default, provided, however, that
such use by Bank shall be suspended if such Events of Default are cured. This
license shall be in addition to, and not in lieu of, the inclusion of all of
Borrower's trademarks, servicemarks, tradenames, logos, goodwill, patents,
franchises and licenses in the Collateral; in addition to the right to use said
Collateral as provided in this paragraph, Bank shall have full right to exercise
any and all of its other rights regarding Collateral with respect to such
trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and
licenses.

            14. BORROWER'S NEGATIVE COVENANTS. Borrower will not at any time
without the written consent of Bank:

            (a) (Tangible Capital Base to Senior Indebtedness) after the
Conversion Event permit the aggregate amount of its Tangible Capital Base to be
less than 1.0 times the amount of its Senior Indebtedness;

                                      -21-
<PAGE>

            (b) (Cash Balances) after the Conversion Event permit the Borrower's
unencumbered cash on deposit with the Bank to be less than three (3) months
projected Cash Burn as shown on the projections prepared by the Borrower and
approved by the Bank.;

            (c) (EBITDA) after the Conversion Event permit EBITDA for each three
(3) month period ending on the last day of any fiscal quarter to be less than
$1;

            (d) (Liquidity) after the Conversion Event permit the ratio of
aggregate of unencumbered cash on deposit with the Bank and Qualified Accounts
to Senior Indebtedness to be less than 2.5 to 1.

            (e) (Disposition of Collateral) sell, assign, exchange or otherwise
dispose of any of the Collateral, other than Inventory consisting of (i) scrap,
waste, defective goods and the like; (ii) obsolete goods; (iii) finished goods
sold in the ordinary course of business or any interest therein to any
individual, partnership, trust or other corporation; and (iv) Equipment which is
no longer required or deemed necessary for the conduct of Borrower's business,
so long as Borrower receives therefor a sum substantially equal to such
Equipment's fair value, remits such sum to Bank in accordance with the terms of
this Agreement or replaces such Equipment with other equipment of similar value
which is subject to a first security interest in Bank's favor;

            (f) (Liens) create, permit to be created or suffer to exist any
lien, encumbrance or security interest of any kind ("Lien") upon any of the
Collateral or any other property of Borrower, now owned or hereafter acquired,
except: (i) landlords', carriers', warehousemen's, mechanics' and other similar
liens arising by operation of law in the ordinary course of Borrower's business;
(ii) arising out of pledge or deposits under worker's compensation, unemployment
insurance, old age pension, social security, retirement benefits or other
similar legislation; (iii) purchase money Liens arising in the ordinary course
of business (so long as the indebtedness secured thereby does not exceed the
lesser of the cost or fair market value of the property subject thereto, and
such Lien extends to no other property); (iv) Liens which total more than
$25,000.00 in aggregate other than those granted to the Bank provided such Liens
are subject and subordinate to the Bank in form and substance satisfactory to
the Bank; (v) Liens for unpaid taxes that are either (x) not yet due and
payable, or (y) are subject of permitted protests; (vi) Liens which are the
subject of permitted protests; (vii) those Liens and encumbrances set forth on
Schedule "B" annexed hereto; and (viii) in favor of Bank; the term "permitted
protests" as used herein means the right of the Borrower to protest any Lien
(other than a Lien that secures the Obligations), tax (other than payroll taxes
or taxes that are the subject of a federal or state tax lien) or rental payment,
provided that (x) a reserve with respect to such liability is established on the
books of the Borrower in an amount that is reasonably satisfactory to the Bank,
(y) any such protest is instituted and diligently prosecuted by the Borrower in
good faith, and (z) the Bank is satisfied that, while such protest is pending,
there will be no impairment of the enforceability, validity or priority of any
of the Liens of the Bank in and to the Collateral;

            (g) (Dividends) pay any dividends on or make any distribution on
account of any class of Borrower's capital stock in cash or in property (other
than additional shares of such Stock), or redeem, purchase or otherwise acquire,
directly or indirectly, any of such stock, other

                                      -22-
<PAGE>

than repurchase of employee stock pursuant to repurchase rights provided in the
agreement which such stock was issued ("Employee Equity Agreements");

            (h) (Loans) make any loans or advances to any individual,
partnership, trust or other corporation, including without limitation Borrower's
directors, officers and employees, except advances to officers or employees with
respect to expenses incurred by them in the ordinary course of their duties
which are properly reimbursable by Borrower or pursuant to Employee Equity
Agreements;

