-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QdfqHrnOLhTFTC7zo/DHu7Y3VaGTffhur5Vd5llfSHkUtksOQHHmIclf2MbQcnmR 2inKCCTBF97wXXhC+HJOlg== 0000950149-01-500238.txt : 20010319 0000950149-01-500238.hdr.sgml : 20010319 ACCESSION NUMBER: 0000950149-01-500238 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010306 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENLIGHTEN SOFTWARE SOLUTIONS INC CENTRAL INDEX KEY: 0000919175 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943008888 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-23446 FILM NUMBER: 1569688 BUSINESS ADDRESS: STREET 1: 999 BAKER WAY STE 390 CITY: SAN MATCO STATE: CA ZIP: 94404-1578 BUSINESS PHONE: 4155780700 FORMER COMPANY: FORMER CONFORMED NAME: SOFTWARE PROFESSIONALS INC DATE OF NAME CHANGE: 19940217 8-K 1 f70497e8-k.txt FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): MARCH 6, 2001 ENLIGHTEN SOFTWARE SOLUTIONS, INC. ---------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 0-23446 94-3008888 - -------------------------------------------------------------------------------- (State or other jurisdiction of (Commission File (I.R.S. Employer incorporation or organization) Number) Identification No.) 999 BAKER WAY, FIFTH FLOOR, SAN MATEO, CA 94404 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (650) 578-0700 ---------------------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) ================================================================================ Exhibit Index is on page 5. 2 ENLIGHTEN SOFTWARE SOLUTIONS, INC. ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Maden Tech Consulting, Inc., a Delaware corporation ("Maden Tech"), acquired control of the Registrant on March 6, 2001 pursuant to the initial advance made by Maden Tech to the Registrant under a Loan Agreement dated as of February 14, 2001 (the "Loan Agreement"). Under the Loan Agreement, Maden Tech agreed to provide the Registrant an initial advance of $100,000 and, in the sole discretion of Maden Tech, additional advances under a credit facility providing for total borrowings in the aggregate amount of up to $1,118,250. All amounts extended under the credit facility are secured by the Registrant's core products, technology and intellectual property and are evidenced by a convertible note repayable upon demand by Maden Tech made after July 15, 2001. To satisfy certain of the conditions precedent specified in the Loan Agreement, on March 6, 2001 the Registrant (1) expanded the size of its Board of Directors from four to seven members, (2) caused one of its incumbent directors to resign effective upon the receipt of the initial advance, and (3) appointed four individuals designated by Maden Tech to serve on the Registrant's Board of Directors. The four directors designated by Maden Tech were Omar Maden, the sole stockholder, Chief Executive Officer and a director of Maden Tech; David Ford, Senior Vice President and General Counsel of Maden Tech; Robert Hinaman, CEO of esqNetwork, Inc. and a former Managing Director of Chase Manhattan Bank for European Mergers and Acquisitions; and Kim McCaffrey, President of MC Info, Inc., a subsidiary of Maden Tech. The remaining three seats on the Registrant's Board of Directors continue to be held by three of the four incumbent members of the Board, including David Parker, Co-Chairman of the Board and a former CEO of the Registrant; Michael Seashols, Co-Chairman of the Registrant's Board and former Chairman and CEO of Evolve Software; and Peter Sprague, former Chairman and CEO of WaveSystems. In addition, Omar Maden was appointed Chief Executive Officer of the Registrant effective immediately following the initial advance. Subject to adjustment upon the occurrence of certain events, Maden Tech is entitled to convert amounts extended under the credit facility into shares of the Registrant's Common Stock at a conversion price of $0.225 per share. Accordingly, as a result of the initial $100,000 advance made by Maden Tech on March 6, 2001, Maden Tech acquired beneficial ownership of 444,444 shares of the Registrant's Common Stock. In addition, in connection with the initial advance, on March 6, 2001 the Registrant granted Maden Tech a warrant to purchase up to 2,000,000 shares of the Registrant's Common Stock. The warrant is immediately exercisable and will remain exercisable until March 6, 2002, at a price equal to the trailing five-day average closing price of the Enlighten common stock calculated as of the trading day immediately before the date of exercise. Accordingly, as of the date hereof Maden Tech beneficially owns 2,444,444 shares of the Registrant's Common Stock, representing 32.9% of the shares of Common Stock outstanding. Maden Tech has a right to acquire all such shares within 60 days upon conversion of amounts outstanding under the credit facility (currently covering 444,444 shares based on the $100,000 principal amount outstanding thereunder) or exercise of the warrant (covering 2,000,000 shares). Maden Tech expects to acquire beneficial ownership of additional shares of the Registrant's Common Stock as additional amounts are loaned to the Registrant under -2- 3 the credit facility. If the credit facility were fully extended, Maden Tech would acquire the right to convert the indebtedness into shares of the Registrant's Common Stock representing up to 49.9 percent of the shares then outstanding (excluding, for the purpose of such calculation, shares of Common Stock issuable upon exercise by Maden Tech of the warrant). ITEM 7. EXHIBITS
Exhibit Number Exhibit Description - ------ ------------------- 10.1 Loan Agreement dated as of February 14, 2001 by and among the Registrant and Maden Tech 10.2 Convertible Demand Note made March 6, 2001 10.3 Warrant Agreement dated as of March 6, 2001 by and among the Registrant and Maden Tech 10.4 Warrant Certificate MT-001 issued March 6, 2001 10.5 Registration Rights Agreement dated as of March 6, 2001 by and among the Registrant and Maden Tech 10.6 Software Security Agreement dated as of February 14, 2001 by and among the Registrant and Maden Tech 10.7 Conditional Assignment dated as of February 14, 2001
-3- 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Enlighten Software Solutions, Inc. Date: March 15, 2001 By: /s/ STEPHEN GIUSTI ---------------- --------------------------------- Stephen Giusti Chief Financial Officer -4- 5 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 10.1 Loan Agreement dated as of February 14, 2001 by and among the Registrant and Maden Tech 10.2 Convertible Demand Note made March 6, 2001 10.3 Warrant Agreement dated as of March 6, 2001 by and among the Registrant and Maden Tech 10.4 Warrant Certificate MT-001 issued March 6, 2001 10.5 Registration Rights Agreement dated as of March 6, 2001 by and among the Registrant and Maden Tech 10.6 Software Security Agreement dated as of February 14, 2001 by and among the Registrant and Maden Tech 10.7 Conditional Assignment dated as of February 14, 2001
-5- EX-10.1 2 f70497ex10-1.txt EXHIBIT 10.1 1 EXHIBIT 10.1 2 LOAN AGREEMENT THIS LOAN AGREEMENT (the "Agreement"), dated as of February 14, 2001, is entered into by and between ENLIGHTEN SOFTWARE SOLUTIONS, INC., a California corporation (the "Borrower"), and MADEN TECH CONSULTING, INC., a Delaware corporation (the "Lender"). WHEREAS, the Borrower has requested that the Lender make available to the Borrower a credit facility (the "Credit Facility") in a maximum principal amount of up to One Million One Hundred Eighteen Thousand Two Hundred Fifty Dollars ($1,118,250), the proceeds of which shall be used by the Borrower for working capital; and WHEREAS, the Lender is willing to make the Credit Facility available to the Borrower upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Borrower and the Lender hereby agree as follows: I. DEFINITIONS 1.1 GENERAL TERMS For purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the following meanings: "Advance" shall mean a borrowing under the Credit Facility under Article II hereof. Any amounts paid by the Lender on behalf of the Borrower shall be an Advance for purposes of this Agreement. "Affiliate" shall mean, as to any Person, any other Person (other than a Subsidiary) (a) which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above or (c) which is the beneficial owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of five percent (5%) or more of any class of the outstanding voting stock or other voting equity interest of such Person. For purposes of this definition, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting stock, by contract or otherwise. "Applicable Interest Rate" shall have the meaning set forth in Section 2.5(a) hereof. "Assignment and Assumption Agreement" shall have the meaning set forth in Section 11.3 hereof. 3 "Authorized Officer" shall mean, with respect to Borrower, the President and Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, any Executive Vice President or such other officer or officers as Borrower may designate to the Lender in writing from time to time. "Board" shall mean the board of directors of Borrower. "Borrower Confidential Information" shall have the meaning set forth in Section 4.19 hereof. "Borrowing Notice" shall have the meaning set forth in Section 2.3 hereof. "Business Day" shall mean any day which is not a Saturday, Sunday or a day on which commercial banks in New York are authorized or required by law to be closed. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Capital Leases" shall mean all leases which have been or should be capitalized in accordance with GAAP. "Change of Control" shall mean any of the following events: when (a) any Person or group (as that term is defined for purposes of Section 13 of the Securities Exchange Act of 1934, as amended), other than the Lender or any Eligible Transferee that is a holder of a Note, any person to whom a holder of a Note transfers such Note, or any of their respective Affiliates, becomes the owner of 40% or more of the outstanding Common Stock, or obtains the right to acquire 40% or more of the outstanding stock of Borrower within 60 days, or (b) there is a change of membership of the Board such that a majority of the members of the Board are persons who (i) have not been members of the Board for at least 12 months (ii) whose election was not approved by a majority of the persons who had been members of the Board at the beginning of that 12 month period and (iii) are not designated by the Lender or, if the Lender shall have assigned or transferred its rights hereunder, the holders of a majority in principal amount of outstanding Notes. "Closing Date" shall mean the date as of which this Agreement shall have been executed and delivered by the Borrower and the Lender and on which all of the conditions precedent set forth in Section 3.1 hereof shall have been satisfied. "Common Stock" shall mean the common stock of the Borrower, no par value per share. "Conditional Assignment" shall have the meaning set forth in Section 2.12 hereof. "Conversion Price" shall mean the Initial Conversion Price, as adjusted from time to time in accordance with the terms of the Note. 4 "Conversion Shares" shall mean shares of Common Stock issued or issuable upon conversion of a Note. "Copyrights" shall mean all Intellectual Property rights in and to the Software, whether or not registered or filed with any Governmental Authority, associated copyright registrations and copyright applications, and all registrations and renewals thereof and applications for registration and renewal thereof, together with (a) source code, object code, build procedures, installation files, help files, dynamic link libraries, informational content included in Software, (b) all writings and computer tapes, disks, data bases, flow diagrams, and other property manifesting, embodying or incorporating any thereof, (c) all present and future rights of Borrower under all present and future license agreements relating thereto, whether Borrower is licensee or licensor thereunder, (d) all income, royalties, damages and payments now or hereafter due and/or payable to Borrower thereunder or with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (e) all of Borrower's present and future claims, causes of action and rights to sue for past, present or future infringements thereof, (f) all rights corresponding thereto throughout the world, (g) all present and future proceeds and products thereof in any form whatsoever, and (h) (i) all registered copyrights owned by Borrower arising in and to the Software, including the jurisdictions in which each such item of Intellectual Property has been issued or registered or in which any application for such issuance and registration has been filed, (ii) licenses and value added reseller agreements in effect with respect to the Software, and (iii) licenses, sublicenses and other agreements as to which Borrower or any Borrower Subsidiary is a party and pursuant to which Borrower or its Subsidiaries are authorized to use any third party patents, trademarks or copyrights, including software, that are incorporated in, are or form a part of the Software or any other product of Borrower or any of its Subsidiaries. "Credit Facility" shall have the meaning set forth in the second paragraph hereof. "Default" shall mean any event or condition which, with the giving of notice or lapse of time or both, would constitute an Event of Default hereunder. "Default Rate" shall have the meaning set forth in Section 2.5(c) hereof. "Dollar" and the sign "$" shall mean lawful money of the United States of America. "Eligible Transferee" shall mean and include any Affiliate of the Lender as well as a commercial bank, financial institution or other "accredited investor" (as defined by Regulation D of the Securities Act of 1933, as amended). "Environmental Laws" shall mean, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law and all other federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, 5 storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of Governmental Authorities with respect thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. "Event of Default" shall mean the occurrence of any of the events specified in Article VII hereof. "Facility Cap" shall have the meaning set forth in Section 2.1 hereof. "Fair Valuation" shall mean, with respect to any Person, the determination of the value of the consolidated assets of such Person on the basis of the amount which may be realized within a reasonable time through collection or sale of such assets at market value on a going concern basis, conceiving the latter as the amount which could be obtained for the property in question within such period by a capable and diligent businessman from an interested buyer who is willing to purchase under ordinary selling conditions in an arm's length transaction. "Form 10-K" shall have the meaning set forth in Section 4.13(b) hereof. "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by nationally recognized accounting firms. "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether of a state, territory or possession of the United States, the United States, a foreign governmental entity or the District of Columbia. "Hazardous Substances" shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyl's, petroleum and petroleum products, methane, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials as defined in and subject to regulation under any applicable Environmental Law. "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations of such Person under Interest Rate Agreements and (viii) all contingent obligations of such Person (other than contingent obligations arising from the guaranty by such Person of the obligations of the 6 Borrower and/or its Subsidiaries to the extent such guaranteed obligations do not constitute Indebtedness), provided that Indebtedness shall not include trade payables, deferred revenue, taxes and accrued expenses, in each case arising in the ordinary course of business. "Initial Advance" shall have the meaning set forth in Section 3.1 hereof. "Initial Conversion Price" shall mean $0.225 per share of Common Stock. "Intellectual Property" shall mean all ideas and inventions, whether or not patentable, all works of authorship in any medium, all information which is not generally known in the industry or the marketplace(s) where either or both of the parties hereto operate, which gives its owner an economic advantage by virtue of the fact that such information is not generally known to others, and which its owner has taken reasonable steps to protect from disclosure. Intellectual property may include, but need not be limited to, trade dress, logos, trade names and corporate names, domain names, know-how, computer software, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, business and marketing plans and proposals, and general intangibles of a like nature. "Interest Rate Agreement" shall mean any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement or other similar agreement or arrangement designed to hedge the position of the Borrower or any Subsidiary with respect to interest rates. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "Loan Documents" shall mean, collectively, this Agreement, the Note, the Registration Rights Agreement, the Software License Agreement, the Software Security Agreement, the Warrant Agreement, and all other agreements, documents, instruments, certificates, reports and financial statements heretofore or hereafter executed or delivered to the Lender in connection with the Advances made, issued or created under this Agreement, as the same may be amended, modified or supplemented from time to time. "Material Adverse Effect" shall mean an event or occurrence that has or is reasonably likely to have a material adverse effect upon Borrower's operations, financial condition or business prospects. "Maximum Conversion Shares" shall have the meaning set forth in Section 4.1(e) hereof. "Nasdaq" shall mean The Nasdaq Stock Market, Inc. "Note" shall mean the Convertible Demand Note of the Borrower evidencing the Advances, executed and delivered to the Lender pursuant to Section 3.1(a) hereof, in the form of Exhibit A hereto, as such may be modified, amended or supplemented from time to time. 7 "Obligations" shall mean the Borrower's obligations, Indebtedness and liabilities to the Lender of every kind, nature and description, direct or indirect, secured or unsecured, joint, several, joint and several, absolute or contingent, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, with respect to (a) the principal of and interest on the Advances, as evidenced by the Note, (b) the payment and performance of all other obligations, Indebtedness and liabilities of the Borrower to the Lender hereunder, under the other Loan Documents or with respect to the Advances and (c) all amounts paid or advanced by the Lender on behalf of or for the benefit of Borrower for any reason as permitted by this Agreement. "Officer's Certificate" shall have the meaning set forth in Section 4.1(m) hereof. "Payment Office" shall mean initially 2110 Washington Boulevard, Suite 200, Arlington, VA 22204; thereafter, such other office of the Lender, if any, which it may designate by notice to the Borrower to be the Payment Office, in accordance with wiring instructions to be delivered by the Lender to the Borrower. "Permitted Encumbrances" shall mean, with respect to any Real Property, such exceptions to title as are set forth in the title insurance policy or title commitment with respect thereto. "Permitted Indebtedness" shall mean Indebtedness of Borrower and its Subsidiaries permitted under Section 6.1 hereof. "Permitted Liens" shall have the meaning set forth in Section 6.2(a) hereof. "Person" shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, a governmental authority or any other entity of whatever nature. "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Register" shall have the meaning set forth in Section 11.3 hereof. "Registration Rights Agreement" shall mean the Registration Rights Agreement by and between the Borrower and the Lender, executed and delivered pursuant to Section 3.1(a) hereof, in the form attached as Exhibit B hereto, as such may be modified, amended or supplemented from time to time. "SEC" shall mean the Securities and Exchange Commission. "SEC Filings" shall have the meaning set forth in Section 4.13(a) hereof. "September 10-Q" shall have the meaning set forth in Section 4.13(b) hereof. "Shareholders Meeting" shall have the meaning set forth in Section 5.13(a) hereof. 8 "Software" shall mean the Enlighten DSM computer program and related computer programs, including, but not limited to, all source code, object code, build procedures, installation files, help files, dynamic link libraries, informational content included in the program, and any supporting information provided by Borrower. "Software License Agreement" shall mean the certain Software License Agreement dated as of the date hereof by and between the Borrower and the Lender. "Software Security Agreement" shall mean the certain Software Security Agreement dated as of the date hereof by and between the Borrower and the Lender, which agreement is to be recorded with the United States Copyright Office. "Subsidiary" shall mean, as to any Person, any corporation or other entity in which more than fifty percent (50%) of all voting equity interests is owned directly or indirectly by such Person and/or by one or more of such Person's Subsidiaries. "Taxes" shall have the meaning set forth in Section 2.5(g)(i) hereof. "Term" shall mean the period commencing on the Closing Date and ending on the Termination Date. "Termination Date" shall have the meaning set forth in Section 10.1 hereof. "Third Party Intellectual Property Rights" shall have the meaning set forth in Section 4.19 hereof. "UCC" shall mean the Uniform Commercial Code as in effect in the Commonwealth of Virginia from time to time. "Warrant Agreement" shall mean the certain Warrant Agreement by and between the Borrower and the Lender, executed and delivered pursuant to Section 3.1(a) hereof, in the form attached as Exhibit C hereto, as such may be modified, amended or supplemented from time to time. "Warrant Shares" shall mean the shares of Common Stock which the Lender may acquire upon exercise of the warrant granted to the Lender pursuant to the Warrant Agreement. "Wholly-Owned Domestic Subsidiary" shall mean each Wholly-Owned Subsidiary of the Borrower that is incorporated under the laws of the United States or any State thereof. "Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of such Person to the extent all of the capital stock or other ownership interests in such Subsidiary, other than directors' qualifying shares, is owned directly or indirectly by such Person. 1.2 ACCOUNTING TERMS 9 As used in this Agreement or in any certificate, report or other document made or delivered pursuant to this Agreement, all accounting terms not defined in Section 1.1 or elsewhere in this Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP; provided, however, that if any change in GAAP or, if applicable, Regulation S-X promulgated pursuant to the Securities Act of 1933, as amended, in effect on the Closing Date shall result in a change in any calculation (or the meaning or effect of any calculation) required to determine compliance with any provision contained in this Agreement, the Borrower and the Lender will amend such provision in a manner to reflect such change such that the determination of compliance with such provision shall yield the same result as would have been obtained prior to such change in GAAP or Regulation S-X. Until any such amendment is entered into, all such covenants shall be calculated in accordance with GAAP or Regulation S-X, as applicable, as in effect immediately preceding such change. 1.3 UNIFORM COMMERCIAL CODE TERMS All capitalized terms used herein and defined in the UCC shall have the meanings given therein unless otherwise defined herein. II. ADVANCES, PAYMENT AND INTEREST; GRANT OF SECURITY INTEREST 2.1 CREDIT FACILITY Subject to the terms and conditions set forth in this Agreement, the Lender agrees to make Advances to the Borrower, from time to time during the Term, provided that the aggregate amount of all Advances at any one time outstanding shall not exceed One Million One Hundred Eighteen Thousand Two Hundred Fifty Dollars ($1,118,250) (the "Facility Cap"). This is not a revolving credit facility, and any repayment of any Advance made shall be applied to permanently reduce the Facility Cap. 2.2 ADVANCES Except as otherwise permitted by the Lender from time to time each Advance hereunder shall be in an amount of at least $25,000 or an integral multiple of $1,000 in excess thereof. 2.3 PROCEDURES FOR BORROWING As a condition to each Advance, Borrower shall deliver to Lender, prior to 11:00 a.m. (Eastern time) on any Business Day which is not less than ten days prior to the date of such requested Advance (which date shall be a Business Day), or such shorter period of time as may be acceptable to the Lender, an irrevocable written notice substantially in the form of Exhibit D hereto (each, a "Borrowing Notice"), duly executed by an Authorized Officer of Borrower. Each Borrowing Notice shall be effective upon receipt by the Lender and shall (a) specify (i) the amount of the requested Advance, (ii) Borrower's intended use of such funds (in reasonable detail), and (iii) the date that such Advance is to be made and (b) certify that each of the conditions set forth in Section 3.2 hereof has been satisfied as of the date of such Borrowing 10 Notice. Notwithstanding the foregoing, should any amount required to be paid hereunder or under any other Loan Document be unpaid, such amount may be paid by the Lender and the payment thereof shall be deemed a request for an Advance as of the date such payment is due. 2.4 DISBURSEMENT OF ADVANCE PROCEEDS All Advances shall be disbursed from whichever office or other place the Lender may designate from time to time and shall be charged to the Borrower's account on the Lender's books. The proceeds of each Advance requested by the Borrower under Section 2.3 hereof and made by the Lender shall be made available to the Borrower no later than 1:00 p.m. (Eastern time) on the day so requested in the applicable Borrowing Notice by crediting the Borrower's account in accordance with wire instructions to be provided to Lender. The proceeds of each Advance deemed to have been requested by the Borrower under the last sentence of Section 2.3 hereof shall be disbursed to the Lender in payment of the outstanding Obligations which are due and payable as of the date of such Advance. 2.5 INTEREST; PAYMENTS (a) Interest on outstanding Advances shall be due and payable in arrears on the first day of each January, April, July and October, commencing April 1, 2001. Interest shall be computed monthly at a rate for each month equal to the applicable Federal short-term rate announced by the Internal Revenue Service pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as amended, through a Revenue Ruling published in the Internal Revenue Bulletin during the preceding month (the "Applicable Interest Rate"). (b) Notwithstanding the foregoing (i) if the Lender, in its sole discretion, permits the Obligations to exceed the Facility Cap and such excess continues for a period of five (5) Business Days or more during any quarter following notice to the Borrower, then that portion of the Obligations that exceeds the Facility Cap shall bear interest at a rate equal to the Applicable Interest Rate then in effect plus two percent (2%) per annum until paid, and (ii) if any interest payment or other payment due and payable hereunder is not received by Lender within five (5) Business Days of the day such payment is due and payable, then Borrower shall pay to the Lender a late charge equal to 15% of the amount of such interest or other payment not timely made. (c) Upon the occurrence of an Event of Default and during the continuation thereof, the interest rate in effect at such time with respect to the Obligations shall be increased to a rate of fifteen percent (15%) per annum (the "Default Rate"). (d) Interest and fees under any subparagraph hereof shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days and calculated for the actual number of days elapsed in each monthly interest calculation period. (e) The principal amount of the Obligations shall be due and payable in full upon demand made by the Lender at any time on or after July 15, 2001. The Obligations may not be repaid at any time without the prior written consent of the Lender. 11 (f) All payments of principal, interest and other amounts payable hereunder, or under any of the other Loan Documents, shall be made to the Lender at the Payment Office not later than 1:00 p.m. (Eastern time) on the due date therefor in lawful money of the United States of America in immediately available funds. If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day. (g) (i) All payments made by the Borrower hereunder or under any other Loan Document will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of Lender pursuant to the laws of the jurisdiction in which it is organized or managed and controlled or the jurisdiction in which the principal office or applicable lending office of the Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts, if any, as may be necessary so that every payment of all amounts due under this Agreement or under any other Loan Document, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Loan Document. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse Lender, upon the written request of Lender, for taxes imposed on or measured by the net income or net profits of Lender pursuant to the laws of the jurisdiction in which the principal office or applicable lending office of Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which the principal office or applicable lending office of Lender is located and for any withholding of taxes as Lender shall determine are payable by, or withheld from, Lender in respect of such amounts so paid to or on behalf of Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of Lender pursuant to this sentence. Borrower will furnish to Lender within 45 days after the date the payment of any Tax is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. Borrower agrees to indemnify and hold harmless Lender, and reimburse Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by Lender. (ii) If Borrower pays any additional amount under this Section 2.5(g) to a Lender and such Lender determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or 12 credit against, its tax liabilities in or with respect to the taxable year in which the additional amount is paid, such Lender shall pay to Borrower an amount that the Lender shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Lender in such year as a consequence of such refund, reduction or credit. Whether or not a Lender claims any refund or credit or files any amended tax return shall be in the sole discretion of such Lender. Nothing in this Section 2.5(g)(ii) shall require a Lender to (A) disclose or detail the basis of its calculation of the amount of any tax benefit or refund to Borrower or any other party or (B) disclose such Lender's tax returns. (iii) Borrower hereby agrees to indemnify and hold the Lender, its directors, officers employees and agents harmless against any and all liability, expense, loss or claim of damage or injury (other than any such liability, expense, loss or claim of damage or injury resulting from the Lender's or such other party's gross negligence or willful misconduct) made against the Lender by Borrower or by any third party, arising from or incurred by reason of (A) handling Borrower's accounts, (B) relying on the instructions of any Authorized Officer of Borrower or (C) taking any other action hereunder. 