S-1

As filed with the Securities and Exchange Commission on June 24, 2011

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

BLUEARC CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	3572	77-0526726
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

50 Rio Robles

San Jose, California 95134

(408) 576-6600

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Michael B. Gustafson

President and Chief Executive Officer

BlueArc Corporation

50 Rio Robles

San Jose, California 95134

(408) 576-6600

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Copies to:

Michael J. Danaher, Esq. Julia Reigel, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304 (650) 493-9300 Martin A. Wellington, Esq. Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, California 94025 (650) 752-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨		Accelerated filer  ¨
Non-accelerated filer  x	(Do not check if a smaller reporting company)	Smaller reporting company  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common Stock, par value $0.001 per share	$100,000,000	$11,610

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

The Registrant hereby amends this Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated June 24, 2011

            shares

Common stock

This is the initial public offering of our common stock of BlueArc Corporation. We are offering              shares of common stock.

Prior to this offering, there has been no public market for our common stock. We expect the initial public offering price of our common stock will be between $             and $             per share. We expect to apply to list our common stock on either The NASDAQ Global Market or The New York Stock Exchange under the symbol “BLRC.”

Investing in our common stock involves risks. See “Risk Factors ” beginning on page 13.

	Price to public	Underwriting discounts and commissions	Proceeds to BlueArc Corporation
Per Share	$	$	$
Total	$	$	$

The underwriters have an option to purchase up to              additional shares of common stock from us to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on                     , 2011.

J.P. Morgan	BofA Merrill Lynch	Credit Suisse
William Blair & Company
Pacific Crest Securities		ThinkEquity LLC

The date of this prospectus is                     , 2011.

Table of contents

	Page
Prospectus summary		1
The offering		8
Summary condensed consolidated financial data		10
Risk factors		13
Special note regarding forward-looking statements and industry data		41
Use of proceeds		42
Dividend policy		42
Capitalization		43
Dilution		45
Selected consolidated financial data		47
Management’s discussion and analysis of financial condition and results of operations		50
Business		77
Management		98
Executive compensation		107
Related party transactions		131
Principal stockholders		139
Description of capital stock		142
Shares eligible for future sale		147
Material United States federal income tax and estate tax consequences to non-U.S. holders		150
Underwriting		154
Experts		164
Legal matters		164
Where you can find more information		164
Index to consolidated financial statements		F-1

You should rely only on the information contained in this prospectus or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

-i-

Prospectus summary

This summary highlights information contained elsewhere in this prospectus and does not contain all the information you should consider in making your investment decision. You should read this summary together with the more detailed information, including our consolidated financial statements and the related notes, elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in “Risk factors” beginning on page 13. Unless the context otherwise requires, we use the terms “BlueArc,” “we,” “us” and “our” in this prospectus to refer to BlueArc Corporation and its subsidiaries.

Overview

We are a leading provider of high performance, highly scalable networked storage systems for businesses of all sizes. Our storage systems deliver the levels of performance, scalability, versatility and simplicity required to cost effectively manage the rapid growth of unstructured data, making them particularly suited for data-intensive applications such as server and desktop virtualization and cloud-based computing. Reliance on email, business documents, web pages, digital images, audio and video, as well as the document retention and access requirements of regulatory compliance are driving the rapid growth of unstructured data. The proliferation of unstructured data and the need to manage and access it at scale has resulted in the demand for next-generation storage systems that minimize the complexities and overcome the performance limitations of existing storage systems. Our storage systems leverage our proprietary file system and flexible architecture to meet the needs of today’s most demanding applications and to manage unstructured data at scale. We enable our customers to more effectively explore, discover, research, create, process and innovate in performance sensitive and data intensive environments.

Our storage systems minimize the complexities and overcome the performance limitations of existing networked storage systems. We enable our customers to address storage bottlenecks and accelerate processes to achieve their critical business goals, such as enhanced revenue generation and improved service offerings. Our massively parallel architecture is highly scalable and delivers sustained performance under increased workloads, unlike competing storage systems. Our storage systems combine our servers with our advanced, proprietary software suite, and use standard interfaces and multiple tiers of efficient enterprise-class storage devices to provide a wide variety of system configurations to our customers. We also sell our servers independently as a gateway solution that can be deployed in storage environments to enable file services for easier data sharing, simplified management, server and desktop virtualization and improved functionality. As of April 30, 2011, over 750 customers worldwide have deployed over 2,000 of our storage systems.

We believe that our networked storage systems address multiple end markets in light of the proliferation of unstructured data, the growing need to manage it at scale and the continuing shift to Internet Protocol networking. According to IDC, an independent research firm, the network attached storage, or NAS, and Internet small computer system interface storage area network, or iSCSI SAN, markets are expected to grow from $8.1 billion in 2010 to $12.0 billion in 2014, representing a 10.2% compound annual growth rate, or CAGR. In addition, we believe that the Fibre Channel connectivity of our platform enables us to address the migration and transition

-1-

away from Fibre Channel to next-generation storage systems that are optimized for unstructured data and file-based applications. Our storage systems are deployed throughout a wide range of organizations, from global businesses to small organizations with just one location. Our diverse customer base includes organizations in industries such as media and entertainment, electronic discovery for litigation, or e-Discovery, energy, the federal government, life sciences, Internet and cloud hosted service providers and other enterprises. We sell our storage systems through multiple channels; which include our direct sales force, our extensive network of channel partners and a global original equipment manufacturer, or OEM, agreement with Hitachi Data Systems Corporation, or HDS.

In fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, we had total revenue of $74.2 million, $65.9 million, $85.6 million and $24.7 million, respectively. In fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, we incurred net losses of $19.6 million, $15.8 million, $9.4 million and $4.3 million, respectively.

Industry background

The amount of data used by businesses of all sizes globally is growing rapidly. IDC predicts that between 2009 and 2020, the amount of digital data in customer sites will grow to 44 times what it was in 2010—growing to 35 billion terabytes. Businesses are increasingly focusing on leveraging highly scalable, high performance file systems and related storage infrastructure as they seek to intelligently organize, manage, access and analyze growing amounts of data. Given the rapid pace of change in today’s markets, businesses seek solutions that can seamlessly scale as their business requirements evolve. In recent years, unstructured data has become increasingly critical to businesses. Reliance on email, business documents, web pages, digital images, audio and video, as well as the document retention and access requirements of regulatory compliance are driving the rapid growth of unstructured data across businesses. For example, computer-generated imagery for film, games and television and e-Discovery all require massive amounts of unstructured data to carry out their primary functions. In addition, system capabilities such as high scalability and parallel processing, once required only for specific high performance computing, or HPC, applications such as genomics, have become increasingly common for a wide variety of businesses. The growth in unstructured data, combined with advanced networking capabilities, increased disk capacities, improved computer processing capabilities and server and desktop virtualization have resulted in the need for next-generation data center technologies uniquely architected to meet the needs of today’s most demanding applications.

Key trends affecting growing data center environments

Proliferation of unstructured data.    As modern applications continue to grow in sophistication, they produce and require increasing amounts of unstructured data. The long-term storage and management of this unstructured data poses a significant challenge for businesses as the amount of unstructured data has grown exponentially, the commercial value of that data has increased and the need to store and access it for long periods continues. IDC estimates that worldwide enterprise storage capacity shipped for traditional unstructured data is expected to grow from 3,924 petabytes in 2010 to 22,930 petabytes in 2014, representing a CAGR of 55.5%. Unlike structured data, which is typically stored in databases, unstructured data is stored in file

-2-

systems. The proliferation of unstructured data is driving a need for next-generation file systems and the related storage infrastructure to manage, move, protect and deliver growing amounts of unstructured data for businesses and consumers. These next-generation solutions must be high performance, flexible and scalable to address the rapid growth of unstructured data.

Growing performance demands.    As data sets have grown and the performance requirements to both process and manage them have increased, mainstream businesses and organizations increasingly require high performance, highly scalable storage systems that were previously only needed for HPC environments. At the same time, the storage system requirements to support HPC applications continue to increase. Growing performance burdens on storage infrastructure also result from greater numbers of files, concurrent users, demands for faster response times, increased sharing of data and the proliferation of server and desktop virtualization. In addition, as businesses increasingly consolidate their data center footprint to achieve cost efficiencies, the performance and scalability requirements for storage intensify.

Focusing on reduced complexity and leveraging existing infrastructure.    To scale their infrastructure and manage growth in unstructured data, many organizations have deployed multiple disparate storage systems over time as their data needs have grown. This has resulted in overly complex infrastructure that is difficult and expensive to manage. To address these difficulties, businesses increasingly demand solutions that provide open architectures, are highly scalable and are interoperable with their existing data center deployments, enabling them to leverage significant existing infrastructure investments.

Increasing use of virtualization technologies.    Increased adoption of server and desktop virtualization technologies has resulted in data center environments with dynamic storage requirements. Server virtualization technologies enable an administrator to use a software application to divide one physical server into multiple virtual servers, enabling multiple operating systems to run simultaneously on the same computer. Desktop virtualization environments provide multiple users with desktop, processing and storage capabilities on a remote central server instead of on a local computer. As businesses increasingly adopt server virtualization technologies and consolidate their data center resources, independent storage resources become siloed, driving demand for solutions that enable the consolidation and centralization of these siloed storage pools. In addition, as businesses continue to adopt desktop virtualization technologies, their data centers are required to evolve to support simultaneous operations of a large number of virtual desktops, such as having multiple users log in at the same time. Increased use of server and desktop virtualization technologies within data centers has resulted in an exponential increase in requirements for high input output operations per second, or IOPs, to support highly unpredictable traffic patterns within data centers.

Accelerating adoption of cloud-based architectures.    The proliferation of cloud-based architectures, or architectures that enable the delivery of hosted on-demand services over the Internet, and data has resulted in the rapid growth of large data centers that require highly scalable networked storage with centralized management. The requirements of on-demand storage in cloud-based architectures are driving the need for storage technologies that deliver high efficiency across the storage infrastructure. To increase cost efficiency, storage architectures are increasingly incorporating tiering, which automatically routes and stores data in different storage media based on administrator-defined policies. Using cloud-based storage as one tier of

-3-

the architecture reduces the cost of storing data. Many existing data center deployments are not optimized for current volumes of data and traffic or for the interoperability to offload data to a cloud-based tier of storage, making them difficult to scale and operate cost effectively.

Increasing focus on minimizing total cost of ownership.    To stay competitive, businesses have increasingly focused on lowering their operating costs, particularly information technology infrastructure costs. Managing information technology infrastructure costs has also become increasingly complex as the rapid adoption of applications has competed with the need to manage mixed workloads across a shared network infrastructure environment.

We believe that existing storage systems do not fully address key requirements of businesses in today’s environment because they were not originally architected to address the scale of and broad prevalence of unstructured data. Existing storage systems lack the performance and scalability to address the diversity of applications and the size of data sets that are now being generated across distributed storage resources. Dynamic requirements for next-generation technologies and limitations of currently available solutions make it difficult for many storage systems to cost effectively address continually evolving business requirements.

Our networked storage systems

We provide industry leading storage systems that leverage our proprietary file system, SiliconFS, and flexible architecture to deliver intelligent data management functionality for our customers. Our massively parallel architecture is designed to overcome the data network bottlenecks created by existing storage systems and deliver superior performance across diverse workloads without sacrificing scalability, storage bandwidth, functionality, or overall capacity. Through our intelligent file system architecture, we enable our customers to scale their infrastructure up, or enable higher performance out of a single storage system, and scale their infrastructure out, or enable multiple servers to be deployed seamlessly across data centers to meet continually changing business and application requirements. Our intelligent file system architecture enables our customers to scale-right, or scale each of these attributes independently to their specific needs, and to run intensive data management applications seamlessly without burdening the performance of overall storage infrastructure.

Our massively parallel architecture and highly scalable storage systems leverage a combination of standard field programmable gate arrays, or FPGAs, as an offload engine for high speed data transfer and multi-core processors for intensive data management functions. This architecture, combined with SiliconFS, allows us to deliver the following benefits to customers:

Management of unstructured data at scale.    Our storage systems allow for the intelligent management of applications in data intensive environments and allow our customers to add storage systems, applications and data management features seamlessly without sacrificing performance or functionality. We believe our storage systems provide the most scalable solution in our product class, with the highest performance, as measured in IOPs, storage capacity up to 16 petabytes in a single system, throughput up to 1.5 gigabytes per second and the ability to configure clusters of up to eight servers. By scaling right, we also enable our customers to scale each of these attributes independently, significantly reducing the potential for underutilization of resources.

-4-

Ability to reduce complexity.    Our storage systems are often deployed as a consolidation platform for networked storage environments, reducing complexity and cost by eliminating excess storage systems. Due to their ability to handle diverse and unpredictable workloads, our storage systems serve as an ideal platform for the consolidation of applications, such as email, databases and home directories, as well as SAN and NAS on the same storage system. Our storage systems allow different users, applications, protocols and performance requirements to share storage resources and enable traditionally siloed pools of storage to be viewed and managed through our single cluster namespace, which enables a user to view clusters of multiple servers and file systems as if they are a single coherent unit. We architected our storage systems to be easily integrated into our customers’ data centers to simplify the integration and management of our storage systems.

Optimized for virtual environments.    Our architecture is ideally suited for large scale virtualized server and desktop environments because it delivers high levels of predictable performance for unpredictable workloads. In addition, our proprietary technology provides the ability to instantly create space-efficient, writeable copies of files for use in a wide variety of environments and run multiple simulations with large-scale data sets. This allows administrators to quickly deploy many new virtual machines without consuming additional disk storage space. Our differentiated solutions enable virtualized environments to achieve maximum utilization of storage resources and avoid performance bottlenecks, reducing the management time required and making the data center less complex and cumbersome to manage.

Support for cloud-based environments.    Our storage systems deliver high predictability, high performance and continuous availability across a variety of workloads. These characteristics allow our customers to easily scale their storage systems, applications and data management features without sacrificing performance, making our storage systems optimal for cloud-based environments. In addition, where most existing storage systems realize performance degradation as capacity begins to be utilized, our customers benefit from our predictable performance across a variety of complex workloads such as those associated with hosted security, storage and software models. Our open architecture provides and supports interoperability with cloud-based tiers of storage, allowing customers to seamlessly offload noncritical data to locations hosted offsite in public and private clouds. Our solutions enable businesses to easily manage the high growth of data in cloud-based environments without increasing complexity or unnecessary infrastructure costs.

Low total cost of ownership.    We believe our storage systems enable our customers to achieve higher usable capacity per server and lower overall total cost of ownership. Our customers are able to realize cost savings and higher efficiencies from using fewer servers, smaller physical data center space and fewer administrators. Our storage systems also provide superior power efficiency, require less cooling and offer efficient space utilization. In addition, our platform is based on our open architecture, which supports interoperability within data center environments, enabling our customers to leverage their significant investments in existing infrastructure to achieve higher returns on investment and faster payback periods.

-5-

Our strategy

Our objective is to be the leading networked storage system vendor providing solutions to solve the challenges businesses face in managing unstructured data at scale. Key elements of our strategy include:

• Extending our technology leadership and product breadth by leveraging our massively parallel architecture and file system;

• Continuing to deepen and expand our customer relationships and vertical market penetration through leveraging our proven high performance technology and our diverse routes to market;

• Continuing to expand our routes to market, including direct and channel distribution, to maximize our reach to customers; and

• Broadening our technology partnerships with infrastructure vendors, application vendors and storage suppliers by leveraging our existing platform.

Risk factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in “Risk Factors” below together with all the other information contained in this prospectus, including the following:

• We have a history of losses, and we may not be able to achieve or sustain consistent profitability in the future.

• We must continue to expand our routes to market, increase our customer base and increase our revenue to become profitable. If we fail to do so, our business, results of operations and financial condition may suffer.

• We have experienced rapid growth in recent periods and we may not be able to sustain or manage any future growth effectively. If we fail to manage our growth effectively, we may be unable to execute our business plan, sell our storage systems and services successfully and adequately address competitive challenges. As a result, our financial performance may suffer.

• We are dependent on our relationship with HDS for a substantial portion of our revenue, and any disruption in this relationship could adversely affect our revenue and significantly harm our business, operating results and financial condition.

• If we are unable to maintain or extend our relationships with our current customers, establish new customer relationships or to increase the diversification of our current customer base, our growth may be limited and our operating results could be adversely affected.

• The market for our storage systems is highly competitive and dominated by larger companies with significantly greater resources than us. If we are unable to compete effectively, we may experience decreased sales or pricing pressure, which would adversely impact our operating results.

-6-

Corporate information

We were founded in 1998 in Bracknell, England. In 1999, we relocated our corporate headquarters to San Jose, California and incorporated as a Delaware corporation under the name Synaxia Networks Inc. We changed our name to BlueArc Corporation in January 2001. Our principal executive offices are located at 50 Rio Robles, San Jose, California 95134. Our telephone number is (408) 576-6600. Our website address is www.bluearc.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus.

“BlueArc,” “Titan,” “Mercury,” “SiliconFS,” “JetCenter,” “JetClone,” “Data Migrator,” our logo and other trademarks or service marks of BlueArc appearing in this prospectus are the property of BlueArc Corporation. This prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

-7-

The offering

Common stock offered by BlueArc              shares

Over-allotment option              shares

Common stock to be outstanding after this offering              shares

Use of proceeds We intend to use the net proceeds from this offering for working capital and other general corporate purposes including research and development and the expansion of our storage systems to serve other high growth data intensive markets. We may also use part of the net proceeds to develop technology partnerships and to acquire other businesses, products or technologies. However, we do not have agreements or commitments for any specific partnerships or acquisitions at this time.

Proposed           symbol BLRC

The number of shares of our common stock to be outstanding following this offering is based on 43,330,741 shares of our common stock outstanding as of April 30, 2011, which excludes:

• 7,019,362 shares of common stock issuable upon exercise of options outstanding as of April 30, 2011 at a weighted average exercise price of $1.02 per share;

• 894,327 shares of common stock reserved as of April 30, 2011 for future grant under our 2000 Stock Plan, or our 2000 Plan;

•              shares of common stock reserved for future issuance under our 2011 Equity Incentive Plan, or our 2011 Plan, that will become effective on the effective date of the registration statement of which this prospectus is a part;

• 1,073,447 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.68 per share; and

• 320,393 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.53 per share that will be net exercised for              shares of common stock, based on an assumed initial public offering price of $              per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus.

Unless otherwise indicated, this prospectus reflects and assumes the following:

• the automatic conversion of each outstanding share of our preferred stock into one share of common stock (excluding conversion of our Series CC and Series EE preferred stock) upon the closing of the offering;

• the automatic conversion of each outstanding share of our Series CC preferred stock into 11.80684 shares of common stock upon the closing of the offering;

-8-

• the automatic conversion of each outstanding share of our Series EE preferred stock into 1.02268 shares of common stock upon the closing of the offering;

• the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the closing of this offering; and

• no exercise of the underwriters’ over-allotment option.

-9-

Summary condensed consolidated financial data

We derived the summary condensed consolidated statements of operations data for the fiscal years ended January 31, 2009, January 30, 2010 and January 29, 2011 from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The condensed consolidated statements of operations data for the three months ended May 1, 2010 and April 30, 2011 and the condensed consolidated balance sheet data as of April 30, 2011, are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include, in our opinion, all adjustments, which include only normal recurring adjustments, that we consider necessary for the fair presentation of the financial information set forth in those financial statements. Historical results are not necessarily indicative of future results. The summary of our consolidated financial data set forth below should be read together with our consolidated financial statements and the accompanying notes to those statements, as well as “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations,” appearing elsewhere in this prospectus.

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
	(in thousands, except per share data)
Consolidated statements of operations data:
Product revenue	$	59,864		$	49,523		$	66,550		$	14,103		$	19,596
Support revenue		14,366			16,352			19,039			4,511			5,116
Total revenue		74,230			65,875			85,589			18,614			24,712
Cost of product revenue		32,179			29,709			34,627			7,546			9,938
Cost of support revenue		3,483			4,570			6,184			1,395			1,815
Total cost of revenue(1)		35,662			34,279			40,811			8,941			11,753
Gross profit		38,568			31,596			44,778			9,673			12,959
Sales and marketing(1)		33,759			28,540			32,068			7,868			9,327
Research and development(1)		18,274			13,783			16,410			3,775			4,966
General and administrative(1)		5,659			4,868			5,277			1,464			1,614
Total operating expenses		57,692			47,191			53,755			13,107			15,907
Loss from operations		(19,124	)		(15,595	)		(8,977	)		(3,434	)		(2,948	)
Interest income		260			24			15			—			2
Interest expense		(237	)		(1,065	)		(1,317	)		(339	)		(284	)
Other expense, net		(1,359	)		(389	)		(566	)		(136	)		(1,552	)
Loss before income taxes		(20,460	)		(17,025	)		(10,845	)		(3,909	)		(4,782	)
Benefit from income taxes		882			1,272			1,420			324			453
Net loss	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)

-10-

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
	(in thousands, except per share data)
Deemed dividend on exchange of preferred stock		—			—			(940	)		—			—
Net loss attributable to common stockholders	$	(19,578	)	$	(15,753	)	$	(10,365	)	$	(3,585	)	$	(4,329	)
Net loss per share attributable to common stockholders, basic and diluted	$	(8.74	)	$	(6.55	)	$	(3.54	)	$	(1.47	)	$	(1.25	)
Shares used in computing net loss per share attributable to common stockholders, basic and diluted		2,241			2,404			2,930			2,438			3,465
Pro forma net loss per share, basic and diluted (unaudited)(2)							$	(0.24	)				$	(0.06	)
Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(2)								39,363						43,284

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
	(in thousands, unaudited)
Other financial data:
Adjusted EBITDA(3)	$	(14,875	)	$	(10,739	)	$	(5,146	)	$	(2,514	)	$	(1,546	)

	As of April 30, 2011
	Actual			Pro forma(4)		Pro forma as adjusted(5)(6)
	(in thousands, unaudited)
Consolidated balance sheet data:
Cash and cash equivalents	$	16,084		$	16,084	$
Working capital		12,187			12,187
Total assets		57,646			57,646
Total debt and capital lease obligations		7,481			7,481
Total liabilities		48,022			44,420
Convertible preferred stock		121,699			—
Common stock and additional paid-in-capital		117,094			242,395
Total stockholders’ equity (deficit)		(112,075	)		13,226

(1) Includes stock-based compensation expense as follows:

	Year ended						Three months ended
	January 31, 2009		January 30, 2010		January 29, 2011		May 1, 2010		April 30, 2011
							(unaudited)
	(in thousands)
Cost of revenue	$	51	$	67	$	44	$	9	$	11
Sales and marketing		498		610		476		86		116
Research and development		282		366		254		69		62
General and administrative		387		366		343		115		132
Total stock-based compensation expense	$	1,218	$	1,409	$	1,117	$	279	$	321

(2) Pro forma weighted average shares outstanding reflects the conversion of our convertible preferred stock (using the if-converted method) into common stock as though the conversion had occurred at the beginning of the period or original date of issuance, if later.

-11-

(3) We present Adjusted EBITDA, which we define as net loss excluding:

• benefit from income taxes;

• other income (expense), net;

• interest expense;

• interest income;

• stock-based compensation; and

• depreciation and amortization.

Adjusted EBITDA is a financial measure that is not calculated in accordance with generally accepted accounting principles, or GAAP. We exclude other income (expense), net from Adjusted EBITDA as it largely consists of mark to market and other expenses related to our warrants and foreign currency gain or losses. Gains from nonrecurring engineering projects included in other income (expense), net are all excluded from other income (expense), net when calculating Adjusted EBITDA. We have provided a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net loss, operating income or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Adjusted EBITDA in the same manner as we do. We have included Adjusted EBITDA in this prospectus because it is a basis upon which our management assesses financial performance and it eliminates the impact of items that we do not consider indicative of our core operating performance. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or nonrecurring items.

We reconcile net loss to Adjusted EBITDA as follows:

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2010
	(in thousands, unaudited)
Net loss	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)
Benefit from income taxes		(882	)		(1,272	)		(1,420	)		(324	)		(453	)
Other expense, net		1,359			389			566			136			1,832
Interest expense		237			1,065			1,317			339			284
Interest income		(260	)		(24	)		(15	)		—			(2	)
Stock-based compensation		1,218			1,409			1,117			279			321
Depreciation and amortization		3,031			3,447			2,714			641			801
Adjusted EBITDA	$	(14,875	)	$	(10,739	)	$	(5,146	)	$	(2,514	)	$	(1,546	)

(4) The pro forma consolidated balance sheet data in the table above gives effect to the automatic conversion of all of our outstanding convertible preferred stock into common stock upon the closing of this offering, assuming that our Series CC preferred stock converts at a ratio of one for 11.80684 and our Series EE preferred stock converts at a ratio of one for 1.02268. In addition, it assumes the reclassification of the convertible preferred stock warrant liability to additional paid-in capital.

(5) The pro forma as adjusted consolidated balance sheet data in the table above gives effect to our receipt of the estimated net proceeds from this offering at an assumed initial public offering price of $             per share, after deducting underwriting discounts and commission and estimated offering expenses payable by us.

(6) A $1.00 increase (decrease) in the assumed initial public offering price of $             per share of our common stock in this offering would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders’ equity (deficit) by $            , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

-12-

Risk factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all the other information contained in this prospectus, including our consolidated financial statements and the related notes, before deciding whether to invest.

Risks related to our business and industry

We have a history of losses, and we may not be able to achieve or sustain consistent profitability in the future.

Since our formation, we have recorded a net loss in every fiscal year and we expect to continue to record net losses. We had a net loss of $9.4 million in fiscal 2011 and $4.3 million in the three months ended April 30, 2011. As of April 30, 2011, our accumulated deficit was $230.3 million. We anticipate spending significantly to develop our storage systems and expand our business, including expenditures for additional personnel in sales and marketing and research and development. As a public company, we will also incur significant legal, accounting and other expenses as a result of regulatory requirements that did not apply to us as a private company. We may encounter unforeseen difficulties, complications and delays and other unknown factors that require additional expenditures. Due to these increased expenditures, we will have to generate and sustain substantially higher revenue in order to achieve and maintain profitability. Our revenue growth trend since the first quarter of fiscal 2010 may not be sustainable, and we may not generate revenue in excess of our anticipated expenditures to achieve or maintain profitability. Failure to achieve and sustain consistent profitability may require us to raise additional capital, which may not be available on terms acceptable to us, or at all. In addition, our expense levels are based in part on our expectations as to future sales and a significant percentage of our expenses are fixed. If sales are below expectations, our operating expenses would be disproportionately high relative to revenue, which would adversely impact our ability to become profitable. Although we achieved Adjusted EBITDA profitability during the three months ended January 29, 2011, we expect that our Adjusted EBITDA will continue to be negative on a quarterly basis.

We must continue to expand our routes to market, increase our customer base and increase our revenue to become profitable. If we fail to do so, our business, results of operations and financial condition may suffer.

We may not continue to experience revenue growth unless we gain market share by expanding our routes to market, including our relationships with OEMs, value added resellers, or VARs, and other distribution partners, as well as our internal sales force. Expanding our relationships with new OEMs, VARs and other distribution partners requires significant time and resources from many of our key personnel. Expanding our internal sales force is a lengthy process that involves substantial training of new sales personnel and competing with our competitors for qualified talent. If we are not successful in expanding our routes to market, our ability to generate future growth could be impaired. In addition, we may be unsuccessful in establishing these new relationships or hiring new sales personnel if our competitors offer incentives or other terms that we are unable to match or exceed. Consequently, our revenue could suffer, our relationships with our existing OEM partner, VARs and other distribution partners could be harmed and our ability to adequately grow or retain our internal sales force could be impaired.

-13-

We must also continue to scale and improve our processes and procedures that support our partners and sales personnel, including investments in systems and training. These processes and procedures may become increasingly complex and difficult to manage. If we fail to adequately develop these processes and procedures, our partners and sales personnel may not adequately market and sell our storage systems or accurately educate our potential customers regarding the benefits of our storage systems.

We must timely develop and introduce new products and technologies that allow us to increase our business with our existing customers, broaden our customer base and expand our business both domestically and internationally. We must also deepen our relationships with our existing customers by penetrating their organizations more deeply with our existing products. Successful marketing and selling of our storage systems depends on us identifying appropriate customers, educating them about the benefits of our storage systems and overcoming any concerns they may have about working with a small, independent storage system vendor with whom they may not have a business relationship. If our storage systems do not continue to achieve market adoption, our ability to grow our business will be materially and adversely affected.

Another key strategy is to partner with major third party software and hardware vendors to integrate our storage systems into their products and also co-market our storage systems with the vendors. We have significant partner relationships with database, business application, backup management and server virtualization companies, including VMware, Inc. A number of these strategic partners are industry leaders that offer us expanded access to segments of the storage and data management market. There is intense competition for strategic partners, and even if we can establish relationships with these or other partners, these partnerships may not generate significant revenue or may not continue to be in effect for any specific period of time. If these relationships are not maintained or fail to materialize as expected, our revenue could be adversely affected and we could suffer delays in product development or experience other operational difficulties.

Our contracts with our partners do not prohibit them from offering products or services that compete with ours. These partners may choose to discontinue offering our storage systems and services or may not devote sufficient attention and resources to selling our storage systems and services. Our competitors may provide more favorable terms or more lucrative sales incentives to our existing and potential partners to use or purchase their products and services or to prevent or reduce sales of our storage systems and services. If our distribution and strategic partners do not effectively promote and sell our storage systems or if we lose the services of certain of our key distribution and strategic partners, we would have to develop additional relationships with other third parties or devote more resources to directly marketing and selling our storage systems, either of which could reduce our revenue or cause us to lose customers.

We have experienced rapid growth in recent periods and we may not be able to sustain or manage any future growth effectively. If we fail to manage our growth effectively, we may be unable to execute our business plan, sell our storage systems and services successfully and adequately address competitive challenges. As a result, our financial performance may suffer.

In recent periods we have significantly expanded the size and scope of our business, and our future operating results depend to a large extent on our ability to successfully manage any future expansion and growth. Continued growth in our business will place significant demands on our managerial, administrative, operational, financial and other resources. Successful

-14-

management of any future growth will require substantial management attention with respect to, among other things:

• recruiting, hiring, integrating and retaining highly skilled and motivated individuals, including research and development and sales personnel;

• maintaining and expanding our indirect sales channels and educating and supporting the sales forces of those channel partners;

• expanding and broadening product development processes;

• accurately forecasting revenue and controlling costs;

• enhancing and expanding our infrastructure;

• managing inventory levels;

• expanding our international operations and managing increasingly dispersed geographic locations and facilities; and

• implementing and improving our company-wide processes and procedures to address human resource, financial reporting and financial management matters.

If we are unable to execute our growth strategy effectively or to manage any future growth we may experience, we may not be able to take advantage of market opportunities, execute our business plan or remain competitive. In addition, our failure to effectively sustain or manage any future growth we do experience could result in a reduction of revenue, an inability to maintain customer relationships or attract new customers and our business and financial results could be materially and adversely affected.

We are dependent on our relationship with HDS for a substantial portion of our revenue, and any disruption in this relationship could adversely affect our revenue and significantly harm our business, operating results and financial condition.

We sell our SiliconFS file system and license additional software applications to HDS, which resells them in combination with its storage arrays. HDS accounted for 22%, 30%, 41% and 45% of our revenue in fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively. Although we have experienced high rates of growth from HDS in recent periods, we do not expect the rate of revenue growth to continue at the level we experienced in fiscal 2011 and the three months ended April 30, 2011. We expect that our relationship with HDS will continue to account for a substantial portion of our revenue for the foreseeable future. Although our OEM agreement with HDS has one-year automatic renewals of its term, either party can terminate the agreement for any reason by providing the other party with written notice at least 60 days prior to the end of the next renewal period, which for the current term is in July 2013. A termination of our agreement with HDS, decreased purchases by HDS, whether under the OEM agreement or otherwise, or any other disruption in our relationship with HDS, could adversely affect our revenue and significantly harm our business, operating results and financial condition.

After September 30, 2011, HDS will no longer have any minimum purchase commitments under the OEM agreement. Although HDS has agreed to provide us with rolling forecasts of potential orders under the agreement, the forecasts are nonbinding. The nonbinding nature of the forecasts and the elimination of HDS’ minimum purchase obligations may make it difficult for us

-15-

to accurately predict HDS sales of our products during any given period. Our long lead time for manufacturing, coupled with this uncertainty in predicting the requirements of HDS, could result in an inventory shortage and force us to make difficult decisions regarding the allocation of our available inventory among HDS and our other customers. If we are unable to fully satisfy purchase orders of HDS on a timely basis, our relationship with HDS could be damaged. Alternatively, if we overestimate the number of units that HDS may purchase in any period, we could have an excess inventory of products that we may or may not be able to sell to other customers.

Our agreement with HDS does not prohibit us or HDS from competing in each other’s respective markets or from approaching the other party’s customer prospects for future business. If we and HDS engage with the same customers, there may be customer confusion and prices for our products may decline due to competition between us and HDS. Although we support HDS’ selling activities, we and HDS do not coordinate our sales and channel conflicts may arise. In addition, if HDS or another OEM partner required us to allow them to rebrand or sell our storage systems as white box storage systems, we may not build the brand recognition we need to grow our business because customers purchasing these storage systems may not realize they are storage systems we developed and sell independently.

Our agreement does not preclude HDS or its affiliates from developing competing products or technologies internally and focusing the activities of its sales force on selling and marketing those internal products and technologies. HDS currently has internally developed NAS storage systems in its product portfolio that do not address the same markets as our storage systems. In the future HDS or its affiliates may enhance these existing storage systems or develop new storage systems or technologies to directly compete with our storage systems. If HDS or its affiliates were to do so, HDS may opt to reduce or eliminate purchases from us in order to promote its internally developed solution, regardless of the relative quality or functionality of its solutions compared to ours, which would cause our revenue and operating results to suffer.

We rely upon HDS’ sales force to continue to aggressively sell the HDS products into which our SiliconFS file system is incorporated. HDS’ sales personnel may decide to focus on selling other HDS products due to changes in sales incentives, the lengthy sales cycle for our products or HDS internal directives to push other products into the market. If these sales personnel reduced their efforts to actively sell the storage systems containing our SiliconFS file system, our revenue would decline and our relationship with HDS and our operating results could be negatively affected.

As an OEM customer, HDS may from time to time require us to customize our SiliconFS file systems and related software to ensure that they interoperate with new products or product enhancements of HDS. This customization process could lengthen our normal sales cycle and make us vulnerable to the risk of delays if we encounter manufacturing or supplier capacity issues, either of which could harm our reputation and reduce our revenue.

If we are unable to maintain or extend our relationships with our current customers, establish new customer relationships or to increase the diversification of our current customer base, our growth may be limited and our operating results could be adversely affected.

We have historically derived a large percentage of our revenue from repeat sales to our existing customers. We may be unable to secure future orders from these customers as they build out their storage networks and, even if we do, our current customers may reach saturation once they complete their storage networks. We cannot provide any assurance that we will be able to

-16-

sustain our revenue from our existing customers. Our customers typically buy storage systems on a purchase order basis and do not enter into long-term contracts or minimum purchase commitments that would obligate them to continue to buy additional storage systems or services from us in the future. Although we continuously seek to grow our customer base through the addition of new customers, there is no assurance that we will be successful in doing so. If we are unable to generate repeat business from our existing customers or to generate revenue from new customers or expand into broader enterprise markets, our operating results would be adversely affected.

Our operating results may fluctuate significantly as a result of factors that may be outside of our control, which may make it difficult to rely on our quarterly comparisons as an indicator of future performance.

Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period to period basis may not be meaningful. You should not rely on our past results as an indication of our future performance. Our sales cycles can be long and unpredictable and our sales efforts require substantial time and expense. Our revenue is difficult to predict and may vary substantially from quarter to quarter, which may cause our operating results to fluctuate significantly. We ship the vast majority of our storage systems in the same quarter in which they are ordered, and as a result do not enter new quarters with any significant backlog. Our revenue each quarter depends on our ability to receive purchase orders and ship our products in that quarter. In addition, a significant percentage of our sales typically occurs near the end of the quarter. Small delays in receipt of purchase orders and shipment of products could result in our failure to achieve our internal forecasts or stock market expectations. Our customers also often purchase our storage systems as part of larger storage installations and the timing of negotiations for those purchases may cause the timing of our orders with customers to fluctuate. In addition, some of the orders we receive may include conditions, such as customer acceptance criteria, in which case we cannot immediately recognize revenue for those orders, if at all. These conditions make it difficult to determine when orders will translate to revenue and to accurately predict future operating results. If our revenue or operating results fall below the expectations of investors or the securities analysts that follow us, the price of our common stock may decline.

In any quarter, our revenue may be largely attributable to the timing of our customers’ orders. We expect our gross margins to fluctuate over time depending on product configuration and channel mix shifts, as well as quarter to quarter volatility caused by large implementations of our storage systems. For these reasons, comparisons of our operating results on a period to period basis may not be meaningful. You should not rely on our past results as an indication of our future performance.

Factors that are difficult to predict and that may affect our operating results include:

• the timing and magnitude of shipments of our storage systems in each quarter;

• the gain or loss of one or more of our significant customers;

• reductions in customers’ budgets for storage system purchases or delays in their purchasing cycles;

• our ability to timely develop new technologies, products and enhancements that meet customer requirements;

-17-

• deferments of customer storage system purchases in anticipation of new products or updates from us or our competitors or products used in combination with ours;

• production delays as a result of manufacturing or supplier capacity or quality issues;

• the extent to which and the timing of when our customers renew their support contracts with us;

• increases in the costs or lack of availability of the components we use in our storage systems;

• the timing of product releases or upgrades or announcements by us or our competitors;

• unanticipated warranty expenses or charges for excess or obsolete inventory;

• fluctuations in demand and prices for our storage systems;

• changes in industry standards in the storage industry;

• any change in the competitive landscape of our industry, including further consolidation or the entrance of new competitors;

• general economic conditions in the markets in which we operate; and

• other factors outside our control.

Our sales cycles can be long and unpredictable, and our sales efforts often require a substantial amount of time and expenses. As a result, the timing of our sales is difficult to predict and could vary substantially from quarter to quarter, which may cause our operating results to fluctuate significantly.

Our sales efforts involve educating our current and prospective customers about the use and benefits of our storage systems, including their technical merits and potential cost savings to the customers as compared to storage solutions currently used by them or other storage solutions that are available. Customers often undertake a significant evaluation and testing process that can result in a lengthy sales cycle that typically averages six months, but has, in some cases, exceeded 12 months. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales. In addition, purchases by our current and prospective customers are frequently subject to budget constraints, multiple approvals and a variety of unpredictable administrative, processing and other delays. Purchases of our storage systems may also occur in connection with a larger data center scale out. The effect of these factors tends to be magnified even greater in the case of large orders.

Our sales to HDS can also involve a substantial amount of time. HDS incorporates our solutions into its products, which can require a lengthy evaluation and testing process before our product is approved for inclusion in one of its storage systems. Sales cycles to customers of HDS may be longer than our normal sales cycle because our product may be a part of a larger storage solution. Our extended sales cycle with HDS’ customers makes us vulnerable to the risk of delays or termination of orders if the end customers decide to delay or withdraw their purchases, which could occur for various reasons, including global economic cycles and capital market fluctuations. These delays or termination of orders could negatively impact the revenue we realize from sales to HDS.

-18-

Our lengthy and uncertain sales cycles make it difficult for us to predict when customers may purchase and accept products from us, may prevent us from recognizing revenue in a particular quarter and ultimately may not produce any sales. As a result, our operating results may vary significantly from quarter to quarter.

The market for our storage systems is highly competitive and dominated by larger companies with significantly greater resources than us. If we are unable to compete effectively, we may experience decreased sales or pricing pressure, which would adversely impact our operating results.

The market for our storage systems is highly competitive and we expect competition to intensify in the future. Currently, we face competition from a number of established companies, including EMC Corporation, or EMC, Hewlett Packard Company, or HP, International Business Machines Corporation, or IBM, and NetApp, Inc., or NetApp. We also face competition from smaller, privately held companies and could face competition from new market entrants, whether from new ventures or from established companies moving into our industry. We also compete against internally developed storage systems as well as combined third party software and hardware systems. A number of new, privately held companies are currently attempting to enter our market, some of which may become significant competitors in the future. All of our well established competitors, as well as some of our other current and potential competitors, have longer operating histories, greater brand awareness, more employees, a larger customer base, more established customer relationships and significantly greater financial, technical, sales, marketing and other resources than we have. As a result of their established presence in the industry, some of our competitors have substantial control and influence over future trends in the industry, including acceptance of a particular industry standard or competing technology. In addition, many of our competitors benefit from long-standing relationships with key decision makers at many of our current and prospective customers. Our competitors may be able to leverage these existing relationships to persuade our current and potential customers to purchase our competitors’ products, regardless of the performance or features of our storage systems. Our competitors may also be able to devote greater resources to the development, promotion and sale of products, which could allow them to introduce new technologies and products to the market faster than we can.

Because many of our competitors have greater resources than we do and are able to offer a more diversified and comprehensive bundle of products and services, these competitors may be able to adopt more aggressive pricing policies than we can adopt, through which they could deliver competitive products or technologies at a lower price than our storage systems. If our competitors are able to undercut our prices, we may be unable to remain competitive in the industry or be forced to reduce our selling prices. This could result in reduced gross margins, increased sales and marketing expenses or our failure to increase, or our loss of, market share, any of which could seriously harm our business, operating results and financial condition.

Our ability to compete effectively depends on a number of factors, including:

• our ability to effectively respond to aggressive business tactics by our competitors, including selling at a discount or asserting intellectual property rights irrespective of the validity of the claims;

• our storage systems’ scalability, performance, quality, ease of use and cost effectiveness relative to that of our competitors’ products;

-19-

• our storage systems’ interoperability with various operating systems, software applications, data access protocols and other storage systems;

• our success in developing and using new and proprietary technologies to offer products and features previously not available in the marketplace;

• our ability to attract and retain other VARs and OEMs;

• our success in identifying new markets, applications and technologies;

• our ability to continue to establish greater name recognition and build upon our reputation in the industry;

• our ability to recruit and retain development engineers and sales and marketing personnel; and

• our ability to protect our intellectual property.

We may not be able to address one or more of the factors listed above, which could hurt our ability to effectively compete in our industry and adversely affect our operating results and financial condition.

Consolidation in the storage industry has increased the competitive pressures that we face and could materially and adversely affect our operating results.

The storage industry has consolidated over the past several years as the result of a series of acquisitions, including recent acquisitions by EMC, HP and IBM. For example, Isilon Systems, Inc. was acquired by EMC in December 2010, 3Par Inc. was acquired by HP in September 2010 and Data Domain, Inc. was acquired by EMC in July 2009. The consolidation in the storage industry has resulted in a few large companies controlling a substantial portion of the market share, which may make it difficult for us to compete effectively. These large competitors may seek to further consolidate the industry by acquiring components, technologies and resources of suppliers in the industry, which may make it difficult for us to obtain components for our storage systems at competitive prices or in sufficient quantities. For example, NetApp recently acquired Engenio, the external storage systems business of LSI Corporation, which is one of our component suppliers. Although we historically competed with targeted sales forces of independent competitors, we now compete with the larger sales forces of integrated storage providers. In addition, current and potential competitors have established, or may establish, strategic alliances among themselves or with third parties, including some of our partners. Through these alliances our competitors could acquire additional market share and further strengthen their positions in the industry. Continued consolidation of our industry or establishment of strategic alliances by our competitors could increase the competitive pressures that we face and materially and adversely affect our business and operating results.

If we are unsuccessful in developing and selling new storage systems, services and product enhancements that achieve market acceptance, our ability to attract and retain customers could be impaired, our competitive position could be harmed and our revenue could be reduced.

We compete in a market characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing customer needs. Improvements in existing technologies and applications, including desktop and server virtualization, to accelerate storage performance or reduce storage costs may reduce the need for our storage systems.

-20-

Improvements in other emerging technologies, other application protocols or network protocols such as the Transmission Control Protocol could have a similar effect. Our future growth depends on our ability to anticipate future market needs and to successfully design, develop, market and sell new file systems and software products that provide increasingly higher levels of performance, functionality, capacity and reliability and that meet the cost expectations of our customers. Developing our storage systems is expensive and the investment in product development may involve a long payback cycle. In fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, our research and development expenses were $18.3 million, $13.8 million, $16.4 million and $5.0 million, respectively. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain and extend our competitive position.

Due to the complexity of storage systems, the new storage systems that we develop are subject to significant technical risks that may impact our ability to introduce these storage systems successfully. Our new storage systems must address technological changes and evolving industry standards and may not achieve market acceptance. In addition, in the event that new storage systems require features for which we have not developed or otherwise acquired technology, we will be required to develop or obtain such technology through purchase, license or other arrangements. If the required technology is not available on commercially reasonable terms, or at all, we may incur additional expenses in an effort to internally develop the required technology.

Despite our efforts to develop new and successful storage systems and technologies, our competitors, many of whom have greater financial and engineering resources than we do, may be able to introduce new storage systems or develop new technologies more quickly than we can. If our investments in our research and development do not provide the desired returns in a timely manner or if the new storage systems and technologies we develop do not achieve market acceptance, our ability to attract and retain customers could be impaired, our competitive position could be harmed and our revenue could be reduced.

If we are unable to reduce or adequately control our total costs of revenue, our gross margins could decrease, we may not become profitable and our business and financial results could suffer.

If we are unable to reduce or maintain a sufficiently low level of costs for manufacturing and selling our storage systems relative to their selling prices, our operating results, gross margins and business could be materially and adversely impacted. The largest component of our cost of product revenue is disk drives and disk arrays that we integrate into and sell with our storage systems. We have made, and will be required to make, significant efforts to reduce the cost of products, including but not limited to disk drives and disk arrays. The consolidation that has occurred among suppliers of a variety of components, including but not limited to disk drives, makes it difficult for us to control the cost of the components we use in our storage systems. As compared to our larger competitors, we typically do not purchase a sufficiently high volume of components to obtain the discounts that our larger competitors are often able to obtain from their component suppliers. Some of our larger competitors, such as NetApp, have also acquired component suppliers, which provides them with advantages in obtaining lower cost components and may negatively affect our ability to reduce our cost of product revenue as we will be negotiating pricing with our competitors. We expect this consolidation of the component suppliers to continue in the future. Further consolidation would continue to make it difficult for

-21-

us to reduce or control the costs of manufacturing our storage systems due to a lack of alternative suppliers.

If the average selling prices of our storage systems decrease, our revenue and gross margins could decline.

We anticipate that we will be forced to make price reductions in the future. Because of the resources available to many of our large, established competitors, reductions in average selling prices throughout our industry could have a more adverse effect on our business than on the business of these large competitors. In addition, if we decide to target the lower end of our market, we may sell our storage systems at prices that are lower than those of our storage systems that address the mid-range and high-end of the market. If we are unsuccessful in offsetting price reductions in our storage systems by increasing our sales volumes or reducing our cost of goods, our revenue and operating results could suffer. If the average selling prices of our existing products decline and if we are unable to introduce and generate significant demand for higher margin storage systems or additional software applications, we may be unable to maintain our current gross margins.

We and our contract manufacturer rely on a limited number of suppliers, and in some cases single sources, and any disruption or termination of these supply arrangements could delay shipments of our storage systems and reduce our revenue.

We and Sanmina-SCI Corporation, or Sanmina-SCI, our contract manufacturer, rely on a limited number of suppliers for several key components used in the assembly of our storage systems, including our FPGAs, which are manufactured by Altera Corporation, and our disk drives, which are manufactured by Seagate Technology plc., or Seagate, and Hitachi Global Storage Technologies, Inc., or Hitachi GST. This reliance on a limited number of suppliers involves several risks, including:

• supplier capacity constraints;

• price increases;

• timely delivery; and

• component quality.

If any of these suppliers were to cancel or materially change their commitments to us or Sanmina-SCI or fail to meet the quality or delivery requirements needed to allow Sanmina-SCI to timely manufacture our storage systems, we could lose time-sensitive customer orders, be unable to develop or sell certain storage systems cost effectively or on a timely basis, if at all, and have significantly reduced revenue. In addition, in the event that it became necessary to find other suppliers of certain of the key components used in the manufacturing and assembly of our storage systems, transition to the new supplier could take three to six months, due to the lengthy qualification and technology development process that is required to qualify suppliers of these key components. Inadequate supplies of critical components may impair our ability to fulfill orders in a given quarter and/or result in a decrease in our gross margins.

Component quality is particularly significant for suppliers of our disk drives. Disruption or termination of the supply of these components and problems with manufacturing quality could delay shipments of our storage systems and materially and adversely affect our operating results. For example, we recently experienced a supply chain disruption for the disk drives used in certain

-22-

of our storage systems as a result of the Japanese earthquake and tsunami in March 2011. In the past we have also experienced quality problems with disk drives and we were forced to seek out and engage a new supplier of disk drives. These delays and quality defects are outside of our control and are difficult to predict. Any delay of storage system shipments or the existence of defects in our storage systems could damage relationships with current and prospective customers, increase our costs due to the time and money spent remedying the defects and reduce our revenue.

Our future financial performance depends on growth in the market for the storage and management of unstructured data at scale and our ability to adapt to customer demands in the market. If this market does not grow as we expect or if we are unable to adequately address market demands, our business and results of operations could be materially adversely affected.

Our storage systems are designed to address the market for the storage and management of unstructured data at scale. This is a rapidly growing, evolving and challenging market. Accordingly, our future financial performance will depend in large part on growth in this market and on our ability to adapt to emerging market demands. Unlike many of our large competitors that have a broad offering of storage systems for various markets and industries, our business is predominantly focused on the NAS segment of the storage industry that addresses the storage and management of unstructured data at scale. Consequently, we are vulnerable to fluctuations in the growth in this market and the demand for storage systems that address this market. A number of factors could adversely affect the growth in this market or the demand for our storage systems, including the following:

• introduction of new products and technologies that serve as replacements or substitutes to our storage systems or that reduce the demand for high performance network systems, such as advances in file compression technology that result in smaller file sizes;

• lack of customer acceptance of new storage systems or technologies that we may develop or our inability to timely develop product enhancements that satisfy customer requirements;

• decreased reliance by businesses on data that their businesses generate; and

• customer budgetary constraints or reduced corporate spending on data storage solutions.

Any of the factors listed above could result in decreased revenue to us or a lower growth rate in our revenue, which would materially adversely affect our business and results of operations.

We are dependent on our customers’ information technology budgets for storage systems and any economic constraints on their capital spending they experience could negatively impact our business.

Our business is subject to our customers’ information technology budgets for building and maintaining storage solutions within their organizations. If the demand for storage solutions declines as a result of our customers’ budgetary constraints, reduced corporate spending on storage solutions or any other factors, demand for our storage systems will be similarly affected. The recent global economic downturn caused a significant reduction in information technology budgets for storage solutions across a wide range of industries, which resulted in a decline in our revenue. Limitations on significant build out of storage infrastructure due to economic factors, lack of access to funding for capital expenditures or other conditions could result in reduced demand for our storage systems. If there is another downturn or customers experience

-23-

substantial reductions in their information technology budgets, our business, operating results and financial condition may be materially harmed.

As we introduce subsequent generations of our storage systems, we may experience difficulties transitioning customers to these newer offerings. Customer acceptance of the newer generations of storage systems is critical because if we are unable to sell customers these newer offerings, we may experience a decline in revenue that could materially impact our financial results.

As we develop and introduce new storage systems to the market, we face the risk that potential and existing customers may be unwilling to replace their current storage systems with our newer storage systems. Transitioning customers to newer generations of storage systems involves a substantial amount of time educating our customers on the benefits provided by the new storage systems. However, regardless of the enhanced features or superior performance of the newer generation of storage systems as compared to older storage systems that the customers may currently have installed, they may be unwilling to adopt the new storage systems as a result of familiarity with the existing storage system, reluctance to use a new storage system that has an unproven record in the industry or internal budget restraints that prevent them from purchasing the new storage systems. We must also successfully manage product transition in order to minimize disruption in our customers’ ordering and purchasing patterns, ensure that sufficient supplies of new storage systems are available to meet customer demand and avoid reductions in the demand for our prior generation storage systems and resulting excessive inventory levels of those storage systems. Due to the extensive time and resources that we invest in developing new storage systems, if we are unable to sell customers subsequent generations of our storage systems, our revenue could decline and our financial results could be materially impacted.