            (i) (Guarantees) assume, guaranty, endorse or otherwise become
directly or contingently liable in respect of (including without limitation by
way of agreement, contingent or otherwise, to purchase, provide funds to or
otherwise invest in a debtor or otherwise to assure a creditor against loss),
any indebtedness which total more than $25,000.00 in the aggregate (except
guarantees by endorsement of instruments for deposit or collection in the
ordinary course of business and guarantees in favor of Bank) of any individual,
partnership, trust or other corporation;

            (j) (Investments) (i) use any loan proceeds to purchase or carry any
"margin stock" (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) or (ii) invest in or purchase any stock or securities of
any individual, partnership, trust or other corporation except (x) readily
marketable direct obligations of, or obligations guaranteed by, the United
States of America or any agency thereof or (y) time deposits with or
certificates of deposit issued by the Bank;

            (k) (Transactions with Affiliates) enter into any lease or other
transaction with any shareholder, officer or affiliate on terms any less
favorable than those which might be obtained at the time from persons who (or
entities which) are not such a shareholder, officer or affiliate;

            (l) (Subsidiaries) sell, transfer or otherwise dispose of any stock
of any subsidiary of Borrower; or

            (m) (Mergers, Consolidations or Sales) (a) merge or consolidate with
or into any corporation; (b) enter into any joint venture or partnership with
any person, firm or corporation; (c) convey, lease or sell all or any material
portion of its property or assets or business to any other person, firm or
corporation, except for the sale of Inventory in the ordinary course of its
business; or (d) convey, lease or sell any of its assets to any person, firm or
corporation for less than the fair market value thereof.

            For purposes of this section: "affiliate" shall mean any person or
entity (i) which directly or indirectly controls, or is controlled by or is
under common control with the Borrower or a subsidiary, (ii) which directly or
indirectly beneficially holds or owns five (5%) percent or more of any class of
voting stock of the Borrower or any subsidiary, or (iii) five (5%) percent or
more of the voting stock of which is directly or indirectly beneficially owned
or held by the Borrower or a subsidiary; "capital assets" shall mean assets
that, in accordance with generally accepted accounting principles, are required
or permitted to be depreciated or amortized on the

                                      -23-
<PAGE>

Borrower's balance sheet; "capital expenditures" shall mean but not be limited
to amounts paid during such fiscal year for capital assets or capital leases and
shall include, in the case of a purchase, the entire purchase price and, in the
case of a capital lease (but not an operating lease), the entire rental for the
term; "capital leases" shall mean capital leases, conditional sales contracts
and other title retention agreements relating to the purchase or acquisition of
capital assets; "cash flow" shall mean EBITDA, minus unfinanced capital
expenditures, minus taxes actually paid; "cash burn" shall mean net change in
cash from beginning to end of the applicable measurement period according to
generally accepted accounting principles consistently applied; "CMLTD" shall
mean the current maturity of long term indebtedness paid during the applicable
period, including but not limited to, amounts required to be paid during such
period under capital leases; "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of any person or entity, whether through the ownership of voting
securities, by contract or otherwise; "distributions" shall mean all payment or
distributions to shareholders in cash or in property other than reasonable
salaries, bonuses and expense reimbursements; "EBITDA" shall mean, for the
applicable period, income from continuing operations before the payment of
interest and taxes, plus depreciation and amortization, determined in accordance
with generally accepted accounting principles; "fixed charges" shall mean
interest, plus CMLTD; "indebtedness" shall mean (i) all liabilities for borrowed
money, for the deferred purchase price of property or services, and under leases
which are or should be, under generally accepted accounting principles, recorded
as capital leases, in respect of which a person or entity is directly or
indirectly, absolutely or contingently liable as obligor, guarantor, endorser or
otherwise, or in respect of which such person or entity otherwise assures a
creditor against loss, (ii) all liabilities of the type described in (i) above
which are secured by (or for which the holder has an existing right, contingent
or otherwise, to be secured by) any lien upon property owned by such person or
entity, whether or not such person or entity has assumed or become liable for
the payment thereof, and (iii) all other liabilities or obligations which would,
in accordance with generally accepted accounting principles, be classified as
liabilities of such person or entity; "interest" shall mean, for the applicable
period, all interest paid or payable, including, but not limited to, interest
paid or payable on indebtedness and on capital leases, determined in accordance
with generally accepted accounting principles; "senior indebtedness" shall mean
any indebtedness which is not subordinated indebtedness; "subordinated
indebtedness" shall mean indebtedness which is expressly stated to be
subordinated or junior in right of payment to Borrower's Obligations to Bank in
a manner and in a form which is satisfactory to Bank; "tangible capital base"
shall mean Borrower's tangible net worth plus its subordinated indebtedness;
"tangible net worth" shall mean Borrower's stockholders' equity determined in
accordance with generally accepted accounting principles, consistently applied,
subtracting therefrom (i) intangibles (as determined in accordance with such
principles so applied) and (ii) accounts and indebtedness owing to Borrower from
any employee or parent, subsidiary or other affiliate of Borrower; and
"unfinanced capital expenditures" shall mean capital expenditures, minus long
term indebtedness issued during the applicable period for the acquisition of
capital assets.