2.6 REPAYMENT OF EXCESS ADVANCES Except as otherwise permitted by Section 2.5(b) hereof, the aggregate balance of Advances outstanding at any time in excess of the Facility Cap hereof shall be immediately due and payable by the Borrower without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred; provided, the Borrower's failure to pay any such excess Advances shall not constitute an Event of Default under Article VII hereof unless such failure to pay continues after five (5) Business Days following written notice to the Borrower of such excess balance. 2.7 NOTE; LENDER RECORDS The Borrower's obligations with respect to the Advances shall be evidenced by the Note, which shall be executed by the Borrower in the face amount of the Facility Cap. The records of the Lender with respect to amounts outstanding under the Note shall be prima facie evidence of the amounts of Advances and of payments and other charges applicable thereto. 2.8 ADDITIONAL PAYMENTS Any sums expended by the Lender as a result of Borrower's failure to perform or comply with the Obligations may be charged to the Borrower's account as an Advance and added to the Obligations. 2.9 MAXIMUM RATE In no event whatsoever shall interest and other charges hereunder exceed the highest rate permissible under law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that a court determines that the Lender has 13 received interest and other charges hereunder in excess of the highest rate applicable hereto, such excess interest shall be first applied to any unpaid principal balance owed by the Borrower, and if the then remaining excess interest is greater than the previously unpaid principal balance, the Lender shall promptly refund such excess amount to the Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. 2.10 GRANT OF SECURITY INTEREST. To secure the prompt payment, performance and observance of the Obligations, Borrower does hereby assign to Lender, and grant to Lender a present, absolute, unconditional, continuing first priority security interest in and to, all of Borrower's right, title and interest, whether now owned or existing or hereafter acquired or arising, in and to the Software and in and to the Copyrights. 2.11 REQUESTED RECORDATION. Borrower authorizes the Register of Copyrights to file and record the Software Security Agreement (and any corresponding or separate application forms of such jurisdiction) in order to reflect publicly Lender's security interest in the Copyrights. 2.12 CONDITIONAL ASSIGNMENT. Borrower shall execute the Conditional Assignment in the form attached hereto as Exhibit E (the "Conditional Assignment"), conditionally assigning all rights in the Software and Copyrights to the Lender. Such Assignment shall become effective automatically upon any Default or Event of Default. Upon Default or Event of Default, Schedule A to the Conditional Assignment shall be amended to include all new Copyrights acquired since execution of the Conditional Assignment. III. CONDITIONS PRECEDENT 3.1 CONDITIONS TO INITIAL ADVANCE The obligation of the Lender to make the initial Advance (the "Initial Advance") on or after the Closing Date is subject to the satisfaction, in the sole judgment of the Lender, of the following conditions precedent: (a) the Lender shall have received this Agreement, the Note, the Registration Rights Agreement, the Software License Agreement, the Software Security Agreement, the Warrant Agreement and the Conditional Assignment, each duly executed and delivered by an Authorized Officer of the Borrower; (b) the Lender shall have received a copy of (i) the certificate of incorporation of Borrower, certified as of a recent date by the California Secretary of State, (ii) the bylaws of Borrower, certified as of the Closing Date by the corporate secretary of Borrower, (iii) certificates of good standing as to Borrower from the California Secretary of State and the California Franchise Tax Board, and certificates of registration or qualification to do business as 14 a foreign corporation from the Secretary of State of each other jurisdiction in which Borrower has an office or conducts business, (iv) resolutions of the Board authorizing the execution, delivery and performance of this Agreement and each of the other Loan Documents, and reserving the Maximum Conversion Shares for issuance upon the conversion of the Note at the then-applicable Conversion Price, as certified by an Authorized Officer of Borrower as of the Closing Date, and (v) satisfactory evidence, as determined in the sole judgment of the Lender (upon advice of its counsel), that all forms, documents and instruments required, under the UCC and the terms of this Agreement, to be filed to perfect the Lender's interest in the Software have been so filed; (c) the Lender shall have received a certificate from an Authorized Officer, in form and substance satisfactory to the Lender, certifying that (i) each of the representations and warranties of Borrower contained in this Agreement will, except as contemplated by this Agreement, be true and correct in all material respects (except that representations and warranties which are qualified as to materiality or as to absence of Material Adverse Effect upon Borrower will be true and correct in all respects) at the Closing Date with the same effect as though made on that date (unless a representation and warranty refers to a specific earlier date, in which case it will have been true and correct in all material respects at that earlier date), (ii) Borrower will have fulfilled in all material respects all its obligations under this Agreement required to have been fulfilled prior to or at the Closing Date, (iii) no order will have been entered by any court or Governmental Authority and be in force which invalidates this Agreement or any other Loan Document or restrains the Lender from completing the transactions contemplated hereby or thereby, and no action will be pending against the Borrower relating to the transactions contemplated hereby or thereby which presents a reasonable likelihood of resulting in an award of damages against the Borrower which would reasonably likely to have a Material Adverse Effect on the Borrower, (iv) either (x) the Borrower shall have received a waiver from Nasdaq pursuant to Nasdaq Rule 4350(i)(2) or (y) the Borrower shall have received all shareholder approvals required for the issuance and delivery of the Maximum Conversion Shares at the time of the Initial Advance, (v) Borrower shall have received the written consent of Informix Software, Inc. and each other Person whose consent Borrower is required to obtain in connection with the execution, delivery and performance of this Agreement and the other Loan Documents including, without limitation, the Conditional Assignment, and (vi) no Default or Event of Default shall have occurred and be continuing on such date, or would exist after giving effect to the Initial Advance; (d) the Lender shall have received a certificate of the corporate secretary of Borrower, dated the Closing Date, as to the incumbency and signature of the officers of Borrower executing this Agreement and each of the other Loan Documents, together with evidence of the incumbency of such corporate secretary; (e) the Lender shall have completed examinations, the results of which shall be satisfactory in form and substance to the Lender in its sole discretion, of the books and records of the Borrower; (f) the Lender shall have received a copy of the financial statements and projections of Borrower described in Section 4.13 hereof, each of which shall be satisfactory in all respects to the Lender; 15 (g) the Borrower shall have demonstrated to the Lender's satisfaction that (x) Borrower's operations comply, in all respects deemed material by the Lender, in its sole judgment, with all applicable federal, state, and local statutes and regulations, (y) none of the Borrower's operations are the subject of any governmental investigation, evaluation or any remedial action which could result in any expenditure or liability deemed material by the Lender, in its sole judgment, and (z) Borrower has no liability (whether contingent or otherwise) that is deemed material by the Lender, in its sole judgment; (h) the Lender shall have completed an examination of the terms and conditions of all obligations owed by the Borrower (both collectively and individually) to third parties and deemed material by the Lender, and the results of such examination shall be satisfactory to the Lender, in its sole judgment; (i) Borrower shall have delivered to the Lender such consents and agreements, in form and substance satisfactory to the Lender in its sole discretion, from such third parties as the Lender and its counsel shall determine are necessary or desirable with respect to claims against the Borrower, which consents and agreements shall provide, among other things, for such third parties' consent to the Loan Documents and the transactions contemplated hereby and thereby; (j) Borrower shall have insured its properties and business in accordance with Section 5.5 hereof, and the Lender shall have received certified copies of all such insurance policies or certificates therefor confirming that such policies are in effect and that the premiums due and owing with respect thereto have been paid in full; (k) all corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated hereby and by the other Loan Documents (including, but not limited to, those relating to Borrower's corporate and capital structure) shall be satisfactory in form and substance to the Lender and its counsel; (l) Borrower shall have taken all necessary corporate action to increase the size of the Board to seven persons and shall have appointed Omar Maden and three other individuals to be designated in writing by the Lender, in its sole discretion, through a written notice provided to Borrower, to serve as members of the Board; (m) Effective immediately following the Closing Date, Omar Maden shall have been elected by the Board to serve as the Chief Executive Officer of Borrower; and (n) Borrower's intended use of the proceeds from the Advance shall be acceptable to the Lender in its sole discretion; provided, that the Lender agrees to waive the conditions precedent contained in paragraphs (e), (f), (g), (h), (i), (j) and (n) of this Section 3.1 with respect to the first $100,000 of the Initial Advance, which amount shall be provided to Borrower at the Closing Date. 16 Notwithstanding the provisions of Section 3.1(n), the parties hereto agree and acknowledge that all certificates required pursuant to this Section 3.1 to be delivered to the Lender by either the Chief Executive Officer or the Chief Financial Officer of Borrower shall be prepared and executed by the individual(s) serving in such capacities on or immediately prior to the Closing Date. 3.2 CONDITIONS TO EACH ADVANCE (a) The obligation of the Lender to make any Advance requested to be made or issued on any date (excluding the Initial Advance, which is governed by Section 3.1 hereof), is subject to the satisfaction, in the sole judgment of the Lender, of the following conditions precedent: (i) Lender shall have received a Borrowing Notice; (ii) each of the representations and warranties of Borrower contained in this Agreement will, except as contemplated by this Agreement, be true and correct in all material respects (except that representations and warranties which are qualified as to materiality or as to absence of Material Adverse Effect upon Borrower will be true and correct in all respects) at the Closing Date with the same effect as though made on that date (unless a representation and warranty refers to a specific earlier date, in which case it will have been true and correct in all material respects at that earlier date); (iii) Borrower shall not be in violation of any covenant hereunder; (iv) no Default or Event of Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advance requested to be on such date; (v) immediately after giving effect to such Advance, the aggregate outstanding principal amount of Advances shall not exceed the Facility Cap; and (vi) Borrower's intended use of the proceeds from the Advance shall be acceptable to the Lender in its sole discretion. (b) The delivery by Borrower of a Borrowing Notice shall constitute a representation and warranty by Borrower as of the date of such Advance that the conditions contained in this Section 3.2 (other than Section 3.2(a)(i) and 3.2(a)(vi)) have been satisfied. IV. REPRESENTATIONS AND WARRANTIES 17 The Borrower represents and warrants, as of the date hereof and as of the date of each Advance (which representations and warranties shall survive the delivery of this Agreement and the making of the Advances), as follows: 4.1 ORGANIZATION AND AUTHORITY (a) Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of California. (b) Borrower (i) has all requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (ii) is duly qualified to do business in every jurisdiction in which Borrower is required to be so registered or qualified, except where Borrower's failure so to register or qualify would not, in the aggregate, be reasonably likely to have a Material Adverse Effect. (c) Borrower has all requisite power and authority to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party and to borrow hereunder. (d) When executed and delivered, each of the Loan Documents will constitute the legal, valid and binding obligation of the Borrower, enforceable against Borrower in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity). (e) When issued and delivered to the Lender as contemplated by this Agreement, the Note will evidence a valid and binding obligation of the Borrower, and will be enforceable against the Borrower in accordance with its terms. A number of Conversion Shares equal to the quotient of the Facility Cap and the Conversion Price, as adjusted (the "Maximum Conversion Shares"), have been, or will have been prior to the Closing Date, reserved for issuance and, when issued upon conversion of the Note, those shares will be duly authorized and issued, fully paid and non-assessable, and will not be subject to, or have been issued in violation of, pre-emptive rights of any shareholders of the Borrower or any other persons. 4.2 LOAN DOCUMENTS The execution, delivery and performance by Borrower of each of the Loan Documents: (a) have been duly authorized by all requisite corporate action of Borrower for the lawful execution, delivery and performance thereof, except that under applicable Nasdaq rules, the Borrower's shareholders may be required to approve the making of the Note and the issuance of the Conversion Shares upon conversion of the Note; (b) assuming that either (x) Borrower has obtained a waiver from Nasdaq pursuant to Nasdaq Rule 4350(i)(2) or (y) the shareholder approval described in subparagraph (a) 18 above either is not required or has been obtained, do not violate any provisions of (i) applicable law, rule, regulation or tariff, (ii) any order of any court or other Governmental Authority binding on Borrower or any of its properties or (iii) the certificate of incorporation, bylaws or any other equivalent governing agreement of Borrower; (c) will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time, or both, would constitute an event of default, under any indenture, agreement, or other instrument to which Borrower is a party, or by which the properties or assets of Borrower are bound, the effect of which would be reasonably likely to have a Material Adverse Effect; and (d) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Borrower. 4.3 CAPITALIZATION The only authorized stock of the Borrower is 20,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. Schedule 4.3 contains a complete description of the Borrower's capitalization as of the date hereof. All shares shown on Schedule 4.3 as issued and outstanding as of the date hereof have been duly authorized and issued and are fully paid and non-assessable and are not subject to any pre-emptive rights. Except as shown on Schedule 4.3, the Borrower has not issued any options, warrants or other securities convertible into or exchangeable Common Stock or other securities, and is not a party to any other agreements, which require, or upon the passage of time, the payment of money or the occurrence of any other event may require, the Borrower to issue or sell any of its stock. 4.4 SUBSIDIARIES As of the Closing Date, the Borrower has no Subsidiaries other than those Persons listed as Subsidiaries on Schedule 4.4. Schedule 4.4 states as of the date hereof the authorized and issued capitalization of each Subsidiary listed thereon, the number of shares or other equity interests of each class of capital stock or interest issued and outstanding of each such Subsidiary and the number and/or percentage of outstanding shares or other equity interest (including options, warrants and other rights to acquire any interest) of each such class of capital stock or equity interest owned by Borrower or by any such Subsidiary. The outstanding shares or other equity interests of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and the Borrower and each such Subsidiary own beneficially and of record all the shares and other interests it is listed as owning on such Schedule 4.4, free and clear of any Lien. 4.5 OWNERSHIP INTERESTS Borrower neither owns a majority interest in nor participates as a greater than 50% partner in any joint venture, partnership or similar arrangements with, any Person other than the Persons listed on Schedule 4.4 or as otherwise permitted under this Agreement. 4.6 ASSETS 19 The assets of the Company and its Subsidiaries constitute, in the aggregate, all the material assets (including, but not limited to, Intellectual Property) used in or necessary to the conduct of their businesses as such businesses are currently being conducted. 4.7 TITLE TO PROPERTIES Borrower has title to all of its personal properties, subject to no transfer restrictions or Liens of any kind, except for the restrictions described on Schedule 4.7 and Permitted Liens and except as would not have a Material Adverse Effect. Borrower is in compliance in all respects with each lease to which Borrower is a party or otherwise bound except as would not have a Material Adverse Effect. Borrower represents that it has no knowledge of any Lien or transfer restriction upon its personal properties other than Permitted Liens and those matters listed on Schedule 4.7, and specifically represents that it is aware of no tax or judgment lien that would have a Material Adverse Effect. 4.8 OTHER AGREEMENTS Except as disclosed on Schedule 4.8, Borrower is not: (a) a party to any judgment, order, decree or any agreement or instrument or subject to restrictions materially adversely affecting the ability of Borrower to observe the covenants and agreements contained herein or in any other Loan Document or to pay the Obligations; or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which Borrower is a party, which default has, or if not remedied within any applicable grace period would reasonably be likely to have, a Material Adverse Effect. 4.9 LITIGATION There is no action, suit, proceeding or investigation pending or, to Borrower's knowledge, currently threatened against Borrower that challenges the validity of this Agreement or any of the other Loan Documents or the right of Borrower to enter into it or them or to deliver the Conversion Shares or the Warrant Shares as provided hereunder or thereunder, or to consummate the transactions contemplated hereby or thereby, or that reasonably would be expected to result, either individually or in the aggregate, in any Material Adverse Effect. Borrower is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality that reasonably would be expected to have a Material Adverse Effect. There is no action, suit, proceeding or investigation by Borrower currently pending or which Borrower or any of its Subsidiaries intends to initiate, that would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. 4.10 NO CONSENTS Except as set forth on Schedule 4.10, neither the business or properties of the Borrower, nor any relationship between Borrower and any other Person, nor any circumstance in connection with the execution, delivery and performance of this Agreement and the other Loan 20 Documents and the transactions contemplated hereby and thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person on the part of Borrower as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by, this Agreement or the other Loan Documents by the Borrower. 4.11 HAZARDOUS MATERIALS Borrower is in compliance in all material respects with all applicable Environmental Laws, and Borrower has not been notified of any action, suit, proceeding or investigation which challenges Borrower's compliance with any Environmental Laws, or which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Substance, and which individually or in the aggregate has caused or is reasonably likely to cause a Material Adverse Effect. 4.12 TAX RETURNS Borrower has filed all federal and other material tax returns and all reports which are required by law to be filed by it and has paid all material taxes, assessments, fees and other governmental charges that are due and payable as shown on said returns, except for those being contested in good faith and for which there is an adequate reserve. The provisions for taxes on the books of the Borrower are adequate for all years not closed by applicable statutes, and for its current fiscal year, and Borrower has no knowledge of any material deficiency or additional material assessment in connection therewith not provided for on its books. 4.13 FINANCIAL STATEMENTS AND COMPANY REPORTS (a) Since April 30, 1994, the Borrower has filed with the SEC all forms, statements, reports and documents it has been required to file under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or the rules under either of them (collectively, the "SEC Filings"). (b) The Borrower's Annual Report on Form 10-KSB for the year ended December 31, 1999 (the "Form 10-K") and its Quarterly Report on Form 10-QSB for the period ended September 30, 2000 (the "September 10-Q") which were filed with the SEC, including the documents incorporated by reference in each of them, each contained all the information required to be included in it and, when it was filed, did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in it, in light of the circumstances under which they were made, not misleading. Without limiting what is said in the preceding sentence, the financial statements included in the Form 10-K all were prepared, and the financial information included in the September 10-Q was derived from financial statements which were prepared, in accordance with United States GAAP applied on a consistent basis (except that financial information included in the September 10-Q does not contain notes and is subject to normal year end adjustments) and present fairly the consolidated financial condition and the consolidated results of operations of the Company and its subsidiaries at the dates, and for the periods, to which they relate. The Company has not filed any reports 21 with the Securities and Exchange Commission with regard to any period which ended, or any event which occurred, after September 30, 2000. (c) As of the Closing Date, and except as set forth on Schedule 4.13 (but for this purpose, assuming that the Initial Advance and the other transactions contemplated by this Agreement and the other Loan Documents have occurred), since September 30, 2000, there has been no change in the condition, financial or otherwise, of the Borrower as shown on the consolidated balance sheet as of such date, except changes in the ordinary course of business, none of which individually or in the aggregate constitutes a Material Adverse Effect. As of the Closing Date, Borrower has no material liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) that are not either reflected or reserved against on the unaudited consolidated balance sheet of the Borrower as at September 30, 2000, or incurred in the ordinary course of the business of the Borrower subsequent to the date thereof. (d) The cash flow projections of the Borrower and the pro forma balance sheet of Borrower and its Subsidiaries as of the Closing Date, copies of which have been delivered to the Lender, were prepared by the Chief Financial Officer of Borrower, are based on underlying assumptions which the Borrower believes provide as of the Closing Date a reasonable basis for the projections contained therein and reflect Borrower's judgment as of the Closing Date, based on circumstances as of the Closing Date, of the most likely set of conditions and course of action for the period, it being recognized by the Lender that such projections and pro forma financial information are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results or pro forma financial information and that such differences may be material. 4.14 COMPLIANCE WITH LAW; ACCURACY OF FILINGS The Borrower is in compliance in all material respects with all laws, statutes, rules, regulations, ordinances and tariffs applicable to its business, assets and operations, and Borrower is not in violation of any order of any court, or other Governmental Authority or arbitration board or tribunal which individually or in the aggregate is likely to cause a Material Adverse Effect. 4.15 ERISA Borrower has not received any notice that it is not in full compliance with any of the requirements of ERISA, and the Borrower (a) has not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, (b) has not failed to meet all applicable minimum funding requirements under Section 302 of ERISA in respect of its plans and no funding requirements have been postponed or delayed, (c) has no knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any of the employee benefit plans, (d) has no fiduciary responsibility for investments with respect to any plan existing for the benefit of Persons other than its employees or former employees or (e) has not withdrawn, completely or partially, from any multi-employer pension plans so as to incur liability under the Multi-Employer Pension Plan Amendments of 1980, each of which matters set forth in the above 22 clauses of this Section 4.15, individually or in the aggregate, has not caused or is not reasonably likely to cause a Material Adverse Effect. There exists no event described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12 C.F.R. Section 2615.3 has not been waived. 4.16 LICENSES AND PERMITS Except as disclosed on Schedule 4.16, Borrower (a) is in compliance with and (b) has procured and is now in possession of, all material licenses and permits required by any applicable federal, state or local law or regulation for the operation of its business in each jurisdiction wherein it is now conducting business and where the failure to procure such licenses or permits would have a Material Adverse Effect. 4.17 NO DEFAULT There does not exist any Default or Event of Default hereunder or under any other Loan Document. 4.18 NO LABOR DISPUTES Borrower is not involved in any labor dispute, and there are no strikes or walkouts or union organization of any employees of Borrower or any of its Subsidiaries threatened or in existence and no labor contract is scheduled to expire during the Term which individually or in the aggregate has caused or is reasonably likely to have a Material Adverse Effect. 