Our storage systems must interoperate with our customers’ existing infrastructure, including hardware and software applications that are developed by others, as well as various data access protocols. If our storage systems fail to interoperate, we may be unable to increase, or we may lose, market share and we may experience weakening demand for our storage systems.

Our storage systems must interoperate with our customers’ existing infrastructure, specifically their networks, operating systems, software applications and other storage devices and hardware that are developed by others, each of which may have different specifications. When new or updated versions of these operating systems or software applications are introduced, or if we find, as we have in the past, defects in the existing software or hardware used in our customers’ infrastructure or an incompatibility or deficiency in our software, we must sometimes develop updated versions of our software so that they interoperate properly with these operating systems, software applications and hardware. We may not accomplish these development efforts quickly, cost effectively or at all. These development efforts may require substantial capital investment and the devotion of substantial employee resources. If we fail to maintain compatibility with these operating systems, software applications or other storage devices and hardware, our storage systems may not be able to fulfill our customers’ requirements, or we may experience longer sales and implementation cycles for our storage systems or order cancellations. As a result, there may be weakening demand for our storage systems and we may fail to increase, or we may lose, market share.

In addition, our storage systems interoperate with servers and software applications predominantly through the use of protocols, many of which are created and maintained by independent standards organizations. Some of these protocols that exist today or that may be

-24-

created in the future are, or could be, proprietary technology and therefore require licensing a proprietary protocol’s specifications from a third party or implementing the protocol without specifications, which could entail significant effort on our part. If we fail to obtain a license to necessary specifications on reasonable terms from third party vendors, we could be liable for infringing certain intellectual property rights of such vendors, and if we are not able to implement a necessary protocol in the absence of these specifications, our storage systems might become less competitive, which would harm our business. For example, Microsoft maintains and enhances the Common Internet File System, or CIFS, a proprietary protocol that our storage systems use to communicate with the Windows operating system. Although our storage systems are currently compatible with CIFS, at present we do not license the specifications to this proprietary protocol. If we are not able to continue to maintain adequate compatibility with CIFS or if we are not able to license adequate specifications to this protocol on reasonable terms, our storage systems would likely be less competitive in the marketplace, which could reduce our revenue.

If we lose key personnel, key personnel are distracted or we are unable to attract and retain highly qualified personnel, our business and our results of operations would be harmed.

Our future success also depends on our continued ability to attract and retain highly qualified technical, sales, support and management personnel. In particular, our ability to enhance and maintain our technology requires talented software and hardware development engineers with specialized skills in areas such as very large scale integration, or VLSI, FPGA design, distributed computing, file systems, network and storage protocols and operating systems. If we are unable to recruit and retain these engineers, the quality and speed with which our storage systems are developed would likely be seriously compromised, and our reputation and business would suffer as a result. In addition, our sales positions require candidates with specific sales and engineering backgrounds in the storage industry, and we may be unable to locate and hire individuals with these credentials as quickly as needed, if at all. Once new sales personnel are hired, we need a reasonable amount of time to train the new sales personnel before they are able to effectively and efficiently perform their responsibilities. Failure to hire and retain qualified sales personnel could adversely impact our storage system sales. Competition for these and the other personnel we require, particularly in the Silicon Valley area, is intense, and we may fail to attract or retain highly qualified technical, sales, support and management personnel necessary for our business. In addition, we compete for these personnel with large, established publicly traded companies and we may be unsuccessful at attracting and retaining employees because of our history of losses and concerns about the impact on employees if we are acquired. If we are unable to attract and retain the necessary key personnel, our business and our results of operations could be harmed.

Our ability to sell our storage systems is partially dependent on ease of use and the quality of our support offerings, and any failure to offer high-quality technical support services could negatively impact our business, operating results and financial condition.

After our storage systems are deployed within our customers’ storage networks, our customers depend on our support services organization to resolve issues relating to our storage systems and how they perform within our customers’ environments. Our storage systems serve mission critical functions for our customers and high-quality support services are therefore imperative for the successful marketing and sale of our storage systems. If we do not succeed in helping our customers to quickly resolve post-deployment issues, it would damage our reputation, harm our

-25-

customer relationships and adversely affect our ability to sell our storage systems to potential and existing customers. Our ability to provide effective support and service offerings is largely dependent on our ability to attract, train and retain qualified service personnel. As we expand our operations internationally, our support services organization will face additional challenges, including those associated with delivering support, training and documentation in languages other than English. If our customers do not receive high-quality post-sale support services from us, they may be unwilling to recommend our storage systems to other potential customers or we may gain a reputation in the industry of providing poor support services. As a result, our failure to maintain high quality support services could reduce our sales and revenue and negatively impact our business, operating results and financial condition.

Our storage systems are highly technical and complex and may contain undetected software or hardware defects, which could cause data unavailability, loss or corruption that might, in turn, result in liability to our customers, harm to our reputation, a loss of customers and a reduction in our revenue.

Our storage systems are highly technical and complex and are often used to store information critical to our customers’ business operations. Our storage systems have contained and may contain undetected errors, defects or security vulnerabilities that could result in data unavailability, loss or corruption or other harm to our customers. Some errors in our storage systems may only be discovered after they have been installed and used by customers. Resolving these errors and defects sometimes requires a significant amount of time and prevents our technical personnel from working on other tasks that may be more important to the future growth of our business.

In addition, if flaws in the design, production or assembly of our storage systems or our suppliers’ components were to occur, we could experience a rate of failure in our storage systems that could result in substantial repair, replacement or service costs and harm to our reputation. The availability of quality components from our suppliers and quality services from our manufacturers are key factors to our continued growth and success. We have in the past, and may in the future, experience quality problems with the components provided by our suppliers. Although we have procedures in place to monitor the quality of our suppliers’ components and our manufacturers’ processes, we cannot assure you that our efforts will be sufficient to avoid a rate of failure in our storage systems that results in substantial delays in shipment or significant repair or replacement costs, any of which could result in lost sales, harm to our reputation and an increase in our operating costs.

Any errors, defects or security vulnerabilities discovered in our storage systems after commercial release, as well as any computer virus or human error on the part of our customer support or other personnel resulting in a customer’s data unavailability, loss or corruption could result in a loss of customers, product return or increased support and warranty costs, any of which may adversely affect our business, operating results and financial condition. Our OEM partner and resellers may also terminate their relationships with us or reduce their efforts to sell our storage systems if we experience significant product failures and they do not believe we respond quickly and effectively. We may also face claims for product liability, tort or breach of warranty, including claims relating to changes to our storage systems made by our partners. Our contracts with customers contain provisions relating to warranty disclaimers and liability limitations, which may be difficult to enforce. Defending a lawsuit, regardless of its merit, could be costly and might divert management’s attention and adversely affect the market’s perception of us and our

-26-

storage systems. In addition, if the amount and scope of our business liability insurance coverage proves inadequate for a claim, or future coverage is unavailable on acceptable terms or at all, our revenue could be reduced.

We currently rely on a single contract manufacturer to manufacture and assemble our storage systems, and our failure to manage this relationship effectively could negatively impact our revenue and operating results.

We currently rely on a single contract manufacturer, Sanmina-SCI, to manufacture our storage systems, assemble our storage systems and, alone or together with us, negotiate certain component costs. Our reliance on Sanmina-SCI reduces our control over the manufacturing and assembly process, exposing us to risks, including reduced control over quality assurance, production costs and product supply. If we fail to manage our relationship with Sanmina-SCI effectively, or if Sanmina-SCI experiences delays, disruptions, capacity constraints or quality control problems in its operations, our ability to ship storage systems to our customers could be impaired and our competitive position and reputation could be harmed. If Sanmina-SCI cannot negotiate with certain suppliers for reduced component costs, our operating results could suffer. Additionally, if Sanmina-SCI terminates its agreement with us, which is terminable by Sanmina-SCI for any reason upon 60 days’ notice, we would be required to engage a new manufacturer. Qualifying a new contract manufacturer and commencing volume production would be expensive and time consuming. If we are required to change contract manufacturers, move from the current production site or assume internal manufacturing operations for any reason including any negative developments in Sanmina-SCI’s business that are unrelated to our relationship, we may lose revenue, incur increased costs and damage our customer relationships.

We are subject to business uncertainties that make it difficult to forecast demand and production levels accurately and to secure components and products on a timely basis, which could interfere with our ability to deliver our storage systems and generate product sales.

Our sales are generally based on purchase orders with our customers rather than long-term purchase commitments. As a result, it is difficult to accurately forecast customer demand for future periods. We are required under our agreement with Sanmina-SCI to provide forecasts regarding product demand and production levels. In order to secure components required for the production of our storage systems on a timely basis and to ensure that we have sufficient inventory to meet our customers’ demands, it is imperative that our forecasts are accurate. If we inaccurately forecast demand for our storage systems, we may have excess or inadequate inventory or incur cancellation charges or penalties. Excess inventory levels could result in unexpected expenses or increases in our reserves that could adversely impact our operating results. Conversely, inadequate inventory levels could cause us to forego revenue opportunities, potentially lose market share and harm our customer relationships. We also intend to introduce new storage systems and product enhancements, which could require us to achieve volume production rapidly or manage transitions from our old storage systems to our new storage systems by coordinating with Sanmina-SCI and our suppliers. We may need to increase our component purchases, contract manufacturing capacity and internal test and quality functions, if we experience increased demand. The inability of Sanmina-SCI to provide us with adequate supplies of high quality products on a timely basis, or an inability to obtain adequate quantities of components, could cause a delay in our order fulfillment and could interfere with our ability to deliver our storage systems and generate revenue.

-27-

Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other factors related to our international operations.

We derived 30%, 24%, 30% and 30% of our revenue from customers outside the United States in fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively. We have sales and technical support personnel in countries other than the United States, as well as a significant number of research and development personnel in England. We outsource certain quality assurance related to research and development as well as product development to third parties in India. We may continue to add personnel in additional countries. Our international operations subject us to a variety of risks, including:

• the difficulty of managing and staffing international offices and the increased travel, infrastructure and legal compliance costs associated with multiple international locations;

• difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging markets;

• the challenge of managing a development team in geographically disparate locations;

• tariffs and trade barriers and other regulatory or contractual limitations on our ability to sell or develop our storage systems in various foreign markets;

• restrictions imposed by the U.S. government on our ability to do business with certain companies or in certain countries as a result of international political conflicts involving the U.S. government;

• increased exposure to foreign currency exchange rate risk;

• reduced protection for intellectual property rights in some countries;

• geopolitical turmoil, including terrorism, war or political or military coups; and

• political and economic instability.

As we expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks. Our failure to manage any of these risks successfully could adversely affect our business, financial condition and results of operations.

If we need additional capital in the future, it may not be available to us on favorable terms, or at all.

There can be no assurance that we will be successful in executing our business plan, maintaining and growing our existing customer base or achieving profitability and realizing our working capital. Failure to generate sufficient revenue, achieve planned gross margins or control operating costs may require us to raise additional capital through equity or debt financing. Such additional financing may not be available on acceptable terms, or at all, and could require us to modify, delay or abandon some of our planned future expansion or expenditures or reduce some of our ongoing operating costs, which could have a material adverse effect on our business, operating results, financial condition and ability to achieve our intended business objectives. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Our accounts

-28-

receivable based credit facility, which expires in December 2012, includes a material adverse change clause as a condition precedent to funding, which allows the lender to withdraw any unutilized portion of the facility at the time it is notified of the occurrence of certain triggering events. In addition, our long-term capital growth facility is subject to interest-only payments through December 2011. However, if we do not meet certain performance criteria tied to a measure of our quarterly earnings for quarters through October 29, 2011, repayment of principal via monthly installments will be accelerated and will commence in the month following the determination that the performance criteria have not been achieved.

We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.

Because a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve, and they could have a material adverse impact on our financial results and cash flows. Historically, our primary exposures have related to nondollar denominated operating expenses in the British pound sterling. An increase in the value of the dollar could increase the real cost to our customers of our storage systems in those markets outside the United States where we sell in dollars and other currencies, and a weakened dollar could increase the cost of local operating expenses.

If we or our third party contractors fail to comply with environmental requirements, our business, financial condition, operating results and reputation could be adversely affected.

We are subject to various environmental laws and regulations, including laws governing the hazardous material content of our products and laws relating to the collection and recycling of electrical and electronic equipment. We face increasing complexity in our research and development and procurement operations as a result of requirements relating to the materials composition of many of our storage systems, including the European Union’s, or EU, Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment, or RoHS, directive, which restricts the content of lead and certain other substances in specified electronic products put on the market in the EU after July 2006 and similar legislation relating to marking of electronic products which became effective in March 2007 in China. In addition, we could be required to recall and replace any non-compliant storage systems already shipped, resulting in reduced revenue, increased costs and harm to our business, customer relationships and reputation. If there are changes to these laws (or their interpretation) or if new similar laws are passed in other jurisdictions, we may be required to reengineer our storage systems to comply with such laws, which could result in additional costs to us or disrupt or delay our operations and adversely affect our business.

There are also significant costs and liabilities associated with product take back legislation. The EU has enacted the Waste Electrical and Electronic Equipment, or WEEE, directive, which makes producers of electronic equipment responsible for specified collection, recycling, treatment and disposal of past and future covered products. We rely on third party contractors to manufacture and take back products on our behalf in compliance with environmental requirements. If such third party contractors do not comply with these laws and regulations, we could be subject to fines, civil or criminal sanctions and contract damage claims.

Some of our operations, such as our research and development facilities, are also regulated under various other federal, state, local, foreign and international environmental laws and

-29-

requirements, including those governing, among other matters, the discharge of pollutants into the air and water, the management, disposal, handling, use, labeling of and exposure to, hazardous substances and wastes and the cleanup of contaminated sites. Liability under certain environmental laws can be joint and several and without regard to comparative fault. Our failure to comply with these and other environmental laws could result in civil or criminal fines and penalties or other sanctions and decreased revenue, which could adversely affect our operating results.

As a result of our efforts to comply with these or other future environmental laws and regulations, we could incur substantial costs, including those relating to excess component inventory, and be subject to disruptions to our operations and logistics, which could harm our business and financial condition. We expect that our operations and products will be affected by new environmental laws and regulations on an ongoing basis, and although we cannot predict the ultimate impact of any such laws or regulations, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our products or how they are manufactured, any of which could have a material adverse effect on our business.

We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets.

Because we incorporate encryption technology into our storage systems, our storage systems are subject to United States export controls and may be exported outside the United States only with the required level of export license or through an export license exception. If a transaction involves countries, individuals or entities that are the target of U.S. or other economic sanctions, licenses or other approvals from the United States Department of the Treasury’s Office of Foreign Assets Control or other sanctions authorities may be required and may not be granted. In addition, various countries regulate the importation of certain encryption technology and have enacted laws that could limit our ability to distribute our storage systems or could limit our customers’ ability to implement our storage systems in those countries. Changes in our storage systems or changes in export or import or economic sanctions regulations may create delays in the introduction of our storage systems in international markets, prevent our customers with international operations from deploying our storage systems throughout their global information technology infrastructure or, in some cases, prevent the export or import of our storage systems to certain countries altogether. Any change in export, import or economic sanctions regulations or related legislation, shift in approach to the enforcement or scope of existing regulations or change in the countries, persons or technologies targeted by these regulations could result in decreased use of our storage systems by, or in our decreased ability to export or sell our storage systems to, existing or potential customers with international operations. In addition, failure to obtain required import or export approval for our storage systems or failure to comply with these regulations could result in penalties and restrictions on export privileges and could impair our ability to compete in international markets.

Failure to comply with the United States Foreign Corrupt Practices Act, or the FCPA, and similar laws associated with our activities outside the United States could subject us to penalties and other adverse consequences.

As a growing percentage of our revenue is and will be from jurisdictions outside of the United States, we face significant risks if we fail to comply with the FCPA and other applicable

-30-

anticorruption laws that prohibit improper payments or offers of payment to foreign government officials and political parties by us for the purpose of obtaining or retaining business. In many foreign countries, particularly in countries with developing economies, which represent our principal markets, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other applicable laws and regulations. We are in the early stages of implementing our FCPA compliance program. There can be no assurance that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anticorruption laws could result in severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracting, which could have a material and adverse effect on our reputation, business, operating results and financial condition.

We may engage in future acquisitions that could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our business.

In the future, we may acquire other businesses, products or technologies. We have not made any acquisitions to date and are not engaged in any at this time. Accordingly, our ability as an organization to make acquisitions is unproven. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If we do complete acquisitions, we may not strengthen our competitive position or achieve our goals, or these acquisitions may be viewed negatively by customers, financial markets or investors. In addition, any acquisitions that we make could lead to difficulties in integrating personnel, technologies and operations from the acquired businesses and in retaining and motivating key personnel from these businesses. Acquisitions may disrupt our ongoing operations, divert management from day-to-day responsibilities, subject us to additional liabilities, increase our expenses and adversely impact our business, operating results and financial condition. Future acquisitions may reduce our cash available for operations and other uses, and could result in an increase in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, any of which could harm our business.

Our ability to benefit from certain tax credits or net operating losses, or NOLs, may be impaired as a result of our growth or changes in tax laws or regulations.

To date, we have not paid material income taxes as a result of our losses. In the United Kingdom, we receive tax benefits primarily due to the surrendering of our NOL carryforwards, in exchange for a current cash refund for research and development activities in the United Kingdom. Beginning after fiscal 2014, we no longer expect to be eligible to surrender these NOLs and receive a cash tax refund as we expect to exceed certain specified statutory thresholds. In the past, these tax credits have resulted in positive cash flows. We also have significant NOL carryforwards in the United States and other jurisdictions. Some of these NOLs will expire at various times in the future or may be rescinded with changes in tax laws or regulations. Any changes that may affect our NOLs would affect our ability to estimate our provision for income tax in the future.

Our ability to use NOLs to offset future taxable income may be subject to significant limitations.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on

-31-

its ability to utilize its prechange NOLs to offset future taxable income. We experienced an ownership change as defined by Section 382 in July 2003. This change resulted in an annual limitation of $1.4 million on all NOLs incurred prior to this date. If we undergo an ownership change in connection with or after this public offering, our ability to utilize NOL carryforwards could be further limited by Section 382 of the Internal Revenue Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Internal Revenue Code. In addition, the State of California has currently suspended the use of NOL carryforwards to offset taxable income. For these reasons, it is likely that we may not be able to utilize a significant portion of our NOL carryforwards if we attain profitability.

Our business is vulnerable to interruption by events beyond our control, including earthquakes, fire, floods and other natural catastrophic events.

Our corporate headquarters and the operations of our key suppliers, manufacturers and spare parts logistics provider are located in the San Francisco Bay area, Wisconsin, England, Singapore, Mexico, China, Japan and Taiwan. A significant natural disaster, such as an earthquake, tsunami, fire or flood, could have a material adverse impact on our business, operating results and financial condition. In the event that any of our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of these events, shipments could be delayed, resulting in our missing key financial targets, including revenue and earnings estimates, for a particular quarter. For example, in June 2011, our spare parts logistics provider suffered a fire at one of their locations and we lost approximately $350,000 of spare parts inventory. See Note 16 in the notes to our consolidated financial statements. Although we believe the losses we incurred as a result of the fire will be covered by insurance, we cannot determine when, if and to what extent we will be reimbursed for our losses.

Risks related to our intellectual property

We operate in an industry with extensive intellectual property litigation. Claims of infringement against us or our suppliers could increase our expenses, disrupt our ability to sell our storage systems and reduce our revenue.

Third parties may claim that our storage systems or technologies infringe or misappropriate their intellectual property rights. The data storage industry is characterized by the existence of a large number of patents, trademarks, trade secrets and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. From 2003 to 2006, we defended an intellectual property infringement claim that was brought by NetApp against us. Although we ultimately prevailed, it was costly to defend and required a substantial amount of our senior management’s time and attention. We expect that infringement claims and misappropriation claims may further increase as the number of products and competitors in our market increases. In addition, if we gain greater visibility and market exposure as a public company, we face a higher risk of being the subject of intellectual property infringement claims and misappropriation claims. We cannot assure you that we do not currently infringe or misappropriate, or that we will not in the future infringe or misappropriate, any third party patents or other proprietary rights. For instance, because patent applications in the United States and foreign jurisdictions are typically maintained in confidence for up to 18 months after their filing or, in some cases, for the entire time prior to issuance as a U.S. patent, third parties may have earlier filed applications covering methods or other inventions that we consider our trade secrets. In addition, the limited size of our patent portfolio may not provide meaningful deterrence against third parties alleging that we infringe their patents, particularly against

-32-

patent holding companies or other adverse patent owners who have no relevant product revenues. Any claims of infringement or misappropriation by a third party, even those without merit, could cause us to incur substantial costs defending against the claims, and could distract our management from our business. Further, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from offering our storage systems. In addition, we might be required to seek a license for the use of the infringed intellectual property, which might not be available on commercially reasonable terms or at all. Alternatively, we might be required to develop noninfringing technology, which could require significant effort and expense and might ultimately be unsuccessful. Any of these events could seriously harm our business, operating results and financial condition.

Third parties may also assert infringement claims against our customers and partners. Claims against our customers and partners may require us to initiate or defend potentially protracted and costly litigation on a customer’s or partner’s behalf, regardless of the merits of these claims, because we generally defend and indemnify our customers and partners from claims of infringement and misappropriation of proprietary rights of third parties based on the use or resale of our storage systems. Because some of our customers and partners, including HDS, are much larger than us and have much greater resources than we do, they may be more likely to be the target of an infringement claim by third parties than we would be, which could increase our chances of becoming involved in a future lawsuit. If any of these claims succeeds, we might be forced to pay damages on behalf of our customers or partners which could increase our expenses, disrupt our ability to sell our storage systems and reduce our revenue.

It is also not uncommon for suppliers of certain components in our storage systems to be involved in infringement lawsuits by or against third parties. Although some of our suppliers are obligated to indemnify us in connection with infringement claims related to their intellectual property rights, these suppliers may contest their obligations to indemnify us, or their available assets or indemnity obligation may not be sufficient to cover our losses. We cannot determine with certainty whether any existing or future third party intellectual property infringement claims that involved us or our suppliers would require us to alter our technologies, obtain licenses or cease certain activities.

We may not be able to protect and enforce our intellectual property rights, which could harm our competitive position and reduce the value of our proprietary technology.

Our success is dependent in part on obtaining, maintaining and enforcing our patent and other proprietary rights. We rely on trade secret, patent, copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. The steps we have taken to protect our proprietary rights may not be adequate to prevent misappropriation of our proprietary information or infringement of our intellectual property rights, and our ability to prevent such misappropriation or infringement is uncertain, particularly in countries outside of the United States. We do not know whether any of our pending patent applications will result in the issuance of a patent or whether the examination process will require us to narrow our claims. As of April 30, 2011, we had five issued U.S. patents, four issued foreign patents, 14 U.S. pending patent applications and 16 pending foreign patent applications. Our patents may be contested, circumvented, found unenforceable or invalidated and we may not be able to prevent third parties from infringing them. Moreover, the rights granted under any issued patents may not provide us with proprietary protection or competitive

-33-

advantages, and, as a result, our competitors may be able to develop technologies similar or superior to ours. In some countries where our storage systems are sold or may be sold, we do not have foreign patents or pending applications corresponding to some of our U.S. patents and patent applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be available.

Protecting against the unauthorized use of our technology, trademarks and other proprietary rights is expensive and difficult. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Any such litigation could result in substantial costs and diversion of management resources, either of which could harm our business, operating results and financial condition. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. For instance, our objection to an Australian web design firm’s use of the BLUEARC name has prompted that firm to challenge our Australian trademark registration, and we will be forced to defend against their claims in a hearing scheduled for July 2011. Further, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforcing their intellectual property rights than we have. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Patent protection outside the United States is generally not as comprehensive as in the United States and may not protect our intellectual property in some countries where our storage systems are sold or may be sold in the future. Even if patents are granted outside the United States, effective enforcement in those countries may not be available. For example, the legal regime protecting intellectual property rights in China is relatively weak and it is often difficult to create and enforce such rights. Accordingly, we may not be able to effectively protect our intellectual property rights in China or elsewhere. Many companies have encountered substantial intellectual property infringement in countries where we sell or intend to sell storage systems. If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our storage systems at competitive prices and to be the sole provider of leading edge products may be adversely affected and our financial condition and results of operations could be materially and adversely affected.

Our use of open source and third party software could impose limitations on our ability to commercialize our storage systems.

We incorporate open source software into certain of our storage systems. Although we monitor our use of open source software to avoid subjecting our storage systems to conditions we do not intend, the terms of many open source licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our storage systems. For example, we may be required to seek licenses from third parties to continue offering our storage systems, to make generally available, in source code form, our proprietary code that is used in connection with certain open source modules, to license or redistribute our proprietary software at no charge, to reengineer our storage systems, or to discontinue the sale of our storage systems if reengineering could not be accomplished on a timely basis, any of which could adversely affect our business, operating results and financial condition.

-34-

We may also find that we need to incorporate certain proprietary, third party technologies, including software programs, into our storage systems in the future. However, licenses to relevant third party technology may not be available to us on commercially reasonable terms, or at all. Therefore, we could face delays in product releases until equivalent technology can be identified, licensed or developed, and integrated into our current storage systems. These delays, if they occur, could result in lost sales and a reduction in our revenue.

Security breaches could expose us to liability and our reputation and business may suffer.

Our storage systems retain sensitive data, including intellectual property, accounting books and records and personally identifiable information of our customers. It is critical to our business strategy that our storage systems remain secure and are perceived by customers and partners to be secure. Despite our security measures, our storage systems may be vulnerable to attacks by hackers or other disruptive problems. Any such security breach may compromise information stored on our storage systems. While we do not believe that any attack to date has successfully penetrated our network defenses, we have not commissioned a formal security audit by any third party. Any such breach could negatively affect our reputation by adversely affecting the market’s perception of the security or reliability of our storage systems.

Risks related to this offering and ownership of our common stock

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on any research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts start coverage of us, the trading price for our stock would be negatively impacted. If securities or industry analysts cover us and one or more of these analysts downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts stops coverage of us or fails to publish reports on us regularly, demand for our stock could decrease which could cause our stock price and trading volume to decline.

If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.

As a result of becoming a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as an opinion from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. A material weakness is a control deficiency or combination of control deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.

-35-

We are in the very early stages of the costly and challenging process of hiring personnel and compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. We cannot assure you that there will not be material weaknesses and significant deficiencies in our internal controls in the future. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm were to issue an adverse opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.

We have not completed a testing cycle under Section 404 of the Sarbanes-Oxley Act and cannot assure you that we will be able to implement and maintain an effective internal control over financial reporting in the future. Any failure to maintain such controls could severely inhibit our ability to accurately report our financial condition or results of operations.

We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.

As a public company, we will incur significant legal, accounting, investor relations and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act and the Dodd-Frank Act of 2010, as well as rules implemented by the Securities and Exchange Commission, or SEC, and the stock exchange on which our common stock is traded. We expect these rules and regulations to increase our legal and financial compliance costs substantially and to make some activities more time consuming and costly. We are currently unable to estimate these costs with any degree of certainty. We also expect that, as a public company, it will be more expensive for us to obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

Our common stock has no prior public trading market and could trade at prices below the initial public offering price.

Our common stock has no prior public trading market. Historically, the trading prices of the securities of technology companies have been highly volatile. Our common stock could trade at prices below the initial public offering price. Factors that could affect the trading price of our common stock, some of which are outside our control, include the following:

• price and volume fluctuations in the overall stock market from time to time;

• significant volatility in the market price and trading volume of technology companies in general, and of companies in our industry;

• variations in our operating results or those of our competitors;

• actual or anticipated announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors;

• the gain or loss of significant customers;

-36-

• recruitment or departure of key personnel;

• level of sales in a particular quarter;

• changes in the estimates of our operating results;

• lawsuits threatened or filed against us;

• sales of large blocks of our stock;

• actual or anticipated changes in recommendations by any securities analysts who elect to follow our common stock;

• whether our operating results meet the expectations of investors or securities analysts;

• major catastrophic events; and

• adoption or modification of regulations, policies, procedures or programs applicable to our business.

In addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could have a material adverse effect on your investment in our common stock. Some companies that have had volatile market prices for their securities have had securities class actions filed against them. If a suit were filed against us, regardless of its merits or outcome, it would likely result in substantial costs and divert management’s attention and resources. This could have a material adverse effect on our business, operating results and financial condition.

A market may not develop for our securities and our stock price may decline after the offering.

Before this offering, there has been no public market for shares of our common stock and we cannot assure you that one will develop or be sustained after this offering. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of our common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade. The initial public offering price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. As a result of these and other factors, the price of our common stock may decline, possibly materially.

Insiders will continue to have substantial control over us after this offering, which could limit your ability to influence corporate matters.

Upon completion of this offering, our directors and executive officers and their affiliates will beneficially own, in the aggregate, approximately     % of our outstanding common stock. As a result, these stockholders, if acting together, will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions such as a merger or other sale of our company or our assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us. For information regarding the ownership of our outstanding stock by our executive officers and directors and their affiliates, see the section titled “Principal stockholders.”

-37-

Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or show an intention to sell, substantial amounts of our common stock in the public market after the contractual lock-up agreements and other restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based on shares outstanding as of April 30, 2011, upon completion of this offering, we will have outstanding              shares of common stock. Of these shares, only the              shares of common stock sold in this offering or              shares of common stock sold in this offering if the underwriters’ over-allotment option were exercised in full, would be freely tradable, without restriction, in the public market. Our underwriters may, in their sole discretion, permit our directors, officers, employees and current stockholders who are subject to the 180-day contractual lock-up to sell shares before the lock-up agreements expire. The lock-up may be extended under some circumstances.

At various times after the lock-up agreements pertaining to this offering expire, up to an additional 43,330,741 shares will be eligible for sale in the public market of which 26,177,168 shares are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or Securities Act, and in certain cases, various vesting agreements.

In addition, the shares that are either subject to outstanding options under our 2000 Plan or reserved for future issuance under any post-initial public offering stock plans, 1,073,447 shares of common stock reserved for issuance upon the exercise of outstanding warrants and 320,393 shares of common stock reserved for issuance of certain outstanding warrants that will be net exercised for              shares of common stock upon completion of this offering will become eligible for sale in the public market to the extent permitted by the provisions of various vesting arrangements, the lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold or if it is perceived that they will be sold in the public market, the trading price of our common stock could decline.

Some of our existing stockholders have demand and piggyback rights to require us to register with the SEC up to 40,732,348 shares of our common stock (including 592,718 shares of our common stock reserved for issuance upon the exercise of certain outstanding warrants and 320,393 shares of our common stock reserved for issuance upon the exercise of outstanding warrants that will be net exercised for             shares of common stock upon completion of this offering). If we register these shares of common stock, the stockholders would be able to sell those shares freely in the public market. Most of these shares are subject to lock-up agreements restricting their sale for 180 days after the date of this prospectus, subject to extension or reduction.

After this offering, we intend to register approximately             shares of our common stock that we have issued or may issue under our equity plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the applicable lock-up agreements described above.

As a new investor, you will experience substantial dilution as a result of this offering.

The assumed initial public offering price per share is substantially higher than the pro forma net tangible book value per share of our common stock outstanding before this offering. As a result, investors purchasing common stock in this offering will experience immediate dilution of

-38-

$             per share in the pro forma net tangible book value per share from the price paid, based on an assumed initial public offering price of $             per share (the mid-point of the range set forth on the cover page of this prospectus). Investors who purchase shares in this offering will contribute approximately     % of the total amount of equity capital raised by us through the date of this offering, but will only own approximately     % of the outstanding capital stock. In addition, we have issued options and warrants to acquire common stock at prices significantly below the assumed initial public offering price. To the extent outstanding options and warrants are ultimately exercised, there will be further dilution to investors in this offering. This dilution occurs because our earlier investors paid substantially less than the initial public offering price when they purchased their shares of common stock. In addition, if the underwriters exercise their option to purchase additional shares from us or if we issue additional equity securities, you will experience additional dilution.

Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of us or changes in our management and therefore depress the trading price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that our stockholders may consider advantageous. These provisions:

• establish a classified board of directors so that not all members of our board are elected at one time;

• provide that directors may only be removed for cause;

• authorize the issuance of blank check preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

• eliminate the ability of our stockholders to call special meetings of stockholders;

• prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of stockholders;

• provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and

• establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of us by prohibiting stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Our management will have broad discretion as to the use of the net proceeds from this offering and might invest or spend the proceeds in ways with which you might not agree or in ways that may not yield a return.

Our management will have broad discretion to use the net proceeds from this offering and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply the net proceeds of this offering in ways with which you

-39-

agree or that increase the value of your investment. We expect to use the net proceeds from this offering for working capital and general corporate purposes, which may include acquisitions of complementary businesses, products or technologies. We have not allocated these net proceeds for any specific purposes. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You may not have the opportunity to influence our decisions on how to use the net proceeds from this offering. Until the net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.

We do not expect to pay dividends in the foreseeable future.

We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We expect to retain all of our future earnings for use in the development of business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Consequently, investors must rely on sales of their common stock after price appreciation which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

-40-

Special note regarding forward-looking statements and industry data

This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. The forward-looking statements are contained principally in the sections entitled “Prospectus summary,” “Risk factors,” “Management’s discussion and analysis of financial condition and results of operations,” “Business,” “Compensation discussion and analysis” and “Executive compensation.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts, “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk factors” and elsewhere in this prospectus. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

This prospectus also contains estimates and other information concerning our industry, including market size and growth rates, that we obtained from industry publications, surveys and forecasts, including those generated by IDC. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Although we believe the information in these industry publications, surveys and forecasts is reliable, we have not independently verified the accuracy or completeness of the information. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the section entitled “Risk factors.”

-41-

Use of proceeds

We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $             million, assuming an initial public offering price of $             per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus and after deducting an assumed underwriting discount and estimated offering expenses that we must pay. If the underwriters’ option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $            . A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our expected net proceeds by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting an assumed underwriting discount and estimated offering expenses that we must pay.

We intend to use the net proceeds from this offering for working capital and other general corporate purposes including research and development and the expansion of our storage systems to serve other high growth data intensive markets. We may also use part of the net proceeds to develop technology partnerships and to acquire other businesses, products or technologies. However, we do not have agreements or commitments for any specific partnerships or acquisitions at this time.

Pending use of net proceeds from this offering, we intend to invest the net proceeds in investment grade, interest-bearing securities.

Dividend policy

We have never declared or paid cash dividends on our common or preferred stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. Our long-term capital growth facility agreement with Gold Hill Capital also limits our ability to pay dividends. Any future determination to declare cash dividends will be made at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may consider relevant.

-42-

Capitalization

The following table sets forth our cash and cash equivalents and capitalization:

• on an actual basis as of April 30, 2011;

• on a pro forma basis after giving effect to the automatic conversion of all outstanding shares of preferred stock, assuming our Series CC preferred stock converts on a one for 11.80684 basis and our Series EE preferred stock converts on a one for 1.02268 basis, into common stock upon the closing of this offering and the reclassification of a portion of the warrants liability to additional paid-in capital; and

• on a pro forma as adjusted basis reflecting (i) the pro forma presentation described above; (ii) the receipt of the estimated net proceeds from the sale of              shares of common stock offered by us in this offering at an assumed initial public offering price of $            , which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus, after deducting an assumed underwriting discount and estimated offering expenses that we must pay; and (iii) the filing of our amended and restated certificate of incorporation immediately prior to the closing of this offering.

You should read this table in conjunction with the sections of this prospectus entitled “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations” and with our consolidated financial statements and related notes.

	As of April 30, 2011
	Actual			Pro forma			Pro forma as adjusted(1)
	(in thousands, except share numbers, unaudited)
Cash and cash equivalents	$	16,084		$	16,084		$
Total debt and capital lease obligations		7,481			7,481
Warrants liability		3,935			333
Convertible preferred stock, $0.001 par value: 52,566,195 authorized, 36,451,015 shares issued and outstanding actual; no shares authorized, no shares issued and outstanding pro forma and pro forma as adjusted		121,699			—
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value: no shares authorized, issued or outstanding actual or pro forma; 50,000,000 shares authorized, no shares issued or outstanding pro forma as adjusted		—			—			—
Common stock and additional paid-in capital, $0.001 par value: 50,540,389 shares authorized, 3,511,504 shares issued and outstanding actual; 75,950,000 shares authorized, 43,330,741 shares issued and outstanding pro forma; 500,000,000 shares authorized,              shares issued and outstanding pro forma as adjusted		117,094			242,395
Accumulated other comprehensive income		1,093			1,093
Accumulated deficit		(230,262	)		(230,262	)
Total stockholders’ equity (deficit)		(112,075	)		13,226
Total capitalization	$	21,040		$	21,040		$

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $             per share of our common stock in this offering would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by $            , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriter discounts and commissions and estimated offering expense payable by us.

-43-

If the underwriters’ option to purchase additional shares in the offering were exercised in full, pro forma as adjusted cash and cash equivalents, common stock and additional paid-in capital, total stockholders’ equity (deficit) and total capitalization as of April 30, 2011 would be $            , $            , $            , $             and $             respectively.

This table excludes the following shares:

• 7,019,362 shares of common stock issuable upon exercise of options outstanding as of April 30, 2011 at a weighted average exercise price of $1.02 per share;

• 894,327 shares of common stock reserved as of April 30, 2011 for future issuance under our 2000 Plan;

•              shares of common stock reserved for future issuance under our 2011 Plan that will become effective on the effective date of the registration statement of which this prospectus is a part;

• 1,073,447 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.68 per share; and

• 320,393 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.53 per share, that will be net exercised for              shares of common stock, based on an assumed initial public offering price of $              per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus.

See the section titled “Executive compensation—Employee benefit plans” for a description of our equity plans.

-44-

Dilution

Our pro forma net tangible book value as of April 30, 2011 was $              , or $               per share. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by                shares of common stock outstanding after giving effect to the automatic conversion of all outstanding shares of preferred stock into shares of common stock upon the closing of this offering, assuming that our Series CC preferred stock converts on a one for 11.80684 basis and our Series EE preferred stock converts on a one for 1.02268 basis.

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the net tangible book value per share of common stock immediately after completion of this offering. After giving effect to our sale of                shares of common stock in this offering at an assumed initial public offering price of $             per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus, and after deducting an assumed underwriting discount and estimated offering expenses, our pro forma net tangible book value as of April 30, 2011 would have been $             million, or $             per share. This represents an immediate increase in pro forma net tangible book value of $             per share attributable to existing stockholders and an immediate dilution in pro forma net tangible book value of $             per share to purchasers of common stock in this offering, as illustrated in the following table:

Assumed initial public offering price per share	$
Pro forma net tangible book value per share as of April 30, 2011	$
Increase in pro forma net tangible book value per share attributable to new investors
Pro forma net tangible book value per share after the offering
Dilution of pro forma net tangible book value per share to new investors	$

If the underwriters exercise in full their option to purchase additional shares of our common stock in this offering, the pro forma net tangible book value per share after the offering would be $             per share, the increase in pro forma net tangible book value per share to existing stockholders would be $             per share and the dilution to new investors purchasing shares in this offering would be $             per share.

Each $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our pro forma net tangible book value by $             million, or $             per share, the increase in pro forma net tangible book value attributable to existing stockholders by $             per share and the dilution in pro forma net tangible book value per share to purchasers of common stock in this offering by $             per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting an assumed underwriting discount and estimated offering expenses we must pay.

-45-

The following table presents on a pro forma basis as of April 30, 2011, after giving effect to the automatic conversion of all outstanding shares of preferred stock, assuming the conversion of our Series CC preferred stock on a one for 11.80684 basis and the conversion of our Series EE preferred stock on a one for 1.02268 basis, into common stock upon completion of this offering, the differences between the existing stockholders and the purchasers of shares in the offering with respect to the number of shares purchased from us, the total consideration paid and the average price paid per share:

	Shares purchased		Total consideration		Average price per share
	Number	Percent	Amount	Percent
	(in thousands, except per share data and percentage)
Existing stockholders
New stockholders
Total

If the underwriters exercise their over-allotment option in full, the number of shares held by new investors will increase to              shares, or     % of the total number of shares of our common stock outstanding after this offering.

These tables exclude the following shares:

• 7,019,362 shares of common stock issuable upon exercise of options outstanding as of April 30, 2011 at a weighted average exercise price of $1.02 per share;

• 894,327 shares of common stock reserved as of April 30, 2011 for future issuance under our 2000 Plan;

•              shares of common stock reserved for future issuance under our 2011 Plan that will become effective on the effective date of the registration statement of which this prospectus is a part;

• 1,073,447 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.68 per share; and

• 320,393 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.53 per share, that will be net exercised for              shares of common stock, based on an assumed initial public offering price of $              per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus.

See the section titled “Executive compensation—Employee benefit plans” for a description of our equity plans.

-46-

Selected consolidated financial data

We derived the selected consolidated statements of operations data for the years ended January 31, 2009, January 30, 2010 and January 29, 2011 and consolidated balance sheet data as of January 30, 2010 and January 29, 2011 from our audited consolidated financial statements and related notes included elsewhere in this prospectus. We derived the selected consolidated statements of operations data for the years ended January 31, 2007 and January 31, 2008 and consolidated balance sheet data as of January 31, 2007, January 31, 2008 and January 31, 2009 from our audited consolidated financial statements and related notes not included in this prospectus. We derived the consolidated statements of operations data for the three months ended May 1, 2010 and April 30, 2011 and the consolidated balance sheet data as of April 30, 2011 from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include, in our opinion, all adjustments, which include only normal recurring adjustments, that we consider necessary for the fair presentation of the financial information set forth in those financial statements. Historical results are not necessarily indicative of future results.

	Year ended															Three months ended
	Jan. 31, 2007			Jan. 31, 2008			Jan. 31, 2009			Jan. 30, 2010			Jan. 29, 2011			May 1, 2010			Apr. 30, 2011
																(unaudited)
	(in thousands, except per share data)
Consolidated statements of operations data:
Product revenue	$	35,555		$	56,490		$	59,864		$	49,523		$	66,550		$	14,103		$	19,596
Support revenue		6,509			10,730			14,366			16,352			19,039			4,511			5,116
Total revenue		42,064			67,220			74,230			65,875			85,589			18,614			24,712
Cost of product revenue		19,752			29,174			32,179			29,709			34,627			7,546			9,938
Cost of support revenue		2,947			3,920			3,483			4,570			6,184			1,395			1,815
Total cost of revenue(1)		22,699			33,094			35,662			34,279			40,811			8,941			11,753
Gross profit		19,365			34,126			38,568			31,596			44,778			9,673			12,959
Sales and marketing(1)		17,625			28,413			33,759			28,540			32,068			7,868			9,327
Research and development(1)		11,149			16,800			18,274			13,783			16,410			3,775			4,966
General and administrative(1)		4,846			9,062			5,659			4,868			5,277			1,464			1,614
Total operating expenses		33,620			54,275			57,692			47,191			53,755			13,107			15,907
Loss from operations		(14,255	)		(20,149	)		(19,124	)		(15,595	)		(8,977	)		(3,434	)		(2,948	)
Interest income		746			744			260			24			15			—			2
Interest expense		(605	)		(76	)		(237	)		(1,065	)		(1,317	)		(339	)		(284	)
Other income (expense), net		373			33			(1,359	)		(389	)		(566	)		(136	)		(1,552	)
Loss before income taxes		(13,741	)		(19,448	)		(20,460	)		(17,025	)		(10,845	)		(3,909	)		(4,782	)
Benefit from income taxes		983			1,390			882			1,272			1,420			324			453
Net loss	$	(12,758	)	$	(18,058	)	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)

-47-

	Year ended															Three months ended
	Jan. 31, 2007			Jan. 31, 2008			Jan. 31, 2009			Jan. 30, 2010			Jan. 29, 2011			May 1, 2010			Apr. 30, 2011
																(unaudited)
	(in thousands, except per share data)
Deemed dividend on exchange of preferred stock		—			—			—			—			(940	)		—			—
Net loss attributable to common stockholders	$	(12,758	)	$	(18,058	)	$	(19,578	)	$	(15,753	)	$	(10,365	)	$	(3,585	)	$	(4,329	)
Net loss per share attributable to common stockholders, basic and diluted	$	(17.93	)	$	(10.85	)	$	(8.74	)	$	(6.55	)	$	(3.54	)	$	(1.47	)	$	(1.25	)
Shares used in computing net loss per share attributable to common stockholders, basic and diluted (unaudited)		711			1,665			2,241			2,404			2,930			2,438			3,465
Pro forma net loss per common share, basic and diluted (unaudited)													$	(0.24	)				$	(0.06	)
Pro forma shares used in calculation of basic and diluted net loss per share attributable to common stockholders, basic and diluted (unaudited)														39,363						43,284

	Year ended															Three months ended
	Jan. 31, 2007			Jan. 31, 2008			Jan. 31, 2009			Jan. 30, 2010			Jan. 29, 2011			May 1, 2010			Apr. 30, 2011
	(in thousands, unaudited)
Other financial data:
Adjusted EBITDA(2)	$	(12,441	)	$	(17,044	)	$	(14,875	)	$	(10,739	)	$	(5,146	)	$	(2,514	)	$	(1,546	)

	As of
	Jan. 31, 2007			Jan. 31, 2008			Jan. 31, 2009			Jan. 30, 2010			Jan. 29, 2011			Apr. 30, 2011
																(unaudited)
	(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	20,140		$	8,978		$	13,805		$	10,711		$	15,971		$	16,084
Working capital		22,013			8,442			14,286			4,126			17,716			12,187
Total assets		48,037			45,190			46,669			38,223			55,082			57,646
Total debt and capital lease obligations		—			7,393			6,020			7,501			7,197			7,481
Total liabilities		21,174			34,834			32,197			37,943			41,681			48,022
Convertible preferred stock		79,510			79,510			102,617			102,617			121,699			121,699
Common stock and additional paid-in-capital		109,065			110,524			111,821			113,265			116,727			117,094
Total stockholders’ equity (deficit)		(52,647	)		(69,154	)		(88,145	)		(102,337	)		(108,298	)		(112,075	)

(1) Includes stock-based compensation expense as follows:

	Year ended										Three months ended
	Jan. 31, 2007		Jan. 31, 2008		Jan. 31, 2009		Jan. 30, 2010		Jan. 29, 2011		May 1, 2010		Apr. 30, 2011
											(unaudited)
	(in thousands)
Cost of revenue	$	—	$	—	$	51	$	67	$	44	$	9	$	11
Sales and marketing		61		370		498		610		476		86		116
Research and development		26		155		282		366		254		69		62
General and administrative		110		235		387		366		343		115		132
Total stock-based compensation expense	$	197	$	760	$	1,218	$	1,409	$	1,117	$	279	$	321

-48-

(2) We present Adjusted EBITDA, which we define as net loss excluding:

• benefit from income taxes;

• other income (expense), net;

• interest expense;

• interest income;

• stock-based compensation; and

• depreciation and amortization.

Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. We exclude other income (expense), net from Adjusted EBITDA as it largely consists of mark to market and other expenses related to our warrants and foreign currency gain or losses. Gains from nonrecurring engineering projects included in other income (expense), net are all excluded from other income (expense), net when calculating Adjusted EBITDA. We have provided a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net loss, operating income or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Adjusted EBITDA in the same manner as we do. We have included Adjusted EBITDA in this prospectus because it is a basis upon which our management assesses financial performance and it eliminates the impact of items that we do not consider indicative of our core operating performance. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or nonrecurring items.

We reconcile net loss to Adjusted EBITDA as follows:

	Year ended															Three months ended
	Jan. 31, 2007			Jan. 31, 2008			Jan. 31, 2009			Jan. 30, 2010			Jan. 29, 2011			May 1, 2010			Apr. 30, 2011
	(in thousands, unaudited)
Net loss	$	(12,758	)	$	(18,058	)	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)
Benefit from income taxes		(983	)		(1,390	)		(882	)		(1,272	)		(1,420	)		(324	)		(453	)
Other income (expense), net		(373	)		(33	)		1,359			389			566			136			1,832
Interest expense		605			76			237			1,065			1,317			339			284
Interest income		(746	)		(744	)		(260	)		(24	)		(15	)		—			(2	)
Stock-based compensation		197			760			1,218			1,409			1,117			279			321
Depreciation and amortization		1,617			2,345			3,031			3,447			2,714			641			801
Adjusted EBITDA	$	(12,441	)	$	(17,044	)	$	(14,875	)	$	(10,739	)	$	(5,146	)	$	(2,514	)	$	(1,546	)

-49-

Management’s discussion and analysis of

financial condition and results of operations

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-looking Statements and Industry Data” included elsewhere in this prospectus.

Overview

We are a leading provider of high performance, highly scalable networked storage systems for businesses of all sizes. Our storage systems deliver the levels of performance, scalability, versatility and simplicity required to cost effectively manage the rapid growth of unstructured data, making them particularly suited for data-intensive applications such as server and desktop virtualization and cloud-based computing. Reliance on email, business documents, web pages, digital images, audio and video, as well as the document retention and access requirements of regulatory compliance are driving the rapid growth of unstructured data. The proliferation of unstructured data and the need to manage and access it at scale has resulted in the demand for next-generation storage systems that minimize the complexities and overcome the performance limitations of existing storage systems. Our storage systems leverage our proprietary file system and flexible architecture to meet the needs of today’s most demanding applications and to manage unstructured data at scale. We enable our customers to more effectively explore, discover, research, create, process and innovate in performance sensitive and data intensive environments. As of April 30, 2011, over 750 customers worldwide have deployed over 2,000 of our storage systems.

We were founded in 1998 and began commercial shipments of our storage systems in 2001. In January 2004, we introduced our first generation storage systems aimed at customers seeking high performance computing solutions in industries such as genomics, oil and gas and media and entertainment. We have continued to innovate and advance our storage systems for HPC. We also leveraged the architecture of our HPC systems to expand our storage system offerings and address the mid-range market. The introduction of our mid-range storage systems in July 2009 resulted in us achieving significant revenue growth beginning in late fiscal 2010. Our solutions include an advanced suite of software features and data management software, such as our software that addresses desktop and server virtualization and cloud environments.

Historically, the substantial majority of our sales were made through our direct sales force. Today we sell our storage systems through multiple channels, which include our direct sales force, our extensive network of channel partners and our OEM, HDS. HDS accounted for 22%, 30%, 41% and 45% of revenue in fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively. HDS has sold our product to over 300 customers worldwide.

We outsource our manufacturing, repair and supply chain operations and also our spare parts logistics to increase our operational efficiency and flexibility. We also outsource some quality assurance related to research and development as well as product development activities.

-50-

We experienced a decrease in revenue in the last quarter of fiscal 2009 and in the first half of fiscal 2010 as a consequence of decreased information technology infrastructure spending caused by global economic conditions. In response, we implemented a variety of cost saving measures, which included a reduction in our direct sales force, and focused on the development of our mid-range storage systems. With the introduction of our mid-range storage systems and improving economic conditions, we achieved 30% growth in revenue from fiscal 2010 to fiscal 2011.

We have a history of net losses in each fiscal year since our inception as we have invested significantly in our product development, customer services and sales and marketing organizations to support the growth of our business. We financed our operations through the issue of preferred stock and debt securities. We plan to continue to invest in our sales channels, customer service and research and development organizations and infrastructure, which we expect will result in future net losses. We believe this strategy will better position us in the market to achieve substantial, long-term growth and market share in our business. We intend to use the proceeds from this offering and other potential sources of funding, if and when available, to fund our growth.

Key financial data

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
	(in thousands)
Revenue	$	74,230		$	65,875		$	85,589		$	18,614		$	24,712
Gross profit		38,568			31,596			44,778			9,673			12,959
Net loss		(19,578	)		(15,753	)		(9,425	)		(3,585	)		(4,329	)
Other financial data:
Adjusted EBITDA (unaudited)	$	(14,875	)	$	(10,739	)	$	(5,146	)	$	(2,514	)	$	(1,546	)

We present Adjusted EBITDA, which we define as net loss excluding:

• benefit from income taxes;

• other income (expense), net;

• interest expense;

• interest income;

• stock-based compensation; and

• depreciation and amortization.

Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. We exclude other income (expense), net from Adjusted EBITDA as it largely consists of mark to market and other expenses related to our warrants and foreign currency gain or losses. Gains from nonrecurring engineering projects included in other income (expense), net are all excluded from other income (expense), net when calculating Adjusted EBITDA. We have provided a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net loss, operating income or any other measure of financial performance calculated and presented in accordance with GAAP. Our

-51-

Adjusted EBITDA may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Adjusted EBITDA in the same manner as we do. We have included Adjusted EBITDA in this prospectus because it is a basis upon which our management assesses financial performance and it eliminates the impact of items that we do not consider indicative of our core operating performance. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or nonrecurring items.

