Document:

EXHIBIT 10.15

 

COUNTERPART/LEASE OF

 

UNITS 33 - 35 PARKER
CENTRE MANSFIELD ROAD DERBY

 

JOHN SPENCER FOXCROFT

 

ARTHUR PAUL WOOLLANDS

 

and

 

CHRISTOPHER NOEL MOORE

 

Trustees of the
Garrandale Limited Directors Pension Scheme

 

TO

 

NEXSAN TECHNOLOGIES
LIMITED

 

 

BAKEWELLS

64 Friar Gate

Derby

DE 1 1W

Tel : 01332 348791

Fax : 01332 7390631739064

DX : 11527 Derby 1 Ref: MGJ

File: GAR011/2

Doc Loc:
H/document/leases/Garrandale GAR011/2 DN3

Date Produced: 7.1.03 Sec:
dma

DN: 3

 

THIS LEASE IS NOT MADE PURSUANT TO AN AGREEMENT
ENTERED INTO BEFORE 1ST JANUARY 1996

 

ALL PARTIES TO AND PERSONS HAVING DEALINGS WITH THIS
LEASE OR THEIR ADVISORS SHOULD BE AWARE OF THE “COMMERCIAL PROPERTY LEASES IN
ENGLAND AND WALES CODE OF PRACTICE, SECOND EDITION”.

 

1

 

INDEX TO CLAUSES

 

	
  A and B.

  	
  Terms specific to this
  Lease

  
	
  1.1

  	
  Definitions

  
	
  1.2

  	
  Interpretation

  
	
  2.

  	
  Demise

  
	
  3.

  	
  Tenants Covenants

  
	
   

  	
  3.1

  	
  Rent

  
	
   

  	
  3.2

  	
  Insurance

  
	
   

  	
  3.3

  	
  Outgoings

  
	
   

  	
  3.4

  	
  Repairs

  
	
   

  	
  3.5

  	
  Upkeep

  
	
   

  	
  3.6

  	
  External Decoration

  
	
   

  	
  3.7

  	
  Internal Decoration

  
	
   

  	
  3.8

  	
  Fixtures

  
	
   

  	
  3.9

  	
  Inspection and Notice
  of Defects

  
	
   

  	
  3.10

  	
  To Yield Up

  
	
   

  	
  3.11

  	
  Compliance with
  Insurance Policy

  
	
   

  	
  3.12

  	
  Notice of insurance
  loss

  
	
   

  	
  3.13

  	
  Irrecoverable insurance
  monies

  
	
   

  	
  3.14

  	
  Alterations and
  additions

  
	
   

  	
  3.15

  	
  Statutory requirements

  
	
   

  	
  3.16

  	
  Town and Country
  Planning

  
	
   

  	
  3.17

  	
  Local Authority Notices

  
	
   

  	
  3.18

  	
  Machinery

  
	
   

  	
  3.19

  	
  Nuisance

  
	
   

  	
  3.20

  	
  Fumes

  
	
   

  	
  3.21

  	
  Inflammatory substances

  
	
   

  	
  3.22

  	
  Costs of nuisance

  
	
   

  	
  3.23

  	
  Use

  
	
   

  	
  3.24

  	
  Encroachments

  
	
   

  	
  3.25

  	
  Not to obstruct windows

  
	
   

  	
  3.26

  	
  Refuse and storage

  
	
   

  	
  3.27

  	
  Drainage

  
	
   

  	
  3.28

  	
  Fire regulations

  
	
   

  	
  3.29

  	
  Third party claims

  
	
   

  	
  3.30

  	
  Support

  
	
   

  	
  3.31

  	
  Sale boards

  
	
   

  	
  3.32

  	
  Costs of proceedings

  
	
   

  	
  3.33

  	
  Alienation

  
	
   

  	
  3.34

  	
  Costs of approvals

  
	
   

  	
  3.35

  	
  Additional provisions

  
	
   

  	
  3.36

  	
  VAT

  

 

1

 

THIS LEASE is made the 23rd day of January Two
thousand and three

 

Terms specific to this Lease

 

A.            In
this Lease the following expressions shall have the following meanings:

 

	
  1.

  	
   

  	
  The Original Landlord

  	
   

  	
  JOHN SPENCER FOXCROFT

  ARTHUR PAUL WOOLLANDS and

  CHRISTOPHER NOEL MOORE being the
  Trustees of the Garrandale Limited Directors Pension Scheme

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  The Original Tenant

  	
   

  	
  NEXSAN TECHNOLOGIES LIMITED

  registered office Imperial house, East Service Road,

  Raynesway, Derby DE21 6BF

  (Company number 3700226)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The Surety

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Rent Commencement Date

  	
   

  	
  Two months after the
  Term Commencement Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  The Term

  	
   

  	
  Ten years

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  The Term Commencement
  Date

  	
   

  	
  The 6th day
  of January 2003

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  The Initial Annual Rent

  	
   

  	
  For the For the first
  year of the Term £52,500

  For the second year of the Term £53,000

  For the third year of the Term £55,000

  For each of the fourth and fifth years of the Term £57,500

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  The Initial Rental
  Period

  	
   

  	
  5 years

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  The Review Dates

  	
   

  	
  Every fifth anniversary
  of the Term Commencement Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  The Permitted Use

  	
   

  	
  Any use within
  Class B1 of the Town and Country Planning (Use Classes Order) 1987

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  The Documents

  	
   

  	
  The Register of Title
  No: DY 290336 at H M Land Registry

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  The Demised Premises
  (see First Schedule for full description)

  	
   

  	
  Units 33 — 35 Parker
  Centre Mansfield Road Derby

  

 

B.            The
liability of the Original Landlord shall be limited to the assets of the
Garrandale Limited Directors Pension Scheme

 

2

 

THIS LEASE is BETWEEN the Original Landlord
(herein known as “the Landlord” which expression shall where the context so
admits include the persons for the time being entitled to the reversion
immediately expectant on the determination of the term hereby granted) of the
First part and The Original Tenant (herein known as “The Tenant” which
expression shall where the context so admits include its successors in title
and assigns) of the Second part and the Surety of the Third part.

 

WITNESSETH as follows:

 

1.1                                 DEFINITIONS

 

In this Deed the following further expressions shall
where the context so admits have the meanings hereinafter respectively assigned
to them:

 

1.1.1                        “the Insured Risks” - Fire impact storm
flood tempest including lightning explosion and in peace time aircraft and
articles dropped therefrom missiles and projectiles and loss of rent for such
period (not exceeding 3 years) as the Landlord shall see fit and such other
risks as the Landlord shall from time to time reasonably require to have
insured but excluding damage to plate glass PROVIDED ALWAYS that if the
Landlord shall be unable to effect insurance against any one or more of the
said risks such risk or risks shall for the purposes of this Lease be deemed to
be excluded from the definition of “the Insured Risks” and the Landlord shall
as soon as practicable notify the Tenant

 

1.1.2                        “the said term” shall include not only
the term hereby granted but also the period of any holding over or of any extension
thereof whether by statute or at common law

 

1.1.3                        “the Specified Rate” shall mean the rate
of interest published as a base rate by Barclays Bank plc on the date upon
which in accordance with the terms of this Lease such rate is required to be
ascertained (or such other comparable rate as the Landlord may reasonably
designate if the base rate shall cease to be published)

 

1.1.4                        “subsidiary” and “holding company” shall
have the respective meanings assigned to them by S.736 of the Companies Act
1985

 

1.1.5                        “Gross Internal Area” means the gross
internal ground floor area (excluding any external porches or external lobbies)
in square feet of the demised premises in accordance with the then current Code
of Measuring Practice published jointly by the Royal Institution of Chartered
Surveyors and the Incorporated Society of Valuers and Auctioneers

 

1.2                                 INTERPRETATION

 

1.2.1                        the expression “the Landlord” shall
include all or any superior landlords and all rights and reservations and
permissions in favour of the Landlord shall also be for the benefit of any
superior landlords to the intent that any superior landlords shall be entitled
to exercise the same in addition to the Landlord

 

1.2.2                        Words importing the singular number only
include the plural number and vice versa and where there are two or more
persons included in the expressions “the Landlord” or “the 

 

3

 

Tenant” or “the Surety” covenants expressed to be made
by the Landlord or the Tenant or the Surety shall be deemed to be made by such
persons jointly and severally

 

1.2.3                        The paragraph headings shall not affect
the interpretation of this Lease

 

2.                                       DEMISE

 

In consideration of the rents hereinafter reserved and
of the Tenant’s and the Surety’s covenants hereinafter contained the Landlord
hereby demises unto the Tenant ALL THOSE the premises described in the
First Schedule hereto together with the rights set out in the Second Schedule
hereto but excepting and reserving the rights and privileges set out in the Third
Schedule hereto all which said premises together with and except and reserved
as aforesaid and together with the buildings erected thereon or on some part
thereof and any additional or replacement buildings which may at any time
during the said term be erected thereon are hereinafter referred to as “the
Demised Premises” TO HOLD the same unto the Tenant SUBJECT TO the
rights and easements exceptions and reservations restrictive and other
covenants and conditions contained mentioned or referred to in the Document for
the Term commencing on the Term Commencement Date YIELDING AND PAYING
therefor unto the Landlord during the said term yearly:

 

2.1                                 Until the day immediately preceding the
Rent Commencement Date the rent of a peppercorn (if demanded)

 

2.2                                 from the Rent Commencement Date and for
the remainder of the Initial Rental Period and so in proportion for any less
time than a year the yearly rent of the Initial Annual Rent and thereafter
during the remainder of the said term such yearly rent as shall be determined
pursuant to the provisions of Clause 6 hereof such rents to be paid without any
deduction whatsoever (save as required by law) by equal quarterly payments in
advance on the usual quarter days in every year the first of such payments (or
a proportionate part thereof) for the period from the Rent Commencement Date to
the day immediately preceding the quarter day next following that date to be
paid on the date hereof

 

2.3                                 throughout the said term by way of
further rent within 14 days of written demand the cost of insurance referred to
in Clause 3.2 hereof

 

2.4                                 as additional rent any monies payable by
the Tenant to the Landlord hereunder

 

2.5                                 as additional rent any value added tax
chargeable on the rent and the additional rent reserved under clauses 2.2, 2.3
and 2.4

 

3.                                       TENANTS COVENANTS

 

THE TENANT HEREBY
COVENANTS with
the Landlord in manner following that is to say:

 

3.1                                 RENT

 

4

 

3.1.1                        To pay the said yearly rents hereinbefore reserved and
made payable without any deductions and rights of set off whatsoever (save as
may be required by law) at the times and in the manner aforesaid and by means
of a Bankers Standing Order

 

3.1.2                        To pay the additional rents reserved by this Lease at
the times and in a manner specified in relation to each of them

 

3.2                                 INSURANCE

 

3.2.1                        To pay to the Landlord within 14 days of written
demand sums of money equal to the premiums which the Landlord may expend in
effecting or maintaining the insurance of the Demised Premises at what the
Landlord shall reasonably consider are reasonable rates of premium having
regard to rates available from major insurers in the London insurance market
from time to time (including insurance for architects’ and surveyors’ fees of
such respective amounts as the Landlord shall from time to time reasonably and
properly determine and also the insurance of not more than three years’ rent
payable hereunder) against (i) the Insured Risks and (ii) the third
party liability of the Landlord in respect of the Demised Premises arising
under the Defective Premises Act 1972

 

3.2.2                        To keep all plate glass on the Demised Premises
insured at all times throughout the said term in the joint names of the
Landlord and the Tenant against the Insured Risks with underwriters to be named
by the Landlord in a sum equal to the full insurable value thereof and to make
all payments necessary for the above purposes within seven days after the same
shall become due and to produce to the Landlord or its agents on demand the
policy or policies of such insurance and the receipt for each such payment
PROVIDED ALWAYS that if the Tenant shall fail at any time to keep the same
insured as aforesaid the Landlord may do all things necessary to effect and
maintain such insurance and any monies expended by it for that purpose shall be
repayable by the Tenant on demand and be recoverable forthwith by action and in
case of damage to or destruction of any plate glass as aforesaid by any of the
Insured Risks the Tenant will reinstate and make good the same with reasonable
speed making good any deficiency in the proceeds of such insurance from its own
monies

 

3.2.3                        Not to effect any other insurance of the Demised
Premises against loss or damage by any of the Insured Risks unless and to the
extent that the Landlord shall fail to comply with its obligations to insure
under this Lease

 

3.3                                 OUTGOINGS

 

To pay and discharge all rates taxes duties charges
assessments impositions and outgoings whatsoever whether Parliamentary
parochial local or otherwise and whether or not of an annual or recurring
nature which are now or which may at anytime during the said term be assessed
charged or imposed upon or payable in respect of the Demised Premises or on the
owner or occupier thereof whether the same shall be in the nature of those now
in being or not and even though of a wholly novel character except any rates
taxes duties charges assessments impositions and outgoings payable by the
Landlord in respect of rent and other payments arising under this Lease or in
respect of any ownership of or any dealing with any reversion immediately or 

 

5

 

mediately expectant upon the determination of the said
term or the execution of this Lease or in respect of any development of the
Demised Premises prior to the date hereof or assessed upon the Landlord by
reference to its profit or its capital

 

3.4                                 REPAIRS

 

From time to time and at all times during the said
term (whether the Landlord shall or shall not have served notice requiring the
Tenant so to do) well and substantially to repair cleanse maintain and keep in
good and substantial repair all the Demised Premises and every part thereof and
all walls drains sewers and appurtenances of or belonging to the Demised
Premises with all proper and sound brick stone and timber and other materials
of suitable quality and description which shall or may be requisite when and as
often as occasion shall require (damage by the Insured Risks excepted save
where the insurance monies are rendered irrecoverable in consequence of some
act or default of the Tenant and the Tenant shall have failed to pay to the
Landlord monies equivalent to the insurance monies so rendered irrecoverable
(credit being given to the Tenant for any ex gratia payment made by the insurers
to the Landlord)

 

3.5                                 UPKEEP

 

To clean the windows in the Demised Premises as often
as occasion shall require and at least once in every calendar month and to keep
any part of the Demised Premises not covered by buildings (if any) in a neat
and tidy condition and reasonably free from weeds

 

3.6                                 EXTERNAL DECORATION

 

In every third year of the said term and in the last
year of the said term whether the same shall expire by effluxion of time or
otherwise in a proper and workmanlike manner to prepare and paint all the
outside parts of the Demised Premises and all additions thereto previously
painted by the Tenant or usually painted with two coats at least of good
quality paint or varnish and at the same time and in like manner to treat as
appropriate with best quality materials all other parts previously or usually
so treated provided that nothing herein contained shall require the Tenant to
so paint or treat the outside parts of the Demised Premises in two successive
years

 

3.7                                 INTERNAL DECORATION

 

In every fifth year of the said term and in the last
year of the said term whether the same shall expire by effluxion of time or
otherwise in a proper and workmanlike manner (and in such last year (unless the
Tenant or any undertenant has agreed to take a new tenancy of the Demised
Premises) in a colour or colours to be approved by the Landlord such approval
not be unreasonably withheld) to paint or varnish all the inside parts of the
Demised Premises and also the Landlord’s fixtures where previously or usually
painted or varnished with two coats at least of good quality paint or varnish
and at the same time and in like manner to treat as appropriate all other parts
previously or usually so treated provided that nothing herein contained shall
require the Tenant to so paint varnish or treat the inside parts of the Demised
Premises in two successive years

 

6

 

3.8                                 FIXTURES

 

To maintain in good and serviceable condition the
Landlord’s fixtures and fittings in or upon the Demised Premises and in the
event of any of the said fixtures and fittings being missing broken damaged or
destroyed forthwith to repair them or where the same shall be beyond economic
repair to replace them with others of a similar character and of equal utility
(damage by the Insured Risks excepted save where the insurance monies are
rendered irrecoverable in consequence of some act or default of the Tenant and
the Tenant shall have failed to pay to the Landlord monies equivalent to the
insurance monies so rendered irrecoverable (credit being given to the Tenant
for any ex gratia payment made by the insurers to the Landlord))

 

3.9                                 INSPECTION AND NOTICE OF DEFECTS

 

Subject to the provisions of Clause 5.7 to permit the
Landlord and its agents or servants at all reasonable hours in the daytime on
reasonable prior written notice of not less than 5 working days to the Tenant
(except in the case of emergency when such notice as can be given shall be
given) with or without workman or others to enter the Demised Premises or any
part thereof to take a plan of and to view the state and condition of the same
and to take inventories of the Landlord’s fixtures and fittings and things to
be yielded up at the expiration of the said term and the Tenant’s will within 3
months after receipt of notice from the Landlord of any breach of the Tenant’s
repairing and decorating covenants herein contained found on such inspection
commence and thereafter diligently proceed to repair and make good the same in
accordance with the covenants on the part of the Tenant hereinbefore contained
And if the Tenant shall fail to repair and make good the same as aforesaid to
permit the Landlord or its contractors agents and workmen (but without
prejudice to any other right or remedy available to the Landlord) to enter upon
the Demised Premises (subject to the provisions of clause 5.7 and then only in
so far as necessary) to execute such works as may be necessary to repair and
make good the same at the expense of the Tenant And the reasonable and proper
costs and expenses reasonably and properly incurred in carrying out such
repairs shall be repaid by the Tenant to the Landlord within 14 days of written
demand provided that the Landlord or its contractors agents or workman shall
not be entitled to enter to execute such works unless the Landlord would be
entitled to take proceedings for the enforcement of any right of re-entry or
forfeiture or for damages pursuant to the provisions of the Leasehold Property
(Repairs) Act 1938 in respect of the relevant disrepair

 

3.10                           TO YIELD UP

 

At the end or sooner determination of the said term
(unless the Tenant or any undertenant shall have agreed to take a new tenancy
of the Demised Premises) peaceably to yield up unto the Landlord the Demised
Premises and every part thereof in such good and substantial repair and
condition and decorative order as shall be in accordance with the Tenant’s
covenants herein contained together with all fixtures improvements and
additions of every kind in or upon the Demised Premises or which at the
expiration or sooner determination of the said term may be affixed or fastened
to or upon the same (trade or Tenant’s fixtures fittings and effects only
excepted) provided (for the avoidance of doubt) that the Tenant shall have no
liability in respect of the state or condition of the Demised Premises if the
Landlord shall have successfully opposed the grant of a new tenancy on any of
the grounds set out in section 30(1)(f) of the Landlord and 

 

7

 

Tenant Act 1954 and on or before the expiration of the
said term to remove every moulding sign-writing or painting of the name or
business of the Tenant or other occupiers of the Demised Premises and to make
good to the reasonable satisfaction of the Landlord any damage caused to the
Demised Premises by such removal or by the removal of the Tenant’s fixtures
fittings and effects

 

3.11                           COMPLIANCE WITH INSURANCE POLICY

 

Not to do or suffer to be done upon the Demised
Premises any act or thing which may make void any policy (written details of
which have been supplied by the Landlord to the Tenant) for the insurance of
the Demised Premises against damage or destruction by the Insured Risks or
render any increased or extra premium payable by the insurance of the Demised
Premises or any adjoining premises belonging to the Landlord against damage or
destruction by the Insured Risks (without in the latter event first having paid
the amount of every such increase or extra premium) and to comply with the
reasonable requirements of the insurers

 

3.12                           NOTICE OF INSURED LOSS

 

In the event of the Demised Premises or any part
thereof being destroyed or damaged by any of the Insured Risks to give notice
thereof to the Landlord as soon as such destruction or damage shall come to the
notice of the Tenant

 

3.13                           IRRECOVERABLE INSURANCE MONIES

 

In the event of the Demised Premises or any adjoining
premises belonging to the Landlord being destroyed or damaged by any of the
Insured Risks and the insurance money under any insurance against the same
effected thereon by the Landlord pursuant to its covenant herein contained
being wholly or partly irrecoverable by reason solely or in part of any act or
default of the Tenant or the Tenant’s servants or agents then and in every such
case the Tenant shall within 14 days of written demand pay to the Landlord the
monies so rendered irrecoverable (credit being given to the Tenant for any ex
gratia payment made by the insurers to the Landlord)