4.19 INTELLECTUAL PROPERTY/NON-DISCLOSURE AGREEMENTS Except, in each case, as set forth on Schedule 4.19: (a) (i) Borrower and each Subsidiary of Borrower owns, free and clear of liens, security interests, pledges, charges, leases, options, rights of first refusal to purchase or license, encumbrances, claims, orders, arbitration awards or any other restrictions of any kind or character, or licenses or otherwise possesses valid and enforceable rights to use the Software and all other Intellectual Property that is used in the business of Borrower and its Subsidiaries. (ii) Except as would not be materially adverse to the business of Borrower or any Subsidiary of Borrower, Borrower and its Subsidiaries have taken reasonable steps to protect the Software and their Intellectual Property. Borrower has registered the copyrights in the current and all prior versions of the Software at the United States Copyright Office and has provided true and correct copies of the filed applications and certificates to the Lender. There is no litigation pending or, to the knowledge of Borrower or any Subsidiary of Borrower, threatened or any written claim from any person challenging the ownership, use, validity or 23 enforceability of the Software or any other Intellectual Property, nor is there any basis for the assertion of any such claim or challenge. (iii) No material patent, trademark, service mark, copyright, trade secret, computer software or other intellectual property right other than the Intellectual Property set forth on Schedule 4.19 is necessary to conduct the businesses of Borrower and its Subsidiaries as presently conducted. (b) Schedule 4.19(b) lists all (i) patents, patent applications, registered and unregistered trademarks, trade names and service marks, and registered copyrights and material unregistered copyrights owned by Borrower included in the Intellectual Property, including the jurisdictions in which each such item of Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed, (ii) licenses and value added reseller agreements in effect with respect to the Software, and (iii) licenses, sublicenses and other agreements as to which Borrower and any Borrower Subsidiary are a party and pursuant to which Borrower and its Subsidiaries are authorized to use any third party patents, trademarks or copyrights, including software ("Third Party Intellectual Property Rights") that are incorporated in, are or form a part of the Software or any other product of Borrower and any of its Subsidiaries. (c) (i) Except as set forth in Schedule 4.19(c), there is no unauthorized use, disclosure, infringement or misappropriation of any Intellectual Property rights of Borrower or any such Subsidiary, any trade secret material to Borrower or its Subsidiaries, or any Intellectual Property right of any third party to the extent licensed by or through Borrower or its Subsidiaries, by any employee of Borrower or any Borrower Subsidiary or any third party for whom Borrower is responsible. Except as set forth in Schedule 4.19(c), there are no royalties, fees or other payments payable by Borrower or its Subsidiaries to any person by reason of the ownership, use, sale or disposition of Intellectual Property. (ii) Except as set forth in Schedule 4.19(c), there has been no prior use of Borrower's registered trademarks or material unregistered trademarks by any third party that would confer upon said third party superior rights in such trademarks. Borrower and its Subsidiaries have taken all necessary steps to adequately police the trademarks against third party infringement, and the trademarks registered in the United States and in other jurisdictions where Borrower or its Subsidiaries are doing business have been continuously used in the form appearing in, and in connection with the goods and services listed in, their respective registration certificates or any amendment, supplement or office action related thereto. (d) Borrower and its Subsidiaries are not, nor will they be as a result of the execution and delivery of this Agreement or the performance of their obligations under this Agreement, in breach of any material license, sublicense or other agreement relating to the Intellectual Property or Third Party Intellectual Property Rights, and the execution and delivery of this Agreement or the performance of the obligations under this Agreement by Borrower and its Subsidiaries will not result in the loss or impairment of, or give rise to any right of any third 24 party to terminate, any of Borrower's or any of its Subsidiaries' rights to own any of its Intellectual Property or their respective rights under any material license agreements, nor require the consent of any Governmental Authority or third party in respect of any such Intellectual Property. (e) Borrower and its Subsidiaries (i) have no knowledge (including knowledge of any litigation pending or threatened or any written claim from any person) or reason to believe that the conduct of their businesses infringe any patent, trademark, service mark, copyright, trade secret or other proprietary right of any third party; and (ii) have not advised any third party that such third party may be infringing any Intellectual Property or breaching any license or agreement involving Intellectual Property and have not brought or threatened any claim against such third party for such conduct. (f) The Software owned or purported to be owned by Borrower or any of its Subsidiaries, was either (i) developed by employees of Borrower or any of its Subsidiaries within the scope of their employment; (ii) developed by independent contractors or consultants who have assigned their rights to Borrower or any of its Subsidiaries pursuant to written agreements; or (iii) otherwise acquired by Borrower or its Subsidiary from a third party. (g) Except as disclosed on Schedule 4.19(g), all employees and independent contractors and consultants of Borrower and its Subsidiaries have executed and delivered to Borrower or its Subsidiaries, as the case may be, a proprietary information and inventions agreement irrevocably transferring or assigning to Borrower or its Subsidiaries all rights to the Software and any other Intellectual Property arising from services performed for Borrower or its Subsidiaries by such persons. (h) Except as disclosed on Schedule 4.19(h), Borrower and its Subsidiaries have obtained or entered into written agreements with their employees and with third parties, in transactions deemed appropriate, in connection with the disclosure to or use or appropriation by, employees and third parties, of trade secrets or proprietary information owned by Borrower and its Subsidiaries and not otherwise protected by a patent, a patent application, copyright, trademark, or other registration or legal scheme ("Borrower Confidential Information"), and do not know of any situation involving such employee or third party use, disclosure or appropriation of Borrower Confidential Information where the lack of such a written agreement is likely to result in any Material Adverse Effect. Except as set forth in Schedule 4.19(h), neither Borrower nor any of its Subsidiaries has furnished the source code of the Software or any of their other software products to any third party, deposited any such source code in escrow or otherwise provided access to such source code to any third party. 4.20 EXISTING INDEBTEDNESS Except as set forth on Schedule 4.20, and as otherwise permitted hereunder, Borrower has no outstanding Indebtedness nor is Borrower subject to any mortgage, note, indenture or guarantee evidencing Indebtedness of Borrower. Borrower has performed all obligations required to be performed by it prior to and including the date hereof in connection with such Indebtedness, and no event of default exists on the date hereof under the documents 25 evidencing such Indebtedness which if not performed would reasonably be likely to have a Material Adverse Effect. 4.21 ABSENCE OF CHANGES As of the Closing Date, and other than as set forth on Schedule 4.21, there has not been since September 30, 2000: (a) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties or financial condition of Borrower; (b) any waiver or compromise by Borrower of a material debt owed to it, except in the ordinary course of business; (c) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by Borrower, except in the ordinary course of business; (d) any material change to a material contract or agreement by which Borrower or any of its assets is bound or subject, except in the ordinary course of business; (e) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder, except in the ordinary course of business and that is not material to the business, properties or financial condition of Borrower; (f) any material resignation or termination of employment of any officer or key employee of Borrower; and Borrower is not aware of any impending resignation or termination of employment of any such officer or key employee; (g) any material mortgage, pledge, transfer of a security interest in, or lien, created by Borrower, with respect to any of its material properties or assets, except liens for taxes not yet due or payable; (h) any loans or guarantees made by Borrower to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business; (i) any declaration, setting aside for payment or other distribution in respect to any of Borrower's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by Borrower; (j) any declaration or payment of any dividend or other distribution of the assets of Borrower; (k) to Borrower's knowledge, any other event or condition of any character that would reasonably be expected to materially and adversely affect the business, properties or financial condition of Borrower; or 26 (l) any arrangement or commitment by Borrower to do any of the things described in this Section 4.21. 4.22 AGREEMENTS; ACTION Except as contained in employment agreements entered in the ordinary course of business or as disclosed on Schedule 4.22 or as permitted by Section 6.6 hereof, there are no material agreements, understandings or proposed transactions between Borrower and any of its officers, directors, affiliates, or any affiliate thereof. 4.23 NO CONFLICT OF INTEREST Except as permitted under this Agreement or as disclosed on Schedule 4.23, Borrower is not indebted, directly or indirectly, to any of its officers or directors or to their respective spouses or children, in any amount whatsoever other than in connection with expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees or any other ordinary course expenses or advances. Except as permitted under this Agreement, none of Borrower's officers or directors, or any members of their immediate families, are, directly or indirectly, indebted to Borrower (other than in connection with purchases of Borrower's stock) or to Borrower's knowledge have any direct or indirect ownership interest in any firm or corporation with which Borrower is affiliated or with which Borrower has a business relationship, or any firm or corporation which competes with Borrower except that officers, directors of Borrower may own stock in (but not exceeding two percent of the outstanding capital stock of) any publicly traded company that may compete with Borrower. Except as disclosed on Schedule 4.23 or as permitted under this Agreement, none of Borrower's officers or directors or any members of their immediate families are, directly or indirectly, a party to any material contract with Borrower, with the exception of employment-related agreements. Borrower is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation, except as disclosed on Schedule 4.23 or as permitted under this Agreement. 4.24 INSURANCE Borrower has in full force and effect fire and casualty insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed and to conduct its business as currently conducted. 4.25 MARGIN REGULATIONS Borrower is not engaged, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No 27 part of the proceeds of any Advance will be used for "purchasing" or "carrying" "margin stock" as defined in said Regulation U. 4.26 INVESTMENT COMPANY ACT Borrower is not an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such an "investment company." 4.27 DISCLOSURE No representation or warranty made by the Borrower in this Agreement or in any other Loan Document contains any untrue statement of material fact or omits to state any fact necessary to make the statements herein or therein not materially misleading. There is no fact known to Borrower which Borrower has not disclosed to the Lender in writing which would be reasonably likely to materially adversely affect the financial condition, operations, business or assets of the Borrower. V. AFFIRMATIVE COVENANTS The Borrower covenants and agrees, that it shall, until such time as (i) Borrower has made payment in full of the Obligations, and (ii) this Agreement has been terminated in accordance with its terms: 5.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION (a) Furnish to the Lender, as soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, consolidated financial statements of Borrower and its Subsidiaries consisting of an audited balance sheet, and the notes thereto, and the related audited statements of income, retained earnings and cash flows for such fiscal year, in each case setting forth comparative consolidated figures for the preceding fiscal year, and in the case of the audited consolidated financial statements a certificate of such auditors stating that they have obtained no knowledge of any Default or Event of Default which has occurred and is continuing or, if in the opinion of such auditors such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof. (b) Furnish to the Lender, as soon as available and in any event within forty-five (45) days after the end of each of the first three fiscal quarters of the Borrower, (i) consolidated unaudited financial statements of Borrower and its Subsidiaries consisting of a balance sheet and the related statements of income, retained earnings and cash flows as at the end of and for such fiscal quarter and for the period from the beginning of the fiscal year to the end of such quarter, all prepared in accordance with GAAP applied on a basis consistent with prior periods, subject to normal year end adjustments and the absence of footnotes, accompanied 28 by a certificate of the chief financial officer or controller of Borrower to the effect that (A) such financial statements present fairly in all material respects the financial position of Borrower and its Subsidiaries as at the end of such fiscal quarter and the results of their operations for such fiscal quarter in accordance with GAAP applied on a basis consistent with prior periods, subject to normal year end adjustments and the absence of footnotes, and (B) no Default or Event of Default has occurred during such fiscal quarter or, if any such Default or Event of Default has occurred and is continuing, specifying the nature thereof and the steps that the Borrower is taking to remedy such situation, and (ii) a list of all of its existing Subsidiaries as at such quarterly report, specifically indicating any newly formed Subsidiary since the past reporting period hereunder. (c) Furnish to the Lender, as soon as available and in any event within thirty (30) days after the end of each monthly accounting period of each fiscal year (other than the last monthly accounting period for such fiscal year), monthly reports of Borrower and its Subsidiaries consisting of a consolidated balance sheet and the related consolidated statements of income, retained earnings and cash flows for such monthly accounting periods, setting forth comparative figures for the corresponding period of the previous year, and accompanied by a certificate of the chief financial officer of Borrower to the effect that (i) such financial statements present fairly in all material respects the financial position of Borrower and its Subsidiaries as at the end of such month and the results of their operations for such month, and (ii) no Default or Event of Default has occurred during such month or, if any such Default or Event of Default has occurred and is continuing, specifying the nature thereof and the steps that the Borrower is taking to remedy such situation. (d) Furnish to the Lender as soon as available, and in any event within ten (10) days after the issuance thereof, copies of such financial statements (other than those required to be delivered pursuant to this Section 5.1), reports and returns as Borrower shall send to its shareholders; provided, however, that, for purposes of meeting the requirements of this Section 5.1(d), Borrower shall only be required to deliver such reports and returns which are of a nature which are typically delivered to shareholders. (e) Promptly notify the Lender in writing of any pending or threatened litigation, suit or administrative proceeding affecting Borrower, whether or not the claim is covered by insurance, which reasonably is likely to materially and adversely affect the business, assets, operations or financial condition of Borrower. (f) Promptly, and in any event within three (3) Business Days after the Borrower obtains knowledge thereof, notify the Lender of the occurrence of any event which constitutes a Default or an Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto. (g) Furnish to the Lender such additional information as the Lender may reasonably request from time to time including, without limitation, copies of the written consent of Informix Software, Inc. and each other Person whose consent Borrower is required to obtain in connection with the execution, delivery and performance of this Agreement and the other Loan Documents including, without limitation, the Conditional Assignment. 29 5.2 PAYMENT OF OBLIGATIONS Make full and timely payment of the principal of and interest on the Advances and all other Obligations. 5.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS (a) Conduct its business in the ordinary course and in a manner consistent with good business practices customary to the industry, and engage principally in the same or similar lines of business substantially as heretofore conducted, and maintain all of its material properties and equipment used or useful in its business in good working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of this Agreement), including, without limitation, all material Intellectual Property. (b) Keep in full force and effect its existence and all material rights, licenses, leases, powers, franchises and permits, and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which the ownership or lease of property or the nature of its business makes such license or qualification necessary and failure to maintain such license or qualification would be, in the aggregate, reasonably likely to have a Material Adverse Effect. 5.4 COMPLIANCE WITH LAW; PAYMENT OF TAXES Comply with all applicable laws, statutes, rules, regulations, ordinances and tariffs of any applicable Governmental Authority with respect to the conduct of its business except for such noncompliance as would not have a Material Adverse Effect, and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation or liability which, if unpaid, might become a Lien against any of its properties not otherwise permitted pursuant to Section 6.2, except liabilities being contested in good faith and against which adequate reserves have been established. 5.5 INSURANCE Keep all of its insurable, material properties adequately insured in all material respects at all times against loss or damage by fire and other hazards as are customarily insured against by businesses engaging in activities similar to those of the Borrower or owning assets similar to those of the Borrower; maintain general public liability insurance at all times against liability on account of damage to persons and property having such limits, deductibles, exclusions and co-insurance and other provisions as are customary in Borrower's industry for similarly situated companies, and maintain insurance under and as required by all applicable workers' compensation laws. 30 5.6 TRUE BOOKS Keep true books of record and account in accordance with commercially reasonable business practices in which full, true and correct entries are made of all of its dealings and transactions in all material respects, and set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in its quarterly as well as year end financial statements. 5.7 INSPECTION; PERIODIC AUDITS Permit the representatives of the Lender, at the expense of the Borrower, to visit and inspect any of the offices or properties of Borrower to examine or audit all of their books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their affairs, finances and accounts with their officers and independent public accountants (and by this provision Borrower authorizes said accountants to discuss the affairs, finances and accounts of Borrower), during normal business hours, upon reasonable notice to an Authorized Officer and as often as reasonably may be requested. Without limiting the foregoing, Borrower shall pay such fees as may be determined by Lender in its discretion in connection with an audit of Borrower or its Subsidiaries which may be conducted by or on behalf of Lender not more than once per year, except that after the occurrence and during the continuation of an Event of Default such limitation upon audits shall not apply. 5.8 FURTHER ASSURANCES; ADDITIONAL DOCUMENTATION (a) At its cost and expense, duly execute and deliver to the Lender from time to time, promptly, but in no event later than twenty (20) days after the Lender's demand therefor, such further agreements, statements, assignments and transfers, or instructions or documents and such other instruments as the Lender reasonably may request, in order that the full intent of this Agreement and the other Loan Documents may be effectuated. (b) Execute any and all documents, instruments and agreements as Lender may request in order to effect a refinancing of the Loans hereunder with Lender or with an Affiliate of Lender, on substantially the same terms (and on the same economic terms) as are set forth herein and at no cost, fee or expense to Borrower. 5.9 MAINTAIN GOODWILL Take all reasonable steps to maintain the goodwill of its business and, except as may be requested by the Lender, the continued employment of Borrower's executive officers and other employees. 5.10 USE OF PROCEEDS 31 Use the proceeds of the Advances in accordance with the intended uses stated in the applicable Borrowing Notices. 5.11 ENFORCEABILITY OF AND COMPLIANCE WITH COVENANTS IN LOAN DOCUMENTS Take all necessary and appropriate actions at the request of the Lender to ensure that (i) each other Loan Document is and remains enforceable against the parties thereto (other than the Lender) in accordance with its terms and (ii) Borrower complies with each of its covenants in each Loan Document in all material respects. 5.12 RESERVATION OF CONVERSION SHARES Borrower shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Note, such number of its shares of Common Stock as shall be equal to the Maximum Conversion Shares. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the aggregate amount of Advances then outstanding, together with accrued but unpaid interest thereon, Borrower will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 5.13 PROXY STATEMENT AND SHAREHOLDERS MEETING (a) If issuance of the Conversion Shares upon conversion of the Note requires approval of Borrower's shareholders under any Nasdaq rule or other applicable law or regulation, and such requirement is not waived by Nasdaq or the Governmental Authority administering such other applicable law or regulation, Borrower will cause a meeting of its shareholders (the "Shareholders Meeting") to be held within six months after the date of this Agreement at which Borrower's shareholders will be asked to vote upon a proposal to approve the issuance of shares of the Conversion Shares upon conversion of the Notes. Borrower will (i) cause a proxy statement (the "Proxy Statement") relating to the Shareholders Meeting to be filed with the SEC not less than 60 days before the scheduled date of the Shareholders Meeting, (ii) use its best efforts to cause review of the Proxy Statement by the SEC staff to be completed as promptly as practicable, (iii) describe in the Proxy Statement the recommendation of its Board of Directors that the shareholders approve the issuance of Conversion Shares upon conversion of the Note, (iv) as promptly as practicable, and in any event within 10 days after Borrower is informed that the SEC staff has no further comments about the Proxy Statement, cause the Proxy Statement to be mailed to its shareholders and (v) cause the Shareholders Meeting to be held not later than the scheduled date of the Shareholders Meeting or such later day as is the 20th business day after the day on which the Proxy Statement is mailed. (b) The Lender will supply to Borrower all information in the Lender's possession which Borrower is required to include in the Proxy Statement and in all other respects cooperate with Borrower in its efforts to file the Proxy Statement with the SEC and cause review of the Proxy Statement to be completed as promptly as practicable after it is filed with the SEC. 32 5.14 ELECTION OF DIRECTORS. (a) Borrower agrees to take all necessary corporate action to (i) increase the size of the Board to seven persons, (ii) appoint Omar Maden and three other individuals to be designated in writing by the Lender, in its sole discretion, through a written notice provided to Borrower, each to serve as one of the seven members of the Board, and (iii) nominate and take all other necessary or desirable actions to ensure that such individual is re-elected to a new term of service at each successive meeting of Borrower's shareholders at which such individual's term as a director is set to expire in accordance with Borrower's governing documents, provided, however, that Borrower's obligations under this Section 5.14(a) shall expire at such time as this Agreement shall have been terminated and all Obligations under this Agreement and the Note have been repaid. . (b) Borrower agrees that its Board shall not act to remove any of the Lender's designees from the Board (with or without cause) unless such removal is made upon the written request of the Lender. The Lender agrees that, in the event Borrower's obligation under clause (a) above expires in accordance with the proviso contained in such clause, the Lender shall use its reasonable efforts to cause all of its designees who are no longer entitled to serve as a result of such expiration to resign from the Board. (c) Prior to any such expiration of Borrower's obligations under (a) above, if any designee of the Lender for any reason shall cease to serve as a member of the Board, Borrower agrees to take all necessary or desirable actions to cause the resulting vacancy to be filled by an individual designated by the Lender. 5.15 LISTING OF CONVERSION SHARES Borrower shall endeavor to authorize all Conversion Shares which may be issued upon conversion of the Note for quotation on the Nasdaq SmallCap Market (or such other automated quotation system or national securities exchange on which the Common Stock may become listed or quoted). 5.16 COPYRIGHTS (a) Borrower agrees to file applications to register the Copyrights in the Software and all prior versions of the Software at the United States Copyright Office within ten Business Days of the date hereof and to provide true and correct copies of all such filings made to Lender's counsel within five Business Days thereafter. Borrower agrees to take all necessary steps to prosecute the applications for copyright registration and will provide Lender's counsel with the copyright registration numbers and copies of the accepted applications within ten Business Days after receipt thereof. (b) Until all Obligations have been paid in full and there exists no commitment by Lender that could give rise to any Obligations, Borrower will maintain, preserve and protect the Copyrights free of any conflict with the rights of any other person. Without 33 limitation of the foregoing, Borrower shall have the duty (i) to pay all taxes, fees or other amounts necessary to maintain in full force and effect all of the Copyrights, (ii) to use its best efforts to defend the Copyrights and the Lender's security interest therein against all claims and demands of any persons who at any time shall claim the same or any other interest therein, and to pay, upon demand, all costs and expenses (including attorneys' fees and disbursements) that Lender incurs in connection therewith, (iii) to prosecute diligently any copyright application relating to the Copyrights pending as of the date hereof or thereafter until this Security Agreement is no longer in effect, (iv) to make application to register Copyrights that have not been registered but which may be registered, as appropriate, including to apply to register all additions or modifications or improvements to the Software, (v) to preserve and maintain all rights in copyright applications and registrations of the Copyrights, and (vi) to assist Lender in perfecting any security interests acquired by Lender pursuant to this Security Agreement, including, without limitation, filing and recording such new security agreements and other documents as may be required by Lender. Any expenses incurred in connection with such applications shall be borne by Borrower, and Lender shall have no obligation or liability to pay any taxes or fees, nor shall Lender have any duties in connection with applications or maintenance of rights in the Copyrights. VI. NEGATIVE COVENANTS The Borrower covenants and agrees, that it shall, until such time as (i) Borrower has made payment in full of the Obligations, and (ii) this Agreement has been terminated in accordance with its terms: 6.1 INDEBTEDNESS The Borrower shall not create, incur, assume or suffer to exist any Indebtedness of Borrower, howsoever evidenced, except the following (collectively, "Permitted Indebtedness"): (a) Indebtedness under this Agreement and the other Loan Documents, (b) any other Indebtedness existing as of the date hereof and set forth on Schedule 4.21; (c) Capitalized Lease Obligations of the Borrower and its Subsidiaries incurred by the Borrower or any of its Subsidiaries after the Closing Date and Indebtedness incurred pursuant to purchase money mortgages permitted by Section 6.2(f); provided that the aggregate amount of Indebtedness incurred pursuant to this clause (c) shall not exceed $250,000 at any time outstanding; (d) Intercompany Indebtedness by and among the Borrower and its Subsidiaries or by and among such Subsidiaries. 34 (e) Indebtedness consisting of guaranties by the Borrower of leases permitted to be incurred by Wholly-Owned Subsidiaries; 6.2 LIENS The Borrower shall not create, incur or suffer to exist any Lien upon or against any of its property or assets now owned or hereafter acquired, except the following (collectively, "Permitted Liens"): (a) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (c) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness for borrowed money), statutory obligations, and other similar obligations or arising as a result of progress payments under government contracts; (d) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere materially with the ordinary conduct of the business of Borrower and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to Borrower; (e) Liens arising from UCC financing statements regarding leases permitted by this Agreement; (f) purchase money Liens securing payables arising from the purchase by the Borrower or any of its Subsidiaries of any equipment or goods in the normal course of business; provided that such payables shall not constitute Indebtedness; (g) any interest or title of a lessor under any lease permitted by this Agreement; (h) Liens arising pursuant to purchase money mortgages relating to, or security interests securing Indebtedness representing, the purchase price or financing thereof of assets acquired by the Borrower or any of its Subsidiaries after the Closing Date; 35 (i) Permitted Encumbrances; (j) Judgment liens not in excess of $5,000; (k) Leases, subleases or licenses granted to others that are not necessary in any material respect to the business of Borrower or any of its Subsidiaries; and (l) Liens securing Indebtedness not in excess of $250,000 at any time outstanding. 