                                      -24-
<PAGE>

            15. DEFAULT; RIGHTS AND REMEDIES UPON DEFAULT.

            (a) Upon the occurrence of any one or more of the following events
(herein, "Events of Default") which event remains continuing and uncured, Bank
may decline to make any or all further loans hereunder or under any other
agreements with Borrower, any and all Obligations of the Borrower to Bank shall
become immediately due and payable, at the option of Bank and without notice or
demand. The occurrence of any such Event of Default shall also constitute,
without notice or demand, a default under all other agreements between Bank and
the Borrower and instruments and papers given Bank by the Borrower, whether such
agreements, instruments, or papers now exist or hereafter arise, namely:

            (i) The failure by the Borrower to pay when due any principal,
      interest, fees, costs, and expenses due pursuant to this Agreement.

            (ii) The failure by the Borrower to pay, when due, any other
      Obligations.

            (iii) Default by the Borrower in the observance or performance of
      any of the covenants or agreements of the Borrower contained in Sections
      5(h), 10(a), 10(d), or 14 of this Agreement.

            (iv) The failure by the Borrower to promptly, punctually and
      faithfully perform, or observe any term, covenant or agreement on its part
      to be performed or observed pursuant to any of the provisions of this
      Agreement, other than those described in Section 15(a)(iii) above for
      which no grace period shall apply other than for what may be specified in
      such sections, or in any other agreement with Bank which is not remedied
      within the earlier of ten (10) days after the earlier of (i) notice
      thereof by Bank to Borrower, or (ii) the date Borrower was required to
      give notice to Bank pursuant to Section 12 hereof.

            (v) The determination by Bank that any material representation or
      warranty heretofore, now or hereafter made by the Borrower to Bank, in any
      documents, instrument, agreement, or paper was not true or accurate when
      given in any material respect.

            (vi) The occurrence of any event such that any material indebtedness
      of the Borrower from any lender other than Bank could be accelerated,
      notwithstanding that such acceleration has not taken place.

            (vii) The occurrence of any event which would cause a lien creditor,
      as that term is defined in Section 9-301 of the Code, to take priority
      over advances made by Bank, which event is not cured within ten (10) days
      of Borrower receiving notice of such event.

            (viii) Subject to the Borrower's right to contest provided in
      Section 14(f), a filing against or relating to the Borrower of (A) a
      federal tax lien in favor of the United States of America or any political
      subdivision of the United States of America, or (B) a

                                      -25-
<PAGE>

      state tax lien in favor of any state of the United States of America or
      any political subdivision of any such state.

            (ix) The occurrence of any event of default under any other
      agreement between Bank and the Borrower or other instrument or paper given
      Bank by the Borrower, whether such agreement, instrument, or paper now
      exists or hereafter arises (notwithstanding that Bank may not have
      exercised its rights upon default under any such other agreement,
      instrument or paper).

            (x) Any act by, against, or relating to the Borrower, or its
      property or assets, which act constitutes the application for, consent to,
      or sufferance of the appointment of a receiver, trustee or other person,
      pursuant to court action or otherwise, over all, or any material part of
      the Borrower's property, which is not dismissed within ten (10) days of
      Borrower receiving notice thereof.