 

3.14                           ALTERATIONS AND ADDITIONS

 

3.14.1.1                                 Not without the prior written consent of
the Landlord (such consent not to be unreasonably withheld or delayed) make any
structural or external alteration addition or excavation in or to the Demised
Premises or any part thereof or cut maim or remove any of the walls horizontal
or vertical partitions beams columns or other structural parts thereof Provided
Always that consent shall not be required for the erection by the Tenant of
demountable partitioning inside the Demised Premises or any other internal
non-structural alteration (where details of such non-structural alterations
have been supplied to the Landlord fifteen working days prior to the date upon
which they are to be carried out) Provided Further that the Landlord shall be
entitled (if reasonable so to do) to require that the Tenant shall remove any
such non-structural alterations and make good to the reasonable satisfaction of
the Landlord any damage caused thereby to the Demised Premises at the end or
sooner determination of the said term but not alterations made to comply with
requirements of law or the insurers

 

8

 

 

3.14.1.2                                 Not at any time during the said term to
make any alterations or additions to the electrical installation of the Demised
Premises save in accordance with the terms and conditions laid down by the
Institution of Electrical Engineers and the regulations of the Electricity
Supply Authority

 

3.14.1.3                                 Not unreasonably to interfere with or
otherwise cause access to any pipes wires cables drains sewers watercourses
conduits or sub-ways which now are under in or through the Demised Premises to
be or become more difficult than the same now is

 

3.14.1.4                                 Not without the prior written consent of
the Landlord (such consent not to be unreasonably withheld of delayed) to place
or suffer to be placed on the exterior of the Demised Premises any sign placard
poster advertisement plate notice flag banner or wireless or television mast or
aerial or other thing provided that the Tenant and/or any lawful occupier may
erect substitute signage and embellishments in accordance with its corporate
style or livery without any consent from the Landlord where the area of such
signage and embellishments is not increased

 

3.14.2                                          In applying for any such consent as is
referred to in this clause 3.14 the Tenant shall submit to the Landlord the
necessary plans and specifications for approval in duplicate and any such
consent if granted shall nevertheless be without prejudice to the provisions of
clause 3.16

 

3.15                           STATUTORY REQUIREMENTS

 

At all times during the said term to observe and
comply in all respects with the provisions and requirements of any and every
enactment (which expression in this covenant includes as well any and every Act
of Parliament already or hereafter to be passed as any and every order
regulation and bye-law already or hereafter to be made under or in pursuance of
any such Act) so far as they relate to or affect the Demised Premises or any
additions or improvements thereto or the user thereof for the purpose of any
manufacture process trade or business or the employment or residence therein of
any person or persons or any fixtures machinery plant and chattels for the time
being affixed thereto or being thereupon or used for the purposes thereof and
to execute all works and provide and maintain all arrangements which by or
under any enactment or by any government department local authority or other
public authority or duly authorised officer or Court of competent jurisdiction
acting under or in pursuance of any enactment are or may be directed or
required to be executed provided and maintained at any time during the said
term upon or in respect of the Demised Premises or any additions or
improvements thereto or in respect of any such user thereof or employment or
residence therein of any person or persons or fixtures machinery plant or
chattels as aforesaid whether by the Landlord or Tenant thereof and to
indemnify the Landlord at all times against all costs charges and expenses of
or incidental to the execution of any works or the provision or maintenance of
any arrangements so directed or required as aforesaid and not at any time
during the said term to do or omit or suffer to be done or omitted on or about
the Demised Premises any act or thing by reason of which the Landlord may under
any enactment incur or have imposed upon it or become liable to pay any penalty
damages compensation costs charges or expenses Provided Always that if any acts
things or works are required to be done or carried out in order to comply with
this covenant the previous written approval of the Landlord shall be obtained
by the Tenant (such approval not to be

 

9

unreasonably withheld or delayed) The Tenant will
produce to the Landlord or to the Landlord’s Surveyor upon demand all such
evidence as the Landlord may require in order to be satisfied that the
provisions of this sub-clause have been complied with

 

3.16         TOWN
AND COUNTRY PLANNING

 

In relation to the Planning Acts by which expression
it is intended to designate the Town and Country Planning Act 1990 or any
statutory modification or re-enactment thereof for the time being in force and
any regulations or orders made thereunder and from time to time in force

 

3.16.1              At all times during
the said term to comply with the provisions and requirements of the Planning
Acts and all notices order licences consents permissions and conditions (if
any) served made granted or imposed thereunder (or under any enactment repealed
thereby) and from time to time in force so far as the same respectively relate
to or affect the Demised Premises or any part thereof or any operations works
acts or things already or hereafter to be carried out executed done or omitted
thereon or the use thereof for any purpose

 

3.16.2              During the said term
so often as occasion shall require at the expense in all respects of the Tenant
to obtain all such planning permissions licences and consents as may be
properly required for the carrying out by the Tenant of its operations on the
Demised Premises or the institution or continuance by the Tenant thereon of its
use thereof which may constitute development within the meaning of Planning
Acts but so that the Tenant shall not make any application for planning
permission without the previous written consent of the Landlord (which shall
not be unreasonably withheld and which shall not be required in respect of any
development which does not otherwise require the Landlord’s consent under this
Lease)

 

3.16.3              Subject to any
statutory direction to the contrary to pay and satisfy any charge that may
hereafter be imposed under the Planning Acts in respect of the carrying out or
maintenance by the Tenant of any such operations or the institution or
continuance by the Tenant of any such use as aforesaid

 

3.16.4              On receipt by the
Tenant of any order direction proposal or notice made given or issued to the
Tenant by a planning authority under or by virtue of the Planning Acts insofar
as the same relates to or affects the Demised Premises to give full particulars
thereof within 14 days from such receipt to the Landlord and subject as
aforesaid and so long as it is not contrary to the Tenant’s interest without
avoidable delay and at the Tenant’s own expense either:

 

3.16.4.1                   take all reasonable or necessary
steps to comply with such notice or order or

 

3.16.4.2                   if the same is capable of challenge
or appeal and if (reasonably so required by the Landlord but subject as
aforesaid) make or join in making reasonable representations in respect of any
such proposal the cost thereof being shared by the Landlord and the Tenant
equally

 

10

 

3.16.5                                          Notwithstanding
any consent which may be granted by the Landlord not to carry out or make any
alteration or addition to the Demised Premises or any change of use thereof
(being an alteration or addition or change of use which is prohibited by or for
which the Landlord’s consent is required to be obtained under this Lease and
for which a planning permission needs to be obtained) before a planning
permission therefor has been produced to the Landlord and acknowledged by it in
writing as satisfactory to it (such acknowledgement not to be unreasonably
withheld or delayed)

 

3.16.6                                          Unless
the Landlord shall otherwise direct to carry out before the expiration or
sooner determination of the said term any works stipulated to be carried out to
the Demised Premises by a date subsequent to such expiration or sooner
determination as a condition of any planning permission which may have been
implemented by the Tenant during the said term

 

3.16.7                                          If
and when reasonably called upon so to do to produce at the Landlord’s expense
to the Landlord or its surveyors all such plans orders directions proposals
notices documents and other evidence as the Landlord may reasonably require in
order to satisfy itself that the provisions of this covenant have been complied
with in all respects

 

3.17                           LOCAL
AUTHORITY NOTICES

 

The Tenant will as soon as reasonably practicable
following receipt of:

 

3.17.1                                          A
proposal for alteration of the valuation list under the Local Government Act
1948 (or any modification or re-enactment thereof for the time being in force)
in respect of the Demised Premises

 

3.17.2                                          Any
notice or communication from any Local Authority or other body or authority
indicating the intention compulsorily to acquire any interest in the Demised
Premises or any part thereof or

 

3.17.3                                          Any
notice or proposal beneficially or detrimentally affecting the Demised Premises
send a copy of such proposal notice or communication to the Landlord and will
if so reasonably requested by the Landlord and provided the same is not
contrary to the Tenant’s commercial interests join with the Landlord in
opposing any such alteration of valuation or compulsory acquisition or
detrimental proposal and the cost of so doing shall be shared by the Landlord
and the Tenant in proportion to the value of their respective estates or
interests in the Demised Premises

 

3.18         MACHINERY

 

Not to install or suffer to be installed any machinery
upon the Demised Premises or any part thereof which shall be unduly noisy or
cause dangerous vibration or be an actionable nuisance nor to overload any
floor wall or staircase or roof of the Demised Premises

 

11

 

3.19         NUISANCE

 

Not to do or permit to be done anything upon the
Demised Premises which may be or become an actionable nuisance annoyance or
cause damage or inconvenience to the Landlord or the owners tenants or
occupiers of the adjoining or neighbouring premises nor to use or permit the
Demised Premises or any part thereof to be used for any illegal or immoral
purpose or for any noxious offensive or noisy trade or business

 

3.20         FUMES

 

Not to install in or upon the Demised Premises any
paraffin burning apparatus whether for heating purposes or otherwise nor cause
or permit any smoke effluvia vapour grit smells or odours to be emitted from
any apparatus on the Demised Premises so as to cause a nuisance outside the
Demised Premises

 

3.21         INFLAMMATORY
SUBSTANCES

 

In all respects to comply with the provisions of all
statutes and any other obligations imposed by law in regard to licensing and
the carrying on of the business for the time being carried on by the Tenant on
the Demised Premises and to observe all statutory and other provisions and
regulations with regard to the storage and use of any explosive or inflammatory
oils or substances in or upon the Demised Premises

 

3.22         COSTS
OF NUISANCE

 

To pay all reasonable costs charges and expenses
properly incurred by the Landlord in abating a legal nuisance caused by the
Tenant its servants or agents at the Demised Premises whether or not required
in obedience to a notice served by the local authority or by any other person
entitled to require abatement of such nuisance

 

3.23         USE

 

3.23.1                                          Not
to use or permit to be used the Demised Premises or any part thereof save for
the Permitted Use

 

3.23.2                                          Not
to use or permit to be used the external parts of the Demised Premises other
than for parking (in the appropriate parking spaces) of motor vehicles and/or
the keeping of one covered refuse receptacle

 

3.23.3                                          Not
to use or permit to be used the external parts of the Demised Premises for the parking
of vehicles awaiting repair

 

3.24         ENCROACHMENTS

 

Not (save as may be required by law or by the
consequence of a lawful alteration) knowingly to permit any new window light
opening doorway path passage drain or other encroachment or easement to be made
or acquired in against out of or upon the Demised Premises which may be or grow
to the damage or inconvenience of the Landlord or any of its lessees or tenants
And that 

 

12

 

in case such window light opening doorway path passage
drain or other encroachment or easement shall be made or acquired or attempted
to be made or acquired the Tenant will give notice thereof to the Landlord as
soon as reasonably practicable and will permit the Landlord or its servants to
enter upon the Demised Premises to inspect the same and will permit the
Landlord to adopt such means as may be reasonably required or deemed proper for
preventing any such encroachment or the acquisition of any such easement
Provided Always that the Landlord shall indemnify the Tenant against all
actions losses or damages which the Tenant may suffer by reason of any act or
action which the Landlord may do or bring under this sub-clause

 

3.25         NOT
TO OBSTRUCT WINDOWS

 

Not (save as may be required by law or be the
consequence of a lawful alteration) to stop up darken or obstruct any window or
lights belonging to the Demised Premises or any other buildings belonging to
the Landlord and not to give to any third party any acknowledgement and not to
give to any third party any acknowledgement that the Tenant enjoys the access
of light to any of the windows or openings in the Demised Premises by the
consent of such third party nor to pay such third party any sum of money nor to
enter into any agreement with such third party for the purposes of inducing or
binding such third party to abstain from obstructing the access of light to any
of such windows or openings and in the event of the Tenant becoming aware of
any of the owners of any adjoining or neighbouring land or buildings doing or
threatening to do anything which obstructs the access of light to any of the
windows or openings in the Demised Premises to notify the same forthwith to the
Landlord

 

3.26         REFUSE
AND STORAGE

 

3.26.1                                          Not
to form or permit to be formed a rubbish dump on the Demised Premises but to
keep all rubbish and refuse on the Demised Premises in properly covered
receptacles not more than one of which shall be kept externally save during
normal working hours more than one wheelie bin can be placed outside provided
it is removed before close of business and not to hang place or deposit nor
permit to be hung placed or deposited any goods articles or things for sale or
display or otherwise (other than lawful signage) outside any building erected
upon the Demised Premises or on any forecourt or yard forming part of the
Demised Premises

 

3.26.2                                          not
to store or permit to be stored any items on any external part of the Demised
Premises

 

3.27         DRAINAGE

 

Not to stop up or obstruct in any way whatsoever or cause
save in compliance with all relevant consents oil grease or other deleterious
matter or substance to enter the drains sewers and watercourses serving the
Demised Premises or any adjoining or neighbouring premises and in the event of
any such obstruction or injury being caused as a result of the Tenant’s breach
to the drains sewers or watercourse otherwise than by any of the Insured Risks
forthwith to make good all such damage to the reasonable satisfaction of the
Landlord or the Landlord’s Surveyor

 

13

 

3.28         FIRE REGULATIONS

 

To keep any fire fighting and extinguishing apparatus
installed in compliance with any legal requirements open to the inspection and
maintained to the reasonable satisfaction of the relevant statutory authority
and also not to obstruct the access to or means of working such apparatus and
appliances by its operations at or connected with the Demised Premises

 

3.29         THIRD
PARTY CLAIMS

 

Not to do anything which would make the Landlord liable
in respect of any claim by any third party and the Tenant shall inform the
Landlord forthwith upon its becoming aware of any defect in the state of the
Demised Premises which could give rise to a claim against the Landlord under
the Defective Premises Act 1972 or any statutory modification or re-enactment
thereof for the time being in force

 

3.30         SUPPORT

 

Not to do anything or suffer anything to be done on
the Demised Premises which would remove support from any adjoining land
buildings or structures or endanger such land buildings or structures in any
way whatsoever

 

3.31         SALE
BOARDS

 

Unless the Tenant or any undertenant then has the
right to a new tenancy of the Demised Premises (subject to Clause 5.8) to
permit the Landlord and its surveyors workmen and agents at any time within six
calendar months next before the expiration or sooner determination of the said
term to enter upon the Demised Premises and to affix and retain upon any
suitable part thereof but so as not to obscure the windows of the Demised
Premises or the signage or in any other manner interfere with the business of
the Tenant or any of its sub-tenants or licensees a notice board for selling or
letting the same (with or without any other premises) as the case may be and
the Tenant will not remove or obscure the same (provided that if the Landlord
is not entitled to erect a re-letting board as aforesaid it shall not be
entitled to (and hereby covenants not to) erect such a board elsewhere on any
adjoining land belonging to the Landlord in relation to the Demised Premises)
and the Tenant will at all times throughout the said term upon prior written
appointment (agreement to appointment not to be unreasonably withheld) permit
all prospective purchasers by order in writing of the Landlord or its agents to
enter and view the Demised Premises or any part thereof at reasonable hours in
the day time without interruption

 

3.32         COSTS
OF PROCEEDINGS

 

To pay all reasonable and proper costs charges and
expenses (including solicitors’ costs and surveyors’ fees) reasonably and
properly incurred by the Landlord in or in reasonable and proper contemplation
of any proceedings under Sections 146 and 147 of the Law of Property Act, 1925
(notwithstanding forfeiture shall be avoided otherwise than by relief granted by
the court) or in relation to distraining for rent in arrear hereunder or in
relation to the preparation (with good cause) and service of a schedule of
dilapidations during or within a period of 3 months of the expiration or prior
determination of the said term

 

14

 

3.33         ALIENATION

 

	
  3.33.1

  	
   

  	
  Not to assign charge
  mortgage underlet or (save as hereinafter permitted) part with or share the
  possession of part only of the Demised Premises

  
	
   

  	
   

  	
   

  
	
  3.33.2

  	
   

  	
  Not to assign underlet
  or part with or share the possession of the Demised Premises as a whole
  without:

  
	
   

  	
   

  	
   

  
	
  3.33.2.1

  	
   

  	
  first obtaining the
  prior written consent of the Landlord (such consent not to be unreasonably
  withheld) and

  
	
   

  	
   

  	
   

  
	
  3.33.2.2

  	
   

  	
  procuring:

  
	
   

  	
   

  	
   

  
	
  3.33.2.2.1

  	
   

  	
  that the proposed
  underlessee shall enter into a direct covenant with the Landlord to be bound
  by and observe and carry out the terms and conditions herein contained (but
  not to pay any rents or other monies payable by the Tenant under this Lease)

  
	
   

  	
   

  	
   

  
	
  3.33.2.2.2

  	
   

  	
  that if reasonably
  required the proposed assignee shall provide reasonably acceptable security
  or obtain a reasonably acceptable guarantor or guarantors who shall enter
  into joint and several covenants with the Landlord (joint and several in the
  case of more than one guarantor) in the form set out in the Fourth Schedule
  hereto

  
	
   

  	
   

  	
   

  
	
  3.33.2.2.3

  	
   

  	
  that no underlease
  shall provide for payment of any rent more than six months in advance

  
	
   

  	
   

  	
   

  
	
  3.33.2.2.4

  	
   

  	
  that any underlease or
  other interest deriving out of the said term howsoever remote or inferior
  shall not be granted at a yearly rent of less than the open market rent
  reasonably obtainable at the date of its grant without taking a fine or
  premium

  
	
   

  	
   

  	
   

  
	
  3.33.2.2.5

  	
   

  	
  that any such
  underlease or derivatory interest shall contain covenants by the underlessee
  and its successors in title (such covenants to be expressed to be entered
  into jointly and severally if more than one undertenant) with the Tenant and
  its successors in title in the same form (mutatis mutandis) as the covenants
  on the part of the Tenant contained in this Lease

  
	
   

  	
   

  	
   

  
	
  3.33.2.2.6

  	
   

  	
  that neither the Tenant
  nor any person deriving title under it (including any under-tenant whether
  immediate or not) will underlet the whole of the Demised Premises for a term
  which shall extend beyond any date on which the rent hereby reserved is to be
  reviewed as herein provided unless such underlease shall include provisions
  to the effect that the rent thereby reserved shall be subject to review on
  the dates on which the rent hereby reserved is to be reviewed (or such of the
  same as fall within the proposed term) to the intent that the rent reserved
  on and after any of the dates on which the rent hereby reserved is to be
  reviewed shall not be less than the open market rent obtainable without
  taking a fine or premium in respect of the Demised Premises calculated as at
  the dates on which the rent hereby reserved is to be reviewed and

  
				

 

 

15

 

3.33.2.3                                                         covenanting
with the Landlord that the Tenant will not expressly waive the covenants and
conditions imposed as aforesaid upon any sub-tenant but that the Tenant will so
long as it is not contrary to the Tenant’s interest enforce such covenants and
conditions and that the Tenant will (without prejudice to the foregoing) from
time to time at the Landlord’s expense within 14 days of written demand during
the said term deliver to the Landlord particulars of any derivative interest on
or in the Demised Premises howsoever remote or inferior including full
particulars of the rent or rents payable under such derivative interest and
such further particulars as the Landlord shall reasonably require

 

PROVIDED ALWAYS
that the Tenant may without the Landlord’s consent part with or share occupation
of the Demised Premises or any part thereof to or with any company which is the
holding company or a subsidiary of the Tenant in such a way that such parting
with or sharing of occupation does not create in such other company any tenancy
and the Tenant shall on written request from the Landlord inform the Landlord
in writing of the names and businesses of any such holding company or
subsidiary of the Tenant

 

PROVIDED FURTHER
that the Landlord may (for the purposes of Section 19(1A) of the Landlord
and Tenant Act 1927 (as amended) (“the Act”)) withhold consent under Clause
3.33.2.1 in any one or more of the following circumstances:

 

(i)                                     If
the assignment is within the first year or the last year of the Term or within
one year of an immediately preceding assignment

 

(ii)                                  If
any remedial works to the Demised Premises which the Tenant is legally obliged
to the Landlord to complete have not been completed.