6.3 CORPORATE GOVERNANCE ISSUES So long as the Note or any Conversion Shares issued upon conversion thereof are outstanding, without the prior written consent of the Lender, Borrower shall not now, and shall not agree to do any of the following at any future time: (a) create, issue or authorize the issuance of any other capital stock of the Borrower, or take any action resulting in a reclassification of any outstanding shares of capital stock into a new class or series of capital stock; (b) declare, pay or make any dividend or distribution on any shares of capital stock of Borrower (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock), apply any of its funds, property or assets to the purchase, redemption or other retirement of any capital stock of the Borrower, or of any options to purchase or acquire any such shares of capital stock or otherwise make any payments to any stockholder of Borrower, in its capacity as such (or pay into or set funds aside for a sinking fund for such purpose), except that (1) any Subsidiary of the Borrower may pay cash dividends to the Borrower or to another Subsidiary of the Borrower, (2) Borrower may acquire or issue shares of any Common Stock solely in exchange for shares of any other stock of Borrower, and (3) Borrower may repurchase or redeem stock held by current or former employees, directors or consultants in connection with termination of employment or service as an employee, director or consultant pursuant to contractual repurchase rights or that is otherwise approved by the Borrower's Board of Directors; (c) enter into any agreement that would restrict Borrower's ability to (1) perform its obligations under this Agreement or any other Loan Document, or (B) repay its Obligations in full; (d) amend its certificate of incorporation or by-laws in any way; (e) issue any additional capital stock, except for capital stock issuable (x) under existing contractual arrangements in existence on the Closing Date, (y) upon the exercise of options and warrants outstanding as of the Closing Date or (z) upon conversion of the Note; (f) engage in (1) any merger, consolidation, business combination, reorganization or recapitalization of Borrower in which Borrower is not the surviving entity or in which the stockholders of Borrower immediately prior to such transaction own capital stock 36 representing less than fifty percent (50%) of Borrower's voting power immediately after such transaction; or (2) a sale, lease or other disposition of all or substantially all of the assets of Borrower; (g) incur indebtedness through a commercial or debt financing transaction; (h) cause the numbers of Persons constituting the entire Board to exceed seven Persons. (i) sell, lease, transfer or otherwise dispose of any interest in any Subsidiary, any Intellectual Property or any other properties or assets (other than inventory or obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business); (j) hire any new employees or terminate any existing employees; (k) expend any funds, or contract to expend any funds, in excess of $3,000 other than with the prior written consent of the Lender; (l) take any corporate action, including, but not limited to, the filing of any proxy statement with the SEC, for the purpose of soliciting in any way or manner the consent or approval of its shareholders, with respect to any matter requiring the vote or approval of Borrower's shareholders, it being understood, however, that nothing in this paragraph shall prohibit Borrower from preparing and filing the Proxy Statement for the purpose of obtaining approval of the issuance of the Conversion Shares, as described in Section 5.13 hereof; or (m) liquidate, dissolve or wind up its operations. 6.4 TRANSACTIONS WITH AFFILIATES The Borrower shall not purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction with, any Affiliate, except transactions entered into in the ordinary course of business, which are on an arm's-length basis on terms not less favorable than terms which would have been obtainable from a Person other than an Affiliate; provided, that the foregoing restrictions shall not apply to: (a) dividends permitted under Section 6.3; (b) transactions between the Borrower and its Subsidiaries to the extent otherwise expressly permitted under this Agreement; (c) employment arrangements (including arrangements made with respect to bonuses) entered into in the ordinary course of business with members of the Board and of the boards of directors of its Subsidiaries; and (d) transactions between the Borrower and the Lender in effect on the Closing Date (including pursuant to the other Loan Documents). 37 6.5 REGARDING THE COPYRIGHTS (a) Borrower agrees not to sell or assign its interest in, or grant any license (other than those non-exclusive commercial licenses granted in the ordinary course of business) under, the Copyrights, without the prior written consent of the Lender. (b) Until the Obligations shall have been satisfied in full and there exists no commitment by the Lender which could give rise to any Obligations, Borrower agrees that it will not, without the prior written consent of the Lender, enter into any agreement (for example, a license agreement) which is inconsistent with Borrower's obligations under this Agreement or the other Loan Documents. Borrower further agrees that it will not take any action, or permit any action to be taken by others subject to its control, including licensees, or fail to take any action, that would materially adversely affect the validity or enforcement of the rights transferred to the Lender under this Agreement. VII. EVENTS OF DEFAULT The occurrence of any one or more of the following shall constitute an "Event of Default:" (a) failure by Borrower to pay any principal of or interest on the Obligations within five (5) Business Days of the date when due (whether on any payment date, at maturity, by reason of acceleration, by notice of intention to repay, by required repayment or otherwise) or failure to make any other payment, fee or charge provided for herein or in any other Loan Document within thirty (30) Business Days of the date when due; (b) any representation or warranty made or deemed made by Borrower in this Agreement or in any other Loan Document shall prove to have been false or misleading in any material respect on the date when made or deemed to have been made; (c) any failure by Borrower to perform, observe or comply with any covenant set forth in the Loan Documents and such failure shall continue unremediated for a period of at least forty-five (45) days after written notice by the Lender to the Borrower; (d) one or more judgments or decrees is rendered against Borrower or any of its Subsidiaries for an amount in excess of $10,000 in the case of any one such judgment or decree, and $50,000 or more in the aggregate for all such judgments and decrees for Borrower and its Subsidiaries (in each case, not paid or to the extent not covered by insurance), which are not satisfied, vacated, stayed, bonded pending appeal or discharged of record within sixty (60) days of the entry thereof; (e) any Indebtedness in excess of $10,000, of Borrower or any of its Subsidiaries shall be accelerated or declared to be due and payable prior to the final stated maturity thereof; 38 (f) Borrower or any of its Subsidiaries files a petition under any insolvency statute, makes a general assignment for the benefit of its creditors, commences a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property, or files a petition or answer seeking reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; (g) a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of Borrower or any of its Subsidiaries or of the whole or any substantial part of its properties and such order, judgment or decree shall continue unstayed and in effect for a period of sixty (60) days, or shall approve a petition filed against Borrower or any of its Subsidiaries seeking reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable federal or state law or statute, which petition is not dismissed within sixty (60) days or, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of Borrower or any of its Subsidiaries or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days, or there is commenced against Borrower or any of its Subsidiaries any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute and the petition remains undismissed for a period of sixty (60) days, or Borrower or any of its Subsidiaries takes any action to indicate its consent to or approval of any such proceeding; (h) at the time of the Initial Advance, the Board does not include at least four individuals designated by the Lender (other than because the Lender fails to designate such individuals); (i) either (x) Borrower has not obtained a waiver from Nasdaq pursuant to Nasdaq Rule 4350(i)(2) or (y) Borrower's shareholders have not approved the issuance of the Maximum Conversion Shares upon conversion of the Note by July 15, 2001; or (j) any Change of Control shall occur. VIII. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT 8.1 RIGHTS AND REMEDIES Upon the occurrence of an Event of Default pursuant to Article VII(f) or (g) hereof with respect to the Borrower, Lender shall have no further obligation to make any additional Advances, all Obligations shall be immediately due and payable and this Agreement shall be deemed terminated. Upon the occurrence and continuation of any other Event of Default under Article VII hereof, at the option of the Lender, all Obligations shall be immediately due and payable, the Lender shall have no further obligation to make additional Advances, and the Lender shall have the right to terminate this Agreement, effective immediately upon giving notice of same to the Borrower. In any such event, the Lender shall have the right to exercise any and all other rights and remedies provided for herein, under the UCC and the Software Security Agreement, and at law or equity generally. 39 8.2 LENDER'S DISCRETION The Lender shall have the right in its sole discretion to determine which rights or remedies the Lender may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of the Lender's rights hereunder. 8.3 SETOFF In addition to any other rights which the Lender may have under applicable law, upon the occurrence of any Event of Default hereunder, the Lender shall have a right to apply any property of Borrower held by the Lender to reduce the Obligations. 8.4 RIGHTS RELATED TO COPYRIGHTS The Lender shall have the right to: (a) Record the Copyright Assignment. (b) Operate, manage and control the business and equipment appurtenant to the Copyrights and collect all rents and revenues therefrom. (c) Sell, assign, or grant any license under, the Copyrights upon such terms and under such conditions as the Lender, in its sole discretion, may determine. (d) Sue for, collect and receive all income, royalties, damages and payments at any time due and/or payable under the Copyrights and any licenses thereunder. (e) Sue in its own name to enforce the Copyrights and any licenses thereunder, and, if the Lender shall commence any such suit, Borrower shall, at the request of the Lender, do any and all lawful acts and execute any and all proper documents required by the Lender in aid of such enforcement and Borrower shall promptly, upon demand, reimburse and indemnify the Lender for all costs and expenses incurred by the Lender in the exercise of its rights hereunder. 8.5 POWER OF ATTORNEY Effective upon the occurrence of any Event of Default, Borrower hereby designates and appoints the Lender and its designees as attorney-in-fact of Borrower, irrevocably and with power of substitution, with authority to endorse Borrower's name on all applications, documents, papers and instruments necessary or desirable for the Lender in the use of the Copyrights; to take any other actions with respect to the Copyrights, as the Lender deems in the 40 best interest of the Lender; to grant or issue exclusive or non-exclusive licenses under the Copyrights to any person; to assign, pledge, convey or otherwise transfer title in or dispose of the Copyrights to any person; and to perform all other acts necessary and advisable, in the sole discretion of the Lender, to carry out and enforce this Agreement and the Loan Documents. All acts of said attorney or designee are hereby ratified and approved by Borrower and said attorney or designee shall not be liable for any acts of commission or omission nor for any error of judgment or mistake of fact or law. This power of attorney is coupled with an interest and is irrevocable so long as any of the Obligations remain unpaid or unperformed or there exists any commitment by the Lender that could give rise to any Obligations. 8.6 RIGHTS AND REMEDIES NOT EXCLUSIVE The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other right or remedies, all of which shall be cumulative and not alternative. IX. WAIVERS AND JUDICIAL PROCEEDINGS 9.1 WAIVER OF NOTICE Borrower hereby waives notice of non-payment, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein. 9.2 DELAY No delay or omission on the Lender's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any default. 9.3 JURY WAIVER EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT EITHER PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9.3 WITH 41 ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. X. EFFECTIVE DATE AND TERMINATION 10.1 TERM This Agreement shall become effective on the date hereof and shall continue in full force and effect until terminated by Lender upon the occurrence of an Event of Default or as otherwise provided in Section 10.2 (the "Termination Date"). 10.2 TERMINATION Borrower may terminate this Agreement at any time upon not less than thirty (30) days' prior written notice to the Lender and upon payment in full of the Obligations (other than any Obligations in respect of indemnification and expense reimbursement hereunder and under any other Loan Document to the extent such Obligations are not then due and payable). The termination of this Agreement shall not affect Borrower's or the Lender's rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all Obligations have been fully satisfied. Unless otherwise provided herein, all representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations (other than any Obligations in respect of indemnification and expense reimbursement hereunder and under any other Loan Document to the extent such Obligations are not then due and payable) are repaid or performed in full. 10.3 SURVIVAL The obligations of the Borrower under Sections 2.5(g)(iii) and 11.5 hereof shall survive termination of this Agreement and the other Loan Documents and payment in full of the Obligations. Notwithstanding any provision of this Agreement to the contrary, the covenants and agreements of Borrower contained in Articles V and VI hereof shall survive until such time as (i) Borrower has made payment in full of the Obligations, and (ii) this Agreement has been terminated in accordance with its terms. XI. MISCELLANEOUS 11.1 GOVERNING LAW; PROCESS; SUBMISSION TO JURISDICTION This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without giving effect to its conflict of laws rules. Any judicial proceeding brought by or against the Borrower with respect to any of the Obligations, this Agreement or any related agreement may be brought in any federal or state court of competent jurisdiction located in the Commonwealth of Virginia, and, by execution and delivery of this Agreement, Borrower accepts for itself and in connection with its properties, generally and unconditionally the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to 42 be bound by any judgment rendered thereby in connection with this Agreement. Borrower hereby waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with Section 11.6 hereof, and service so made shall be deemed completed on the third (3rd) Business Day after mailing. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of the Lender to bring proceedings against Borrower in the courts of any other jurisdiction having jurisdiction over Borrower. Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceedings by Borrower against the Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the Commonwealth of Virginia. 11.2 ENTIRE UNDERSTANDING This Agreement and the other Loan Documents contain the entire understanding between the Borrower and the Lender and supersede that certain term sheet (including the Indemnification provisions contained therein) under cover of that certain letter dated January 19, 2001, between the Borrower and the Lender, and all other prior agreements and understandings, if any, relating to the subject matter hereof. Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by Borrower and the Lender. Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, canceled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged. Each party to this Agreement acknowledges that it has been advised by counsel in connection the execution of this Agreement and other Loan Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement. 11.3 SUCCESSORS AND ASSIGNS; NEW LENDERS; REGISTER (a) This Agreement shall inure to the benefit of the Lender, all future holders of the Note, and their respective successors and assigns. Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender. (b) The Lender may sell, assign or transfer all or any part of its rights under this Agreement and the other Loan Documents to an Eligible Transferee, provided that the Borrower is given notice of such sale pursuant to subsections (c) and (d) of this Section 11.3 and that the transferee agrees to perform the obligations of the transferor. (c) If the Lender sells or assigns all or a part of its rights hereunder or under the Note, any reference in this Agreement or the Note to the Lender shall thereafter refer to the Lender and to the respective assignee to the extent of their respective interests, and the respective assignee shall have, to the extent of such assignment (unless otherwise provided therein), the 43 same rights and benefits as it would if it were such assigning Lender. Each assignment pursuant to Section 11.3(b) shall be effected by the assigning Lender and the assignee Lender executing an Assignment and Agreement (the "Assignment and Assumption Agreement") reasonably acceptable in form and substance to the Lender and Borrower; provided that no such Assignment and Assumption Agreement shall be required if the assignment is made to an Eligible Transferee that is an Affiliate of the Lender. At the time of any assignment pursuant to Section 11.3(b), if any assignment occurs, the Borrower will issue new Notes to the respective assignee and to the assigning Lender. No transfer or assignment under Section 11.3(b) will be effective until recorded by the Lender on the Register pursuant to Section 11.3(d). To the extent of any assignment pursuant to Section 11.3(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned commitment. To the extent that an assignment of all or any portion of a Lender's commitments and related outstanding Obligations pursuant to this Section 11.3(c) would, at the time of such participation or assignment, result in increased costs under Section 2 which exceed those being charged, if any, by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such excess increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes giving rise to such increased costs after the date of the respective assignment). The Lender and the Borrower agree to execute such documents (including without limitation amendments to this Agreement and the other Loan Documents) as shall be necessary to effect the foregoing. (d) The Borrower hereby designates the Lender to serve as the Borrower's agent, solely for purposed of this Section 11.3, to maintain a register (the "Register") on which it will record the commitment from time to time of each of the Lenders, the Advances made by each of the Lenders and each repayment in respect of the principal amount of, and interest on, the Advances of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Advances. With respect to the Lender, the transfer of the commitment of the Lender and the rights to the principal of, and interest on, any Advance made pursuant to such commitments shall not be effective until such transfer is recorded on the Register maintained by the Lender with respect to ownership of such commitment and Advances and prior to such recordation all amounts owing to the transferor with respect to such commitments and Advances shall remain owing to the transferor. The registration of assignment or transfer of all or part of any commitments and Advances shall be recorded by the Lender on the Register only upon the delivery to the Borrower of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 11.3; provided that if such assignment or transfer is to an Eligible Transferee that is an Affiliate of the Lender and no Assignment and Assumption Agreement is required under Section 11.3(c) hereof, such registration of the assignment or transfer shall be recorded by the Lender on the Register promptly following delivery of a notice (pursuant to the provisions of Section 11.6 hereof) of such assignment or transfer to Borrower. Coincident with the delivery of such an Assignment and Assumption Agreement (or notice, as the case may be) to the Borrower and registration of assignment or transfer of all or part of an Advance, or as soon thereafter as practicable, the Lender shall surrender the Note evidencing such Advance, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the Lender and/or the new Lender. 11.4 APPLICATION OF PAYMENTS 44 To the extent that Borrower makes a payment or the Lender receives any payment or for the Borrower's benefit, which is subsequently invalidated, determined to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment had not been received by the Lender. 11.5 INDEMNITY The Borrower shall indemnify the Lender from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against the Lender in any litigation, proceeding or investigation instituted or conducted by any governmental agency or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement (other than any liability, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Lender as a result of it being a stockholder of the Borrower), whether or not the Lender is a party thereto, except to the extent that any of the foregoing arises out of the gross negligence or willful misconduct of the Lender. 11.6 NOTICE Any notice or request hereunder shall be given to the Borrower or to the Lender at their respective addresses set forth below or at such other address as such Person may hereafter specify in a notice designated as a notice given in the manner required under this Section 11.6. Any notice or request hereunder shall be given by (a) hand delivery, (b) registered or certified mail, return receipt requested, (c) delivery by an internationally recognized overnight courier, (d) telex or telegram, subsequently confirmed by registered or certified mail, or (e) telefax to the number set forth below (or such other number as may hereafter be specified in a notice given in the manner required under this Section 11.6) with telephone communication to a duly authorized officer of the recipient confirming its receipt as subsequently confirmed by registered or certified mail. Notices and requests shall be deemed to have been given (x) in the case of those by mail or telegram, five (5) Business Days after being deposited in the mail or delivered to the telegraph office addresses as provided in this Section 11.6, (y) in the case of those by overnight courier, one (1) day after deposit with such courier, and (z) in the case of those given by telefax, upon receipt. (i) If to the Lender: Maden Tech Consulting, Inc 2110 Washington Boulevard, Suite 200 Arlington, VA 22204 Attention: David R. Ford, Esq. 45 Telephone: (703) 769-4576 FAX: (703) 832-8343 with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. 555 13th Street, N.W. Washington, D.C. 20004-1109 Attention: James E. Showen, Esq. Telephone: (202) 637-5600 FAX: (202) 637-5910 (ii) If to Borrower: Enlighten Software Solutions, Inc. 999 Baker Way, Fifth Floor San Mateo, CA 94404 Attention: Chief Financial Officer Telephone: (650) 578-0700 FAX: (650) 578-0118 11.7 SEVERABILITY If any or part of this Agreement is contrary to, prohibited by, or deemed invalid under applicable laws or regulations, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible. 11.8 EXPENSES All costs and expenses including, without limitation, reasonable attorneys' fees, incurred by the Lender (a) in any effort to enforce payment of any Obligation or effect collection (b) in connection with the entering into, modification, amendment, administration and enforcement of this Agreement or any consents or waivers hereunder and all related agreements, documents and instruments, including but not limited to search, audit, recording and filing fees, (c) incidental costs and expenses arising out of administration of the Obligations including without limitation, any wire transfer fees or audit expenses incurred by Lender, (d) in defending or prosecuting any actions or proceedings arising out of or relating to the Lender's transactions with the Borrower (other than any action or proceeding arising out of or relating to Lender's status as a stockholder of the Borrower) or (e) in seeking any advice with respect to its rights and obligations under this Agreement and all related agreements, may be charged to the Borrower's account and shall be part of the Obligations. 11.9 CAPTIONS 46 The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement. 11.10 COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which taken together shall constitute one and the same instrument. 11.11 ABSENCE OF BROKERS The Lender and Borrower each represents and warrants to the other of them that except as shown on Schedule 11.11(a) as to Borrower or Schedule 11.11(b) as to the Lender, nobody acted as a broker, a finder or in any similar capacity on its behalf in connection with the transactions which are the subject of this Agreement. Borrower will pay the fees of anybody named on Schedule 11.11(a) and the Lender will pay the fees of anybody named on Schedule 11.11(b). The Lender and Borrower each indemnifies the other of them against, and agrees to hold the other of them harmless from, all losses, liabilities and expenses (including, but not limited to, reasonable fees and expenses of counsel and costs of investigation) incurred because of any claim by anyone for compensation as a broker, a finder or in any similar capacity by reason of services allegedly rendered to the indemnifying party in connection with the transactions which are the subject of this Agreement or the other Loan Documents. [SIGNATURES APPEAR ON THE FOLLOWING PAGE] 47 IN WITNESS WHEREOF, each of the parties has duly executed and delivered this Loan Agreement as of the date first above written. ENLIGHTEN SOFTWARE SOLUTIONS, INC. /s/ David D. Parker ------------------------------------ By: David D. Parker Its: Co-Chairman of the Board MADEN TECH CONSULTING, INC. /s/ Omar Maden ------------------------------------ By: Omar Maden Its: Chief Executive Officer EX-10.2 3 f70497ex10-2.txt EXHIBIT 10.2 1 EXHIBIT 10.2 2 ENLIGHTEN SOFTWARE SOLUTIONS, INC. CONVERTIBLE DEMAND NOTE $1,118,250 March 6, 2001 Enlighten Software Solutions, Inc. (the "Company"), a California corporation, promises to pay to Maden Tech Consulting, Inc. or its assigns (the "Lender"), at the time described below, the unpaid principal amount at any time outstanding, which shall not exceed One Million One Hundred Eighteen Thousand Two Hundred Fifty Dollars ($1,118,250) (the "Loan"), on demand of the Lender made on or after July 15, 2001 (the "Maturity Date") or otherwise at the time and in the manner set forth in the Loan Agreement dated as of February 14, 2001 by and between the Company and the Lender (as it may be amended, supplemented or otherwise modified from time to time, the "Loan Agreement"). This Note is referred to in, and is entitled to the benefits of, the Loan Agreement. The Loan Agreement, among other things, (i) provides for the making of the Loan by the Lender to the Company in the U.S. dollar amount first mentioned above, (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events upon the terms and conditions therein specified, and (iii) contains provisions defining an Event of Default and the rights and remedies of the Lender in such Event of Default. This Note, and any notes which may be issued as a result of transfers, partial payments or partial conversions, are referred to as "Notes." Capitalized terms used but not defined herein shall have the meanings given to such terms in the Loan Agreement. 1. Interest and Payments. (a) The Company promises to pay interest on the outstanding principal balance of the Loan from the date of any Advance under the Loan until such principal amount is paid in full. Interest on outstanding Advances shall be paid quarterly, in arrears, on the first day of January, April, July and October of each year (each an "Interest Payment Date"), with the first interest payment to be made on April 1, 2001 (or such later day as is the first Interest Payment Date after the date of this Note). Interest shall be computed monthly at a rate for each month equal to the applicable Federal short-term rate announced by the Internal Revenue Service pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as amended, through a Revenue Ruling published in the Internal Revenue Bulletin during the preceding month based on the actual number of days elapsed in such month in a year of 365 or 366 days. If any Interest Payment Date is not a Business Day, the Interest Payment Date will be deferred until the next Business Day, and interest will be payable through that next Business Day. (b) Each Advance made by the Lender to the Company, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any permitted transfer hereof, endorsed on Schedule A attached hereto which is part of this Note; provided, however, that the failure to make any such recordation or endorsement shall not affect the obligation of the Company under this Note. (c) Each payment of principal or interest will be made to the Lender by certified or bank cashier's check or wire transfer of immediately available funds, at such address 3 or to such account as the Lender specifies to the Company in writing at least three business days before the payment is to be made, except that the Company may, with the written consent of the Lender, make any interest payment due with Common Stock with a value, based on the Current Market Price (as defined in Section 3(c) hereof) of the Common Stock on the applicable Interest Payment Date equal to the amount of the interest payment due. Any fractional interest in respect of a share of Common Stock arising upon an interest payment made in Common Stock will be paid in cash (computed to the nearest cent) based on the Current Market Price of the Common Stock. (d) If the Obligations exceed the Facility Cap, and such excess continues for a period of more than five (5) Business Days during any month following notice to the Company, then that portion of the Obligations that exceeds such limitation shall bear interest at the rate as calculated above plus an additional 2% per annum until paid. (e) If any interest payment or other payment due hereunder is not received by Lender within five (5) Business Days of the day such payment is due and payable, then the Company shall pay to the Lender a late charge equal to 15% of the amount of such interest or other payment not timely made. (f) Upon the occurrence of an Event of Default and during the continuation thereof, and after notice to the Company by the Lender, the rate of interest in effect at such time with respect to the Obligations shall be increased to the Default Rate. (g) The Obligations under this Note may not be repaid in whole or from time to time in part without the written consent of the Lender. (h) This Note is hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the amount paid or agreed to be paid to the Lender for the use, forbearance or detention of money hereunder exceed the maximum amount permissible under applicable law. If, due to any circumstance whatsoever, fulfillment of any provision hereof, at the time performance of such provision shall be due, shall exceed any limits prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to such lawful limit, and if the Lender shall have received interest, or any other payment of any kind which might be deemed to be interest under applicable law in excess of the highest lawful rate, then such excess amount shall be applied to the reduction of the outstanding principal balance owing under this Note and not to the payment of interest, or if such excess interest exceeds the unpaid balance of principal of this Note and any other Obligations (other than any Obligations in respect of indemnification and expense reimbursement hereunder and under any other Loan Document to the extent such Obligations are not then due and payable) hereunder or under the Loan Agreement that lawfully may be satisfied with such excess interest, such excess interest shall be refunded to the Company. The terms and provisions of this Section shall control to the extent inconsistent with other provisions of this Note. 4 2. Lender's Rights upon Certain Events. (a) The Company may not sell all or substantially all its assets or consent to or participate in a transaction which involves a sale of a majority of its outstanding stock, unless (a) at least forty days before the record date for the transaction (or if there is no record date, at least 40 days before the expected date of the transaction) the Company has notified the Lender that (i) the transaction will take place (describing the transaction in reasonable detail), (ii) this Note will be repaid on the date the transaction takes place (specifying the expected date), and (iii) the Lender will have the right to convert this Note into Common Stock at any time before 5:00 p.m. on the day before the record date for determining the shareholders of the Company entitled to participate in the transaction (or if there is no record date, the tenth day before the expected date of the transaction), (b) if not later than ten days after the Company gives the notice to the Lender, either the Lender or the Company notifies the other of them that, in its opinion (based upon advice of counsel), the shares the Company is required to issue upon conversion of this Note may not be issued until filings have been made under the HSR Act and the waiting periods required by the HSR Act have either expired or terminated, the record date for the transaction (or if there is no record date, the date of the transaction) will be not earlier than the day specified in clause (z) of Section 4(a), and (c) the Lender consents to the proposed transaction in writing. If the Lender presents this Note for conversion within 30 days after the Company gives a notice of the type described in the preceding sentence, the Lender may specify that the conversion will be subject to, and will be effective immediately before, completion of the transaction described in the notice. (b) If at any time there is to be a Change of Control, in addition to its right to demand payment hereunder (whether in cash or by conversion pursuant to Section 3 below), the Lender will have the option, which the Lender may exercise upon notice to the Company given not later than ten Business Days after the Company notifies the Lender of the Change of Control, to require the Company to repurchase this Note for an amount equal to 100% of the principal amount then outstanding plus accrued but unpaid interest to the date of repurchase. If the Lender presents this Note for conversion after the Company gives notice that a Change of Control is to occur, the Lender may specify that the conversion is subject to the Change of Control's occurring, and will be effective immediately before the Change of Control occurs. 