            (xi) The granting of any trust mortgage or execution of an
      assignment for the benefit of the creditors of the Borrower, or the
      occurrence of any other voluntary or involuntary liquidation or extension
      of debt agreement for the Borrower; the failure by the Borrower to
      generally pay the debts of the Borrower as they mature; adjudication of
      bankruptcy or insolvency relative to the Borrower; the entry of an order
      for relief or similar order with respect to the Borrower in any proceeding
      pursuant to Title 11 of the United States Code entitled "Bankruptcy"
      (hereinafter the "Bankruptcy Code") or any other federal bankruptcy law;
      the filing of any complaint, application, or petition by or against the
      Borrower initiating any matter in which the Borrower is or may be granted
      any relief from the debts of the Borrower pursuant to the Bankruptcy Code
      or any other insolvency statute or procedure; the calling or sufferance of
      a meeting of creditors of the Borrower; the meeting by the Borrower of a
      formal or informal creditor's committee; the offering by or entering into
      by the Borrower of any composition, extension or any other arrangement
      seeking relief or extension for the debts of the Borrower, or the
      initiation of any other judicial or non-judicial proceeding or agreement
      by, against or including the Borrower which seeks or intends to accomplish
      a reorganization or arrangement with creditors; provided that none of the
      foregoing shall constitute an Event of Default if such is dismissed or
      terminated within ten (10) days of notice to Borrower thereof.

            (xii) The entry of any judgment(s) against Borrower in an amount of
      more than $25,000.00 which judgment(s) is not satisfied or appealed from
      (with execution or similar process stayed) within fifteen (15) days of its
      entry.

            (xiii) The occurrence of any event or circumstance with respect to
      the Borrower such that Bank shall believe in good faith that the prospect
      of payment of all or any part of the Obligations or the performance by the
      Borrower under this Agreement or any other agreement between Bank and the
      Borrower is impaired or there shall occur any material adverse change in
      the business or financial condition of the Borrower.

                                      -26-
<PAGE>

            (xiv) The entry of any court order which enjoins, restrains or in
      any way prevents the Borrower from conducting all or any material part of
      its business affairs in the ordinary course of business.

            (xv) The service of any process upon Bank seeking to attach by
      trustee process any funds of the Borrower in excess of $25,000.00 on
      deposit with Bank which action is not dismissed prior to the Bank filing
      an answer with the court.

            (xvi) Any change in the identity, authority or responsibilities of
      both the chief financial officer and chief executive officer, or a change
      in the majority of the board of directors from that existing at the
      execution of this Agreement.

            (xvii) The occurrence of any material uninsured loss, theft, damage
      or destruction to any material asset(s) of the Borrower.

            (xviii) Any act by or against, or relating to the Borrower or
      material portion of its assets pursuant to which any creditor of the
      Borrower seeks to reclaim or repossess or reclaims or repossesses all or a
      portion of the Borrower's assets which is not dismissed within ten (10)
      days of Borrower's receipt of notice thereof.

            (xix) The death, termination of existence, dissolution, or
      liquidation of the Borrower, or the ceasing to carry on actively any
      substantial part of Borrower's current business.

            (xx) This Agreement shall, at any time after its execution and
      delivery and for any reason, cease (A) to create a valid and perfected
      first priority security interest in and to the property purported to be
      subject to this Agreement; or (B) to be in full force and effect or shall
      be declared null and void, or the validity or enforceability hereof shall
      be contested by the Borrower or any guarantor of the Borrower denies it
      has any further liability or obligation hereunder.

            (xxi) Any of the following events occur or exist with respect to the
      Borrower or any ERISA affiliate: (A) any "prohibited transaction" (as
      defined in Section 406 of ERISA or Section 4975 of the Internal Revenue
      Code) involving any Plan; (B) any reportable event" (as defined in Section
      4043 of ERISA and the regulations issued under such Section) shall occur
      with respect to any Plan; (C) The filing under Section 4041 of ERISA of a
      notice of intent to terminate any Plan or the termination of any Plan;
      (D) any event or circumstance exists which might constitute grounds
      entitling the Pension Benefit Guaranty Corporation (PBGC) to institute
      proceedings under Section 4042 of ERISA for the termination of, or for the
      appointment of a trustee to administer, any Plan, or the institution by
      the PBGC of any such proceedings; (E) or partial withdrawal under Section
      4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization,
      insolvency, or termination of any Multiemployer Plan; and in each case
      above, such event or condition, together with all other events or
      conditions, if any, could in the opinion of Bank subject the Borrower to
      any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the
      PBGC, or otherwise.