 

(iii)                               If there is a breach of
covenant by the Tenant which in the reasonable opinion of the landlord reduces
the value of the Landlord’s reversionary interest in the Demised Premises

 

(iv)                              If
the proposed assignee is entitled to claim diplomatic or sovereign immunity

 

(v)                                 If
a Review Date has passed and the Rent Review in accordance with Clause 6 has
not been completed.

 

(vi)                              If
the Landlord determines that an assignment to the proposed assignee would
reduce the value or marketability of the Landlord’s reversionary interest in
the Demised Premises (whether or not the Landlord intends to dispose of its
interest) but the Tenant is given the unrestricted right to have such
determination by the Landlord reviewed by a chartered surveyor (having current
experience of values of property of a like kind and character to the Demised
Premises) to be agreed upon by the Landlord and by the Tenant or at the request
and option of either of them to be nominated by or on behalf of the President
for the time being of the Royal Institution of Chartered Surveyors and if such
surveyor is appointed:

 

(A)          he shall act as an
expert

 

16

 

(B)                                he
shall give notice to the Landlord and the Tenant inviting each of them to
submit to him within such time as he shall stipulate their respective arguments
which may be supported by the submission of reasons and/or a professional
valuation or report

 

(C)                                he
shall afford to each part an opportunity to make counter-submissions in respect
of any submission valuation or report

 

(D)                               he
shall give written reasons for his decisions

 

(E)                                 the
determination made by such surveyor on such review shall be conclusive

 

(F)                                 his
fees and the cost of appointing him shall be borne and paid by the Landlord and
the Tenant in such shares and in such manner as he shall decide or failing such
decision in equal shares

 

(G)                                and
shall die or become unwilling to act or incapable of acting for any reason or
fail to act within reasonable expedition another expert shall be appointed in
his place in like manner

 

And Provided that the Landlord may for the purposes of the Act give such
consent subject to any one or more of the following conditions:

 

(i)                                     That
the Tenant enters into an authorised guarantee agreement (as defined in section
16 of the Landlord and Tenant (Covenants) Act 1995) in the form annexed hereto
or if the Landlord shall so elect in such other form as the Landlord may
reasonably require and including the provisions set out in sub-section (5) of
such section

 

(ii)                                  That
the Tenant’s solicitors undertake to pay all the proper costs and disbursements
of the Landlord’s solicitors the Landlord’s Surveyors and any management fee in
connection with the proposed assignment

 

(iii)                               that the proposed
assignee deposits with the Landlord a sum equal to one half of the annual rent
first reserved and from time to time payable under this Lease such sum to be
held on the terms of a rent deposit deed to be prepared by the Landlord and
approved by the Tenant (such approval not to be unreasonable withheld or
delayed)

 

(iv)                              That
if any parent or other company or individual or individuals (“the Principal”)
offers or is lawfully required to guarantee the obligations of a proposed
assignee under this Lease such offer or requirement shall be implemented by the
Principal taking an assignment of this Lease jointly with the proposed assignee
or if the proposed assignee so elects in substitution for the proposed assignee

 

3.33.3              Not to hold the whole or any part
of the Demised Premises on trust for another

 

17

 

3.33.4                                          At
the cost of the Tenant within one month next after the execution of every
assurance assignment or underlease affecting the Demised Premises to give
notice thereof in writing with particulars thereof to the Landlord and deliver
to the Landlord a certified copy of the instrument effecting the same and
within one month after the grant of Probate or Letters of Administration in the
case of a deceased tenant to produce the same to the Landlord and in each case
paying at the same time to the Landlord a registration fee of such sum (being
not less than twenty pounds) as shall be reasonable

 

3.34         COSTS
OF APPROVALS

 

To pay the reasonable and proper legal charges and the
surveyors’ fees properly incurred by the Landlord following all applications by
the Tenant for any consent of the Landlord required by this Lease whether or
not the same is granted or the application withdrawn but not in circumstances
where this Lease requires the Landlord not to unreasonably withhold or delay
its consent and the Landlord does unreasonably withhold or delay its consent or
grants or offers to grant such consent subject to unreasonable conditions
unless the Landlord withdraws the same

 

3.35         ADDITIONAL
PROVISIONS

 

At all times during the said term to observe and
comply with the restrictions conditions stipulations and regulations and
provisions contained or referred to in the Documents to the extent that the
same affect the Demised Premises and are subsisting and capable of being
enforced

 

3.36         V.A.T.

 

Upon receipt of a valid Value Added Tax invoice
addressed to the Tenant to pay to the Landlord in addition to the rent and
other charges and fees and other payments of whatsoever nature which are or
shall be reserved or which are or may become payable pursuant to the provisions
of this Lease (herein called “the Payments”) by or on behalf of the Tenant to
the Landlord which attracts Value Added Tax any Value Added Tax (or any other
tax replacing the same) which is properly payable in respect of the Payments
(save where the same is recoverable by the Landlord)

 

3.37         INTEREST
ON LATE PAYMENT

 

3.37.1                                          If
the Tenant shall make default in paying within 14 days of the due date the rent
hereby reserved and within 14 days of demand any other payments hereby made
payable by the Tenant pursuant to any of the Tenants covenants herein contained
to pay to the Landlord within 14 days of written demand interest at the rate of
three per centum per annum above the Specified Rate ruling from time to time
from the date the same became due until the date of actual payment

 

3.37.2                                          To
pay interest equivalent to that which would be payable under clause 3.37.1 for
any period during which the Landlord properly refuses to accept the tender of
payment or to demand payment because of an unremedied breach of covenant of the
Tenant

 

18

 

3.38         ACCESS

 

Subject to the provisions of Clause 5.8 to permit the
Landlord and (if reasonably authorised in writing by the Landlord) the lessees
or occupiers of any adjoining property belonging to the Landlord with their
respective agents officers contractors licensees and workmen with all necessary
appliances at all reasonable times and upon reasonable prior written notice to
the Tenant (and at all times without notice in the case of emergency) to enter
upon the Demised Premises (but only in so far as necessary) for executing
repairs to or upon any adjoining property belonging to the Landlord

 

3.39         EXPENSES

 

To pay to the Landlord on demand a fair and proper
proportion (to be conclusively determined by the Landlord or the Landlord’s
surveyor) of the expense of cleaning lighting repairing renewing decorating
maintaining and rebuilding any party walls fences gutters drains service media
roadways pavements entrance ways access ways or service areas which are or may
be used or enjoyed by an occupier of the Demised Premises in common with any
other person or person

 

3.40         TITLE
OBLIGATION

 

During the Term to observe the covenants conditions
and other obligations on the Landlord (save mortgages) contained mentioned or
referred to in the Documents and to indemnify the Landlord against all costs
claims and/or demands arising out of the same insofar as they relate to the
Demised Premises

 

3.41         HEALTH
AND SAFETY

 

3.41.1                                          In
this clause Health and Safety Law means all applicable statutes, statutory
instruments, common law, treaties, regulations, directives, codes of practice
and guidance notes concerning the health, safety and welfare of persons who are
employees of the Tenant or who are at the Premises for any purposes in
connection with the Tenant’s presence thereat and are exposed to risks to their
health and safety or concerning the control use keeping and transport of
explosive, highly flammable or dangerous substances or substances hazardous to
human health.

 

3.41.2                                          At
the Tenant’s own expense to comply at all times with Health and Safety Law and
all its requirements relating to the use or occupation of the Premises.

 

3.41.3                                          To
prepare a formal assessment of the risks to the health and safety of the Tenant’s
employees and of persons who are not the Tenant’s employees arising out of or
in connection with the Tenant’s occupation of the Premises.

 

3.41.4                                          To
co-operate and co-ordinate all health and safety procedures with the Landlord.

 

3.41.5                                          To
provide upon written request to the Landlord a copy of its current health and
safety policy statement and full details of any events or accidents reportable
under Health and Safety Law together with copies of any notices or any
associated

 

19

 

 

correspondence served or sent by any regulatory body
on or to the Tenant or other occupier of the Premises under Health and Safety
Law.

 

3.41.6                                          In relation to any matters to which the
Construction (Design and Management) Regulations 1994 (“the Regulations”) apply
where such works are undertaken by the Tenant or any person deriving title or
authority from the Tenant:

 

3.41.6.1                                 To
procure that the Regulations are fully observed.

 

3.41.6.2                                 To
procure that the Tenant shall act as the sole “client” for the purposes of the
Regulations and that a declaration to that effect will be made by the Tenant
under Regulation 4 and a copy sent to the Landlord at such time.

 

3.41.6.3                                 Promptly
to provide to the Landlord a full and complete copy of the health and safety
file for all works prepared in accordance with the Regulations and any Code of
Practice or other guidance issued by any competent authority and (no later than
the expiry or sooner determination of this lease) the original health and
safety file.

 

3.41.6.4                                 To procure
that there should be granted to the Landlord a licence to use and copy and
design, maintenance or operational information and documentation and other
information comprised in the health and safety file for any purposes in
connection with the Premises or any building of which the Premises forms part.

 

3.42          VAT
USE

 

To ensure that at all times the use of the Demised
Premises is for a purpose or purposes such that it will not result in any
election by the Landlord to waive exemption for Value Added Tax being
disapplied or restricted

 

3.43          VAT
REGISTRATION

 

Forthwith to become and at all times remain a
registered taxable person for the purposes of Value Added Tax and from time to
time on demand to furnish the Landlord with full particulars of such registration
and of all documents and facts regarding the use of the Demised Premises which
may be relevant to determine whether any election by the Landlord to waive
exemption from Value Added Tax applies or may be disapplied or restricted

 

3.44          RELIEF
FROM NON-DOMESTIC RATE

 

To reimburse the Landlord for loss of relief from
non-domestic rate of unoccupied property which would have been available to the
Landlord in respect of vacancy of the Demised Premises after the termination of
this Lease but for the allowance of relief to the Tenant or any other person
formerly in occupation of the Demised Premises for vacancy commencing before
the termination of this Lease

 

20

 

3.45          INDEMNITY

 

To indemnify the Landlord against all costs claims
demands and liability the Landlord incurs as a result of any breach of the
Tenant’s covenants herein

 

3.46                           Within fourteen days of the death during
the term of any person who is the Surety or of such person becoming bankrupt or
having a receiving order made against him or being a company suffering an
Administrative Receiver to be appointed passing a Resolution to wind-up or
entering into liquidation then to give notice thereof to the Landlord and if so
required by the Landlord at the expense of the Tenant within twenty-eight days
to procure some other person or persons acceptable to the Landlord to execute a
guarantee in respect of the payment of the rents hereby reserved and the
observance and performance of the covenants herein contained in the form set
out in the fourth schedule hereof

 

4.              LANDLORDS
COVENANTS

 

THE LANDLORD HEREBY
COVENANTS with
the Tenant as a personal obligation of the Landlord (but not so as to be liable
after the Landlord shall have transferred all its estate and interest in the
Demised Premises if it shall have procured that any person to whom the
Landlords estate and interest in the Demised Premises is transferred shall have
covenanted by deed with the Tenant in the same terms as set out in this Clause
4 and shall have supplied that deed to the Tenant:

 

4.1            QUIET
ENJOYMENT

 

That the Tenant shall have quiet enjoyment of the
Demised Premises and the other rights hereby granted against the Landlord and
all persons claiming title through under or in trust for the Landlord

 

4.2            INSURANCE

 

4.2.1         The
Landlord shall at all times during the said term:

 

4.2.1.1                                       insure and keep insured with an insurance office of
good repute having its principal place of business in England or Scotland the
Demised Premises (other than any glass) against loss or damage by the Insured
Risks in the full rebuilding cost thereof with provision for inflation to cover
the period of rebuilding or reinstatement including the cost of demolition site
clearance and shoring up and hoarding of any land or buildings and related
costs and architects’ surveyors’ and other professionals’ fees and incidental
expenses consequent upon rebuilding or reinstatement

 

4.2.1.2                                       whenever required by the Tenant or whenever there is a
material change in the risks covered or the nature extent and terms and
conditions of the insurance produce to the Tenant a certified copy of the
policy or policies of such insurance or other sufficient written evidence of
the nature extent and terms and conditions thereof and the receipt for or other
evidence of the payment of 

 

21

 

the last premium for the same in respect of the period of insurance
then current and confirmation from the insurers that the same is in existence

 

4.2.1.3                                       ensure that nothing is done or omitted by itself or
its servants or agents which causes the policy or policies of insurance
effected by the Landlord pursuant to this Lease to be rendered void or voidable
or whereby any extra or increased premium may become payable by the Tenant save
where the Landlord pays such increased or extra premium out of its own monies

 

4.2.1.4                                       notify the Tenant in writing of any proposed change in
the ambit quantum or terms of cover provided from time to time by such
insurance and shall supply (without the need of any request from the Tenant) a
copy of any new form of policy which becomes applicable

 

4.2.1.5                                       use all reasonable endeavours to ensure that every
policy of insurance effected by the Landlord hereunder contains a
non-invalidation clause to the effect that the policy shall not be avoided by
any act or omission or by any alteration whereby the risk of damage or
destruction is increased unknown to or beyond the control of the Landlord and a
provision whereby the insurers agree to waive all rights of subrogation
remedies or relief to which the insurers might become subrogated against the
Tenant (unless the loss has been occasioned by or contributed to by the
fraudulent or criminal or malicious act of the Tenant)

 

4.2.1.6                                       in case of the destruction of or damage to the Demised
Premises or any part thereof by any of the Insured Risks the Landlord shall
forthwith institute and thereafter diligently proceed with a claim on the
policy or policies of insurance

 

4.2.1.7                                       (unless and save to the extent that the policy of
insurance on the Demised Premises has been invalidated and the policy monies
have been properly withheld by reason of any act or default of the Tenant and
the Tenant has not paid to the Landlord the policy monies lost thereby (credit
being given in respect of any ex-gratia payment made by the insurer to the
Landlord)) forthwith to use all reasonable endeavours to obtain with all due
diligence and speed any labour permits planning permissions bye-law and other
approvals which are necessary to enable the Demised Premises to be rebuilt or
reinstated and

 

4.2.1.8                                       apply all the insurance monies received (save in
respect of the loss of rent) in rebuilding or reinstating with due diligence
and speed the Demised Premises or such part or parts thereof as shall have been
so destroyed or damaged and make up any deficiency out of its own monies

 

4.2.2                        The Landlord shall carry out all works of
reinstatement or replacement in a good and workmanlike manner in accordance
with good building practice and using good sound and suitable materials and in
accordance with all necessary consents and the requirements of statute bye-law
any local act the fire officer and any applicable supra-national 

 

22

 

legislation or directives and the requirements of any relevant British
Standards Institution Standards and Codes of Practice applicable from time to
time with due diligence and speed

 

4.2.3                        If the Demised Premises are wholly or substantially
damaged or destroyed by any of the Insured Risks the Landlord shall use all
reasonable endeavours to obtain deeds of collateral warranty from the
contractor any nominated sub-contractor the architect the structural engineer
and the mechanical and electrical services engineer engaged to carry out the
works of reinstatement or replacement or their design or supervision such
collateral warranty deeds to be in a form approved by the Tenant (such approval
not to be unreasonably withheld)

 

4.2.4                        If it shall not be possible to rebuild or reinstate
the Demised Premises in accordance with clauses 4.2.2 and 4.2.3 exactly as it
was prior to the date of damage or destruction the Landlord shall rebuild or
reinstate the same making any necessary changes provided that the use and
enjoyment of the Demised Premises and the ability of the Tenant and any lawful
occupier to use the Demised Premises beneficially for the use permitted by this
Lease shall not thereby be materially and adversely affected and the prior
written consent of the Tenant (such consent not to be unreasonably withheld)
shall be obtained by the Landlord prior to any such changes being made

 

4.2.5                        If any of the said necessary consents contain a
condition which was not in force immediately prior to the date of damage or
destruction by any of the Insured Risks and which prevents the Tenant or any
lawful occupier from using the Demised Premises beneficially for its purpose
the Tenant shall be entitled by giving written notice to the Landlord not later
than whichever shall be the later of 21 days after receiving a copy of the
relevant consent and 14 days after the expiration of the time limits for making
an appeal against the imposition of such condition without such appeal having
been made by the Landlord to determine this Lease whereupon this Lease shall
cease and be at an end but without prejudice to any claim in respect of any
antecedent breach of the terms of this Lease by either party hereto PROVIDED
THAT if such a condition is imposed and within the time limits for making an
appeal against the imposition of such condition the Landlord shall make such
appeal then the Tenant shall not be entitled to determine this Lease unless or
until the appeal against the imposition of such condition is lost or abandoned

 

4.2.6                        Upon receipt of any insurance monies (save in respect
of loss of rent) the Landlord shall pay the same into a separately-designated
trust account until they are required for disbursement in connection with the
reinstatement or replacement required pursuant to clauses 4.2.2 and 4.2.3 and
until actual disbursement all monies in such account shall be held by the
Landlord as trustee

 

4.2.7                        If the insurer has under the terms of the policy the
option to effect reinstatement rather than to pay the insurance monies to the
Landlord and exercises such option the Landlord shall use all reasonable
endeavours (which expression shall connote (inter alia) the taking of any
requisite proceedings where counsel of not less than ten years’ call at the
English bar specialising in insurance matters shall have advised that on the
balance of 

 

23

 

probabilities such proceedings would succeed) to procure that the
insurer carries out such reinstatement without avoidable delay and shall not
agree to accept anything less than full repair or restoration without the prior
written consent of the Tenant (such consent not to be unreasonably withheld)

 

4.3            CONSENTS

 

That where the Landlord is not lawfully entitled to
unreasonably withhold or delay any licence consent approval or acknowledgement
required under the terms of this Lease the Landlord shall with due diligence
and speed not unreasonably withhold or delay the issuance of the same nor
proffer the same subject to unreasonable conditions

 

5.              PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that:

 

5.1            FORFEITURE

 

Notwithstanding and without prejudice to any other
remedy and power herein contained or otherwise available to the Landlord if the
rents or other charges reserved or made payable hereunder or any part thereof respectively
shall be unpaid for twenty-one days after becoming payable (whether (in the
case of the rent first reserved) formally demanded or not) or if any covenant
agreement condition or stipulation on the Tenant’s part herein contained shall
not be performed or observed or the Tenant shall enter into liquidation whether
compulsory or voluntary (not being merely a voluntary liquidation while solvent
for the purpose of amalgamation or reconstruction) or if a receiver shall be
appointed of all or a substantial part of the assets or undertaking of the
Tenant or if the Tenant being an individual shall enter into composition with
his creditors generally or be adjudicated bankrupt then and in any such case it
shall be lawful for the Landlord at any time thereafter to re-enter upon the
Demised Premises or any part thereof in the name of the whole and thereupon
this demise shall absolutely determine but without prejudice to any right of
action of either party hereto in respect of any breach non-observance or non-performance
of any of the other’s covenants agreements conditions or stipulations herein
contained

 

5.2            RENT
ABATEMENT

 

If during the said term the Demised Premises or any
part thereof shall be destroyed or damaged by any of the Insured Risks so as to
render the Demised Premises unfit for occupation or use for the use permitted
hereunder then (save to the extent that the policy moneys payable in respect of
loss of rent shall have been properly refused in whole or in part in
consequence of some act or default of the Tenant its servants or agents) the
rents and charges hereby reserved or made payable or a fair and just proportion
thereof (according to the nature and extent of the damage sustained and the
part (if any) of the policy monies withheld as aforesaid) shall cease to be
payable as from the date of such destruction or damage until the Demised
Premises are fit for occupation and use for the permitted use hereunder or the
date upon which the proceeds of loss of rent insurance ceases to be referable
which ever is the lesser and any dispute as to the extent proportion or period
of such suspension shall be determined by a single arbitrator to be appointed
by the Landlord and the Tenant and in case of difference upon the application
of either party by or on behalf of the President for the time being of the
Royal Institution of Chartered Surveyors 