3. Conversion. The Lender will have the right at any time (subject to the provisions of Section 2 hereof), at the Lender's option, to convert all or any of the outstanding principal amount of all Advances outstanding under this Note, together with any accrued but unpaid interest on such principal amount to be converted (the "Conversion Amount"), into the number of fully paid and non-assessable shares of Common Stock of the Company (calculated as to each conversion to the nearest 1/100th of a share) equal to (x) the Conversion Amount divided by (y) the Conversion Price (as defined in Section 3(c)), or such other securities or assets as the Lender is entitled to receive in accordance with Section 3(c); provided, however, that the maximum number of shares of Common Stock issuable by the Company upon any such conversion or series of conversions shall not exceed 49.99% of the aggregate number of shares of Common Stock outstanding immediately after (and giving effect to) such conversion. (a) (i) In order to exercise the conversion privilege, the Lender must surrender this Note, with the Notice of Election to Convert duly completed and signed, to 5 the Company at its principal office (or, if the Company has appointed a conversion agent other than itself, to the conversion agent at the office specified by the Company in a notice to the Lender). If the Conversion Amount is less than the aggregate principal amount of all Advances outstanding under this Note, the Company will issue to the Lender a new Note, with the same terms as this Note, in a principal amount equal to the face amount of this Note less all Advances of principal being converted. (ii) Each conversion will be at the Conversion Price in effect at the close of business on the day when all the conditions in Section 3(a)(i) and Section 4(a) have been satisfied. (iii) The Company will not make any payment or adjustment for accrued interest (including overdue interest) with regard to any Advances of principal under this Note which are converted, or for dividends on the shares of Common Stock issued upon the conversion. (iv) As promptly as practicable after this Note is surrendered and all the other conditions in Section 3(a)(i) and Section 4(a) have been satisfied, the Company will issue and will deliver to the Lender at the office of the Company, or on the Lender's written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion. Any fractional interest in respect of a share of Common Stock arising upon a conversion will be settled as provided in Section 3(b). (v) A conversion under this Note will be deemed to be effected immediately prior to the close of business on the day on which all the conditions specified in Section 3(a)(i) and Section 4(a) have been satisfied, and the Lender will be deemed to have become the holder of record at that time of the shares of Common Stock into which the Conversion Amount is converted, regardless of when certificates representing those shares are issued. All shares of Common Stock delivered upon conversion of the Conversion Amount will upon delivery be duly and validly issued and fully paid and nonassessable, free of all liens and charges and not subject to any preemptive rights. (b) No fractional shares of Common Stock will be issued upon any conversion of this Note. Any fractional interest in a share of Common Stock resulting from any conversion of this Note will be paid in cash (computed to the nearest cent) based on the Current Market Price of the Common Stock on the Trading Day (as defined in Section 3(d)(vii)) next preceding the day of conversion. (c) The "Conversion Price" initially will be $0.225, and will be adjusted as follows from time to time if any of the events described below occurs after February 14, 2001. (i) If the Company (A) pays a stock dividend or makes a distribution on its Common Stock in shares of its Common Stock, (B) subdivides its outstanding Common Stock into a greater number of shares, or (C) combines its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to that event will be adjusted so that upon conversion of any Conversion Amount under this Note after that 6 event, the Lender will receive the number of shares of Common Stock which the Lender would have received if the Conversion Amount had been converted immediately before the happening of the event (or, if there is more than one such event, if the Conversion Amount had been converted immediately before the first of those events and the Lender had retained all the Common Stock or other securities or assets received after the conversion). An adjustment made pursuant to this Section 3(c) will become effective immediately after the record date in the case of a dividend or distribution, except as provided in Section 3(c)(viii), and will become effective immediately after the effective date in the case of a subdivision or combination. If a dividend or distribution is declared but is not paid or made, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment of the Conversion Price will not affect any conversion which takes place before the readjustment. (ii) If the Company issues rights or warrants to the holders of its Common Stock as a class entitling them (for a period expiring within 45 days after the record date for issuance of the rights or warrants) to subscribe for or purchase Common Stock at a price per share less than the Conversion Price at the record date for the determination of shareholders entitled to receive the rights or warrants, the Conversion Price in effect immediately before the issuance of the rights or warrants will be reduced so that it will be the amount determined by multiplying the Conversion Price in effect immediately before the record date for the issuance of the rights or warrants by a fraction of which the numerator is the number of shares of Common Stock outstanding on the record date for the issuance of the rights or warrants plus the number of shares of Common Stock which the aggregate exercise price of all the rights or warrants would purchase at the Conversion Price at that record date, and of which the denominator is the number of shares of Common Stock outstanding on the record date for the issuance of the rights or warrants plus the number of additional shares of Common Stock issuable on exercise of all the rights or warrants. The adjustment provided for in this Section 3(c)(ii) will be made successively whenever any rights or warrants are issued, and will become effective immediately, except as provided in Section 3(c)(viii), after each record date. In determining whether any rights or warrants entitle the holders of the Common Stock to subscribe for or purchase shares of Common Stock at less than the Conversion Price, and in determining the aggregate sale price of the shares of Common Stock issuable on the exercise of rights or warrants, there will be taken into account any consideration received by the Company for the rights or warrants, with the value of that consideration, if other than cash, to be determined by the Board of Directors of the Company (whose determination, if made in good faith, will be conclusive). If any rights or warrants which lead to an adjustment of the Conversion Price expire or terminate without having been exercised, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment of the Conversion Price will not affect any conversions which take place before the readjustment. (iii) If the Company distributes to the holders of its Common Stock as a class any shares of capital stock of the Company (other than Common Stock) or evidences of indebtedness or assets (other than cash dividends or distributions of cash paid from retained earnings of the Company) or rights or warrants (other than those referred to in Section 3(c)(ii)) to subscribe for or purchase any of its securities, then, in each such case, the Conversion Price will be reduced so that it will equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date for the distribution by a fraction of which the numerator is the Current Market Price of the Common Stock on the record date for the 7 distribution less the then fair market value (as determined by the Board of Directors, whose determination, if made in good faith, will be conclusive) of the capital stock, evidences of indebtedness, assets, rights or warrants which are distributed with respect to one share of Common Stock, and of which the denominator is the Current Market Price of the Common Stock on that record date. Each adjustment will, except as provided in Section 3(c)(viii), become effective immediately after the record date for the determination of the shareholders entitled to receive the distribution. If any distribution is declared but not made, or if any rights or warrants expire or terminate without having been exercised, effective immediately after the decision is made not to make the distribution or the rights or warrants expire or terminate, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment will not affect any conversions which take place before the readjustment. (iv) If there is a reclassification or change of outstanding shares of Common Stock (other than a change in par value, or as a result of a subdivision or combination), or a merger or consolidation of the Company with any other entity that results in a reclassification, change, conversion, exchange or cancellation of outstanding shares of Common Stock, or a sale or transfer of all or substantially all of the assets of the Company, upon any subsequent conversion of any Conversion Amount under this Note, the Lender will be entitled to receive the kind and amount of securities, cash and other property which the Lender would have received if the Lender had converted such Conversion Amount into Common Stock immediately before the first of those events and had retained all the securities, cash and other assets received as a result of all those events. (v) For the purpose of any computation under this Note, the "Current Market Price" of the Common Stock on a day will be the average of the last reported sale price per share of the Common Stock on each of the five consecutive Trading Days (as defined below) preceding the date of the computation. The last reported sale price of the Common Stock on a day will be (A) the last sale price of the Common Stock before 4:00 p.m. reported on the principal stock exchange on which the Common Stock is listed, or (B) if the Common Stock is not listed on a stock exchange, the last sale price of the Common Stock before 4:00 p.m. reported on the principal automated securities price quotation system on which sale prices of the Common Stock are reported, or (C) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, the mean of the high bid and low asked price quotations for the Common Stock as reported by National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Common Stock on at least five of the ten preceding Trading Days. If the Common Stock is not traded or quoted as described in any of clause (A), (B) or (C), the Current Market Price of the Common Stock on a day will be the fair market value of the Common Stock on that day as determined in good faith by the Company's Board of Directors based upon (and consistent with) written advice from a member firm of the New York Stock Exchange, Inc. selected by the Board of Directors. As used in this Note, the term "Trading Day" means (x) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the principal stock exchange on which the Common Stock is listed, (y) if the Common Stock is not listed on a stock exchange, but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are 8 not reported on an automated quotation system, a day on which quotations are reported by National Quotation Bureau Incorporated. (vi) No adjustment in the Conversion Price will be required unless the adjustment would require a change of at least 1% in the Conversion Price; provided, however, that any adjustments which are not made because of this Section 3(c)(vi) will be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3 will be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (vii) Whenever the Conversion Price is adjusted, the Company will promptly send the holder of this Note a notice of the adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which the adjustment becomes effective and containing a brief description of the events which caused the adjustment. (viii) In any case in which this Section 3 provides that an adjustment will become effective immediately after a record date for an event, the Company may defer until the occurrence of the event (A) issuing to the holder of this Note, if the Conversion Amount is converted after the record date and before the occurrence of the event, the additional shares of Common Stock issuable upon the conversion by reason of the adjustment and (B) paying to the Lender any cash in lieu of any fractional share as required by Section 3(b). (d) If: (i) the Company declares a dividend (or any other distribution) on the Common Stock (other than a dividend payable in cash out of retained earnings); or (ii) the Company authorizes the granting to the holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of any class or any other rights or warrants; or (iii) the Company issues, or changes the conversion, exchange or exercise price of, any Convertible Securities (other than the Notes), rights, options (other than stock options issued to employees or directors of the Company or its subsidiaries under a plan approved by the Company's shareholders) or warrants; or (iv) the Company sells any Common Stock for less than the Conversion Price on the date of the sale; or (v) there is any reclassification of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value, or from par value to no par value, or from no par value to par value), or any consolidation, merger, or statutory share exchange to which the Company is a party and for which approval of any shareholders of the Company is required, or any sale or transfer of all or substantially all the assets of the Company; or (vi) there is a voluntary or an involuntary dissolution, liquidation or winding up of the Company, then the Company will mail to the Lender, at least 15 days before the applicable date specified below, a notice stating the applicable one of (A) the 9 date on which a record is to be taken for the purpose of the dividend, distribution or grant of rights or warrants, or, if no record is to be taken, the date as of which the holders of Common Stock of record who will be entitled to the dividend, distribution or rights or warrants will be determined, (B) the date on which it is expected the Convertible Securities will be issued or the date on which the change in the conversion, exchange or exercise price of the Convertible Securities, rights, options or warrants will be effective, or (C) the date on which the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up. Failure to give any such notice or any defect in the notice will not affect the legality or validity of the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up. 4. Covenants Relating to Conversion. (a) If (i) at or after the time when the Lender surrenders this Note for conversion of any Conversion Amount into Common Stock and before the Common Stock is issued, or (ii) under the circumstances described in Section 2 hereof, either the Lender or the Company notifies the other of them that, in its opinion (based on advice of counsel), shares the Company is required to issue upon conversion of such Conversion Amount may not be issued until filings have been made under the HSR Act and the waiting periods required by the HSR Act have either expired or been terminated, (w) the Lender and the Company will each make as promptly as practicable the filing it is required to make under the HSR Act with regard to the issuance of those shares upon conversion of this Note, (x) each of them will provide information and cooperate in all other respects to assist the other of them in making its filing under the HSR Act, (y) each of them will take all reasonable steps within its control (including providing information to the Federal Trade Commission or the Department of Justice) to cause the waiting periods required by that Act to be terminated or to expire as promptly as practicable, and (z) the time when the Company will issue the shares of Common Stock which are the subject of the filing under the HSR Act will be deferred until the day after the day on which the waiting periods under the HSR Act expire or the Company is notified that the waiting periods under the HSR Act have been terminated. (b) If at the time when the Lender surrenders this Note for conversion of any Conversion Amount into Common Stock (i) the Company's shareholders have not approved the issuance upon such conversion of the shares into which the Lender has elected to convert such Conversion Amount, and (ii) the issuance of those shares on conversion of such Conversion Amount without approval of the Company's shareholders would violate the rules of any stock exchange or automated quotation system, the time when the Company will issue the shares of Common Stock into which the Lender has elected to convert such Conversion Amount will be deferred until the day after the day on which the Company's shareholders approve the issuance of those shares. (c) The Company will at all times reserve and keep available, free from preemptive rights, out of the authorized but unissued shares of Common Stock or the issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversion of 10 the Note, the maximum number of shares of Common Stock, if any, which the Company would be required to deliver upon the conversion of the aggregate amount of Advances under this Note then outstanding. (d) Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversion of this Note, the Company will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock at the adjusted Conversion Price. (e) The Company will endeavor to list the shares of Common Stock it may be required to deliver upon conversion of this Note, as promptly as practicable after the date of this Note, and in any event before they are delivered, upon each national securities exchange or automated quotation system, if any, upon which the Common Stock is listed at the time of delivery. (f) Before the Company delivers any securities upon conversion of this Note, the Company will endeavor, in good faith and as expeditiously as possible, to comply with all federal and state laws and regulations requiring the registration of those securities with, or any approval of or consent to the delivery of those securities by, any governmental authority. Inability of the Company to issue securities on conversion of this Note within 90 days after it is presented for conversion, because of failure to cause registration of those securities to become effective or to obtain any approval of or consent to the delivery of those securities will constitute a failure by the Company to fulfill its obligations under this Note, even if the failure to cause a registration to become effective or to obtain an approval or consent was due to factors beyond the Company's control, unless the registration did not become effective or the approval or consent was not obtained because of acts or failures to act by the Lender. (g) The Company will pay any documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversion of this Note; except that the Company will not be required to pay any foreign tax or any other tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the Lender and no such issue or delivery will be made unless and until the person requesting the issue or delivery has paid to the Company the amount of any such tax or has established to the reasonable satisfaction of the Company that the tax has been paid. 11 5. Miscellaneous. (a) No amendment of this Note, waiver of any provision of this Note, or extension of the time by which the Company must make any payment of principal or interest required by this Note, will be effective unless it is made in writing by the Lenders of a majority in principal amount of all the Notes. Any waiver or extension will be effective only in the instance and for the purpose for which it is given. (b) The remedies provided in this Note are cumulative and are not exclusive of any other remedies provided by law. The Company will pay on demand any expenses (including reasonable attorneys' fees and expenses) incurred by the Lender in enforcing its rights under this Note. (c) Any notice or other communication required or permitted to be given under this Note must be in accordance with the procedures for notices specified in the Loan Agreement. (d) This Note will be binding upon the Company and its assigns, and will inure to the benefit of the Lender and the Lender's assigns. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without giving effect to its conflict of laws rules. (e) The Company hereby waives presentment, protest, demand, notice of dishonor, and all other notices, and all defenses and pleas on the grounds of any extension of the time of payment or the due date of this Note. No renewal or extension of this Note, no release of the Company and no delay in enforcement of this Note or in exercising any right or power hereunder, shall affect the liability of the Company. The pleading of any statute of limitations as a defense to any demand against the Company is expressly waived by the Company. (f) No single or partial exercise by the Lender of any right hereunder shall preclude any other or further exercise thereof or the exercise of any other rights. No delay or omission on the part of the Lender in exercising any right hereunder shall operate as a waiver of such right or of any other right under this Note. (g) In the event of any demand or default on the Obligations of Borrower under this Note, the Borrower hereby duly constitutes and appoints Omar Maden it true and lawful attorney-in-fact, for it, in its name, place and stead, and upon default of payment as set forth herein, to confess judgment against it in the Circuit Court for Arlington County, Virginia, or in any other Court of Record in the Commonwealth of Virginia, upon such obligation, including all costs of collection and court costs and 15% of the full indebtedness due under this Note as attorneys' fees, hereby ratifying and confirming the acts of said attorney-in-fact as fully as if done by itself, expressly waiving the benefit of any homestead or other exemption laws. [Signature Page Follows] 12 IN WITNESS WHEREOF, the Company is executing and delivering this Note on the date shown on the first page. ENLIGHTEN SOFTWARE SOLUTIONS, INC. By: /s/ Bill Bradley --------------------------------- Name: Bill Bradley Title: President and CEO 13 SCHEDULE A
- ------------------------------------------------------------------------------------------------- Unpaid Name of Payments Principal Person Amount of ------------------------- Balance of Making Date Loan Principal Interest Note Notation - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