                                      -27-
<PAGE>

            (xxii) The occurrence of (A) any of the Events of Default described
      in Sections 15(vi), 15(viii), 15(xi), 15(xii), or 15(xix), with respect to
      any guarantor to Bank of the 0bligations, as if such guarantor were the
      "Borrower" described therein, or (B) the failure by any guarantor to Bank
      of the Obligations to perform in accordance with the terms of any
      agreement between such guarantor and the Bank.

            (xxiii) The termination of any guaranty by any guarantor of the
      Obligations.

            Upon the occurrence of an Event of Default which is continuing Bank,
      may declare any obligation Bank may have hereunder to be canceled, declare
      all Obligations of Borrower to be due and payable and proceed to enforce
      payment of the Obligations and to exercise any and all of the rights and
      remedies afforded to Bank by the Uniform Commercial Code or under the
      terms of this Agreement or otherwise. In addition, upon the occurrence of
      an Event of Default, if Bank proceeds to enforce payment of the
      Obligations, Borrower shall be obligated to deliver to Bank cash
      collateral in an amount equal to the aggregate amounts then undrawn on all
      outstanding Letters of Credit or acceptances issued or guaranteed by Bank
      for the account of Borrower, and Bank may proceed to enforce payment of
      the same and to exercise all rights and remedies afforded to Bank by the
      Uniform Commercial Code or under the terms of this Agreement or otherwise.
      Upon the occurrence of, and during the continuance of, an Event of
      Default, the Borrower, as additional compensation to the Bank for its
      increased credit risk, promises to pay interest on all Obligations
      (including, without limitation, principal, whether or not past due, past
      due interest and any other amounts past due under this Agreement) at a per
      annum rate of four (4%) percent greater than the rate of interest then
      specified in Section 5 of this Agreement.

            (b) Upon the filing of any complaint, application, or petition by or
against the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code, Bank's obligation hereunder shall be canceled immediately, automatically,
and without notice, and subject to the grace period in Section 15(xi) above, all
Obligations of the Borrower then outstanding shall become immediately due and
payable without presentation, demand, or notice of any kind to the Borrower.

            (c) Any sale or other disposition of the Collateral may be at public
or private sale upon such terms and in such manner as the Bank deems advisable,
having due regard to compliance with any statute or regulation which might
affect, limit or apply to the Bank's disposition of the Collateral; provided
that Borrower shall have the right to receive reasonable notice and opportunity
to participate and bid at any such sale. The Bank may conduct any such sale or
other disposition of the Collateral upon the Borrower's premises. Unless the
Collateral is perishable or threatens to decline speedily in value, or is of a
type customarily sold on a recognized market (in which event the Bank shall
provide the Borrower with such notice as may be practicable under the
circumstances), the Bank shall give the Borrower at least the greater of the
minimum notice required by law or seven (7) days prior written notice of the
date, time and place of any proposed public sale, and of the date after which
any private sale or other

                                      -28-
<PAGE>

disposition of the Collateral may be made. The Bank may purchase the Collateral,
or any portion of it at any public sale.

            (d) In connection with the Bank's exercise of the Bank's rights
after the occurrence of an Event of Default, the Bank may enter upon, occupy and
use any premises owned or occupied by the Borrower, and may exclude the Borrower
from such premises or portion thereof as may have been so entered upon,
occupied, or used by the Bank. The Bank shall not be required to remove any of
the Collateral from any such premises upon the Bank's taking possession thereof,
and may render any Collateral unusable to the Borrower. In no event shall the
Bank be liable to the Borrower for use or occupancy by the Bank of any premises
pursuant to this Agreement.

            (e) Upon the occurrence and during the continuance of any Event of
Default, the Bank may require the Borrower to assemble the Collateral and make
it available to the Bank at the Borrower's sole risk and expense at a place or
places which are reasonably convenient to both the Bank and the Borrower.

            16. PROCESSING AND SALES OF INVENTORY. So long as Borrower is not in
default hereunder, Borrower shall have the right, in the regular course of
business, to process and sell Borrower's Inventory. A sale in the ordinary
course of business shall not include a transfer in total or partial satisfaction
of a debt.

            17. WAIVER OF JURY TRIAL. BORROWER AND BANK EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. Borrower hereby certifies that neither Bank nor any
of its representatives, agents or counsel has represented, expressly or
otherwise, that Bank would not, in the event of any such suit, action or
proceeding, seek to enforce this waiver of right to trial by jury. Borrower
acknowledges that Bank has been induced to enter into this Agreement by, among
other things, this waiver. Borrower acknowledges that it has read the provisions
of this Agreement and in particular, this section; has consulted legal counsel;
understands the right it is granting in this Agreement and is waiving in this
section in particular; and makes the above waiver knowingly, voluntarily and
intentionally.