Hitachi Data Systems arrangements

We have a Master Distribution Agreement, or MDA, with HDS. The MDA commits HDS to purchase specified dollar amounts of our product offerings through September 2011. Under the MDA, during fiscal 2010 and fiscal 2011, HDS prepaid $10.0 million and $5.0 million, respectively, for future purchases of our products. As partial consideration for these prepayments, during fiscal 2011 we issued to HDS vested warrants to purchase 206,184 shares of our common stock with a per share exercise price of $1.94 and expiration in 2017. We determined the fair value at issuance was $222,000 and recognized as a reduction in revenue upon HDS’ purchase of products using the prepayment.

During fiscal 2011, HDS paid us $1.5 million for certain research and development projects. We recognized these amounts as a reduction in research and development expense as the associated projects were conducted. As of April 30, 2011, $537,000 remained included in customer deposits in our balance sheet. We have also received fees from HDS for an inventory supply agreement, whereby we set aside certain inventory quantities to be available for them as needed. The amount of support fees recognized for this service was $112,000, $682,000 and $321,000 in fiscal 2009, fiscal 2010 and fiscal 2011, respectively. This inventory arrangement expired at the end of fiscal 2011.

During fiscal 2009, we issued HDS vested warrants to purchase 151,418 shares of our common stock with a per share exercise price of $4.13 and a fair value at issuance of $194,000. The warrants were issued upon HDS’ achievement of specified revenue milestones for the sale of our products. These warrants expired unexercised in fiscal 2011. We recognized fair value of these warrants as a reduction in revenue.

Components of our results of operations

Revenue.    We generate product revenue from sales of our storage systems in configurations tailored to meet our customers’ requirements. Our storage systems combine our file servers with an advanced software suite critical to the functionality of our SiliconFS file system, standard interfaces and multiple tiers of enterprise-class storage devices. We also license certain of our software separately to add functionality for our storage solution. We sell our SiliconFS file system and license additional software applications to HDS, which resells them in combination with its storage arrays. We generate our support revenue by providing hardware and software support and maintenance under contracts, which are generally one to three years, as well as installation, training and professional services. We generally ship our products and recognize the related revenue in the period in which the products are ordered and do not carry a significant backlog

from period to period. As such, our revenue in a given period is substantially dependent on sales in that period.

-52-

We market and sell our storage systems, support and professional services primarily through our direct sales force or through resellers and other channel partners. We maintain sales operations, which include our direct sales force and our channel management personnel, in the United States, England, Germany, Canada, Norway and Australia. The following table summarizes by geographic region our total revenue in fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended May 1, 2010 and April 30, 2011:

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			Apr. 30, 2011
										(unaudited)
	(in thousands)
Revenue:
United States	$	51,645		$	50,295		$	59,492		$	12,549		$	17,218
Canada		8,830			1,932			3,943			1,915			806
EMEA		9,002			7,372			15,937			3,700			4,442
Other		4,753			6,276			6,217			450			2,246
Total	$	74,230		$	65,875		$	85,589		$	18,614		$	24,712
Percent of revenue by geography:
United States		70	%		76	%		70	%		67	%		70	%
Canada		12			3			5			10			3
EMEA		12			11			19			20			18
Other		6			10			6			3			9
Total		100	%		100	%		100	%		100	%		100	%

We expect that sales in the United States will continue to contribute a substantial majority of our revenue for the foreseeable future. We plan to continue to add direct sales personnel in the United States, as well as elsewhere, and to expand our network of channel partners and resellers.

Cost of revenue

Cost of product revenue.    Cost of product revenue consists primarily of the cost of components used to manufacture our SiliconFS file system and storage hardware, as well as manufacturing and assembly costs charged by our contract manufacturer. We make provisions for excess and obsolete inventory, if any, product warranty obligations, shipping charges, overhead allocations and personnel-related costs. Because our storage systems combine our proprietary SiliconFS file system and software with third party storage arrays, gross margins on these storage systems are lower than when we sell our file system and software on a standalone basis. We intend to continue to optimize our cost of product revenue through cost improvements and achievements of economies of scale. We expect our product gross margins to fluctuate over time depending on product configuration and channel mix shifts, as well as quarter to quarter volatility caused by large implementations of our storage systems.

Cost of support revenue.    Cost of support revenue consists of customer service and technical support personnel and third party costs we incur in order to provide hardware repair and replacement services, installation, training and other professional services. We expect cost of support revenue to increase on an absolute basis as we continue to invest in our support infrastructure.

-53-

Operating expenses.    Personnel-related costs, which include stock-based compensation, are the most significant component of each of our operating expense categories. We expect to hire significant numbers of additional employees in order to support our anticipated growth. In any particular period, the timing of additional hires could materially affect our operating expenses. We recently began outsourcing certain research and development, quality assurance related to research and development and product development activities and expect to continue to do so in the future to reduce costs.

Sales and marketing.    Sales and marketing expenses represent the largest component of our operating expenses and include personnel-related costs, sales commissions, travel and marketing programs. We intend to continue to invest heavily in sales and marketing by increasing the number of sales and support personnel worldwide. New sales personnel do not immediately generate revenue and therefore we may not experience the full benefits of these additional sales personnel until they gain experience selling our storage systems. We expect sales and marketing costs to continue to increase in absolute dollars.

Research and development.    Research and development expenses primarily include personnel-related costs, depreciation on lab equipment, prototype equipment, outsourced quality assurance and product development. In addition, we periodically perform nonrecurring research and development services for HDS, payment for which we offset against personnel and equipment costs. We expense research and development costs as incurred. Our research and development employees are based in England and the United States. A substantial majority of our research and development employees focus on software development. We expect our research and development expense to increase in absolute dollars.

General and administrative.    General and administrative expenses consist primarily of personnel-related costs and facilities costs related to our executives, finance, human resource and information technology functions and fees for professional services. Professional services consist of outside legal, tax and audit. We expect our general and administrative expenses to increase in absolute dollars as we invest in additional infrastructure to support our growth and incur expenses as a result of operating as a public company, including increased audit and legal fees, compliance costs, investor relations expenses and higher insurance premiums.

Interest income.    Interest income consists of interest income on our cash and cash equivalents balances. We have historically primarily invested our funds in deposits and money market accounts.

Interest expense.    Interest expense primarily consists of interest accrued or paid and loan fees on our outstanding long-term capital growth facility agreement and/or our accounts receivable revolving line of credit.

Other income (expense), net.    We classify our outstanding preferred stock warrants and certain common stock warrants as liabilities on our balance sheets and record changes in their fair value from period to period in other income (expense), net. In addition, we record fluctuations in foreign exchange rates on receivables and payables denominated in currencies other than the U.S. dollar in other income (expense), net.

Benefit from income taxes.     To date, we have not paid material income taxes as a result of our losses. We receive tax benefits primarily due to the surrendering of our NOL carryforwards in the United Kingdom, in exchange for a cash refund for research and development activities in the

-54-

United Kingdom. After fiscal 2014, we no longer expect to be eligible to surrender these NOLs and receive a cash tax refund as we expect to exceed certain specified statutory thresholds.

Critical accounting policies and estimates

We prepare our consolidated financial statements in accordance with GAAP. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. In other cases, our judgment is required in selecting among available alternative accounting policies that allow different accounting treatment for similar transactions. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances. In many instances, we could reasonably use different accounting estimates, and in some instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our judgments and estimates.

Revenue recognition.    We recognize revenue, net of sales tax, when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is probable. These criteria are usually met for hardware and software license elements when the storage system is shipped to the customer. For evaluation units, we do not recognize revenue until receipt and acceptance of the customer’s purchase order requesting conversion of the unit into a sale. We defer support revenue and recognize it ratably over the period during which the support is to be performed, which is typically from one to three years.

For channel partner sales, we evaluate whether fees are fixed or determinable by considering a number of factors, including payment terms, the channel partner’s credit standing and financial position and our contractual relationship and past history with the particular channel partner. If the fees are not deemed to be fixed or determinable, we delay the shipment or, if product is shipped, defer recognition of revenue until there is persuasive evidence that fees are fixed or determinable and that collection is probable. Persuasive evidence may include copies of end customer purchase orders, cash payments or letters of credit guaranteeing cash payments, reports from channel partners documenting sell-through activity, data indicating an order has shipped to an end customer or other similar information. We do not offer channel partners return rights, rebate, price protection or other similar rights.

Deferred revenue balances consist of deferred support revenue and deferred product revenue.

Our storage systems are typically sold with multiple elements: hardware and perpetual software licenses for the embedded software and support services that entitle customers during the support services term to telephone support and unspecified software upgrades, bug fixes and patch releases, which are offered on a when-and-if-available basis. The hardware in our storage systems is integrated with software that is essential to the functionality of the equipment, except

-55-

for certain optional software features, and more than incidental to the storage system as a whole. Accordingly, we applied the accounting standards for software revenue recognition for all transactions involving the sales of software and related services for all periods prior to January 30, 2011. For these fiscal years, we allocated revenue between delivered hardware and software elements and undelivered support services using the residual value method. Under the residual method the amount equal to the fair value of the undelivered support services, also known as vendor specific objective evidence, or VSOE, is deferred and amortized over the period when such services are provided and any remaining amounts are attributed to the delivered hardware and software elements and are recognized when those items are delivered. VSOE represents the price charged for a deliverable when it is sold separately.

We established VSOE of fair value for our support services. For arrangements where support renewal rates are not contractually stated, fair value is established based on the pricing analysis of our actual support renewals. For arrangements with contractually stated support renewal rates, fair value of one year of support services is established by reference to the contractually stated renewal rates.

In October 2009, the Financial Accounting Standards Board, or FASB, issued an accounting standards update, which removes tangible products containing software components and non-software components that function together to deliver the product’s essential functionality from the scope of industry specific software revenue guidance. At the same time, FASB amended the accounting standard for multiple element revenue arrangements, which are not in the scope of industry specific software revenue recognition guidance, to provide updated guidance to separate the deliverables and to measure and allocate arrangement consideration to one or more units of accounting. The new guidance eliminates the use of the residual method and requires an entity to allocate arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method. In contrast to the residual method, this has the effect of allocating any inherent discount in a multiple element arrangement to each of the deliverables on a proportionate basis. The guidance also expands the disclosure requirements to require an entity to provide both qualitative and quantitative information about the significant judgments made in applying the revised guidance and subsequent changes in those judgments that may significantly affect the timing or amount of revenue recognition. The revised revenue recognition accounting standards are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.

We adopted the new revenue recognition guidance for arrangements with multiple deliverables on a prospective basis for new or modified arrangements entered on or after January 30, 2011. We now allocate arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method unless the amount allocated to delivered hardware and software elements exceeds the arrangement consideration that is not contingent upon delivery of support services. This method requires us to determine the selling price at which each deliverable could be sold if it were sold regularly on a standalone basis. Under this approach, the selling price of a deliverable is determined by using a selling price hierarchy which requires the use of VSOE of fair value if available, third party evidence, or TPE, if VSOE is not available, or estimated selling price, or ESP, if neither VSOE nor TPE is available. Since we generally do not have standalone sales of our hardware and software products, the use of VSOE is limited to support services. TPE of selling price is established by evaluating largely interchangeable competitor products or services in standalone sales to similarly situated customers. However, since our competitors do not generally sell tangible products and perpetual

-56-

licenses on a standalone basis except for limited cases, no consistent pricing information is available. Therefore, we concluded that no reliable TPE is available for our products and services. We determine ESP by considering factors such as market conditions, sales channels, internal costs and product margin objectives, and pricing practices. We regularly review and update our VSOE, TPE and ESP information and obtain formal approval by appropriate levels of management.

We continue to account for optional software applications and related support services included in a multiple element arrangement under industry specific software revenue recognition guidance using the residual method. Revenue is first allocated to the nonsoftware deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the selling price hierarchy described above. Next, under the residual method, we defer revenue from the sale equivalent to the VSOE of the fair value of support services and apply any inherent discounts to the delivered software element.

The adoption of the new revenue recognition guidance did not result in changes of the individual deliverables to which we allocate revenue, or the timing of recognition of revenue for the individual deliverables. The change in the allocation method from residual to relative selling price did not have a material impact on our financial statements during the three months ended April 30, 2011.

Income taxes.    We use the asset and liability method of accounting for income taxes. We recognize deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We establish valuation allowances when necessary to reduce deferred tax assets where management concludes that it is more likely than not that the deferred tax assets will not be realized based upon the available evidence.

We record a liability for the uncertain tax positions taken or expected to be taken on our tax return when it is more likely than not that the tax position might be challenged and additional taxes may be due as a result, despite our belief that the tax return positions are fully supportable. To the extent that our assessment of our tax positions change, the change in estimate is recorded in the period in which the determination is made. The provision for income taxes includes the impact of provisions for uncertain tax positions.

Warranty reserve.    We provide three year and 90 day warranties for our hardware and software, respectively. These warranty periods are extended for customers who purchase additional hardware support after the warranty period has expired. We estimate the costs that we may incur under our warranty obligations and record a liability concurrent with the revenue recognition, which is included in other accrued liabilities and other long-term liabilities. The warranty accrual is based on our historical experience of product replacements, repair costs and ongoing product failure rates and for specific failure issues, if necessary. Each period, we assess the adequacy of our recorded warranty reserve and make adjustments we deem necessary. We record warranty cost as part of our cost of product revenue.

Inventory.    Inventories include the cost of materials, labor and related manufacturing overhead and are adjusted to approximate the lower of cost or market value. Raw materials consist principally of storage system components and finished goods are comprised of assembled storage

-57-

systems. We write down inventory to market value if lower than cost, based on current inventory levels, projected realizable values and demand, expected lives and technological obsolescence of the products or component parts.

Service spares inventory consists of components used to support the field services organization. In addition, in order to fulfill our hardware warranty obligations, we hold storage system components at our logistics provider’s depots that are used to repair and replace broken hardware. We establish an inventory valuation reserve for spares inventory to reduce the carrying amounts of the inventories to their net estimated realizable values. We estimate these net estimated realizable values by analyzing historical failure rates and past usage of service components, expected lives and support terms, technological obsolescence and economic factors.

Evaluation storage systems are finished goods located at customer sites, as some of our customers test our storage systems prior to purchase primarily for a period of up to 90 days. At the end of the evaluation period, a customer may decide to either purchase the system or return the system to us at no further cost or obligation. We disassemble returned evaluation storage systems and we hold the related components as raw materials. We adjust the inventory value of evaluation storage systems for expected wear and tear based upon factors that include past experience of diminution in value of returned evaluation storage systems and the length of time the storage systems are at our customers’ sites.

We include the reserve provision for all inventories in cost of product revenue. Once the lower cost basis is established, subsequent changes in facts or circumstances do not result in the restoration or increase in that newly established cost basis. Historically, we have written off excess and obsolete inventory during product transitions.

Stock-based compensation.    We grant our employees options to purchase our common stock. Effective February 1, 2006, we utilize the fair value recognition method of accounting for stock-based employee compensation arrangements, which requires us to measure the stock-based compensation costs of stock-based compensation arrangements based on the grant date fair value, and recognize the costs in the financial statements over the employees’ requisite service period. We adopted the above guidance using the modified prospective transition method. Under this transition method, the new fair value recognition provisions are applied to option grants on and after July 1, 2005. We expense all options granted or modified after July 1, 2005 on a straight-line basis. We measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award. We recognize the fair value of the employee awards that vest based only on employees’ continuing service on a straight-line basis over the requisite service period, which is generally the vesting period. For employee awards with performance conditions, we recognize expense separately for each vesting event of the award to the extent we determine it is probable that the performance goals will be achieved. We continue to recognize this expense until such time as the vesting event is achieved or becomes unachievable. The fair value of the options granted to nonemployees is revalued as they vest, and the resulting change in value, if any, is recognized as expense during the period the related services are rendered. We estimate the fair value of stock-based awards on the grant date using an option pricing model.

In future periods, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based compensation still to be recognized combined with the issuance of additional stock-based awards in order to attract and retain employees and nonemployee consultants.

-58-

Significant factors, assumptions and methodologies used in determining fair value.    The fair value of options on the grant date is estimated using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions including expected term, volatility, risk-free interest rate and the fair value of our common stock. Compensation expense is recognized on awards ultimately expected to vest and reduced for forfeitures that are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. These assumptions generally require significant judgment.

The fair value of each new employee option awarded was estimated on the grant date for the periods below using the Black-Scholes option-pricing model with the following assumptions:

	For the year ended January 29, 2011		Three months ended May 1, 2010		Three months ended April 30, 2011
Risk-free interest rate		1.4% - 2.7%		2.4% - 2.7%		2%
Expected term (in years)		4.5		4.5		4.9
Expected dividend		0%		0%		0%
Expected volatility		50% - 51%		50%		53%

Our assumptions used in the Black-Scholes model are discussed below:

Expected volatility.    As we have no active trading history for our common stock, we have derived our expected volatility from historical volatilities of several peer public companies deemed to be comparable to our business.

Expected term.    The expected term represents the period that our stock-based awards are expected to be outstanding and was estimated based on patterns of historical exercises and post-vesting cancellations and the options’ contractual term.

Risk-free interest rate.    The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to each award’s expected term.

Expected dividend.    The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so.

We estimate our forfeiture rate based on an analysis of our actual forfeitures, employee turnover and other factors.

The absence of an active market for our common stock also required our board of directors, the members of which we believe have extensive business, finance and venture capital experience, to estimate the fair value of our common stock for purposes of granting options and for determining stock-based compensation expense for the periods presented. In response to these requirements, our board of directors’ practice has been to estimate the fair market value of common stock at each meeting at which options were granted. We have obtained contemporaneous third party valuations to assist our board of directors in determining fair market value. We have historically granted stock options at not less than the fair market value of our common stock as determined at the time of grant. These contemporaneous third party valuations used the methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the AICPA Practice Guide.

-59-

The following table summarizes the options granted or existing grants we modified during fiscal 2011 and the three months ended April 30, 2011:

Date of grants	Number of shares granted		Exercise price per share
April 2010		240,767	$	1.94
September 2010		841,108		1.42
October 2010		306,261		1.42
December 2010		42,000		1.71
March 2011		347,500		1.78
		1,777,636

Our board of directors determined the fair value of our common stock based on an evaluation of numerous objective and subjective factors as of the date of each grant including the following:

• contemporaneous valuations by an unrelated third party valuation firm;

• the prices of the recent preferred stock sales to investors in arms-length transactions;

• our capital resources and financial condition;

• the preferences held by our preferred stock classes in favor of our common stock;

• the likelihood and timing of achieving a liquidity event, such as an initial public offering or sale of our company given prevailing market conditions;

• our historical operating and financial performance as well as management’s estimates of future financial performance;

• recent acquisitions and valuations of comparable companies;

• the hiring of key personnel;

• the status of our development, product introduction and sales efforts;

• revenue growth;

• industry information such as market growth and volume and macro-economic events; and

• additional objective and subjective factors relating to our business.

The valuations that our board of directors considered in making its determination of the fair value of our common stock utilized a probability-weighted expected return method, or PWERM. This valuation method was considered to be most appropriate given the status of our business and the anticipated liquidity events. Under PWERM, the valuations assigned probabilities and timing estimates to potential liquidity events for us based on a variety of factors, including primarily our recent operating history, the amount of cash held by us and the preferences held by the preferred stock relative to our common stock. Three principal scenarios were examined: a merger or acquisition, or M&A, scenario; an initial public offering, or IPO, scenario; and a scenario in which we continue to operate as a private entity. For each valuation date, we prepared a financial forecast to be used in the computation of the enterprise value. The financial forecasts took into account our past experience and future expectations.

To arrive at a value for common shares under the M&A scenario and the IPO scenario, the market approach and specifically, the guideline public company method, was used to estimate our total

-60-

stockholder value at the time of the respective anticipated liquidity event. The guideline public company method estimates the fair value of a company by applying to that company market revenue multiples of publicly traded firms in similar lines of business. When choosing the comparable companies to be used for the guideline public company method, the valuations focused on companies in the computer storage industry. Some of the specific criteria used to select and analyze comparable companies within our industry included the business description, business size, projected growth, financial condition and historical operating results. The valuations analyzed the business and financial profiles of the selected companies for relative similarity to us, and once such differences and similarities were determined and proper adjustments were made, determined an appropriate total stockholder value revenue multiple for us. This revenue multiple was applied to the trailing 12 months’ revenue to arrive at our anticipated total stockholder value at the time of the anticipated future liquidity event. The total stockholder value was then allocated amongst share classes based on the amount of liquidation preferences, and the resulting values were discounted to the present value using a discount rate which accounted for the market cost of capital and risk.

To estimate the value of the common shares under the continuing to operate as a private company scenario, the valuations used two approaches: a guideline public company method (market approach), and a discounted cash flow approach (income approach). The guideline public company method, as discussed previously, was applied at the valuation date to estimate the total stockholder value of the company at the present. Under the discounted cash flow approach, the valuations analyzed the forecast of our expected future financial performance, and discounted those amounts to present value using an appropriate discount rate which reflected the then-current company’s cost of capital. The total stockholder values determined by the guideline public company method and the discounted cash flow approach were weighed to arrive at a single enterprise value for the continuing to operate as a private company scenario. Subsequently, this total stockholder value was apportioned to the various classes of our stock, based on their respective liquidation preferences, to arrive at a value for the common shares under the continuing to operate as a private company scenario. Finally, the valuations applied a marketability discount to reflect the fact that our common stockholders were unable to liquidate their holdings at will, or possibly at all.

The common stockholder values under each of the scenarios were probability weighed to arrive at an indication of value for our common equity.

The following table provides some key assumptions utilized in the contemporaneous third party valuations at each respective grant or modification date:

Grant date	Derived common stock value		Expected liquidity timing		Probability % weighting of potential outcomes (IPO, M&A, Private)		Discount rate		Remain private discount for lack of marketability
April 2010 grants	$	1.94		June 2011		25%, 40%, 35%		31%		35%
September & October 2010 grants	$	1.42		June 2011		25%, 35%, 40%		31%		37%
December 2010 grants	$	1.71		June 2011		25%, 45%, 30%		32%		39%
March 2011 grants	$	1.78		March 2012		25%, 45%, 30%		33%		38%

Determining the fair value of the enterprise using PWERM requires us to estimate the probability and timing of IPO and non-IPO scenarios. Changes to the timing and probability estimates can significantly affect the fair value of the enterprise. In addition, our calculations are sensitive to highly subjective assumptions relating to an appropriate present value discount rate that we

-61-

were required to make at each valuation date. Our present value discount rate was determined using a Capital Asset Pricing Model, or CAPM. The discount rate was based on an analysis of comparable companies in the computer storage industry. We also compared the results of the CAPM discount rate analysis to discount rates published in various studies of venture capital required rate of return for investments in companies of an equivalent stage of development.

April to September 2010.    The lower common stock value for the September and October 2010 grants as compared to the common stock value for the April 2010 grants was primarily due to the issuance of our Series GG convertible preferred stock in July 2010. During the first half of 2010, we lowered our financial forecasts from the one in existence at the beginning of 2010 and used for the valuation of the April 2010 grants as we continued to develop and elaborate on our business plan and multi-year financial model. Finally, a slightly lower estimated probability assigned to an M&A scenario occurring by the middle of 2011 and a slightly higher estimated probability assigned to a remain private scenario (which had a lower derived value for our company compared to the M&A scenario) lowered the common stock value.

October to December 2010.    The higher common stock value for the December 2010 grants compared to the September and October 2010 value is primarily due to our higher estimated probability of an M&A scenario at those dates; progress towards achieving the projected financial forecast; the passage of time toward the expected liquidity event date; and slightly higher peer company comparable valuations. We estimated a higher probability of the M&A scenario primarily as a result of the increased number of public company acquisitions of comparable companies in our industry.

December 2010 to March 2011.    The higher common stock value for the March 2011 grants compared to the December 2010 grants is primarily due to the incorporation of a higher financial forecast due to an improved outlook for our business, partially offset by the extension of time anticipated for the liquidity events. The improved outlook was a result of the ongoing acceptance of our mid-range storage systems into the enterprise market, the anticipation of new product features expanding on the capabilities of our high-end storage system offerings and the overall anticipated growth of our industry as well as expected improvements in the overall macro-economic environment. The extension of time anticipated for the liquidity events was primarily due to management’s assessment of a potential liquidity event date and the length of time it would take to complete an IPO process.

Convertible preferred stock warrants and common stock warrants.

Convertible preferred stock warrants.    We classify freestanding warrants to purchase shares of our convertible preferred stock as liabilities on our consolidated balance sheets carry them at fair value, because the warrants may obligate us to transfer assets to the holders under certain circumstances (e.g., upon a change in control) at some point in the future. The warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized as a component of other income (expense), net in the consolidated statements of operations. We estimated the fair value of these warrants at issuance and at the respective balance sheet dates using the Black-Scholes option pricing model or a binomial model, to the extent the warrants had antidilutive features. The various estimates and assumptions inputted into these models are highly judgmental and could differ significantly in the future.

As of January 30, 2010, we had outstanding warrants to purchase an aggregate of 397,847 shares of our Series CC and Series FF convertible preferred stock. As of January 29, 2011 and April 30,

-62-

2011, we had outstanding warrants to purchase an aggregate of 913,111 shares of our Series FF, Series FF-1 and Series GG convertible preferred stock. The aggregate fair value of our warrants was $1.3 million, $1.8 million and $3.6 million as of January 30, 2010, January 29, 2011 and April 30, 2011, respectively, and these amounts were recorded on our consolidated balance sheets as a warrant liability within current liabilities. The change in fair value of these warrants resulted in a gain to other income (expense), net in the amount of $134,000, a loss of $372,000, a loss of $5,000 and a loss of $1.8 million during fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively.

We will continue to record adjustments to the fair value of the warrants until they are exercised, converted into warrants to purchase common stock or expire, at which time the warrants will no longer be remeasured at each balance sheet date. Upon the closing of this offering, for example, all outstanding warrants to purchase shares of our convertible preferred stock will become warrants to purchase shares of our common stock and, as a result, will no longer be remeasured. The then-current aggregate fair value of these warrants at the time of the offering will be reclassified from liabilities to additional paid-in capital, a component of stockholders’ (equity) deficit.

Common stock warrants.    We have issued warrants to purchase our common stock that have certain exercise features not indexed to our common stock. These features require such warrants to be classified as liabilities and remeasured to fair value at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net. These common stock warrants were issued to our growth facility lender as part of the renegotiated terms of the loan. We issued warrants to purchase 174,371 and 100,170 shares of our common stock in April 2010 and January 2011, respectively. The number of shares subject to the warrant issued in April 2010 was subject to a one-time reduction if we did not achieve certain levels of earnings during quarters within fiscal 2011. The number of shares subject to the warrant issued in January 2011 is subject to a one-time reduction if we do not achieve certain levels of earnings during quarters within fiscal 2012. The number of shares subject to the reduction varies depending on the quarter in which we do not achieve the requisite level of earnings, and the principal on the loan will begin to amortize. We achieved the contractual levels of earnings during fiscal 2011 and expect to achieve all contractual levels of earnings during fiscal 2012, such that there has been, and we expect, no reduction in the number of shares underlying these warrants.

We will continue to record adjustments to the fair value of these warrants until the number of shares of common stock underlying the warrants is no longer subject to change. At that time, the then-current fair value of these warrants will be reclassified from liabilities to additional paid-in capital.

We estimated the fair value of these warrants at issuance and at the respective balance sheet dates using the Black-Scholes option pricing model under various probability-weighted outcomes and estimates and assumptions, including the probabilities of achieving the quarterly earnings levels, fair value and volatility of our stock, the remaining contractual term of the warrants, risk-free interest rates and expected dividend yield.

As of January 29, 2011, we had an outstanding warrant to purchase an aggregate of 174,371 shares of our common stock with a fair value of $208,000 for which the number of shares was no longer subject to change and that were reclassified to equity. The change in the fair value of this warrant throughout the remeasurement period during fiscal 2011 resulted in a gain to other income (expense), net in the amount of $64,000.

-63-

As of January 29, 2011, we also had an outstanding warrant to purchase an aggregate of 100,170 shares of our common stock with a fair value of $135,000. The change in the fair value of this warrant during the three months ended April 30, 2011 resulted in a loss to other income (expense), net in the amount of $198,000.

We have also issued warrants to purchase common stock to HDS in connection with HDS’s achievement of certain revenue milestones as well as for prepayments for our products. We estimated the fair value of these warrants at the respective issuance dates using the Black-Scholes option pricing model and various estimates and assumptions, including fair value and volatility of our common stock, the remaining contractual term of the warrants, risk-free interest rates and expected dividend yield. The fair value of these common stock warrants at issuance was recorded on our consolidated balance sheets in stockholders’ deficit and was not subject to remeasurement. Warrants to purchase a total of 151,418 shares of our common stock at a fair value at issuance of $194,000 were issued to HDS in fiscal 2009. These warrants expired unexercised in fiscal 2011. The fair value of these warrants was recognized as a reduction in revenue. We issued HDS warrants to purchase a total of 206,184 shares of our common stock with a fair value at issuance of $222,000 in fiscal 2011. The fair value of these warrants was also recorded as a reduction in revenue.

Results of operations

The following table sets forth our historical operating results for fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended May 1, 2010 and April 30, 2011, respectively. The period to period comparison of financial results is not necessarily indicative of the financial results we may achieve in future periods and the results for the three months ended April 30, 2011 are not necessarily indicative of financial results to be expected for the full fiscal year or any other period.

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
	(in thousands)
Consolidated statements of operations data:
Product revenue	$	59,864		$	49,523		$	66,550		$	14,103		$	19,596
Support revenue		14,366			16,352			19,039			4,511			5,116
Total revenue		74,230			65,875			85,589			18,614			24,712
Cost of product revenue		32,179			29,709			34,627			7,546			9,938
Cost of support revenue		3,483			4,570			6,184			1,395			1,815
Total cost of revenue		35,662			34,279			40,811			8,941			11,753
Gross profit		38,568			31,596			44,778			9,673			12,959
Sales and marketing		33,759			28,540			32,068			7,868			9,327
Research and development		18,274			13,783			16,410			3,775			4,966
General and administrative		5,659			4,868			5,277			1,464			1,614
Total operating expenses		57,692			47,191			53,755			13,107			15,907
Loss from operations		(19,124	)		(15,595	)		(8,977	)		(3,434	)		(2,948	)
Interest income		260			24			15			—			2
Interest expense		(237	)		(1,065	)		(1,317	)		(339	)		(284	)
Other expense, net		(1,359	)		(389	)		(566	)		(136	)		(1,552	)
Loss before income taxes		(20,460	)		(17,025	)		(10,845	)		(3,909	)		(4,782	)
Benefit from income taxes		882			1,272			1,420			324			453
Net loss	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)

-64-

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
	(as a percentage of revenue)
Consolidated statements of operations data:
Product revenue		81	%		75	%		78	%		76	%		79	%
Support revenue		19			25			22			24			21
Total revenue		100			100			100			100			100
Cost of product revenue		43			45			41			41			40
Cost of support revenue		5			7			7			7			8
Total cost of revenue		48			52			48			48			48
Gross profit		52			48			52			52			52
Sales and marketing		45			43			38			42			38
Research and development		25			21			19			20			20
General and administrative		8			8			6			8			6
Total operating expenses		78			72			63			70			64
Loss from operations		(26	)		(24	)		(11	)		(18	)		(12	)
Interest income		—			—			—			—			—
Interest expense		—			(2	)		(2	)		(2	)		(1	)
Other expense, net		(2	)		(1	)		(1	)		(1	)		(6	)
Loss before income taxes		(28	)		(27	)		(14	)		(21	)		(19	)
Benefit from income taxes		1			2			2			2			2
Net loss		(27	)%		(25	)%		(12	)%		(19	)%		(17	)%

Comparison of the three months ended May 1, 2010 and April 30, 2011

Revenue.    Revenue and the related changes for the three months ended May 1, 2010 and April 30, 2011 were as follows (in thousands):

	Three months ended										Change
	May 1, 2010					April 30, 2011
	$		% of total revenue			$		% of total revenue			$		%
	(unaudited)
Revenue
Product	$	14,103		76	%	$	19,596		79	%	$	5,493		39	%
Support		4,511		24			5,116		21			605		13
Total	$	18,614		100	%	$	24,712		100	%	$	6,098		33	%

Product revenue.    The increase in product revenue resulted from growth across our high-end and mid-range storage systems. In particular, we experienced strong adoption of our lower-priced, mid-range storage systems across all channels.

Support revenue.    The increase in support revenue was primarily due to an increase in the number of hardware and software maintenance contracts resulting from the increase in our installed base, in addition to revenue from existing maintenance contracts and customer support renewals.

Of our revenue, indirect sales, including HDS, VARs and other channel partners, accounted for 51% and 57% in the three months ended May 1, 2010 and April 30, 2011, respectively. HDS contributed 38% and 45% of our revenue in the three months ended May 1, 2010 and April 30, 2011, respectively. No other customer accounted for 10% or more of our revenue in either period.

-65-

Cost of revenue and gross margin.    Cost of revenue, gross margin and the related changes for the three months ended May 1, 2010 and April 30, 2011 were as follows (in thousands):

	Three months ended										Change
	May 1, 2010					April 30, 2011
	$		Gross margin			$		Gross margin			$		%
	(unaudited)
Cost of revenue
Product	$	7,546		47	%	$	9,938		49	%	$	2,392		32	%
Support		1,395		69			1,815		65			420		30
Total	$	8,941		52	%	$	11,753		52	%	$	2,812		32	%

Cost of product revenue increased as a result of higher volumes of our storage systems sold, as well as incremental inventory write downs of $640,000 in the three months ended April 30, 2011, as compared to the three months ended May 1, 2010 for excess materials and spare parts inventory amortization. Product gross margin increased as a result of faster growth in our OEM channel and less pricing pressure as economic conditions improved.

Cost of support revenue increased as a result of continued investment in our customer support infrastructure, which resulted in an increase of $385,000 in headcount and third party vendor costs associated with providing support and training to customers. These infrastructure expenses were incurred in connection with the incremental needs of our customers. The impact of additional headcount and infrastructure expenses adversely affected support gross margin for the period.

Operating expenses.    Operating expenses and the related changes for the three months ended May 1, 2010 and April 30, 2011 were as follows (in thousands):

	Three months ended										Change
	May 1, 2010					April 30, 2011
	$		% of total revenue			$		% of total revenue			$		%
	(unaudited)
Operating expenses
Sales and marketing	$	7,868		42	%	$	9,327		38	%	$	1,459		19	%
Research and development		3,775		20			4,966		20			1,191		32
General and administrative		1,464		8			1,614		6			150		10
Total	$	13,107		70	%	$	15,907		64	%	$	2,800		21	%

Sales and marketing.    Sales and marketing expense increased primarily due to an increase in headcount, resulting in an $838,000 increase in salaries, employee benefits and stock-based compensation expense, a $320,000 increase in third party vendors for marketing and outsourced sales activities and a $253,000 increase in sales and marketing related travel.

Research and development.    Research and development expense increased primarily due to an increase in headcount, resulting in an $884,000 increase in salaries, employee benefits and stock-based compensation expense and a $218,000 increase in outside services, including offshore providers of quality assurance services and product development.

General and administrative.    General and administrative expense remained relatively flat compared to the three months ended May 1, 2010. An increase in recruiting costs of $217,000 was offset by lower costs in various other areas.

-66-

Other income (expense), net.    Other income (expense), net was $1.6 million in the three months ended April 30, 2011 and was higher than the three months ended May 1, 2010, primarily due to higher outstanding preferred and common stock warrants and mark to market adjustments of the outstanding warrants. We realized nonrecurring income of $280,000 by obtaining acceptance of one of our research and development arrangements from HDS.

Benefit from income taxes.    Our benefit from income taxes increased by $129,000 to $453,000. This was primarily due to the increased expenses eligible for the United Kingdom research and development tax credit.

Fiscal 2010 compared to fiscal 2011

Revenue.    Revenue and the related changes for fiscal 2010 and fiscal 2011 were as follows (in thousands):

	Year ended										Change
	January 30, 2010					January 29, 2011
	$		% of total revenue			$		% of total revenue			$		%
Revenue
Product	$	49,523		75	%	$	66,550		78	%	$	17,027		34	%
Support		16,352		25			19,039		22			2,687		16
Total	$	65,875		100	%	$	85,589		100	%	$	19,714		30	%

Product revenue.    The increase in product revenue resulted from growth across our high-end and mid-range storage systems as well as continued improvements in economic conditions. In particular, our fiscal 2011 product revenue benefited from the strong adoption and full year of sales of our lower-priced, mid-range storage systems, which we introduced during the third quarter of fiscal 2010.

Support revenue.    The increase in support revenue was primarily due to an increase in the number of hardware and software maintenance contracts resulting from the increase in our installed base, in addition to revenue from existing maintenance contracts and customer support renewals.

Of our revenue, indirect sales, including OEMs, VARs and other channel partners, accounted for 47% and 57% in fiscal 2010 and 2011, respectively. HDS contributed 30% and 41% of our revenue in fiscal 2010 and fiscal 2011, respectively. No other customer accounted for 10% or more of our revenue in either period.

Cost of revenue and gross margin.    Cost of revenue, gross margin and the related changes for fiscal 2010 and fiscal 2011 were as follows (in thousands):

	Year ended										Change
	January 30, 2010					January 29, 2011
	$		Gross margin			$		Gross margin			$		%
Cost of revenue
Cost of product revenue	$	29,709		40	%	$	34,627		48	%	$	4,918		17	%
Cost of support revenue		4,570		72			6,184		68			1,614		35
Total	$	34,279		48	%	$	40,811		52	%	$	6,532		19	%

-67-

Cost of product revenue increased as a result of higher volumes of storage systems sales. In fiscal 2011, we recorded an increase of $1.5 million in warranty-related expense driven by increased volumes in our mid-range storage systems as well as higher reserves for certain components. In fiscal 2010, cost of product revenue included a $1.0 million charge for excess and obsolete inventory in connection with the transition to our new mid-range storage systems. Product gross margin in fiscal 2011 increased as a result of faster growth in our OEM channel, continued adoption of our mid-range storage systems and more favorable pricing due to improving economic conditions.

Cost of support revenue increased primarily as a result of continued investment in our customer support infrastructure, which resulted in an increase of $1.4 million in headcount and third party vendor costs associated with providing support and training to customers. As a result, support gross margin decreased.

Operating expenses.    Operating expenses and the related changes for fiscal 2010 and fiscal 2011 were as follows (in thousands):

	Year ended										Change
	January 30, 2010					January 29, 2011
	$		% of total revenue			$		% of total revenue			$		%
Operating expenses
Sales and marketing	$	28,540		43	%	$	32,068		38	%	$	3,528		12	%
Research and development		13,783		21			16,410		19			2,627		19
General and administrative		4,868		8			5,277		6			409		8
Total	$	47,191		72	%	$	53,755		63	%	$	6,564		14	%

Sales and marketing.    Sales and marketing expense increased primarily due to an increase in headcount, as well as restoration of salaries following cost reduction actions taken in fiscal 2010, resulting in a $2.9 million increase in salaries, employee benefits and stock-based compensation expense, a $780,000 increase in sales and marketing related travel and a $473,000 increase in marketing programs and trade shows. These increases were partially offset by a $403,000 decrease in depreciation expense.

Research and development.    Research and development expense increased primarily due to an increase in headcount, as well as restoration of salaries following cost reduction actions taken in fiscal 2010, resulting in a $2.0 million increase in salaries, employee benefits and stock-based compensation expense, and a $631,000 increase in outside services including an offshore provider of quality assurance and product development services.

General and administrative.    General and administrative expense increased primarily due to an increase in headcount, as well as restoration of salaries following cost reduction actions taken in fiscal 2010, resulting in a $575,000 increase in salaries, employee benefits and stock-based compensation expense, and an increase in recruiting fees of $273,000. These increases were partially offset by a decrease in bad debt expense of $335,000.

Interest expense.    Interest expense increased by $252,000 to $1.3 million in fiscal 2011, primarily due to interest payable on our long-term capital growth facility agreement that we entered into during fiscal 2010.

-68-

Other income (expense), net.    Other income (expense), net increased by $177,000 to $566,000 in fiscal 2011. The increase in expense was primarily due to the issuances of preferred and common stock warrants and the mark to market adjustments of the outstanding warrants.

Benefit from income taxes.    Our benefit from income taxes increased by $148,000 to $1.4 million in fiscal 2011. This was primarily due to the increased expenses eligible for the United Kingdom research and development tax credit.

Fiscal 2009 compared to fiscal 2010

Revenue.    Revenue and the related changes for fiscal 2009 and fiscal 2010 were as follows (in thousands):

	Year ended										Change
	January 31, 2009					January 30, 2010
	$		% of total revenue			$		% of total revenue			$			%
Revenue
Product	$	59,864		81	%	$	49,523		75	%	$	(10,341	)		(17	)%
Support		14,366		19			16,352		25			1,986			14
Total	$	74,230		100	%	$	65,875		100	%	$	(8,355	)		(11	)%

Product revenue.    The decrease in product revenue was primarily due to reduced spending by customers across our industry in response to the challenging economic conditions that existed during fiscal 2010. In the second half of fiscal 2010, we introduced and experienced strong adoption of our mid-range storage systems, which partially offset the negative impact of economic conditions.

Support revenue.    The increase in support revenue was primarily due to an increase in the number of hardware and software maintenance contracts resulting from the cumulative growth in our installed base. An inventory supply arrangement with HDS also accounted for a $570,000 increase in support revenue.

Of our revenue, indirect sales, including HDS, VARs and other channel partners, accounted for 40% and 47% in fiscal 2009 and fiscal 2010, respectively. HDS contributed 22% and 30% of our revenue in fiscal 2009 and fiscal 2010. No other customer accounted for 10% or more of our revenue in either period.

Cost of revenue and gross margin.    Cost of revenue and gross margin and the related changes for fiscal 2009 and fiscal 2010 were as follows (in thousands):

	Year ended										Change
	January 31, 2009					January 30, 2010
	$		Gross margin			$		Gross margin			$			%
Cost of revenue
Cost of product revenue	$	32,179		46	%	$	29,709		40	%	$	(2,470	)		(8	)%
Cost of support revenue		3,483		76			4,570		72			1,087			31
Total	$	35,662		52	%	$	34,279		48	%	$	(1,383	)		(4	)%

Cost of product revenue decreased as a result of lower volumes. Product gross margin decreased primarily due to pricing pressure caused by the challenging economic conditions that existed during fiscal 2010.

-69-

Cost of support revenue increased primarily as a result of investment in our customer support infrastructure, which resulted in an increase of $1.1 million in headcount and third party vendor costs associated with providing support and training to customers.

Operating expenses.    Operating expenses and the related changes for fiscal 2009 and fiscal 2010 were as follows (in thousands):

	Year ended
	January 31, 2009					January 30, 2010					Change
	$		% of total revenue			$		% of total revenue			$			%
Operating expenses
Sales and marketing	$	33,759		45	%	$	28,540		43	%	$	(5,219	)		(16)	%
Research and development		18,274		25			13,783		21			(4,491	)		(25)
General and administrative		5,659		8			4,868		8			(791	)		(14)
Total	$	57,692		78	%	$	47,191		72	%	$	(10,501	)		(18)	%

In the fourth quarter of fiscal 2009 and early fiscal 2010, we implemented a variety of cost saving measures due to the challenging economic conditions. These cost saving measures included a reduction in personnel costs through a variety of measures, renegotiation of costs for third party services such as legal, insurance and audit, and reduced travel costs.

Sales and marketing.    Sales and marketing expense decreased as a result of a reduction in force and salary reductions for the remaining employees. These actions resulted in a $1.2 million decrease in salaries, employee benefits and stock-based compensation expense. We also experienced a $2.1 million decrease in commissions, an $848,000 reduction in travel costs and a $734,000 decrease in marketing programs.

Research and development.    Research and development expense decreased primarily as a result of salary reductions. We experienced a $1.6 million decrease in salaries, employee benefits and stock-based compensation expense, a $1.0 million decrease in temporary contractors and outside services and an $881,000 decrease in engineering consumables for prototypes and development of new products.

General and administrative.    General and administrative expense decreased primarily as a result of cost saving measures and salary reductions. We experienced a $628,000 decrease in third party services and a $552,000 decrease in salaries, employee benefits and stock-based compensation. These decreases were partially offset by an increase in bad debt expense of $305,000.

Interest income.    Interest income decreased by $236,000 from $260,000 in fiscal 2009 due to lower interest rates payable on available cash balances.

Interest expense.    Interest expense increased by $828,000 to $1.1 million in fiscal 2010 primarily due to interest payable on our long-term capital growth facility agreement entered into in April 2009.

Other income (expense), net.    Other income (expense), net decreased by $970,000 to $389,000 in fiscal 2010 primarily due to lower foreign currency exchange rate losses.

Benefit from income taxes.    Our benefit from income taxes increased by $390,000 to $1.3 million in fiscal 2010. This was primarily due to the increased expenses eligible for the United Kingdom research and development tax credit.

-70-

Unaudited quarterly results of operations

Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period to period basis may not be meaningful. A significant portion of our quarterly sales typically occurs during the last month of the quarter, which we believe reflects customer buying patterns of products similar to ours and other products in the technology industry, generally. You should not rely on our past results as an indication of our future performance. The unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include, in our opinion, all adjustments, which include only normal recurring adjustments, that we consider necessary for the fair presentation of the financial information set forth in those financial statements. As a result, our quarterly operating results are difficult to predict even in the near term.

	Three months ended
	May 1, 2010			July 31, 2010			October 30, 2010			January 29, 2011			April 30, 2011
	(in thousands, unaudited)
Consolidated statements of operations data:
Product revenue	$	14,103		$	15,473		$	17,319		$	19,655		$	19,596
Support revenue		4,511			4,588			4,778			5,162			5,116
Total revenue		18,614			20,061			22,097			24,817			24,712
Cost of product revenue		7,546			8,057			8,680			10,344			9,938
Cost of support revenue		1,395			1,528			1,579			1,682			1,815
Total cost of revenue		8,941			9,585			10,259			12,026			11,753
Gross profit		9,673			10,476			11,838			12,791			12,959
Sales and marketing		7,868			7,690			8,504			8,006			9,327
Research and development		3,775			3,875			4,260			4,500			4,966
General and administrative		1,464			1,226			1,447			1,140			1,614
Total operating expenses		13,107			12,791			14,211			13,646			15,907
Loss from operations		(3,434	)		(2,315	)		(2,373	)		(855	)		(2,948	)
Interest income		—			1			4			10			2
Interest expense		(339	)		(346	)		(337	)		(295	)		(284	)
Other income (expense), net		(136	)		(409	)		(208	)		187			(1,552	)
Loss before income taxes		(3,909	)		(3,069	)		(2,914	)		(953	)		(4,782	)
Benefit from income taxes		324			370			293			433			453
Net loss	$	(3,585	)	$	(2,699	)	$	(2,621	)	$	(520	)	$	(4,329	)

	Three months ended
	May 1, 2010			July 31, 2010			October 30, 2010			January 29, 2011		April 30, 2011
	(in thousands, unaudited)
Other financial data:
Adjusted EBITDA (1)	$	(2,514	)	$	(1,369	)	$	(1,361	)	$	98	$	(1,546	)

-71-

(1) We define Adjusted EBITDA as net loss excluding benefit from income taxes, other income (expense), net, interest expense, interest income, stock-based compensation and depreciation and amortization. Please see footnote 2 in the section titled “Selected consolidated financial data” for more information. We reconcile net loss to Adjusted EBITDA as follows:

	Three months ended
	May 1, 2010			July 31, 2010			October 30, 2010			January 29, 2011			April 30, 2011
	(in thousands, unaudited)
Net loss	$	(3,585	)	$	(2,699	)	$	(2,621	)	$	(520	)	$	(4,329	)
Benefit from income taxes		(324	)		(370	)		(293	)		(433	)		(453	)
Other income (expense), net		136			409			208			(187	)		1,832
Interest expense		339			346			337			295			284
Interest income		—			(1	)		(4	)		(10	)		(2	)
Stock-based compensation		279			314			297			227			321
Depreciation and amortization		641			632			715			726			801
Adjusted EBITDA	$	(2,514	)	$	(1,369	)	$	(1,361	)	$	98		$	(1,546	)

The following table sets forth our unaudited quarterly consolidated statements of operations data as a percentage of revenue:

	Three months ended
	May 1, 2010			July 31, 2010			October 30, 2010			January 29, 2011			April 30, 2011
	(unaudited)
Consolidated statements of operations data:
Product revenue		76	%		77	%		78	%		79	%		79	%
Support revenue		24			23			22			21			21
Total revenue		100			100			100			100			100
Cost of product revenue		41			40			39			42			40
Cost of support revenue		7			8			7			7			8
Total cost of revenue		48			48			46			49			48
Gross profit		52			52			54			51			52
Sales and marketing		42			38			38			32			38
Research and development		20			19			19			18			20
General and administrative		8			6			7			5			6
Total operating expenses		70			63			64			55			64
Loss from operations		(18	)		(11	)		(10	)		(4	)		(12)
Interest income		—			—			—			—			—
Interest expense		(2	)		(2	)		(2	)		(1	)		(1)
Other income (expense), net		(1	)		(2	)		(1	)		1			(6)
Loss before income taxes		(21	)		(15	)		(13	)		(4	)		(19)
Benefit from income taxes		2			2			1			1			2
Net loss		(19	)%		(13	)%		(12	)%		(3	)%		(17	)%

Revenue was flat in the three months ended April 30, 2011 due to seasonally reduced activity. In the three months ended January 29, 2011, our warranty-related expense increased by $449,000 due to higher reserves for certain components. In the three months ended January 29, 2011 and the three months ended April 30, 2011, our inventory reserve expense increased by $259,000 and $258,000, respectively, compared to the three months ended October 30, 2010. These expenses were for excess materials in the three months ended January 29, 2011 and excess materials and spare parts inventory amortization in the three months ended April 30, 2011. Sales and marketing expenses have generally increased sequentially in each of the quarters presented as we continue to add personnel and incur related costs to accommodate our growing business, with the exception of the three months ended January 29, 2011, during which we recognized a benefit of $508,000 for a change in estimate regarding commissions expense. We usually experience increased costs in the first quarter of each fiscal year due to some annual events and year end activities, such as audit.

-72-

Liquidity and capital resources

Since our inception, we have incurred significant losses and, as of April 30, 2011, we had an accumulated deficit of $230.3 million. We have funded our operations primarily with customer payments for our storage systems and services, proceeds from issuances of convertible preferred stock, borrowings under our long-term capital growth facility, the utilization of our accounts receivable credit line and the issuance of convertible promissory notes. From inception, we have sold an aggregate of $247 million of our convertible preferred stock, including the conversion or our convertible promissory notes. At April 30, 2011, we had cash and cash equivalents of $16.1 million, an unutilized accounts receivable credit line of $12.5 million, $7.5 million of debt outstanding on our long-term capital growth facility, and $686,000 of capital and $4.1 million of operating lease obligations. We had positive working capital of $17.7 million and $12.2 million as of January 29, 2011 and April 30, 2011, respectively.

We believe that our existing sources of liquidity and the proceeds of this offering will satisfy our working capital and capital requirements for at least the next 12 months. There can be no assurance, however, that we will be successful in executing our business plan, maintaining and growing our existing customer base or achieving profitability and realizing our working capital. Failure to generate sufficient revenue, achieve planned gross margins or control operating costs may require us to raise additional capital through equity or debt financing. Such additional financing may not be available on terms acceptable to us, or at all, and could require us to modify, delay or abandon some of our planned future expansion or expenditures or reduce some of our ongoing operating costs, which could have a material adverse effect on our business, operating results, financial condition and ability to achieve our intended business objectives. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Our accounts receivable based credit facility, which expires in December 2012, includes a material adverse change clause as a condition precedent to funding which allows the lender to withdraw any unutilized portion of the facility at the time we are notified of the occurrence of certain triggering events. In addition, our long-term capital growth facility is subject to interest-only payments through December 2011. However, if we do not meet certain performance criteria tied to a measure of our quarterly earnings for quarters through October 29, 2011, repayment of principal via monthly installments will be accelerated and will commence in the month following the determination that the performance criteria have not been achieved.