14 NOTICE OF ELECTION TO CONVERT The undersigned Lender of a Convertible Demand Note (the "Note") of Enlighten Software Solutions, Inc. (the "Company") elects to convert $______________ principal amount of outstanding Advances under the Note, together with $______________ in accrued but unpaid interest payable upon such principal amount of Advances under the Note, into shares of common stock of the Company or other assets, as provided in the Note, at the Conversion Price in effect at the date of this Notice. Date: _______________________ ------------------------------ Name: EX-10.3 4 f70497ex10-3.txt EXHIBIT 10.3 1 EXHIBIT 10.3 2 ENLIGHTEN SOFTWARE SOLUTIONS, INC. WARRANT AGREEMENT THIS WARRANT AGREEMENT (this "Agreement") is made and entered into as of March 6, 2001 between ENLIGHTEN SOFTWARE SOLUTIONS, INC., a California corporation (the "Company"), and MADEN TECH CONSULTING, INC., a Delaware corporation ("Maden Tech"). Certain capitalized terms used herein are defined in Section 24 hereof. WHEREAS, the Company desires to obtain a credit facility from Maden Tech upon the terms and subject to the conditions specified in the certain Loan Agreement by and between the Company and Maden Tech dated as of February 14, 2001 (the "Loan Agreement"); and WHEREAS, as an inducement to Maden Tech to enter into the Loan Agreement and provide the Credit Facility (as such term is defined in the Loan Agreement), the Company has agreed to issue to Maden Tech Warrants, as hereinafter described, to purchase shares of the Company's common stock, no par value per share (the "Common Stock"), upon the terms and subject to the conditions set forth herein; and WHEREAS, the Company wishes to set forth, among other things, the provisions of such Warrants and the terms and conditions on which such Warrants may be issued, exchanged, exercised and replaced. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: 1. GRANT; FORM OF WARRANTS. The Company shall issue and deliver to Maden Tech on the date hereof, a warrant (the "Warrant") to purchase 2,000,000 shares of Common Stock. For all purposes of this Agreement, all shares of Common Stock which Maden Tech may acquire upon exercise of a Warrant may be referred to as "Warrant Shares." The number of Warrant Shares for which a Warrant shall be exercisable shall be calculated in each case based on the criteria set forth herein. The Warrant, and any additional Warrants which may be issued upon partial exercise, replacement or transfer of such Warrant or Warrants, shall be evidenced by, and subject to the terms of a Warrant Certificate (including the Forms of Election to Purchase and Assignment attached thereto, a "Warrant Certificate") in the form of Exhibit 1 attached hereto, in each case executed on behalf of the Company by the manual or facsimile signature of the President or Vice President of the Company, or in facsimile, and attested by the Secretary or an Assistant Secretary of the Company. 2. EXERCISE PRICE. Subject to the terms, conditions and adjustments herein set forth, the Warrants shall be exercisable at a price per share equal to the Current Market Price ("Exercise Price"). 3. REGISTRATION. All Warrant Certificates shall be numbered and shall be registered in a warrant register (the "Warrant Register") as they are issued. Subject to its compliance with the foregoing, the Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact of such Warrant for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person or entity, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. 3 4. TRANSFER OF WARRANTS. (a) Neither any Warrant nor any Warrant Shares obtained upon exercise of any Warrant may be offered, sold, transferred, pledged or otherwise disposed of, in whole or in part, to any Person other than in accordance with applicable federal and state securities laws. (b) Except as otherwise permitted by this Section 4, each Warrant Certificate and each certificate evidencing any Warrant Shares issued upon exercise of a Warrant shall be stamped or otherwise imprinted with a legend in substantially the form as set forth on the form of Warrant Certificate attached hereto as Exhibit 1. Notwithstanding the foregoing, a holder of a Warrant Certificate or a certificate evidencing any Warrant Shares issued upon exercise of a Warrant (a "Holder") may require the Company to issue a Warrant Certificate or stock certificate, in each case without a legend, if and to the extent permitted by, and in accordance with, applicable law. (c) Provided that a transfer is permitted under applicable law, a Warrant may be transferred or endorsed to another party in whole or in part by surrendering to the Company, or its duly authorized agent, for cancellation the existing Warrant Certificate evidencing the Warrant to be transferred, endorsed or accompanied by a written instrument of transfer, in form satisfactory to the Company, duly executed by the holder thereof in person or by a duly authorized representative, agent or attorney-in-fact appointed in writing. Upon receipt thereof by the Company or such agent, the Company shall issue and deliver, or cause such agent to issue and deliver, in the name of the transferee, a new Warrant Certificate containing the same terms as the surrendered Warrant Certificate. In the case of the transfer of fewer than all of the rights evidenced by the surrendered Warrant Certificate, the Company shall issue a new Warrant Certificate to the transferring Holder for the remaining number of shares specified in the Warrant Certificate so surrendered. 5. EXERCISE OF WARRANTS. (a) Term of Exercise. Each Warrant Certificate shall entitle the holder thereof to purchase up to such number of Warrant Shares as are specified in the Warrant Certificate at the Exercise Price, in whole or in part, at any time or from time to time, on any Business Day during the Exercise Period. (b) Mechanics of Exercise. To exercise a Warrant, the holder thereof shall deliver to the Company, or its duly authorized agent, the Warrant Certificate or Certificates evidencing such Warrant, with the Form of Election to Purchase attached thereto duly completed and signed, together with payment to the Company of the Exercise Price for the number of Warrant Shares in respect of which the Warrant is then exercised. Upon such surrender of the Warrant Certificate and payment of the Exercise Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch (and in any event within five (5) Business Days of the surrender of such Warrant Certificate and payment of the applicable Exercise Price) to or upon the written order of the Holder of such Warrant, in such name or names as such Holder may designate on the completed Election to Purchase, a certificate or certificates for the number of Shares so purchased, together with cash, as provided in Section 13 of this Agreement, in respect of any fraction of a Warrant Share otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and any person or entity so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of the Warrant Certificate and payment of the Exercise Price as aforesaid. If any Warrant is exercised by its Holder in part, the Company shall issue a new Warrant Certificate to the Holder exercisable for the remaining number of Warrant Shares specified in the Warrant Certificate so surrendered (which shall be in all other respects identical to the Warrant Certificate surrendered). (c) Payment of Exercise Price. Payment of the Exercise Price may be made in cash, by certified check or bank draft payable to the order of the Company, by wire transfer of immediately available funds. 4 (d) Payment of Taxes. The Company shall pay all expenses, taxes and other governmental charges with respect to the issue or delivery of the Warrant Shares, unless such tax or charge is required by law to be imposed upon the Holder. The Company shall not be required, however, to pay any transfer tax or other similar charge imposed in connection with the issue of any certificate for Warrant Shares in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. 6. MUTILATED OR MISSING WARRANT CERTIFICATE. If a Warrant Certificate is mutilated, lost, stolen or destroyed, the Company shall issue and deliver (a) in exchange and substitution for and upon cancellation of any mutilated Warrant Certificate or (b) in lieu of and in substitution for any Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor representing an equivalent right or interest; but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate including, without limitation, an Affidavit of Loss executed by the Holder. 7. RESERVATION OF COMMON STOCK, ETC. The Company shall reserve, for so long as any Warrant remains outstanding, a number of authorized and unissued Warrant Shares sufficient to provide for the exercise in full of any and all such Warrants, and the transfer agent for the Common Stock, which may be the Company (the "Transfer Agent"), is hereby irrevocably authorized and directed at all times until all such Warrants have been exercised in full or otherwise surrendered for cancellation to reserve such number of authorized and unissued Warrant Shares as necessary for such purpose. The Company shall keep copies of this Agreement on file with the Transfer Agent and shall supply the Transfer Agent with duly executed stock certificates for issue and delivery for such purpose and will itself provide or otherwise make available any cash payable as provided in Section 13 of this Agreement. All Warrant Certificates surrendered upon the exercise of a Warrant shall be, and such Warrant Certificates shall constitute, sufficient evidence of the number of Warrant Shares which have been issued upon the exercise of Warrants. The Company covenants and agrees that upon exercise of the Warrants and payment of the Exercise Price therefor, all Warrant Shares issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable, not subject to the preemptive rights of any shareholder, and free from all taxes, liens, security interests, charges, and other encumbrances with respect to the issuance thereof, other than taxes in respect of any transfer occurring contemporaneously with such issuance. 8. ADJUSTMENTS. The number of Warrant Shares and the Exercise Price of each Warrant shall be subject to adjustment from time to time as set forth in this Section 8. The Company shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 8 in accordance with Section 12. (a) Mechanical Adjustments. The number of Warrant Shares purchasable upon the exercise of each Warrant and the Exercise Price shall be subject to adjustment as follows: (1) Adjustment for Change in Capital Stock. Subject to paragraph 8(a)(6) below, in case the Company shall (i) pay a dividend on its outstanding shares of Common Stock in shares of Common Stock or make a distribution of shares of Common Stock on its outstanding shares of Common Stock, (ii) make a distribution on its outstanding shares of Common Stock in shares of its capital stock other than Common Stock, (iii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iv) combine its outstanding shares of Common Stock into a smaller number of shares of 5 Common Stock, or (v) issue, by reclassification of its shares of Common Stock, other securities of the Company (including any such reclassification in connection with a consolidation or merger in which the Company is the surviving entity), then the number of Warrant Shares purchasable upon exercise of a Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which such Holder would have owned or have been entitled to receive upon the happening of any of the events described above had such Warrant been exercised in full immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph 8(a)(1) shall become effective immediately after the record date for such event or, if none, immediately after the effective date of such event. Such adjustment shall be made successively whenever such an event occurs. (2) Adjustment for Rights Issue. Subject to paragraph 8(a)(6) below, in case the Company shall issue rights, options or warrants (collectively, "Rights") to all holders of its outstanding Common Stock entitling them to subscribe for or purchase shares of Common Stock at a Price Per Share (as defined in paragraph 8(a)(5) below) which is lower at the record date mentioned below than the then Current Market Price per share of Common Stock, the number of Warrant Shares thereafter purchasable upon the exercise of a Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable upon exercise of such Warrant by a fraction, the numerator of which shall be the sum of (a) the total number of shares of Common Stock and shares of Common Stock issuable upon the exercise of Convertible Securities (as defined in paragraph 8(a)(4) below), each as outstanding on the date of issuance of such Rights plus (b) the additional Number of Shares (as defined in paragraph 8(a)(5) below) of Common Stock offered for subscription or purchase in connection with such Rights and the denominator of which shall be the sum of (x) the total number of shares of Common Stock and shares of Common Stock issuable upon the exercise of Convertible Securities, each as outstanding on the date of issuance of such Rights plus (y) the number of shares which the aggregate Proceeds (as defined in paragraph 8(a)(5) below) received or receivable by the Company upon exercise of such Rights would purchase at the Current Market Price per share of Common Stock at such record date. Such adjustment shall be made whenever Rights are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive Rights, provided, that except as provided in paragraph 8(a)(10) below, no further adjustment of the number of Warrant Shares issuable upon exercise of such Warrant shall be made upon the actual issue of Warrant Shares. (3) Adjustment for Other Distributions. Subject to paragraph 8(a)(6) below, in case the Company shall distribute to all holders of its shares of Common Stock (x) evidences of indebtedness or assets (excluding cash dividends or distributions payable out of the consolidated earnings or surplus legally available for such dividends or distributions and dividends or distributions referred to in paragraphs 8(a)(1) or (2) above) of the Company or any corporation or other legal entity a majority of the voting equity or equity interests of which are owned, directly or indirectly, by the Company (a "Subsidiary"), or (y) shares of capital stock of a Subsidiary (such evidences of indebtedness, assets and securities as set forth in clauses (x) and (y) above, collectively, "Assets"), then in each case the number of Warrant Shares thereafter purchasable upon the exercise of a Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable upon the exercise of such Warrant by a fraction, the 6 numerator of which shall be the Current Market Price per share of Common Stock on the date of such distribution and the denominator of which shall be the difference between (a) such Current Market Price per share of Common Stock and (b) the fair value as of such record date as determined reasonably and in good faith by the Board of Directors of the portion of the Assets applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for the determination of shareholders entitled to receive such distribution. (4) Adjustment for Common Stock and Convertible Securities Issue. Subject to paragraph 8(a)(6) below, in case the Company shall issue shares of its Common Stock, or securities convertible into, or exchangeable or exercisable for Common Stock or Rights to subscribe for or purchase such securities (collectively, "Convertible Securities") (excluding the issuance of (i) Common Stock or Convertible Securities issued in any of the transactions described in paragraphs 8(a)(1), (2) or (3) above or Section 8(d) below, (ii) securities issued pursuant to or in connection with any Permitted Issuance, or (iii) shares of Common Stock issued upon the exercise of the Warrants) at a Price Per Share of Common Stock, in the case of the issuance of Common Stock, or at a Price Per Share of Common Stock initially deliverable upon conversion or exercise of exchange of such Convertible Securities, in each case, together with any other consideration received by the Company in connection with such issuance, below the then Current Market Price per share of Common Stock on the date the Company fixed the offering, conversion or exercise or exchange price of such additional shares, then the number of Warrant Shares thereafter purchasable upon the exercise of a Warrant shall be determined by multiplying the number of Warrant Shares theretofore purchasable upon exercise of such Warrant by a fraction, the numerator of which shall be the sum of (a) the total number of shares of Common Stock and shares of Common Stock issuable upon the exercise of Convertible Securities (in each case, excluding all shares being issued for which adjustment is being made pursuant to this paragraph 8(a)(4)), each as outstanding on such date plus (b) the additional Number of Shares of Common Stock offered for subscription or purchase, and the denominator of which shall be the sum of (x) the total number of shares of Common Stock and shares of Common Stock issuable upon the exercise of Convertible Securities (in each case, excluding all shares being issued for which adjustment is being made pursuant to this paragraph 8(a)(4)), each as outstanding on such date plus (y) the number of shares of Common Stock which the aggregate Proceeds of the total amount of Convertible Securities so offered would purchase at the Current Market Price Per Share of Common Stock at such record date. In case the Company shall issue and sell Convertible Securities for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the "Price Per Share" of Common Stock and the "consideration received by the Company" for purposes of the first sentence and the immediately preceding sentence of this paragraph 8(a)(4), the Board of Directors shall reasonably and in good faith determine the fair value of such property. The determination of whether any adjustment is required under this paragraph 8(a)(4), by reason of the sale and issuance of any Convertible Securities and the amount of such adjustment, if any, shall be made at such time and not at the subsequent time of issuance of shares of Common Stock upon the exercise, conversion or exchange of Convertible Securities. (5) Price Per Share. For purposes of this Section 8(a), "Price Per Share" shall be defined and determined according to the following formula: P = R/N where P = Price Per Share; R = the "Proceeds" received or receivable by the Company which (x) in the case of shares of Common Stock is the total amount received or receivable by the Company in consideration for the 7 issuance and sale of such shares; (y) in the case of Rights or of Convertible Securities with respect to shares of Common Stock, is the total amount received or receivable by the Company in consideration for the issuance and sale of Rights or such Convertible Securities, plus the minimum aggregate amount of additional consideration, other than the surrender of such Convertible Securities, payable to the Company upon exercise, conversion or exchange thereof; and (z) in the case of Rights to subscribe for or purchase such Convertible Securities, is the total amount received or receivable by the Company in consideration for the issuance and sale of such Rights plus the minimum aggregate amount of additional consideration, other than the surrender of such Convertible Securities, payable upon the conversion or exchange or exercise of such Convertible Securities; provided that in each case the proceeds received or receivable by the Company shall be the net cash proceeds after deducting therefrom any compensation paid or discount allowed in the sale, underwriting or purchase thereof by underwriters or dealers or others performing similar services; and N = the "Number of Shares," which (x) in the case of Common Stock is the number of shares issued; and (y) in the case of Rights or of Convertible Securities with respect to shares of Common Stock, is the maximum number of shares of Common Stock initially issuable upon exercise, conversion or exchange thereof. (6) Minimum Adjustment. No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of Warrant Shares purchasable upon the exercise of this Warrant; provided that any adjustments which by reason of this paragraph 8(a)(6) are not required to be made shall be carried forward and taken into account in any subsequent adjustment, and provided further that notwithstanding the foregoing, all such adjustments shall be made no later than three years from the date of the first event that would have required an adjustment but for this paragraph. All calculations shall be made to the nearest one-thousandth of a Warrant Share and the nearest cent. (7) Adjustment in Exercise Price. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant is adjusted as herein provided, the Exercise Price payable upon exercise of this Warrant immediately prior to such adjustment shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of Warrant Shares purchasable upon the exercise of this Warrant immediately prior to such adjustment and the denominator of which shall be the number of Warrant Shares purchasable immediately thereafter. 8 (8) Shares of Common Stock. For all purposes of this Agreement, the term "shares of Common Stock" shall mean (i) the Common Stock and/or (ii) any other class of stock resulting from successive changes or reclassification of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. If at any time, as a result of an adjustment made pursuant to this Section 8(a), the Holder shall become entitled to purchase any securities of the Company other than shares of Common Stock, thereafter the number of such other shares so purchasable upon exercise of a Warrant and the Exercise Price shall be subject to adjustment from time to time in a manner and on terms substantially identical to the provisions with respect to the Warrant Shares contained in paragraphs (1) through (7) above, and the provisions of this Agreement with respect to the Warrant Shares shall apply on like terms to any such other securities. (9) Expiration of Rights, Etc. Upon the expiration of any Rights or the expiration of any conversion or exchange rights, if any thereof shall not have been exercised, the Exercise Price and the number of Warrant Shares purchasable upon the exercise of this Warrant shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (i) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such Rights or conversion or exchange or exercise rights and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such Rights or conversion or exchange or exercise rights whether or not exercised; provided that no such readjustment shall have the effect of increasing the Exercise Price or decreasing the number of Warrant Shares purchasable upon the exercise of a Warrant by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such Rights or conversion or exchange or exercise rights. (b) Voluntary Adjustment by the Company. The Company may, at its option and at any time during the term of a Warrant, reduce the then current Exercise Price to any amount deemed appropriate by the Board of Directors. (c) Notice of Adjustment. Whenever the number of Warrant Shares purchasable upon the exercise of a Warrant or the Exercise Price of Warrant Shares is adjusted as herein provided, the Company shall promptly mail to the Holder, at the sole expense of the Company by first class mail, postage prepaid, notice of such adjustment or adjustments and shall prepare and cause to be executed and delivered an officer's certificate setting forth the number of Warrant Shares purchasable upon the exercise of such Warrant and the Exercise Price of Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth in reasonable detail the computations by which such adjustment was made. (d) Preservation of Purchase Rights upon Merger or Consolidation. In case of any consolidation of the Company with or merger of the Company into another entity, prior to the consummation of such consolidation or merger the Company and such successor entity shall execute and deliver an agreement, which shall be binding on the Holder, that the Holder shall have the right upon the consummation of such consolidation or merger and upon payment of the Exercise Price in effect immediately prior to such action (after giving effect to any applicable adjustments under Section 8(a) hereof) to purchase upon exercise of a Warrant the kind and amount of shares and other securities and property (including cash) which such Holder would have owned or have been entitled to receive after the happening of such consolidation or merger had such Warrant been exercised immediately prior to such action. The Company shall at its sole expense mail by first class mail, postage prepaid, to the Holder notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be substantially identical to the adjustments provided for in this Section 8. The provisions of this Section 8(d) shall similarly apply to successive consolidations or mergers. 9 (e) Statement on Warrant. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of this Warrant, this Warrant theretofore or thereafter issued may continue to express the same Exercise Price and number and kind of Warrant Shares as are stated in this Warrant as initially issued. (f) Notices to Holders. In case, at any time or from time to time: (1) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (2) the Company shall authorize the distribution to all holders of shares of Common Stock of securities or assets or cash; or (3) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of a substantial portion of the assets of the Company for which approval of any shareholders of the Company is required, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (5) the Company takes any significant action toward a public offering or sale of shares of Common Stock (including, without limitation, the engagement of an investment banking firm, underwriter or other consultant); or (6) the Company receives a notice from any holder of its other equity securities that such holder desires to exercise its right to "put" such securities so held back to the Company; then the Company shall cause to be given to the Holder at its address appearing hereon, at least ten (10) Business Days prior to the applicable record date hereinafter specified or the date on which a registration statement relating to such public offering is to be filed with the Securities and Exchange Commission (the "SEC"), or promptly in the case of events for which there is no record date, by first class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock entitled to receive any such rights, options, warrants or distribution are to be determined, (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, (iii) the date on which any such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, as well as the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, 10 conveyance, transfer, dissolution, liquidation, or winding up, (iv) that the Company intends to proceed with a public offering and notifying the Holder of the date such registration statement is scheduled to be filed with the SEC, or (v) the date on which the purchase of shares by the Company is to be effected pursuant to the exercise of such a put option, together with, in such case, an officer's certificate stating whether the Company has sufficient funds legally available to it to make the purchase required in connection with such exercise, and describing in sufficient detail the calculations made by the Company in making such statement. The failure to give the notice required by this Section 8(f) or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation, winding up or action, or the vote upon any of the foregoing. 9. SECURITIES ACT REGISTRATION. (a) By acceptance of a Warrant Certificate evidencing the Warrant, each Holder: (1) represents and agrees that such Holder is acquiring the Warrant, and that upon exercise thereof it will acquire the Warrant Shares, with its own funds for its own account for investment, not as a nominee or agent, and not with a view to any sale, distribution or transfer thereof in violation of the Securities Act. By acceptance of a Warrant Certificate evidencing the Warrant, each Holder further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participations to such person or to any third person, with respect to the Warrant or the Warrant Shares. (2) acknowledges that such Holder has been informed by the Company or by the previous Holder of the Warrant that the Warrant and any Warrant Shares obtained upon exercise of any Warrant may not, under the Securities Act and applicable regulations thereunder, be re-sold, transferred or otherwise disposed of without registration under the Securities Act or an applicable exemption from the registration requirements of the Securities Act. (3) acknowledges that the Warrant and any Warrant Shares obtained upon exercise of any Warrant at the time of issuance may not be registered under the Securities Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. (4) acknowledges that an investment in the Company is highly speculative and represents that the Holder is able to fend for itself in the transactions contemplated by this Warrant Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investments, and has the ability to bear the economic risks (including the risk of a total loss) of its investment. Each Holder represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information which it considered necessary to verify the accuracy of or to amplify the Company's disclosures, and has had all questions which have been asked by it satisfactorily answered by the Company. (b) As of the date hereof, the parties hereto have executed and delivered the Registration Rights Agreement pursuant to which the Warrant Shares shall be considered Registrable Securities (as defined therein). The parties agree that the Registration Rights Agreement shall govern all matters relating to the registration of the Warrant Shares under the Securities Act. 10. INFORMATION COVENANTS. (a) Notice of Shareholder Meetings. Nothing contained in this Agreement shall be construed as conferring upon any Holder the right to vote or to consent to or receive notice as a shareholder in respect of the 11 meetings of shareholders or the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company; provided, however, that if a meeting of the shareholders of the Company is called or if consents of the Company's shareholders are solicited to consider and take action on a proposal for (i) the declaration of a dividend with respect to the Common Stock, other than in cash, (ii) the voluntary dissolution of the Company, or (iii) any consolidation, merger or sale of all or substantially all of its property, assets, business and good will as an entirety, then the Company shall cause a notice thereof to be sent by first class mail, postage prepaid, at least five (5) Business Days prior to the record date for determining shareholders entitled to vote at such meeting or to take action with respect to such consent, to each Holder of Warrants at such Holder's address appearing on the Warrant Register. (b) Cooperation. The Company shall cooperate with the Holder and each holder of Warrant Shares in supplying such information as may be reasonably necessary for such holders to complete and file any information reporting forms presently or hereafter required by the SEC and any state securities agency as a condition to the availability of an exemption under the Securities Act and any applicable state securities law for the sale of this Warrant or any Warrant Shares. (c) Proper Books and Records. The Company covenants that it will keep proper books and records in which full, true and correct entries in conformity with generally accepted accounting principles shall be made of all dealings and transactions in relation to its business and activities. 11. REPRESENTATIONS AND WARRANTIES. As an inducement to Maden Tech to enter into this Agreement and the Registration Rights Agreement (collectively, the "Transaction Documents"), the Company represents and warrants to Maden Tech as of the date hereof as follows: (a) Validity of Securities. The Warrants, when issued and delivered in accordance with the terms of this Agreement, and the Warrant Shares issued upon exercise of the Warrants when issued, paid for and delivered in accordance with the terms of this Agreement and the Warrant Certificates, shall be duly and validly issued and outstanding, fully paid and nonassessable, not subject to the preemptive rights of any shareholder and free from all taxes, liens, security interests, charges, and other encumbrances with respect to the issuance thereof, other than taxes in respect of any transfer occurring contemporaneously with such issuance, other than the transfer and other restrictions contemplated by this Agreement. All issued and outstanding shares of the Company's capital stock have been duly authorized and validly issued and are fully paid and nonassessable, are not subject to the preemptive rights of any shareholder, have been issued in compliance with all applicable federal and state securities laws and are free from all taxes, liens, security interests, charges, and other encumbrances with respect to the issuance thereof, other than taxes in respect of any transfer occurring contemporaneously with such issuance. (b) Registration Rights. Except for parties to the Registration Rights Agreement and as set forth on Schedule 11(b) hereto, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company. 12 12. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service, overnight mail or personal delivery: (a) if to Maden Tech: Maden Tech Consulting, Inc. 2110 Washington Boulevard Suite 200 Arlington, VA 22204 Fax: (703) 769-4423 Attention: David R. Ford, Esq. with a copy to: Hogan & Hartson L.L.P. 555 13th Street, NW Washington, D.C. 20004 Fax: (202) 637-6542 Attention: James E. Showen, Esq. (b) if to the Company: Enlighten Software Solutions, Inc. 999 Baker Way, Fifth Floor San Mateo, CA 94404 Fax: (650) 578-0700 Attention: Chief Financial Officer All such notices and communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier or overnight mail, if delivered by commercial courier service or overnight mail; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. Any party may by notice given in accordance with this Section 12 designate another address or Person for receipt of notices hereunder. 13. FRACTIONAL INTERESTS. The Company shall not be required to issue fractions of Warrant Shares on the exercise of Warrants. If the Company elects not to issue fractions of Warrant Shares, then with respect to any fraction of a Share that would otherwise have been issuable on the exercise of a Warrant, the Company shall purchase such fraction for an amount in cash equal to the fraction of the Current Market Price of such fractional Share. 14. SURVIVAL. This Agreement shall survive the exercise of the Warrants. 