            18. CONSENT TO JURISDICTION. Borrower and Bank agree that any action
or Proceeding to enforce or arising out of this Agreement may be commenced in
any court of the Commonwealth of Massachusetts sitting in the county of Suffolk,
or in the District Court of the United States for the District of Massachusetts,
and Borrower waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and confer personal jurisdiction if served by registered or certified
mail to Borrower, or as otherwise provided by the laws of the Commonwealth of
Massachusetts or the United States of America.

                                      -29-
<PAGE>

            19. TERMINATION

            (a) Unless renewed in writing, this Agreement shall terminate on
March 27, 2003 (the "Termination Date"), and all Obligations shall be due and
payable in full without presentation, demand, or further notice of any kind,
whether or not all or any part of the Obligations is otherwise due and payable
pursuant to the agreement or instrument evidencing same. Bank may terminate this
Agreement immediately and without notice upon the occurrence of an Event of
Default which is continuing. Notwithstanding the foregoing or anything in this
Agreement or elsewhere to the contrary, the security interest, Bank's rights and
remedies hereunder and Borrower's obligations and liabilities hereunder shall
survive any termination of this Agreement and shall remain in full force and
effect until all of the Obligations outstanding, or contracted or committed for
(whether or not outstanding), before the receipt of such notice by Bank, and any
extensions or renewals thereof (whether made before or after receipt of such
notice), together with interest accruing thereon after such notice, shall be
finally and irrevocably paid in full. No Collateral shall be released or
financing statement terminated until such final and irrevocable payment in full
of the Obligations, as described in the preceding sentence.

            (b) In the event that Bank continues to make loans hereunder after
the Termination Date without a written extension of the Termination Date, all
such loans: (i) shall be made in the sole and absolute discretion of Bank; and
(ii) shall, together with all other Obligations, be payable thereafter ON
DEMAND.

            20. MISCELLANEOUS.

            (a) No delay or omission on the part of Bank in exercising any
rights shall operate as a waiver of such right or any other right. Waiver on any
one occasion shall not be construed as a bar to or waiver of any right or remedy
on any future occasion. All Bank's rights and remedies, whether evidenced hereby
or by any other agreement, instrument or paper, shall be cumulative and may be
exercised singularly or concurrently.

            (b) Bank is authorized to make loans under the terms of this
Agreement upon the request, either written or oral, in the name of Borrower or
any authorized person whose name appears at the end of this Agreement or of any
of the following named person, or persons, from time to time, holding the
following offices of Borrower, President, Treasurer and such other officers and
authorized signatories as may from time to time be set forth in separate
resolutions.

            (c) This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties hereto; provided,
however, that Borrower may not assign this Agreement or any rights or duties
hereunder without Bank's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by Bank shall release
Borrower from its Obligations. Bank may assign this Agreement and its rights and
duties hereunder and no consent or approval by Borrower is required in
connection with any such assignment. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in Bank's rights and benefits hereunder. In connection with any
assignment or participation, Bank may disclose all documents and information
which Bank now or hereafter may have relating to Borrower or Borrower's
business. To the extent that Bank

                                      -30-
<PAGE>

assigns its rights and obligations hereunder to another party, Bank thereafter
shall be released from such assigned obligations to Borrower and such assignment
shall effect a novation between Borrower and such other party; provided that the
assignee agrees to be bound by the terms of this Agreement.

            (d) Borrower agrees that any and all loans made by Bank to Borrower
or for its account under this Agreement shall be conclusively deemed to have
been authorized by Borrower and to have been made pursuant to duly authorized
requests therefor on its behalf.

            (e) Unless otherwise defined in this Agreement, capitalized words
shall have the meanings set forth in the Uniform Commercial Code as in effect in
the Commonwealth of Massachusetts as of the date of this Agreement.

            (f) Paragraph and section headings used in this Agreement are for
convenience only, and shall not effect the construction of this Agreement. If
one or more provisions of this Agreement (or the application thereof) shall be
invalid, illegal or unenforceable in any respect in any jurisdiction, the same
shall not, invalidate or render illegal or unenforceable such provision (or its
application) in any other jurisdiction or any other provision of this Agreement
(or its application). This Agreement is the entire agreement of the parties with
respect to the subject matter hereof and supersedes any prior written or verbal
communications or instruments relating thereto.