In summary, our cash flows were as follows:

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(14,059	)	$	(2,464	)	$	(11,529	)	$	(479	)	$	1,247
Investing activities		(2,833	)		(2,013	)		(3,920	)		(1,007	)		(1,118	)
Financing activities		21,719			1,383			20,682			2,653			(22	)
Net increase/(decrease) in cash and cash equivalents	$	4,827		$	(3,094	)	$	5,233		$	1,167		$	107

-73-

Cash flows from operating activities.    We have historically experienced negative cash flows from operating activities as we continued to expand our business and built our infrastructure. Our operating cash flow primarily depends on the timing and amount of cash receipts from our customers, inventory purchases and payments for operating expenses. Net cash used in operating activities for the periods presented consisted of net losses adjusted for certain noncash items and changes in assets and liabilities.

Three months ended May 1, 2010 compared to three months ended April 30, 2011.    For the three months ended April 30, 2011, revenue increased by 33% compared to the three months ended May 1, 2010. However, our net loss was higher due to a significant increase in noncash expenses related to fair value adjustments of warrant liabilities in the three months ended April 30, 2011. Increases in product sales, and a higher level of evaluation units led to an increase in the inventory balance during the period. The increase in use of cash was more than offset by higher accounts payables and accrued liabilities balances, primarily due to the timing of inventory purchases at the end of the quarter.

Fiscal 2010 compared to fiscal 2011.    For fiscal 2011, revenue increased 30%, resulting in a smaller net loss. Noncash expenses such as stock-based compensation and depreciation were lower while changes in the fair value of issued preferred and common stock warrants were higher in fiscal 2011. Substantial revenue growth in fiscal 2011 resulted in an increase in outstanding accounts receivable balances. The change in inventory in fiscal 2011 was not significant. However, in fiscal 2010 the change in inventory was a source of cash of $2.1 million. In addition, we applied the prepayments from HDS against the sales of our products to them. These increases in uses of cash were partially offset by higher accounts payable and accrued liability balances in fiscal 2011 as we increased our headcount and spending to support our growth.

Fiscal 2009 compared to fiscal 2010.    For fiscal 2010, revenue decreased 11%. However, we reduced our net loss by reducing our headcount and operating expenses to a greater extent. Noncash expenses such as stock-based compensation, depreciation and changes in the fair value of issued preferred stock warrants were higher in fiscal 2010. The lower sales and spending levels contributed to an overall decrease in cash used in operating activities as we had lower outstanding receivable and inventory balances. Deferred revenue increased because of a larger installed base purchasing our support services. A source of cash was prepayments from HDS in fiscal 2010 to be applied toward future sales. Declines in cash usage during fiscal 2010 were partially offset by a higher research and development tax credit receivable balance.

Cash flows from investing activities.    Cash flows from investing activities primarily relate to capital expenditures incurred to support our growth. In the three months ended April 30, 2011, our cash used for capital expenditures increased by 11% compared to three months ended May 1, 2010. During fiscal 2011, fiscal 2010 and fiscal 2009, our net cash used in investing activities was $3.9 million, $2.0 million and $2.8 million, respectively. The increase in capital expenditures in fiscal 2011 and the three months ended April 1, 2011 was due to increased investment in our engineering and lab equipment, and leasehold improvements at our offices in the United States and England.

Cash flows from financing activities.    Cash flows from financing activities primarily include net proceeds from issuances of convertible preferred stock and convertible promissory notes; proceeds and payments related to our accounts receivable credit line; proceeds from our long-term capital growth facility and payments on our capital lease obligations.

-74-

In the three months ended April 30, 2011, cash used in financing activities primarily consisted of payments related to our capital lease obligations, partially offset by proceeds from issuance of common stock resulting from exercise of stock options.

We generated $20.7 million of net cash from financing activities during fiscal 2011. In July 2010, we issued Series GG convertible preferred stock for net proceeds of $18.1 million and the conversion of promissory notes amounting to $2.7 million that were issued in connection with the Series GG financing.

We generated $1.4 million in net cash from financing activities in fiscal 2010, including $7.5 million borrowed from our long-term growth facility, offset by payment of $6.0 million on our accounts receivables credit line.

During fiscal 2009, we generated $21.7 million in cash from financing activities, primarily due to the net proceeds of $16.4 million received from the sale and issuance of our Series FF convertible preferred stock, and proceeds of $6.7 million from the issuance of convertible promissory notes and related warrants, offset by payment of $1.4 million on our accounts receivables credit line.

Off balance sheet arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose.

Contractual obligations and commitments

The following table summarizes our contractual obligations and commitments for principal and interest payments due on the long-term capital growth facility and lease payments as of January 29, 2011:

	Payments due by period
	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years
	(in thousands)
Debt payments	$	9,236	$	1,048	$	6,776	$	1,412
Operating lease obligations		4,193		992		1,997		1,204
Capital lease obligations		436		287		149		—
Component purchase obligations		10,809		10,809		—		—
Total	$	24,674	$	13,136	$	8,922	$	2,616

At January 29, 2011 we had a liability for unrecognized tax benefits of $202,000. Due to uncertainties with respect to the timing to future cash flow associated with our unrecognized tax benefits at January 29, 2011 we are unable to make reasonably reliable estimates of the period of cash settlement with the applicable taxing authority. Therefore, $202,000 of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 12 in the notes to our consolidated financial statements for a discussion of income taxes.

Our operating lease commitments primarily relate to the lease of our corporate headquarters in San Jose, California and our England office, and to a lesser extent, our leases for our sales offices in Germany, Australia and New Zealand.

Our capital lease consists of equipment financing arrangements with vendors.

-75-

To ensure uninterrupted supply, our contract manufacturer makes advance purchases of components based on the system unit forecasts we provide. To the extent these components are purchased by the contract manufacturer and cannot be used by their other customers, we are obligated to purchase these components. The amounts in the table above represent the maximum amount of purchase commitment that we may be obligated to pay within one year. The amount as of April 30, 2011 was $7.5 million. Actual amounts paid may be lower to the extent that the contract manufacturer can avoid purchasing components that are ultimately not needed. Additionally, we have an obligation to purchase components procured by our contract manufacturer if these components become obsolete. Accruals related to obsolete components purchased by the contract manufacturer were immaterial as of January 29, 2011 and April 30, 2011.

Quantitative and qualitative disclosures about market risk

Foreign currency risk.    A substantial portion of our sales are currently denominated in U.S. dollars. Our international research and development and sales operations incur expenses that are denominated in foreign currencies. Our international sales and operating expenses could be materially affected by currency fluctuations. Our exposures are to fluctuations in exchange rates primarily for the U.S. dollar versus the euro, the British pound, and to a lesser extent, the Australian, Canadian and New Zealand dollar. Any foreign currency transaction, defined as a transaction denominated in a currency other than the U.S. dollar, will be reported in U.S. dollars at the applicable exchange rate. Changes in currency exchange rates could adversely affect our consolidated results of operations or financial position. Additionally, our research and development operations maintain cash balances denominated in the British pound. In order to decrease the inherent risk associated with translation of foreign cash balances into our reporting currency, we have not maintained significant cash balances in foreign currencies. As of April 30, 2011, we had $420,000 of cash in foreign accounts. To date, we have occasionally used foreign currency forward contracts to manage our currency exposure to the British pound.

Interest rate sensitivity.    We had cash and cash equivalents of $16.1 million as of April 30, 2011. Our cash and cash equivalents are held primarily in cash deposits and money market funds. We hold our cash and cash equivalents for working capital purposes. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future interest income. During fiscal 2011, a 10% appreciation or depreciation in overall interest rates would not have had a material impact on our interest income.

-76-

Business

Overview

We are a leading provider of high performance, highly scalable networked storage systems for businesses of all sizes. Our storage systems deliver the levels of performance, scalability, versatility and simplicity required to cost effectively manage the rapid growth of unstructured data, making them particularly suited for data-intensive applications such as server and desktop virtualization and cloud-based computing. Reliance on email, business documents, web pages, digital images, audio and video, as well as the document retention and access requirements of regulatory compliance are driving the rapid growth of unstructured data. The proliferation of unstructured data and the need to manage and access it at scale has resulted in the demand for next-generation storage systems that minimize the complexities and overcome the performance limitations of existing storage systems. Our storage systems leverage our proprietary file system and flexible architecture to meet the needs of today’s most demanding applications and to manage unstructured data at scale. We enable our customers to more effectively explore, discover, research, create, process and innovate in performance sensitive and data intensive environments.

Our storage systems minimize the complexities and overcome the performance limitations of existing networked storage systems. We enable our customers to address storage bottlenecks and accelerate processes to achieve their critical business goals, including enhanced revenue generation and improved service offerings. Our massively parallel architecture is highly scalable and delivers sustained performance without feature degradation under increased workloads, unlike competing storage systems, which typically suffer from performance or feature degradation as the workload increases. Our storage systems combine our servers with our advanced, proprietary software suite, and use standard interfaces and multiple tiers of efficient enterprise-class storage devices to provide a wide variety of system configurations to our customers. We also sell our servers independently as a gateway solution that can be deployed in storage environments to enable file services for easier data sharing, simplified management, server and desktop virtualization and improved functionality. As of April 30, 2011, over 750 customers worldwide have deployed over 2,000 of our storage systems.

We believe that our networked storage systems address multiple end markets in light of the proliferation of unstructured data, the growing need to manage it at scale and the continuing shift to Internet Protocol networking. According to IDC, the NAS and iSCSI SAN markets are expected to grow from $8.1 billion in 2010 to $12.0 billion in 2014, representing a 10.2% CAGR. In addition, we believe that the Fibre Channel connectivity of our platform enables us to address the migration and transition away from Fibre Channel to next-generation storage systems that are optimized for unstructured data and file-based applications. Our storage systems are deployed throughout a wide range of organizations, from global businesses to small organizations with just one location. Our diverse customer base includes organizations in industries such as media and entertainment, e-Discovery, energy, the federal government, life sciences, Internet and cloud hosted service providers and other enterprises. We sell our storage systems through multiple channels which include our direct sales force, our extensive network of channel partners and an OEM agreement with HDS.

In fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, we had total revenue of $74.2 million, $65.9 million, $85.6 million and $24.7 million, respectively. In fiscal

-77-

2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, we incurred net losses of $19.6 million, $15.8 million, $9.4 million and $4.3 million, respectively.

Industry background

The amount of data used by businesses of all sizes globally is growing rapidly. IDC predicts that between 2009 and 2020, the amount of digital data in customer sites will grow to 44 times what it was in 2010—growing to 35 billion terabytes. Businesses are increasingly focusing on leveraging highly scalable, high performance file systems and related storage infrastructure as they seek to intelligently organize, manage, access and analyze growing amounts of data. Given the rapid pace of change in today’s markets, businesses seek solutions that can seamlessly scale as their business requirements evolve. In recent years, unstructured data has become increasingly critical to businesses. Reliance on email, business documents, web pages, digital images, audio and video, as well as the document retention and access requirements of regulatory compliance are driving the rapid growth of unstructured data across businesses. For example, computer-generated imagery for film, games and television and e-Discovery all require massive amounts of unstructured data to carry out their primary functions. In addition, system capabilities such as high scalability and parallel processing, once required only for specific HPC applications such as genomics, have become increasingly common for a wide variety of businesses. The growth in unstructured data, combined with advanced networking capabilities, increased disk capacities, improved computer processing capabilities and server and desktop virtualization have resulted in the need for next-generation data center technologies uniquely architected to meet the needs of today’s most demanding applications.

Key trends affecting growing data center environments

Proliferation of unstructured data.    As modern applications continue to grow in sophistication, they produce and require increasing amounts of unstructured data. The long-term storage and management of this unstructured data poses a significant challenge for businesses as the amount of unstructured data has grown exponentially, the commercial value of that data has increased and the need to store and access it for long periods continues. IDC estimates that worldwide enterprise storage capacity shipped for traditional unstructured data is expected to grow from 3,924 petabytes in 2010 to 22,930 petabytes in 2014, representing a CAGR of 55.5%. Unlike structured data, which is typically stored in databases, unstructured data is stored in file systems. The proliferation of unstructured data is driving a need for next-generation file systems and the related storage infrastructure to manage, move, protect and deliver growing amounts of unstructured data for businesses and consumers. These next-generation solutions must be high performance, flexible and scalable to address the rapid growth of unstructured data.

Growing performance demands.    As data sets have grown and the performance requirements to both process and manage them have increased, mainstream businesses and organizations increasingly require high performance, highly scalable storage systems that were previously only needed for HPC environments. At the same time, the storage system requirements to support HPC applications continue to increase. HPC applications, such as oil and gas exploration, animation rendering services and genomics, and emerging data-intensive applications, such as cloud-based services, e-Discovery and web analytics, are driving new performance and scalability requirements for networked storage. Growing performance burdens on storage infrastructure also result from greater numbers of files, concurrent users, demands for faster response times, increased sharing of data and the proliferation of server and desktop

-78-

virtualization. In addition, as businesses increasingly consolidate their data center footprint to achieve cost efficiencies, the performance and scalability requirements for storage intensify.

Focusing on reduced complexity and leveraging existing infrastructure.    To scale their infrastructure and manage growth in unstructured data, many organizations have deployed multiple disparate storage systems over time as their data needs have grown. This has resulted in overly complex infrastructure that is difficult and expensive to manage. To address these difficulties, businesses increasingly demand solutions that provide open architectures, are highly scalable and are interoperable with their existing data center deployments, enabling them to leverage significant existing infrastructure investments. Most businesses have traditionally selected either a SAN, which is optimized for structured, or block-level, data, or a NAS, which is optimized for unstructured, or file-level data. As businesses increasingly need to manage both types of data efficiently and cost effectively, they are looking for solutions that support interoperability and convergence of their SAN and NAS storage infrastructures.

Increasing use of virtualization technologies.    Increased adoption of server and desktop virtualization technologies has resulted in data center environments with dynamic storage requirements. Server virtualization technologies enable an administrator to use a software application to divide one physical server into multiple virtual servers, enabling multiple operating systems to run simultaneously on the same computer. Desktop virtualization environments provide multiple users with desktop processing and storage capabilities on a remote central server instead of on a local computer. As businesses increasingly adopt server virtualization technologies and consolidate their data center resources, independent storage resources become siloed, driving demand for solutions that enable the consolidation and centralization of these siloed storage pools. In addition, as businesses continue to adopt desktop virtualization technologies, their data centers are required to evolve to support simultaneous operations of a large number of virtual desktops, such as having multiple users log in at the same time. Increased use of server and desktop virtualization technologies within data centers has resulted in an exponential increase in requirements for high IOPs to support highly unpredictable traffic patterns within data centers. Storage infrastructure is frequently cited as the bottleneck in these highly virtualized environments.

Accelerating adoption of cloud-based architectures.    Cloud-based architectures, or architectures that enable the delivery of hosted on-demand services over the Internet, have gained prominence given their ability to provide cost effective support to multiple users while maintaining the security, agility and reliability of existing computing platforms. The proliferation of cloud-based architectures and data has resulted in the rapid growth of large data centers that require highly scalable networked storage with centralized management. The requirements of on-demand storage in cloud-based architectures are driving the need for storage technologies that deliver high efficiency across the storage infrastructure. To increase cost efficiency, storage architectures are increasingly incorporating tiering, which automatically routes and stores data in different storage media based on administrator-defined policies. Using cloud-based storage as one tier of the architecture reduces the cost of storing data. Many existing data center deployments were not optimized for current volumes of data and traffic or for the interoperability to offload data to a cloud-based tier of storage, making them difficult to scale and operate cost effectively.

Increasing focus on minimizing total cost of ownership.    To stay competitive, businesses have increasingly focused on lowering their operating costs, particularly information technology infrastructure costs. As data center infrastructure struggles to keep up with the growth in data,

-79-

there has been increased focus from businesses on managing operating costs and efficiently scaling capacity, or doing more with less. With increasing focus on budgets, businesses seek the flexibility to add only the capacity or additional IOPs needed on an incremental basis. Managing information technology infrastructure costs has also become increasingly complex as the rapid adoption of applications has competed with the need to manage mixed workloads across a shared network infrastructure environment.

Limitations of existing storage networking systems

We believe that existing storage systems do not fully address key requirements of businesses in today’s environment because they were not originally architected to address the scale of and broad prevalence of unstructured data. Key limitations of existing storage systems include:

Inability to manage unstructured data at scale.    Existing storage systems lack the performance and scalability to address the diversity of applications and the size and diversity of data sets that are now being generated across distributed storage resources. Most NAS systems are based on general purpose server technology running a proprietary operating system that has been optimized for file serving, creating a dedicated storage server appliance that is easy to deploy. Many existing NAS storage systems only support a small file system size, small storage capacity and a limited number of concurrent users. These network protocol, file system and storage management functions all contend for the same internal system resources. As the burden of the workload and the number of users increases, businesses are required to deploy additional devices, resulting in sprawling systems with very unpredictable performance that can drop off dramatically. Many alternative remedial solutions have been designed to scale capacity, bandwidth and processing power in unison, which results in over-provisioning of one of those areas, creating complexity and underutilization of resources.

Inability to manage complexities within data centers.    Businesses have often responded to data growth by using multiple storage systems with multiple file systems that, when combined together within a data center, result in an overly complex environment that is difficult to manage and results in excess capacity that cannot be used to address other needs. Many existing storage systems were based on proprietary platforms and are not interoperable with other components of the data center infrastructure. While both NAS and SAN have particular strengths, there remain challenges for the vast majority of businesses due to the lack of heterogeneous block and file support from the same system. SAN environments are not optimized to readily access file-based, unstructured data. In addition, most existing NAS deployments have been ineffective at achieving the performance and scalability of SAN deployments. Businesses increasingly need a storage solution that delivers the performance benefits of a SAN with the ability to work with large volumes of unstructured data.

Not optimized for virtualization.    Most existing networked storage systems were not architected to support data center environments that use server and desktop virtualization technologies. The use of server and desktop virtualization results in highly unpredictable traffic patterns and higher performance demands on storage systems, which combine to create significant performance degradation. Existing storage systems lack the performance and scalability necessary to satisfy the exponential increase in demand for IOPs within these environments, resulting in significant bottlenecks from storage systems.

Lack of support for cloud-based environments.    The proliferation of cloud-based environments has placed significant strains on data centers as unstructured data continues to

-80-

grow rapidly. The mix of unpredictable workloads pervasive in cloud environments causes existing network storage systems to experience performance degradation during periods of high demand. In addition, most existing storage systems do not provide support for the interoperability, information movement and management necessary for the deployment of cloud-based tiers of storage.

Total cost of ownership.    Limitations on performance, scalability and manageability have a direct impact on total cost of ownership. The use of multiple single-application storage systems and the proliferation of devices within data centers results in lower storage utilization and increased storage administration time. Siloed storage resources have resulted in higher energy use and physical footprint, increasing capital and operating costs for businesses that are looking to drive more utilization out of their infrastructure investments.

These dynamic requirements and challenges within data centers make it difficult for many storage systems to cost effectively address continually evolving business requirements. Market trends, such as the management of unstructured data and data center complexity at scale, virtualization and cloud computing and an increased focus on total cost of ownership make existing storage systems inadequate to address businesses’ storage systems problems today.

Our networked storage systems

We provide industry-leading storage systems that leverage our proprietary file system, SiliconFS, and flexible architecture to deliver intelligent data management functionality for our customers. Our massively parallel architecture is designed to overcome the data network bottlenecks created by existing storage systems and deliver superior performance across diverse workloads without sacrificing scalability, storage bandwidth, functionality or overall capacity. Through our intelligent file system architecture, we enable our customers to scale their infrastructure up, or enable higher performance out of a single storage system, and scale their infrastructure out, or enable multiple servers to be deployed seamlessly across data centers, to meet continually changing business and application requirements. Our intelligent file system architecture enables our customers to scale-right, or scale each of these attributes independently to their specific needs, and to run intensive data management applications seamlessly without burdening the performance of overall storage infrastructure.

-81-

BlueArc “Scale-Right” storage architecture

Our massively parallel architecture and highly scalable storage systems leverage a combination of standard FPGAs, as an offload engine for high speed data transfer and multi-core processors for intensive data management functions. This architecture, combined with SiliconFS, allows us to deliver the following benefits to customers:

Management of unstructured data at scale.    Our storage systems allow for the intelligent management of applications in data intensive environments and allow our customers to add storage systems, applications and data management features seamlessly without sacrificing performance or functionality. We believe our storage systems provide the most scalable solution in our product class, with the highest performance, as measured in IOPs, storage capacity up to 16 petabytes in a single system, throughput up to 1.5 gigabytes per second and the ability to configure clusters of up to eight servers. By scaling right, we also enable our customers to scale each of these attributes independently, significantly reducing the potential for underutilization of resources.

Ability to reduce complexity.    Our storage systems are often deployed as a consolidation platform for networked storage environments, reducing complexity and cost by eliminating excess storage systems. Due to their ability to handle diverse and unpredictable workloads, our storage systems serve as an ideal platform for the consolidation of applications, such as email, databases and home directories, on the same storage system. Our storage systems allow different users, applications, protocols and performance requirements to share storage resources and enable traditionally siloed pools of storage to be viewed and managed through our single cluster namespace, which enables a user to view clusters of multiple servers and file systems as if they are a single coherent unit. We architected our storage systems to be easily integrated into our customers’ data centers to simplify the integration and management of our storage systems. Our solution is a unified storage platform supporting both SAN and NAS file and management protocols.

-82-

Optimized for virtual environments.    Our architecture is ideally suited for large scale virtualized server and desktop environments because it delivers high levels of predictable performance for unpredictable workloads. In addition, our proprietary technology provides the ability to instantly create space-efficient, writeable copies of files for use in a wide variety of environments and run multiple simulations with large-scale data sets. This allows administrators to quickly deploy many new virtual machines without consuming additional disk storage space. Our differentiated solutions enable virtualized environments to achieve maximum utilization of storage resources and avoid performance bottlenecks, reducing the management time required and making the data center less complex and cumbersome to manage.

Support for cloud-based environments.    Our storage systems deliver high predictability, high performance and continuous availability across a variety of workloads. These characteristics allow our customers to easily scale their storage systems, applications and data management features without sacrificing performance, making our storage systems optimal for cloud-based environments. In addition, where most existing storage systems realize performance degradation as capacity begins to be utilized, our customers benefit from our predictable performance across a variety of complex workloads such as those associated with hosted security, storage and software models. Our open architecture provides and supports interoperability with cloud-based tiers of storage, allowing customers to seamlessly offload noncritical data to locations hosted offsite in public and private clouds. Our solutions enable businesses to easily manage the high growth of data in cloud-based environments without increasing complexity or unnecessary infrastructure costs.

Lower total cost of ownership.    We believe our storage systems enable our customers to achieve higher usable capacity per server and lower overall total cost of ownership. Given the high capacity, performance and scalability of our networked storage systems, our customers are able to realize cost savings and higher efficiencies from using fewer servers, smaller physical data center space and fewer administrators. Our storage systems also provide superior power efficiency, require less cooling and offer efficient space utilization. We enable our customers to scale performance, capacity and throughput independently when they need it, increasing efficiency and reducing upfront capital requirements. In addition, our platform is based on our open architecture, which supports interoperability within data center environments, enabling our customers to leverage their significant investments in existing infrastructure to achieve higher returns on investment and faster payback periods.

Our strategy

Our objective is to be the leading networked storage system vendor providing solutions to solve the challenges businesses face in managing unstructured data at scale. Key elements of our strategy include:

Extending our technology leadership and product breadth.    We intend to continue to innovate and to maintain our leadership position by leveraging our massively parallel architecture and file system. We believe that our innovative system architecture and design provide us with significant competitive advantages over existing storage systems for managing unstructured data at scale, including virtualized and cloud-based environments. We intend to continue to make investments to extend the performance leadership of our platform through both software and hardware improvements. We will continue to make significant investment in our SiliconFS file system that

-83-

enables customers to run more intensive applications on our systems, such as primary deduplication, while preserving the performance of the file system.

Continuing to deepen and expand our customer relationships and vertical market penetration.    We intend to expand our enterprise customer base by continuing to leverage our proven high performance technology and our diverse routes to market. We will continue to target customers who are increasingly dependent on storage performance and management of unstructured data at scale. We believe our deep customer relationships, service offerings and customer feedback programs enable us to better understand their challenges and determine the solutions that we can provide to better serve their needs as well as to identify areas of focus for our ongoing research and development activities. This positions us to sell additional products and services such as storage capacity and additional software functionality to address their growing demand for storage.

Continuing to expand our routes to market including direct and channel distribution.    We utilize a multi-channel go-to-market strategy through our direct sales effort, our extensive network of partners and our OEM relationship with HDS. We plan to continue optimizing our multi-dimensional go-to-market strategy to maximize our reach to customers. We plan to further invest in growing our direct, VAR and solution partners channels across various geographies. We will continue to evaluate additional OEM and strategic reseller partnerships to leverage their global reach and continue to drive our penetration into the enterprise.

Broadening our technology partnerships.    We intend to continue to leverage our existing platform by expanding our technology partnerships with infrastructure vendors, application vendors and storage suppliers. Broadening our partnerships with infrastructure vendors in particular vertical markets will provide us with additional competitive insights into those markets so we can continue tailoring our products to specific applications. We plan to enhance our partnerships with application vendors that benefit from running their applications in close proximity to the data set, as this will serve as a fundamental component of our software initiatives as we leverage the ability to run applications on the storage server itself. We continuously seek to expand our storage supplier relationships to offer customers a choice of storage arrays, to improve our supply chain and to encourage competitive pricing from our suppliers.

Case studies

Major Internet company using cloud computing.    Over the past year, a large worldwide Internet company made a strategic decision to move part of its business away from its existing storage vendor and implemented our SiliconFS file system due to its ability to meet the Internet company’s requirements. The Internet company consolidated data that was previously spread across many systems and moved its business data to our storage systems. The Internet company is now able to use our streamlined storage system environment to deliver the performance required to serve data, such as photos, video and email, at scale from the cloud.

Large airline.    In 2010, a large airline was looking for an optimal storage solution to deploy a large scale virtual desktop environment. The airline adopted our storage systems after evaluating competing solutions. Although it had adopted another company’s NAS solution for general file management, the airline selected our storage system because of our SiliconFS file system’s virtual desktop capabilities.

-84-

Major media and entertainment company.    In early 2010, one of the world’s largest movie, music and entertainment companies needed a more powerful solution for transcoding, which is the process of converting original content into an increasing variety of format outputs. Transcoding enables original content providers to stream full length motion pictures over the Internet for viewing on a laptop, game player or other device, each of which requires a separate file conversion. We collaborated with a transcoding software vendor to offer the entertainment company a unified solution. The entertainment company selected our storage solution based in part on our storage systems’ ability to handle the dynamic workloads involved in this data-intensive process, as well as our other high performance features that enable quick conversion of original source files. The high performance and quick conversion of our storage systems enabled the entertainment company to realize a faster time to revenue for its product.

Large oil exploration company.    One of the world’s largest publicly traded oil companies was interested in decreasing costs while increasing the performance of the primary applications used in the exploration for oil resources. The key application was a third party seismic data processing suite that was known for its high IOPs requirements. Our technology enabled the oil exploration company to complete a large consolidation of the oil exploration company’s legacy storage environment while significantly improving application performance. Subsequently, the oil exploration company’s Australian subsidiary decided to move all of its geophysical and commercial office applications to our platform. The oil exploration company now has our storage solutions in its four largest global exploration and production data centers that host high performance computing applications. Implementation of our storage systems reduced the time to complete its seismic processing work flows, reduced its information technology expense and enabled it to locate and exploit oil resources faster.

Products

We offer a range of storage systems to meet different performance, scalability and price points. Our storage systems share a common underlying architecture, with most software and file system features available across our product offerings. In addition, we offer a rich suite of software features organized into a comprehensive operating environment that includes the base operating system, licensed options for file services, data protection services, integration with system virtualization products and an extensive system management framework. To facilitate the sale of our platform and software products when sold as complete systems, we also offer a range of ancillary products that we purchase and resell, including storage arrays, Fibre Channel switches, equipment racks and other items.

With common software across all of our storage systems, customers have a choice of different price and performance points to meet their individual application requirements. All of our software features are available on our storage systems, including unique features that take advantage of our hybrid core design. Software updates with new features can be added as they become available.

High-end and mid-range storage systems.    Currently we designate our products as Mercury and Titan.

Our Titan storage systems offer competitive pricing with high-end performance, scalability and functionality for HPC environments. Our Titan product family consists of our 3200 series storage systems that are designed to meet the needs of customers seeking HPC solutions. Our Titan storage systems have been our performance flagship systems over three product generations for

-85-

the past seven years. Titan’s performance and scalability have doubled with each succeeding generation and offers a suitable storage solution for large-scale installations.

We leveraged the architecture of our HPC systems to expand our storage system offerings and address the mid-range market and tailor solutions for a broader array of customer needs. Our Mercury storage systems offer mid-range pricing with high-end performance, scalability and functionality. Our Mercury product family consists of our 55 and 110 series storage systems that are designed to meet the needs of mid-range storage customers.

The following table provides certain technical and performance statistics regarding our products:

	Mid-range			High-end
	Mercury 55	Mercury 110		Titan 3200
SPECsfs IOPs(1)	Up to 40,000		Up to 73,000	Up to 200,000
Data throughput per server(2)	up to 700 MB/sec		Up to 1,100 MB/sec	Up to 1,500 MB/sec
Maximum capacity(3)	4 PB		8 PB	16 PB
Ethernet network data ports(4)	Two 10 GbE + Six GbE		Two 10 GbE + Six GbE	Two 10 GbE
Fibre Channel storage ports(5)	Four 4 Gb		Four 4 Gb	Eight 4 Gb
Clustering interconnect ports(6)	Two 10 GbE		Two 10 GbE	Two 10 GbE

(1) Input/output operations per second are measured using the SPECsfs 2008 benchmark for Mercury 55 and Mercury 110 and SPECsfs 97_r1.v3 benchmark for Titan 3210. SPECsfs benchmarks are developed and published by Standard Performance Evaluation Corporation.

(2) Maximum data throughput capability in megabytes/second, or MB/sec for mixed read/write operations as measured using the IOzone benchmark.

(3) Maximum capacity is defined as maximum usable storage capacity in petabytes, or PBs.

(4) Ethernet LAN ports are used for LAN connectivity to enable client access to our platforms and operate at either 1 gigabit/second, or Gb/sec, or 10 Gb/sec each.

(5) Fibre Channel storage ports are used for connection to Fibre Channel switches and Redundant Array of Independent Drives, or RAID, disk arrays and operate at 4 Gb/sec.

(6) Clustering interconnect ports are used to connect two or more Mercury or Titan systems together in a high-availability cluster, and operate at 10 Gb/sec.

Our storage systems use open standards for both network and disk array connections, making integration into existing local area networks, or LANs, easy and enabling a range of different classes of disk array storage to meet various application requirements. Our customers can mix a range of storage media types, formats, capacities and speeds including solid state storage, SAS, Serial Attached ATA drives, Fibre Channel and tape libraries. This allows our customers to take advantage of the latest storage media to create different tiers of storage and to tailor their storage environments to specific budgets and application needs. Our storage systems can be clustered together to increase system availability and performance, offering a combination of scalability and performance growth over time.

Software.    Our highly integrated software suite offers users a base operating system and file services, optional licensed software functionality and an extensive system management framework. Our software suite enables users to quickly and cost effectively add new features to existing platforms, such as data protection, data management, virtualization and system management.

-86-

Base operating system and file services include:

• Object-based file system.    Our file system provides the flexibility and power to handle a variety of file sizes as well as several concurrent file system operations without impacting performance. Our file systems can scale up to 256 terabytes, support over 16 million files per directory and up to 128 separate file systems can coexist on any one of our platforms.

• Multi-protocol support.    We offer a unified network storage system with support for both block- and file-level data within a single system, enabling both block and file protocols to share common storage, features and administrative functions where possible and within one integrated platform.

• Snapshot backups.    Our snapshots offer the use of high speed point-in-time copy technology that provides rapid data protection, allows for quick and easy recovery of individual files that were accidentally deleted, lost or changed and requires no copying of data, significantly reducing amount of storage needed.

• Storage pools.    Our file system virtualizes physical storage through the creation of one or more storage pools that can be shared by multiple file systems, eliminating siloed storage and enabling all applications and users to securely access the storage pools as needed.

We intend to include a parallel file system option in NFS version 4.1 that will be based on the new industry standard, parallel network file system. Our design will distribute the contents of a data set or even a single large file across multiple storage systems that will work in parallel to read and write the data to a large number of clients, such as HPC computer servers or workstations, simultaneously, which will provide near-linear scaling of aggregated throughput and capacity as our customers add storage systems.

In addition to the base operating system, we offer our customers the following advanced software functionality options:

Advanced file services.

• Advanced name space services.    We offer a single namespace across all of our platforms in a cluster and also provide the capability to link in third party NAS platforms into the namespace to create a single virtual file system. This enables simplified provisioning, faster performance through load balancing between nodes and easier administration of consistent data protection, data management and security policies across the storage infrastructure.

• Advanced data caching services.    Our cluster read caching functionality caches commonly used files across multiple nodes in a cluster, improving performance for read-intensive applications. This functionality also simplifies administration for environments that have applications with unpredictable workloads.

• Data Migrator.    Our Data Migrator application enables data movement among tiers of storage by allowing automated and transparent data migration from one tier of storage to another based on predefined policies, rules and triggers. Our Data Migrator application also supports the use of external cross volume links, enabling customers to repurpose other NFS-compatible storage servers for use as data migration targets for archival data.

-87-

Advanced data protection services.

• High availability clustering.    Our clustering technology allows our storage systems to share access to the same storage resources and provide automatic fail over for data protection and continuous access in mission critical applications. Depending on the storage system, cluster configurations support anywhere from two to eight node configurations and offer increased application availability and simplified administration.

• Local and remote replication.    We offer a complete range of policy-based replication capabilities, including synchronous and asynchronous data replication at the block and file level for full or incremental copies as well as replication on the same system or to another geographically dispersed storage system. Using rule-based policies, administrators can create one or more copies of their data for local or remote backup or alternate use.

• Backup services.    We offer Network Data Management Protocol, or NDMP, and object-based backup capabilities for both SAN attached and LAN-based backup using a variety of commonly used third party backup software packages, and we support the use of most NDMP compatible tape libraries and virtual tape libraries as data repositories.

Advanced data management services.    We offer advanced data management services to facilitate the scheduling and movement of data to different tiers as needs to access the data change. Our data management features allow administrators to consolidate and manage block- and file-based data on a single storage system.

Advanced virtualization services.

• JetCenter.    For customers who are using VMware, we offer JetCenter, a plug-in storage management tool for VMware’s vCenter management suite. JetCenter enables easy management of various storage functions on our platforms, such as creation of clones of virtual machine environments and management of backup capabilities, from within the familiar vCenter environment.

• JetClones.    JetClones are an extension of our snapshot technology and provide file-level writeable snapshot capabilities, enabling users to make near-instant, space-efficient copies of entire virtual machine environments. Each clone can be mounted as a new, writable virtual environment for use by a VMware server and thousands of JetClones can be created within a single SiliconFS file system, making this technology especially attractive to customers deploying server and desktop virtualization solutions.

• Virtual servers.    Virtual servers allow administrators to create separate logical servers with their own IP addresses, security policies and management policies within a single storage system, providing for better use of available storage, elimination of hot spots and the ability to quickly add or move storage to other projects, or even other storage systems, in response to changes in the data center environment.

Extensive system management framework.    Our system management framework simplifies common storage tasks performed by administrators. When using our storage systems, administrators have the ability to create file services, data protection, data management and virtualization policies, as well as consistent security policies with multiple administrator roles and access privileges for managing storage and server resources.

-88-

Our external System Management Unit provides a web-based graphical user interface and a command line interface, or CLI, as well as keeping historical information, management system redundancy and administration functions. With an easy to use interface and an online documentation library, administrators can quickly and easily provision storage resources for immediate user access. Our system management framework allows users to take advantage of programming and scripting functionality or perform further integration of our storage systems with other applications via CLI and simple network management protocol capabilities.

Technology and architecture

Our high performance NAS systems are comprised of our highly parallelized operating system, file system and core software and run on industry-standard hardware components. Our system software is designed to concurrently take advantage of both multi-core X86 processors and standard FPGAs. Using this architecture, our storage systems are able to deliver high performance file serving at near line-speed levels, while simultaneously offering a range of data management and storage efficiency-related functionality.

Our file system, SiliconFS, is the core of our architecture and with our operating system runs across our entire product family. Our file system and operating system have over 10 years of development history and are optimized to address the diverse needs associated with managing unstructured data at scale.

We use open industry standards in our product portfolio whenever possible . We believe through incorporating open standards in our product portfolio we are able to drive significant benefit to our customers. Our storage systems are designed to communicate with users and applications running Windows, Unix/Linux operating systems and cloud protocols using industry standard file sharing protocols over 10 Gigabit and Gigabit Ethernet networks.

We designed our storage systems to minimize complexity within customer deployments. Our systems use a standards-based SAN protocol with the flexibility to communicate with a range of storage arrays which have been qualified by us in close cooperation with the storage array vendors. To mitigate the complexity of provisioning and managing large arrays of storage, our systems provide the ability to virtualize the attached storage to create large pools grouped by class or tier of storage. This approach delivers the performance and scalability typically associated with a SAN, while providing the clients with standard IP network-based protocols, including NFS for UNIX or Linux clients, CIFS for Windows clients and iSCSI for block-based storage needs. With the use of SAN protocols on our systems, backups and replication are handled in the high speed storage network, minimizing impact on the client network.

By enabling pooling of storage resources, our systems simplify the scalability of storage infrastructure, allowing multiple systems to communicate, replicate and share data access through a single name space across the entire cluster. Our systems incorporate a data migration mechanism that transparently migrates data to storage tiers based upon the customer-defined value of the data, resulting in better utilization of storage infrastructure. Another benefit associated with our systems use of a standards-based SAN is the ability to scale capacity and performance independently. Our systems can also aggregate throughput across nodes while still maintaining the ability to scale capacity independently.

The parallelism of our system software allows data management and storage efficiency tools to operate simultaneously without slowing down file access. This capability provides significant

-89-

benefit to performance-sensitive applications that run in close proximity to their dataset, such as deduplication. We are currently working on enhancing this on-board application environment. Applications currently under development within this framework include primary deduplication and cloud gateway connectivity.

Customers

Since inception, over 750 customers worldwide have deployed over 2,000 of our storage systems. We deploy our storage systems in a wide range of organizations, from large global enterprises with multiple locations to small organizations with just one location. Our customer base includes businesses and other organizations of all sizes across a variety of industries such as energy, the federal government, life sciences, Internet and cloud hosted service providers, media and entertainment and e-Discovery.

HDS accounted for 22%, 30%, 41% and 45% of our revenue in fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively. No other customer accounted for 10% or more of our revenue in fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011. In fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, sales to customers outside the United States represented 30%, 24%, 30% and 30% of our revenue, respectively.

Sales and marketing

We sell our storage systems to businesses and organizations of all sizes through multiple channels, which include our direct sales force, our extensive network of channel partners and a global OEM agreement with HDS. As of April 30, 2011, we had 115 employees in sales and marketing located in North America, Europe and Australia.

We have a variety of marketing programs designed to create brand recognition and market awareness for our product offerings and for qualified sales lead generation for our direct sales force and partners. Our marketing efforts include trade shows, technical conferences and technology seminars, advertising, publication of technical and educational articles in industry journals and sales training.

In addition, our strategic partners augment our marketing and sales campaigns through seminars, trade shows and joint advertising campaigns. Our customers and strategic partners provide references and recommendations that we often feature in our advertising and promotional activities.

Support and services

Customer services.    We offer services that supplement the basic product warranty we provide. The services are provided globally and offer various levels of remote support, parts delivery and field support.

Our customer service organization provides the following services and support:

• Toll-free phone, web and email support, 24 hours a day, 7 days a week, 365 days a year;

• Proactive remote system monitoring through a Callhome email system that allows automation and advanced product analytics to both monitor individual customers and population changes;

-90-

• Onsite troubleshooting, service and system hardware and software upgrades;

• Parts fulfillment, tiered delivery based on service level; and

• Remote service capability to aid in remote troubleshooting and advanced diagnostic tools.

Technical assistance centers.    We have centralized support call centers in the United States and England running 24x7 as complete Technical Assistance Centers, or TACs, enabling phone, email and remote monitoring of customer systems. The call centers are responsible for the traditional Level One, Two and Three support layers, case management and field replacement dispatch.

Worldwide parts fulfillment.    Our customer services organization provides the logistics management related to worldwide parts replacement and returned materials authorization, as well as managing the failure analysis process and corrective action reports for customers.

Integrated serviceability.    Our storage systems include a built-in reporting capability that provides system status monitoring and enables our TACs to respond to critical alerts. Our support personnel are able to leverage these management capabilities to better diagnose and resolve field issues.

Standard service plans.    We offer the following service plans:

• Hardware service plans

• 3 year warranty;

• Standard plan provides next business day parts delivery;

• Premium plan provides 4 hour parts delivery;

• Secure standard to enable parts retention; and

• Secure premium to enable parts retention.

• Software services

• 90 day warranty; and

• Can be extended to co-terminate with any of the available hardware plans.

Authorized service providers.    We have Authorized Service Provider programs for our partners designed to enable key strategic OEM and channel partners to select from a range of services and support strategies to fit their business. We can enable partners to offer their own support contracts and provide their own level 1 and level 2 support processes.

Direct professional services.    We develop and deliver professional service offerings to our end user customers. Our professional services offerings are designed to help our customers with the initial implementation of our technology and the scaling of our storage systems. Our professional services typically are used to help our customers through transitional events associated with changes to their business or information technology infrastructure.

Our professional services offerings include:

• Installation, upgrade and expansion services;

• Data center relocation services;

-91-

• Design and architecture services;

• Optimization services for management and operation;

• Replication services;

• Data migration services;

• Performance analysis services;

• Assessment services;

• Technical account management;

• On-site enterprise support engineers; and

• Custom services.

As of April 30, 2011, we had 44 employees in support and services.

Distribution

HDS OEM relationship. In November 2006, we entered into the MDA with HDS, which had an initial term of five years and has since been extended to July 31, 2013. Under this agreement, HDS combines our SiliconFS file system and related software with its disk arrays and sells the combined product as its HNAS system. HDS provides its own Level 1 and 2 support for the combined offering, which consists primarily of providing initial telephone support and problem resolution to customers, and we provide support for higher level issues. For fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, HDS accounted for 22%, 30%, 41% and 45%, respectively, of our revenue.

The MDA commits HDS to purchase specified dollar amounts of our product offerings through September 2011. Under the MDA, during fiscal 2010 and fiscal 2011, HDS prepaid $10.0 million and $5.0 million, respectively, for future purchases of our products. As partial consideration for these prepayments, during fiscal 2011 we issued to HDS vested warrants to purchase 206,184 shares of our common stock with a per share exercise price of $1.94 and expiration in 2017. We determined the fair value at issuance was $222,000 and recognized as a reduction in revenue upon HDS’ purchase of products using the prepayment.

During fiscal 2011, HDS paid us $1.5 million for certain research and development projects. We recognized these amounts as a reduction in research and development expense as the associated projects were conducted. As of April 30, 2011, $537,000 remained included in customer deposits in our balance sheet. We have also received fees from HDS for an inventory supply agreement, whereby we set aside certain inventory quantities to be available for them as needed. The amount of support fees recognized for this service was $112,000, $682,000 and $321,000 in fiscal 2009, fiscal 2010 and fiscal 2011, respectively. This inventory arrangement expired at the end of fiscal 2011.

During fiscal 2009, we issued HDS vested warrants to purchase 151,418 shares of our common stock with a per share exercise price of $4.13 and a fair value at issuance of $194,000. The warrants were issued upon HDS’ achievement of specified revenue milestones for the sale of our products. These warrants expired unexercised in fiscal 2011. We recognized fair value of these warrants as a reduction in revenue.

-92-

Although the MDA prevents either party from soliciting the other party’s employees, it does not prohibit either party from competing in each other’s respective markets or from approaching the other party’s customer prospects for future business. We are obligated under the MDA to provide HDS with the same or better pricing than we provide any other similarly situated distributor, reseller or OEM.

After July 31, 2013, our MDA with HDS automatically renews for successive one-year periods, unless canceled by either party 60 days prior to the annual renewal date. In addition, either party may terminate the MDA with prior written notice if the other party commits a material breach that is not cured within a specified period.

Value added resellers and other channel partners. We enter into agreements with VARs and other channel partners to provide our storage systems to their customers. As of April 30, 2011, we had effective agreements with 140 VARs and other channel partners. These agreements provide for and establish our channel partners as independent, nonexclusive resellers of our products solely to end users located within their territories as mutually agreed. The terms of these agreements are typically one year, with automatic annual renewals unless one of the parties indicates their intention not to renew by providing written notice at least 30 days prior to the renewal date. None of our VARs or other channel partners have minimum purchase commitments. None of our VARs or other channel partners accounted for more than 10% of our revenue in fiscal 2009, fiscal 2010, fiscal 2011 or the three months ended April 30, 2011.

Manufacturing

We outsource the manufacturing of our storage systems, as well as their assembly, testing and integration. Our manufacturing partner, Sanmina-SCI, provides us with a limited warranty to cover workmanship and manufactures all products in accordance with our specified tests and processes. Disk storage array and switch partners provide limited warranties for their hardware and software. Our storage systems are based on a common physical chassis, common modules, switches and disk storage components enabling Sanmina-SCI to more easily respond to changes in our storage systems without significant delay or increased costs.

We are party to a Manufacturing Services Agreement dated October 19, 2006 with Sanmina-SCI that had an initial term of one year. This agreement has one year automatic renewals of its term absent termination by either party for any reason by providing the other party with written notice at least 30 days prior to the expiration of each such one year period. Otherwise, Sanmina-SCI may terminate our agreement at any time upon 60 days notice. We may terminate the agreement for any reason upon 30 days prior written notice.

We forecast our supply requirements on a rolling 12-month basis and provide that forecast to Sanmina-SCI and key component suppliers. At any given time, we have firm purchase orders with Sanmina-SCI for three months of supply and nine additional months of forecast horizon. We review actual demand and supply on a weekly basis and adjust orders as required. The use of three months of confirmed, forward purchase orders provides Sanmina-SCI the lead time, if required, to qualify or source material from additional suppliers.

We incorporate disk arrays into our storage systems, which we source from Engenio under our OEM License and Distribution Agreement dated November 12, 2003. Our OEM agreement with Engenio had an initial term of two years and has one year automatic renewals. However, either

-93-

party may terminate the agreement at any time and for any reason upon 30 days’ prior written notice. Engenio was recently acquired by NetApp.

We use multiple component sources and realize competitive pricing and sufficient supply by balancing order quantities between suppliers. We also leverage the supply chain of our vendors to reduce our inventory levels and minimize interruptions in our supply chain.

The lead times associated with certain components are lengthy and preclude rapid changes in quantity requirements and delivery schedules. Some of these components are available only from single or limited sources of supply. For example, our products use FPGAs that are manufactured by Altera and disk drives that are manufactured by Seagate and Hitachi GST. We do not have a long-term agreement with Altera with respect to the supply of the FPGAs.

Competition

The market for our products is highly competitive and we expect competition to intensify in the future. Currently, we face competition from a number of established companies, including EMC, HP, IBM and NetApp. We also face competition from smaller, privately held companies and could face competition from new market entrants, whether from new ventures or from established companies moving into our industry. In addition, we compete against internally developed storage systems as well as combined third party software and hardware systems. A number of new, privately held companies are currently attempting to enter our market, some of which may become significant competitors in the future.

Our ability to compete effectively in our target markets depends on a number of factors, including:

• our ability to effectively respond to aggressive business tactics by our competitors, including selling at a discount or asserting intellectual property rights irrespective of the validity of the claims;

• our storage systems’ scalability, performance, quality, ease of use and cost effectiveness relative to that of our competitors’ storage systems;

• our storage systems’ interoperability with various operating systems, software applications, data access protocols and other storage systems;

• our success in developing and using new and proprietary technologies to offer products and features previously not available in the marketplace;

• our ability to attract and retain other VARs and OEMs;

• our success in identifying new markets, applications and technologies;

• our ability to continue to establish greater name recognition and build upon our reputation in the industry;

• our ability to recruit development engineers and sales and marketing personnel; and

• our ability to protect our intellectual property.

With respect to these factors, based on publicly available data, we believe that we compete favorably on performance, scalability and total cost of ownership, and that our ease of use and reliability are comparable to market competitors, based on our customer feedback.

-94-

Research and development

Since our inception we have made substantial investments in research and development. We have research and development facilities in San Jose, California and Bracknell, England. As of April 30, 2011, we had 106 employees in research and development. Our focus is to maintain and enhance our current storage systems, develop new products that achieve market acceptance, maintain technological competitiveness and meet an expanding range of customer requirements. A substantial majority of our research and development employees focus on software development.

Our total expenses for research and development for fiscal 2009, fiscal 2010, fiscal 2011 and the three months ended April 30, 2011 were $18.3 million, $13.8 million, $16.4 million and $5.0 million, respectively.

Intellectual property

Our success depends in part upon our ability to develop and protect our core technology and intellectual property. We rely primarily on a combination of trade secret, patent, copyright and trademark laws, as well as contractual provisions with employees and third parties, to establish and protect our intellectual property rights. Our products are provided to customers pursuant to agreements that impose restrictions on use and disclosure. Our agreements with employees and contractors who participate in the development of our core technology and intellectual property include provisions that assign any intellectual property rights to us. In addition to the foregoing protections, we generally control access to our proprietary and confidential information through the use of internal and external controls.

As of April 30, 2011, we held five U.S. patents expiring between August 2020 and June 2025 and also had 14 U.S. patent applications pending, of which 12 were nonprovisional patent applications, or patent applications that are examined on their merits by the U.S. Patent and Trademark Office, and two were provisional patent applications, or patent applications filed for purposes of establishing priority that cannot result in an issued U.S. patent unless they are first converted to nonprovisional patent applications. We also held four issued foreign patents and had 16 foreign patent applications pending, of which 15 were applications filed in individual countries and one was an international application that cannot result in an issued foreign patent unless it is first converted into one or more national patent applications. Pending patent applications may receive unfavorable examination and are not guaranteed allowance as issued patents. We may elect to amend, abandon or otherwise not pursue prosecution of certain pending patent applications or of certain inventions disclosed in those patent applications due to patent examination results, strategic concerns, economic considerations or other factors. To the extent that a patent is issued, any such issued patent may be contested, circumvented, found unenforceable or invalidated, and we may be unwilling or unable to prevent third parties from infringing a particular patent. Moreover, there can be no assurance that we can successfully use our patents to prevent competitors from copying our products or developing competing technologies. We will continue to assess appropriate occasions to seek patent protection for aspects of our technology that we believe provide us a significant competitive advantage in the market.

We have registered the trademarks BLUEARC (either as one or two words) and our logo in Belgium, Canada, China, the European Union, France, Hong Kong, Israel, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Russia, Saudi Arabia, Singapore, South

-95-

Africa, South Korea, Switzerland, Taiwan, Thailand, Turkey, Ukraine and the United States. In Australia and India certain classes of trademarks for BLUEARC (either as one or two words) and our logo have been registered and applications for other classes are pending.

The pending applications in Australia were initially rejected by that country’s trademark authority because third parties have filed trademark applications for similar marks, and for issues regarding the proper classification of some of the services listed. Our objection to an Australian web design firm’s use of the BLUEARC name has prompted that firm to challenge our Australian trademark registration, and we intend to defend against their claims in a hearing scheduled for July 2011.

BLUEARC MERCURY is registered in the European Union and is pending in the United States and Canada.

We have trademark applications for JETCENTER, JETCLONE and JETMIRROR pending in Canada, the European Union and the United States.

Although we rely on patent, copyright, trade secret, trademark and other intellectual property laws to protect our technology, we also believe that factors such as the technological and creative skills of our personnel, new product developments, frequent product enhancements and reliable product support and services are essential to establishing and maintaining a technology leadership position. We cannot be sure that others will not develop technologies that are similar or superior to our technology.

Despite our efforts to protect the intellectual property rights associated with our technology, unauthorized parties may still attempt to copy or otherwise obtain and use our technology. Moreover, it is difficult and expensive to monitor whether other parties are complying with patent and copyright laws and their confidentiality or other agreements with us and to pursue legal remedies against parties suspected of breaching our intellectual property rights.