15. NO IMPAIRMENT; NECESSARY ACTIONS. The Company shall not by any action (including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action) avoid or seek to avoid the observance or performance of any of the terms of this Agreement or any Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against 13 impairment. Without limiting the generality of the foregoing, the Company will: (a) use its commercially reasonable efforts to obtain all such authorizations, approvals, exemptions or consents from any Governmental Authority having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Agreement (including, without limitation, making all necessary filings with such Governmental Authorities, except that the Company shall not be required to make any such filings as would cause it to be required to qualify to do business in any such jurisdiction where it would not otherwise be required to so qualify); (b) take all necessary steps (including, without limitation, making appropriate amendments to its certificate of incorporation) to ensure that the Company has authorized a sufficient number of authorized but unissued shares of its common stock to provide for the issuance of the Warrant Shares; (c) reserve from such authorized but unissued shares of common stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any and all Warrants issued pursuant to this Agreement; and (d) take all actions as may be necessary or appropriate to ensure that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of any such Warrant that are not subject to any preemptive rights and are free from all taxes, liens, security interests, charges, and other encumbrances with respect to the issuance thereof, other than taxes in respect of any transfer occurring contemporaneously with such issuance. 16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Holder with respect to this Warrant; provided, that the Company and the Holder are parties to the Registration Rights Agreement, and the provisions thereof are deemed incorporated into this Agreement as if the provisions thereof were originally set forth in full in this Agreement. The provisions of the Registration Rights Agreement shall be binding on the Holder without giving effect to any amendment or modification of the Registration Rights Agreement, unless such amendments or modifications shall have been made pursuant to the provisions of such Registration Rights Agreement. 17. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit of and shall be binding upon the Company and the Holder and their respective permitted successors and assigns. Nothing in this Agreement, expressed or implied, is intended to or shall confer on any person other than the Company and the Holder, or their respective permitted successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 18. SECTION AND OTHER HEADINGS. The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of this Agreement. 19. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. 20. RIGHTS TO CASH DIVIDENDS; NO OTHER RIGHTS OR LIABILITIES AS SHAREHOLDER. Notwithstanding anything to the contrary in this Agreement, during the Exercise Period, the Company may not declare and pay any cash dividends to holders of its Common Stock unless the Company pays to each Holder a cash dividend in an amount equal to that which such Holder would have received had such Holder's Warrants been exercised immediately prior to the record date with respect to such dividend for the number of Warrant Shares for which its Warrants would have been then exercisable. Nothing contained in this Agreement shall be determined as conferring upon the Holder any rights, other than the right to receive cash dividends as 14 described in the preceding sentence, as a shareholder of the Company or as imposing any liabilities on the Holder to purchase any securities whether such liabilities are asserted by the Company or by creditors or shareholders of the Company or otherwise. 21. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which so executed shall be deemed to be an original; but such counterparts together shall constitute but one and the same instrument. 22. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to the conflict of law provisions thereof. 23. REMEDIES. Any Holder of a Warrant Certificate or certificate evidencing any Warrant Shares, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to equitable remedies including injunctive relief and specific performance of its rights under this Agreement or such certificate. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for injunctive relief or specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. 24. CERTAIN DEFINITIONS. "Affiliate" means, with respect to any Person: (a) any other Person that directly or indirectly, controls, is controlled by, or is under common control with, such Person; or (b) a member or a general or limited partner of such Person. "Board of Directors" means the Board of Directors of the Company. "Business Day" means any day other than a Saturday, Sunday or a day on which national banks are authorized by law to close in the State of California. "Current Market Price" per share of Common Stock, for the purpose of any computation under this Agreement shall mean the average of the last reported sale price per share of the Common Stock on each of the five consecutive Trading Days preceding the date of the computation. The last reported sale price of the Common Stock on a day will be (a) the last sale price of the Common Stock before 4:00 p.m. reported on the principal stock exchange on which the Common Stock is listed, or (b) if the Common Stock is not listed on a stock exchange, the last sale price of the Common Stock before 4:00 p.m. reported on the principal automated securities price quotation system on which sale prices of the Common Stock are reported or (c) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, the mean of the high bid and low asked price quotations for the Common Stock as reported by National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Common Stock on at least five of the ten preceding Trading Days. If the Common Stock is not traded or quoted as described in any of clause (a), (b) or (c), the Current Market Price of the Common Stock on a day will be the fair market value of the Common Stock on that day as determined in good faith by the Company's Board of Directors based upon (and consistent with) written advice from a member firm of the New York Stock Exchange, Inc. selected by the Board of Directors. "Exercise Form" means an Exercise Form in the form attached to the form of Warrant Certificate attached hereto as Exhibit 1. 15 "Exercise Period" means the period commencing on the date hereof and continuing until 5:00 p.m., Arlington, Virginia time, on March 6, 2002. "Governmental Authority" means any foreign, federal, state, local or other governmental authority or regulatory body having jurisdiction over the Company, its Affiliates and the Holder. "Indebtedness" shall have the meaning ascribed to it in the Loan Agreement. "Permitted Issuance" shall mean any issuance of Common Stock or other securities of the Company pursuant to or in connection with any of the following: (i) shares of Common Stock or options to purchase Common Stock issued or granted to officers, directors, employees or consultants of the Company and its subsidiaries, or, if approved by the Company's Board of Directors, to any other individual or entity for any purpose other than an equity financing of the Company; (ii) securities issued to financial institutions or lessors in conjunction with a bona fide equipment financing, commercial credit arrangement or similar transaction, provided that such issuance is approved by the Company's Board of Directors; (iii) securities issued upon conversion of any convertible securities outstanding as of the date hereof; (iv) securities issued in connection with business combinations or corporate partnering agreements approved by the Company's Board of Directors; or (v) securities issued in connection with the Company's merger or acquisition of, by or into another corporation. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Registration Rights Agreement" means the certain Registration Rights Agreement, dated as of the date hereof, by and between the Company and Maden Tech, as amended from time to time. "Securities Act" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the United States Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act shall be deemed to include a reference to the comparable section, if any, of any such successor Federal statute. "Trading Day" shall mean (a) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the principal stock exchange on which the Common Stock is listed, (b) if the Common Stock is not listed on a stock exchange, but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported or (c) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, a day on which quotations are reported by National Quotation Bureau Incorporated. [Remainder of this page intentionally left blank.] 16 WARRANT AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, each of the parties hereto has caused this Warrant Agreement, or a counterpart hereof, to be duly executed and delivered as of the day, month and year first above written. Attest: ENLIGHTEN SOFTWARE SOLUTIONS, INC. /s/ [NAME] By: /s/ Bill Bradley - --------------------------------- --------------------------------- Name: Name: Bill Bradley Title: Title: President and CEO MADEN TECH CONSULTING, INC. By: /s/ Omar Maden --------------------------------- Name: Omar Maden Title: Chief Executive Officer 17 SCHEDULE 11(b) Pursuant to Subscription Agreements (the "Subscription Agreements") dated as of April 28, 2000 (the "Subscription Closing Date"), the Company issued and sold 715,885 shares of Common Stock and warrants to purchase up to 859,063 shares of Common Stock to certain investors. Pursuant to the Subscription Agreements, the Company is obligated to (i) file a registration statement with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act for the sales and distribution of all of such Common Stock issued or issuable under the Subscription Agreements (the "Subscription Registrable Securities"); (ii) use its best efforts to secure the effectiveness of such registration statement as soon as practicable thereafter; and (iii) use its best efforts to cause the registration statement to remain effective until (A) the date ending two years of the Subscription Closing Date, (B) the date on which all the Subscription Registrable Securities have been resold, or (C) the date on which each holder of Subscription Registrable Securities is able to sell all of such holder's Registrable Securities in a single three month period without registration under the Securities Act pursuant to Rule 144. On July 27, 2000, the Company filed a Form SB-2 with the SEC covering the Registrable Securities (a total of 1,574,948 shares of Common Stock). On September 15, 2000, the Company filed Amendment Number One to the Form SB-2. The Company will be required to file further amendments to the Form SB-2 in order to meet its obligations under the Subscription Agreements. 18 EXHIBIT 1 WARRANT CERTIFICATE THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE TRANSFER OR EXCHANGE OF THIS WARRANT MUST BE REGISTERED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. NO. MT-001 March 6, 2001 ENLIGHTEN SOFTWARE SOLUTIONS, INC. WARRANT CERTIFICATE THIS CERTIFIES THAT for value received, Maden Tech Consulting, Inc., or its registered assigns, is the owner of a Warrant which entitles it to purchase at any time or from time to time on or after the date hereof, as provided in the Warrant Agreement (as hereinafter defined) up to 2,000,000 fully paid and nonassessable Shares of the voting common stock (the "Common Stock"), of Enlighten Software Solutions, Inc., a California corporation (the "Company"), at the purchase price per Share equal to the Current Market Price as defined in the Warrant Agreement (the "Exercise Price") upon presentation and surrender of this Warrant Certificate with the Form of Election to Purchase attached hereto duly executed. As provided in the Warrant Agreement, the number and kind of Shares which may be purchased upon the exercise of the Warrant evidenced by this Warrant Certificate, and the Exercise Price at which such shares are purchasable, are, upon the happening of certain events, subject to modification and adjustment. This Warrant Certificate and the Warrant it represents are subject to, and entitled to the benefits of, all of the terms, provisions and conditions of a certain Warrant Agreement dated as of March 6, 2001 (the "Warrant Agreement") between the Company and Maden Tech Consulting, Inc., which Warrant Agreement is hereby incorporated herein by reference and made a part hereof and to which Warrant Agreement reference is hereby made for a full description of the rights, limitation of rights, obligations, duties and immunities hereunder of Company and the holder of this Warrant Certificate. Copies of the Warrant Agreement are on file at the principal office of the Company. Subject to the terms of the Warrant Agreement, this Warrant Certificate, upon surrender at the principal office of the Company, may be exchanged for another Warrant Certificate or Warrant Certificates of like tenor and date evidencing a Warrant or Warrants entitling the holder to purchase a like aggregate number of Shares of Common Stock as the Warrant evidenced by the Warrant Certificate surrendered entitled such holder to purchase. No fractional Shares of Common Stock need be issued upon the exercise of any Warrant evidenced hereby, but in lieu thereof a cash payment may be made, as provided in the Warrant Agreement. During the Exercise Period, the Company may not declare and pay any cash dividends to holders of its Common Stock, unless the Company pays to the holder of this Warrant Certificate a cash dividend in an amount equal to that which such holder would have received had such holder's Warrants been exercised immediately prior to the record date with respect to such dividend for the number of Warrant Shares for which its Warrants would have been then exercisable. No holder of this Warrant Certificate shall be entitled to vote or receive 19 dividends (other than as described in the preceding sentence) or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained in the Warrant Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, to give or withhold consent to any corporate action (whether upon any recapitalization, issue of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance or otherwise), to receive notice of meetings (except as provided in the Warrant Agreement), or to receive dividends or subscription rights or otherwise, until the Warrant evidenced by this Warrant Certificate shall have been exercised and the Common Stock purchasable upon the exercise thereof shall have become deliverable as provided in the Warrant Agreement. [Remainder of this page intentionally left blank.] 20 IN WITNESS WHEREOF, the Company has caused the signature (or facsimile signature) of its President and Secretary to be printed herein and its corporate seal (or facsimile) to be printed herein. Attest: ENLIGHTEN SOFTWARE SOLUTIONS, INC. By: - ------------------------- ------------------------------------ Name: Name: Title: Title: 21 FORM OF ELECTION TO PURCHASE To be executed if the Holder desires to exercise the Warrant. TO ENLIGHTEN SOFTWARE SOLUTIONS, INC.: The undersigned hereby irrevocably elects to exercise the Warrant evidenced by this Warrant Certificate to purchase _____________ Shares of Common Stock issuable upon the exercise of such Warrant and requests that certificates for such Shares be issued in the name of: ---------------------------- Name ---------------------------- Address ---------------------------- Tax Identification Number If such number of Shares shall not be all the Shares with respect to which this Warrant is exercisable, a new Warrant for the balance remaining of such Shares will be registered in the name of and delivered to: ---------------------------- Name ---------------------------- Address ---------------------------- Tax Identification Number Date: ------------------- ---------------------------- Signature (Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate) 22 ASSIGNMENT (To be executed only upon assignment of Warrant Certificate) For value received, the undersigned hereby sells, assigns and transfers unto the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint the Secretary of the Company his agent to transfer said Warrant certificate on the books of the within-named Company, with full power of substitution in the premises. Dated: _________________,_____ ----------------------------------- NOTE: The above signature should correspond exactly with the name on the face of this Warrant Certificate. - --------------------------------- - --------------------------------- (Insert Social Security or Other Identifying Number of Holder) EX-10.4 5 f70497ex10-4.txt EXHIBIT 10.4 1 EXHIBIT 10.4 2 WARRANT CERTIFICATE THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE TRANSFER OR EXCHANGE OF THIS WARRANT MUST BE REGISTERED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. NO. MT-001 March 6, 2001 ENLIGHTEN SOFTWARE SOLUTIONS, INC. WARRANT CERTIFICATE THIS CERTIFIES THAT for value received, Maden Tech Consulting, Inc., or its registered assigns, is the owner of a Warrant which entitles it to purchase at any time or from time to time on or after the date hereof, as provided in the Warrant Agreement (as hereinafter defined) up to 2,000,000 fully paid and nonassessable Shares of the voting common stock (the "Common Stock"), of Enlighten Software Solutions, Inc., a California corporation (the "Company"), at the purchase price per Share equal to the Current Market Price as defined in the Warrant Agreement (the "Exercise Price") upon presentation and surrender of this Warrant Certificate with the Form of Election to Purchase attached hereto duly executed. As provided in the Warrant Agreement, the number and kind of Shares which may be purchased upon the exercise of the Warrant evidenced by this Warrant Certificate, and the Exercise Price at which such shares are purchasable, are, upon the happening of certain events, subject to modification and adjustment. This Warrant Certificate and the Warrant it represents are subject to, and entitled to the benefits of, all of the terms, provisions and conditions of a certain Warrant Agreement dated as of March 6, 2001 (the "Warrant Agreement") between the Company and Maden Tech Consulting, Inc., which Warrant Agreement is hereby incorporated herein by reference and made a part hereof and to which Warrant Agreement reference is hereby made for a full description of the rights, limitation of rights, obligations, duties and immunities hereunder of Company and the holder of this Warrant Certificate. Copies of the Warrant Agreement are on file at the principal office of the Company. Subject to the terms of the Warrant Agreement, this Warrant Certificate, upon surrender at the principal office of the Company, may be exchanged for another Warrant Certificate or Warrant Certificates of like tenor and date evidencing a Warrant or Warrants entitling the holder to purchase a like aggregate number of Shares of Common Stock as the Warrant evidenced by the Warrant Certificate surrendered entitled such holder to purchase. No fractional Shares of Common Stock need be issued upon the exercise of any Warrant evidenced hereby, but in lieu thereof a cash payment may be made, as provided in the Warrant Agreement. During the Exercise Period, the Company may not declare and pay any cash dividends to holders of its Common Stock, unless the Company pays to the holder of this Warrant Certificate a cash dividend in an amount equal to that which such holder would have received had such holder's Warrants been exercised immediately prior to the record date with respect to such dividend for the number of Warrant Shares for which its Warrants would have been then exercisable. No holder of this Warrant Certificate shall be entitled to vote or receive dividends (other than as described in the preceding sentence) or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained in the Warrant Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter 3 submitted to shareholders at any meeting thereof, to give or withhold consent to any corporate action (whether upon any recapitalization, issue of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance or otherwise), to receive notice of meetings (except as provided in the Warrant Agreement), or to receive dividends or subscription rights or otherwise, until the Warrant evidenced by this Warrant Certificate shall have been exercised and the Common Stock purchasable upon the exercise thereof shall have become deliverable as provided in the Warrant Agreement. [Remainder of this page intentionally left blank.] 4 IN WITNESS WHEREOF, the Company has caused the signature (or facsimile signature) of its President and Secretary to be printed herein and its corporate seal (or facsimile) to be printed herein. Attest: ENLIGHTEN SOFTWARE SOLUTIONS, INC. /S/ [NAME] By: /s/ Bill Bradley - --------------------------------- --------------------------------- Name: Name: Bill Bradley Title: Title: President and CEO 5 FORM OF ELECTION TO PURCHASE To be executed if the Holder desires to exercise the Warrant. TO ENLIGHTEN SOFTWARE SOLUTIONS, INC.: The undersigned hereby irrevocably elects to exercise the Warrant evidenced by this Warrant Certificate to purchase _____________ Shares of Common Stock issuable upon the exercise of such Warrant and requests that certificates for such Shares be issued in the name of: ----------------------------- Name ----------------------------- Address ----------------------------- Tax Identification Number If such number of Shares shall not be all the Shares with respect to which this Warrant is exercisable, a new Warrant for the balance remaining of such Shares will be registered in the name of and delivered to: ----------------------------- Name ----------------------------- Address ----------------------------- Tax Identification Number Date: ----------------- ----------------------------- Signature (Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate) 6 ASSIGNMENT (To be executed only upon assignment of Warrant Certificate) For value received, the undersigned hereby sells, assigns and transfers unto the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint the Secretary of the Company his agent to transfer said Warrant certificate on the books of the within-named Company, with full power of substitution in the premises. Dated: _________________,_____ ----------------------------------- NOTE: The above signature should correspond exactly with the name on the face of this Warrant Certificate. - --------------------------------- - --------------------------------- (Insert Social Security or Other Identifying Number of Holder) EX-10.5 6 f70497ex10-5.txt EXHIBIT 10.5 1 EXHIBIT 10.5 2 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT ("AGREEMENT"), dated as of March 6, 2001, is entered into between ENLIGHTEN SOFTWARE SOLUTIONS, INC., a California corporation (the "COMPANY"), and MADEN TECH CONSULTING, INC., a Delaware corporation (the "INVESTOR"). Recitals: In connection with the Initial Advance under the certain Loan Agreement dated as of February 14, 2001 by and between the Company and the Investor, on the date hereof the Company and the Investor are entering into a Warrant Agreement (as hereinafter defined) and the Company is making the Note in favor of the Investor. The Company and the Investor deem it to be in their respective best interests to set forth their rights in connection with public offerings and sales of the Common Stock and are entering into this Agreement as a condition to and in connection with the Loan Agreement and Warrant Agreement. A condition precedent to the obligations of the Company and the Investor under the Loan Agreement and the Warrant Agreement is the execution and delivery by the parties hereto of this Agreement. Agreement: NOW, THEREFORE, in consideration of the premises and mutual covenants and obligations hereinafter set forth, the Company and the Investor hereby agree as follows: SECTION 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "BOARD" means the Board of Directors of the Company. "COMMISSION" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "COMMON STOCK" means the common stock, no par value per share, of the Company. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. 3 "LOAN AGREEMENT" means the Loan Agreement dated as of February 14, 2001, between the Company and the Investor. "NEW SHARES" means at any time the shares of Common Stock (including instruments convertible or exercisable therefor) issued by the Company in connection with subsequent financings of the Company. "NOTE" means the Convertible Demand Note issued to the Investor by the Company pursuant to the Loan Agreement. "OTHER SHARES" means at any time those shares of Common Stock which do not constitute New Shares, Primary Shares or Registrable Shares. "PRIMARY SHARES" means at any time the authorized but unissued shares of Common Stock and shares of Common Stock held by the Company in its treasury. "REGISTRABLE SHARES" means at any time, with respect to the Investor, the shares of Common Stock and other securities of the Company convertible into or exercisable for Common Stock held by the Investor which constitute or when converted or exercised will constitute, as the case may be, Restricted Shares. "RESTRICTED SHARES" means shares of Common Stock held by the Investor issued or issuable upon the conversion of the Note or exercise of the Warrant and any other securities which by their terms are exercisable or exchangeable for or convertible into Common Stock or other securities which are so exercisable or convertible and any securities received in respect thereof, which are held by the Investor. As to any particular Restricted Shares, once issued, such Restricted Shares shall cease to be Restricted Shares when (i) they have been registered under the Securities Act, the registration statement in connection therewith has been declared effective and they have been disposed of pursuant to such effective registration statement, (ii) they are eligible to be sold or distributed pursuant to Rule 144 within any consecutive three month period (including, without limitation, Rule 144(k)) without volume limitations, or (iii) they shall have ceased to be outstanding. "RULE 144" means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto (such as Rule 144A). "SECURITIES ACT" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "WARRANT" means the Warrant issued to the Investor by the Company pursuant to the Warrant Agreement. 4 "WARRANT AGREEMENT" means the Warrant Agreement dated the date hereof, between the Company and the Investor. SECTION 2. REQUIRED REGISTRATION. (a) If the Investor desires to sell Registrable Shares in the public securities markets and requests the Company to effect the registration under the Securities Act of Registrable Shares, the Company shall promptly use its best efforts to effect the registration under the Securities Act of the Registrable Shares which the Company has been so requested to register by the Investor. (b) Notwithstanding anything contained in this Section 2 to the contrary, the Company shall not be obligated to effect any registration under the Securities Act except in accordance with the following provisions: (i) The Company shall not be obligated to use its best efforts to file and cause to become effective any registration statement pursuant to this Section 2 (A) during any period in which any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold has been filed and not withdrawn or has been declared effective within the prior 180 days; (B) at any time after the date ten years following the date hereof; or (C) after the Company has effected five such registrations pursuant to this Section 2 and each such registration has been declared or ordered effective for the period set forth in Section 5(a) below. (ii) The Company may delay the filing or effectiveness of any registration statement for a period of up to 90 days after the date of a request for registration pursuant to this Section 2 if at the time of such request (A) the Company is engaged, or has fixed plans to engage within 90 days of the time of such request, in a firm commitment underwritten public offering of Primary Shares in which the Investor may include Registrable Shares pursuant to Section 3; provided, however, that Company must provide the Investor with notice of such action not later than 30 days after such request has been made, or (B) the Board reasonably determines that such registration and offering would interfere with any material transaction involving the Company, as approved by the Board of Directors, provided, however, that the Company may only delay the filing or effectiveness of a registration statement pursuant to this Section 2(b) for one period not to exceed 90 days in any twelve-month period after the date of a request for registration pursuant to this Section 2. (iii) If the Investor has requested registration pursuant to Section 2(a) and so elects, the offering of such Registrable Shares pursuant to such registration shall be in the form of an underwritten offering. The Investor 5 shall select one or more nationally prominent firms of investment bankers reasonably acceptable to the Company to act as the lead managing underwriter or underwriters in connection with such offering. (iv) Notwithstanding any other provision of this Section 2, if the underwriter advises the Investor in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of shares of Registrable Shares that may be included in the registration and underwriting shall be allocated among all holders of Registrable Shares participating in such registration and underwriting in proportion, as nearly as practicable, to the respective amounts of Registrable Shares held by such holders. Any Registrable Shares which are excluded from the underwriting by reason of the underwriter's marketing limitation or withdrawn from such underwriting shall be withdrawn from such registration. If the underwriter has not limited the number of Registrable Shares to be underwritten, the Company may include securities for its own account (or for the account of employees and other holders, at the Company's sole discretion) in such registration if the underwriter so agrees and if the number of Registrable Shares which would otherwise have been included in such registration and underwriting will not thereby be limited by the underwriter. SECTION 3. PIGGYBACK REGISTRATION. If the Company at any time proposes for any reason to register Primary Shares or Other Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto), it shall give written notice to the Investor of its intention to so register such Primary Shares or Other Shares at least 30 days before the initial filing of such registration statement and, upon the written request, delivered to the Company within 20 days after delivery of any such notice by the Company, of the Investor to include in such registration Registrable Shares (which request shall specify the number of Registrable Shares proposed to be included in such registration and shall state that the Investor desires to sell such Registrable Shares in the public securities markets), the Company shall use its best efforts to cause all such Registrable Shares to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration; provided, however, that if the managing underwriter advises the Company that the inclusion of all Registrable