 

24

 

such arbitrator to act in accordance with the
provisions of the Arbitration Act 1996 or any statutory modification or
re-enactment thereof for the time being in force PROVIDED THAT for the
avoidance of doubt if the Tenant shall have paid any sum in advance in respect
of a period following the date of damage or destruction the Landlord shall on
whichever shall be the earlier of the end of the period in respect of which the
sum was paid and the date upon which the Demised Premises are rendered fit for
occupation and use as aforesaid refund the same or a due proportion thereof
according to the length of time the Demised Premises are unfit for occupation
or use for the use permitted by this Lease and if the Demised Premises shall
not have been so rendered fit for occupation and use within 18 months of such
damage or destruction either party hereto may (before the Demised Premises have
been rendered fit for occupation and use as aforesaid) give notice in writing
to the other to terminate this Lease whereupon this Lease shall determine but
without prejudice to any claim that either party may have against the other in
respect of any antecedent breach

 

5.3            NOTICES

 

Section 196 of the Law of Property Act 1925 (as
amended) shall apply to any notices to be served under the terms of this Lease
save that no notices shall be left at the Demised Premises (unless they are the
principal place of business or registered office of the Tenant)

 

5.4            ACKNOWLEDGEMENT
RE USE

 

The Tenant hereby acknowledges that no warranty is
given or implied by the granting of this Lease or by the giving of any consent
to a change of use hereunder by the Landlord or otherwise that the use to which
the Tenant proposes now or hereafter to put the Demised Premises or any
alterations or additions which the Tenant may now or hereafter desire to carry
out will not require planning permission under the Planning Acts

 

5.5            WAIVER
OF BREACH

 

No acceptance or demand or receipt for rent by the
Landlord after knowledge (actual or implied) by the Landlord or its agents of
any breach of any of the covenants agreements and obligations on the part of
the Tenant herein contained or implied shall operate as a waiver in whole or in
part of such breach or of the Landlords right of forfeiture or re-entry in
respect thereof but any such breach shall for all the purposes of this Lease be
a continuing breach for so long as such breach shall be subsisting and no
person taking any estate or interest under the Tenant shall be entitled to set
up any such acceptance of or demand or receipt for rent as a defence in any
action or proceedings by the Landlord

 

5.6            ARREARS

 

No arrears of rents or other sums due shall be
recoverable form The Original Tenant after it shall have assigned this Lease
where such sums become due more than twelve months before The Original Tenant
is notified thereof

 

25

 

5.7            CONDITIONS ON RIGHTS OF ENTRY

 

Wherever in this Lease it is provided that the
Landlord or any other person is entitled to enter upon the Demised Premises
such rights of entry shall only be exercised in accordance with the following
conditions:

 

5.7.1                        That the Landlord shall procure that the person
exercising the rights shall cause as little damage annoyance and disturbance to
the Demised Premises and the business carried on thereat as reasonably possible
and

 

5.7.2                        That the Landlord shall as soon as practicable make
good to the reasonable satisfaction of the Tenant any physical damage thereby
occasioned and

 

5.7.3                        That the Landlord shall procure that the persons
exercising the right exercises it only in accordance with a programme of works
first agreed with the Tenant such agreement not to be unreasonably withheld or
delayed

 

5.8            WITHHOLDING
CONSENTS

 

References herein to consents or approvals not being
unreasonably “withheld” shall where not expressly provided be deemed to mean “withheld
or delayed”

 

6.              RENT REVIEW

 

The yearly rent first reserved by this Lease shall be
reviewed on each of the Review Dates (and the relevant review date shall be
construed accordingly) and as and from each review date the reviewed rent
(agreed or determined in accordance with the following provisions of this
clause) shall become payable in all respects as if it were the yearly rent
firstly reserved by this Lease

 

6.1            Upward
only rent reviews

 

The reviewed rent shall be the greater of:

 

6.1.1                        the yearly rent firstly reserved payable under this
Lease immediately preceding the relevant review date and

 

6.1.2                        the market rent of the Demised Premises at the
relevant review date

 

6.2            The
market rent

 

The expression the ‘market rent’ shall for the
purposes of this Lease mean the yearly rent at which the Demised Premises might
reasonably be expected to be let as a whole in the open market at the relevant
review date without a fine or premium or other inducement for the grant thereof
being paid or given by either party with vacant possession by a willing
landlord to a willing tenant for a term equal to the residue of the term
(subject to a minimum of fifteen years) of this Lease at and commencing from
the relevant review date and subject to the provisions to the same effect as
those contained in this Lease (other than the amount of yearly rent firstly 

 

26

 

hereby reserved and any rent free period allowed to
the Tenant but including these provisions for rent review but on the assumption
(if not the fact) that at the relevant review date

 

6.2.1                        the Demised Premises are available to be let with
vacant possession (but such assumption shall not give rise to any discount or
abatement of the market rent to reflect the absence of any concessionary rent
or rent-free period which a willing landlord would properly grant to a willing
tenant upon such a letting in respect of bona fide fitting out works or to
reflect the length of time which it would take the willing tenant to carry out
its fitting out works)

 

6.2.2                        the Demised Premises are ready for the willing tenant
to carry out its fitting out works

 

6.2.3                        no work (other than any required to comply with a
requirement of law or the insurers) has been carried out to the Demised
Premises by the Tenant which has diminished the market rent

 

6.2.4                        in case the Demised Premises have been destroyed or
damaged by any of the Insured Risk they have been fully reinstated

 

6.2.5                        the covenants of the Tenant herein mentioned have been
fully observed and performed

 

6.2.6                        (so far as permitted by law) there is not in operation
any statute order or instrument regulation or direction which has the effect of
regulating or restricting the amount of rent of the Demised Premises which
might otherwise be payable

 

6.3            Matters
to be disregarded

 

In agreeing or determining the market rent the effect
upon it of the following matters shall be disregarded:

 

6.3.1                        the occupation of the Demised Premises or any part
thereof or any adjoining or neighbouring property by the Tenant its subtenants
or their respective predecessors in title or lawful occupiers

 

6.3.2                        any goodwill attached to the Demised Premises by
reason of the carrying on at the Demised Premises of the business of the Tenant
its subtenants or their respective predecessors in title or lawful occupiers

 

6.3.3                        any improvements to the Demised Premises or any part
thereof made by or at the expense of the Tenant its subtenants or their
respective predecessors in title or lawful occupiers with the consent of the
Landlord or its predecessors in title (where required and so that any consent
which shall have been unreasonably withheld or proffered subject to
unreasonable conditions shall be deemed to have been given for the purposes of
this paragraph) whether before or after the Term Commencement Date of the said
term other than those made in pursuance of an obligation to the Landlord
provided that for the avoidance of doubt it is hereby 

 

27

 

agreed that the Tenant’s fitting out works and any works required to be
carried out to comply with statute or the requirements of local authorities or
other bodies exercising powers under statute or Royal Charter or any other
requirement of law or of the insurers shall be deemed not to have been carried
out pursuant to an obligation to the Landlord

 

6.3.4                        the Tenant’s fitting out works save where carried out
pursuant to an obligation to the Landlord

 

6.4            Procedure
for determination of market rent

 

6.4.1                        The Landlord and the Tenant shall endeavour to agree
the market rent at any time not being earlier than 12 months before the
relevant review date but if they shall not have agreed the market rent three
months before the relevant review date the amount of the market rent shall be
determined by reference to agreement between the Landlord and the Tenant or in
the absence of such agreement by or on behalf of the determination of an expert
nominated by the President for the time being of the Royal Institution of
Chartered Surveyors on the application of either of the Landlord or the Tenant
and the costs of the expert determination shall be in the award of the expert
whose decision shall be final and binding on the parties hereto

 

6.4.2                        The expert to be nominated shall be a chartered
surveyor having experience of leasehold valuation of property being put to the
same or similar use as the Demised Premises and of property in the same region
in which the Demised Premises are situated

 

6.4.3                        The expert so nominated shall give notice to the
Landlord and the Tenant inviting each of them to submit to him within such time
limits as he may stipulate a proposal for the market rent supported (if so
desired by either of the parties) by any or all of:

 

6.4.3.1                                       a statement of reasons;

 

6.5.3.2                                       a professional rental valuation; and

 

6.4.3.3                                       (separately and later) submissions in respect of each
other’s statement of reasons and valuation but the expert shall not be bound
thereby and he shall make shall make the determination in accordance with his
own judgement

 

6.5            Time
Limits

 

Time shall not be of the essence in agreeing or
determining the market rent or in appointing an expert.  The non-intimation of intention to review by
the Landlord prior to the relevant review date shall not prejudice the Landlord’s
entitlement to a rent review from the relevant review date

 

28

 

6.6            Rental adjustments

 

If the market rent shall not have been ascertained in
accordance with the provisions of this clause before the relevant review date
then until the market rent shall have been so ascertained the Tenant shall
continue to pay on account rent at the rate of the yearly rent payable
immediately before the relevant review date and when the market rent shall have
been ascertained the Tenant shall within 14 days of written demand pay to the
Landlord the difference between the yearly rent paid and the yearly rent which
would have been payable if the market rent had been agreed or determined at the
relevant review date with interest at the Specified Rate upon each quarterly constituent
part of the said difference from the date upon which each quarterly constituent
part would have been payable if the reviewed rent had been agreed or determined
at the relevant review date until the payment of the same

 

6.7            Memorandum
of rent review

 

The parties shall cause a memorandum of the reviewed
rent duly signed by the Landlord and the Tenant to be endorsed on or securely
annexed to this Lease and the counterpart of this Lease and each party shall
bear its own costs of so doing

 

6.8            General

 

6.8.1                        If the expert nominated pursuant to Clause 6.5.1
hereof shall die or decline to act the President for the time being of the
Royal Institution of Chartered Surveyors or the person acting on his behalf may
on the application of either the Landlord or the Tenant by writing discharge
the expert and appoint another in his place this procedure being repeated as
often as necessary

 

6.8.2                        If either the Landlord or the Tenant shall fail to pay
any costs awarded against it under any expert determination under the
provisions hereof within 21 days of the same being demanded by the expert the
other shall be entitled to pay the same and the amount so paid shall be repaid
by the party chargeable within 14 days of written demand

 

6.8.3                        The market rent shall be deemed to have been
ascertained on the date when the same has been agreed between the Landlord and
the Tenant or as the case may be the date when the written determination of the
expert is notified in writing to the Landlord and the Tenant

 

7.              BREAK CLAUSE

 

The Tenant may determine this Lease by serving not
less that six months written notice on the Landlord expiring on the fifth
anniversary of the Term provided that on the expiry of such notice the sum of
£5,000.00 (exclusive of VAT) shall be paid to the Landlord and on expiry of
such notice and payment of the said sum this Lease shall determine without
prejudice to the rights of either party in respect of any antecedent claim or
breach of covenant.

 

 

29

 

 

 

 

 

8.                                       CERTIFICATE

 

The Original Landlord and the Original Tenant hereby
certify that there is no agreement for lease or tack to which this Lease gives
effect

 

9.                                       RIGHTS OF THIRD PARTIES

 

The Contracts (Rights of Third Parties Act 1999) shall
not apply to this Lease

 

IN WITNESS whereof the parties hereto have executed
this deed the day and year first before written

 

THE FIRST SCHEDULE hereinbefore referred to

ALL THAT piece or parcel of land situate and
known as the Premises Together with the buildings now or hereafter erected
thereon or on parts thereof and more particularly delineated and edged red on
the plan annexed hereto together with all sewers drains pipes wires and cables
exclusively serving the said property and which are situated therein or thereunder
and including all Landlord’s fixtures and fittings from time to time in or upon
the same

 

THE SECOND SCHEDULE hereinbefore referred to

Easements and Rights
granted

 

The following rights are granted to the Tenant and all
persons expressly or by implication authorised by the Tenant to use the same in
respect of the Demised Premises

 

1.                                       The right to the free and uninterrupted
passage and running of water soil gas electricity and telephonic communications
and the services and supplies to and from the Demised Premises in and through
the sewers drains wires pipes channels watercourses and other conducting media
which are now or may at any time during the said term be in on over or under
any nearby land which the Landlord owns or has the benefit of rights over

 

THE THIRD SCHEDULE
hereinbefore referred to

Exceptions and
Reservations

 

Subject to the provisions of Clause 5.7 all rights of
entry upon the Demised Premises referred to in this Lease

 

THE FOURTH SCHEDULE

hereinbefore referred to

 

The Surety hereby covenants with the Landlord that at
all times during the said term and notwithstanding any disclaimer of these
presents the rents hereby reserved and all other sums and payments agreed to be
paid by the Tenant to the Landlord will be paid at the respective times and in
manner hereinbefore appointed for payment thereof and that the several
stipulations hereinbefore on the Tenant’s part contained will be duly performed
observed and kept in all cases as well after as before any disclaimer and that
the Surety will pay and make good to the Landlord all reasonable losses costs
and expenses properly sustained by the Landlord through the default of the
Tenant in respect of any of the before mentioned matters Provided Always that
any 

 

30

 

neglect or forbearance of the Landlord in endeavouring
to obtain payment of the said several rents and payments as and when the same
became due or its delay in taking any steps to enforce performance or
observance of the several covenants stipulations on the Tenant’s part contained
and any time which may be given by the Landlord to the Tenant shall not release
or in any way lessen or affect the liability of the Surety under the guarantee
on its part hereinbefore contained and Provided further that the Surety shall
be bound by all or any agreements made between the Landlord and the Tenant as
to the market rent of the Demised Premises pursuant to any review of rent
hereunder and by any determination of an expert in that behalf to the intent that
any rent agreed or determined as aforesaid shall be deemed to be properly
agreed or determined and no failure to adhere to the procedures or timetables
herein provided nor the inclusion or exclusion of any item which should have
been excluded or included in determining the market rent shall release or
affect the liability of the Surety hereunder Provided Also that in the event of
the Tenant during the said term hereby granted entering into liquidation or
(being a private individual) becoming bankrupt and the Liquidator thereof or
the Trustee in such bankruptcy disclaiming this Lease THE SURETY HEREBY
COVENANTS with the Landlord that it will if required by the Landlord in
writing within 3 months of such disclaimer (as to which time shall be of the
essence) accept from the Landlord a lease of the Demised Premises in their then
actual state or condition for a term equal in duration to the residue remaining
unexpired of the term hereby granted at clause 2 the time of the granting of
such lease to the Surety such lease to be at the same rent as that for the time
being payable hereunder and to contain the like Tenant’s and Landlord’s
covenants respectively and the like provisions and conditions in all respects
(including the proviso for re-entry) as are herein contained (other than this
clause).  Provided further that the
Surety’s obligations to the Landlord shall last throughout the Term but be
limited to:

 

1                                          In the case of the Surety the period
during which the Original Tenant is bound by the Tenant’s covenants in this
Lease together with any additional period during which the Original Tenant is
liable under an authorised guarantee agreement; and

 

2                                          In the case of any guarantor(s) required
pursuant to sub-clause 3.33.2.2.2, the period during which any relevant assignee
is bound by the Tenant’s covenants of this Lease together with any additional
period during which such assignee is liable under an authorised guarantee
agreement

 

Form of authorised
guarantee agreement

 

1.                                       The Tenant will procure the punctual
payment of the rents and the observance and performance of all obligations of
the Assignee as lessee under these Presents and in the case of any default the
Tenant will on demand pay such rents and observe and perform such obligations
as if the Tenant instead of the Assignee were liable therefor as a principal
obligor and not merely as a surety

 

2.                                       The Tenant agrees with the Landlord as a
primary obligation to keep the Landlord Indemnified on demand against all
losses damages costs and expenses incurred by the Landlord as a result of any
failure by the Assignee to pay the rents and/or observe and perform such
obligations or as a result of any obligation of the Assignee as lessee under
these Presents being or becoming unenforceable

 

31

 

3.                                       If this lease is disclaimed by or on
behalf of the Assignee the Tenant will (if so required by the Landlord by
written notice to the Tenant within six months after such disclaimer) take from
the Landlord and execute and deliver to the Landlord a counterpart of a new
lease of the Premises for the residue of the Contractual Term unexpired at the
date of such disclaimer at the same rents as are reserved from time to time by
and subject to the same covenants and provisions as are contained in these
Presents (mutatis mutandis) and the Tenant will on demand pay the Landlord’s
legal costs in connection with such lease

 

4.                                       The obligations of the Tenant under these
Presents shall be in addition to any other right or remedy of the Landlord and shall
not be discharged diminished or in any way affected by:

 

4.1                                 any time or indulgence granted by the
Landlord to the Assignee or any neglect or forbearance of the Landlord in
obtaining payment of the rents or enforcing the obligations of the Assignee as
lessee under these Presents

 

4.2                                 any refusal by the Landlord to accept
rents tendered at a time when the Landlord was entitled (or would after service
of the appropriate statutory notice have been entitled) to re-enter the Demised
Premises

 

4.3                                 any surrender by the Assignee of part of
the Demised Premises in which event the liability of the Tenant shall continue
in respect of the part of the Premises not so surrendered after making any
necessary apportionments under section 140 of the Law of Property Act 1925

 

4.4                                 any variation of these Presents (subject
to section 18 of the Act of 1995) or other act omission matter or thing (other
than a release by deed given by the Landlord) by which but for this provision
the obligations of the Tenant under these Presents would have been so
discharged diminished or affected

 

EXECUTED as a DEED and

Delivered by NEXSAN TECHNOLOGIES LIMITED

acting by:

 

 

 

 

	
   

  	
  DIRECTOR

  
	
   

  
	
   /s/

  	
  ILLEGIBLE

  
	
   

  
	
   

  	
  SECRETARY/DIRECTOR

  
	
   

  
	
   /s/

  	
  ILLEGIBLE

  

 

32

 

	
   

  	
   

  	
   

  	
   

  	
  TITLE
  NUMBER

  	
   

  	
   

  
	
  H. M. LAND REGISTRY

  	
   

  	
   

  	
   

  	
  DY
  290336

  
	
  ORDNANCE
  SURVEY

  PLAN REFERENCE

  	
   

  	
  SK3537

  	
   

  	
  SECTION          M

  	
   

  	
  SCALE                  1  /1250

  
	
  ADMINISTRATIVE
  AREA 

  	
  CITY
  OF DERBY

  	
   

  	
   

  	
   

  	
  ©
  Crown Copyright 1997

  

 

 

This office copy shows the
state of the title plan on 23 December 2002 at 10:11:30.  It may be subject to minor distortions in
scale.

Under s.113 of the Land Registration Act 1925, this copy is admissible in
evidence to the same extent as the original.

Issued on 23 December 2002.

The title is dealt with by the Nottingham (West) District Land Registry.

© Crown copyright.  Produced by
HMLR.  Further reproduction in whole or
in part is prohibited without the prior written permission of Ordnance Survey.  Licence Number 013272128.EXHIBIT
10.16

 

	
   

  
	
   

  
	
  NEXSAN TECHNOLOGIES
  INCORPORATED

  
	
   

  
	
  LOAN AND SECURITY
  AGREEMENT

  
	
   

  

 

 

 

This
LOAN AND SECURITY AGREEMENT is entered into as of March 31, 2004, by and between COMERICA BANK (“Bank”)
and NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

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

 

AGREEMENT

 

The
parties agree as follows:

 

1.             DEFINITIONS AND CONSTRUCTION.

 

1.1          Definitions.  As used in this Agreement, the following
terms shall have the following definitions:

 

“Accounts”
means all presently existing and hereafter arising accounts, contract rights,
payment intangibles, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower’s Books relating to any of
the foregoing.

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

“Closing
Date” means the date of this Agreement.

 

“Code”
means the California Uniform Commercial Code.