            (g) Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other loan document 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 registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to Borrower or to
Bank, as the case may be, at its address set forth below:

           If to Bank:                        Citizens Bank of Massachusetts
                                              53 State Street
                                              Boston, Massachusetts 02109
                                              Attn: Mr. Ralph L. Letner
                                              Telephone: (617) 725-5621
                                              Telecopier: (617) 742-9548

           With a copy to:                    Goulston & Storrs, P.C.
                                              400 Atlantic Avenue
                                              Boston, MA 02110
                                              Attn: James H. Lerner, Esq.
                                              Telephone: (617) 574-3525
                                              Telecopier: (617) 574-4112

                                     -31-
<PAGE>

           If to Borrower:                    Webhire, Inc.
                                              91 Hartwell Avenue
                                              Lexington, Massachusetts 02421
                                              Attn: Chief Financial Officer
                                              Telephone: (781) 869-5000
                                              Telecopier: (781) 869-6478

           With a copy to:                    Webhire, Inc.
                                              91 Hartwell Avenue
                                              Lexington, Massachusetts 02421
                                              Attention: Gaz Crittenden, Esquire
                                              Telephone: (781) 869-5000
                                              Telecopier: (781) 869-4404

            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. All notices or demand sent in accordance with this section shall be
deemed received on the earlier of the date of actual receipt or three (3) days
after the deposit thereof in the mail.

            (h) Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Bank or Borrower, whether under any rule
of construction or otherwise. On the contrary, this Agreement has been reviewed
by all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.

            (i) 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.

            (j) This Agreement, together with the other documents and
instruments executed concurrently herewith represent the entire and final
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by evidence of any prior,
contemporaneous or subsequent other agreement, oral or written, before the date
hereof.

            (k) This Agreement can only be amended by a writing signed by both
Bank and Borrower.

                                      -32-
<PAGE>

            (l) The laws of Massachusetts shall govern the construction of this
Agreement and the rights and duties of the parties hereto. This Agreement shall
take effect as a sealed instrument.

Witnessed by:

                                      WEBHIRE, INC.

G. L. [ILLEGIBLE]                     By: /s/ Stephen D. Allison
---------------------------               -----------------------------
                                          Stephen D. Allison
                                          Chief Financial Officer
                                      Address: 91 Hartwell Avenue, Lexington, MA

                                      CITIZENS BANK OF MASSACHUSETTS

                                      By: /s/ Ralph L. Letner
                                          -----------------------------
                                          Ralph L. Letner
                                      Address: 53 State Street
                                               Boston, Massachusetts 02109

                                      -33-
<PAGE>

                                                                 EXHIBIT 10.32

                         CITIZENS BANK OF MASSACHUSETTS

                                 REVOLVING NOTE

$3,000,000.00                             Boston, Massachusetts
                                          March 27, 2001

      For value received, the undersigned, Webhire, Inc., a Delaware corporation
(the "Borrower"), hereby promises to pay on March 27, 2003 to the order of
Citizens Bank of Massachusetts (the "Lender"), at its main office in Boston,
Massachusetts, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of Three Million ($3,000,000.00) Dollars, or,
if less, the aggregate unpaid principal amount of all loans made by the Lender
to the Borrower under the Loan Agreement (defined below) together with interest
on the principal amount hereunder remaining unpaid from time to time, computed
on the basis of the actual number of days elapsed and a 360-day year, from the
date hereof until this Note is fully paid at the rate from time to time in
effect under the Loan and Security Agreement (All Assets) of even date herewith
(the "Loan Agreement") by and between the Lender and the Borrower. The principal
hereof and interest accruing thereon shall be due and payable as provided in the
Loan Agreement. This Note may be prepaid only in accordance with the Loan
Agreement.

      This Note is issued pursuant, and is subject, to the Loan Agreement, which
provides, among other things, for acceleration hereof. This Note is the "Note"
referred to in the Loan Agreement.

      This Note is secured, among other things, pursuant to the Loan Agreement,
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or agreements.

      The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.

      Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.

                                       -1-
<PAGE>

      All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts and this Note shall be deemed to be under seal.

                                   WEBHIRE, INC.

                                   By: /s/ Stephen D. Allison
                                       -----------------------------
                                   Stephen D. Allison
                                   Chief Financial Officer

                                       -2-

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