Shares requested to be included in such registration would interfere with the successful marketing (including pricing) of the Primary Shares or Other Shares proposed to be registered by the Company, then the number of Primary Shares, Registrable Shares and Other Shares proposed to be included in such registration shall be included in the following order: (i) first, the Primary Shares; 6 (ii) second, the Registrable Shares and New Shares; and (iii) third, the Other Shares requested to be included in such registration. SECTION 4. REGISTRATIONS ON FORM S-3. (a) Anything contained in Section 2 to the contrary notwithstanding, at such time as the Company shall have qualified for the use of Form S-3 promulgated under the Securities Act or any successor form thereto, the Investor shall have the right to request in writing an unlimited number of registrations of Registrable Shares on Form S-3 or such successor form, which request or requests shall (i) specify the number of Registrable Shares intended to be sold or disposed of and (ii) state the intended method of disposition of such Registrable Shares. (b) Notwithstanding anything contained in this Section 4 to the contrary, the Company shall not be obligated to effect any registration pursuant to this section during any period in which any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold has been filed and not withdrawn or has been declared effective within the prior 180 days. (c) The Company may delay the filing or effectiveness of any registration statement for a period of up to 90 days after the date of a request for registration pursuant to this Section 4 if at the time of such request either (A) the Company is engaged, or has fixed plans to engage within 90 days of the time of such request, in a firm commitment underwritten public offering of Primary Shares in which the Investor may include Registrable Shares pursuant to Section 3; provided, however, that the Company must provide the Investor with notice of such action not later than 30 days after such request has been made, or (B) the Board reasonably determines that such registration and offering would interfere with any material transaction involving the Company, as approved by the Board of Directors, provided, however, that the Company may only delay the filing or effectiveness of a registration statement pursuant to this Section 4(c) for one period not to exceed 90 days in any twelve-month period after the date of a request for registration pursuant to this Section 4. SECTION 5. PREPARATION AND FILING. If and whenever the Company is under an obligation pursuant to the provisions of this Agreement to use its best efforts to effect the registration of any Registrable Shares, the Company shall, as expeditiously as practicable: (a) use its best efforts to cause a registration statement that registers such Registrable Shares to become and remain effective for a period of 90 days or until all of such Registrable Shares have been disposed of (if earlier); 7 (b) furnish, at least five business days before filing a registration statement that registers such Registrable Shares, a prospectus relating thereto or any amendments or supplements relating to such a registration statement or prospectus, to counsel selected by the Investor (the "INVESTOR'S COUNSEL"), copies of all such documents proposed to be filed (it being understood that such five-business-day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to the Investor's Counsel in advance of the proposed filing by a period of time that is customary and reasonable under the circumstances); (c) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for at least a period of 90 days or until all of such Registrable Shares have been disposed of (if earlier) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of such Registrable Shares; (d) notify in writing the Investor's Counsel (i) of the receipt by the Company of any notification with respect to any comments by the Commission with respect to such registration statement or prospectus or any amendment or supplement thereto or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (ii) of the receipt by the Company of any notification with respect to the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or prospectus or any amendment or supplement thereto or the initiation or threatening of any proceeding for that purpose and (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of such Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes; (e) use its best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as the Investor reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable the Investor to consummate the disposition in such jurisdictions of the Registrable Shares owned by the Investor; provided, however, that the Company will not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this paragraph (e) or to provide any material undertaking or make any changes in its Bylaws or Certificate of Incorporation which the Board determines to be contrary to the best interests of the Company or to modify any of its contractual relationships then existing; (f) furnish to the Investor holding such Registrable Shares such number of copies of a summary prospectus, if any, or other prospectus, including a 8 preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the Investor may reasonably request in order to facilitate the public sale or other disposition of such Registrable Shares; (g) without limiting subsection (e) above, use its best efforts to cause such Registrable Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Investor holding such Registrable Shares to consummate the disposition of such Registrable Shares; (h) notify the Investor holding such Registrable Shares on a timely basis at any time when a prospectus relating to such Registrable Shares is required to be delivered under the Securities Act within the appropriate period mentioned in subparagraph (a) of this Section 5, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and, at the request of the Investor prepare and furnish to the Investor a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (i) subject to the execution of confidentiality agreements in form and substance satisfactory to the Company, make available upon reasonable notice and during normal business hours, for inspection by the Investor holding such Registrable Shares, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by the Investor or underwriter (collectively, the "INSPECTORS"), all pertinent financial and other records, pertinent corporate documents and properties of the Company (collectively, the "RECORDS"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information (together with the Records, the "INFORMATION") reasonably requested by any such Inspector in connection with such registration statement. Any of the Information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors unless (i) the disclosure of such Information is necessary to avoid or correct a misstatement or omission in the registration statement, (ii) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) such Information has been made generally available to the public; the Investor agrees that it will, upon learning that disclosure of such Information is sought in a court of competent jurisdiction, give notice to the 9 Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential; (j) use its best efforts to obtain from its independent certified public accountants "cold comfort" letters in customary form and at customary times and covering matters of the type customarily covered by cold comfort letters; (k) use its best efforts to obtain from its counsel an opinion or opinions in customary form; (l) provide a transfer agent and registrar (which may be the same entity and which may be the Company) for such Registrable Shares; (m) issue to any underwriter to which the Investor holding such Registrable Shares may sell shares in such offering certificates evidencing such Registrable Shares; (n) list such Registrable Shares on any national securities exchange on which any shares of the Common Stock are listed or, if the Common Stock is not listed on a national securities exchange, use its best efforts to qualify such Registrable Shares for inclusion on the automated quotation system of the National Association of Securities Dealers, Inc. (the "NASD"), or such other national securities exchange as the Investor shall reasonably request; (o) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make available to its securityholders, as soon as reasonably practicable, earnings statements (which need not be audited) covering a period of 12 months beginning within three months after the effective date of the registration statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act; and (p) subject to all the other provisions of this Agreement, use its best efforts to take all other steps necessary to effect the registration of such Registrable Shares contemplated hereby. The Investor, upon receipt of any notice from the Company of any event of the kind described in Section 5(h) hereof, shall forthwith discontinue disposition of the Registrable Shares pursuant to the registration statement covering such Registrable Shares until the Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 5(h) hereof, and, if so directed by the Company, the Investor shall deliver to the Company all copies, other than permanent file copies then in the Investor's possession, of the prospectus covering such Registrable Shares at the time of receipt of such notice. 10 SECTION 6. EXPENSES. All expenses (other than underwriting discounts and commissions relating to the Registrable Shares, as provided below) incurred by the Company in complying with Section 5, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), fees and expenses of complying with securities and blue sky laws, printing expenses, fees and expenses of the Company's counsel and accountants and reasonable fees and expenses of a single counsel acting on behalf of all selling holders of Registrable Shares (which counsel may also, at the holders' request, be counsel to the Company, unless counsel to the Company has a conflict of interest with respect to the representation of any selling holder or the underwriters object to the selling holders' representation by Company counsel) shall be paid by the Company; provided, however, that all underwriting discounts and selling commissions applicable to the Registrable Shares and Other Shares shall be borne by the Investor. SECTION 7. INDEMNIFICATION. (a) In connection with any registration of any Registrable Shares under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless the Investor, each underwriter, broker or any other person acting on behalf of the Investor and each other person, if any, who controls any of the foregoing persons within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several (or actions in respect thereof), to which any of the foregoing persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or allegedly untrue statement of a material fact contained in the registration statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, or arise out of or are based on any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration or qualification under such state securities or blue sky laws; and shall reimburse the Investor, such underwriter, such broker or such other person acting on behalf of the Investor and each such controlling person on an as-incurred basis for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 7(a) shall not apply to amounts 11 paid in settlement of any such claim, loss, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld); and provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action (including any legal or other expenses incurred) arises out of or is based upon an untrue statement or allegedly untrue statement or omission or alleged omission made in said registration statement, preliminary prospectus, final prospectus, amendment, supplement or document incident to registration or qualification of any Registrable Shares in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by the Investor or its counsel or underwriter specifically for use in the preparation thereof. (b) In connection with any registration of Registrable Shares under the Securities Act pursuant to this Agreement, the Investor shall hold harmless (in the same manner and to the same extent as set forth in the preceding paragraph of this Section 7) the Company, each director of the Company, each officer of the Company who shall sign such registration statement, each underwriter, broker or other person acting on behalf of the Investor and each person who controls any of the foregoing persons within the meaning of the Securities Act with respect to any statement or omission from such registration statement, any preliminary prospectus or final prospectus contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, if such statement or omission was made solely in reliance upon and in conformity with written information furnished to the Company or such underwriter specifically for use in connection with the preparation of such registration statement, preliminary prospectus, final prospectus, amendment, supplement or document; provided, however, that the maximum amount of liability in respect of such indemnification shall be limited, in the case of each seller of Registrable Shares, to an amount equal to the net proceeds actually received by such seller from the sale of Registrable Shares effected pursuant to such registration. (c) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section 7, such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action. The failure of any indemnified party to notify an indemnifying party of any such action shall not (unless such failure shall have a material adverse effect on the indemnifying party) relieve the indemnifying party from any liability in respect of such action that it may have to such indemnified party on account of this Section 7. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified 12 party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, however, that if any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 7, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party (but shall have the right to participate therein with counsel of its choice) and such indemnifying party shall reimburse such indemnified party and any person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity agreement provided in this Section 7. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel with respect to such claim. (d) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant hereto were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to herein. No person guilty of fraudulent misrepresentation shall be entitled to contribution from any person. (e) The obligations of the Company and Investor under this Section 7 shall survive completion of any offering of Registrable Shares and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as a term thereof the giving by the claimant or plaintiff to such indemnified party of an 13 unconditional release from all liability in respect to such claim or litigation. Each indemnified party shall reasonably cooperate with the indemnifying party in the defense of any claim or litigation brought against such indemnified party. SECTION 8. UNDERWRITING AGREEMENT. Notwithstanding the provisions of Sections 5, 6 and 7, to the extent that the Investor shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Sections, the provisions contained in such agreement addressing such issue or issues shall control. SECTION 9. INFORMATION BY INVESTOR. The Investor shall furnish to the Company such written information regarding the Investor and the distribution proposed by the Investor as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. SECTION 10. EXCHANGE ACT COMPLIANCE. At all times the Company shall comply with all of the reporting requirements of the Exchange Act applicable to it (whether or not it shall be required to do so, but specifically excluding Section 14 of the Exchange Act if not then applicable to the Company) and shall comply with all other public information reporting requirements of the Commission which are conditions to the availability of Rule 144 for the sale of the Common Stock. The Company shall cooperate with the Investor in supplying such information as may be necessary for the Investor to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144. SECTION 11. NO CONFLICT OF RIGHTS. The Company shall not, after the date hereof, grant any registration rights which conflict with or impair the registration rights granted hereby. SECTION 12. TERMINATION. This Agreement shall terminate and be of no further force or effect on the date ten years from the date hereof. 14 SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of the Company, the Investor and, subject to Section 14, the respective successors and assigns of the Company and the Investor. SECTION 14. ASSIGNMENT. The Investor may, at any time, with written notice to the Company, assign its rights hereunder with respect to all or a portion of the Registrable Shares; provided, however, that such purchaser or transferee shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as the Investor whereupon such purchaser or transferee shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement as if such purchaser or transferee was originally included in the definition of the Investor herein and had originally been a party hereto; and provided, further, that no transfer or assignment may be made by the Investor unless (i) the transferee or assignee either (x) acquires more than 100,000 of the Registrable Shares or (y) is an affiliate (as such term is defined in Rule 405 promulgated under the Securities Act) of such Investor; and (ii) such transfer or assignment is effected in accordance with applicable securities laws (as presently constituted or as may be amended from time to time). SECTION 15. ENTIRE AGREEMENT. This Agreement, the Loan Agreement and the Warrant Agreement, each dated as of the date hereof, and the other writings referred to herein or therein or delivered pursuant hereto or thereto (including without limitation the Note and the Warrant), contain the entire agreement between the Investor and the Company with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto. SECTION 16. NOTICES. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by telecopy, nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties: if to the Company, to: Enlighten Software Solutions, Inc. 999 Baker Way, Fifth Floor San Mateo, CA 94404 15 Fax: (650) 578-0700 Attention: Chief Financial Officer if to the Investor, to: Maden Tech Consulting, Inc. 2110 Washington Boulevard Suite 200 Arlington, VA 22204 Fax: (703) 769-4423 Attention: David R. Ford, Esq. with a copy to: Hogan & Hartson L.L.P. Columbia Square 555 Thirteenth Street, N.W. Washington, D.C. 20004 Telephone: (202) 637-5600 Fax: (202) 637-5910 Attention: James E. Showen, Esq. All such notices, requests, consents and other communications shall be deemed to have been delivered (a) in the case of personal delivery or delivery by telecopy, on the date of such delivery, (b) in the case of dispatch by nationally-recognized overnight courier, on the next business day following such dispatch and (c) in the case of mailing, on the third business day after the posting thereof. SECTION 17. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and provisions of this Agreement may not be modified or amended, nor may any provision be waived, except pursuant to a writing signed by the Company and the Investor. SECTION 18. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile counterpart signatures to this Agreement shall be acceptable at the Closing (as defined in the Loan Agreement) if the originally executed counterpart is delivered within a reasonable period thereafter. 16 SECTION 19. HEADINGS. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. SECTION 20. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to the conflict of law provisions thereof. 17 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the date first written above. ENLIGHTEN SOFTWARE SOLUTIONS, INC. By: /s/ Bill Bradley --------------------------------- Name: Bill Bradley Title: President and CEO MADEN TECH CONSULTING, INC. By: /s/ Omar Maden --------------------------------- Name: Omar Maden Title: Chief Executive Officer EX-10.6 7 f70497ex10-6.txt EXHIBIT 10.6 1 EXHIBIT 10.6 2 SOFTWARE SECURITY AGREEMENT THIS SOFTWARE SECURITY AGREEMENT ("Security Agreement") is made this 14th day of February, 2001 by and between Enlighten Software Solutions, Inc., a California corporation having a place of business at 999 Baker Way, Fifth Floor, San Mateo, California 94404 ("Borrower"), and Maden Tech Consulting, Inc., a Delaware corporation having a place of business at 2110 Washington Boulevard, Suite 200, Arlington, Virginia 22204 ("Secured Party"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreement dated as of the date hereof by and between Borrower and Secured Party. RECITALS WHEREAS, Borrower desires to obtain the Credit Facility from Secured Party pursuant to, evidenced by the Loan Agreement dated as of the date hereof by and between the Borrower and the Secured Party; and WHEREAS, as an inducement to Secured Party to provide the Credit Facility, Borrower has agreed to grant to Secured Party a security interest in the Software, including without limitations that Intellectual Property set forth in Schedule 1, and any and all proceeds therefrom, to secure all present and future Obligations of Borrower under the Credit Documents; and WHEREAS, the execution and delivery by the parties hereto of this Security Agreement is a condition precedent to the obligation of Secured Party to make Advances under the Credit Facility; and WHEREAS, to evidence the rights of Secured Party in and to the Software, Borrower and Secured Party have entered into this Security Agreement. NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Borrower and Secured Party hereby agree as follows: 1. GRANT OF SECURITY INTEREST. To secure the prompt payment, performance and observance of the Obligations, Borrower does hereby assign to Secured Party, and grant to Secured Party a present, absolute, unconditional, continuing first priority security interest in and to, all of Borrower's right, title and interest, whether now owned or existing or hereafter acquired or arising, in and to the Software and in and to all Intellectual Property rights in the Software, whether or not registered or filed with any Governmental Authority, associated copyright registrations and copyright applications, and all registrations and renewals thereof and applications for registration and renewal thereof, together with (a) source code, object code, build procedures, installation files, help files, dynamic link libraries, informational content included in Software, (b) all writings and computer tapes, disks, data bases, flow diagrams, and other property manifesting, embodying or incorporating any thereof, (c) all present and future rights of Borrower under all present and future license agreements relating thereto, whether Borrower is licensee or licensor thereunder, (d) all income, royalties, damages and payments now or hereafter due and/or payable to Borrower thereunder or with respect thereto, including, 3 without limitation, damages and payments for past, present or future infringements thereof, (e) all of Borrower's present and future claims, causes of action and rights to sue for past, present or future infringements thereof, (f) all rights corresponding thereto throughout the world, (g) all present and future proceeds and products thereof in any form whatsoever, and (h) (i) all registered copyrights owned by Borrower arising in and to the Software, including the jurisdictions in which each such item of Intellectual Property has been issued or registered or in which any application for such issuance and registration has been filed, (ii) licenses and value added reseller agreements in effect with respect to the Software, and (iii) licenses, sublicenses and other agreements as to which Borrower or any Borrower Subsidiary is a party and pursuant to which Borrower or its Subsidiaries are authorized to use any third party patents, trademarks or copyrights, including software, that are incorporated in, are or form a part of the Software or any other product of Borrower or any of its Subsidiaries (all of the foregoing collectively, the "Copyrights"). 2. REQUESTED RECORDATION. Borrower authorizes the Register of Copyrights to file and record this Security Agreement (and any corresponding or separate application forms of such jurisdiction) in order to reflect publicly Secured Party's security interest in the Software and the Copyrights. 3. TERMINATION. The security interest granted herein shall terminate upon the later of (a) the satisfaction in full of the Obligations, and (b) such time as there exists no commitment by Secured Party that could give rise to any Obligations. 4 IN WITNESS WHEREOF, the undersigned have executed and delivered this Security Agreement on this 14th day of February, 2001. ATTEST/WITNESS: ENLIGHTEN SOFTWARE SOLUTIONS, INC. (Borrower) By: /S/ [Name] By: /s/ David D. Parker ---------------------------- --------------------------------- Name: David D. Parker Title: Co-Chairman of the Board By: /s/ David R. Ford MADEN TECH CONSULTING, INC. ---------------------------- (Secured Party) By:/s/ Omar Maden --------------------------------- Name: Omar Maden Title: Chief Executive Officer * * * * * 5 STATE OF California ) ) ss COUNTY OF Santa Clara ) On this 14th day of February, 2001 before me personally appeared David D. Parker to me personally known, who, being duly sworn, did say that he is the Co-Chairman of the Board of Enlighten Software Solutions, Inc. and that he duly executed the foregoing instrument for and on behalf of Enlighten Software Solutions, Inc. being duly authorized to do so and that said individual acknowledged said instrument to be the free act and deed of said corporation. /s/ Marie Delphine Herrera - -------------------------------- Notary Public My Commission expires: 1/8/2004 6 SCHEDULE 1 SOFTWARE Title Registration No. Registration Date - -------------------------------------------------------------------------------- Enlighten DSM Software related software EX-10.7 8 f70497ex10-7.txt EXHIBIT 10.7 1 EXHIBIT 10.7 2 COPYRIGHT ASSIGNMENT WHEREAS, ENLIGHTEN SOFTWARE SOLUTIONS, INC., a corporation organized and existing under the laws of the State of California, having its office at 999 Baker Way, Fifth Floor, San Mateo, California 94404, ("Enlighten") is the owner of certain intellectual property that is listed on the attached Schedule A, which is made a part hereof, including without limitation all intellectual property rights, whether or not registered or filed with any governmental authority, associated copyright registrations and copyright applications, and all registrations and renewals thereof and applications for registration and renewal thereof, together with (a) source code, object code, build procedures, installation files, help files, dynamic link libraries, informational content included in Software, (b) all writings and computer tapes, disks, data bases, flow diagrams, and other property manifesting, embodying or incorporating any thereof, (c) all present and future rights of Enlighten under all present and future license agreements relating thereto, whether Enlighten is licensee or licensor thereunder, (d) all income, royalties, damages and payments now or hereafter due and/or payable to Enlighten thereunder or with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (e) all of Enlighten's present and future claims, causes of action and rights to sue for past, present or future infringements thereof, (f) all rights corresponding thereto throughout the world, (g) all present and future proceeds and products thereof in any form whatsoever, and (h) (i) all registered copyrights owned by Enlighten arising in and to the Software, including the jurisdictions in which each such item of Intellectual Property has been issued or registered or in which any application for such issuance and registration has been filed, (ii) licenses and value added reseller agreements in effect with respect to the Software, and (iii) licenses, sublicenses and other agreements as to which Enlighten or any Enlighten Subsidiary is a party and pursuant to which Enlighten or its Subsidiaries are authorized to use any third party patents, trademarks or copyrights, including software, that are incorporated in, are or form a part of the Software or any other product of Enlighten or any of its Subsidiaries (collectively, the "Copyrights"). WHEREAS, MADEN TECH CONSULTING, INC., a corporation organized and existing under the laws of the State of Delaware, having an address at 2110 Washington Boulevard, Suite 200, Arlington, VA 22204 and Enlighten Software Solutions, Inc. have entered into a Software Security Agreement contemporaneously herewith. WHEREAS, this assignment shall automatically become effective upon the occurrence of any default or event of default under or as defined in any of the Credit Documents or Software Security Agreement. NOW, THEREFORE, in consideration of the investment of Maden Tech Consulting, Inc. in Enlighten Software Solutions, Inc. and other good and valuable consideration, receipt of which is hereby acknowledged, Enlighten Software Solutions, Inc. does hereby conditionally sell, assign and transfer unto Maden Tech Consulting, Inc. its successors and assigns, all of its right, title and interest in and to the Software and Copyrights as listed on Schedule A, and the right to apply for copyrights, registrations and renewals thereof, together with all rights of action and claims for damages and benefits arising because of past infringement of said Copyrights. 3 IN WITNESS WHEREOF, Enlighten Software Solutions, Inc. has caused this instrument to be signed by a duly authorized corporate officer and delivered, as of this 14th day of February, 2001. ENLIGHTEN SOFTWARE SOLUTIONS, INC. By: /s/ David D. Parker ----------------------------- Name: David D. Parker Title: Co-Chairman of the Board * * * * * * * * * STATE OF California ) ) ss COUNTY OF Santa Clara ) On this 14th day of February, 2001 before me personally appeared David D. Parker to me personally known, who, being duly sworn, did say that he is the Co-Chairman of the Board of Enlighten Software Solutions, Inc. and that he duly executed the foregoing instrument for and on behalf of Enlighten Software Solutions, Inc. being duly authorized to do so and that said individual acknowledged said instrument to be the free act and deed of said corporation. /s/ Marie Delphine Herrera - ------------------------------------- Notary Public My Commission expires: 1/8/2004 4 SCHEDULE A COPYRIGHTS Title Registration No. Registration Date - -------------------------------------------------------------------------------- Enlighten DSM Software related software -----END PRIVACY-ENHANCED MESSAGE-----