 

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

 

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

 

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

 

“Current
Liabilities” means, as of any applicable date, all amounts that should, in
accordance with GAAP, be included as current liabilities on the consolidated
balance sheet of Borrower and its Subsidiaries, as at such date, plus, to the
extent not already included therein, all outstanding Credit Extensions made
under this Agreement, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendible at the option of Borrower or any Subsidiary to a
date more than one year from the date of determination.

 

“Daily
Balance” means the amount of the Obligations owed at the end of a given day.

 

3

 

“Eligible
Accounts” means those Accounts that arise in the ordinary course of Borrower’s
business that comply with all of Borrower’s representations and warranties to
Bank set forth in Section 5.4; provided, that standards of eligibility may
be fixed and revised from time to time by Bank in Bank’s reasonable judgment
and upon notification thereof to Borrower in accordance with the provisions
hereof.  Unless otherwise agreed to by
Bank, Eligible Accounts shall not include the following:

 

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

 

(b)           Accounts
with respect to an account debtor, twenty-five percent (25%) of whose Accounts
the account debtor has failed to pay within ninety (90) days of invoice date;

 

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

 

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

 

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

 

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

 

(g)           Accounts
with respect to which the account debtor is the United States or any
department, agency, or instrumentality of the United States;

 

(h)           Accounts
with respect to which the account debtor is a military agency or which were
generated from the sale of defense articles or services;

 

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

 

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

 

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

 

4

 

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

 

“Eligible
Foreign Accounts” means Accounts with respect to which the account debtor does
not have its principal place of business in the United States and that (i) are
supported by one or more letters of credit in an amount and of a tenor, and
issued by a financial institution, acceptable to Bank, or (ii) that Bank
approves on a case-by-case basis.

 

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

 

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

 

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

 

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

 

“Guarantor”
means Nexsan Corporation.

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

“Permitted
Indebtedness” means:

 

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

 

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

 

(c)           Indebtedness
secured by a lien described in clause (c) of the defined term “Permitted
Liens,” provided (i) such Indebtedness does not exceed the lesser of the
cost or fair market value of the equipment financed with such Indebtedness and (ii) such
Indebtedness does not exceed $100,000 in the aggregate at any given time; and

 

(d)           Subordinated
Debt.

 

“Permitted
Investment” means:

 

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

 

(b)           (i) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within

 

6

 

one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having rating of at least A-2
or P-2 from either Standard & Poor’s Corporation or Moody’s Investors
Service, (iii) certificates of deposit maturing no more than one (1) year
from the date of investment therein issued by Bank and (iv) Bank’s money
market accounts.

 

“Permitted
Liens” means the following:

 

(a)           Any
Liens existing on the Closing Date and disclosed in the Schedule or arising
under this Agreement or the other Loan Documents;

 

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

 

(c)           Liens
(i) upon or in any equipment which was not financed by Bank acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment;

 

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

 

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

 

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

 

“Quick
Assets” means, at any date as of which the amount thereof shall be determined,
the unrestricted cash and cash-equivalents and accounts receivable (net of
reserves therefore) of Borrower (on a consolidated basis) determined in
accordance with GAAP.

 

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

 

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

 

“Revolving
Line” means a credit extension of up to Three Million Dollars ($3,000,000).

 

7

 

“Revolving
Maturity Date” means March 31, 2006; provided, however, that
the Revolving Maturity Date may be extended through and including March 31,
2007, subject to (i) Borrower’s prior written request therefor, received
by Bank no later than ninety (90) days prior to the then current Revolving
Maturity Date; (ii) receipt by Bank (concurrent with the request for
extension) of Borrower’s pro forma operating budget for the following two (2) years,
in form and content reasonably satisfactory to Bank; and (iii) Bank’s
final credit approval thereof.

 

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

 

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

 

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

 

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

 

2.             LOAN AND TERMS OF PAYMENT.

 

2.1          Credit
Extensions.

 

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

 

(a)           Revolving
Advances.

 

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

 

(ii)           Whenever
Borrower desires an Advance, Borrower will notify Bank by facsimile
transmission or telephone no later than 3:00 p.m. Pacific time, on the Business
Day that the Advance is to be made.  Each
such notification shall be promptly

 

8

 

confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto.  Bank shall make Advances under this
Agreement, based upon instructions received from a Responsible Officer or a
designee of a Responsible Officer, or without instructions if in Bank’s
discretion such Advances are necessary to meet Obligations which have become
due and remain unpaid.  Bank shall be
entitled to rely on any telephonic notice given by a person who Bank reasonably
believes to be a Responsible Officer or a designee thereof, and Borrower shall
indemnify and hold Bank harmless for any damages or loss suffered by Bank as a
result of such reliance.  Bank will
credit the amount of Advances made under this Section 2.1(a) to
Borrower’s deposit account.

 

(b)           Letters
of Credit.

 

(i)            Subject
to the terms and conditions of this
Agreement, at any time prior to the Revolving Maturity Date, Bank agrees to
issue or cause to be issued letters of
credit for the account of Borrower
(each, a “Letter of Credit” and
collectively, the “Letters of Credit”)
in an aggregate outstanding face amount not to exceed the lesser of the
Revolving Line or the Borrowing Base minus, in each case, the aggregate
amount of the outstanding Advances and issued Letters of Credit at any time,
provided that the aggregate face amount of all outstanding Letters of Credit
shall not exceed Five Hundred Thousand Dollars ($500,000).  All Letters of Credit shall be, in form and
substance, acceptable to Bank in its sole discretion and shall be subject to
the terms and conditions of Bank’s form of standard application and letter of
credit agreement (the “Application”), which Borrower hereby agrees to execute,
including Bank’s standard fee equal to the greater of 1.5% per annum of the
face amount of each Letter of Credit or Five Hundred Dollars ($500).  On any drawn but unreimbursed Letter of
Credit, the unreimbursed amount shall be deemed an Advance under Section 2.1(a).  Prior to the Revolving Maturity Date,
Borrower shall secure in cash all obligations under any outstanding Letters of
Credit on terms acceptable to Bank.

 

(ii)           The
obligation of Borrower to reimburse Bank for drawings made under Letters of
Credit shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement, the Application, and
such Letters of Credit, under all circumstances whatsoever.  Borrower shall indemnify, defend, protect,
and hold Bank harmless from any loss, cost, expense or liability, including,
without limitation, reasonable attorneys’ fees, arising out of or in connection
with any Letters of Credit, except for expenses caused by Bank’s gross negligence
or willful misconduct.

 

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

 

2.3           Interest
Rates, Payments, and Calculations.

 

(a)            Interest
Rates.

 

(i)            Advances.  Except as set forth in Section 2.3(b),
the Advances shall bear interest, on the outstanding Daily Balance thereof, at
a rate equal to the Prime Rate.

 

9

 

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

 

(c)           Payments.  Interest hereunder shall be due and payable
on the last calendar day of each month during the term hereof.  Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
deposit accounts or against the Revolving Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable hereunder.  Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.  All payments shall be free and clear of any
taxes, withholdings, duties, impositions or other charges, to the end that Bank
will receive the entire amount of any Obligations payable hereunder, regardless
of source of payment.

 

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

 

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

 

2.5           Fees.  Borrower shall pay to Bank the following:

 

(a)           Facility
Fee.  On the Closing Date, a Facility
Fee equal to $7,500, which shall be nonrefundable; and

 

(b)           Bank
Expenses.  On the Closing Date, all
Bank Expenses incurred through the Closing Date, including reasonable attorneys’
fees and expenses and, after the Closing Date, all Bank Expenses, including
reasonable attorneys’ fees and expenses, as and when they become due.

 

10

 

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

 

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

 

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

 

(c)           imposes
upon Bank any other condition with respect to its performance under this
Agreement,

 

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

 

2.7          Term.  This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force
and effect for so long as any Obligations remain outstanding or Bank has any
obligation to make Credit Extensions under this Agreement.  Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. 
Notwithstanding termination, Bank’s Lien on the Collateral shall remain
in effect for so long as any Obligations are outstanding.

 

3.             CONDITIONS OF LOANS.

 

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

 

(a)           this
Agreement;

 

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

 

(c)           UCC
National Form Financing Statement;

 

(d)           an
Unconditional Guaranty executed by Guarantor,

 

(e)           a
Third Party Pledge agreement executed by Guarantor;

 

11

 

(f)            evidence
of or authorization for termination of any Liens other than Permitted Liens;

 

(g)           securities
and/or deposit account control agreements with respect to any such accounts
permitted hereunder to be maintained outside Bank;

 

(h)           agreement
to provide insurance;

 

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

 

(j)            current
financial statements of Borrower;

 

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

 

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

 

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

 

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

 

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

 

4.             CREATION OF SECURITY INTEREST.

 

4.1          Grant
of Security Interest.  Borrower
grants and pledges to Bank a continuing security interest in all presently
existing and hereafter acquired or arising Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents.  Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof.  Borrower also hereby agrees not to sell,
transfer, assign, mortgage, pledge, lease, grant a security interest in, or
encumber any of its intellectual property.

 

12

 

4.2                               Delivery
of Additional Documentation Required. 
Borrower shall from time to time execute and deliver to Bank, at the
request of Bank, all Negotiable Collateral, all financing statements and other
documents that Bank may reasonably request, in form satisfactory to Bank, to
perfect and continue the perfection of Bank’s security interests in the
Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents. 
Borrower from time to time may deposit with Bank specific time deposit
accounts to secure specific Obligations. 
Borrower authorizes Bank to hold such balances in pledge and to decline
to honor any drafts thereon or any request by Borrower or any other Person to
pay or otherwise transfer any part of such balances for so long as the
Obligations are outstanding.

 

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

 

5.                                      REPRESENTATIONS AND WARRANTIES.

 

Borrower
represents and warrants as follows:

 

5.1                               Due
Organization and Qualification. 
Borrower and each Subsidiary is a corporation duly existing under the
laws of its state of incorporation and qualified and licensed to do business in
any state in which the conduct of its business or its ownership of property
requires that it be so qualified.

 

5.2                               Due
Authorization; No Conflict.  The
execution, delivery, and performance of the Loan Documents are within Borrower’s
powers, have been duly authorized, and are not in conflict with nor constitute
a breach of any provision contained in Borrower’s Articles of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound.  Borrower is not in default under any material
agreement to which it is a party or by which it is bound.

 

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

 

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

 

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

 

5.6                               Intellectual
Property.  Borrower is the sole owner
of its patents, trademarks, copyrights and other intellectual property, except
for non-exclusive licenses granted 

 

13

 

by Borrower to its customers in the ordinary course of
business.  To the best of Borrower’s
knowledge, each of Borrower’s patents is valid and enforceable, and no part of
its intellectual property has been judged invalid or unenforceable, in whole or
in part, and, except as set forth in the Schedule, no claim has been made that
any part of its intellectual property violates the rights of any third party.

 

5.7                               Name;
Location of Chief Executive Office. 
Except as disclosed in the Schedule, Borrower has not done business
under any name other than that specified on the signature page hereof.  The chief executive office of Borrower is
located at the address indicated in Section 10 hereof.  All Borrower’s Inventory and Equipment is
located only at the location set forth in Section 10 hereof.

 

5.8                               Litigation.  Except as set forth in the Schedule, there
are no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could have a Material Adverse Effect,
or a material adverse effect on Borrower’s interest or Bank’s security interest
in the Collateral.

 

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

 

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

 

5.11                        Regulatory
Compliance.  Borrower and each
Subsidiary have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA, and no event has occurred
resulting from Borrower’s failure to comply with ERISA that could result in
Borrower’s incurring any material liability. 
Borrower is not an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940.  Borrower is not engaged principally, or as
one of the important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations T and U of the Board of Governors of the Federal Reserve System).  Borrower has complied with all the provisions
of the Federal Fair Labor Standards Act. 
Borrower has not violated any statutes, laws, ordinances or rules applicable
to it, violation of which could have a Material Adverse Effect.

 

5.12                        Environmental
Condition.  Except as disclosed in
the Schedule, none of Borrower’s or any Subsidiary’s properties or assets has
ever been used by Borrower or any Subsidiary or, to the best of Borrower’s
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in accordance with applicable law; to the best of Borrower’s
knowledge, none of Borrower’s properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
hazardous waste or hazardous substance disposal site, or a candidate for
closure pursuant to any environmental protection 

 

14

 

statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by Borrower or any Subsidiary resulting in
the releasing, or otherwise disposing of hazardous waste or hazardous
substances into the environment.

 

5.13                        Taxes.  Borrower and each Subsidiary have filed or
caused to be filed all tax returns required to be filed, and have paid, or have
made adequate provision for the payment of, all taxes reflected therein.

 

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

 

5.15                        Government
Consents.  Borrower and each
Subsidiary have obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of Borrower’s
business as currently conducted, the failure to obtain which could have a
Material Adverse Effect.

 

5.16                        Accounts.  None of Borrower’s nor any Subsidiary’s
property is maintained or invested with a Person other than Bank.

 

5.17                        Full
Disclosure.  No representation,
warranty or other statement made by Borrower in this Agreement or any
certificate or written statement furnished to Bank contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained in such certificates or statements not
misleading.

 

6.                                      AFFIRMATIVE COVENANTS.

 

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

 

6.1                               Good
Standing.  Borrower shall maintain
its and each of its Subsidiaries’ corporate existence and good standing in its
jurisdiction of incorporation and maintain qualification in each jurisdiction
in which it is required under applicable law. 
Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, in force all licenses, approvals and agreements, the loss of which
could have a Material Adverse Effect

 

6.2                               Government
Compliance.  Borrower shall meet, and
shall cause each Subsidiary to meet, the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA.  Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules and
regulations to which it is subject, noncompliance with which could have a
Material Adverse Effect.

 

6.3                               Financial
Statements, Reports, Certificates. 
Borrower shall deliver the following to Bank (a) as soon as
available, but in any event within forty (40) days after the end of each
calendar month, a company prepared consolidated and consolidating balance
sheet, 

 

15

 

income, and cash flow statement covering Borrower’s
consolidated and consolidating operations during such period, prepared in
accordance with GAAP, consistently applied, in a form acceptable to Bank and
certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred and twenty (120) days after the end of Borrower’s
fiscal year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified
opinion on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank; (c) copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and, if applicable,
all reports on Forms 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any
legal actions pending or, to Borrower’s knowledge, threatened against Borrower
or any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000) or more; (e) as soon
as available, but in any event no later than thirty (30) days prior to the
beginning of Borrower’s fiscal year, an annual business plan prepared on a
consolidated and consolidating basis; and (t) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time.

 

Within
twenty (20) days after the last day of each month, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.

 

Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit D
hereto.

 

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

 

6.4                               Inventory;
Returns.  Borrower shall keep all
Inventory in good and marketable condition, free from all material defects
except for Inventory for which adequate reserves have been made.  Returns and allowances, if any, as between
Borrower and its account debtors shall be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist at the time of
the execution and delivery of this Agreement. 
Borrower shall promptly notify Bank of all returns and recoveries and of
all disputes and claims, where the return, recovery, dispute or claim involves
more than One Hundred Thousand Dollars ($100,000).

 

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

 

16

 

6.6                                Insurance.

 

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

 

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

 

6.7                               Accounts.  Borrower shall maintain and shall cause each
of its Subsidiaries to maintain its primary depository, operating, and
investment accounts with Bank and/or Comerica Securities, Inc.

 

6.8                               Quick
Ratio.  Borrower shall maintain at
all times, measured as of the last day of each calendar month, on a
consolidated basis with Guarantor, a ratio of Quick Assets to Current
Liabilities plus, to the extent not already included therein, all
Indebtedness (including without limitation any Contingent Obligations) owing
from Borrower to Bank, of at least 1.50 to 1.00.

 

6.9                               Profitability.  Borrower shall maintain, on a consolidated
basis with Guarantor, a minimum net profit before taxes of (a) One Dollar
($1.00) for fiscal year 2004, and (b) Two Million Dollars ($2,000,000) for
fiscal year 2005.  Borrower shall incur
no more than Five Hundred Thousand Dollars ($500,000) in cumulative losses
during fiscal year 2005.

 

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

 

7.                                      NEGATIVE COVENANTS.

 

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

 

7.1                               Dispositions.  Convey, sell, lease, transfer or otherwise
dispose of (collectively, a “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, including its
intellectual property, other than:  (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of
non-exclusive licenses and similar arrangements 

 

17

 

for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (iii) Transfers of
worn-out or obsolete Equipment which was not financed by Bank.

 

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

 

7.3                               Mergers
or Acquisitions.  Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with or
into any other business organization, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person.

 

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

 

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

 

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

 

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

 

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

 

7.9                               Subordinated
Debt.  Make any payment in respect of
any Subordinated Debt, or permit any of its Subsidiaries to make any such
payment, except in compliance with the 

 

18

 

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

 

7.10                        Inventory
and Equipment.  Store the Inventory
or the Equipment with a bailee, warehouseman, or other third party unless the
third party has been notified of Bank’s security interest and Bank (a) has
received an acknowledgment from the third party that it is holding or will hold
the Inventory or Equipment for Bank’s benefit or (b) is in pledge
possession of the warehouse receipt, where negotiable, covering such Inventory
or Equipment.  Store or maintain any
Equipment or Inventory at a location other than the location set forth in Section 10
of this Agreement.

 

7.11                        Compliance.  Become an “investment company” or be
controlled by an “investment company,” within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Credit
Extension for such purpose.  Fail to meet
the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect, or a material adverse effect on
the Collateral or the priority of Bank’s Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.

 

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

 

8.                                      EVENTS OF DEFAULT.

 

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

 

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

 

8.2                                Covenant
Default.

 

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

 

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

 

19

 

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

 

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

 

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

 

8.6                               Other
Agreements.  If there is a default or
other failure to perform in any agreement to which Borrower is a party or by
which it is bound resulting in a right by a third party or parties, whether or
not exercised, to accelerate the maturity of any Indebtedness in an amount in
excess of One Hundred Thousand Dollars ($100,000) or which could reasonably be
expected to have a Material Adverse Effect;

 

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

 

8.8                               Judgments.  If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such judgment); or

 

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

 

8.10                        Guaranty.  If any guaranty of all or a portion of the
Obligations (a “Guaranty”) ceases for any reason to be in full force and
effect, or any guarantor fails to perform any obligation under any Guaranty or
a security agreement securing any Guaranty (collectively, the “Guaranty
Documents”), or any event of default occurs under any Guaranty Document or 

 

20

 

any guarantor revokes or purports to revoke a
Guaranty, or any material misrepresentation or material misstatement exists now
or hereafter in any warranty or representation set forth in any Guaranty
Document or in any certificate delivered to Bank in connection with any
Guaranty Document, or if any of the circumstances described in Sections 8.3
through 8.8 occur with respect to any guarantor or any guarantor dies or
becomes subject to any criminal prosecution, or any circumstances arise causing
Bank, in good faith, to become insecure as to the satisfaction of any of any
guarantor’s obligations under the Guaranty Documents.

 

9.                                      BANK’S RIGHTS AND REMEDIES.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

(g)                                 Dispose
of the Collateral by way of one or more contracts or transactions, for cash or
on terms, in such manner and at such places (including Borrower’s premises) as
Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank
deems appropriate;

 

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

 

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

 

9.2                               Power
of Attorney.  Effective only upon the
occurrence and during the continuance of an Event of Default, Borrower hereby
irrevocably appoints Bank (and any of Bank’s designated officers, or employees)
as Borrower’s true and lawful attorney to: 
(a) send requests for verification of Accounts or notify account
debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s
name on any checks or other forms of payment or security that may come into
Bank’s possession; (c) sign Borrower’s name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust
all claims under and decisions with respect to Borrower’s policies of
insurance; (f) settle and adjust disputes and claims respecting the
accounts directly with account debtors, for amounts and upon terms which Bank
determines to be reasonable; and (g) to file, in its sole discretion, one
or more financing or continuation statements and amendments thereto, relative
to any of the Collateral.  The
appointment of Bank as Borrower’s attorney in fact, and each and every one of
Bank’s rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been
fully repaid and performed and Bank’s obligation to provide Credit Extensions
hereunder is terminated.