Third parties could claim that our products or technologies infringe or misappropriate their proprietary rights. Our industry is characterized by the existence of a large number of patents, trademarks, trade secrets and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We may in the future be sued for violations of other parties’ intellectual property rights and the risk of such a lawsuit will likely increase as our size and market share expand and as the number of products and competitors in our market increase.

Employees

As of April 30, 2011, we had 296 employees in offices across North America, Europe and Australia including 115 employees in sales and marketing, 106 in research and development, 44 in support and services and 31 in finance, administration and operations. We consider our current relationship with our employees to be good. None of our employees are represented by labor unions or have collective bargaining agreements.

-96-

Properties

Our principal administrative, sales, marketing, customer support and research and development facility is located at our headquarters in San Jose, California. We currently lease approximately 41,772 square feet of office space at the San Jose facility pursuant to a lease that expires in August 2014. In addition to our headquarters, we lease approximately 12,191 square feet of office space in Bracknell, England for research and development, as well as European sales and our lease for this facility expires in October 2015. We also have a sales office in Germany of approximately 345 square feet. Additionally, we have virtual offices which provide mail, phone and voicemail forwarding services in Australia and New Zealand pursuant to service agreements which expire November 30, 2011 and October 31, 2011, respectively. From time to time we rent conference rooms at our virtual offices for sales meetings with potential customers.

We believe that our existing properties are in good condition and are sufficient and suitable for the conduct of our business. We intend to add new facilities or expand existing facilities as we add employees or expand our markets and we believe that suitable additional space will be available as needed to accommodate any such expansion of our operations.

Legal proceedings

We are currently not a party to any material legal proceedings. From time to time, we may be involved in legal actions arising in the ordinary course of business.

-97-

Management

Executive officers and directors

The following table sets forth information regarding our executive officers and directors and their ages as of April 30, 2011:

Name	Age		Position
Michael B. Gustafson		44	President, Chief Executive Officer and Director
Rick Martig		48	Chief Financial Officer
Shmuel Shottan		59	Chief Technology Officer
Christopher J. McBride		48	Senior Vice President, Global Customer Operations
David A. de Simone		56	Senior Vice President, Product and Technology Operations
Bridget Warwick		49	Senior Vice President, Marketing & Business Development
Christopher P. White		45	Vice President, Global Channel Sales
Paul S. Madera(2)		54	Director
David N. Martin		66	Director
Gary J. Morgenthaler(1)(2)(3)		62	Director
Michael J. Stark(3)		55	Director
José F. Suarez(1)(2)(3)		42	Director
Duston M. Williams(1)		52	Director

(1) Member of our audit committee.

(2) Member of our compensation committee.

(3) Member of our nominating and corporate governance committee.

Executive officers

Michael B. Gustafson has served as our Chief Executive Officer and a director since May 2005, and as our President since June 2004. From April 1998 to May 2004, Mr. Gustafson served in various executive capacities as an officer of McData Corporation, an enterprise-level storage network company. His most recent positions at McData included Senior Vice President of Marketing and Senior Vice President of Sales. From 1989 to 1998, Mr. Gustafson served in various sales management positions for IBM Corporation, a global information technology systems and services company. Mr. Gustafson received a B.S. and B.A. from Washington University in St. Louis. We believe Mr. Gustafson possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience as a senior executive in the storage technology industry and the operational insight and expertise he has accumulated as our President and Chief Executive Officer.

Rick Martig has served as our Chief Financial Officer since July 2008. From November 2007 to July 2008, Mr. Martig served as Senior Vice President of Finance and Chief Financial Officer of Genesis Microchip, Inc., a supplier of integrated circuits. From 1995 to November 2007, Mr. Martig served in various positions with Xilinx, Inc., a supplier of programmable logic devices, most recently as Senior Director of Worldwide Corporate Finance and previously as Senior Director Controller of all business units within Xilinx. Mr. Martig received a B.S. from Santa Clara University and an M.B.A. from Saint Mary’s College.

-98-

Shmuel Shottan has served as our Senior Vice President of Product Development since August 2001 and as our Chief Technology Officer since January 2005. From September 2000 to July 2001, Mr. Shottan served as Chief Strategy Officer for SNAP Appliances, Inc., a network storage spin-off from Quantum Corporation. From August 1999 to September 2000, Mr. Shottan served as a General Partner of Quantum Technology Ventures, a storage focused venture fund. From September 1994 to July 1999, Mr. Shottan served as Senior Vice President of engineering and Chief Technology Officer at Meridian Data, Inc., a network storage solutions company, where he led the development of the Snap Server. Prior to Meridian Data, Mr. Shottan held engineering development and management positions at Parallan Computer, Inc. and AST Research. Mr. Shottan received a B.S.E.E. degree from the Technion Institute of Technology in Israel.

Christopher J. McBride has served as our Senior Vice President, Global Customer Operations since December 2007 and from March 2007 to December 2007, served as our Vice President of Global Services. Prior to joining us, Mr. McBride served as a sales executive at Emulex Corporation, a networking company, from May 2006 to February 2007. From August 2004 to May 2006, Mr. McBride also served as a senior sales executive at Aarohi Communications, Inc., a semiconductor company acquired by Emulex in 2006. Before that, from October 1999 to July 2004, Mr. McBride served in various positions for McData, including Vice President of Sales—Americas. Prior to working for McData, Mr. McBride served in various sales and management positions from July 1995 to September 1999, at CompuCom Systems, Inc., a systems integrator for enterprise customers in the U.S. Prior to that, he served in various sales and management roles at IBM, a global IT systems and services company, from July 1987 to June 1995. Mr. McBride received an M.S. and a B.S. from Auburn University.

David A. de Simone has served as our Senior Vice President, Product Operations and Technology since June 2011. From September 2003 to June 2011, Mr. De Simone served in various capacities at Blue Coat Systems, Inc., a network technology company, most recently as its Senior Vice President, Products and Technology. Mr. de Simone previously held positions at Brocade Communications Systems, Inc., a provider of storage area networking products, Tandem Computers, an enterprise computer company, and Compaq Computer Systems, a computer systems company, after its acquisition of Tandem. Mr. de Simone holds a B.S.E.E. from the University of California, Davis.

Bridget Warwick has served as our Senior Vice President Marketing since February 2009. From February 2007 to February 2009, Ms. Warwick was self employed as an individual investor. From April 1997 to February 2007, Ms. Warwick served in various positions with NetApp, Inc., a network storage company, including most recently as its Vice President of Business Operations. From June 1995 to April 1997, Ms. Warwick served as Network Architect for Octel Communications Corporation, a telecommunications company. Ms. Warwick received a B.A. from Sheffield University in England.

Christopher P. White has served as our Vice President, Global Channel Sales since June 2011. Prior to joining us, Mr. White served as a Senior Director of Channel Sales at NetApp, Inc. from October 2009 to June 2011. From December 2000 to October 2009, with the exception of a period of time from July 2007 to August 2007, Mr. White held various sales management roles at Veritas Software Corp., a storage management software company, and Symantec Corporation, a security software company (Veritas was acquired by Symantec in July 2005). From July 2007 to August 2007, Mr. White was employed at CommVault Systems, Inc., a provider of enterprise backup

-99-

software, as Director of Sales, West Area before rejoining Symantec Corporation. Before that, from June 1999 to December 2000, Mr. White held the position of National Director of Sales at Virtual Growth, Incorporated, a financial application services provider. Prior to that, from February 1994 to June 1999, Mr. White served in various sales and management positions at Automatic Data Processing, Inc., a provider of payroll services. Previous to that Mr. White held various sales roles in the pharmaceutical industry with Boehringer Mannheim Group, Syntex Laboratories Inc. and Ortho Pharmaceutical Corporation. Mr. White received a B.A. from the University of California at Irvine.

Directors

Paul S. Madera has served as one of our directors since July 2003. Mr. Madera currently serves as Managing Director of Meritech Capital Partners, a venture capital firm he cofounded in June 1999, where he focuses on investing in the storage, semiconductor and digital consumer sectors. In July 2003, Meritech led a round of equity financing which invested in us. Before founding Meritech, Mr. Madera held various positions at Montgomery Securities/Banc of America from 1994 to 1999 including Managing Director and Head of the Private Equity Group. Prior to joining Montgomery, Mr. Madera was an investment banker with Morgan Stanley & Co. in New York. Mr. Madera also serves as a director to a number of private companies, including DealerSocket, Inc., a developer of customer relationship management technology, Openlane, Inc., a company in the automotive wholesale market, and Force10 Networks, Inc., a network technology company. He also serves as a board observer at Facebook, Inc., the social networking company, Wonga Ltd., a UK-based short term lending company, as well as Glaukos, Inc., a medical device company. Mr. Madera received a B.S. from the United States Air Force Academy and an M.B.A. from the Stanford Graduate School of Business. We believe Mr. Madera possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience in the venture capital and investment banking industries.

David N. Martin has served as one of our directors since September 2010. Mr. Martin currently serves as Founder and Managing Director of 280 Capital Partners, a private equity firm he cofounded in January 2008. From January 2006 to May 2007, Mr. Martin served as a CEO in Residence at Warburg Pincus LLC, a global venture capital and private equity firm. From October 2003 to July 2005, Mr. Martin served as Chairman and Chief Executive Officer of Qlusters, Inc., a utility computing software company. From July 1996 to October 2003, Mr. Martin served as Chairman and Chief Executive Officer of Entegrity Solutions Corporation, an Internet software and services provider. Prior to Entegrity, Mr. Martin also was an Executive Vice President and Board member at National Semiconductor Corporation and Chief Executive Officer of National Advanced Systems Co. Ltd., the predecessor company to HDS. Mr. Martin received a B.S.E. from Princeton University. We believe Mr. Martin possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as an executive in the technology and private equity industries.

Gary J. Morgenthaler has served as one of our directors since May 2006. Mr. Morgenthaler has served as General Partner of Morgenthaler Ventures since December 1989. Mr. Morgenthaler was a cofounder and Chief Executive Officer and Chairman of Illustra Information Technologies, Inc., a relational database software company, from 1992 to 1996. From 1980 until 1989, Mr. Morgenthaler served as a cofounder, Chief Executive Officer and Chairman of Ingres

-100-

Corporation, a leading relational database software company. Before that, Mr. Morgenthaler served as a management consultant with McKinsey & Co., a global management consulting firm. Mr. Morgenthaler also serves as a director to a number of private companies, including Nominum, Inc., an Internet software company, OneChip Photonics Inc., a provider of optical transceiver solutions, Orb Networks, Inc. a provider of digital media streaming solution and Overture Networks, Inc., a provider of Carrier Ethernet solutions. Mr. Morgenthaler received a B.A. degree from Harvard University. We believe Mr. Morgenthaler possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience as a venture capitalist and technology executive.

Michael J. Stark has served as one of our directors since January 2008. Since January 1999, Mr. Stark has been founder and General Partner of Crosslink Capital, Inc., a venture capital and growth equity investment management firm. Mr. Stark served as Managing Director of Crosslink Capital, which was a business unit of Robertson Stephens from 1992 to December 1998. Mr. Stark was a research analyst with Robertson Stephens from 1983 to 1989. Before joining Robertson Stephens, Mr. Stark worked in Intel Corporation’s strategic planning group. Mr. Stark also serves as a director for a number of private companies, including Livescribe, Inc., a provider of low-cost mobile computing platforms, ReVera Incorporated, a semiconductor company and SiliconBlue Technologies Corporation, a semiconductor company. Mr. Stark received a B.S. from Northwestern University and an M.B.A. from the University of Michigan. We believe Mr. Stark possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experience as an executive in the venture capital industry and as a board member of other privately held companies.

José F. Suarez has served as one of our directors since July 2010. Mr. Suarez has served as Managing Director of Investor Growth Capital, the venture capital arm of Investor AB, a Nordic industrial holding company, since January 2007. From August 2003 to December 2006, Mr. Suarez served in various roles at Investor AB, most recently as a Vice President. Mr. Suarez is currently a director of Atrenta, Inc., a electronic design automation company, Chelsio Communications, Inc., a provider of networking solutions, eSilicon Corporation, a semiconductor design company, ExaGrid Systems Inc., a provider of disk-based backup solutions, Innovative Micro Technology, Inc., a semiconductor manufacturing company, Magnum Semiconductor, Inc., a provider of broadcast infrastructure media processors and Millennium Microtech Group, a semiconductor company. Mr. Suarez received a B.A. from Dartmouth College. We believe Mr. Suarez possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as a director of technology companies and his background in the venture capital industry.

Duston M. Williams has served as one of our directors since October 2007. Mr. Williams has served as Chief Financial Officer of SandForce, Inc., a data storage company, since March 2011. From July 2010 to February 2011, Mr. Williams served as Chief Financial Officer of Soraa Inc., a semiconductor company. From June 2006 to June 2010, Mr. Williams served as Chief Financial Officer of Infinera Corp., a digital optical networking company. From December 2004 to June 2006, Mr. Williams was Executive Vice President and Chief Financial Officer of Maxtor Corporation, an information storage solutions company. From July 2003 to November 2004, Mr. Williams served as Chief Financial Officer of Aruba Networks, Inc., a wireless network infrastructure company. From July 2001 to February 2003, Mr. Williams served as Chief Financial Officer of Rhapsody Networks, Inc., a storage networking provider. Mr. Williams also spent 14 years at Western Digital Corporation, a disk drive company, including four years as Chief

-101-

Financial Officer. Mr. Williams holds a B.S. from Bentley College and an M.B.A. from the University of Southern California. We believe Mr. Williams possesses specific attributes that qualify him to serve as a member of our board of directors, including his deep financial and accounting background and his extensive experience in the storage and networking industries.

Board composition

Our board of directors currently consists of seven members. Our bylaws permit our board of directors to establish by resolution the authorized number of directors, and seven directors are currently authorized.

Board composition and risk oversight

Following the completion of this offering, at each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the class whose term is then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during 2012 for the Class I directors, 2013 for the Class II directors and 2014 for the Class III directors.

• Our Class I directors will be Messrs. Morgenthaler and Stark.

• Our Class II directors will be Messrs. Madera, Martin and Suarez.

• Our Class III directors will be Messrs. Gustafson and Williams.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the number of our directors shall be fixed from time to time by resolution of the majority of our board of directors. Any additional directorships resulting from an increase in the number of authorized directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change of control. Under Delaware law, our directors may be removed for cause by the affirmative vote of the holders of a majority of our voting stock.

Our board of directors is responsible for, among other things, overseeing the conduct of our business, reviewing and, where appropriate, approving our long-term strategic, financial and organizational goals and plans, and reviewing the performance of our Chief Executive Officer and other members of senior management. Following the end of each year, our board of directors will conduct an annual self-evaluation, which includes a review of any areas in which the board of directors or management believes the board of directors can make a better contribution to our corporate governance, as well as a review of the committee structure and an assessment of the board of directors’ compliance with corporate governance principles. In fulfilling the board of directors’ responsibilities, directors have full access to our management and independent advisors.

Our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. Our senior management is responsible for assessing and managing our risks on a day to day basis. Our audit committee oversees and reviews with

-102-

management our policies with respect to risk assessment and risk management and our significant financial risk exposures and the actions management has taken to limit, monitor or control such exposures, and our compensation committee oversees risk related to compensation policies. Both our audit and compensation committees report to the full board of directors with respect to these matters, among others.

Director independence

In June 2011, our board of directors undertook a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, our board of directors determined that each of Messrs. Madera, Morgenthaler, Stark, Suarez and Williams are “independent directors” as defined under the rules of The NASDAQ Global Market and the New York Stock Exchange, constituting a majority of independent directors of our board of directors as required by the rules of The NASDAQ Global Market and the New York Stock Exchange.

Board committees

Our board of directors currently has an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee operates under a charter that has been approved by our board of directors. Following the completion of the offering contemplated by this prospectus, copies of the charters for our audit committee, compensation committee and nominating and corporate governance committee will be available without charge, upon request in writing to BlueArc Corporation, 50 Rio Robles, San Jose, California 95134; Attn: Secretary, or on the investor relations portion of our website, www.bluearc.com. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

Audit committee.    Our audit committee oversees our corporate accounting and financial reporting processes. The audit committee generally oversees:

• our accounting and financial reporting processes as well as the audit and integrity of our financial statements;

• the qualifications and independence of our independent registered public accounting firm;

• the performance of our independent registered public accounting firm; and

• our compliance with disclosure controls and procedures and internal controls over financial reporting, as well as the compliance of our employees, directors and consultants with ethical standards adopted by us.

The audit committee also has certain responsibilities, including without limitation, the following:

• selecting and hiring the independent registered public accounting firm;

• supervising and evaluating the independent registered public accounting firm;

• evaluating the independence of the independent registered public accounting firm;

-103-

• approving audit and nonaudit services and fees;

• reviewing financial statements and discussing with management and the independent registered public accounting firm our annual audited and quarterly financial statements, the results of the independent audit and the quarterly reviews, and the reports and certifications regarding internal controls over financial reporting and disclosure controls; and

• reviewing reports and communications from the independent registered public accounting firm.

Our audit committee consists of Mr. Williams, who is the committee Chairman, and Messrs. Morgenthaler and Suarez, each of whom is a nonemployee member of our board of directors. Our board of directors has determined that Mr. Williams is a financial expert as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act of 2002. Mr. Williams has also been appointed to serve as the chairman of the audit committee. Our board of directors has considered the independence and other characteristics of each member of our audit committee. Our board of directors believes that the composition of the audit committee meets the requirements for independence under the current requirements of The NASDAQ Global Market, New York Stock Exchange and SEC rules and regulations. We believe that the audit committee charter and the functioning of the audit committee comply with the applicable requirements of The NASDAQ Global Market, New York Stock Exchange and SEC rules and regulations. Our audit committee also serves as our qualified legal compliance committee. We intend to comply with future requirements to the extent they become applicable to us.

Compensation committee.    The compensation committee oversees our corporate compensation policies, plans and benefit programs and has the responsibilities described in the “Compensation discussion and analysis” below.

Our compensation committee consists of Mr. Madera, who is the committee chairman, and Messrs. Morgenthaler and Suarez, each of whom is a nonemployee member of our board of directors. We believe that each member of the compensation committee meets the requirements for independence under the current requirements of The NASDAQ Global Market and the New York Stock Exchange, is a nonemployee director as defined by Rule 16b-3 promulgated under the Exchange Act and is an outside director as defined pursuant to Section 162(m) of the Internal Revenue Code. We believe that the compensation committee charter and the functioning of the compensation committee comply with the applicable requirements of The NASDAQ Global Market, the New York Stock Exchange and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

The functions of this committee include, among other things:

• overseeing our compensation policies, plans and benefit programs;

• reviewing and approving for our executive officers: the annual base salary, annual incentive bonus, including the specific goals and dollar amount, equity compensation, employment agreements, severance agreements and change in control arrangements and any other benefits, compensation or arrangements;

• preparing the compensation committee report that the SEC requires to be included in our annual proxy statement; and

• administrating our equity compensation plans.

-104-

Nominating and corporate governance committee.    Our nominating and corporate governance committee consists of Mr. Morgenthaler, who is the committee chairman and Messrs. Stark and Suarez, each of whom is a nonemployee director of our board of directors. Our board of directors has determined that each member of our nominating and governance committee meets the requirements for independence under the current requirements of The NASDAQ Global Market and the New York Stock Exchange. We believe that the nominating and corporate governance committee charter and the functioning of the nominating and corporate governance committee comply with the applicable requirements of The NASDAQ Global Market and New York Stock Exchange and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

The functions of this committee include, among other things:

• assisting our board of directors in identifying prospective director nominees and recommending nominees to the board of directors for each annual meeting of stockholders;

• reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our board of directors;

• reviewing the succession planning for each of our executive officers;

• overseeing the evaluation of our board of directors and management; and

• recommending members for each board committee to our board of directors.

Code of business conduct and ethics

We have adopted a code of business conduct and ethics that is applicable to all of our employees, officers and directors, and we have also adopted a code of ethics for principal executives and senior financial officers.

Director compensation

During fiscal 2011, our directors did not receive cash compensation for their services as directors; however, Mr. Williams received a stock option to purchase 58,261 shares of our common stock in connection with his continuing service with our board of directors, and Mr. Martin received a stock option to purchase 90,000 shares of our common stock upon his becoming a member of our board of directors.

Additionally, our board of directors granted Mr. Martin 28,926 shares of restricted stock under our 2000 Plan, subject to vesting, pursuant to a consulting agreement under which Mr. Martin provided consulting services to us. Mr. Martin also received cash compensation for his consulting services. Mr. Martin’s compensation related to the consulting services he provided to us is discussed further in the section entitled “Related party transactions.”

-105-

The following table provides information for fiscal 2011 regarding all compensation awarded to, earned by or paid to each nonemployee director for their services as a nonemployee director. Mr. Gustafson did not receive any separate compensation as a director.

Name	Option awards(1)(4)		Total
Paul S. Madera	$	—	$	—
David N. Martin		54,684(2)		54,684
Gary J. Morgenthaler		—		—
Michael J. Stark		—		—
José F. Suarez		—		—
Duston M. Williams		35,399(3)		35,399

(1) Amounts represent the aggregate grant date fair value of the option award calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation, as amended, without regard to estimated forfeitures. See Note 9 in the notes to our consolidated financial statements for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of our stock options.

(2) Represents an option granted on September 1, 2010 to purchase up to 90,000 shares of our common stock at a price per share of $1.42. The option vests beginning on September 1, 2010 and vests as to 1/48th of the shares subject to the option award monthly thereafter, subject to Mr. Martin’s continued service through each vesting date.

(3) Represents an option award granted on October 22, 2010 to purchase up to 58,261 shares of our common stock at a price per share of $1.42. The option vests beginning on October 22, 2010 and vests as to 1/4th of the shares subject to the option award on the first anniversary of the vesting commencement date, then as to 1/48th of the shares subject to the option award monthly thereafter, subject to Mr. Williams’ continued service through each vesting date.

(4) The aggregate number of shares subject to stock awards and stock options outstanding at January 29, 2011 for each nonemployee director is as follows:

Name	Aggregate number of stock awards outstanding		Aggregate number of stock options outstanding
Paul S. Madera		—		—
David N. Martin		28,926		100,000
Gary J. Morgenthaler		—		—
Michael J. Stark		—		—
José F. Suarez		—		—
Duston M. Williams		—		120,991

On June 22, 2011, Messrs. Madera, Morgenthaler, Stark and Suarez were each granted an option to purchase 104,000 shares of common stock at an exercise price of $3.99 per share. Also on June 22, 2011, Mr. Martin was granted an option to purchase 30,000 shares of common stock at an exercise price of $3.99 share, and Mr. Williams was granted an option to purchase 60,000 shares of common stock at an exercise price of $3.99 per share. Subject to the director’s continued service through each vesting date, 1/48^th of the shares subject to these options vest each month after the date of grant.

Compensation committee interlocks and insider participation

No member of our compensation committee has ever been an executive officer or employee of our company. None of our executive officers currently serves, or has served during the last completed year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Before establishing the compensation committee, our full board of directors made decisions relating to compensation of our executive officers.

-106-

Executive compensation

Compensation discussion and analysis

This compensation discussion and analysis provides information about the material components of our compensation program for our named executive officers. Our named executive officers for fiscal 2011 were Michael B. Gustafson, our President and Chief Executive Officer, to whom we refer as our CEO; Rick Martig, our Chief Financial Officer, to whom we refer as our CFO; Christopher J. McBride, our Senior Vice President of Global Customer Operations; Shmuel Shottan, our Chief Technology Officer, to whom we refer as our CTO; and Bridget Warwick, our Senior Vice President of Marketing and Business Development. More information on the compensation for our named executive officers appears in the “—Fiscal 2011 summary compensation table” that follows this section.

Process overview.    Our compensation committee discharges the board of directors’ responsibilities relating to compensation for all our executive officers. The responsibilities and primary functions of the compensation committee are discussed above under the heading “Management—Board committees—Compensation committee.”

The agenda for meetings is determined by the chair of the compensation committee with the assistance of certain employees who attend compensation committee meetings. Committee meetings are regularly attended by one or more of our CEO, our CFO and our Vice President of Human Resources. Our CEO supports the compensation committee in its work by providing information relating to our financial plans and performance assessments of our officers. Our CEO assesses our officers’ contributions to corporate goals as well as achievement of their individual goals, and makes a recommendation to the compensation committee with respect to any changes in compensation for each member of the executive team, other than himself. The compensation committee meets to evaluate, discuss and modify or approve these recommendations and to conduct a similar evaluation of our CEO’s contributions to corporate goals and achievement of individual goals. The compensation committee also has the authority under its charter to engage the services of outside advisors, experts and others for assistance. During fiscal 2011, the compensation committee did not engage any compensation consultants. In June 2011, the compensation committee retained Compensia LLC to perform certain compensatory advisory services for fiscal 2012. These services had not been completed as of the date of this prospectus. The compensation committee’s chair reports the compensation committee’s determinations and recommendations on compensation to our board of directors.

Compensation philosophy and objectives.    One of the compensation committee’s principal objectives is to assess compensation levels and determine compensation in light of the following key factors: corporate performance, financial targets, individual performance and the competitive market for talent. The compensation committee believes that the most effective executive compensation program is one that is designed to reward the achievement of annual, long-term and strategic goals, with the ultimate objective of improving stockholder value. The compensation committee evaluates both performance and compensation to ensure that we maintain our ability to attract and retain superior employees in key positions with competitive compensation.

The compensation committee believes that the compensation we provide to our executive officers, including our named executive officers, should be weighted in favor of at-risk compensation incentives designed to reward performance. To that end, the total compensation

-107-

of each executive officer includes base salary, an annual performance-based incentive component and a long-term equity incentive component. The annual performance-based incentive may include both cash and equity components linked to pre-established, objective corporate performance measures. The long-term equity component, in the form of stock options, links compensation to the price of our common stock. The compensation committee believes that both the short-term and long-term equity components align our executives’ interests with those of our stockholders.

The compensation committee applies its judgment in determining the relative allocation of each compensation element based on a compensation package for each executive officer. The compensation committee makes these allocations taking into consideration compensation of similarly situated executives at other private, late-stage companies in our industry and our geographic area, as described below. Other factors affecting the compensation committee’s judgments include performance compared to strategic goals established for each individual, the nature and scope of the executive’s responsibilities and the individual’s effectiveness in leading our initiatives to achieve corporate goals.

The compensation committee has not adopted any policies or guidelines for allocating compensation between cash and noncash compensation, or between short and long-term components of equity incentive compensation. However, our philosophy is to make a greater percentage of an officer’s compensation performance-based, using both cash and equity. The compensation committee sets guidelines that target executive officers’ base salary at the 50th percentile and total overall compensation at between the 50th and 75th percentile of an internal compensation index (based on executive compensation data taken from the technology company survey listed below). Only the compensation for our CTO falls outside the high end of these guidelines. We deviated from our targeted range for our CTO because of his contributions to our proprietary technology.

Our officers participate in an annual performance-based incentive program that has included both cash and equity components. Given our stage of growth, equity has historically been a significant component of the annual performance-based program; however, the cash component has become more significant in recent years and is now the sole component of the annual performance-based program for fiscal 2012.

Principal elements of executive compensation.    In fiscal 2011, the principal components of compensation for our executive officers were:

• base salary;

• performance-based incentive compensation;

• long-term equity incentive compensation; and

• change of control and severance arrangements.

Competitive market review for fiscal 2011.    The market for experienced management is highly competitive in the technology industry. We seek to attract and retain the most highly qualified executives to manage each of our business functions, and we face substantial competition in recruiting and retaining management from companies ranging from large and established technology companies to entrepreneurial early-stage companies. We expect competition for appropriate technical, commercial and management skills to remain strong for the foreseeable future.

-108-

In making its compensation determinations for fiscal 2011, the compensation committee relied on their judgment and on data from the Radford High Technology Industry Report and the Meritech Late Stage Private Company Survey, or the Compensation Surveys, to compare our compensation levels to others in the markets in which we compete for executives. The compensation committee reviewed and considered compensation data for 18 public and private U.S. companies in Computer Peripheral or Networking Services industries with less than $200 million in revenue, both public and private. The Compensation Surveys provided information on base salary and target total cash compensation for specific positions and delineates its data based on quartiles. We used the Compensation Surveys to compare our compensation levels to the compensation levels of the following 18 peer companies:

3PAR	Digi International	Netscout Systems
Adaptec	Ditech Networks	Omneon
Allied Telesis	Evans & Sutherland	Pillar Data Systems
Ampex Data Systems	Fujifilm Dimatix	Printronix
Cray	Immersion	Pure Digital Technologies
Datalogic Scanning	Kentrox	Silver Spring Networks

Base salary.    The base salaries of our CEO and our other executive officers reflect the scope of their respective responsibilities, seniority and competitive market factors.

While base salaries and new survey data are reviewed by the compensation committee annually, the compensation committee generally considers an adjustment to salary for an executive officer only:

• when the survey data demonstrates a significant deviation from the market;

• to recognize outstanding individual performance over the prior year; or

• to recognize an increase in responsibilities over the prior year.

Salary adjustments are determined by the compensation committee and are typically based on competitive conditions, our overall financial results, our budget requirements and individual performance. Even when one of the above circumstances exists, a salary adjustment is not automatic. In the course of its annual salary review, the compensation committee did not increase any of our named executive’s base salaries; however, the base salaries for Mr. Martig and Ms. Warwick were increased starting August 1, 2010 to reward their high ratings on their annual performance reviews and to align their base salaries closer to the 50th percentile of peer companies identified in the Compensation Surveys.

The following table shows our named executive officers’ beginning and ending salaries in fiscal 2011:

Name	Fiscal 2011 starting base salary		Salary adjustments on August 1, 2010		Fiscal 2011 ending base salary
Michael B. Gustafson	$	345,000	$	—	$	345,000
Rick Martig		225,000		12,500		237,500
Christopher J. McBride		200,000		—		200,000
Shmuel Shottan		226,600		—		226,600
Bridget Warwick		200,000		13,500		213,500

-109-

Performance-Based Incentive Compensation.    Our performance-based cash and equity incentive program is tied to both achievement of an executive officer’s individual goals and the achievement of financial and other corporate objectives. These goals are approved by the compensation committee and communicated to the executives at the beginning of each fiscal year.

Fiscal Year 2011 Management Challenge Bonus Plan.    The Fiscal Year 2011 Management Challenge Bonus Plan, or the Fiscal 2011 Management Plan, was a performance-based cash and equity incentive program developed to:

• support achievement of our key business goals and strategies;

• attract, retain and motivate well-qualified management personnel;

• reward high performing individuals and teams; and

• encourage a collaborative, results-oriented management team environment.

Certain key personnel were eligible to participate in the Fiscal 2011 Management Plan, including our CEO, executive officers and certain other members of the management team.

Under the Fiscal 2011 Management Plan, each participant was eligible to receive both a cash bonus and equity award if corporate performance objectives and individual goals were met during fiscal 2011. Participants’ target awards were determined based on role, responsibility and total compensation. Target cash awards were calculated using a percent of base salary pro-rated by the approved bonus cash pool and target equity awards were set by the compensation committee. Our named executive officers’ targets under the Fiscal 2011 Management Plan were as follows:

Name	Target cash bonus		Target equity award(1)
Michael B. Gustafson	$	58,504		8,144
Rick Martig		50,873		7,082
Christopher J. McBride		28,263		3,934
Shmuel Shottan		51,235		7,132
Bridget Warwick		45,220		6,295

(1) At the time of the adoption of the Fiscal 2011 Management Plan, each participant was granted an option to purchase shares of our common stock that vested only upon the achievement of our corporate performance objectives; the amounts in this column represent the number of shares subject to each named executive officers’ stock options.

The Fiscal 2011 Management Plan’s threshold corporate objectives consisted of our recording at least $85.6 million in revenue and achieving an earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, operating loss, which excludes stock based compensation, of better than $6.0 million. Adjusted EBITDA operating loss is a non-GAAP measure and is only used internally for measuring performance for purposes of our performance-based plans. As an incentive for superior performance, the compensation committee set these targets at levels moderately in excess of the operating plan for fiscal 2011 approved by our board of directors. In establishing the targets, the compensation committee considered management’s historic performance relative to prior operating plans as well as the compensation committee’s view of the prospects for our business in fiscal 2011. As a result of its review, the compensation committee believed the targets identified were attainable but acknowledged they required substantial management attention to growing our revenues during fiscal 2011.

-110-

If we had reached exactly the threshold achievement levels—revenue of $85.6 million and Adjusted EBITDA operating loss of $6.0 million—each participant would have been eligible to vest 49% of his or her equity awards shares, and subject to the participant achieving his or her individual goals, be paid 49% of his or her target cash bonus. If we did not meet these objectives, no award would be made. In the event we out-performed our threshold objectives, our compensation committee would determine any additional cash bonuses available for distribution to participants by calculating the additional revenue and/or operating expense savings, with the maximum payout being 150% of a participant’s cash bonus target and 100% vesting of equity awards. At the end of fiscal 2011, based on our corporate performance achievement of 104%, our Fiscal 2011 Management Plan cash award pool was funded at 104% and 100% of each participant’s equity award vested. Individual cash payouts were subject to each participant’s level of achievement of his or her individual goals.

Our CEO’s individual goals were established by mutual agreement between our CEO and the compensation committee and ratified by our board of directors. The weight assigned to each of our CEO’s goals was determined at the discretion of the board of directors.

The other executive officers’ individual goals were established by mutual agreement between each of the executive officers and our CEO. The weight assigned to each of the individual goals of our executive officers, other than our CEO, was determined at the discretion of our CEO.

Mr. Gustafson’s individual goals in fiscal 2011 were based on us achieving our corporate objectives, achieving market penetration goals, developing our sales channel strategy and preparing for a possible initial public offering. Mr. Martig’s individual goals in fiscal 2011 were based on us achieving our corporate objectives, further developing our financial planning and reporting capabilities and preparing for our initial public offering. Mr. McBride’s individual goals for fiscal 2011 were based on us achieving our corporate objectives, further developing our sales channels and helping coordinate our sales and marketing teams. Mr. Shottan’s individual goals for fiscal 2011 were aligned with developing and maintaining our product strategy roadmap and overseeing our technology development. Ms. Warwick’s individual goals for fiscal 2011 were based on developing our marketing strategy and product roadmap. All of our named executive officers met their individual goals for fiscal 2011.

Our CEO or, in the case of our CEO’s award, the compensation committee, may reduce, modify or withhold participants’ awards under all incentive bonus plans in accordance with the terms of the plans. At the end of fiscal 2011, our CEO assessed each of the named executive officers’ level of achievement of his or her individual goals, other than his own, and adjusted each individual cash payout under our Fiscal 2011 Management Plan accordingly. He determined that Messrs. Martig and McBride and Ms. Warwick exceeded the objectives set for their respective individual goals, and adjusted their individual cash payouts upward to $60,211, $33,225 and $53,160, respectively. Our CEO determined that Mr. Shottan did not fully meet the objectives set for his individual goals and adjusted his individual cash payout downward to $45,953. Our compensation committee did not modify our CEO’s individual cash payout under our Fiscal 2011 Management Plan in fiscal 2011.

Mr. McBride, our Senior Vice President of Global Customer Operations, also participated in an annual sales compensation plan that was structured in a manner similar to the commission-based compensation program in place for our sales group, of which he is the head. Commission earnings were tied to corporate revenues and gross margin.

-111-

Fiscal 2012 Management Challenge Bonus Plan.    At the beginning of fiscal 2012, the compensation committee adopted the Fiscal Year 2012 Management Challenge Bonus Plan, or the Fiscal 2012 Management Plan, a performance-based cash bonus program designed to provide at-risk compensation in order to reward high performance throughout fiscal 2012.

Our CEO, named executive officers and certain other members of the management team are eligible to participate in the Fiscal 2012 Management Plan. A participant in the Fiscal 2012 Management Plan will be eligible to receive target cash bonuses only if our company meets specific financial objectives during fiscal 2012 and if such participant meets his or her individual goals during fiscal 2012.

The compensation committee and our board of directors established corporate performance objectives based on achieving minimum targets for revenue and Adjusted EBITDA operating loss for fiscal 2012. Our compensation committee believes these targets are difficult to achieve because these targets represent significant increases over the comparable results for fiscal 2011, and attaining these goals will require our management’s attention to expand our business and to engage with a substantially higher number of potential customers. We do not publicly disclose the corporate performance objectives for fiscal 2012 and, if disclosed, we believe the information would provide competitors and others with insights into our operations and compensation programs that would be harmful to us. Therefore we believe these corporate performance objectives may be omitted pursuant to instruction 4 to Item 402(b) of Regulation S-K.

The Fiscal 2012 Management Plan’s cash bonus awards were calculated using a percent of base salary pro-rated by the approved bonus cash pool. See the “Grants of plan-based awards” table following this section for a description of target awards for named executive officers.

If we do not achieve at least minimum thresholds for these performance goals, the cash award pool will not be funded. Minimum achievement of both revenue and Adjusted EBITDA operating loss performance goals will result in 49% of the cash pool being made available for distribution to participants. Over achievement of one or both of the revenue and Adjusted EBITDA operating loss performance goals would allow for up to 150% of the cash award pool being made available for distribution to participants. The available cash award pool in the event of over-achievement is determined by calculating the additional revenue and/or operating expense savings.

Our CEO’s individual goals were established by mutual agreement between our CEO and the compensation committee and ratified by our board of directors. The weight assigned to each of our CEO’s goals was determined at the discretion of the board of directors.

The cash award for the other executive officers is contingent on achievement of individual goals established by mutual agreement between each of the executive officers and CEO. The weight assigned to each of the individual goals of our executive officers, other than our CEO, was determined at the discretion of our CEO.

Our CEO may reduce, modify or withhold participants’ awards of all incentive bonus plans in accordance with the terms of the plans.

Fiscal 2011 CEO management-by-objective bonus.    At the beginning of fiscal 2011, the compensation committee approved a management-by-objective bonus, or MBO bonus, for our CEO. The compensation committee chose to take 25% of our CEO’s target cash bonus that would have been otherwise allocated to the Fiscal 2011 Management Plan and instead created a cash incentive for our CEO to achieve a goal related to expanding our routes to market. Once he achieved this goal, our CEO became entitled to receive the entire MBO bonus amount of $51,750.

-112-

Fiscal 2011 and 2012 CEO guaranteed bonuses.    In recognition of our CEO’s leadership and commitment to our success, in each of fiscal 2011 and 2012, the compensation committee chose to take 25% of our CEO’s target cash bonus that would have been otherwise allocated to the Fiscal 2011 Management Plan and to the Fiscal 2012 Management Plan and instead approved a guaranteed cash bonus of $51,750 payable on the first day of fiscal 2011 and fiscal 2012, respectively.

Fiscal 2011 CEO performance based option grant.    In December 2009, our board of directors granted our CEO options to purchase our common stock, the vesting of which was subject to the achievement of certain milestones to be completed during fiscal 2011. Because these milestones were not met, these options expired immediately before the first day of fiscal 2012.

Long-term equity incentive compensation.    Generally, a significant stock option grant is made when an executive officer commences employment or is promoted to the position. This grant is made within our written guidelines for new-hire grants, consistent with the executive’s position. The guidelines were developed based on our historical practices as well as private and public company executive compensation data including proportionate share ownership of executive officers in comparable positions to our own executives in relation to total shares outstanding. The size of each grant is generally set at a level that the compensation committee deems appropriate to create a meaningful opportunity for stock ownership based upon the grant guidelines, the individual’s position with us, the stage of our growth when the individual joins us and the individual’s potential for future responsibility and promotion. Adjustments may be made as the compensation committee deems reasonable to attract candidates in the competitive environment in which we operate.

Subsequent option grants may be made at varying times, in varying amounts and with varying vesting schedules at the discretion of the compensation committee. Historically, there have not been annual stock option grants to all officers with the exception of annual performance-based awards as described above; however, in fiscal 2011 we did provide our named executive officers, with the exception of our CEO, with annual stock option grants. Please see the “—Fiscal 2011 summary compensation” and “—Outstanding equity awards at January 29, 2011” tables below for a more detailed description of the option grants to our named executive officers.

Under our 2000 Plan, most option grants vest as to 25% of the shares after one year of service and 1/48th of the shares each month thereafter. Accordingly, the option provides a return to the employee only if he or she remains in our employ and then only if the market price of our common stock appreciates over the option term.

Historically, the exercise price of our stock options has been equal to the fair market valuation of our common stock, as determined and approved by our board of directors based upon multiple factors. After this offering, the exercise price of stock options will be set based upon the closing price of our common stock on the effective date of the grant.

Benefits programs.    We provide our employees with retirement health and welfare benefits, such as our group health insurance plans, 401(k) retirement plan and life, disability and accidental death insurance plans. Those plans, most of which are available to all employees, including our named executive officers, are designed to provide a stable array of support to our employees and their families and are not performance based. Effective in fiscal 2008, our executive officers were eligible to receive a supplemental long term disability insurance program benefit not available to other employees. Our benefits programs are generally established and

-113-

adjusted by our human resources department with approval, as necessary, from senior management, the compensation committee or our board of directors, as appropriate.

Perquisites.    Historically, we have not provided special benefits or other perquisites to any of our executive officers; however, effective fiscal 2008, the executive officers were eligible to receive a supplemental long term disability insurance program benefit not available to other employees.

Change of control and severance benefits.    We have entered into Change of Control Severance Agreements with our named executive officers, which provide for payments and benefits upon termination of their employment in specified circumstances, including following a change of control. These arrangements (including potential payments and terms) are discussed in more detail in the “Executive Compensation—Change of control severance agreements and potential payments upon termination or change of control” section below. We believe that these agreements are an important retention tool, and will incent the named executive officers to maintain continued focus and dedication to their assigned duties to maximize stockholder value.

Stock ownership guidelines.    We currently do not require our directors or executive officers to own a particular amount of our common stock. The compensation committee believes that stock and option holdings among our directors and executive officers are sufficient at this time to provide motivation and to align this group’s interests with those of our stockholders.

Tax and accounting treatment of compensation

Deductibility of Executive Compensation.    Generally, Section 162(m) of the Internal Revenue Code disallows a tax deduction to any publicly held corporation for any remuneration in excess of $1.0 million paid in any taxable year to its chief executive officer and to certain other highly compensated officers. Remuneration in excess of $1.0 million may be deducted if, among other things, it qualifies as “performance based compensation” within the meaning of the Internal Revenue Code. In this regard, the compensation income realized upon the exercise of stock options granted under a stockholder approved stock option plan generally will be deductible so long as the options are granted by a committee whose members are nonemployee directors and certain other conditions are satisfied.

As we had been a privately held corporation, the deductibility limit imposed by Section 162(m) previously did not apply to us. Moreover, under a certain Section 162(m) exception, any compensation paid pursuant to a compensation plan in existence before the effective date of this public offering will not be subject to the $1.0 million limitation until the earliest of: (i) the expiration of the compensation plan, (ii) a material modification of the compensation plan (as determined under Section 162(m), (iii) the issuance of all the employer stock and other compensation allocated under the compensation plan or (iv) the first meeting of stockholders at which directors are elected after the close of the third calendar year following the year in which the public offering occurs. We expect that, where reasonably practicable, we will seek to qualify the variable compensation paid to our executive officers for the “performance based compensation” exemption from the deductibility limit. As such, in approving the amount and form of compensation for our executive officers in the future, we will consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m). The compensation committee may, in its judgment, authorize compensation payments that do not comply with an exemption from the deductibility limit when it believes that such payments are appropriate to attract and retain executive talent.

-114-

Taxation of “Parachute” Payments and Deferred Compensation.    We did not provide any executive officer, including any named executive officer, with a “gross up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999, or 409A of the Internal Revenue Code during 2010 and

we have not agreed and are not otherwise obligated to provide any named executive officers with such a “gross up.” Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control that exceeds certain prescribed limits, and that we, or a successor, may forfeit a deduction on the amounts subject to this additional tax. Section 409A of the Internal Revenue Code also imposes additional significant taxes on the individual in the event that an executive officer, director or other service provider receives “deferred compensation” that does not meet the requirements of Section 409A of the Internal Revenue Code.

Accounting Treatment.    We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation, or ASC Topic 718, for our stock based awards. ASC Topic 718 requires companies to measure the compensation expense for all share based payment awards made to employees and directors, including stock options and restricted stock awards, based on the grant date fair value of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock based compensation awards over the period that an executive officer is required to render service in exchange for the option or other award.

Compensation risk assessment.    The compensation committee believes that although a portion of compensation provided to our executive officers is performance-based, our compensation programs do not encourage excessive or unnecessary risk taking. In fact, the design of our compensation programs encourage our executives to remain focused on both short-term and long-term strategic goals, in particular in connection with our pay-for-performance business model.

-115-

Fiscal 2011 summary compensation table

The following table presents compensation information for fiscal 2011 paid to or earned by our CEO, CFO and each of our three other most highly compensated executive officers whose aggregate salary and bonus was more than $100,000. We refer to these executive officers as our “named executive officers” elsewhere in this prospectus.

Name and principal position	Salary(1)		Bonus		Option awards(2)		Non-equity incentive plan compensation		All other compensation		Total
Michael B. Gustafson President and Chief Executive Officer	$	345,000	$	103,500(3)	$	6,994(4)	$	60,844(6)	$	3,976(8)	$	520,314
Rick Martig Chief Financial Officer		230,769		—		31,905(5)		60,221(6)		4,462(8)		327,357
Christopher J. McBride Senior Vice President, Global Customer Operations		200,000		—		26,163(5)		205,390(7)		25,453(9)		457,006
Shmuel Shottan Chief Technology Officer		226,600		—		24,353(5)		45,953(6)		7,759(8)		304,665
Bridget Warwick Senior Vice President, Marketing and Business Development		206,231		—		60,090(5)		53,160(6)		3,114(8)		322,595

(1) The amounts in this column include payments in respect of accrued vacation, holidays and sick days.

(2) These amounts represent grant date fair value for the respective executives’ option grants granted in the fiscal year computed in accordance with FASB ASC Topic 718. See Note 9 in the notes to our consolidated financial statements for a discussion of valuation assumptions made in determining the grant date fair value of our stock options.

(3) This amount represents payment of the MBO bonus in the amount of $51,750 and the payment of Mr. Gustafson’s 2011 guaranteed bonus in the amount of $51,750. Please see the “Compensation Discussion and Analysis—Performance-Based Incentive Compensation” section for a more detailed description of these bonus payments.

(4) Amounts represent total performance-based equity awards awarded pursuant to our Fiscal 2011 Management Plan. See Grants of plan-based awards table below for further discussion.

(5) Amounts represent total performance-based equity awards awarded pursuant to our Fiscal 2011 Management Plan and stock options granted under our 2000 Plan. See Grants of plan-based awards table below for further discussion.

(6) Amounts represent cash bonuses earned under our Fiscal 2011 Management Plan, which were 104% of each named executive’s target cash bonus amount and adjusted by our CEO. The non-equity incentive award was earned in fiscal 2011 but paid in fiscal 2012. For a description of the applicable non-equity incentive targets for each named executive officer, refer to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(7) This amount includes sales commissions in the amount of $172,165 and a cash bonus in the amount of $33,255 paid under our Fiscal 2011 Management Plan. The cash bonus award was earned in fiscal 2011 but paid in fiscal 2012. For a description of the applicable non-equity incentive targets for Mr. McBride, refer to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(8) This amount represents premiums we paid for supplemental long term disability insurance.

(9) This amount Includes $19,200 reimbursed housing costs and $2,257 in related tax gross-ups, as well as $3,996 in premiums we paid for supplemental long term disability insurance.

-116-

Grants of plan-based awards

The following table presents information concerning grants of plan-based awards to each of our named executive officers during fiscal 2011.

			Estimated possible payouts under non-equity incentive plan awards						Estimated possible payouts under equity incentive plan awards						All other option awards: number of securities underlying options (#)			Exercise or base price of option awards ($/Sh)(7)		Grant date fair value of stock and option awards(8)
Name	Grant date		Threshold (1)		Target (2)		Maximum (3)		Threshold (#)(4)		Target (#)(5)		Maximum (#)(6)
Michael B. Gustafson			$	28,667	$	58,504	$	87,756		—		—		—		—		$	—	$	—
		04/06/10		—		—		—		3,991		8,144		8,144		—			1.94		6,994
Rick Martig				24,928		50,873		76,310		—		—		—		—			—		—
		04/06/10		—		—		—		3,470		7,082		7,082		—			1.94		6,082
		10/22/10		—		—		—		—		—		—		42,500	(9)		1.42		25,823
Christopher J. McBride				13,849		28,263		42,395		—		—		—		—			—		—
		04/06/10		—		—		—		1,928		3,934		3,934		—			1.94		3,378
		10/22/10		—		—		—		—		—		—		37,500	(9)		1.42		22,785
Shmuel Shottan				25,105		51,235		76,853		—		—		—		—			—		—
		04/06/10		—		—		—		3,495		7,132		7,132		—			1.94		6,125
		10/22/10		—		—		—		—		—		—		30,000	(9)		1.42		18,228
Bridget Warwick				22,158		45,220		67,830		—		—		—		—			—		—
		04/06/10		—		—		—		3,085		6,295		6,295		—			1.94		5,406
		09/24/10		—		—		—		—		—		—		75,000	(10)		1.42		45,570
		10/22/10		—		—		—		—		—		—		15,000	(9)		1.42		9,114

(1) Amounts represent the minimum cash bonus amount each named executive officer would be eligible to receive under our Fiscal 2011 Management Plan if our threshold corporate objectives were met and his or her individual goals were met. These amounts are equal to 49% of each named executive officer’s target cash bonus amount. For further discussion of the applicable non-equity incentive targets for each named executive officer, please see to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(2) Amounts represent the target cash bonus amount each named executive officer would be eligible to receive under our Fiscal 2011 Management Plan if our target corporate objectives were met and his or her individual goals were met. For further discussion of the applicable non-equity incentive targets for each named executive officer, please see to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(3) Amounts represent the maximum cash bonus amount each named executive officer would be eligible to receive under our Fiscal 2011 Management Plan if our maximum corporate objectives were exceeded and his or her individual goals were met. These amounts are equal to 150% of each named executive officer’s target cash bonus amount. For further discussion of the applicable non-equity incentive targets for each named executive officer, please see to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(4) Amounts represent the number of shares that would vest under each named executive’s equity award granted pursuant to our 2011 Management Plan, if our threshold corporate objectives were met. These amounts are equal to 49% of the shares under each named executive officer’s equity award. For further discussion of the applicable equity incentive targets for each named executive officer, please see to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(5) Amounts represent the number of shares that would vest under each named executive’s equity award granted pursuant to our 2011 Management Plan, if our target corporate objectives were met. These amounts are equal to 100% of the shares under each named executive officer’s equity award. For further discussion of the applicable equity incentive targets for each named executive officer, please see to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(6) Amounts represent the number of shares that would vest under each named executive’s equity award granted pursuant to our 2011 Management Plan, if our maximum corporate objectives were met. These amounts are equal to 100% of the shares under each named executive officer’s equity award. For further discussion of the applicable equity incentive targets for each named executive officer, please see to the “—Compensation Discussion and Analysis—Performance-Based Incentive Compensation—Fiscal Year 2011 Management Challenge Bonus Plan” section above.

(7) Shares of our common stock were not publicly traded during fiscal 2011. The exercise price of all options was the fair value of a share of our common stock on the date of grant as determined in good faith by our board of directors.

(8) Amounts represent the aggregate fair market value of options granted in fiscal 2011 to the named executive officers calculated in accordance with ASC Topic 718 without regard to estimated forfeitures. See Note 9 in the notes to our consolidated financial statements for a discussion of assumptions made in determining the grant date fair value and compensation expense of our stock options.

-117-

(9) 10% of the total number of shares subject to this option will vest on October 22, 2011; 15% of the total number of shares subject to this option will vest on October 22, 2012; 35% of the total number of shares subject to this option will vest on October 22, 2013 and 40% of the total number of shares subject to this option will vest on October 22, 2014.

(10) 1/4th of the total number of shares subject to this stock option became vested and exercisable on September 1, 2010 (vesting commencement date) and the remaining shares subject to the option vest at a rate of 1/48th of the total number of shares subject to this stock option each month thereafter.

Outstanding equity awards at January 29, 2011

The following table presents the outstanding option awards held by each of our named executive officers as of 2011. All stock options listed in this outstanding equity awards table were granted under our 2000 Plan. There were no other stock awards outstanding.

	Option awards
Name	Number of securities underlying unexercised options (#) exercisable(1)		Number of securities underlying unexercised options (#) unexercisable			Equity incentive plan awards: number of securities underlying unexercised unearned options (#)			Option exercise price ($)		Option expiration date
Michael B. Gustafson		10,625		—			—		$	20.00		06/14/14
		449,803		—			—			0.18		08/09/16
		26,274		10,820	(2)		—			0.86		07/15/19
		3,311		3,600	(3)		—			0.86		07/15/19
		41,945		—	(4)		—			0.86		09/02/19
		103,930		279,814	(5)		—			0.86		12/11/19
		—		—			8,144	(6)		1.94		04/06/20
Rick Martig		4,931		—	(7)		—			0.83		04/03/19
		112,499		187,501	(8)		—			0.86		07/15/19
		22,000		—	(9)		—			0.86		09/02/19
		—		—			7,082	(10)		1.94		04/06/20
		—		42,500	(11)		—			1.42		10/22/20
Christopher J. McBride		4,383		—	(12)		—			0.83		04/03/19
		109,374		40,626	(13)		—			0.86		07/15/19
		39,061		35,939	(14)		—			0.86		07/15/19
		1,605		1,745	(15)		—			0.86		07/15/19
		12,222		—	(16)		—			0.86		09/02/19
		—		—			3,934	(17)		1.94		04/06/20
		—		37,500	(18)		—			1.42		10/22/20
Shmuel Shottan		23		—			—			1,100.00		05/28/13
		6,250		—			—			20.00		08/29/13
		57,936		—			—			0.18		08/09/16
		4,966		—	(19)		—			0.83		04/03/19
		375		125	(20)		—			0.86		07/15/19
		13,093		5,392	(21)		—			0.86		07/15/19
		25,207		29,793	(22)		—			0.86		07/15/19
		1,766		1,920	(23)		—			0.86		07/15/19
		22,156		—	(24)		—			0.86		09/02/19
		—		—			7,132	(25)		1.94		04/06/20
		—		30,000	(26)		—			1.42		10/22/20
Bridget Warwick		95,834		104,166	(27)		—			0.83		02/25/19
		19,555		—	(28)		—			0.86		09/02/19
		—		—			6,295	(29)		1.94		04/06/20
		—		75,000	(30)		—			1.42		09/24/20
		—		15,000	(31)		—			1.42		10/22/20

(1) The options listed are subject to an early exercise right and may be exercised in full prior to vesting of the shares underlying the option. The share numbers in this column represent the shares vested under each option as of January 29, 2011.

(2) 1/48th of the total number of shares subject to this stock option vest monthly starting March 15, 2008 (vesting commencement date).

(3) 1/48th of the total number of shares subject to this stock option vest monthly starting February 1, 2009 (vesting commencement date).

-118-

(4) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(5) 1/48th of the total number of shares subject to this stock option vest monthly starting December 15, 2009 (vesting commencement date).

(6) 100% of the total number of shares subject to this stock option vested on January 30, 2011 upon achievement of certain corporate performance objectives set forth in the option agreement.

(7) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(8) 1/48th of the total number of shares subject to this stock option vested monthly starting July 14, 2009 (vesting commencement date).

(9) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(10) 100% of the total number of shares subject to this stock option vested on January 30, 2011 upon achievement of certain corporate performance objectives set forth in the option agreement.

(11) 10% of the total number of shares subject to this option will vest on October 22, 2011; 15% of the total number of shares subject to this option will vest on October 22, 2012; 35% of the total number of shares subject to this option will vest on October 22, 2013 and 40% of the total number of shares subject to this option will vest on October 22, 2014.

(12) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(13) 1/48th of the total number of shares subject to this stock option vested monthly starting February 27, 2008 (vesting commencement date).

(14) 1/48th of the total number of shares subject to this stock option vested monthly starting December 17, 2008 (vesting commencement date).

(15) 1/48th of the total number of shares subject to this stock option vested monthly starting February 1, 2009 (vesting commencement date).

(16) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(17) 100% of the total number of shares subject to this stock option vested on January 30, 2011 upon achievement of certain corporate performance objectives set forth in the option agreement.

(18) 10% of the total number of shares subject to this option will vest on October 22, 2011; 15% of the total number of shares subject to this option will vest on October 22, 2012; 35% of the total number of shares subject to this option will vest on October 22, 2013 and 40% of the total number of shares subject to this option will vest on October 22, 2014.

(19) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(20) 1/48th of the total number of shares subject to this stock option vested monthly starting January 25, 2008 (vesting commencement date).

(21) 1/48th of the total number of shares subject to this stock option vested monthly starting March 15, 2008 (vesting commencement date).

(22) 1/48th of the total number of shares subject to this stock option vested monthly starting February 28, 2009 (vesting commencement date).

(23) 1/48th of the total number of shares subject to this stock option vested monthly starting February 1, 2009 (vesting commencement date).

(24) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(25) 100% of the total number of shares subject to this stock option vested on January 30, 2011 upon achievement of certain corporate performance objectives set forth in the option agreement.

(26) 10% of the total number of shares subject to this option will vest on October 22, 2011; 15% of the total number of shares subject to this option will vest on October 22, 2012; 35% of the total number of shares subject to this option will vest on October 22, 2013 and 40% of the total number of shares subject to this option will vest on October 22, 2014.

(27) 1/4th of the total number of shares subject to this stock option vested and became exercisable on February 2, 2009 (vesting commencement date) and the remaining shares subject to the option vest at a rate of 1/36^th each month thereafter.

(28) 100% of the total number of shares subject to this stock option vested on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(29) 100% of the total number of shares subject to this stock option vested on January 30, 2011 upon achievement of certain corporate performance objectives set forth in the option agreement.

(30) 1/4th of the total number of shares subject to this stock option vested and became exercisable on September 1, 2010 (vesting commencement date) and the remaining shares subject to the option vest at a rate of 1/48th of the total number of shares subject to this stock option each month thereafter.

(31) 10% of the total number of shares subject to this option will vest on October 22, 2011; 15% of the total number of shares subject to this option will vest on October 22, 2012; 35% of the total number of shares subject to this option will vest on October 22, 2013 and 40% of the total number of shares subject to this option will vest on October 22, 2014.

-119-

Option exercises and stock vested during fiscal 2011

None of the named executive officers exercised stock options during fiscal 2011.

Change of control severance agreements and potential payments upon termination or change of control

In June 2009, we entered into change of control severance agreements, or severance agreements, with our named executive officers, which require us to make specific payments and benefits in connection with termination of their employment under certain circumstances. These severance agreements superseded any other agreement or arrangement relating to severance benefits with these executive officers. The description and table that follow describe such payments and benefits that may be owed by us to each of our named executive officers upon the named executive officer’s termination under certain circumstances.

The severance agreements remain in effect until all obligations thereunder have been satisfied. The severance agreements also acknowledge that each executive officer is an at-will employee, whose employment can be terminated at any time.

In order to receive the severance benefits described below, each named executive officer is obligated to execute a release of claims against us, provided such release of claims becomes effective and irrevocable no later than 60 days following such executive officer’s termination date or such earlier date required by the release of claims.

In the event any payment to one of our named executive officers, under his or her severance agreement, is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (as a result of a payment being classified as a “parachute payment” under Section 280G of the Internal Revenue Code), the executive officer will be entitled to receive such payment as would entitle him or her to receive the greatest after tax benefit of either the full payment or a lesser payment which would result in no portion of such severance benefits being subject to excise tax.

All of our severance agreements with our named executive officers provide that upon each named executive officer’s termination, regardless of the reason for, or timing of, such termination, we will pay such named executive officer any unpaid base salary for periods prior to termination, all unused vacation accrued prior to termination and reimbursement of any expenses reasonably and necessarily incurred in connection with our business prior to termination.

For the purpose of the severance agreements, “cause” means the occurrence of any of the following:

(i) acts or omissions constituting gross negligence or willful misconduct with respect to the named executive officer’s obligations or otherwise relating to the business of our company;

(ii) felony conviction of, or felony plea or nolo contendere for fraud, misappropriation or embezzlement, or a felony crime of moral turpitude or conviction of fraud, misappropriation or embezzlement;

(iii) willfully or negligently exposing our company to a risk of civil or criminal legal damages, liabilities or penalties;

(iv) violation or breach of any fiduciary duty;

-120-

(v) violation or breach of any contractual duty to us, which duty is material to the performance of the named executive officer’s duties or responsibilities or results in material damage to us or our business;

(vi) breach of the named executive officer’s confidential information agreement with us; or

(vii) engaging in any other act of dishonesty, fraud, intentional misrepresentation, illegality; or harassment, which, as determined in good faith by our board of directors, is reasonably likely to materially adversely affect our business or reputation with our current or prospective customers, suppliers, lenders and/or other third parties with whom we do or might do business.

For the purpose of the severance agreements, “good reason” is defined as the occurrence of one or more of the following, without the named executive officer’s consent:

(i) a significant reduction of the executive officer’s duties, position or responsibilities relative to the executive officer’s duties, position or responsibilities in effect immediately prior to such reduction, or the removal of the executive officer from such position, duties and responsibilities, unless the named executive officer is provided with comparable or greater duties, position and responsibilities; provided, however, that a reduction in duties, position or responsibilities solely by virtue of our company being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise will not constitute good reason;

(ii) a material reduction by us of the named executive officer’s base salary and/or benefits as in effect immediately prior to such reduction, other than substantially similar reductions that are also applied to substantially similar employees of ours;

(iii) the relocation of the named executive officer to a facility or location more than 50 miles from the executive officer’s then-current work location;

(iv) the failure of us to obtain the assumption of the severance agreement by any successors of our company; or

(v) a material breach by us of any term or condition of the severance agreement or any other agreement between us and the executive officer;

provided that the named executive officer will not resign for good reason without first providing us with written notice of the acts or omissions constituting the grounds for good reason within 90 days of the occurrence of the good reason event and a reasonable cure period of not less than 30 days following the date of such notice.

For the purpose of the severance agreements, “change of control” means the occurrence of any of the following:

(i) any person, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, becomes the beneficial owner, as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of our company representing 50% or more of the total voting power represented by our then outstanding voting securities;

(ii) the consummation of the sale or disposition by us of all or substantially all of our company’s assets;

(iii) the consummation of a merger or consolidation of our company with any other corporation, other than a merger or consolidation which would result in our voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by

-121-

being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by our voting securities or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) a change in the composition of our board of directors occurring within a two-year period, as a result of which less than a majority of the directors are either (1) directors of our company as of the date of each respective severance agreement, or (2) elected, or nominated for election, to our board of directors with the affirmative votes of at least a majority of the directors of our company at the time of such election or nomination, not including an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to our company.

Severance Agreement with Michael B. Gustafson.    Mr. Gustafson’s severance agreement with us provides that if we terminate his employment without cause or if Mr. Gustafson resigns for good reason within 12 months of a change of control, he will be entitled to:

• a lump sum severance payment equal to six months of Mr. Gustafson’s base salary as in effect either immediately before the change of control or at the time of his termination, whichever is greater;

• assuming Mr. Gustafson timely elects COBRA continuation coverage, reimbursement of payment of premiums for COBRA continuation coverage, at the coverage levels in effect immediately prior to his termination, until the earlier of (1) a period of six months from the last date of his employment with us, or (2) the date upon which he and/or his dependents becomes covered under similar plans; and

• 100% of Mr. Gustafson’s then outstanding and unvested awards relating to our common stock shall vest and will remain subject to the terms and conditions of such awards.

Mr. Gustafson’s severance agreement with us also provides for severance benefits that can be triggered without a change of control. If we terminate Mr. Gustafson’s employment without cause, he will be entitled to:

• a lump sum severance payment equal to six months of Mr. Gustafson’s base salary as in effect immediately before his termination; and

• assuming Mr. Gustafson timely elects COBRA continuation coverage, reimbursement of payment of premiums for COBRA continuation coverage, at the coverage levels in effect immediately prior to his termination, until the earlier of (1) a period of six months from the last date of his employment with us or (2) the date upon which he and/or his dependents becomes covered under similar plans.

Severance agreement with Rick Martig.    Mr. Martig’s severance agreement with us provides that if we terminate his employment without cause or if Mr. Martig resigns for good reason within 12 months of a change of control, he will be entitled to:

• a lump sum severance payment equal to six months of Mr. Martig’s base salary as in effect either immediately before the change of control or at the time of his termination, whichever is greater;

-122-

• assuming Mr. Martig timely elects COBRA continuation coverage, reimbursement of payment of premiums for COBRA continuation coverage, at the coverage levels in effect immediately prior to his termination, until the earlier of (1) a period of six months from the last date of his employment with us, or (2) the date upon which he and/or his dependents becomes covered under similar plans; and

• 100% of Mr. Martig’s then outstanding and unvested awards relating to our common stock shall vest and will remain subject to the terms and conditions of such awards.

Severance agreement with Christopher J. McBride and Bridget Warwick.    The severance agreements between us and each of Mr. McBride and Ms. Warwick, whom we refer to as the SVPs, provide that if we terminate a SVP’s employment without cause or if a SVP resigns for Good Reason within six months of a change of control, such SVP will be entitled to:

• a lump sum severance payment equal to six months of such SVP’s base salary as in effect either immediately before the change of control or at the time of such SVP’s termination, whichever is greater;

• assuming such SVP timely elects COBRA continuation coverage, reimbursement of payment of premiums for COBRA continuation coverage, at the coverage levels in effect immediately prior to his or her termination, until the earlier of (1) a period of six months from the last date of his or her employment with us, or (2) the date upon which such SVP and/or his or her dependents becomes covered under similar plans; and

• 50% of such SVP’s then outstanding and unvested awards relating to our common stock shall vest and will remain subject to the terms and conditions of such awards.

Severance agreement with Shmuel Shottan.    Mr. Shottan’s severance agreement with us provides that if we terminate his employment without cause or if Mr. Shottan resigns for good reason within six months of a change of control, he will be entitled to:

• a lump sum severance payment equal to six months of Mr. Shottan’s base salary as in effect either immediately before the change of control or at the time of his termination, whichever is greater;

• assuming Mr. Shottan timely elects COBRA continuation coverage, reimbursement of payment of premiums for COBRA continuation coverage, at the coverage levels in effect immediately prior to his termination, until the earlier of (1) a period of six months from the last date of his employment with us, or (2) the date upon which he and/or his dependents becomes covered under similar plans; and

• 50% of Mr. Shottan’s then outstanding and unvested awards relating to our common stock shall vest and will remain subject to the terms and conditions of such awards.

Mr. Shottan’s severance agreement with us also provides for severance benefits that can be triggered without a change of control. If we terminate Mr. Shottan’s employment without cause, he will be entitled to:

• a lump sum severance payment equal to six months of Mr. Shottan’s base salary as in effect immediately before his termination.

-123-

Potential payments upon termination or change of control. The following table shows the amounts each of our named executive officers would have received in the event of their termination with and without a change of control. This table assumes the termination took place on January 29, 2011, the last day of fiscal 2011.

		Involuntary termination
Name	Benefits	Not in connection with change of control		In connection with change of control
Michael B. Gustafson	Severance Payment (Salary)	$	172,500(1)	$	172,500(3)
	Healthcare Benefits		9,676(2)		9,676(4)
	Acceleration of Stock Options		—		250,096(5)
Rick Martig	Severance Payment (Salary)		—		118,750(3)
	Healthcare Benefits		—		3,191(4)
	Acceleration of Stock Options		—		170,930(5)
Christopher J. McBride	Severance Payment (Salary)		—		100,000(6)
	Healthcare Benefits		—		9,676(7)
	Acceleration of Stock Options		—		38,378(8)
Shmuel Shottan	Severance Payment (Salary)		113,300(1)		113,300(6)
	Healthcare Benefits		—		9,676(7)
	Acceleration of Stock Options		—		19,413(8)
Bridget Warwick	Severance Payment (Salary)		—		106,750(6)
	Healthcare Benefits		—		9,676(7)
	Acceleration of Stock Options		—		58,748(8)

(1) Upon an involuntary termination without cause that is not in connection with a change of control, the named executive officer would receive a lump sum severance payment equal to six months of the named executive officer’s base salary as in effect immediately before the termination.

(2) Upon an involuntary termination without cause that is not in connection with a change of control, the named executive officer would be entitled to COBRA continuation coverage, at the coverage levels in effect immediately prior to the named executive officer’s termination for a period of six months from the last date of the employment with us.

(3) Upon an involuntary termination without cause or if the named executive officer resigns for good reason within 12 months of a change of control, the named executive officer would receive a lump sum severance payment equal to six months of the named executive officer’s base salary as in effect either immediately before the change of control or at the time of the termination, whichever is greater.

(4) Upon an involuntary termination without cause or if the named executive officer resigns for good reason within 12 months of a change of control, the named executive officer would be entitled to COBRA continuation coverage, at the coverage levels in effect immediately prior to the named executive officer’s termination for a period of six months from the last date of the employment with us.

(5) Upon an involuntary termination without cause or if the named executive officer resigns for good reason within 12 months of a change of control, 100% of the named executive officer’s then outstanding and unvested awards relating to our common stock shall vest and will remain subject to the terms and conditions of such awards. The amount represents the gain the named executive officer would receive, calculated as the difference between the fair market value of our common stock on the last day of fiscal 2011 and the exercise price of such accelerated shares. The fair market value of our common stock on the last day of fiscal 2011 as determined by our board of directors was $1.71 per share.

(6) Upon an involuntary termination without cause or if the named executive officer resigns for good reason within six months of a change of control, the named executive officer would receive a lump sum severance payment equal to six months of the named executive officer’s base salary as in effect either immediately before the change of control or at the time of the termination, whichever is greater.

(7) Upon an involuntary termination without cause or if the named executive officer resigns for good reason within six months of a change of control, the named executive officer would be entitled to COBRA continuation coverage, at the coverage levels in effect immediately prior to the named executive officer’s termination for a period of six months from the last date of the employment with us.

(8) Upon an involuntary termination without cause or if the named executive officer resigns for good reason within six months of a change of control, 50% of the named executive officer’s then outstanding and unvested awards relating to our common stock shall vest and will remain subject to the terms and conditions of such awards. The amount represents the gain the named executive officer would receive, calculated as the difference between the fair market value of our common stock on the last day of fiscal 2011 and the exercise price of such accelerated shares. The fair market value of our common stock on the last day of fiscal 2011 as determined by our board of directors was $1.71 per share.

-124-

Employee benefit plans

2000 Stock Plan.    Our board of directors adopted, and our stockholders approved, our 2000 Plan on March 2, 2000. We amended the 2000 Plan in March 2010 to extend its term to March 2020. Our 2000 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, to our employees and any parent or subsidiary corporation’s employees, and for the grant of nonstatutory stock options to our employees, directors and consultants and any parent or subsidiary corporation’s employees and consultants. The 2000 Plan also allows for awards of stock purchase rights. At the time our 2011 Plan becomes effective, we will no longer grant new awards under the 2000 Plan.

Administration.    Our board of directors or a committee appointed by our board of directors administers our 2000 Plan. Under our 2000 Plan, the board of directors has the power to determine the terms of the awards, including the service providers who will receive awards, the exercise price, the number of shares subject to each award, the vesting schedule and exercisability of awards and the form of consideration payable upon exercise of an option. Our compensation committee recommends guidelines for equity compensation arrangements for all employees including guidelines for stock and option awards and vesting schedules.

Share reserve.    Subject to adjustment, as of April 30, 2011, the maximum aggregate number of shares that may be subject to options and sold under the 2000 Plan was 10,462,657 shares of our common stock. As of April 30, 2011, options to purchase 7,019,362 shares of our common stock were outstanding under our 2000 Plan and 894,327 shares of our common stock remained available for future grant under the 2000 Plan. If a stock option or other stock award expires or otherwise terminates without having been exercised in full, the unpurchased shares to subject to such awards will become available for future grant under the 2000 Plan, unless the 2000 Plan has terminated. We will not grant any additional awards under our 2000 Plan following this offering and will instead grant awards under our 2011 Plan. However, the 2000 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.

Stock options.    The administrator may grant incentive and/or nonstatutory stock options under our 2000 Plan; provided that incentive stock options are only granted to employees. The exercise price of incentive stock options within the meaning of Section 422 of the Internal Revenue Code must equal at least 100% of the fair market value of our common stock on the date of grant and the exercise price of nonstatutory stock options may not be less than 85% of the fair market value of our common stock on the date of grant. The term of an option may not exceed ten years; provided, however, that an incentive stock option held by a participant who owns more than 10% of the total combined voting power of all classes of our stock, or of certain of our parent or subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the plan administrator. Subject to the provisions of our 2000 Plan, the administrator determines the remaining terms of the option (e.g., vesting). After a participant’s termination of service, the participant may exercise his or her option, to the extent vested as of the date of termination, for a period of three months (one year in the case of termination due to death or disability) following such termination, or such longer period of time specified in the individual option agreement. However, in no event may an option be exercised later than the expiration of its term.

-125-

Stock purchase rights.    Stock purchase rights may be issued alone, in addition to or in tandem with other awards granted under our 2000 Plan. Stock purchase rights are rights to purchase our common stock that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of shares subject to a stock purchase right granted to any service provider. Unless the administrator determines otherwise, we have a repurchase option exercisable upon termination of the purchaser’s service with us. Shares subject to stock purchase rights that do not vest are subject to our right of repurchase.

Dissolution or liquidation.    Upon a dissolution or liquidation of us, the administrator shall notify each optionee as soon as practicable prior to the effective date of such dissolution or liquidation. The administrator, in its discretion, may provide for an optionee to have the right to exercise his or her option or stock purchase right until 15 days prior to such transaction as to all of the optioned stock covered by his or her award, including shares as to which the award would not otherwise be exercisable. To the extent that the award has not been previously exercised, an option of stock purchase right will terminate immediately prior to the consummation of the dissolution or liquidation of us.

Effect of a change of control.    Our 2000 Plan provides that in the event of our merger with or into another corporation, or a sale of substantially all of our assets, the successor corporation shall assume or substitute an equivalent award with respect to each outstanding award under the 2000 Plan. In the event that the successor corporation refuses to assume or substitute for the award, the optionee will fully vest in and have the right to exercise the option or stock purchase right, as to all of the optioned stock, including shares as to which it would not otherwise be vested or exercisable. If an award becomes fully vested and exercisable, the administrator will provide notice to the participant that he or she has the right to exercise such outstanding awards for a period of 15 days from the date of such notice, and the options or stock purchase rights will terminate at the expiration of such stated notice period.

Transferability of awards.    Our 2000 Plan generally does not allow for awards to be transferred in any manner other than by will or the laws of descent or distribution and may be exercised, during the lifetime of the participant, only by the participant.

Amendment and termination.    Our board of directors may at any time amend, suspend or terminate the 2000 Plan, provided such action does not impair the existing rights of any participant. Our 2000 Plan will terminate in connection with, and contingent upon, the effectiveness of this offering; provided that the 2000 Plan will continue to govern the terms and conditions of awards originally granted under the 2000 Plan.

2011 Equity Incentive Plan.    Our board of directors adopted our 2011 Plan in June 2011 and we expect our stockholders will approve the plan before we complete this offering. The 2011 Plan is effective upon its adoption by our board of directors, but will not be utilized until immediately prior to the time the registration statement to which this offering relates is declared effective by the SEC. Our 2011 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to our employees and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants.

Authorized shares.    The maximum aggregate number of shares that may be issued under the 2011 Plan is              shares of our common stock, plus (i) any shares that as of the completion of this offering, have been reserved but not issued pursuant to any awards granted under our 2000 Plan and are not subject to any awards granted thereunder, and (ii) any shares subject to

-126-

stock options or similar awards granted under the 2000 Plan that expire or otherwise terminate without having been exercised in full and unvested shares issued pursuant to awards granted under the 2000 Plan that are forfeited to or repurchased by us, with the maximum number of shares to be added to the 2011 Plan pursuant to clauses (i) and (ii) above equal to              shares as of April 30, 2011. In addition, the number of shares available for issuance under the 2011 Plan will be annually increased on the first day of each of our fiscal years beginning with fiscal year 2014, by an amount equal to the lesser of:

•               shares;

•              % of the outstanding shares of our common stock as of the last day of our immediately preceding fiscal year; or

• such other amount as our board of directors may determine.

Shares issued pursuant to awards under the 2011 Plan that we repurchase or that are forfeited, as well as shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award, will become available for future grant under the 2011 Plan. In addition, to the extent that an award is paid out in cash rather than shares, such cash payment will not reduce the number of shares available for issuance under the 2011 Plan.

Plan administration.    The 2011 Plan will be administered by our board of directors which, at its discretion or as legally required, may delegate such administration to our compensation committee and/or one or more additional committees. In the case of awards intended to qualify as “performance-based compensation” within the meaning of Internal Revenue Code Section 162(m), the committee will consist of two or more “outside directors” within the meaning of Internal Revenue Code Section 162(m).

Subject to the provisions of our 2011 Plan, the administrator has the power to determine the terms of awards, including the recipients, the exercise price, if any, the number of shares subject to each award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of consideration, if any, payable upon exercise of the award and the terms of the award agreement for use under the 2011 Plan. The administrator also has the authority, subject to the terms of the 2011 Plan, to amend existing awards to reduce or increase their exercise price, to allow participants the opportunity to transfer outstanding awards to a financial institution or other person or entity selected by the administrator, to institute an exchange program by which outstanding awards may be surrendered in exchange for awards that may have different exercise prices and terms, to prescribe rules and to construe and interpret the 2011 Plan and awards granted thereunder.

Stock options.    The administrator may grant incentive and/or nonstatutory stock options under our 2011 Plan; provided that incentive stock options are only granted to employees. The exercise price of such options must equal at least the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed ten years; provided, however, that an incentive stock option held by a participant who owns more than 10% of the total combined voting power of all classes of our stock, or of certain of our parent or subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the plan administrator. Subject to the provisions of our 2011 Plan, the administrator determines the remaining terms of the options (e.g., vesting).

-127-

After the termination of service of an employee, director or consultant, the participant may exercise his or her option, to the extent vested as of such date of termination, for the period of time stated in his or her option agreement. Unless otherwise specified in the award agreement, if termination is due to death or disability, the option will remain exercisable for 12 months. In all other cases, unless otherwise specified in the award agreement, the option will remain exercisable for three months following the termination of service. However, in no event may an option be exercised later than the expiration of its term. The specific terms will be set forth in an award agreement.

Stock appreciation rights.    Stock appreciation rights may be granted under our 2011 Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. Subject to the provisions of our 2011 Plan, the administrator determines the terms of stock appreciation rights, including when such rights vest and become exercisable and whether to settle such awards in cash or with shares of our common stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant. The specific terms will be set forth in an award agreement.

Restricted stock.    Restricted stock may be granted under our 2011 Plan. Restricted stock awards are grants of shares of our common stock that are subject to various restrictions, including restrictions on transferability and forfeiture provisions. Shares of restricted stock will vest, and the restrictions on such shares will lapse, in accordance with terms and conditions established by the administrator. Such terms may include, among other things, vesting upon the achievement of specific performance goals determined by the administrator and/or continued service to us. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares upon grant without regard to vesting, unless the administrator provides otherwise. Shares of restricted stock that do not vest for any reason will be forfeited by the recipient and will revert to us. The specific terms will be set forth in an award agreement.

Restricted stock units.    Restricted stock units may be granted under our 2011 Plan. Each restricted stock unit granted is a bookkeeping entry representing an amount equal to the fair market value of one share of our common stock. The administrator determines the terms and conditions of restricted stock units, including the vesting criteria, which may include achievement of specified performance criteria or continued service to us, and the form and timing of payment. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. The administrator determines in its sole discretion whether an award will be settled in stock, cash or a combination of both. The specific terms will be set forth in an award agreement.

Performance units/performance shares.    Performance units and performance shares may be granted under our 2011 Plan. Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The administrator will establish organizational or individual performance goals in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. After the grant of a performance unit or performance share, the administrator, in its sole discretion, may reduce or waive any performance objectives or other

-128-

vesting provisions for such performance units or performance shares. Performance units shall have an initial dollar value established by the administrator prior to the grant date. Performance shares shall have an initial value equal to the fair market value of our common stock on the grant date. The administrator, in its sole discretion, may pay earned performance units or performance shares in the form of cash, in shares or in some combination thereof. The specific terms will be set forth in an award agreement.

Transferability of awards.    Unless the administrator provides otherwise, our 2011 Plan generally does not allow for the transfer of awards and only the recipient of an option or stock appreciation right may exercise such an award during his or her lifetime.

Certain adjustments.    In the event of certain changes in our capitalization, to prevent diminution or enlargement of the benefits or potential benefits available under the 2011 Plan, the administrator will make adjustments to one or more of the number and class of shares that may be delivered under the plan and/or the number, class and price of shares covered by each outstanding award and the numerical share limits contained in the plan. In the event of our proposed liquidation or dissolution, the administrator will notify participants as soon as practicable and all awards will terminate immediately prior to the consummation of such proposed transaction.

Merger or change in control.    Our 2011 Plan provides that in the event of a merger or change in control, as defined under the 2011 Plan, each outstanding award will be treated as the administrator determines, except that if a successor corporation or its parent or subsidiary does not assume or substitute an equivalent award for any outstanding award, then such award will fully vest, all restrictions on such award will lapse, all performance goals or other vesting criteria applicable to such award will be deemed achieved at 100% of target levels and such award will become fully exercisable, if applicable, for a specified period prior to the transaction. The award will then terminate upon the expiration of the specified period of time. If the service of an outside director is terminated on or following a change of control, other than pursuant to a voluntary resignation, his or her options, restricted stock units and stock appreciation rights, if any, will vest fully and become immediately exercisable, all restrictions on his or her restricted stock will lapse, and all performance goals or other vesting requirements for his or her performance shares and units will be deemed achieved at 100% of target levels, and all other terms and conditions met.

Plan amendment, termination.    Our board of directors has the authority to amend, suspend or terminate the 2011 Plan provided that any action that impairs the rights of any participant must be agreed to by such participant. Our 2011 Plan will automatically terminate in 2021, unless we terminate it sooner.

401(k) plan.    We maintain a tax-qualified 401(k) retirement plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. Under our 401(k) plan, employees may elect to defer up to 60% of their eligible compensation subject to applicable annual Internal Revenue Code limits. We currently do not match any contributions made by our employees, including executives, but have the discretion to do so. We intend for the 401(k) plan to qualify under Section 401(a) and 501(a) of the Code so that contributions by employees to the 401(k) plan, and income earned on those contributions, are not taxable to employees until withdrawn from the 401(k) plan.

Other.    In addition to the United States, we currently have employees located in England, Germany, Canada, Norway and Australia. In addition to providing statutorily mandated benefit

-129-

programs in each country, we contribute to private plans for health, pension and insurance benefits in the countries where those contributions are customarily provided to employees.

Limitation of liability and indemnification

Our amended and restated certificate of incorporation, which will be in effect upon the completion of this offering, contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

• any breach of the director’s duty of loyalty to us or our stockholders;

• any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

• unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

• any transaction from which the director derived an improper personal benefit.

Our amended and restated certificate of incorporation and amended and restated bylaws to be in effect upon the completion of this offering provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our amended and restated bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

-130-

Related party transactions

In addition to the director and executive compensation arrangements discussed above under “Executive Compensation”, the following is a description of transactions since February 1, 2006, to which we have been a participant in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock or entities affiliated with them, had or will have a direct or indirect material interest.

Private placements

Series DD preferred stock financing. In May 2006, we sold an aggregate of 7,004,826 shares of Series DD preferred stock at a per share purchase price of $4.14 pursuant to a stock purchase agreement. Purchasers of the Series DD preferred stock include venture capital funds that hold 5% or more of our capital stock and were represented on our board of directors. The following table summarizes purchases of Series DD preferred stock by the above-listed investors:

Name of stockholder	BlueArc director		Number of Series DD shares(1)		Total purchase price
Funds affiliated with Crosslink Capital(2)		David J. Epstein		600,139	$	2,484,575
Funds affiliated with Meritech Capital(3)		Paul S. Madera		1,081,374		4,476,888
Morgenthaler Partners VIII, L.P.		Gary J. Morgenthaler		3,381,642		13,999,997
Peter Johnson(4)				143,211		592,893
Rod Canion(5)				143,211		592,893

(1) Includes shares of Series DD preferred stock which were converted into Series DD-1 preferred stock in the recapitalization discussed below.

(2) Affiliates of Crosslink Capital holding our securities whose shares are aggregated for purposes of reporting share ownership information include Crosslink Ventures IV, L.P., Crosslink Crossover Fund V, L.P., Crosslink Omega Ventures IV GmbH & Co. KG, Offshore Crosslink Omega Ventures IV, Offshore Crosslink Crossover Fund III and Omega Bayview IV, LLC.

(3) Affiliates of Meritech Capital holding securities whose shares are aggregated for purposes of reporting share ownership information include MCP Entrepreneur Partners II, Meritech Capital Partners II and Meritech Capital Affiliates II.

(4) Mr. Johnson was a member of our board of directors until his resignation in October 2008.

(5) Mr. Canion was one of our founders and a member of our board of directors until his resignation in January 2007.

Series FF preferred stock financing. Between May and August 2008, we sold an aggregate of 5,140,814 shares of Series FF preferred stock at a per share purchase price of $4.53 pursuant to a stock purchase agreement. Purchasers of the Series FF preferred stock include venture capital funds that hold 5% or more of our capital stock and were represented on our board of directors. The following table summarizes purchases of Series FF preferred stock by the above-listed investors:

Name of stockholder	BlueArc director		Number of Series FF shares(1)		Total purchase price
Funds affiliated with Crosslink Capital(2)		Michael J. Stark		416,776	$	1,886,937
Funds affiliated with Meritech Capital(3)		Paul S. Madera		641,449		2,904,115
Morgenthaler Partners VIII, L.P.		Gary J. Morgenthaler		267,028		1,208,948

(1) Includes shares of Series FF preferred stock which were converted into Series FF-1 preferred stock in the recapitalization discussed below.

(2) Affiliates of Crosslink Capital holding our securities whose shares are aggregated for purposes of reporting share ownership information include Crosslink Ventures IV, L.P., Crosslink Crossover Fund V, L.P., Crosslink Omega Ventures IV GmbH & Co. KG, Offshore Crosslink Omega Ventures IV, Offshore Crosslink Crossover Fund III and Omega Bayview IV, LLC.

(3) Affiliates of Meritech Capital holding securities whose shares are aggregated for purposes of reporting share ownership information include MCP Entrepreneur Partners II, Meritech Capital Partners II and Meritech Capital Affiliates II.

-131-

Series GG preferred stock financing and recapitalization.    In July 2010, we sold an aggregate of 8,342,358 shares of Series GG preferred stock at a per share purchase price of $2.53 pursuant to a stock purchase agreement. Purchasers of the Series GG preferred stock include venture capital funds that hold 5% or more of our capital stock and were represented on our board of directors. In addition, Investor Growth Capital, which made its initial investment in our company in the Series GG financing, became a greater than 5% holder of our outstanding capital and is represented on our board of directors. The following table summarizes purchases of Series GG preferred stock by the above-listed investors:

Name of stockholder	BlueArc director		Number of Series GG shares		Total purchase price
Funds affiliated with Crosslink Capital(1)		Michael J. Stark		622,249	$	1,573,605
Funds affiliated with Meritech Capital(2)		Paul S. Madera		957,680		2,421,877
Morgenthaler Partners VIII, L.P.		Gary J. Morgenthaler		398,670		1,008,196
Funds affiliated with Investor Growth Capital(3)		José F. Suarez		4,745,146		11,999,999

(1) Affiliates of Crosslink Capital holding our securities whose shares are aggregated for purposes of reporting share ownership information include Crosslink Ventures IV, L.P., Crosslink Crossover Fund V, L.P., Crosslink Omega Ventures IV GmbH & Co. KG, Offshore Crosslink Omega Ventures IV, Offshore Crosslink Crossover Fund III and Omega Bayview IV, LLC.

(2) Affiliates of Meritech Capital holding securities whose shares are aggregated for purposes of reporting share ownership information include MCP Entrepreneur Partners II, Meritech Capital Partners II and Meritech Capital Affiliates II.

(3) Affiliates of Investor Growth Capital holding securities whose shares are aggregated for purposes of reporting share ownership information include Investor Growth Capital Limited and Investor Group LP.

In accordance with the terms of our amended and restated certificate of incorporation that we filed in connection with the Series GG financing, 50% of every preferred stockholder’s outstanding shares of Series AA preferred stock, or Series AA, Series BB preferred stock, or Series BB, Series DD preferred stock, or Series DD, and Series FF preferred stock, or Series FF, was converted to common stock. To the extent each holder of previously converted preferred stock participated at the required level in the Series GG financing, such holder was able to immediately exchange each of the previously converted shares of common stock into one share of preferred stock of a new series. Shares of common stock issued upon conversion of Series AA were exchanged for shares of Series AA-1 preferred stock, or Series AA-1; shares of common stock issued upon conversion of Series BB were exchanged for shares of Series BB-1 preferred stock, or Series BB-1; shares of common stock issued upon conversion of Series DD were exchanged for shares of Series DD-1 preferred stock, or Series DD-1; and shares of common stock issued upon conversion of Series FF were exchanged for shares of Series FF-1 preferred stock, or Series FF-1. In aggregate, there were 2,691,061 shares of Series AA-1, 4,603,023 shares of Series BB-1, 3,279,749 shares of Series DD-1 and 2,517,391 shares of Series FF-1 issued, and 504,647 shares of Series AA, 45,818 shares of Series BB, 222,653 shares of Series DD and 53,010 shares of Series FF were converted to common stock and not exchanged for the new series of preferred stock. The liquidation preferences per share for Series AA-1 is $5.91, for Series BB-1 is $2.51, for Series DD-1 is $3.85 and for Series FF-1 is $4.21. In addition, the liquidation preferences per share of the remaining 50% shares of Series AA, Series BB, Series DD and Series FF were reduced as follows: from $6.00 to $4.98 for Series AA; from $3.00 to $2.49 for Series BB; from $4.14 to $3.60 for Series DD; and from $4.53 to $4.12 for Series FF. None of the Series EE preferred stock was converted into common stock; however, the liquidation preference per share decreased from $5.19 to $4.52. The Series CC preferred stock was not affected by the Series GG transaction.

Other than through the sale of the Series GG, we received no proceeds from the issuance of the shares of the Series “-1” preferred stock.

-132-

Bridge debt financings. In March and April 2008 we entered into a Note and Warrant Purchase Agreement with certain of our stockholders pursuant to which we issued convertible promissory notes and warrants in an aggregate amount of $6,694,655. The principal amount of the notes was convertible into an aggregate of 1,478,684 principal shares of Series FF preferred stock at $4.53 per share. The following table summarizes the original note investment amounts of our officers, directors and principal stockholders under this bridge financing:

Name of stockholder	BlueArc director		Aggregate principal amount of notes		Warrants(1)		Series FF preferred stock issued upon conversion of notes(2)
Funds affiliated with Crosslink Capital		Michael J. Stark	$	1,886,937		41,675		416,776
Funds affiliated with Meritech Capital		Paul S. Madera		2,904,115		64,144		641,449
Morgenthaler Partners VIII, L.P.		Gary J. Morgenthaler		1,208,948		26,702		267,028

(1) Reflects currently outstanding warrants to purchase shares of Series FF and Series FF-1 with an exercise price of $4.53 per share.

(2) Includes shares of Series FF preferred stock which were converted into Series FF-1 preferred stock in the recapitalization discussed above.

In February 2010, we entered into a Note and Warrant Purchase Agreement with certain of our stockholders pursuant to which we issued subordinated convertible promissory notes and warrants in an aggregate of $2,700,885. The promissory notes bore interest at the rate of 8% per annum, and pursuant to their terms were converted into 1,099,938 shares of Series GG at $2.53 per share. The following table summarizes the original note investment amounts of our officers, directors and principal stockholders under this bridge financing:

Name of stockholder	BlueArc director		Aggregate principal amount and accrued interest of notes		Warrants(1)		Series GG preferred stock issued upon conversion of notes
Funds affiliated with Crosslink Capital		Michael J. Stark	$	737,762		84,947		291,730
Funds affiliated with Meritech Capital		Paul S. Madera		1,135,463		130,742		448,993
Morgenthaler Partners VIII, L.P.		Gary J. Morgenthaler		472,679		54,427		186,911

(1) Reflects currently outstanding warrants to purchase shares of Series GG with exercise price of $2.53 per share that will be net exercised for              shares of common stock based on an assumed initial public offering price of $             per share, which is the midpoint of the range of the initial public offering listed on the cover page of the prospectus.

-133-

Stock option awards

Certain stock option grants to our directors and executive officers and related option grant policies are described in this prospectus under the sections entitled “Management—Director compensation,” “Executive compensation—Compensation disclosure and analysis,” “Executive compensation—Grants of plan-based awards at fiscal year end,” “Executive compensation—Outstanding awards at fiscal year-end” and “Executive compensation—Change of control severance agreements and potential payments upon termination or change of control.” Pursuant to our director and executive officer compensation policies or other arrangements, we granted the following options to certain directors and executive officers since February 1, 2007:

Name	Grant date			Shares subject to option(1)		Exercise price
Michael B. Gustafson		03/15/07	(2)		37,094	$	1.70
		03/26/08	(3)		6,911		4.13
		06/05/08	(4)		14,808		4.13
		04/03/09	(4)		21,912		0.83
		09/02/09	(5)		41,945		0.86
		12/11/09	(6)		383,744		0.86
		12/11/09	(4)		95,936		0.86
		12/11/09	(4)		95,936		0.86
		04/06/10	(7)		8,144		1.94
		06/17/11	(6)		150,000		3.99
Rick Martig		08/27/08	(8)		300,000		2.58
		08/27/08	(4)		4,332		2.58
		04/03/09	(5)		4,931		0.83
		04/03/09	(4)		11,493		0.83
		09/02/09	(5)		22,000		0.86
		04/06/10	(7)		7,082		1.94
		10/22/10	(9)		42,500		1.42
		06/17/11	(6)		100,000		3.99
Shmuel Shottan		01/25/07	(10)		500		1.70
		03/15/07	(11)		18,485		1.70
		03/26/08	(12)		55,000		4.13
		03/26/08	(13)		3,686		4.13
		06/05/08	(4)		7,821		4.13
		04/03/09	(4)		11,574		0.83
		04/03/09	(5)		4,966		0.83
		09/02/09	(5)		22,156		0.86
		04/06/10	(7)		7,132		1.94
		10/22/10	(9)		30,000		1.42
		06/17/11	(6)		20,000		3.99
Christopher J. McBride		02/27/07	(14)		141,177		1.70
		03/15/07	(15)		58,823		1.70
		03/26/08	(16)		24,213		4.13
		03/26/08	(17)		50,787		4.13
		03/26/08	(18)		3,350		4.13
		06/05/08	(4)		4,315		4.13
		04/03/09	(5)		4,383		0.83
		04/03/09	(4)		6,385		0.83
		09/02/09	(5)		12,222		0.86
		04/06/10	(7)		3,934		1.94
		10/22/10	(9)		37,500		1.42
		06/17/11	(6)		40,000		3.99
Bridget Warwick		02/25/09			200,000		0.83
		04/03/09	(4)		10,216		0.83
		09/02/09	(5)		19,555		0.86
		04/06/10	(7)		6,295		1.94
		09/24/10			75,000		1.42
		10/22/10	(9)		15,000		1.42
		06/17/11	(6)		25,000		3.99
David A. de Simone		06/17/11			400,000		3.99

-134-

Name	Grant date			Shares subject to option(1)		Exercise price
Christopher P. White		06/17/11			150,000		3.99
Paul S. Madera		06/22/11	(6)		104,000		3.99
David N. Martin		06/10/09	(6)		10,000		0.86
		09/01/10	(6)		90,000		1.42
		06/22/11	(6)		30,000		3.99
Gary J. Morgenthaler		06/22/11	(6)		104,000		3.99
Michael J. Stark		06/22/11	(6)		104,000		3.99
José F. Suarez		06/22/11	(6)		104,000		3.99
Duston M. Williams		10/08/07	(19)		62,730		5.81
		10/22/10			58,261		1.42
		06/22/11	(6)		60,000		3.99
Alan E. Baratz, PhD(20)		08/02/07	(21)		46,800		5.22
		09/30/10	(22)		10,725		1.71

(1) Unless otherwise noted, each option listed in this table vests and becomes exercisable at a rate of 25% on the first anniversary of the vesting commencement date with the remainder vesting and becoming exercisable ratably over the next 36 months, subject to continued service through each applicable date by the applicable optionholder.

(2) This option was exchanged for an option to purchase 37,094 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 15, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(3) This option was exchanged for an option to purchase 6,911 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 26, 2008, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(4) These options were exercisable only in the event that we attained certain performance objectives. We did not attain those objectives and the options were cancelled.

(5) This option became vested and exercisable on January 31, 2010 upon achievement of certain corporate performance objectives set forth in the option agreement.

(6) 1/48^th of the total number of shares subject to this option vest monthly subject to continued service through each applicable date.

(7) 100% of the total number of shares subject to this option vested on January 30, 2011 upon achievement of certain corporate performance objectives set forth in the option agreement.

(8) This option was exchanged for an option to purchase 300,000 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 15, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(9) This option vests as to 10% of the total shares subject to the option on the first anniversary of the grant date; 15% of the total shares subject to the option on the second anniversary of the grant date; 30% of the total shares subject to the option on the third anniversary of the grant date and 40% of the total shares subject to the option on the fourth anniversary of the grant date.

(10) This option was exchanged for an option to purchase 500 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on January 25, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(11) This option was exchanged for an option to purchase 18,485 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 15, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(12) This option was exchanged for an option to purchase 55,000 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 26, 2008, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(13) This option was exchanged for an option to purchase 3,686 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 26, 2008, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

-135-

(14) This option was exchanged for an option to purchase 141,177 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on February 27, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(15) 50,000 of the shares subject to this option were exercised by Mr. McBride in April 2007, and the remaining 8,823 shares were exchanged for an option to purchase 8,823 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 15, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(16) This option was exchanged for an option to purchase 24,213 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 26, 2008, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(17) This option was exchanged for an option to purchase 50,787 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 26, 2008, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(18) This option was exchanged for an option to purchase 3,350 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on March 26, 2008, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(19) This option was exchanged for an option to purchase 62,730 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on October 8, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(20) Dr. Baratz resigned as a member of our board of directors in September 2010, but continues to providing consulting services.

(21) This option was exchanged for an option to purchase 46,800 shares of common stock at an exercise price of $0.86 per share granted on July 15, 2009. The vesting schedule of the option granted on July 15, 2009 remained the same as the stock option granted on August 2, 2007, which vests and becomes exercisable ratably over 48 months, subject to continued service through each applicable date; however, the vesting commencement date was 12 months later than the original option vesting commencement date.

(22) This option vests and becomes exercisable ratably over 24 months, subject to continued service through each applicable date.

Consulting agreement with David N. Martin

On June 1, 2009, we entered into a consulting agreement, or the Consulting Agreement, with David N. Martin, who became a member of our board of directors on September 1, 2010. Pursuant to the Consulting Agreement, Mr. Martin provided services to us in exchange for cash compensation and the grant of equity awards under our 2000 Plan. The following table provides information regarding all compensation awarded to, earned by or paid to Mr. Martin since June 2009 for his services as a consultant.

Fiscal Year	Fees earned or paid in cash		Stock awards(1)		Option awards(2)		Total
2010	$	180,120	$	—	$	12,571(3)	$	192,691
2011		219,382		49,463(4)		—		268,845

(1) Amounts represent the aggregate grant date fair value of the restricted stock award calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation, as amended. See Note 9 in the notes to our consolidated financial statements for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of our restricted stock awards.

(2) Amounts represent the aggregate grant date fair value of the option award calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation, as amended, without regard to estimated forfeitures. See Note 9 in the notes to our consolidated financial statements for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of our stock options.

(3) Represents an option granted on June 10, 2009 to purchase up to 10,000 shares of our common stock at a price per share of $0.86. The option vests beginning on June 10, 2009 and vests as to 1/48th of the shares subject to the option award monthly thereafter or until the end of the Consulting Agreement, whichever is earlier.

-136-

(4) Represents 28,926 shares of restricted stock granted on January 18, 2011 under our 2000 Stock Option/Stock Issuance Plan at a price per share of $1.71. The restricted stock vests beginning on November 1, 2010 and vests as to 1/6th of the shares monthly thereafter, subject to Mr. Martin’s continued service through each vesting date.

Investors’ rights agreement

In connection with our Series GG financing, we entered into an amended and restated investors’ rights agreement with certain purchasers of our preferred stock, including our principal stockholders with whom certain of our directors are affiliated. Pursuant to this agreement, we granted such stockholders certain registration rights with respect to certain shares of our common stock which will be issuable upon conversion of the shares of preferred stock held by them. For a description of these registration rights, see “Description of capital stock—Registration rights.”

Voting agreements

We have entered into a voting agreement with certain holders of our outstanding preferred stock and common stock, including entities with which certain of our directors are affiliated, and certain other stockholders, obligating each party to vote or consent at each stockholder meeting or with respect to each written stockholder consent to elect the nominees of certain parties to our board of directors. The parties to the voting agreement have agreed, subject to certain conditions, to vote their shares so as to elect as directors the nominees designated by certain of our investors, including Meritech Capital Partners, which has designated Paul S. Madera for election to our board of directors; Crosslink Capital, which has designated Michael J. Stark for election to our board of directors; Morgenthaler Partners VIII, L.P., which has designated Gary J. Morgenthaler for election to our board of directors; and Investor Growth Capital, Inc., which has designated José F. Suarez for election to our board of directors. In addition, the parties to the voting agreement have agreed to vote their shares so as to elect our then current Chief Executive Officer to our board of directors, and two persons nominated by the holders of a majority of the outstanding shares held by Meritech Capital Partners, Morgenthaler Partners VIII, L.P., Crosslink Capital and Investor Growth Capital, which are Duston M. Williams and David N. Martin. Upon this closing of this offering, the voting agreement will terminate in its entirety and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.

Indemnification agreements

We have entered into indemnity agreements with each of our current directors and officers, in addition to the indemnification provided for in our bylaws. These agreements will require us to indemnify each such person against expenses and liabilities incurred by such person for a proceeding related to such person’s services for us, and to advance expenses incurred for such proceeding, all subject to limited exceptions. See “Compensation Discussion and Analysis—Limitation of liability and indemnification.”

-137-

Policies and procedures for related party transactions

As provided by our audit committee charter to be effective upon completion of this offering, our audit committee is responsible for reviewing and approving in advance any related party transaction. All of our directors, officers and employees are required to report to the audit committee any related party transaction prior to entering into the transaction.

We believe that we have executed all of the transactions set forth under the section entitled “Related party transactions” on terms no less favorable to us than we could have obtained from unaffiliated third parties. It is our intention to ensure that all future transactions between us and our officers, directors and principal stockholders and their affiliates, are approved by the audit committee of our board of directors, and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.

-138-

Principal stockholders

The following table presents information as to the beneficial ownership of our common stock as of April 30, 2011, and as adjusted to reflect the sale of the common stock in this offering, by:

• each stockholder known by us to be the beneficial owner of more than 5% of our common stock;

• each of our directors;

• each of our named executive officers; and

• all of our directors and executive officers as a group.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power for securities. Unless otherwise shown below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power for all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to options and warrants that are currently exercisable or exercisable within 60 days of April 30, 2011 are considered to be outstanding and to be beneficially owned by the person holding the options or warrants to compute the percentage ownership of that person, but are not treated as outstanding to compute the percentage ownership of any other person.

The number of shares of our common stock outstanding after this offering includes              shares of common stock being offered by us and does not include the shares that are subject to the underwriters’ over-allotment option. The percentage of our common stock outstanding before and after the offering is based on 43,330,741 shares of our common stock outstanding on April 30, 2011, assuming the conversion of all outstanding shares of preferred stock, including our Series CC preferred stock (assuming a one for 11.80684 conversion ratio), into an aggregate of 3,660,325 shares of common stock and including our Series EE preferred stock (assuming a one for 1.02268 conversion ratio), into an aggregate of 807,896 shares of common stock immediately prior to the closing of this offering. The percentage ownership information assumes no exercise of the underwriters’ overallotment option.

-139-

Unless otherwise indicated, the address of each of the individuals and entities named below is c/o BlueArc Corporation, 50 Rio Robles San Jose, California 95134.