 

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

 

9.4                               Bank
Expenses.  If Borrower fails to pay
any amounts or furnish any required proof of payment due to third persons or
entities, as required under the terms of this Agreement, then Bank may do any
or all of the following after reasonable notice to Borrower:  (a) make payment of the same or any part
thereof; (b) set up such reserves under a loan facility in Section 2.1
as Bank deems necessary to protect Bank from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type
discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. 
Any amounts so paid or deposited by Bank shall constitute Bank Expenses,
shall be immediately due and payable, and shall bear interest at the then
applicable rate hereinabove provided, and shall be secured by the
Collateral.  Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the
future or a waiver by Bank of any Event of Default under this Agreement.

 

22

 

9.5                               Bank’s
Liability for Collateral.  So long as
Bank complies with reasonable banking practices, Bank shall not in any way or
manner be liable or responsible for:  (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other person whomsoever.  All risk of loss, damage or destruction of
the Collateral shall be borne by Borrower.

 

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

 

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

 

10.                               NOTICES.

 

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

 

	
  If to Borrower:

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
  21700 Oxnard Street, Suite 1850

  
	
   

  	
  Woodland Hills, CA 91367

  
	
   

  	
  Attn: Mohan Vachani – CEO/CFO

  
	
   

  	
  FAX: (818) 715-9175

  
	
   

  	
   

  
	
  If to Bank:

  	
  Comerica Bank

  
	
   

  	
  9920 S. La Cienega Blvd., Suite 1401

  
	
   

  	
  Inglewood, CA 90301 Attn: Manager

  
	
   

  	
  FAX: (310) 338-6110

  
	
   

  	
   

  
	
  with a copy to:

  	
  Comerica Bank

  
	
   

  	
  1100 Glendon Avenue, Suite 2020

  
	
   

  	
  Los Angeles, CA 90024

  
	
   

  	
  Attn: Scott M. Lane – V.P. & Regional
  Manager

  
	
   

  	
  FAX: (310) 481-1099

  

 

23

 

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

 

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

 

This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of California, without regard to principles of conflicts of
law.  Each of Borrower and Bank hereby
submits to the exclusive jurisdiction of the state and Federal courts located
in the County of Santa Clara, State of California.  BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT.  EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

 

12.                               GENERAL PROVISIONS.

 

12.1                        Successors
and Assigns.  This Agreement shall
bind and inure to the benefit of the respective successors and permitted
assigns of each of the parties; provided, however, that neither this Agreement
nor any rights hereunder may be assigned by Borrower without Bank’s prior
written consent, which consent may be granted or withheld in Bank’s sole
discretion.  Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank’s
obligations, rights and benefits hereunder.

 

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

 

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

 

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

 

12.5                        Amendments
in Writing, Integrating.  Neither
this Agreement nor the Loan Documents can be amended or terminated orally.  All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the 

 

24

 

subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan Documents.

 

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

 

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

 

[Balance of Page Intentionally
Left Blank]

 

25

 

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

 

	
   

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mohan Vachani

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
  CFO

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ ILLEGIBLE

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
  Vice President

  
				

 

 

[Signature Page to
Loan and Security Agreement]

 

 

	
  DEBTOR

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
  SECURED PARTY:

  	
  COMERICA BANK

  

 

EXHIBIT
A

 

COLLATERAL
DESCRIPTION ATTACHMENT

TO LOAN AND SECURITY AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

2

 

EXHIBIT
B

 

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

 

DEADLINE FOR SAME DAY PROCESSING IS [3:00* P.M., Pacific Time/
3:30 P.M. Eastern Time]

FORMULA BASED LINES:  DEADLINE FOR NEXT DAY PROCESSING IS [3:00* P.M.,
Pacific Time/ 3:30 P.M. Eastern Time]

DEADLINE FOR EQUIPMENT ADVANCES IS [3:00 P.M., Pacific Time/ 3:30 P.M.
Eastern Time]**

DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M.
Eastern Time]

[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]

**Subject to 3 day advance notice.

 

	
  To: Loan Analysis

  	
  DATE:

  	
   

  	
  TIME:

  	
   

  

FAX#:  (650)
846-6840

 

	
  FROM:

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED 

  	
   

  	
  TELEPHONE
  REQUEST (For Bank Use Only):   

  
	
   

  	
  Borrower’s
  Name

  	
   

  	
   

  
	
  FROM:
  

  	
   

  	
   

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

  
	
   

  	
  Authorized
  Signer’s Name 

  	
   

  
	
  FROM:

  	
  MOHAN
  VACHANI 

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer’s Name

  	
   

  	
  Authorized
  Request & Phone #

  
	
  PHONE
  # 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FROM
  ACCOUNT#

  	
   

  	
  Received
  by (Bank) & Phone # 

  
	
  (please
  include Note number, if applicable)

  	
   

  	
   

  
	
  TO
  ACCOUNT#: 

  	
   

  	
   

  
	
  (please
  include Note number, if applicable)

  	
   

  	
  Authorized
  Signature (Blank)

  
	
   

  	
   

  	
   

  
	
  REQUESTED
  TRANSACTION TYPE  

  	
   

  	
  REQUESTED
  DOLLAR AMOUNT

  	
   

  	
  For
  Bank Use Only     

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRINCIPAL
  INCREASE* (ADVANCE)

  	
   

  	
  $

  	
   

  	
  Date
  Rec’d:

  
	
  PRINCIPAL
  PAYMENT (ONLY)

  	
   

  	
  $

  	
   

  	
  Time:

  
	
   

  	
   

  	
   

  	
   

  	
  Com.
  Status:     YES     NO

  
	
  OTHER
  INSTRUCTIONS:

  	
   

  	
   

  	
   

  	
  Status
  Date:

  
	
   

  	
   

  	
  Time:

  
	
   

  	
   

  	
  Approval:

  
								

 

All representations and warranties of Borrower stated
in the Loan Agreement are true, correct and complete in all material respects
as of the date of the telephone request for and advance confirmed by this
Borrowing Certificate; provided, however, that those representations and
warranties the date expressly referring to another date shall be true, correct
and complete in all material respects as of such date.

 

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

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

 

	
  OUTGOING WIRE TRANSFER INSTRUCTIONS

  	
  Fed Reference Number

  	
  Bank Transfer Number

  
	
   

  	
   

  	
   

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

  
	
   

  
	
  *Beneficiary Name

  	
   

  
	
  *Beneficiary Account Number

  	
   

  
	
  *Beneficiary Address

  	
   

  
	
  Currency Type

  	
  US DOLLARS ONLY

  
	
  *ABA Routing Number (9 Digits)

  	
   

  
	
  *Receiving Institution Name

  	
   

  
	
  *Receiving Institution Address

  	
   

  
	
  *Wire Account

  	
  $

  
				

 

 

EXHIBIT
C

 

BORROWING
BASE CERTIFICATE

 

	
  Borrower:  NEXSAN TECHNOLOGIES
  INCORPORATED

  	
   

  	
  Lender:  Comerica Bank

  

 

	
  Commitment Amount:  $3,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  
	
  1.

  	
  Accounts Receivable Book Value as of

  	
   

  	
  $

  
	
  2.

  	
  Additions (please explain on reverse)

  	
   

  	
  $

  
	
  3.

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE
  DEDUCTIONS (without duplication)

  	
   

  	
   

  
	
  4.

  	
  Amounts over 90 days due

  	
  $

  	
   

  
	
  5.

  	
  Balance of 25% over 90 day accounts

  	
  $

  	
   

  
	
  6.

  	
  Concentration Limits

  	
  $

  	
   

  
	
  7.

  	
  Foreign Accounts

  	
  $

  	
   

  
	
  8.

  	
  Governmental Accounts

  	
  $

  	
   

  
	
  9.

  	
  Contra Accounts

  	
  $

  	
   

  
	
  10.

  	
  Demo Accounts

  	
  $

  	
   

  
	
  11.

  	
  Intercompany/Employee Accounts

  	
  $

  	
   

  
	
  12.

  	
  Military Accounts

  	
  $

  	
   

  
	
  13.

  	
  Other (please explain on reverse)

  	
  $

  	
   

  
	
  14.

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
  $

  
	
  15.

  	
  Eligible Accounts (#3 minus #14)

  	
   

  	
  $

  
	
  16.

  	
  LOAN VALUE OF ACCOUNTS (80% of #15)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  
	
  17.

  	
  Maximum Loan Amount

  	
   

  	
  $

  	
  3,000,000

  
	
  18.

  	
  Total Funds Available [Lesser of #17 or #16]

  	
   

  	
  $

  
	
  19.

  	
  Present balance owing on Line of Credit

  	
   

  	
  $

  
	
  20.

  	
  Outstanding under Sublimits (Letters of Credit)

  	
   

  	
  $

  
	
  21.

  	
  RESERVE POSITION (#18 minus #l9 and #20)

  	
   

  	
  $

  
							

 

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

 

 

NEXSAN TECHNOLOGIES INCORPORATED

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer

  	
   

  

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  

 

The
undersigned authorized officer of NEXSAN TECHNOLOGIES INCORPORATED hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower
is in complete compliance for the period ending
                                          
with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof.  Attached herewith are the required documents
supporting the above certification.  The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 40 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  AIR & A/P Agings, Borrowing Base Cert.

  	
   

  	
  Monthly within 20 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  AIR Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Quick Ratio 

  	
   

  	
  1.50:1.00

  	
   

  	
  :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Measured on a Yearly Basis

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Profitability

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FY04

  	
   

  	
  $

  	
  1.00

  	
   

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  FY05

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  (Losses
  FY05)

  	
   

  	
  $

  	
  (500,000

  	
  )

  	
  $

  	
   

  	
  Yes

  	
   

  	
  No

  

 

 

	
  Comments Regarding Exceptions: See
  Attached.    

  	
  BANK USE ONLY     

  
	
   

  	
   

  
	
   

  	
  Received by:

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SIGNATURE

  	
   

  	
  Verified: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
  TITLE

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DATE

  	
   

  	
  Compliance Status

  	
  Yes        No        

  
										

 

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This First
Amendment to Loan and Security Agreement (this “Amendment”) is entered into as
of April 22, 2005, by and between COMERICA BANK (“Bank”) and NEXSAN
TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank
are parties to that certain Loan and Security Agreement dated as of March 31,
2004, as amended from time to time (the “Agreement”).  The parties desire to amend the Agreement in
accordance with the terms of this Amendment.

 

NOW, THEREFORE,
the parties agree as follows:

 

1.             The following defined
terms in Section 1.1 of the Agreement hereby are added, amended or
restated as follows:

 

“Cash”
means unrestricted cash and cash equivalents (provided Borrower shall maintain
Five Hundred Thousand Dollars ($500,000) in Cash in an account at Bank at all
times).

 

“Eligible
Accounts” means those Accounts that arise in the ordinary course of Borrower’s
business that comply with all of Borrower’s representations and warranties to
Bank set forth in Section 5.4; provided, that standards of eligibility may
be fixed and revised from time to time by Bank in Bank’s reasonable judgment
and upon notification thereof to Borrower in accordance with the provisions
hereof.  Unless otherwise agreed to by
Bank, Eligible Accounts shall not include the following:

 

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

 

(b)           Accounts with respect
to an account debtor, twenty-five percent (25%) of whose Accounts the account
debtor has failed to pay within ninety (90) days of invoice date;

 

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

 

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

 

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

 

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

 

 

(g)           Accounts with respect
to which the account debtor is the United States or any department, agency, or
instrumentality of the United States;

 

(h)           Accounts with respect
to which the account debtor is a military agency or which were generated from
the sale of defense articles or services;

 

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

 

(j)            Accounts with respect
to an account debtor, including Subsidiaries and Affiliates, whose total
obligations to Borrower exceed twenty-five percent (25%) of all Accounts (the “Concentration
Limit”), to the extent such obligations exceed the aforementioned percentage,
except as approved in writing by Bank and provided that that Concentration
Limit for Bosch Security Systems, Inc. shall be thirty-five percent (35%);

 

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

 

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

 

“Evertrust”
means AESign Evertrust Inc., a Canadian corporation

 

“Evertrust
Acquisition” means the acquisition by Borrower of 100% of the issued and
outstanding stock of Evertrust.

 

“Liquidity”
means the sum of Cash plus net Accounts receivable.

 

“Permitted
Indebtedness” means:

 

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

 

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

 

(c)           Indebtedness secured by
a lien described in clause (c) of the defined term “Permitted Liens,”
provided (i) such Indebtedness does not exceed the lesser of the cost or
fair market value of the equipment financed with such Indebtedness and (ii) such
Indebtedness does not exceed $100,000 in the aggregate at any given time; and

 

(d)           Subordinated Debt; and

 

2

 

(e)           Indebtedness not to
exceed Three Hundred Fifty Thousand Dollars ($350,000) in connection with a
guaranty provided to Bell Microproducts.

 

“Permitted
Investment” means:

 

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

 

(b)           Investments in
Evertrust;

 

(c)           (i) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one (1) year
from the date of acquisition thereof, (ii) commercial paper maturing no
more than one (1) year from the date of creation thereof and currently having
rating of at least A-2 or P-2 from either Standard & Poor’s
Corporation or Moody’s Investors Service, (iii) certificates of deposit
maturing no more than one (I) year from the date of investment therein
issued by Bank and (iv) Bank’s money market accounts.

 

“Revolving
Maturity Date” means May 31, 2006.

 

2.             A new Section 2.5(c) is
hereby added to the Agreement as follows:

 

“Unused
Fee.  A fee equal to one quarter of
one percent (0.25%) of the difference between the amount then available under
the Revolving Line, and the average Daily Balance during the term hereof, paid
quarterly in arrears, which shall be nonrefundable.”

 

3.             Section 6.3 of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Financial
Statements, Reports, Certificates. 
Borrower shall deliver the following to Bank (a) as soon as
available, but in any event within thirty (30) days after the end of each
calendar month, a company prepared consolidated and consolidating balance
sheet, income, and cash flow statement covering Borrower’s consolidated and
consolidating operations during such period, prepared in accordance with GAAP,
consistently applied, in a form acceptable to Bank and certified by a
Responsible Officer; (b) as soon as available, but in any event within one
hundred and twenty (120) days after the end of Borrower’s fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) copies of all statements, reports and notices sent
or made available generally by Borrower to its security holders or to any
holders of Subordinated Debt and, if applicable, all reports on Forms 10-K and
10-Q filed with the Securities and Exchange Commission; (d) promptly upon
receipt of notice thereof, a report of any legal actions pending or, to
Borrower’s knowledge, threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of’ One Hundred
Thousand Dollars ($100,000) or more; (e) as soon as available, but in any
event no later than thirty (30) days prior to the beginning of Borrower’s
fiscal year, an annual business plan prepared on a consolidated and
consolidating basis; and (f) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time
to time.

 

3

 

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

 

Borrower shall
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit D
hereto.

 

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

 

4.             Section 6.7 of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Accounts.  Borrower shall maintain and shall cause each
of its Subsidiaries to maintain all their Cash domiciled in the United States
in an account at Bank at all times.”

 

5.             Section 6.8 of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Bank
Debt Liquidity Coverage.  Borrower
shall maintain at all times, measured as of the last day of each calendar month
on a consolidated basis, a ratio of Liquidity to all Indebtedness to Bank of at
least 1.75 to 1.00.

 

6.             Section 6.9 of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Intentionally
Omitted.”

 

7.             Section 7.3 of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Mergers
or Acquisitions.  Merge or
consolidate, at permit any of its Subsidiaries to merge or consolidate, with or
into any other business organization, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person. 
Notwithstanding the foregoing, Borrower shall be permitted to consummate
the Evertrust Acquisition upon terms and conditions reasonably acceptable to
Bank.”

 

8.             A new sentence is
added to the end of Section 7.8 of the Agreement as follows:

 

“Notwithstanding
the foregoing, Borrower shall be permitted to transfer not more than Four
Million Five Hundred Thousand Dollars ($4,500,000) in each fiscal quarter
through December 31, 2005 to its subsidiary, Nexsan Technologies Ltd.  (“Nexsan UK”).  Beginning on January 31, 2006, Borrower
shall be permitted to transfer not more than Two Million Dollars ($2,000,000)
in each fiscal quarter to Nexsan UK. 
Borrower shall also be permitted to transfer not more than One Million
Five Hundred Thousand Dollars ($1,500,000) in each fiscal quarter through December 31,
2005 to Evertrust.  Beginning on January 31,
2006, Borrower shall be 

 

4

 

permitted to transfer not more
than One Million Dollars ($1,000,000) in each fiscal quarter to Evertrust.

 

9.             All references in the
Loan Documents to Bank’s address at 9920 S. 
La Cienega Blvd., Suite 1401, Inglewood, CA 90301, shall mean and
refer to 2321 Rosecrans Ave., Suite 5000, El Segundo, CA 90245.

 

10.           Section 12 of the
Agreement as in effect prior to the date of this Amendment hereby is renumbered
to read “Section 13,” and references to Section 12 throughout the
Agreement as in effect prior to the date of this Amendment shall mean and refer
to “Section 13.” New Section 12 hereby is added to the Agreement to
read as follows:

 

12.           REFERENCE PROVISION.

 

The parties prefer that
any dispute between them be resolved in litigation subject to a Jury Trial
Waiver as set forth in Section 11 of this Agreement, but the availability
of that process is in doubt because of the opinion of the California Court of
Appeal in Grafton Partners LP v. Superior Court, 9 Cal.Rptr.3d 511.  This Reference Provision will be applicable
until the California Supreme Court completes its review of that case, and will
continue to be applicable if either that court or a California Court of Appeal
publishes a decision holding that a pre-dispute Jury Trial Waiver provision
similar to that contained in the Loan Documents is invalid or unenforceable.  Delay in requesting appointment of a referee
pending review of any such decision, or participation in litigation pending
review, will not be deemed a waiver of this Reference Provision.

 

12.1         Mechanics.

 

(a)           Other than (i) nonjudicial
foreclosure of security interests in real or personal property, (ii) the
appointment of a receiver or (iii) the exercise of other provisional
remedies (any of which may be initiated pursuant to applicable law), any
controversy, dispute or claim (each, a “Claim”) between the parties arising out
of or relating to this Agreement or any other document, instrument or agreement
between the Bank and the undersigned (collectively in this Section, the “Loan
Documents”), will be resolved by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California
Code of Civil Procedure (“CCP”), or their successor sections, which shall
constitute the exclusive remedy for the resolution of any Claim, including
whether the Claim is subject to the reference proceeding.  Except as otherwise provided in the Loan
Documents, venue for the reference proceeding will be in the Superior Court or
Federal District Court in the County or District where venue is otherwise
appropriate under applicable law (the “Court”).

 

(b)           The referee shall be a
retired Judge or Justice selected by mutual written agreement of the
parties.  If the parties do not agree,
the referee shall be selected by the Presiding Judge of the Court (or his or
her representative).  A request for appointment
of a referee may be heard on an ex parte or expedited basis, and the parties
agree that irreparable harm would result if ex parte relief is not
granted.  The referee shall be appointed
to sit with all the powers provided by law. 
Each party shall have one 

 

5

 

peremptory
challenge pursuant to CCP §170.6. 
Pending appointment of the referee, the Court has power to issue
temporary or provisional remedies.

 

(c)           The parties agree that
time is of the essence in conducting the reference proceedings.  Accordingly, the referee shall be requested
to (a) set the matter for a status and trial-setting conference within
fifteen (15) days after the date of selection of the referee, (b) if
practicable, try all issues of law or fact within ninety (90) days after the
date of the conference and (c) report a statement of decision within
twenty (20) days after the matter has been submitted for decision.  Any decision rendered by the referee will be
final, binding and conclusive, and judgment shall be entered pursuant to CCP
§644.