	Number of shares beneficially owned(1)		Percentage of shares beneficially owned
			Before offering			After offering
5% Stockholders:
Entities affiliated with Meritech Capital Partners(2)		10,165,446		23.37	%
Entities affiliated with Crosslink Capital(3)		6,429,420		14.80
Entities affiliated with Investor Growth Capital(4)		4,745,146		10.95
Morgenthaler Venture Partners VIII, L.P.(5)		4,119,292		9.49
Directors and Executive Officers:
Michael B. Gustafson(6)		1,453,370		3.30
Rick Martig(7)		177,762		*
Shmuel Shottan(8)		378,245		*
Christopher J. McBride(9)		244,666		*
Bridget Warwick(10)		142,517		*
Christopher P. White		—		*
David A. de Simone		—		*
Paul S. Madera(2)		10,165,446		23.37
David N. Martin(11)		33,926		*
Gary J. Morgenthaler(5)		4,119,292		9.49
Michael J. Stark(3)		6,429,420		14.80
José F. Suarez(4)		4,745,146		10.95
Duston M. Williams(12)		41,280		*
All directors and executive officers as a group (13 persons)(13)		27,931,070		61.95

* Represents beneficial ownership of less than 1%.

(1) The options granted to our executive officers and directors are subject to an early exercise right and may be exercised in full prior to vesting of the shares underlying the options. The option exercisable information provided in this table includes only the shares vested under such options within 60 days of April 30, 2011.

(2) Represents 9,669,861 shares held by Meritech Capital Partners II, L.P., 248,810 shares held by Meritech Capital Affiliates II, L.P. and 73,933 shares held by MCP Entrepreneur Partners II. L.P. Includes 64,144 shares of common stock to be issued upon exercise of outstanding warrants to purchase Series FF and Series FF-1 preferred stock, and warrants to purchase 108,698 shares of Series GG preferred stock that will be net exercised on the closing of this offering for             shares of common stock, based on an assumed initial public offering price of $             per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus. Meritech Management Associates II L.L.C., the managing members of Meritech Capital Associates II L.L.C., the general partner of each of these funds, and Paul S. Madera and Mike B. Gordon, the managing member of Meritech Management Associates II L.L.C., may be considered to share voting and dispositive power over these shares. Each of Meritech Management Associates II, L.L.C., Meritech Capital Associates II, L.L.C., Mr. Madera and Mr. Gordon disclaims beneficial ownership of these shares except to the extent of their respective pecuniary interests therein. The address of each of these funds is c/o Meritech Capital Partners, 245 Lytton Avenue, Suite 350, Palo Alto, California 94301.

(3) Represents 2,447,262 shares held by Crosslink Ventures IV, L.P., 1,080,598 shares held by Crosslink Crossover Fund III, 820,575 shares held by Crosslink Crossover Fund IV, L.P., 867,343 shares held by Offshore Crosslink Omega Ventures IV, 435,242 shares held by Offshore Crosslink Crossover Fund III, 185,082 shares held by Omega Bayview IV, L.L.C., 106,756 shares held by Crosslink Omega Ventures IV GmbH & Co. KG and 374,264 shares held by Crosslink Crossover Fund V, L.P. Includes 41,675 shares of common stock to be issued upon exercise of outstanding warrants to purchase Series FF and Series FF-1 preferred stock, and warrants to purchase 70,623 shares of Series GG preferred stock that will be net exercised on the closing of this offering for              shares of common stock, based on an assumed initial public offering price of $             per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus. The general partner of each of these funds, and Michael J. Stark, the managing member of Crosslink Ventures, may be considered to share voting and dispositive power over these shares. Each of these funds and Mr. Stark disclaims beneficial ownership of these shares except to the extent of their respective pecuniary interests therein. The address of each of these funds is c/o Crosslink Ventures ATTN: Nancy D. Payne, Two Embarcadero Center, Suite 2200, San Francisco, California 94116.

(4) Represents 3,321,602 shares held by Investor Growth Capital Limited and 1,423,544 shares held by Investor Group, L.P. The general partner of each of these funds, and José F. Suarez, the managing director of Investor Growth Capital, may be considered to share voting and dispositive power over these shares. Mr. Suarez disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. The address for each of these funds is Canada Court, Upland Road, St. Peter Port, Guernsey GY1 3BQ.

(5) Represents 4,047,340 shares held by Morgenthaler Partners VIII, L.P. Includes 26,702 shares of common stock to be issued upon exercise of outstanding warrants to purchase Series FF and Series FF-1 preferred stock, and warrants to purchase 45,250 shares of Series GG preferred stock that will be net exercised on the closing of this offering for             shares of common stock, based on an assumed initial public offering price of $             per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus. Gary J. Morgenthaler, the managing member of Morgenthaler

-140-

Ventures may be considered to share voting and dispositive power over these shares. Morgenthaler Ventures and Mr. Morgenthaler disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interests therein. The address of each of these funds is c/o Morgenthaler Partners VIII, L.P., 2710 Sand Hill Road, Suite 100, Menlo Park, California 94025.

(6) Includes 688,590 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

(7) Includes 177,762 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

(8) Includes 146,995 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

(9) Includes 194,666 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

(10) Includes 142,517 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

(11) Includes 4,821 shares that are subject to a right of repurchase at cost and 5,000 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011. The right repurchase will lapse as of May 1, 2011.

(12) Includes 41,280 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

(13) Includes 1,396,810 shares issuable upon exercise of options that are exercisable within 60 days after April 30, 2011.

-141-

Description of capital stock

The following is a summary of our capital stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the closing of this offering. This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part.

Immediately following the closing of this offering, our authorized capital stock will consist of              shares of common stock, $.001 par value per share, and              shares of preferred stock, $.001 par value per share.

Common stock

Based on 3,511,504 shares of common stock outstanding as of April 30, 2011 and the conversion of outstanding preferred stock as of April 30, 2011 into 39,819,237 shares of common stock upon the completion of this offering (assuming that shares of Series CC preferred stock convert on a one for 11.80684 basis and the shares of Series EE preferred stock convert on a one for 1.02268 basis), assuming no outstanding options are exercised prior to the closing of this offering and the issuance of              shares of common stock in this offering, there will be              shares of common stock outstanding upon the closing of this offering (including 1,073,447 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.68 per share; and 320,393 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.53 per shares, that will be net exercised for              shares of common stock, based on an assumed initial public offering price of $              per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus). As of April 30, 2011, assuming the conversion of all outstanding preferred stock into common stock upon the closing of this offering, we had 264 record holders of our common stock.

Holders of our common stock are entitled to one vote for each share of common stock held of record for the election of directors and on all matters submitted to a vote of stockholders. Holders of our common stock are entitled to receive dividends ratably, if any, as may be declared by our board of directors out of legally available funds, subject to any preferential dividend rights of any preferred stock then outstanding. Upon our dissolution, liquidation or winding up, holders of our common stock are entitled to shares ratably in our net assets legally available after the payment of all our debts and other liabilities, subject to the preferential rights of any preferred stock then outstanding. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. All of our outstanding shares of common stock are, and the shares of common stock to be issued pursuant to this offering will be, fully paid and nonassessable.

Preferred stock

Upon completion of this offering, our board of directors will be authorized, without further vote or action by the stockholders, to issue from time to time, up to an aggregate of 50,000,000 shares of preferred stock in one or more series and to fix or alter the designations, rights, preferences

-142-

and privileges and any qualifications, limitations or restrictions of the shares of each such series of preferred stock, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series, any or all of which may be greater than the rights of common stock. The issuance of preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that holders of our common stock will receive dividend payments upon liquidation and could have the effect of delaying, deferring or preventing a change in control. We have no present plans to issue any shares of preferred stock.

Warrants

As of April 30, 2011, we had the following warrants outstanding:

• Warrants to purchase an aggregate of 480,729 shares of common stock at exercise prices ranging from $1.71 to $44,000 per share. The warrants expire on various dates between March 8, 2012 and April 16, 2020.

• Warrants to purchase 296,362 shares of Series FF and 296,356 shares of Series FF-1 at exercise prices ranging from $2.53 to $4.53 per share in connection with a debt financing. Each warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon exercise in the event of stock dividends, stock splits, reorganizations and reclassifications, consolidations and the like. The warrants expire on various dates between March 11, 2018 and March 30, 2019.

• Warrants to purchase 320,393 shares of Series GG at an exercise price of $2.53 per share in connection with a debt financing. Upon completion of this offering, all of these warrants will expire if not exercised. Each warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon exercise in the event of stock dividends, stock splits, reorganizations and reclassifications, consolidations and the like.

Registration rights

Following the closing of this offering, the holders of an aggregate of 40,732,348 shares of our common stock issuable upon the conversion of our convertible preferred stock (including 592,718 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $3.02 per share; and 320,393 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.53 per shares, that will be net exercised for              shares of common stock, based on an assumed initial public offering price of $              per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus), or their transferees, will be entitled to the registration rights set forth below with respect to registration of the resale of such shares under the Securities Act pursuant to an investors’ rights agreement by and among us and certain of our stockholders. As applicable, we refer to these shares collectively as registrable securities. The rights set forth below will expire on the fifth anniversary of the closing of the offering.

Demand registration rights.    At any time, other than during the six-month period following the effective date of the registration statement of which this prospectus is a part and subject to certain exceptions, the holders of at least 30% of the registrable securities may demand that we effect a registration under the Securities Act covering the public offering and sale of all or part

-143-

of the registrable securities held by such stockholders, provided that the aggregate offering price of the registrable securities that such holders propose to sell in such offering is at least $25,000,000. Upon any such demand we must use our best efforts to effect the registration of the registrable securities which we have been requested to register together with all other registrable securities that we may have been requested to register by other stockholders pursuant to the incidental registration rights described below. We are only obligated to effect two registrations in response to these demand registration rights for the holders of the registrable securities. Depending on certain conditions, we may defer such registration for up to 90 days.

Incidental registration rights.    If we register any securities for public sale, including pursuant to any stockholder initiated demand registration, holders of the registrable securities will have the right to include their shares in the registration statement, subject to certain exceptions relating to employee benefit plans and mergers and acquisitions. The underwriters of any underwritten offering will have the right to limit the number registrable securities to be included in the registration statement, subject to certain restrictions.

Short form registration rights.    Following this offering, we are obligated under the investors’ rights agreement to use our best efforts to qualify and remain eligible for registration on Form S-3 under the Securities Act. At any time after we are qualified to file a registration statement on Form S-3, the holders of at least 30% of the registrable securities may request in writing that we effect a registration on Form S-3 if the proposed aggregate offering price of the shares to be registered by the holders requesting registration is at least $5,000,000, subject to certain exceptions.

Expenses of registration.    We will pay all registration expenses related to any demand, company or Form S-3 registration, including reasonable fees and expenses of counsel for the selling holders of the registrable securities, other than underwriting discounts, selling commissions and transfer taxes (if any), which will be borne by the holders of the registrable securities.

Canadian registration requirements.    We are obligated, at the request of any Canadian holder of registrable securities and subject to certain conditions, to file a prospectus under the securities laws of each Canadian province in which holders of registrable securities are then resident, to qualify the distribution of the registrable securities in such provinces, and to use our best efforts to obtain a receipt (or equivalent document) therefor concurrently with the completion of this offering.

Indemnification.    The investors’ rights agreement contains indemnification provisions pursuant to which we are obligated to indemnify the selling stockholders and any person who might be deemed to control us or any of our subsidiaries in the event of material misstatements or omissions in the registration statement or related violations of law attributable to us. As a condition to including their securities in any registration statement filed pursuant to demand or incidental registration rights, the selling stockholders shall indemnify us for misstatements or omissions attributable to them.

Antitakeover effects of provisions of the amended and restated certificate of incorporation and amended and restated bylaws

Our amended and restated certificate of incorporation and our amended and restated bylaws contain certain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. We expect these provisions and certain provisions of

-144-

Delaware law, which are summarized below, to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection due to our potential ability to negotiate more favorable terms with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us.

Undesignated preferred stock.    As discussed above, our board of directors has the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.

Limits on the ability of stockholders to act by written consent or call a special meeting.    Our amended and restated certificate of incorporation provides that our stockholders may not act by written consent, which may lengthen the amount of time required to take stockholder actions. As a result, a holder controlling a majority of our capital stock would not be able to amend our certificate of incorporation or bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws.

In addition, our amended and restated certificate of incorporation and amended and restated bylaws provide that special meetings of the stockholders may be called only by the chairperson of the board of directors, the chief executive officer or our board of directors. Stockholders may not call a special meeting, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take any action, including the removal of directors.

Requirements for advance notification of stockholder nominations and proposals.    Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Board classification.    Our amended and restated certificate of incorporation provides that our board of directors will be divided into three classes, one class of which is elected each year by our stockholders. The directors in each class will serve for a three-year term. For more information on the classified board of directors, see “Management—Board composition and risk oversight.” Our classified board of directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for stockholders to replace a majority of the directors.

Election and removal of directors.    Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that establish specific procedures for appointing and removing members of our board of directors. Under our amended and restated certificate of incorporation and amended and restated bylaws, vacancies and newly created directorships on our board of directors may be filled only by a majority of the directors then serving on the board of directors. Under our amended and restated certificate of incorporation and amended and restated bylaws, directors may be removed only for cause by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors.

-145-

No cumulative voting.    The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our restated certificate of incorporation provides otherwise. Our restated certificate of incorporation and amended and restated bylaws do not expressly provide for cumulative voting. The absence of cumulative voting makes it more difficult for a minority stockholder to gain a seat on our board of directors to influence our board of directors’ decision regarding a takeover.

Delaware antitakeover statute.    Upon the completion of this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

• prior to the date of the transaction, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

• upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, calculated as provided under Section 203; or

• at or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

Generally, a business combination includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to have an antitakeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may discourage takeover attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

The provisions of Delaware law and the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they might also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions might also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests.

Transfer agent and registrar

The transfer agent and registrar for our common stock is                     . The transfer agent’s address is              and its telephone number is (    )                     .

Listing on The NASDAQ Global Market or The New York Stock Exchange

We intend to apply to list our common stock on The NASDAQ Global Market or the New York Stock Exchange under the trading symbol “BLRC.”

-146-

Shares eligible for future sale

Prior to this offering, there has not been any public market for our common stock, and we make no prediction as to the effect, if any, that market sales of shares of our common stock or the availability of shares of common stock for sale will have on the market price of our common stock. Nevertheless, sales of substantial amounts of common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of common stock and could impair our future ability to raise capital through the sale of equity securities.

Upon the completion of this offering, we will have an aggregate of              shares of common stock outstanding, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options. Of the outstanding shares, all of the              shares sold in this offering, plus any additional shares sold upon exercise of the underwriters’ over-allotment option, will be freely tradable, except that any shares purchased by “affiliates” (as that term is defined in Rule 144 under the Securities Act), may only be sold in compliance with the limitations described below. The remaining              shares of common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or Rule 701, promulgated under the Securities Act, which rules are summarized below.

As a result of the contractual restrictions described below and the provisions of Rules 144 and 701, the restricted shares will be available for sale in the public market as follows:

• no shares will be eligible for sale upon completion of this offering;

• no shares will be eligible for sale upon the expiration of the lock-up agreements, described below, beginning 90 days after the date of this prospectus;

• 43,330,741 shares will be eligible for sale upon the expiration of the lock-up agreements, described below, beginning 180 days after the date of this prospectus; and

•              shares will be eligible for sale upon the exercise of vested options 180 days after the date of this prospectus, subject to extension in certain circumstances.

Lock-up agreements and obligations

Our directors, officers and substantially all of our stockholders have entered into lock-up agreements that generally provide that these holders will not offer, pledge, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of common stock or any securities convertible into or exchangeable for shares of common stock without the prior written consent of J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days from the date of this prospectus, subject to certain exceptions described under the heading “Underwriting.”

In addition, each grant agreement under each of our 2000 Plan contains restrictions similar to those set forth in the lock-up agreements described above limiting the disposition of securities issuable pursuant to those plans for a period of at least 180 days following the date of this prospectus.

The 180-day restricted periods described above are subject to extension such that, in the event that either (1) during the last 17 days of the 180-day restricted period, we issue an earnings

-147-

release or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions on offers, pledges, sales, agreements to sell or other dispositions of common stock or securities convertible into or exchangeable or exercisable for shares of our common stock described above will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release; provided, however, that if none of the underwriters’ representatives publishes or otherwise distributes a research report or makes a public appearance concerning us within three trading days of the announcement of such material news or material event, the extension of the 180-day restricted period related to such material news or material event (but not related to any other material news or material event) will be only until the later of (i) the last day of the initial 180-day restricted period and (ii) the third trading day after such announcement.

Rule 144

In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.

In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

• 1% of the number of shares of common stock then outstanding, which will equal approximately              shares immediately after this offering; or

• the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of

-148-

Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701.

As of April 30, 2011, 2,666,709 shares of our outstanding common stock had been issued in reliance on Rule 701 as a result of exercises of stock options and stock awards.

Stock options

We intend to file registration statements on Form S-8 under the Securities Act covering all of the shares of our common stock subject to options outstanding or reserved for issuance under our stock plans, employee stock purchase plan and shares of our common stock issued upon the exercise of options by employees. We expect to file this registration statement as soon as practicable after this offering. However, the shares registered on Form S-8 will be subject to volume limitations, manner of sale, notice and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up agreements to which they are subject.

Registration rights

Upon completion of this offering, the holders of an aggregate of 40,732,348 shares of our common stock issuable upon the conversion of our convertible preferred stock (including 592,718 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $3.02 per share; and 320,393 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of April 30, 2011, at a weighted average exercise price of $2.53 per shares, that will be net exercised for              shares of common stock, based on an assumed initial public offering price of $              per share, which is the midpoint of the range of the initial public offering price listed on the cover page of this prospectus), or their transferees, will be entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming freely tradeable without restriction under the Securities Act immediately upon the effectiveness of such registration. For a further description of these rights, see “Description of capital stock—Registration rights.”

-149-

Material United States federal income tax and estate tax consequences to non-U.S. holders

The following is a summary of the material U.S. federal income tax and estate tax consequences to non-U.S. holders (as defined below) of the ownership and disposition of our common stock, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income or estate tax consequences different from those set forth below.

This summary does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction or under U.S. federal gift and estate tax laws, except to the limited extent below. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

• banks, insurance companies or other financial institutions;

• persons subject to the alternative minimum tax;

• tax-exempt organizations;

• controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax;

• dealers in securities or currencies;

• traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

• persons that own, or are deemed to own, more than five percent of our capital stock, except to the extent specifically set forth below;

• certain former citizens or long-term residents of the United States;

• persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction;

• persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code (generally, for investment purposes); or

• persons deemed to sell our common stock under the constructive sale provisions of the Internal Revenue Code.

In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.

YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX

-150-

CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

Non-U.S. holder defined

For purposes of this discussion, you are a non-U.S. holder if you are any holder, other than a partnership or entity classified as a partnership for U.S. federal income tax purposes, that is not:

• an individual citizen or resident of the United States;

• a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or any political subdivision thereof;

• an estate whose income is subject to U.S. federal income tax regardless of its source; or

• a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (y) which has made an election to be treated as a U.S. person.

Distributions

We have not made any distributions on our common stock and we do not plan to make any distributions for the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of our common stock.

Any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. A non-U.S. holder of shares of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service, or IRS. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

Dividends received by you that are effectively connected with your conduct of a U.S. trade or business, and, if required by an applicable income tax treaty, attributable to a permanent establishment maintained by you in the United States, are exempt from such withholding tax. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are generally taxed at the same graduated rates applicable to U.S.

-151-

persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.

Gain on disposition of common stock

You generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

• the gain is effectively connected with your conduct of a U.S. trade or business, and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment maintained by you in the United States;

• you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

• our common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation,” or a USRPHC, for U.S. federal income tax purposes, at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock.

We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as a U.S. real property interest only if you actually or constructively hold more than five percent of such regularly traded common stock at any time during the applicable period described above.

If you are a non-U.S. holder described in the first bullet above, you will generally be required to pay tax on the gain derived from the sale, net of certain deductions or credits, under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in the first bullet above may be subject to branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by U.S. source capital losses, even though you are not considered a resident of the United States. You should consult any applicable income tax or other treaties that may provide for different rules.

Federal estate tax

Our common stock beneficially owned by an individual who is not a citizen or resident of the United States, as defined for U.S. federal estate tax purposes, at the time of death will generally be includable in the decedent’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

-152-

Backup withholding and information reporting

Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.

Payments of dividends or of proceeds on the disposition of stock made to you may be subject to additional information reporting and backup withholding at a current rate of 28% unless you establish an exemption, for example by properly certifying your non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person.

Backup withholding is not an additional tax; rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

Recently enacted legislation affecting taxation of our common stock held by or through foreign entities

Recently enacted legislation generally will impose a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a “foreign financial institution,” as specially defined under these rules, unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution, which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners. The legislation also will generally impose a U.S. federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a non financial foreign entity unless such entity provides the withholding agent with a certification identifying the direct and indirect U.S. owners of the entity. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in our common stock.

THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

-153-

Underwriting

J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, or the Representatives, are acting as the representatives of the underwriters and joint book running managers in connection with this offering. Under the terms of an underwriting agreement, the form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part, each of the underwriters named below has severally agreed to purchase from us, and have agreed to sell, the respective number of shares of common stock shown opposite its name below:

Name	Number of shares
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith
Incoporated
Credit Suisse Securities (USA) LLC
William Blair & Company, L.L.C.
Pacific Crest Securities LLC
ThinkEquity LLC
Total

The underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:

• the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below), if any of the shares are purchased;

• the representations and warranties made by us to the underwriters are true;

• there is no material adverse change in our business or in the financial markets; and

• we deliver customary closing documents to the underwriters.

Commissions and expenses

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to              additional shares from us. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us, and we have severally agreed to sell, for the shares.

Paid by us	No exercise	Full exercise
Per Share	$	$
Total	$	$

The Representatives have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $             per share. After the offering, the Representatives may change the offering price and other selling terms.

-154-

The expenses of this offering, which are payable by us, are estimated to be approximately $             million (excluding underwriting discounts and commissions).

Option to purchase additional shares

We have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to an aggregate of              shares of common stock at the public offering price less underwriting discounts and commissions. This option may be exercised by the underwriters to cover over-allotments, if any, in connection with this offering. To the extent that the underwriters exercise this option, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares of common stock proportionate to that underwriter’s initial commitment as indicated in the table above, and we will be obligated to sell the additional shares of common stock to the underwriters.

Lock-up agreements

We, all of our directors and executive officers and holders of substantially all of our outstanding stock, have agreed that, subject to certain exceptions, we and they will not directly or indirectly, without the prior written consent of J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, (1) offer, sell, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of our common stock or securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any stock options), or publicly disclose the intention to make any offer, pledge, sale disposition, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock or such securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or other securities, in cash or otherwise or (3) make any demand for or exercise any right or cause to be filed with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities for a period of 180 days after the date of this prospectus.

The 180-day restricted period described in the preceding paragraph will be extended if:

(1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or

(2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of the material event, unless such extension is waived in writing by J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated.

-155-

J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time.

Offering price determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the Representatives and us. In determining the initial public offering price of our common stock, the Representatives will consider:

• the history and prospects for the industry in which we compete;

• our financial information;

• an assessment of management and our business potential and earning prospects;

• the prevailing securities market conditions at the time of this offering; and

• the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

Stabilization, short positions and penalty bids

The underwriters may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock, in accordance with Regulation M under the Exchange Act:

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

• A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out

-156-

any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

• Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

• Penalty bids permit the Representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that may otherwise exist in the open market. These transactions may be effected on              or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make representation that the Representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic distribution

A prospectus in electronic format may be made available on Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the Representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s website and any information contained in any other website maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors in deciding whether to purchase any shares of common stock.

Discretionary sales

The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares offered by them.

-157-

Stamp taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Directed share program

At our request, the underwriters have reserved         percent of the shares of common stock to be issued by us and offered by this prospectus for sale, at the initial public offering price, to business associates, customers and related persons. If purchased by these persons, these shares will be subject to a 180-day lock-up restriction, subject to certain extensions. The number of shares of our common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the sales of directed shares.

Relationships

The underwriters and certain of their respective affiliates are financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates may in the future perform, investment banking and advisory services for us from time to time, for which they may in the future receive customary fees and expenses. The underwriters and their respective affiliates may, from time to time, engage in transactions with or perform services for us in the ordinary course of their business.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve our securities and/or instruments. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling restrictions

The common stock is being offered for sale in those jurisdictions in the United States, Europe and elsewhere where it is lawful to make such offers.

European economic area

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), including each Relevant Member State that has implemented the 2010 PD Amending Directive with regard to persons to whom an offer

-158-

of securities is addressed and the denomination per unit of the offer of securities (each, an “Early Implementing Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), no offer of ordinary shares will be made to the public in that Relevant Member State (other than offers (the “Permitted Public Offers”) where a prospectus will be published in relation to the ordinary shares that has been approved by the competent authority in a Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive), except that with effect from and including that Relevant Implementation Date, offers of ordinary shares may be made to the public in that Relevant Member State at any time:

a) to “qualified investors” as defined in the Prospectus Directive, including:

A. (in the case of Relevant Member States other than Early Implementing Member States), legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities, or any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43.0 million and (iii) an annual turnover of more than €50.0 million as shown in its last annual or consolidated accounts; or

B. (in the case of Early Implementing Member States), persons or entities that are described in points (1) to (4) of Section I of Annex II to Directive 2004/39/EC, and those who are treated on request as professional clients in accordance with Annex II to Directive 2004/39/EC, or recognized as eligible counterparties in accordance with Article 24 of Directive 2004/39/EC unless they have requested that they be treated as nonprofessional clients; or

b) to fewer than 100 (or, in the case of Early Implementing Member States, 150) natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive), as permitted in the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of ordinary shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State (other than a Relevant Member State where there is a Permitted Public Offer) who initially acquires any ordinary shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (A) it is a “qualified investor,” and (B) in the case of any ordinary shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (x) the ordinary shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, or in circumstances in which the prior consent of the Subscribers has been given to the offer or resale, or (y) where ordinary shares have been acquired by it on behalf of persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, the offer of those ordinary shares to it is not treated under the Prospectus Directive as having been made to such persons.

-159-

For the purpose of the above provisions, the expression “an offer to the public” in relation to any ordinary shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer of any ordinary shares to be offered so as to enable an investor to decide to purchase any ordinary shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71 EC (including the 2010 PD Amending Directive, in the case of Early Implementing Member States) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The securities are only available to and any invitation, offer or agreement to subscribe purchase or otherwise acquire such securities will be enjoyed in only with relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Australia

This prospectus is not a formal disclosure document and has not been lodged with the Australian Securities and Investments Commission, or ASIC. It does not purport to contain all information that an investor or their professional advisers would expect to find in a prospectus for the purposes of Chapter 6D.2 of the Australian Corporations Act 2001, or the Act, in relation to the securities or our company.

This prospectus is not an offer to retail investors in Australia generally. Any offer of securities in Australia is made on the condition that the recipient is a “sophisticated investor” within the meaning of section 708(8) of the Act or a “professional investor” within the meaning of section 708(11) of the Act, or on condition that the offer to that recipient can be brought within the exemption for ‘Small-Scale Offerings’ (within the meaning of section 708(1) of the Act). If any recipient does not satisfy the criteria for these exemptions, no applications for securities will be accepted from that recipient. Any offer to a recipient in Australia any agreement arising from acceptance of the offer, is personal and may only he accepted by the recipient.

If a recipient on-sells their securities within 12 months of their issue, that person will be required to lodge a disclosure document with ASIC unless either:

• the sale is pursuant to an offer received outside Australia or is made to a “sophisticated investor” within the meaning of 708(8) of the Act or a “professional investor” within the meaning of section 708(11) of the Act; or

• it can be established that our company issued, and the recipient subscribed for, the securities without the purpose of the recipient on-selling them or granting, issuing or transferring interests in, or options or warrants over them.

-160-

Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of the issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) or any rules made thereunder.

India

This prospectus has not been and will not be registered as a prospectus with the Registrar of Companies in India. This prospectus or any other material relating to these securities may not be circulated or distributed, directly or indirectly, to the public or any members of the public in India. Further, persons into whose possession this prospectus comes are required to inform themselves about and to observe any such restrictions. Each prospective investor is advised to consult its advisors about the particular consequences to it of an investment in these securities. Each prospective investor is also advised that any investment in these securities by it is subject to the regulations prescribed by the Reserve Bank of India and the Foreign Exchange Management Act and any regulations framed thereunder.

Japan

No registration has been made under Article 4, Paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended), which we refer to as the FIEL, in relation to the offering of the shares. The shares are being offered in a private placement to up to 49 investors under Article 2, Paragraph 3, Item 2 iii of the FIEL.

-161-

Korea

Our securities may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for reoffering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the Securities and Exchange Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. Our securities have not been registered with the Financial Supervisory Commission of Korea for public offering in Korea. Furthermore, our securities may not be resold to Korean residents unless the purchaser of our securities complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with the purchase of our securities.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA, (ii) to a relevant person, or any person pursuant to Section 275 (1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole whole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275 (1A), and in accordance with the conditions, specified in Section 275 of the SFA; (ii) where no consideration is given for the transfer; or (iii) by operation of law.

By accepting this prospectus, the recipient hereof represents and warrants that he is entitled to receive it in accordance with the restrictions set forth above and agrees to be bound by limitations contained herein. Any failure to comply with these limitations may constitute a violation of law.

Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of

-162-

any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

-163-

Experts

The financial statements as of January 29, 2011 and January 30, 2010, and for each of the three fiscal years in the period ended January 29, 2011, included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

Legal matters

The validity of the shares of common stock offered hereby has been passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. Certain members of, and investment entities comprised of members of, and persons associated with, Wilson Sonsini Goodrich & Rosati, Professional Corporation own or control approximately 0.13% of the shares of our common stock, assuming the conversion of all outstanding convertible preferred stock. Davis Polk & Wardwell LLP, Menlo Park, California is representing the underwriters of this offering.

Where you can find more information

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock we are offering. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and our common stock. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in the registration statement.

For further information about us and our common stock, you may inspect a copy of the registration statement and the exhibits and schedules to the registration statement without charge at the offices of the SEC at 100 F Street, N.E., Washington D.C. 20549. You may obtain copies of all or any part of the registration statement from the Public Reference Section of the SEC, 100 F Street, N.E., Washington D.C. 20549 upon the payment of the prescribed fees. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding registrants like us that file electronically with the SEC. You can also inspect our registration statement on this website.

Upon completion of this offering, we will become subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended, and we will file reports, proxy statements and other information with the SEC.

-164-

BlueArc Corporation

Index to consolidated financial statements

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Cash Flows	F-5
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of independent registered public accounting firm

To Board of Directors and Stockholders of

BlueArc Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of convertible preferred stock and stockholders’ deficit, present fairly, in all material respects, the financial position of BlueArc Corporation and its subsidiaries at January 29, 2011 and January 30, 2010, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 2011 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California

June 23, 2011

F-2

BlueArc Corporation

Consolidated balance sheets

(in thousands, except per share data)

	January 30, 2010			January 29, 2011			April 30, 2011			Pro forma stockholders equity as of April 30, 2011
							(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,711		$	15,971		$	16,084
Accounts receivable, net of allowance of $241, $140 and $132 as of January 30, 2010, January 29, 2011 and April 30, 2011 (unaudited)		11,057			20,580			19,638
Inventory		7,768			8,050			9,770
Prepaid expenses and other current assets		3,133			3,328			4,232
Total current assets		32,669			47,929			49,724
Property and equipment, net		4,120			5,551			6,223
Other assets		1,434			1,602			1,699
TOTAL ASSETS	$	38,223		$	55,082		$	57,646
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	5,466		$	8,426		$	12,326
Accrued compensation		3,433			3,604			3,716
Other accrued liabilities		2,565			2,231			1,980
Customer deposits		2,275			960			632
Warranty liability, current portion		1,628			1,954			2,004
Long-term debt, current portion		2,728			502			1,269
Deferred revenue, current portion		9,133			10,566			11,675
Warrants liability		1,315			1,970			3,935		$	333
Total current liabilities		28,543			30,213			37,537
Deferred revenue, net of current portion		4,020			3,982			3,449
Long-term debt, net of current portion		4,773			6,695			6,212
Warranty liability, net of current portion		354			453			453
Other liabilities		253			338			371
Total liabilities		37,943			41,681			48,022
Commitments and contingencies (Note 5)
Convertible preferred stock, par value $0.001 per share—33,962, 52,566 and 52,566 shares authorized as of January 30, 2010, January 29, 2011 and April 30, 2011 (unaudited), 28,935, 36,451 and 36,451 shares issued and outstanding as of January 30, 2010, January 29, 2011 and April 30, 2011 (unaudited) (aggregate liquidation value of $136,600 as of January 29, 2011 and April 30, 2011 (unaudited)), actual; no shares issued and outstanding, pro forma (unaudited)		102,617			121,699			121,699			—
STOCKHOLDERS’ EQUITY (DEFICIT):
Common stock, par value $0.001 per share—55,045, 50,540 and 50,540 shares authorized as of January 30, 2010, January 29, 2011 and April 30, 2011 (unaudited), 2,449, 3,389 and 3,512 shares issued and outstanding as of January 30, 2010, January 29, 2011, April 30, 2011 (unaudited), actual; 43,331 shares issued and outstanding, pro forma (unaudited)		2			3			3			43
Additional paid-in capital		113,263			116,724			117,091			242,352
Accumulated other comprehensive income		906			908			1,093			1,093
Accumulated deficit		(216,508	)		(225,933	)		(230,262	)		(230,262	)
Total stockholders’ equity (deficit)		(102,337	)		(108,298	)		(112,075	)	$	13,226
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	38,223		$	55,082		$	57,646

The accompanying notes are an integral part of these consolidated financial statements.

F-3

BlueArc Corporation

Consolidated statements of operations

(in thousands, except per share data)

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
Product revenue	$	59,864		$	49,523		$	66,550		$	14,103		$	19,596
Support revenue		14,366			16,352			19,039			4,511			5,116
Total revenue		74,230			65,875			85,589			18,614			24,712
Cost of product revenue		32,179			29,709			34,627			7,546			9,938
Cost of support revenue		3,483			4,570			6,184			1,395			1,815
Total cost of revenue		35,662			34,279			40,811			8,941			11,753
Gross profit		38,568			31,596			44,778			9,673			12,959
Sales and marketing		33,759			28,540			32,068			7,868			9,327
Research and development		18,274			13,783			16,410			3,775			4,966
General and administrative		5,659			4,868			5,277			1,464			1,614
Total operating expenses		57,692			47,191			53,755			13,107			15,907
Loss from operations		(19,124	)		(15,595	)		(8,977	)		(3,434	)		(2,948	)
Interest income		260			24			15			—			2
Interest expense		(237	)		(1,065	)		(1,317	)		(339	)		(284	)
Other expense, net		(1,359	)		(389	)		(566	)		(136	)		(1,552	)
Loss before income taxes		(20,460	)		(17,025	)		(10,845	)		(3,909	)		(4,782	)
Benefit from income taxes		882			1,272			1,420			324			453
Net loss	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)
Deemed dividend on exchange of preferred stock		—			—			(940	)		—			—
Net loss attributable to common stockholders	$	(19,578	)	$	(15,753	)	$	(10,365	)	$	(3,585	)	$	(4,329	)
Net loss per share attributable to common stockholders, basic and diluted	$	(8.74	)	$	(6.55	)	$	(3.54	)	$	(1.47	)	$	(1.25	)
Shares used in computing net loss per share attributable to common stockholders, basic and diluted		2,241			2,404			2,930			2,438			3,465
Pro forma net loss per share, basic and diluted (unaudited)							$	(0.24	)				$	(0.06	)
Shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)								39,363						43,284

The accompanying notes are an integral part of these consolidated financial statements.

F-4

BlueArc Corporation

Consolidated statements of cash flows

(in thousands)

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		3,031			3,447			2,714			641			801
Loss on disposal of property and equipment		—			28			68			—			12
Provision for (recovery of) bad debts		132			109			60			(9	)		(4	)
Provision for inventory		1,548			1,985			947			(99	)		541
Stock-based compensation expense		1,218			1,409			1,117			279			321
Remeasurement of fair value of warrants liability		(134	)		372			(59	)		(63	)		1,965
Noncash issuance of warrants		401			—			736			222			—
Accrued interest on convertible promissory notes		—			—			82			38			—
Amortization of debt discount		—			167			208			51			50
Changes in operating assets and liabilities:
Accounts receivable		2,203			4,551			(9,583	)		(358	)		947
Inventory		(4,317	)		87			(1,232	)		492			(2,261	)
Prepaid expenses, other current assets and other assets		(59	)		(1,173	)		(135	)		115			(386	)
Research and development credit		2,391			(670	)		(260	)		(440	)		(562	)
Accounts payable		(3,583	)		555			2,785			1,354			3,929
Accrued compensation		(328	)		249			178			11			123
Other accrued liabilities		1,225			(1,450	)		(341	)		(518	)		(247	)
Warranty liability		55			309			425			4			50
Customer deposits		—			2,157			(1,315	)		1,390			(328	)
Other liabilities		244			(523	)		98			29			36
Deferred revenue		1,492			1,680			1,403			(34	)		589
Net cash provided by (used in) operating activities		(14,059	)		(2,464	)		(11,529	)		(479	)		1,247
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(2,833	)		(2,013	)		(3,920	)		(1,007	)		(1,118	)
Net cash used in investing activities		(2,833	)		(2,013	)		(3,920	)		(1,007	)		(1,118	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of line of credit		(1,393	)		(6,000	)		—			—			—
Proceeds from issuance of convertible promissory notes		6,695			—			2,702			2,702			—
Proceeds from issuance of loan		—			7,500			—			—			—
Payment on capital lease obligations		—			(118	)		(232	)		(54	)		(64	)
Proceeds from issuance of convertible preferred stock, net		16,411			—			18,182			—			—
Proceeds from issuance of common stock		6			1			30			5			42
Net cash provided by (used in) financing activities		21,719			1,383			20,682			2,653			(22	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,827			(3,094	)		5,233			1,167			107
Effect of exchange rate changes on cash and cash equivalents		—			—			27			—			6
Cash and cash equivalents as of beginning of period		8,978			13,805			10,711			10,711			15,971
CASH AND CASH EQUIVALENTS AS OF END OF PERIOD	$	13,805		$	10,711		$	15,971		$	11,878		$	16,084
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest	$	237		$	776		$	906		$	218		$	206
Cash paid for taxes	$	—		$	—		$	71		$	17		$	31
Cash received for research and development tax credit	$	3,411		$	698		$	1,419		$	—		$	—
NONCASH INVESTING AND FINANCING ACTIVITIES:
Deemed dividends on preferred stock	$	—		$	—		$	(940	)	$	—		$	—
Issuance of preferred and common stock warrants	$	—		$	677		$	407		$	—		$	—
Reclassification of common stock warrants from liability to equity	$	—		$	—		$	(208	)	$	—		$	—
Conversion of convertible promissory notes into convertible preferred stock	$	6,695		$	—		$	2,702		$	—		$	—
Property and equipment acquired under capital leases	$	21		$	—		$	130		$	130		$	297
Property and equipment in accounts payable and other current liabilities	$	73		$	150		$	329		$	299		$	309

The accompanying notes are an integral part of these consolidated financial statements.

F-5

BlueArc Corporation

Consolidated statements of convertible

preferred stock and stockholders’ deficit

(in thousands)

	Convertible preferred stock						Common stock					Addi- tional paid-in capital		Accu- mulated other compre- hensive income (loss)			Accu- mulated deficit			Total stock- holders’ deficit
	Shares			Amount			Shares			Amount
Balances as of January 31, 2008		23,794		$	79,510			2,499		$	2	$	110,522	$	1,499		$	(181,177	)	$	(69,154	)
Exercise of vested stock options		—			—			13			—		6		—			—			6
Vesting of shares exercised prior to vesting		—			—			—			—		73		—			—			73
Repurchase of common stock		—			—			(68	)		—		—		—			—			—
Issuance of restricted stock		—			—			6			—		—		—			—			—
Stock-based compensation expense		—			—			—			—		1,193		—			—			1,193
Nonemployee stock-based compensation expense		—			—			—			—		25		—			—			25
Issuance of Series FF convertible preferred stock (net of issuance costs of $68)		5,141			23,107			—			—		—		—			—			—
Comprehensive loss:
Foreign currency translation adjustment		—			—			—			—		—		(710	)		—			(710	)
Net loss		—			—			—			—		—		—			(19,578	)		(19,578	)
Total comprehensive loss		—			—			—			—		—		—			—			(20,288	)
Balances as of January 31, 2009		28,935			102,617			2,450			2		111,819		789			(200,755	)		(88,145	)
Exercise of vested stock options		—			—			1			—		1		—			—			1
Vesting of shares exercised prior to vesting		—			—			—			—		34		—			—			34
Repurchase of common stock and shares surrendered by investors		—			—			(2	)		—		—		—			—			—
Stock-based compensation expense		—			—			—			—		1,405		—			—			1,405
Nonemployee stock-based compensation expense		—			—			—			—		4		—			—			4
Comprehensive income (loss):
Foreign currency translation adjustment		—			—			—			—		—		117			—			117
Net loss		—			—			—			—		—		—			(15,753	)		(15,753	)
Total comprehensive loss		—			—			—			—		—		—			—			(15,636	)
Balances as of January 30, 2010		28,935			102,617			2,449			2		113,263		906			(216,508	)		(102,337	)
Exercise of vested stock options		—			—			115			—		30		—			—			30
Vesting of shares exercised prior to vesting		—			—			—			—		14		—			—			14
Repurchase of common stock					—			(1	)		—		—		—			—			—
Stock-based compensation expense		—			—			—			—		1,108		—			—			1,108
Nonemployee stock-based compensation expense		—			—			—			—		9		—			—			9
Issuance of common stock warrants		—			—			—			—		220		—			—			220
Reclassification of common stock warrants from liabilities		—			—			—			—		208		—			—			208
Issuance of Series GG convertible preferred stock (net of issuance costs of $142)		8,342			20,955			—			—		—		—			—			—
Conversion of convertible preferred stock into other series of convertible preferred and into common stock (recapitalization)		(826	)		(1,873	)		826			1		1,872		—			—			1,873
Comprehensive income (loss):
Foreign currency translation adjustment		—			—			—			—		—		2			—			2
Net loss		—			—			—			—		—		—			(9,425	)		(9,425	)
Total comprehensive loss		—			—			—			—		—		—			—			(9,423	)
Balances as of January 29, 2011		36,451			121,699			3,389			3		116,724		908			(225,933	)		(108,298	)
Exercise of vested stock options (unaudited)		—			—			76			—		42		—			—			42
Vesting of shares exercised prior to vesting (unaudited)		—			—			—			—		4		—			—			4
Issuance of restricted stock (unaudited)		—			—			47			—		—		—			—			—
Stock-based compensation expense (unaudited)		—			—			—			—		304		—			—			304
Nonemployee stock-based compensation expense (unaudited)		—			—			—			—		17		—			—			17
Comprehensive income (loss):
Foreign currency translation adjustment (unaudited)		—			—			—			—		—		185			—			185
Net loss (unaudited)		—			—			—			—		—		—			(4,329	)		(4,329	)
Total comprehensive loss (unaudited)		—			—			—			—		—		—			—			(4,144	)
Balances as of April 30, 2011 (unaudited)		36,451			121,699			3,512			3		117,091		1,093			(230,262	)		(112,075	)
Assumed conversion of convertible preferred stock (unaudited)		(36,451	)		(121,699	)		39,819			40		125,261		—			—			125,301
Balances as of April 30, 2011, proforma (unaudited)	$	—		$	—			43,331		$	43	$	242,352	$	1,093		$	(230,262	)	$	13,226

The accompanying notes are an integral part of these consolidated financial statements.

F-6

BlueArc Corporation

Notes to consolidated financial statements

1. Formation and business of the company

BlueArc Corporation, or BlueArc or the Company, was founded in 1998 in Bracknell, England. In 1999, the Company relocated its corporate headquarters to San Jose, California and incorporated as a Delaware corporation. The Company is a leading provider of high performance, highly scalable networked storage systems for businesses of all sizes. The Company operates in a single segment.

In these notes, the Company refers to the fiscal years ended January 31, 2009, January 30, 2010 and January 29, 2011 as fiscal 2009, fiscal 2010 and fiscal 2011, respectively, and the fiscal year ending January 28, 2012 as fiscal 2012. Effective February 1, 2009, the Company adopted fiscal year based on the 52 or 53 week period ending on the last Saturday in January. Each of fiscal 2010 and 2011 was, and fiscal 2012 will be, a 52-week fiscal year.

Since the Company’s inception, it has incurred significant losses and, as of April 30, 2011, it had an accumulated deficit of $230.3 million (unaudited). The Company has funded its operations primarily with customer payments for its products and services, proceeds from issuances of convertible preferred stock, borrowings under its long-term capital growth facility, the utilization of its accounts receivable credit line and the issuance of convertible promissory notes. From inception, the Company has sold an aggregate of $247 million of its convertible preferred stock, including the conversion of its convertible promissory notes. As of January 29, 2011, the Company had cash and cash equivalents of $16.0 million, an unutilized accounts receivable credit line of $12.5 million, $7.5 million of debt outstanding on its long-term capital growth facility, and capital and operating lease obligations. At April 30, 2011, the Company had cash and cash equivalents of $16.1 million (unaudited), an unutilized accounts receivable credit line of $12.5 million, $7.5 million of debt outstanding on its long-term capital growth facility, and capital and operating lease obligations. The Company had positive working capital of $17.7 million and $12.2 million (unaudited) as of January 29, 2011 and April 30, 2011, respectively.

The Company believes that its existing sources of liquidity and the proceeds of this offering will satisfy its working capital and capital requirements for at least the next 12 months. Failure to generate sufficient revenue, achieve planned gross margins, or control operating costs may require the Company to raise additional capital through equity or debt financing. Such additional financing may not be available on acceptable terms, or at all, and could require the Company to modify, delay or abandon some of its planned future expansion or expenditures or reduce some of its ongoing operating costs, which could have a material adverse effect on its business, operating results, financial condition and ability to achieve its intended business objectives. If the Company raises additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, its existing stockholders could suffer significant dilution in their percentage ownership of the Company and any new securities it issues could have rights, preferences and privileges senior to those of holders of its common stock. The Company’s accounts receivable based credit facility, which expires in December 2012, includes a material adverse change clause which allows the lender to withdraw any unutilized portion of the facility at the time of notification if certain triggering events per the agreement occur. In addition, the Company’s long-term capital growth facility is subject to interest-only payments through December 2011. However, if the Company does not meet certain performance criteria

F-7

BlueArc Corporation

Notes to consolidated financial statements (continued)

tied to a measure of its quarterly earnings for quarters through October 29, 2011, repayment of principal via monthly installments will be accelerated and will commence in the month following the determination that the performance criteria have not been achieved.

Unaudited interim financial information

The accompanying interim consolidated balance sheet as of April 30, 2011, the interim consolidated statements of operations and cash flows for the three months ended May 1, 2010 and April 30, 2011 and the interim consolidated statement of convertible preferred stock and stockholders’ deficit for the three months ended April 30, 2011 are unaudited. The unaudited interim consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position as of April 30, 2011 and its consolidated results of operations and cash flows for the three months ended May 1, 2010 and April 30, 2011. The financial data and the other financial information disclosed in these notes to the consolidated financial statements related to the three month periods are also unaudited. The consolidated results of operations during the three months ended April 30, 2011 are not necessarily indicative of the results to be expected during fiscal 2012 or for any other future annual or interim period.

Unaudited pro forma balance sheet

In the event that an initial public offering of the Company’s common stock, or IPO, is completed all shares of the Company’s outstanding convertible preferred stock will convert into common stock automatically, as further described in Note 8. In addition, the portion of the warrant liability related to shares of convertible preferred stock will be reclassified to additional paid-in capital as these warrants either expire upon an IPO or become common stock warrants that are classified as equity. The unaudited pro forma amounts as of April 30, 2011 give effect to the automatic conversion of convertible preferred stock into 39,819,237 shares of common stock and the related reclassification of the preferred stock warrant liability to additional paid-in capital, assuming that shares of the Company’s Series CC preferred stock convert on a 1 for 11.80684 basis and shares of the Company’s Series EE preferred stock convert on a 1 for 1.02268 basis. The pro forma amounts do not give effect to any proceeds from the IPO itself or the exercise of any outstanding warrants.

2. Summary of significant accounting policies

Basis of presentation

The consolidated financial statements include the accounts of BlueArc and its wholly owned subsidiaries. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. All significant intercompany accounts and transactions have been eliminated.

F-8

BlueArc Corporation

Notes to consolidated financial statements (continued)

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense. These judgments, estimates and assumptions are used for, but not limited to: revenue recognition; accruals for warranty costs; inventory write-downs; the valuation of the Company’s convertible preferred stock, common stock and stock options; deferred income taxes including required valuation allowances; and the valuation of warrants to purchase convertible preferred stock and common stock. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. However, actual results could differ from these estimates, and these differences may be material.

Cash equivalents and short-term investments

All highly liquid investments with stated maturities of three months or less from the date of original purchase are classified as cash equivalents. As of January 30, 2010, January 29, 2011 and April 30, 2011, the Company had cash equivalents consisting of money market securities. The Company’s cash equivalents and short-term investments are classified as available-for-sale and stated at their fair values. Unrealized gains and losses on available-for-sale securities are included as a separate component of stockholders’ deficit. Realized gains and losses on available-for-sale securities are determined based on the specific identification of the cost of securities sold, and such gains and losses are reflected in the consolidated statements of operations as a component of interest income.

Fair value of financial instruments

Carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values due to their short maturities. The carrying amounts of the warrants liability and foreign currency forward contracts represent their fair value. The carrying amount of long-term debt approximates its fair value based on borrowing rates currently available to the Company for loans with similar terms.

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and takes into consideration the assumptions that market participants would use when pricing the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement of an asset or liability requires management to make judgments and to consider specific characteristics of that asset or liability.

F-9

BlueArc Corporation

Notes to consolidated financial statements (continued)

The current accounting guidance provides three levels of inputs that may be used to measure fair value, as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.

In April 2009, the FASB issued guidance for estimating fair value when the level of market activity for an asset or liability has significantly decreased, which was effective for the Company in the first quarter of fiscal 2010. The adoption of this accounting standard did not have a material impact on the Company’s consolidated financial statements.

In January 2010, FASB revised the guidance for fair value measurements and disclosures by adding new disclosure requirements with respect to transfers in and out of Levels 1 and 2 fair value measurements, as well as by requiring gross basis disclosures for purchases, sales, issuances and settlements for Level 3 fair value measurements. This guidance also provides clarifications to existing disclosure requirements. The Company adopted this new guidance, including the guidance related to the disclosures about purchases, sales, issuances and settlements in the roll forwards of activity in Level 3 fair value measurements, beginning first quarter of our 2011 fiscal year. The adoption of this guidance did not have a material impact on our financial position or results of operations.

Concentrations of risk, significant customers and key suppliers

Most of the Company’s products are currently assembled and tested by a contract manufacturer, Sanmina-SCI, in the United States. The Company’s agreement with Sanmina-SCI has one-year automatic renewals of its term absent termination by either party for any reason by providing the other party with written notice at least 30 days prior to the expiration of each such one-year period. There are no long-term binding manufacturing agreements with this contractor. A significant disruption in the operations of this contractor may impact the production of the Company’s products for a substantial period of time, which could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company’s agreement with Sanmina-SCI contains purchase commitment as discussed in Note 5. The Company incorporates disk arrays into its storage systems, which it sources from Engenio under a license agreement which was executed in November 2003. The Company’s agreement with Engenio had an initial term of two years and has one year automatic renewals. However, either party may terminate the agreement at any time and for any reason upon 30 days’ prior written notice. Engenio was recently acquired by NetApp. In the event that following its acquisition of Engenio, NetApp decides to terminate the agreement between Engenio and the Company, the

F-10

BlueArc Corporation

Notes to consolidated financial statements (continued)

Company would be required to find and qualify other vendors to provide the components currently purchased by the Company under this agreement.

A significant portion of the Company’s research and development activities are conducted in the United Kingdom. Significant changes in exchange rates could substantially impact the Company’s results of operations.

Financial instruments that potentially subject the Company to credit risk consist of cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with one financial institution, and these deposits may exceed amounts insured by the Federal Deposit Insurance Corporation. The Company performs both periodic evaluations of the risks associated with its investments and the relative credit standing of this financial institution.