 

(d)           The referee will have
power to expand or limit the amount and duration of discovery.  The referee may set or extend discovery
deadlines or cutoffs for good cause, including a party’s failure to provide
requested discovery for any reason whatsoever. 
Unless otherwise ordered, no party shall be entitled to “priority” in
conducting discovery, depositions may be taken by either party upon seven (7) days
written notice, and all other discovery shall be responded to within fifteen
(15) days after service.  All disputes
relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding.

 

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

 

12.3         Application of Law.  The referee shall be required to determine
all issues in accordance with existing case law and the statutory laws of the
State of California.  The rules of
evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. 
The referee shall be empowered to enter equitable as well as legal
relief, provide all temporary or provisional remedies, enter equitable orders
that will be binding on the parties and rule on any motion which would be
authorized in a trial, including without limitation motions for summary
judgment or summary adjudication .  The
referee shall issue a decision at the close of the reference proceeding which
disposes of all claims of the parties that are the subject of the
reference.  The referee’s decision shall
be entered by the Court as a judgment or an order in the same manner as if the
action had been tried by the Court.  The
parties reserve the right to appeal from the final judgment or order or from
any appealable decision or order entered by the referee.  The parties reserve the right to findings of
fact, conclusions of Laws, a written statement of decision, and the right to
move for a new trial or a different 

 

6

 

judgment,
which new trial, if granted, is also to be a reference proceeding under this
provision.

 

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

 

12.5         THE PARTIES RECOGNIZE AND
AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED
BY A REFEREE AND NOT BY A JURY, AND THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT
TO TRIAL BY JURY IN AGREEING TO THIS REFERENCE PROVISION.  AFTER CONSULTING (OR HAVING HAD THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY
AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE
PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS
RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

 

11.           Exhibit D to the
Agreement is hereby replaced with Exhibit D attached hereto.

 

12.           Bank hereby waives
Borrower’s violation of Section 6.8 and Section 6.9 of the Agreement
through the date hereof.

 

13.           No course of dealing on
the part of Bank or its officers, nor any failure or delay in the exercise of
any right by Bank, shall operate as a waiver thereof, and any single or partial
exercise of any such right shall not preclude any later exercise of any such
right.  Bank’s failure at any time to
require strict performance by a Borrower of any provision shall not affect any
right of Bank thereafter to demand strict compliance and performance.  Any suspension or waiver of a right must be
in writing signed by an officer of Bank.

 

14.           Unless otherwise
defined, all initially capitalized terms in this Amendment shall be as defined
in the Agreement.  The Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with
its respective terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power, or remedy of Bank under the
Agreement, as in effect prior to the date hereof.

 

15.           Borrower represents and
warrants that the Representations and Warranties contained in the Agreement are
true and correct as of the date of this Amendment, and that no Event of Default
has occurred and is continuing.

 

16.           As a condition to the
effectiveness of this Amendment, Bank shall have received, in form and
substance satisfactory to Bank, the following:

 

7

 

(a)           this Amendment, duly
executed by Borrower;

 

(b)           a warrant to purchase
preferred stock;

 

(c)           an affirmation of
Guaranty executed by Guarantor;

 

(d)           a Certificate of the
Secretary of Borrower with respect to incumbency and resolutions authorizing
the execution and delivery of this Amendment;

 

(e)           an Amended and Restated
Third Party Pledge Agreement executed by Guarantor;

 

(f)            a Certificate of the
Secretary of Guarantor with respect to incumbency and resolutions authorizing
the execution and delivery of the affirmation of Guaranty and Amended and
Restated Third Party Pledge and Security Agreement;

 

(g)           a Third Party Pledge
Agreement executed by 6360246 Canada Inc.;

 

(h)           a Certificate of the
Secretary of 6360246 Canada Inc. with respect to incumbency and resolutions
authorizing the execution and delivery of the Third Party Pledge Agreement;

 

(i)            a Third Party Pledge
Agreement executed by 6360319 Canada Inc.;

 

(j)            a Certificate of the
Secretary of 6360319 Canada Inc, with respect to incumbency and resolutions
authorizing the execution and delivery of the Third Party Pledge Agreement;

 

(k)           the certificate(s) for
the Shares, together with Assignment(s) Separate from Certificate, duly
executed by in blank;

 

(l)            a commitment fee in
the amount of $5,000, which may be debited from any of Borrower’s accounts;

 

(m)          all reasonable Bank Expenses
incurred through the date of this Amendment, which may be debited from any of
Borrower’s accounts; and

 

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

 

17.           This Amendment may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.

 

8

 

IN WITNESS
WHEREOF, the undersigned have executed this Amendment as of the first date
above written.

 

	
   

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dale J.
  Bartos

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMERICA
  BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ILLEGIBLE

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  AVP

  
						

 

9

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  

 

The undersigned
authorized officer of NEXSAN TECHNOLOGIES INCORPORATED hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in complete
compliance for the period ending
                              
with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof.  Attached herewith are the required documents
supporting the above certification.  The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial
  statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Compliance Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

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

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
  1.75:1.00

  	
   

  	
  :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Minimum Liquidity

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Comments Regarding Exceptions: See Attached.  

  	
   

  	
  BANK USE
  ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
  SIGNATURE

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  TITLE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
	
  DATE

  	
   

  	
   

  
							

 

10

 

SECOND
AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Second Amendment to Loan and Security Agreement
(this “Amendment”) is entered into as of August 10, 2005, by and between
COMERICA BANK (“Bank”) and NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and
Security Agreement dated as of March 31, 2004 (as amended from time to
time, including without limitation by that certain First Amendment to Loan and
Security Agreement dated as of April 22, 2005, the “Agreement”). The
parties desire to further amend the Agreement in accordance with the terms of
this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                       The
following defined terms in Section 1.1 of the Agreement hereby are added,
amended or restated to read in their entirety as follows:

 

“‘Intercreditor Agreement’
means that certain Intercreditor Agreement dated as of August 10, 2005
between Bank and ORIX, in form and content acceptable to Bank.”

 

“‘ORIX’ means ORIX
Venture Finance LLC and its successor and assigns.”

 

“‘ORIX Loan Agreement’
means that certain Loan and Security Agreement dated as of August 10, 2005
by and between Borrower and ORIX, as the same may be modified or amended from
time to time, in form and content reasonably acceptable to Bank.”

 

“‘Permitted Indebtedness’
means:

 

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

 

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

 

(c)                                  Indebtedness
under the ORIX Loan Agreement;

 

(d)                                 Indebtedness
secured by a lien described in clause (c) of the defined term ‘Permitted
Liens,’ provided (i) such Indebtedness does not exceed the lesser of the
cost or fair market value of the equipment financed with such Indebtedness and (ii) such
Indebtedness does not exceed $100,000 in the aggregate at any given time;

 

(e)                                  Subordinated
Debt; and

 

(f)                                    Indebtedness
not to exceed Three Hundred Fifty Thousand Dollars ($350,000) in connection
with a guaranty provided to Bell Microproducts.”

 

 

“‘Permitted Liens’ means
the following:

 

(a)                                  Any
Liens existing on the Closing Date and disclosed in the Schedule or arising
under this Agreement or the other Loan Documents;

 

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

 

(c)                                  Liens
(i) upon or in any equipment which was not financed by Bank acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment;

 

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

 

(e)                                  Liens
securing the Indebtedness of Borrower to ORIX under the ORIX Loan Agreement.”

 

2.                                       Section 2.3(a)(i) of
the Agreement is amended and restated in its entirety to read as follows:

 

“(i)                               Advances.
Except as set forth in Section 2.3(b), the Advances shall bear interest,
on the outstanding Daily Balance thereof, at a variable rate equal to one
quarter of one percent (.25%) above the Prime Rate.”

 

3.                                       The
second sentence of Section 4.1 of the Agreement is amended and restated in
its entirety to read as follows:

 

“Except as set forth in
the Schedule, and subject to the Intercreditor Agreement, such security
interest constitutes a valid, first priority security interest in the presently
existing Collateral, and will constitute a valid, first priority security
interest in Collateral acquired after the date hereof.”

 

4.                                       The
last sentence of Section 6.3 of the Agreement is amended and restated in
its entirety to read as follows:

 

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

 

2

 

5.                                       A
new Section 8.11 is added to the Agreement to read in its entirety as
follows:

 

“8.11                     Intercreditor
Agreement. If any default or event of default occurs under the
Intercreditor Agreement.”

 

6.                                       Exhibit D
to the Agreement is hereby replaced with Exhibit D attached hereto.

 

7.                                       On
or before September 10, 2005, Borrower shall deliver to Bank (a) a
duly executed Certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this Amendment
and (b) a duly executed Certificate of the Secretary of Guarantor with
respect to incumbency and resolutions authorizing the execution and delivery of
the affirmation of Guaranty, each substantially in the form of the Certificates
of Secretary attached hereto.

 

8.                                       No
course of dealing on the part of Bank or its officers, nor any failure or delay
in the exercise of any right by Bank, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later
exercise of any such right. Bank’s failure at any time to require strict
performance by a Borrower of any provision shall not affect any right of Bank
thereafter to demand strict compliance and performance. Any suspension or
waiver of a right must be in writing signed by an officer of Bank.

 

9.                                       Unless
otherwise defined, all initially capitalized terms in this Amendment shall be
as defined in the Agreement. The Agreement, as amended hereby, shall be and
remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of
Bank under the Agreement, as in effect prior to the date hereof.

 

10.                                 Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct as of the date of this Amendment, and that
no Event of Default has occurred and is continuing.

 

11.                                 As
a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

 

(a)                                  this
Amendment, duly executed by Borrower;

 

(b)                                 the
Intercreditor Agreement, duly executed by the parties thereto;

 

(c)                                  an
affirmation of Guaranty executed by Guarantor;

 

(d)                                 an
incumbency certification for Borrower;

 

(e)                                  an
incumbency certification for Guarantor;

 

(f)                                    an
amendment fee in the amount of $7,500, which may be debited from any of
Borrower’s accounts;

 

3

 

(g)                                 all
Bank Expenses incurred through the date of this Amendment, which may be debited
from any of Borrower’s accounts; and

 

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

 

12.                                 This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.

 

[Signature page follows]

 

4

 

IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the first date above written.

 

	
   

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Dale J. Bartos

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  [ILLEGIBLE]

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  AVP

  
				

 

5

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:                                                       COMERICA
BANK

 

FROM:                                    NEXSAN
TECHNOLOGIES INCORPORATED

 

The undersigned authorized officer of NEXSAN
TECHNOLOGIES INCORPORATED hereby certifies that in accordance with the terms
and conditions of the Loan and Security Agreement dated as of March 31,
2004 between Borrower and Bank (as amended from time to time, the “Agreement”),
(i) Borrower is in complete compliance for the period ending
                        
with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to
the next except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Compliance Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

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

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Liquidity

  	
   

  	
  1.75:1.00

  	
   

  	
         :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Comments Regarding Exceptions: See Attached.

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
  Sincerely,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
  SIGNATURE

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TITLE

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
	
   

  	
  DATE

  	
   

  	
   

  
											

 

 

THIRD
AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER

 

This Third Amendment to Loan and Security Agreement
and Waiver (this “Amendment”) is entered into as of May 30, 2006, by and
between COMERICA BANK (“Bank”) and NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and
Security Agreement and Waiver dated as of March 31, 2004, as amended from
time to time, including without limitation by that certain First Amendment to
Loan and Security Agreement dated as of April 22, 2005, that certain
Second Amendment to Loan and Security Agreement dated as of August 10,
2005 and that certain Forbearance Agreement dated as of January 27, 2006
(collectively, the “Agreement”). The parties desire to further amend the
Agreement in accordance with the terms of this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                       Bank
hereby waives Borrower’s violation of Section 6.3(b) of the Agreement
for Borrower’s fiscal year ended June 30, 2005. This waiver is specific as
to content and time, shall be limited precisely as written, and shall not
constitute a waiver of any other current or future Default or Event of Default
or breach of any covenant contained in the Agreement or the terms and
conditions of any other Loan Documents. Bank expressly reserves all of its
various rights, remedies, powers and privileges under the Agreement and the
other Loan Documents due to any other Default or breach not waived herein.

 

2.                                       Section 1.1
of the Agreement is hereby amended by adding or amending and restating the
following defined terms:

 

“‘Adjusted Net Income’
means with respect to any fiscal period, an amount equal to the sum of (a) consolidated
net income of Borrower and Guarantor for such fiscal period, plus (b) in
each case to the extent deducted in the calculation of the consolidated net
income of Borrower and Guarantor and without duplication, depreciation and
amortization for such period.”

 

“‘Revolving Maturity Date’
means November 30, 2006.”

 

“‘Sale’ means (a) the
sale, license, or other disposition of all or substantially all of the assets
(including intellectual property) of Borrower and/or Guarantor, or (b) the
reorganization, consolidation, merger or sale of the voting securities of
Borrower and/or Guarantor or any other transaction where the holders of
Borrower’s and/or Guarantor’s securities before the transaction beneficially
own less than 50% of the outstanding voting securities of the surviving entity
after the transaction pursuant to purchase agreement(s) with terms and
conditions reasonably acceptable to Bank.”

 

3.                                       Section 2.3(a)(i) of
the Agreement is hereby amended and restated in its entirety to read as
follows:

 

 

“(i)                               Advances.
Except as set forth in Section 2.3(b), the Advances shall bear interest,
on the outstanding Daily Balance thereof, at a variable rate equal to three
quarters of one percent (.75%) above the Prime Rate.”

 

4.                                       The
second paragraph of Section 6.3 of the Agreement is hereby amended and
restated to read in its entirety as follows:

 

“On a weekly basis, for
the preceding week, Borrower shall deliver to Bank a Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of Exhibit C
hereto, together with aged listings by invoice date of accounts receivable and
accounts payable.”

 

5.                                       A
new Section 6.11 is hereby added to the Agreement to read in its entirety
as follows:

 

“6.11                     Adjusted
Net Income/(Loss). Borrower shall maintain, on a consolidated basis with
Guarantor, a minimum/(maximum) Adjusted Net Income/(Loss) of (a) not more
($300,000) for the fiscal quarter ending June 30, 2006 and (b) not
less than $500,000 for the fiscal quarter ending September 30, 2006.”

 

6.                                       Exhibit D
to the Agreement is hereby replaced with Exhibit D attached hereto.

 

7.                                       Borrower
acknowledges that the issuance date of the warrant to be executed as of the
date hereof shall be October 1, 2006 if the Sale has not been consummated
on or before September 30, 2006.

 

8.                                       No
course of dealing on the part of Bank or its officers, nor any failure or delay
in the exercise of any right by Bank, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later
exercise of any such right. Bank’s failure at any time to require strict
performance by Borrower of any provision shall not affect any right of Bank
thereafter to demand strict compliance and performance. Any suspension or
waiver of a right must be in writing signed by an officer of Bank.

 

9.                                       Unless
otherwise defined, all initially capitalized terms in this Amendment shall be
as defined in the Agreement. The Agreement, as amended hereby, shall be and
remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of
Bank under the Agreement, as in effect prior to the date hereof.

 

10.                                 Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct as of the date of this Amendment, and that
no Event of Default (other than the one referenced in the first paragraph
above) has occurred and is continuing.

 

11.                                 As
a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

 

2

 

(a)           this
Amendment, duly executed by Borrower;

 

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

 

(c)           an
Affirmation of Guaranty executed by Guarantor;

 

(d)           a
Certificate of the Secretary of Guarantor with respect to incumbency and
resolutions authorizing the execution and delivery of the affirmation of
Guaranty;

 

(e)           a
Warrant substantially in the form of Annex A attached hereto;

 

(f)            an
amendment fee in the amount of $5,000, which may be debited from any of
Borrower’s accounts;

 

(g)           all
Bank Expenses incurred through the date of this Amendment, which may be debited
from any of Borrower’s accounts; and

 

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

 

12.                                 This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.

 

[Signature page follows]

 

3

 

IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the first date above written.

 

	
   

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Dale
  J. Bartos

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gary Reagan

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  
				

 

4

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:                                                       COMERICA BANK

 

FROM:                                    NEXSAN
TECHNOLOGIES INCORPORATED

 

The undersigned authorized
officer of NEXSAN TECHNOLOGIES INCORPORATED hereby certifies that in accordance
with the terms and conditions of the Loan and Security Agreement dated as of March 31,
2004 between Borrower and Bank (as amended from time to time, the “Agreement”),
(i) Borrower is in complete compliance for the period ending
                        with
all required covenants except as noted below and (ii) all representations
and warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Compliance Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

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

  	
   

  	
  Weekly

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Liquidity

  	
   

  	
  1.75:1.00

  	
   

  	
        :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Minimum Cash in Bank

  	
   

  	
  $ 500,000

  	
   

  	
  $

  	
                   

  	
   

  	
  Yes

  	
   

  	
  No

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Quarterly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
    Minimum/(Maximum)
  Adjusted Net

  	
   

  	
  Not more than

  	
   

  	
  $

  	
                   

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Income/Loss

  	
   

  	
  ($300,000) for the fiscal quarter ending 6/30/06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Note less than $500,000 for the fiscal quarter ending 9/30/06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Comments Regarding Exceptions: See Attached.

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
  Received by:

  	
   

  
	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
  SIGNATURE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TITLE

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
	
   

  	
  DATE

  	
   

  	
   

  
									

 

 

FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

AND WAIVER AND CONSENT

 

This Fourth
Amendment to Loan and Security Agreement and Waiver and Consent (this “Amendment”)
is entered into as of November 2, 2006, by and between COMERICA BANK (“Bank”)
and NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank
are parties to that certain Loan and Security Agreement dated as of March 31,
2004, as amended from time to time, including without limitation by that
certain First Amendment to Loan and Security Agreement dated as of April 22,
2005, that certain Second Amendment to Loan and Security Agreement dated as of August 10,
2005, that certain Forbearance Agreement dated as of January 27, 2006 (the
“Forbearance Agreement”), and that certain Third Amendment to Loan and Security
Agreement and Waiver dated as of May 30, 2006 (collectively, the “Agreement”).  The parties desire to further amend the
Agreement in accordance with the terms of this Amendment.

 

NOW, THEREFORE,
the parties agree as follows:

 

1.             With
respect to Section 6.3(b) of the Agreement and with respect only to
Borrower’s fiscal year ending June 30, 2006: (a) Bank hereby waives
the requirement that Borrower provide it with an unqualified opinion for its
fiscal year ending June 30, 2006 financial statements, so long as the only
qualification set forth in the opinion delivered to Bank for such fiscal year
ending period is a going concern qualification resulting from Borrower’s
liquidity position, with any other qualification to result in a breach of Section 6.3(b);
and (b) Bank extends the deadline set forth therein from 120 days to 180
days, it being understood and agreed that the audited financial statements (and
other information) delivered to Bank for such fiscal year ending period shall
contain no material changes from the unaudited financial statements (and other
information) previously delivered to the Bank for the same period.

 

2.             Notwithstanding
anything to the contrary contained in the Loan Documents, Bank consents to
Guarantor’s granting of a security interest in its assets in favor of (a) Terrapin,
which security interest in favor of Terrapin shall be subject to the terms and
conditions of the Subordination and Intercreditor Agreement; (b) VantagePoint
Venture Partners IV (Q), L.P., as collateral agent (the “Collateral Agent”) for
the Subordinated Debt Investors, pursuant to the Amended and Restated
Subordinated Security Agreement, dated as of August 8, 2006, between
Guarantor, the Collateral Agent and the Subordinated Debt Investors (the “Amended
and Restated Subordinated Security Agreement”), which security interest is
subject to the terms and conditions of the Bridge Lender Subordination
Agreements; and (c) subject to the Collateral Agent becoming bound by the
terms of the Subordination and Intercreditor Agreement, the Collateral Agent
for the benefit of Terrapin and the Subordinated Debt Investors, if and to the
extent the Amended and Restated Subordinated Security Agreement is further
amended and restated to add Terrapin as a party thereto and provide for the
security interest to be granted to Terrapin as contemplated in clause (a) immediately
preceding.  Bank waives any Event of
Default under Section 4(b) of the Amended and Restated Third Party
Pledge Agreement dated

 

1

 

April 22, 2005 by and
among Bank and Guarantor caused by Guarantor’s failure to comply with Sections
2(a) and 2(b) thereof in respect of the security interests granted to
Terrapin, the Subordinated Note Investors and the Collateral Agent described
herein.  Notwithstanding anything to the
contrary contained in the Loan Documents, Bank consents to Borrower’s payment
of One Million Dollars ($1,000,000) to Orix from the proceeds of the Terrapin
Note, in partial repayment of the indebtedness under the Orix Loan Agreement.

 

3.             The following defined
terms in Section 1.1 of the Agreement hereby are added, amended or restated to read in their entirety as follows:

 

“‘Bridge Lender Subordination Agreements’ means those
certain Subordination Agreements,
dated as of January 27, 2006 and August 8, 2006, respectively,
between Bank and the Subordinated Debt Investors.”

 

“‘Revolving Line’ means a credit extension of up to Two
Million Five Hundred Thousand Dollars
($2,500,000).”

 

“‘Revolving Maturity Date’ means January 31, 2007.”

 

“‘Subordination and Intercreditor Agreement’ means that
certain Subordination  and Intercreditor Agreement dated as of November 2,
2006 between Bank and Terrapin,  in form and
content acceptable to Bank.”

 

“‘Terrapin’ means Terrapin Partners LLC and its successor
and assigns.”

 

“‘Terrapin Note’ means that certain 8% Secured Convertible
Subordinated Bridge  Note dated as of November 2, 2006 by and
between Guarantor and Terrapin, as the same may be modified or amended from time to time, in form and
content reasonably acceptable to Bank.”

 

4.             Section 6.3(b) of the
Agreement is hereby amended to extend the one hundred and twenty (120) day
period set forth therein to one hundred and eighty (180) days.  All other terms and provisions of Section 6.3
remain unchanged and in full force and effect.

 

5.             Section 6.11 of
the Agreement is hereby amended and restated in its entirety to read  as follows:

 

“6.11  Adjusted
Net Income/(Loss).  Borrower shall
maintain, on a consolidated basis with Guarantor, a minimum/(maximum) Adjusted
Net Income/(Loss) of (a) not more than ($1,000,000) for the fiscal
quarter ending September 30, 2006, and (b) not more than ($900,000)
for the fiscal quarter ending December 31, 2006.”

 

6.             Section 8.11
of the Agreement is amended and restated in its entirety to read as follows:

 

“8.11  Intercreditor
Agreements.  If any default or event
of default occurs under the Intercreditor Agreement, the Subordination and
Intercreditor Agreement or any of the Bridge Lender
Subordination Agreements.”

 

2

 

7.             Exhibit D
to the Agreement is hereby replaced with Exhibit D attached hereto.

 

8.             No
course of dealing on the part of Bank
or its officers, nor any failure or delay in the exercise of any right
by Bank, shall operate as a waiver thereof, and any single or partial exercise
of any such right shall not preclude any later exercise of any such right.  Bank’s failure at any time to require strict
performance by a Borrower of any provision shall not affect any right of Bank thereafter
to demand strict compliance and performance. 
Any suspension or waiver of a
right must be in writing signed by an officer of Bank.

 

9.             Unless otherwise
defined, all initially capitalized terms in this Amendment shall be as defined
in the Agreement.  The Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and
confirmed in all respects.  Except as expressly set forth herein, the execution,
delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any
right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

 

10.           Borrower represents and
warrants that the Representations and Warranties contained in  the Agreement are true and correct as of
the date of this Amendment, and that no Event of Default has occurred and is continuing.

 

11.           As a condition to the
effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)           this
Amendment, duly executed by Borrower;

 

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

 

(c)           the Subordination and Intercreditor Agreement, duly executed by the parties
thereto (together with a side-letter from the Collateral Agent (as defined
above) agreeing to be bound by the terms
thereof);

 

(d)           a
Limited Liability Company Resolution to Subordinate in connection with the Subordination and Intercreditor Agreement;

 

(e)           the
Terrapin Note and any and all related documents, duly executed by all parties
thereto;

 

(f)            evidence
that the Borrower has closed the transaction evidenced by the Terrapin Note and
has received the loan proceeds from such transaction;

 

(g)           an
affirmation of Guaranty executed by Guarantor;

 

(h)           a
Certificate of the Secretary of Guarantor with respect to incumbency and
resolutions authorizing the execution and delivery of the affirmation of
Guaranty;

 

(i)            an
amendment fee in the amount of $5,000, which may be debited from any of
Borrower’s accounts;

 

3

 

(j)            all
Bank Expenses incurred through the date of this Amendment, which may be debited
from any of Borrower’s accounts; and

 

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

 

12.           As
a condition subsequent to this Amendment, Bank, as soon as practicable, shall
have received a fully executed lockbox agreement (in form and substance
satisfactory to Bank) into which all collections
on Borrower’s Accounts shall be deposited, with Borrower’s failure to cause
same to constitute an Event of Default.

 

13.           This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.

 

IN WITNESS WHEREOF, the  undersigned have executed this  Amendment
as of the first date above written.

 

	
   

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Philip
  Black

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
  COMERICA
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary
  Reagan

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  
					

 

4

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  

 

The undersigned
authorized officer of NEXSAN TECHNOLOGIES INCORPORATED hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
dated as of March 31, 2004 between Borrower and Bank (as amended from time
to time, the “Agreement”), (i) Borrower is in complete compliance for the
period ending                 
with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof.  Attached herewith are the required documents
supporting the above certification.  The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
   

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly Financial statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Compliance Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

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

  	
   

  	
  Weekly

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
   

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Liquidity

  	
   

  	
  1.75:1.00

  	
   

  	
       :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Minimum Cash in Bank

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
                 

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Quarterly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum/(Maximum) Adjusted Net Income/(Loss)

  	
   

  	
  Not more
  than

  $(1,000,000 for the

  fiscal quarter ending

  (09/30/06)

  	
   

  	
  $

  	
       

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Not more
  than

  ($900,000) for the fiscal

  quarter ending 12/31/06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
													

 

	
  Comments Regarding
  Exceptions: See Attached.  

  	
   

  	
  BANK USE
  ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
  TITLE

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  DATE

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
	
   

  	
   

  	
   

  
									

 

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Fifth Amendment to Loan and
Security Agreement (this “Amendment”) is entered into as of February 22,
2007, by and between COMERICA BANK (“Bank”) and NEXSAN TECHNOLOGIES
INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to
that certain Loan and Security Agreement dated as of March 31, 2004,
as amended from time to time, including without limitation by that certain
First Amendment to Loan and Security Agreement dated as of April 22, 2005,
that certain Second Amendment to Loan and Security Agreement dated as of August 10,
2005, that certain Forbearance Agreement dated as of January 27, 2006,
that certain Third Amendment to Loan and Security Agreement and Waiver as May 30,
2006 and that certain Fourth Amendment to Loan and Security Agreement and
Waiver and Consent dated as of November 2, 2006 (collectively, the “Agreement”).
The parties desire to further amend the Agreement in accordance with the terms
of this Amendment.

 

NOW, THEREFORE, the parties agree
as follows:

 

1.             Section 1.1 of the Agreement is hereby amended by adding
or amending and restating the following defined terms:

 

“‘Equity Event’ means the receipt
by Borrower after February 22, 2007 of cash proceeds of not less than
$6,000,000 from the sale or issuance of Borrower’s equity securities from
investors acceptable to Bank.”

 

“`Revolving Maturity Date’ means July 31,
2007; provided, however, that upon Bank’s receipt of evidence
satisfactory to it of the consummation of the Equity Event, ‘Revolving Maturity
Date’ shall mean January 31, 2008.”

 

2.             Section 6.11 of the Agreement is hereby amended and
restated to read in its entirety as follows:

 

“6.11       Adjusted Net Income/(Loss).  Measured on a quarterly basis, Borrower shall
maintain, on a consolidated basis with Guarantor, a minimum/(maximum) Adjusted
Net Income/(Loss) of not less than/(more than) the amounts of Adjusted Net
Income/(Loss) set forth below during the periods set forth below:

 

	
  Period Ending

  	
   

  	
  Minimum/Maximum Adjusted Net

  Income/(Loss)

  	
   

  
	
  Fiscal quarter ending
  March 31, 2007

  	
   

  	
  $

  	
  (1,000,000

  	
  )

  
	
  Six months ending June 30,
  2007

  	
   

  	
  $

  	
  (1,500,000

  	
  )

  
	
  Nine months ending
  September 30, 2007

  	
   

  	
  $

  	
  (1,500,000

  	
  )

  
	
  Twelve months ending
  December 31, 2007

  	
   

  	
  $

  	
  (1,000,000

  	
  )

  

 

The Adjusted Net Income/(Loss)
covenant will no longer be tested commencing with the first fiscal quarter of
Borrower following the consummation of the Equity Event.”

 

 

3.             Exhibit D to the Agreement is hereby replaced with Exhibit D
attached hereto.

 

4.             No course of dealing on the part of Bank or its officers, nor
any failure or delay in the exercise of any right by Bank, shall operate as a
waiver thereof, and any single or partial exercise of any such right shall not
preclude any later exercise of any such right. Bank’s failure at any time to
require strict performance by Borrower of any provision shall not affect any
right of Bank thereafter to demand strict compliance and performance. Any
suspension or waiver of a right must be in writing signed by an officer of
Bank.

 

5.             Unless otherwise defined, all initially capitalized terms in
this Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power, or remedy of Bank under the
Agreement, as in effect prior to the date hereof.

 

6.             Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

 

7.             As a condition to the effectiveness of this Amendment, Bank
shall have received, in form and substance satisfactory to Bank, the following:

 

(a)           this Amendment, duly executed by Borrower;

 

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

 

(c)           an Affirmation of Guaranty executed by Guarantor;

 

(d)           a Certificate of the Secretary of Guarantor with respect to
incumbency and resolutions authorizing the execution and delivery of the
affirmation of Guaranty;

 

(e)           an amendment fee in the amount of $5,000, which may be
debited from any of Borrower’s accounts;

 

(f)            all Bank Expenses incurred through the date of this
Amendment, which may be debited from any of Borrower’s accounts; and

 

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

 

8.             Bank acknowledges that Borrower is no longer required to
establish a lockbox with Bank as set forth in paragraph 12 of the Fourth Amendment
to Loan and Security Agreement and Waiver and Consent dated as of November 2,
2006.

 

9.             This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the first date above written.

 

	
   

  	
  NEXSAN
  TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gene Spies

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary
  Reagan

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  
					

 

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  

 

The undersigned authorized officer of NEXSAN TECHNOLOGIES
INCORPORATED hereby certifies that in accordance with the terms and conditions of
the Loan and Security Agreement dated as of March 31, 2004 between
Borrower and Bank (as amended from time to time, the “Agreement”), (i) Borrower
is in complete compliance for the period ending                                   
with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof.  Attached herewith are the required documents
supporting the above certification.  The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.

 

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

 

	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Compliance Certificate

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

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

  	
   

  	
  Monthly

  	
   

  	
  Yes

  	
   

  	
  No

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  

 

	
  Financial Covenants

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Liquidity

  	
   

  	
  1.75:1.00

  	
   

  	
  :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Minimum Cash in Bank

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
            

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Quarterterly
  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum/(Maximum) Adjusted Net

  	
   

  	
  See Section 6.11 of

  	
   

  	
  $

  	
              

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Income/(Loss)*

  	
   

  	
  the Agreement

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

* Covenant will no longer be tested upon the
consummation of the Equity Event.

 

Comments Regarding Exceptions:           See Attached.

 

	
   

  	
   

  	
  BANK USE
  ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  Sincerely,

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
  TITLE

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  
	
  DATE

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
									

 

 

SIXTH
AMENDMENT TO LOAN AND SECURITY
AGREEMENT

 

This Sixth Amendment to Loan and Security
Agreement (this “Amendment”) is entered
into as of September 12, 2007, by and between COMERICA BANK (“Bank”) and
NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain
Loan and Security Agreement dated as of March 31, 2004, as amended from
time to time, including without limitation by that certain First Amendment to
Loan and Security Agreement dated as of April 22, 2005, that certain
Second Amendment to Loan and Security Agreement dated as of August 10,
2005, that certain Forbearance Agreement dated as of January 27, 2006,
that certain Third Amendment to Loan and Security Agreement and Waiver as May 30,
2006, that certain Fourth Amendment to Loan and Security Agreement and Waiver
and Consent dated as of November 2, 2006 and that certain Fifth Amendment
to Loan and Security Agreement dated as of February 22, 2007
(collectively, the “Agreement”).  The
parties desire to further amend the Agreement in accordance with the terms of
this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Section 1.1
of the Agreement is hereby amended by adding or amending and restating the
following defined terms:

 

“‘Revolving Line’ means a
credit extension of up to Three Million Dollars ($3,000,000).”

 

“‘Revolving Maturity Date’
means July 31, 2008.”

 

2.             Section 2.3(a)(i) of
the Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(i)          Advances.  Except as set forth in Section 2.3(b),
the Advances shall bear interest, on the outstanding Daily Balance thereof, at
a variable rate equal to one quarter of one percent (0.25%) above the Prime
Rate.”

 

3.             No
course of dealing on the part of Bank or its officers, nor any failure or delay
in the exercise of any right by Bank, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later
exercise of any such right.  Bank’s
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance.  Any suspension or waiver of
a right must be in writing signed by an officer of Bank.

 

4.             Unless
otherwise defined, all initially capitalized terms in this Amendment shall be
as defined in the Agreement.  The
Agreement, as amended hereby, shall be and remain in full force and effect in
accordance with its respective terms and hereby is ratified and confirmed in
all respects.  Except as expressly set
forth herein, the execution, delivery, and performance of this Amendment shall
not operate as a waiver of, or as an amendment of, any right, power, or remedy
of Bank under the Agreement, as in effect prior to the date hereof.

 

 

5.             Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct as of the date of this Amendment, and that
no Event of Default has occurred
and is continuing.

 

6.             As
a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

 

(a)           this
Amendment, duly executed by Borrower;

 

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

 

(c)           an
Affirmation of Guaranty executed by Guarantor;

 

(d)           a
Certificate of the Secretary of Guarantor with respect to incumbency and
resolutions authorizing the execution and delivery of the affirmation of
Guaranty;

 

(e)           an
amendment fee in the amount of $2,500, which may be debited from any of
Borrower’s accounts;

 

(f)            all
Bank Expenses incurred through the date of this Amendment, which may be debited
from any of Borrower’s accounts; and

 

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

 

7.             This
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument.

 

[Signature page follows]

 

2

 

IN WITNESS WHEREOF, the undersigned have
executed this Amendment as of the first date above written.

 

	
   

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gene Spies

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W.S. Lemmer

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  

 

3

 

SEVENTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Seventh Amendment to Loan and Security
Agreement (this “Amendment”) is entered into as of December 20, 2007, by
and between COMERICA BANK (“Bank”) and NEXSAN TECHNOLOGIES INCORPORATED (“Borrower”).

 

RECITALS

 

Borrower and Bank are
parties to that certain Loan and Security Agreement dated as of March 31,
2004, as amended from time to time, including without limitation by that
certain First Amendment to Loan and Security Agreement
dated as of April 22, 2005, that certain Second Amendment to Loan and
Security Agreement dated as of August 10, 2005, that certain
Forbearance Agreement dated as of January 27, 2006, that certain Third
Amendment to Loan and Security Agreement and
Waiver as May 30, 2006, that certain Fourth Amendment to Loan and Security
Agreement and Waiver and Consent dated as of
November 2, 2006 and that certain Fifth Amendment to Loan and
Security Agreement dated as of February 22, 2007 and that certain Sixth
Amendment to Loan and Security Agreement dated as of September 12, 2007
(collectively, the “Agreement”).  The
parties desire to further amend the Agreement in accordance with the terms of
this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Section 6.3(b) of
the Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(b) as soon as available, but in any
event within (i) two hundred and forty (240) days after the end of
Borrower’s 2007 fiscal year and (ii) one hundred and eighty (180) days
after the end of each of Borrower’s fiscal years thereafter, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together, with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank;”

 

2.             Exhibit D
to the Agreement is hereby replaced with Exhibit D attached hereto.

 

3.             No
course of dealing on the part of Bank or its officers, nor any failure or delay
in the exercise of any right by Bank, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later
exercise of any such right.  Bank’s
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance.  Any suspension or waiver of
a right must be in writing signed by an officer of Bank.

 

4.             Unless
otherwise defined, all initially capitalized terms in this Amendment shall be
as defined in the Agreement.  The Agreement, as amended hereby, shall be
and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power, or remedy of Bank under the
Agreement, as in effect prior to the date hereof.

 

5.             Borrower
is a party to certain documents, instruments and/or agreements (collectively,
the “Documents”) with or between it and Comerica Bank, a Michigan banking
corporation (the “Merged 

 

 

Bank”).  The Merged Bank has been
merged with and into Comerica Bank, a Texas banking association.  Borrower hereby acknowledges and agrees that
any reference in the Documents to Comerica Bank, a Michigan banking
corporation, shall mean Comerica Bank, a Texas banking association, as
successor by merger to the Merged Bank.

 

6.             Borrower
represents and warrants that the Representations and Warranties contained in
the Agreement are true and correct as of the
date of this Amendment, and that no Event of Default has occurred and is
continuing.

 

7.             As
a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

 

(a)           this
Amendment, duly executed by Borrower;

 

(b)           all
Bank Expenses incurred through the date of this Amendment, which may be debited
from any of Borrower’s accounts; and

 

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

 

8.             This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.

 

[Remainder of Page Intentionally Left
Blank]

 

2

 

IN WITNESS WHEREOF, the
undersigned have executed this Amendment as of the first date above written.

 

	
   

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gene Spies

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W.S. Lemmer

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  SVP

  
					

 

3

 

EXHIBIT D

 

COMPLIANCE
CERTIFICATE

 

	
  TO:

  	
  COMERICA BANK

  
	
   

  	
   

  
	
  FROM:

  	
  NEXSAN TECHNOLOGIES INCORPORATED

  

 

The undersigned authorized
officer of NEXSAN TECHNOLOGIES INCORPORATED hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
dated as of March 31, 2004 between Borrower and Bank (as amended from time
to time, the “Agreement”), (i) Borrower is in complete compliance for the
period ending                                                               
with all required covenants except as noted
below and (ii) all representations and warranties of Borrower stated in
the Agreement are true and correct in all material respects as of the
date hereof.  Attached herewith are the
required documents supporting the above certification.  The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP) and
are consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

 

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

 

	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Compliance Certificate

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Annual (CPA Audited)

  	
   

  	
  FYE within 180 days
  (within 240 for 2007 FY)

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  10K and 10Q

  	
   

  	
  (as applicable)

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

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

  	
   

  	
  Monthly, within 30 days

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  A/R and Inventory Audit

  	
   

  	
  Initial and Semi-Annual

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  

 

	
  Financial Covenants

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Monthly
  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Minimum
  Liquidity

  	
   

  	
  1.75:1.00

  	
   

  	
         :1.00

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Minimum
  Cash in Bank

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
               

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Measured on a Quarterly
  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
	
  Minimum/(Maximum)
  Adjusted Net Income/(Loss)*

  	
   

  	
  See
  Section 6.11 of the Agreement

  	
   

  	
  $

  	
               

  	
   

  	
  Yes

  	
   

  	
  No

  	
   

  
												

 

	
  *
  Covenant will no longer be tested upon the consummation of the Equity Event.

  	
   

  
	
   

  	
   

  
	
  Comments
  Regarding Exceptions:

  	
  See
  Attached.

  	
  BANK USE ONLY

  
	
   

  	
   

  
	
  Sincerely,

  	
  Received by:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  SIGNATURE

  	
   

  
	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  
	
  TITLE

  	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
  Compliance Status

  	
  Yes

  	
  No

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]