The Company performs ongoing credit evaluations of its customers’ financial condition. The Company does not require collateral from its customers. The Company has not experienced significant credit losses to date.

For fiscal 2009, fiscal 2010 and fiscal 2011, Hitachi Data Systems Corporation, or HDS, accounted for 22%, 30% and 41% of the Company’s total revenues, respectively. HDS represented 32% of the Company’s outstanding accounts receivable as of January 29, 2011. For the three months ended April 30, 2011, HDS accounted for 45% of the Company’s revenue. HDS represented 27% of the Company’s outstanding accounts receivable as of April 30, 2011. See Note 7.

Accounts receivable and provision for doubtful accounts

Trade accounts receivables are recorded at invoiced amounts and do not bear interest. The Company generally does not require collateral and performs ongoing credit evaluations of its customers and provides an allowance for expected losses. The Company records a provision for doubtful accounts based on historical experience and a detailed assessment of the collectability of its accounts receivable. In estimating the allowance for doubtful accounts, management considers, among other factors: (i) the history of collections and the credit worthiness of each customer, (ii) the aging of accounts receivable balances relative to the payment terms for each customer, (iii) the Company’s historical write-offs and (iv) the economic conditions of the customer’s industry and general economic conditions. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations, the Company records a specific allowance against amounts due from that customer, and thereby reduces the net recognized receivable to the amount the Company reasonably believes will be collected.

F-11

BlueArc Corporation

Notes to consolidated financial statements (continued)

The following table presents changes in the allowance for doubtful accounts (in thousands):

	Year ended							Three months ended April 30, 2011
	January 31, 2009		January 30, 2010		January 29, 2011
					(unaudited)
Allowance—beginning of period	$	—	$	132	$	241		$	140
Provisions for bad debts		132		109		60			—
Write-off, net of recoveries and other adjustments		—		—		(161	)		(8	)
Allowance—end of period	$	132	$	241	$	140		$	132

Inventory

Inventories include the cost of materials, labor and related manufacturing overhead and are adjusted to approximate the lower of cost or market value. Raw materials consist principally of system components, and finished goods are comprised of assembled systems. The Company uses the weighted-average cost method to value its inventory which approximates the first-in, first-out method. The Company writes down inventory to market if lower than cost, based on current inventory levels, projected realizable values and product demand, expected product lives and technological obsolescence of the products or component parts.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. An estimated useful life of three years is used for machinery and equipment, computer equipment and software. An estimated useful life of five years is used for furniture and fixtures. Leasehold improvements are amortized using the straight-line method over the shorter of five years, which is the estimated useful life of the leasehold improvements, or the remaining term of the lease.

Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased assets at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. Amortization of assets under capital leases is included in depreciation expense.

Impairment of long-lived assets

The Company evaluates long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets to their estimated fair values based on a discounted cash flow approach or, when available and appropriate, to comparable market values. No impairment losses were recorded during any of the periods presented in these financial statements.

F-12

BlueArc Corporation

Notes to consolidated financial statements (continued)

Warrants to purchase convertible preferred stock and common stock

Freestanding warrants to purchase shares of the Company’s convertible preferred stock are classified as liabilities in the consolidated balance sheets and are carried at fair value, because the warrants may obligate the Company to transfer assets to the holders at a future date under certain circumstances, such as a change in control. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net in the consolidated statements of operations. The Company estimates the fair value of these warrants at issuance and at each balance sheet date using the Black-Scholes option pricing model or a binomial model to the extent the warrants have antidilutive features.

The Company will continue to adjust the liability for changes in fair value of preferred stock warrants until the earlier of the exercise or expiration of the warrants, or until the completion of an IPO, at which time these preferred stock warrants will be converted into warrants to purchase common stock and, accordingly, the liability will be reclassified into additional paid-in capital.

The Company also issued warrants to purchase common stock that have certain exercise features not indexed to common stock (Notes 6 and 10). In particular, the number of shares subject to the warrant is subject to a one-time reduction if the Company does not meet certain performance criteria tied to a measure of quarterly earnings for quarters through October 29, 2011, as a result of which the principal on the note would also begin to amortize. The number of shares by which the warrant is reduced varies depending on the quarter in which the Company does not achieve the requisite level of earnings. This feature requires such warrants to be classified as liabilities and remeasured to fair value at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net. The Company estimates the fair value of these warrants at issuance and at each balance sheet date using the Black-Scholes option pricing model adjusted for a potential reduction in the number of shares based on various probability-weighted outcomes. When the number of shares underlying the warrants is no longer subject to change, the then-current fair value of these warrants will be reclassified from a liability into additional paid-in capital.

The Company also issued other common stock warrants that are included in stockholders’ deficit. The fair value of these warrants is estimated at issuance using the Black-Scholes option pricing model and is not subject to subsequent remeasurement.

Revenue recognition

The Company recognizes revenue, net of sales tax, when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is probable. These criteria are usually met for hardware and software license elements when the system is shipped to the customer. For evaluation units, revenue is not recognized until receipt and acceptance of the customer’s purchase order requesting conversion of the unit into a sale. Support revenue is deferred and recognized ratably over the period during which the support is to be performed, which is typically from one to three years.

F-13

BlueArc Corporation

Notes to consolidated financial statements (continued)

For channel partner sales, the Company evaluates whether fees are fixed or determinable by considering a number of factors, including payment terms, the channel partner’s credit standing and financial position, and the Company’s contractual relationship and past history with the particular channel partner. If the fees are not deemed to be fixed or determinable, the Company delays the shipment or, if product is shipped, defers recognition of revenue until there is persuasive evidence that fees are fixed or determinable and that collection is probable. Persuasive evidence may include copies of end customer purchase orders, cash payments or letters of credit guaranteeing cash payments, reports from channel partners documenting sell-through activity, data indicating an order has shipped to an end customer, or other similar information. The Company does not offer channel partners return rights, rebate, price protection or other similar rights.

Deferred revenue balances consist of deferred support revenue and deferred product revenue.

The Company’s storage systems are typically sold with multiple elements: hardware and perpetual software licenses for the embedded software and support services that entitle customers during the support services term to telephone support and unspecified software upgrades, bug fixes and patch releases, which are offered on a when-and-if-available basis. The Company’s hardware in its storage systems is integrated with software that is essential to the functionality of the equipment, except for certain optional software features, and more than incidental to the storage system as a whole. Accordingly, the Company applied the accounting standards for software revenue recognition for all transactions involving the sales of software and related services for all periods prior to January 30, 2011. For these fiscal years, the Company allocated revenue between delivered hardware and software elements and undelivered support services using the residual value method. Under the residual method the amount equal to the fair value of the undelivered support services, also known as vendor specific objective evidence, or VSOE, is deferred and amortized over the period when such services are provided and any remaining amounts are attributed to the delivered hardware and software elements and are recognized when those items are delivered. VSOE represents the price charged for a deliverable when it is sold separately.

The Company has established VSOE of fair value for its support services. For arrangements where support renewal rates are not contractually stated, fair value is established based on the pricing analysis of the Company’s actual stand alone support renewals. For arrangements with contractually stated support renewal rates, fair value of one year of support services is established by reference to the contractually stated renewal rates.

In October 2009, the Financial Accounting Standards Board, or FASB, issued an accounting standards update, which removes tangible products containing software components and non-software components that function together to deliver the product’s essential functionality from the scope of industry specific software revenue guidance. At the same time, FASB amended the accounting standard for multiple element revenue arrangements, which are not in the scope of industry specific software revenue recognition guidance, to provide updated guidance to separate the deliverables and to measure and allocate arrangement consideration to one or more units of accounting. The new guidance eliminates the use of the residual method and requires an

entity to allocate arrangement consideration at the inception of the arrangement to all

F-14

BlueArc Corporation

Notes to consolidated financial statements (continued)

deliverables using the relative selling price method. In contrast to the residual method, this has the effect of allocating any inherent discount in a multiple element arrangement to each of the deliverables on a proportionate basis. The guidance also expands the disclosure requirements to require an entity to provide both qualitative and quantitative information about the significant judgments made in applying the revised guidance and subsequent changes in those judgments that may significantly affect the timing or amount of revenue recognition. The revised revenue recognition accounting standards are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.

The Company adopted the new revenue recognition guidance for arrangements with multiple deliverables on a prospective basis for new or modified arrangements entered on or after January 30, 2011. The Company now allocates arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method unless the amount allocated to delivered hardware and software elements exceeds the arrangement consideration that is not contingent upon delivery of support services. This method requires the Company to determine the selling price at which each deliverable could be sold if it were sold regularly on a standalone basis. Under this approach, the selling price of a deliverable is determined by using a selling price hierarchy which requires the use of VSOE of fair value if available, third party evidence, or TPE, if VSOE is not available, or estimated selling price, or ESP, if neither VSOE nor TPE is available. Since the Company generally does not have standalone sales of its hardware and software products, the use of VSOE is limited to support services. TPE of selling price is established by evaluating largely interchangeable competitor products or services in standalone sales to similarly situated customers. However, since the Company’s competitors do not generally sell tangible products and perpetual licenses on a standalone basis except for limited cases, no consistent pricing information is available. Therefore, the Company concluded that no reliable TPE is available for its products and services. The Company determines ESP by considering factors such as market conditions, sales channels, internal costs and product margin objectives, and pricing practices. The Company regularly reviews and updates its VSOE, TPE and ESP information and obtains formal approval by appropriate levels of management.

The Company continues to account for optional software applications and related support services included in a multiple element arrangement under industry specific software revenue recognition guidance using the residual method. Revenue is first allocated to the nonsoftware deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the selling price hierarchy described above. Next, under the residual method, the Company defers revenue from the sale equivalent to the VSOE of the fair value of support services and applies any inherent discounts to the delivered software element.

The adoption of the new revenue recognition guidance did not result in changes of the individual deliverables to which the Company allocates revenue, or the timing of recognition of revenue for the individual deliverables. The change in the allocation method from residual to relative selling price did not have a material impact on the Company’s financial statements during the three months ended April 30, 2011.

F-15

BlueArc Corporation

Notes to consolidated financial statements (continued)

Shipping and handling costs

Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of revenue in the Company’s consolidated statements of operations.

Product warranty

The Company provides three-year and 90-day warranties for its hardware and software, respectively. These warranty periods are extended for customers who purchase additional hardware support after the warranty period has expired. The Company estimates the costs that it may incur under its warranty obligations and records a liability concurrent with revenue recognition, which is included in other accrued liabilities and other long-term liabilities. The warranty accrual is based on the Company’s historical experience of product replacements, repair costs, ongoing product failure rates and specific quality issues, if any. Each period, the Company assesses the adequacy of its recorded warranty liability and makes adjustments it deems necessary. The Company records warranty cost as part of its cost of product revenue.

Research and development

Research and development costs are expensed as incurred and primarily include personnel costs, prototype expenses and allocated facilities costs as well as depreciation of equipment used in research and development.

Software development

Capitalization of certain software development costs is required subsequent to the establishment of technological feasibility. Based on the Company’s product development process, the Company has determined its software products generally reach technological feasibility upon completion of a working model. The Company does not incur material costs between the completion of the working model and the point at which products are available for general release; therefore, software development costs have been expensed as incurred and included in research and development expenses.

Costs related to internally developed software and software purchased for internal use are capitalized. These costs include software licenses, consulting services and direct materials, as well as associated employee payroll and related costs. Capitalized internal-use software costs, which are included in property and equipment, are depreciated over three years.

Stock-based compensation

The Company’s employee stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award on such date and are expensed over the requisite service period.

The Company uses the Black-Scholes option pricing model to determine the fair value of the awards and the straight-line attribution method for recognizing compensation expense for awards that vest based only on the employees’ continuing service. For awards with performance

F-16

BlueArc Corporation

Notes to consolidated financial statements (continued)

conditions, expense is recognized separately for each vesting tranche of the award if it is probable that the related performance goals will be achieved. Compensation expense is recognized on awards ultimately expected to vest and reduced by forfeitures that are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical experience, employee turnover and other factors.

Equity instruments granted to nonemployees are valued using the Black-Scholes option pricing model and are subject to periodic revaluation over their vesting terms. Nonemployee stock-based compensation is recognized over the related performance period, which is generally the vesting term of the awards.

Foreign currency translation

The functional currency of the Company’s foreign subsidiaries is the local currency in the respective country. The assets and liabilities of all subsidiaries are translated into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated using average exchange rates prevailing during the period. The Company records translation gains and losses as a component of other comprehensive income (loss) and are included in stockholders’ deficit. Gains or losses from transactions in foreign currencies are reflected in the consolidated statements of operations as a component of other income (expense), net. Transaction gains (losses) were $(0.8) million, $40,000, $(0.2) million and $0.1 million for fiscal 2009, fiscal 2010, fiscal 2011 and three months ended April 30, 2011, respectively.

Derivative instruments

Derivative instruments are carried at fair value in our consolidated balance sheets. The fair values of the derivative financial instruments generally represent the estimated amounts the Company would expect to receive or pay upon termination of the contracts as of the reporting date.

During fiscal 2010 and fiscal 2011, the Company held derivative instruments that consisted of short-term forward contracts to sell foreign currency, which were used to hedge foreign currency-denominated cash balances. The Company’s goal was to reduce its potential exposure to the changes that currency exchange rates might have on its operating results, cash flows and financial position. These foreign currency forward contracts did not qualify for hedge accounting treatment. Changes in the fair value of these forward contracts were included in other income (expense), net. The Company did not hold or issue financial instruments for speculative or trading purposes.

As of January 30, 2010, outstanding foreign currency forward contracts had a total notional value of £1.1 million (approximately $1.8 million using the exchange rate as of January 30, 2010). Fair value of these contracts was a liability of $56,000 and was included in other accrued liabilities as of January 30, 2010. No forward contracts were outstanding as of January 29, 2011. Net losses from foreign currency forward contracts were $80,000, $80,000 and $0 during fiscal 2010, fiscal 2011 and three months ended April 30, 2011, respectively. There were no outstanding foreign currency forward contracts outstanding at January 29, 2011 and April 30, 2011.

F-17

BlueArc Corporation

Notes to consolidated financial statements (continued)

Income taxes

The Company uses the asset and liability method of accounting for income taxes. The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company establishes valuation allowances when necessary to reduce deferred tax assets where management concludes that it is more likely than not that the deferred tax assets will not be realized based upon the available evidence.

The Company records a liability for the uncertain tax positions taken or expected to be taken on the Company’s tax return when it is more likely than not that the tax position might be challenged, and additional taxes may be due as a result, despite the Company’s belief that the tax return positions are fully supportable. To the extent that the Company’s assessment of its tax positions changes, the change in estimate is recorded in the period in which the determination is made. The provision for income taxes includes the impact of provisions for uncertain tax positions.

Interest and penalties related to unrecognized tax benefits are included within the provision for income taxes. Through January 29, 2011 and April 30, 2011, the Company did not have any interest or penalties associated with unrecognized tax benefits.

Net loss per share

Basic net loss per common share is calculated using the weighted-average number of common shares outstanding during the period that are not subject to vesting provisions. Net loss per common share assuming dilution is calculated on the basis of the weighted-average number of common shares outstanding and the dilutive effect of all potentially dilutive securities, including common stock options, unvested common stock, warrants and convertible securities. Basic and diluted net loss per common share was the same for all periods presented, as the impact of all potentially dilutive securities outstanding was antidilutive. Unaudited pro forma basic and diluted net loss per share have been computed to give effect to the conversion of the Company’s convertible preferred stock.

3. Balance sheet components

Inventory

Inventory consisted of the following (in thousands):

	January 30, 2010		January 29, 2011		April 30, 2011
					(unaudited)
Raw materials	$	6,201	$	6,553	$	6,714
Finished goods		1,567		1,497		3,056
Inventory	$	7,768	$	8,050	$	9,770

F-18

BlueArc Corporation

Notes to consolidated financial statements (continued)

Property and equipment

Property and equipment consist of the following (in thousands):

	January 30, 2010			January 29, 2011			April 30, 2011
							(unaudited)
Machinery and equipment	$	10,352		$	13,000		$	14,196
Computer equipment and software		1,810			2,317			2,429
Furniture and fixtures		687			850			877
Leasehold improvements		1,268			1,734			1,989
Construction in progress		47			36			—
		14,164			17,937			19,491
Less accumulated depreciation and amortization		(10,044	)		(12,386	)		(13,268	)
Property and equipment, net	$	4,120		$	5,551		$	6,223

Cost and related accumulated depreciation of property and equipment acquired under capital leases are as follows (in thousands):

	January 30, 2010			January 29, 2011			April 30, 2011
							(unaudited)
Cost	$	602		$	729		$	1,027
Less accumulated depreciation		(121	)		(357	)		(417	)
	$	481		$	372		$	610

The Company capitalized certain external and internal costs, including internal payroll costs incurred in connection with the development or acquisition of software for internal use. These costs are capitalized when the Company has entered the application development stage. Capitalization ceases when the software is substantially complete and is ready for its intended use. The Company purchased software and capitalized internal costs of $55,000, $432,000 and $32,000 during fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively. Amortization expense associated with these capitalized costs was $57,000, $100,000 and $43,000 for fiscal 2010, fiscal 2011 and the three months ended April 30, 2011, respectively.

Product warranty

The amounts accrued and charged against the warranty reserve were as follows (in thousands):

	Year ended									Three months ended April 30, 2011
	January 31, 2009			January 30, 2010			January 29, 2011
										(unaudited)
Warranty—beginning of period	$	2,236		$	2,291		$	1,982		$	2,407
Accrual of warranty		660			459			1,986			363
Warranty costs		(605	)		(768	)		(1,561	)		(313	)
Warranty—end of period	$	2,291		$	1,982		$	2,407		$	2,457

F-19

BlueArc Corporation

Notes to consolidated financial statements (continued)

4. Fair value measurements

Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments as of January 30, 2010, January 29, 2011 and April 30, 2011 (in thousands):

	January 30, 2010
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	5,690	$	—	$	—	$	5,690
Liabilities
Other accrued liabilities:
Foreign currency forward contracts	$	—	$	—	$	55	$	55
Other long-term liabilities:
Preferred stock warrants	$	—	$	—	$	1,315	$	1,315

	January 29, 2011
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	10,833	$	—	$	—	$	10,833
Liabilities
Other long-term liabilities:
Preferred stock warrants	$	—	$	—	$	1,834	$	1,834
Common stock warrants	$	—	$	—	$	136	$	136

	April 30, 2011
	Level 1		Level 2		Level 3		Total
	(unaudited)
Assets
Cash equivalents:
Money market funds	$	10,465	$	—	$	—	$	10,465
Liabilities
Other long-term liabilities:
Preferred stock warrants	$		$		$	3,602	$	3,602
Common stock warrants	$		$		$	333	$	333

The aggregate fair value of the Company’s money market funds approximated amortized cost and, as such, there were no unrealized gains or losses on money market funds as of January 30, 2010, January 29, 2011 and April 30, 2011.

F-20

BlueArc Corporation

Notes to consolidated financial statements (continued)

The tables below present reconciliations for the preferred stock warrant and common stock warrant liabilities measured and recorded at fair value on a recurring basis using Level 3 inputs for fiscal 2010, fiscal 2011 and three months ended April 30, 2011 (in thousands):

Preferred stock warrants

	Year ended							Three months ended April 30, 2011
	January 31, 2009			January 30, 2010		January 29, 2011
								(unaudited)
Beginning balance	$	—		$	267	$	1,315	$	1,834
Issuances		401			676		514		—
Loss (gain) recognized in earnings		(134	)		372		5		1,768
Ending balance	$	267		$	1,315	$	1,834	$	3,602

Common stock warrants

	Year ended							Three months ended April 30, 2011
	January 31, 2009		January 30, 2010		January 29, 2011
								(unaudited)
Beginning balance	$	—	$	—	$	—		$	136
Issuances		—		—		408			—
Loss (gain) recognized in earnings		—		—		(64	)		197
Reclassification to additional paid-in capital		—		—		(208	)		—
Ending balance	$	—	$	—	$	136		$	333

The valuation of the preferred stock warrants and common stock warrants and input assumptions used in the valuation is discussed in Note 10. There were no transfers between Level 1 and Level 2 into Level 3 for the periods presented.

F-21

BlueArc Corporation

Notes to consolidated financial statements (continued)

5. Commitments and contingencies

Leases

In October 2000, the Company entered into a noncancelable operating lease for its facility in Bracknell, England from November 1, 2000 to October 26, 2015. In May 2006, the Company entered into a noncancelable operating lease for its facility in San Jose, California from June 23, 2006 to August 30, 2009 and subsequently extended the term of the lease to August 31, 2014. The Company also leases various fixed assets under capital leases with terms that expire at various dates through January 2014. The Company also incurs rent expense to support sales offices in other countries with total square footage of approximately 345. Future minimum lease payments due under noncancelable leases as of January 29, 2011 were as follows (in thousands):

Years ending:	Capital leases			Operating leases
January 28, 2012	$	287		$	992
January 26, 2013		138			996
January 25, 2014		11			1,001
January 31, 2015		—			808
January 30, 2016		—			396
Total future minimum lease payments		436		$	4,193
Less interest cost		(31	)
Net present value of future minimum lease payments		405
Less current obligations under capital leases, included under long-term debt, current portion		(262	)
Long-term obligations under capital leases included under long-term debt, net of current portion	$	143

The terms of certain lease arrangements have escalating rent payment provisions. The Company recognizes rent expense on a straight-line basis over the lease period, resulting in a deferred rent liability. Rent expense under all operating leases was $1.0 million, $0.9 million, $1.0 million and $0.3 million for fiscal 2009, fiscal 2010, fiscal 2011 and three months ended April 30, 2011, respectively.

Purchase commitments

To ensure uninterrupted supply, the Company’s contract manufacturer makes advance purchases of components based on the system unit forecasts provided by the Company. To the extent these components are purchased by the contract manufacturer and cannot be used by their other customers, the Company is obligated to purchase these components. The maximum amount of purchase commitment that the Company may be obligated to pay within one year was $10.8 million and $7.5 million as of January 29, 2011 and April 30, 2011, respectively. Actual amounts paid may be lower to the extent that the contract manufacturer can avoid purchasing components that are ultimately not needed. Additionally, the Company has an obligation to purchase components procured by its contract manufacturer if these components become obsolete. Accruals related to obsolete components purchased by the contract manufacturer were immaterial as of January 29, 2011 and April 30, 2011.

F-22

BlueArc Corporation

Notes to consolidated financial statements (continued)

Indemnification obligations

The Company’s bylaws permit it to indemnify its officers and directors, as well as those who act as directors and officers of other entities at the request of the Company, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to the Company. In addition, the Company has entered into indemnification agreements with each director and officer that provide for indemnification of these persons under certain circumstances. The Company maintains insurance intended to cover claims made against its directors and officers. As a maximum obligation is not explicitly stated in the Company’s bylaws or these agreements and will depend on the facts and circumstances that arise from any future claims, the maximum amount of the obligations cannot reasonably be estimated. Historically, the Company has not made payments under these indemnification obligations and believes the estimated fair value of these indemnification obligations is not material. Accordingly, the Company recorded no liabilities for these agreements as of January 30, 2010, January 29, 2011 and April 30, 2011.

As is customary in the Company’s industry and as provided for under local law in certain jurisdictions, many of the Company’s contracts provide remedies to customers and other parties with whom the Company enters into contracts in the event that a claim is brought against the customer or other party alleging that the Company’s products infringe another party’s intellectual property. These remedies include provisions for the defense, settlement or payment of any final judgment entered against the indemnified party, subject to limitations set forth in the contract. From time to time, the Company also agrees to indemnify customers, suppliers, contractors, lessors, lessees and other parties with whom it enters into contracts, against loss, expense or liability arising from various events related to the sale and the use of the Company’s products and services, the use of the other party’s goods, services or facilities and other matters covered by such contracts, generally subject to a maximum amount. From time to time, the Company also agrees to indemnify third parties with whom it contracts against claims related to undiscovered liabilities or additional product liability. The Company maintains errors and omissions insurance intended to reduce its potential loss under indemnification obligations. Claims made under such indemnification obligations have not been significant, and the Company believes the estimated value of these indemnification obligations is not material. Accordingly, the Company has recorded no liabilities for these provisions as of January 30, 2010, January 29, 2011 and April 30, 2011.

6. Financing arrangements

Accounts receivable credit facility

The Company has an asset-based revolving credit facility with Silicon Valley Bank for $12.5 million. On June 3, 2011, the Company extended the facility until December 31, 2012 and amended various terms of the agreement. The credit facility is collateralized by the Company’s tangible assets and is subject to a borrowing base calculation with an advance rate of 80% of eligible accounts receivable. The interest rate on the credit facility is variable, ranging between 1% and 3% over prime rate on the basis of the Company’s unrestricted cash balance. Effective June 2011, the Company will pay an unused line charge of 0.25% per annum. As of January 30,

F-23

BlueArc Corporation

Notes to consolidated financial statements (continued)

2010, January 29, 2011 and April 30, 2011, the Company did not have an outstanding balance on the credit facility. Based on the borrowing base calculation, the Company had $12.5 million available for future borrowings as of January 29, 2011 and April 30, 2011. Amounts borrowed under the credit facility are payable to Silicon Valley Bank following collection of the underlying accounts receivable and the credit facility includes a material adverse change clause as a condition precedent to funding which allows Silicon Valley Bank to withdraw any unutilized portion of the facility at the time it is notified of the occurrence of certain triggering events. The credit facility does not include a material adverse change clause as an event of default or any financial covenants.

Long-term capital growth facility

In April 2009, the Company entered into a long-term capital growth facility agreement with Gold Hill Capital for a principal amount of $7.5 million, of which the entire amount available was then drawn. The loan facility was amended in each of April 2010 and January 2011 to extend the facility repayment terms, originally scheduled to occur in installments from January 2010 to June 2012. The loan facility is subject to interest-only payments during a period that ends December 2011. The Company is obligated to start making payments of principal and interest monthly of $282,000 from January 2012 through June 2014. In June 2014, the Company will be obligated to pay an end of term fee of $150,000. The loan facility originally carried a fixed interest rate of 12%, which was reduced to 11% effective in April 2010. The interest rate is scheduled to be further reduced to 9.5% effective January 1, 2012.

If the Company does not meet specified performance criteria tied to a measure of quarterly earnings through October 29, 2011, its repayment of principal via monthly installments will be accelerated and will commence in the month following the determination that the performance criteria have not been met. In addition, the Company would not be entitled to any reduction in the interest rate, and the number of shares underlying warrants to purchase common stock issued to Gold Hill Capital in April 2010 and January 2011 would be reduced. The Company met all applicable performance criteria through January 29, 2011 and April 30, 2011.

Modifications in the terms of the Gold Hill loan facility in April 2010 and January 2011 were not so substantial as to be considered to result in the extinguishment of the original facility and drawing of a new debt. Therefore, the Company did not record a gain or loss upon the modifications and expensed all related legal and administrative expenses as incurred.

In connection with the issuance of the original facility, the Company issued warrants to purchase 248,486 of Series FF convertible preferred stock, or Series FF, at a price of $4.53 per share to Gold Hill Capital. At the time of issuance, the total fair value of these warrants was $0.7 million. The fair value of the warrants on the date of issuance was recorded as a liability and debt discount. See Note 10.

The terms of these warrants provide that the number of shares and the exercise price will be adjusted in the event the Company sells preferred stock at a lower price per share in a subsequent preferred stock financing. Since the issue price of the Company’s Series GG convertible preferred stock, or Series GG, of $2.53 per share was lower than the original per

F-24

BlueArc Corporation

Notes to consolidated financial statements (continued)

share exercise price of $4.53, the Company adjusted the previously issued warrants such that the Gold Hill warrants are now exercisable for 222,429 shares of Series FF convertible preferred stock and 222,428 shares of Series FF-1 convertible preferred stock at an exercise price of $2.53 per share. The reason that one-half of the warrants were issued as Series FF-1 warrants was because the terms of the warrants allowed for Gold Hill to receive the same securities and/or rights as those who participate at their full pro rata share of the next round of financing. See Note 8.

In connection with the Gold Hill loan facility modifications in April 2010 and January 2011, the Company issued warrants to purchase 174,371 shares and 100,170 shares of the Company’s common stock with per share exercise prices of $1.94 and $1.71, respectively, to Gold Hill Capital. The number of shares subject to the warrant issued in April 2010 was subject to a one-time reduction if the Company failed to achieve specified performance criteria tied to a measure of quarterly earnings through January 29, 2011. The number of shares subject to the warrant issued in January 2011 is subject to a one-time reduction if the Company does not achieve specified performance criteria tied to a measure of quarterly earnings for quarters through October 29, 2011. The number of shares subject to the reduction varies depending on the quarter in which the Company fails to achieve the criteria. The April 2010 warrants had a fair value of $0.3 million at issuance and the January 2011 warrants had a fair value of $0.1 million at issuance. The Company estimated these fair values using the Black-Scholes option pricing model adjusted for a potential reduction in the number of shares, based on various probability-weighted outcomes. The following assumptions were used in the Black-Scholes model: expected volatility of 75% in April 2010 and 66% in January 2011, risk free interest rates of 4% in April 2010 and 3% in January 2011, expected life of 10 years and zero dividend yield. The fair value of the warrants on the date of issuance was recorded as a liability and debt discount.

Over the life of the loan facility, including the extension periods, using the effective interest method, the Company recognizes as interest expense fees paid to Gold Hill Capital upon the initial drawing of the loan facility, and modifications, the payment of the end of term fee, debt discounts resulting from the issuance of warrants and the direct and incremental costs of the initial borrowing.

As of January 30, 2010, January 29, 2011 and April 30, 2011, the Company was in compliance with all loan covenants with Gold Hill. Including the value of preferred stock warrants issued in connection with this loan, the effective interest rate was approximately 19% as of January 30, 2010 and 17% as of January 29, 2011 and April 30, 2011.

The Gold Hill loan is collateralized by a security interest in all of the Company’s assets, excluding the Company’s intellectual property. The Company, however, has provided a negative pledge regarding its intellectual property and cannot give or sell it to another party without Gold Hill’s consent. The loan agreement also limits the Company’s ability to pay dividends. Gold Hill’s security interest is subordinated to Silicon Valley Bank’s first priority security interest in the Company’s cash (including short- and long-term investments) and accounts receivable to the extent the Silicon Valley Bank line is drawn.

F-25

BlueArc Corporation

Notes to consolidated financial statements (continued)

Aggregate annual payments due on the Gold Hill loan as of January 29, 2011 were as follows (in thousands):

Years ending	Payments*
January 28, 2012	$	1,048
January 26, 2013		3,388
January 25, 2014		3,388
January 31, 2015		1,412
Total payments		9,236
Less: amount representing interest		(1,736	)
Total debt		7,500
Less: unamortized discount		(708	)
Total debt, net of unamortized discount		6,792
Less: current portion		(240	)
Long-term portion	$	6,552

* These amounts were calculated using the interest rate of 11% through December 31, 2011 and 10% thereafter, which will apply if the Company meets specified performance criteria tied to a measure of quarterly earnings through October 29, 2011. The Company currently anticipates that it will achieve these performance criteria. If these criteria are not achieved, repayment of principal via monthly installments will be accelerated and will commence in the month following the determination that the performance criteria have not been achieved. In addition, the 11% interest rate will continue to apply for the remainder of the facility term. Should this occur, a maximum of $2.1 million may become due during fiscal 2012 as a result of repayment acceleration. Additional interest payments that may become due through the facility repayment period as a result of the higher interest rate are $0.2 million.

Convertible promissory notes

In February 2010, the Company issued $2.7 million in convertible promissory notes with an annual interest rate of 8%. In July 2010, upon closing of the Series GG convertible preferred stock financing, the principal and accrued interest of $0.1 million was converted into shares of Series GG convertible preferred stock as discussed below in Note 8. Upon conversion, the Company also issued vested warrants to purchase 320,393 shares of Series GG convertible preferred stock at an exercise price of $2.53 per share to the promissory note holders and recorded a charge equal to the issuance-date fair value of these warrants of $0.6 million in other income (expense), net. The Company estimated the fair value of the warrants at issuance using the Black-Scholes option pricing model with the following assumptions: expected volatility of 51%, risk free interest rate of 2%, expected life of five years and zero dividend yield. See Note 10.

7. Hitachi Data Systems arrangements

The Company has a Master Distribution Agreement, or MDA, with HDS. The MDA commits HDS to purchase specified dollar amounts of the Company’s storage systems through September 2011. During fiscal 2010 and fiscal 2011, HDS made prepayments of $10.0 million and $5.0 million, respectively, for future purchases of the Company’s products. As partial consideration for these prepayments, during fiscal 2011 the Company issued to HDS vested warrants to purchase 206,184 shares of its common stock with a per share exercise price of $1.94, which expires in 2017. The Company determined the fair value at issuance was $0.2 million and it was recognized as a reduction in revenue upon HDS’ purchase of products using the prepayment. The Company estimated the fair value using the Black-Scholes option pricing model with the following

F-26

BlueArc Corporation

Notes to consolidated financial statements (continued)

assumptions: expected volatility of 50%, risk free interest rate of 4%, expected life of seven years and zero dividend yield.

During fiscal 2011, HDS paid the Company $1.5 million for certain research and development projects. The Company recognizes these amounts as a reduction in its research and development expense as the associated projects are conducted. As of January 29, 2011 and April 30, 2011, $0.9 million and $0.5 million of customer deposits associated with these projects remained on the Company’s balance sheet. The Company has also received fees from HDS for setting aside certain inventory quantities to be available for them as needed. The amount of support fees recognized for this service was $0.1 million, $0.7 million and $0.3 million in fiscal 2009, fiscal 2010 and fiscal 2011, respectively. This inventory arrangement expired at the end of fiscal 2011.

During fiscal 2009, the Company issued HDS vested warrants to purchase 151,418 shares of its common stock with a per share exercise price of $4.13 and a fair value at issuance of $0.2 million. The warrants were issued upon HDS’ achievement of specified revenue milestones for the sale of the Company’s products. The warrants expired unexercised in fiscal 2011. The fair value of these warrants was recognized as a reduction in revenue. The Company estimated the fair value using the Black-Scholes option pricing model with the following assumptions: expected volatility of 44%, risk free interest rate of 2%, expected life of 2.8 years and zero dividend yield.

Pursuant to the terms of the MDA as amended in March 2010, the Company agreed not to solicit a specified list of potential acquirers prior to April 1, 2011 and the Company and certain holders of its preferred stock agreed to certain limitations on the sale of the Company to a specified list of third parties. These protections expire on the earlier to occur of September 30, 2011 or immediately prior to the closing of an IPO.

8. Convertible preferred stock and stockholders’ deficit

In July 2010, the board and stockholders approved and the Company increased its authorized common stock to 50,540,389 shares and authorized convertible preferred stock to 52,566,195 shares, and designated 9,019,856 shares of convertible preferred stock as Series GG. The Company then issued 8,342,358 shares of Series GG for gross proceeds of $21.1 million, which included the conversion of $2.7 million of promissory notes and accumulated interest of $0.1 million.

In accordance with the terms of the amendment and restatement of our certificate of incorporation that we filed in connection with the Series GG financing, 50% of every preferred stockholder’s outstanding shares of Series AA convertible preferred stock, or Series AA, Series BB convertible preferred stock, or Series BB, Series DD convertible preferred stock, or Series DD and Series FF, was converted to common stock. To the extent each holder of previously converted preferred stock participated at the required level in the Series GG financing, such holder was able to immediately exchange each of the previously converted shares of common stock into one share of preferred stock of a new series. Shares of common stock issued upon conversion of Series AA were exchanged for shares of Series AA-1 convertible preferred stock, or Series AA-1; shares of common stock issued upon conversion of Series BB were exchanged for shares of Series BB-1 convertible preferred stock, or Series BB-1; shares of common stock issued upon conversion of Series DD were exchanged for shares of Series DD-1 convertible preferred stock, or Series DD-1;

F-27

BlueArc Corporation

Notes to consolidated financial statements (continued)

and shares of common stock issued upon conversion of Series FF were exchanged for shares of Series FF-1 convertible preferred stock, or Series FF-1. In aggregate, there were 2,691,061 shares of Series AA-1, 4,603,023 shares of Series BB-1, 3,279,749 shares of Series DD-1 and 2,517,391 shares of Series FF-1 issued, and 504,647 shares of Series AA, 45,818 shares of Series BB, 222,653 shares of Series DD and 53,010 shares of Series FF were converted to common stock and not exchanged for the new series of preferred stock. The liquidation preferences per share for Series AA-1 is $5.91, for Series BB-1 is $2.51, for Series DD-1 is $3.85 and for Series FF-1 is $4.21. In addition, the liquidation preferences per share of the remaining 50% shares of Series AA, Series BB, Series DD and Series FF were reduced as follows: from $6.00 to $4.98 for Series AA; from $3.00 to $2.49 for Series BB; from $4.14 to $3.60 for Series DD; and from $4.53 to $4.12 for Series FF. None of the Series EE convertible preferred stock was converted into common stock; however, the liquidation preference per share decreased from $5.19 to $4.52. The Series CC convertible preferred stock was not affected by the Series GG transaction.

The Company accounted for the exchange of convertible preferred stock into preferred stock of a new series as an extinguishment and a subsequent reissuance. The net difference between the fair values of newly issued convertible preferred stock, and the carrying values of the previously outstanding preferred stock that was exchanged, was reflected as a deemed dividend to preferred stockholders, with a debit to additional paid-in capital and an increase in net loss attributable to common stockholders for fiscal 2011. The fair values of newly issued convertible preferred stock shares were determined by management using probability-weighted expected return method and estimates and assumptions consistent with those used to estimate the fair value of the Company’s common stock. See Note 9.

The book value of shares of Series AA, BB, DD and FF converted into shares of common stock for those stockholders who did not participate in the Series GG financing was transferred from temporary equity to permanent equity since such conversion occurred at the initial conversion price.

F-28

BlueArc Corporation

Notes to consolidated financial statements (continued)

The following table lists the shares of convertible preferred stock authorized and outstanding as of January 30, 2010 and January 29, 2011 (in thousands, except per share data):

As of January 30, 2010	Shares				Carrying value		Aggregate liquidation preference		Liquidation preference per share
	Designated		Outstanding
Series
AA		6,391		6,391	$	26,330	$	38,349	$	6.00
BB		9,298		9,298		20,250		27,893	$	3.00
CC		311		310		—		—	$	—
DD		11,605		7,005		28,830		29,000	$	4.14
EE		790		790		4,100		4,100	$	5.19
FF		5,567		5,141		23,107		25,069	$	4.53
		33,962		28,935	$	102,617	$	124,411

As of January 29, 2011	Shares				Carrying value		Aggregate liquidation preference		Liquidation preference per share
	Designated		Outstanding
Series
AA		6,391		3,197	$	9,100	$	15,915	$	4.98
AA-1		3,196		2,691		10,604		15,915	$	5.91
BB		9,298		4,649		13,947		11,576	$	2.49
BB-1		4,649		4,603		15,752		11,576	$	2.51
CC*		311		310		—		—	$	—	*
DD		7,005		3,502		14,329		12,612	$	3.60
DD-1		3,502		3,280		11,920		12,615	$	3.85
EE		790		790		4,100		3,567	$	4.52
FF		5,537		2,570		11,470		10,588	$	4.12
FF-1		2,867		2,517		9,522		10,590	$	4.21
GG**		9,020		8,342		20,955		31,646	$	3.79	**
		52,566		36,451	$	121,699	$	136,600

* See “Liquidation” section below.

** Amount if a liquidation event occurs before January 14, 2012. After January 14, 2012, the liquidation preference amount is $26.4 million, or $3.16 per share.

Voting rights

The holder of each share of convertible preferred stock (other than Series CC) is entitled to one vote for each share of common stock into which it is convertible. Except as required by law, the Series CC convertible preferred stock does not have any voting rights.

The holders of Series AA stock, voting as a separate class, are entitled to elect two members of the Board of Directors. The holders of Series DD stock, voting as a separate class, are entitled to elect one member of the Board of Directors. The holders of Series GG stock, voting as a separate class, are entitled to elect one member of the Board of Directors. Holders of convertible preferred stock (other than Series CC) and common stock, voting together on an as converted to common stock basis, are entitled to elect three remaining members of the Board of Directors.

F-29

BlueArc Corporation

Notes to consolidated financial statements (continued)

Conversion rights

Each share of convertible preferred stock (other than Series CC) is convertible, at the option of the holder and at any time, into such number of shares of common stock as is determined by dividing the applicable original issue price by the conversion price applicable to such shares in effect at the date of conversion, initially on a one for one basis. As of January 29, 2011, each share of preferred stock is convertible into common stock shares as follows:

Series	Shares of common stock issuable upon conversion		Conversion Price
AA and AA-1		1.00	$	3.00
BB and BB-1		1.00		3.00
DD and DD-1		1.00		4.14
EE		1.02		5.07
FF and FF-1		1.00		4.53
GG		1.00		2.53

Each share of Series CC is automatically convertible into shares of common stock only upon the closing of a qualified IPO. In the event of such a conversion, each share of Series CC is convertible into such number of shares of common stock determined by dividing $60.00 by the price per share to the public of the common stock sold in such qualified IPO.

Each share of convertible preferred stock will automatically convert into common stock immediately prior to the closing of an underwritten public offering pursuant to an effective registration statement under Securities Act of 1933, with an offering price to the public of at least $5.08 per share and aggregate gross offering proceeds of not less than $50.0 million, which would be a Qualified IPO, or with the written consent of at least two-thirds of the then outstanding convertible preferred stock; however, other than upon a Qualified IPO, Series GG cannot be converted to common stock without the consent of a majority of the holders of Series GG.

Dividends

Payment preference order	Series	Dividend per share
1	GG	$ 0.2023
2	FF and FF-1	0.3622
2	EE	0.4152
2	DD and DD-1	0.3312
3	AA, AA-1, BB, BB-1	0.2400

Holders of the convertible preferred stock are entitled to an annual noncumulative dividend per share payable in accordance with the payment preference order set forth above. Only until dividends for each series within a particular preference order are paid, will the next series in the preference order be paid. After the holders of the above series have received their dividend preferences, they will participate with shares of common stock on an as converted to common stock basis as to any additional declaration or payment of any dividend. No dividends had been declared or paid as of January 29, 2011.

F-30

BlueArc Corporation

Notes to consolidated financial statements (continued)

Liquidation

In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, distributions to the stockholders of the Company, after distribution of 10% of the proceeds to management of the Company in accordance with the terms of the management bonus plan (which expires upon the occurrence of an IPO), will be made in the following manner:

Liquidation preference order	Series
1	GG
2	FF and FF-1
3	DD, DD-1 and EE
4	AA and AA-1
5	BB and BB-1

The holders of the above series of convertible preferred stock carry a liquidation preference in accordance with the above liquidation preference order. Only until the liquidation preferences per share, combined with all declared but unpaid dividends within a particular liquidation preference order, are paid, will the next series in the preference order be paid. If the assets and funds distributed among the holders within a certain preference order are insufficient to permit the payment of the full preferential amounts, the entire assets and funds legally available for distribution will be distributed ratably among the holders of preferred stock within that preference order.

After the payment of the full preferential amounts to the preferred stockholders in the table above, the remaining assets and funds of the Company legally available for distribution to the preferred and common stock holders will be distributed in the following manner:

Series GG, Series FF, Series FF-1, Series EE, Series DD and Series DD-1 holders receive their pro rata share of the remaining assets determined on an as converted to common stock basis. Of the remaining proceeds, initially 50% is distributed to Series CC holders and the other 50% is distributed to Series AA, Series AA-1, Series BB, Series BB-1 and common stockholders on a pro rata as converted to common stock basis (except that 50% of the amount otherwise distributable to the Series BB and Series BB-1 holders will instead be allocated to the Series AA and Series AA-1 holders), until the Series CC holders have received an amount of $20.00 per share. Next, 7% of the remaining amounts is distributed to Series CC holders and the other 93% is distributed to Series AA, Series AA-1, Series BB, Series BB-1 and common stockholders on a pro rata as converted to common stock basis (except that 50% of the amount otherwise distributable to the Series BB and Series BB-1 holders will instead be allocated to the Series AA and Series AA-1 holders), until the Series CC holders have received an additional amount of $40.00 per share. Thereafter, 4% of the remaining amounts is distributed to Series CC holders and the other 96% is distributed to Series AA, Series AA-1, Series BB, Series BB-1 and common stockholders on a pro rata as converted to common stock basis (except that 50% of the amount otherwise distributable to the Series BB and Series BB-1 holders will instead be allocated to the Series AA and Series AA-1 holders).

The merger or consolidation of the Company into another entity in which the stockholders of the Company own less than 50% of the voting stock of the surviving company or the sale, transfer or

F-31

BlueArc Corporation

Notes to consolidated financial statements (continued)

lease of substantially all of the assets of the Company is deemed to be a liquidation, dissolution or winding up of the Company, or a liquidation event. As the occurrence of a potential liquidation event is outside of the Company’s control due to the rights of the holders of convertible preferred stock to vote to approve or disapprove a potential liquidation event, the Company has classified all shares of convertible preferred stock outside of its permanent stockholders’ deficit.

Accretion

A change in control, as defined, is not currently probable and, therefore, the Company has not recorded any accretion related to the difference between the liquidation value and the carrying value of the Company’s convertible preferred stock.

Common Stock

Shares of common stock reserved for issuance on an as-if converted basis is as follows (in thousands):

	January 30, 2010		January 29, 2011		April 30, 2011
					(unaudited)
Conversion of convertible preferred stock		28,935		39,819		39,819
Exercise of stock options		5,998		6,811		7,019
Available for option grants		121		1,196		894
Exercise of convertible preferred stock warrants		398		913		913
Exercise of common stock warrants		456		481		481
		35,908		49,220		49,126

9. Stock based compensation

2000 Stock Option/Stock Issuance Plan

In April 2000, the Company adopted the 2000 Stock Option/Stock Issuance Plan, or 2000 Plan. The 2000 Plan was most recently amended in April 2010 to extend the term of the plan for an additional period of 10 years and increase the number of shares of common stock that may be issued under the plan. The maximum number of shares of common stock that may be issued under the plan as of January 29, 2011 was 8,036,521. The 2000 Plan provides for the grant of incentive stock options to employees, including officers and members of the Board of Directors who are also employees, and for the grants of nonqualified stock options and awards of restricted or unrestricted shares of common stock to employees, officers, directors, consultants and advisors of the Company. Stock options granted under the 2000 Plan generally vest over a period of 48 months and have a contractual life of 10 years from the date of grant. The incentive stock options may be granted to employees at prices not lower than fair value at the date of grant, as determined by the Board of Directors (110% in certain cases). Nonqualified options may be granted to key employees, including directors and consultants, at prices not lower than 85% of fair value at the date of grant (110% in certain cases) as determined by the Board of Directors.

F-32

BlueArc Corporation

Notes to consolidated financial statements (continued)

During fiscal 2010 and fiscal 2011, the Company granted options to purchase 602,863 and 88,429 shares, respectively, that contained vesting criteria based on the Company’s performance during the year of grant. Of the options granted during fiscal 2010, options to purchase 410,991 shares vested as the related performance conditions were satisfied, and the remaining options to purchase 191,872 shares were cancelled as the performance conditions applicable to those options were not met. Of the options granted during fiscal 2011, options to purchase 85,800 shares vested as the related performance conditions were satisfied and options to purchase 2,629 shares were cancelled as the performance conditions applicable to those options were not met.

On July 15, 2009, the Company cancelled options to purchase 2,395,387 shares held by 201 employees that had exercise prices greater than the fair market value of Company’s common stock as of that date, and granted new options to those employees with exercise prices that were equal to the fair market value of Company’s common stock as of the date of grant. The Company’s Board of Directors determined that the fair market value as of that date was $0.86 per share and set the exercise prices of the new options at $0.86 per share. Prior to the cancellation of the earlier grants, their exercises prices ranged from $1.70 to $5.81. The Company extended the vesting term by 12 months for the replacement options for those original options that were not fully vested as of the date of grant of the replacement options. The grant of new options was treated as a modification of the original grants. The Company incurred additional stock-based compensation costs of $0.6 million as a result of the modification, of which $0.1 million was recognized immediately and the remaining amount of $0.5 million will be recognized over the remaining vesting period of the modified options.

Activity under the 2000 Plan is as follows (in thousands, except per share data):

	Shares available for grant			Number of stock options outstanding			Weighted- average exercise price		Range of exercise prices
Balance as of January 31, 2010		121			5,998			0.84
Additional shares authorized		2,030			—			—
Option grants		(1,430	)		1,430			1.50
Restricted stock grants		(29	)		—			—
Repurchases		1			—			1.70
Exercises		—			(114	)		0.31	$	0.03 -$1.94
Forfeited		368			(368	)		0.88
Expired		135			(135	)		1.39
Balance as of January 29, 2011		1,196			6,811			0.97
Option grants (unaudited)		(347	)		347			1.78
Restricted stock grants (unaudited)		(18	)		—			—
Exercises (unaudited)		—			(76	)		0.51	$	0.05 -$1.70
Forfeited (unaudited)		43			(43	)		1.35
Expired (unaudited)		20			(20	)		1.32
Balance as of April 30, 2011 (unaudited)		894			7,019
Vested and expected to vest as of January 29, 2011					6,596			0.97
Exercisable as of January 29, 2011					6,112			0.97

F-33

BlueArc Corporation

Notes to consolidated financial statements (continued)

The following table summarizes information about stock options outstanding and exercisable as of January 29, 2011 (in thousands):

	Options outstanding						Options exercisable
Exercise prices	Number		Weighted- average remaining life (in years)		Weighted- average exercise price		Number		Weighted- average exercise price
$0.03 – $0.05		755		4.3	$	0.03		755	$	0.03
$0.18 – $0.71		932		5.5	$	0.18		932	$	0.18
$0.83 – $0.86		3,602		8.4	$	0.86		3,106	$	0.86
$1.42 – $1.94		1,428		9.5	$	1.52		1,226	$	1.53
$2.28 – $5.81		56		6.8	$	1.72		55	$	1.72
$20 – $11,000		38		3.0	$	25.21		38	$	25.21
		6,811						6,112

The weighted-average remaining contractual life for all exercisable options as of January 29, 2011 was 7.6 years. The weighted-average remaining contractual life of all vested and expected-to-vest stock options as of January 29, 2011 was 7.7 years.

The intrinsic value of unexercised and outstanding stock options, and expected to vest is the difference between the exercise price and the fair value of the underlying common stock. The aggregate intrinsic value of stock options outstanding as of January 29, 2011 and April 30, 2011 was $6.5 million and $21.8 million, respectively, of which $4.7 million and $13.6 million were related to exercisable options. The aggregate intrinsic value of stock options vested and expected to vest, net of estimated forfeitures, was $6.4 million and $21.2 million as of January 29, 2011 and April 30, 2011, respectively.

The intrinsic value of exercised stock options is the difference between the exercise price and the fair value of the underlying common stock as of the exercise date. The aggregate intrinsic value of exercised stock options was $34,000, $1,000, and $0.2 million during fiscal 2009, fiscal 2010 and fiscal 2011, respectively.

As of January 29, 2011 there was $2.4 million of unrecognized stock-based compensation cost, net of estimated forfeitures, related to stock options granted under the 2000 Plan. The unrecognized compensation cost was expected to be recognized over a weighted-average period of 2.7 years.

Stock-based compensation expense was included in the consolidated statements of operations as follows (in thousands):

	Year ended						Three months ended
	January 31, 2009		January 30, 2010		January 29, 2011		May 1, 2010		April 30, 2011
							(unaudited)
Total cost of revenue	$	51	$	67	$	44	$	9	$	11
Sales and marketing		498		610		476		86		116
Research and development		282		366		254		69		62
General and administrative		387		366		343		115		132
	$	1,218	$	1,409	$	1,117	$	279	$	321

F-34

BlueArc Corporation

Notes to consolidated financial statements (continued)

The fair value of each option grant was estimated on the date of grant using the Black Scholes option pricing model with the following assumptions:

	Year Ended						Three Months Ended
	January 31, 2009		January 30, 2010		January 29, 2011		May 1, 2010		April 30, 2011
							(unaudited)
Risk-free interest rate		1.8% - 3.3%		2.0% - 2.5%		1.4% - 2.7%		2.4% - 2.7%		2%
Expected term (in years)		5.0		4.5		4.5		4.5		4.9
Expected dividend		0%		0%		0%		0%		0%
Expected volatility		47%		49% - 51%		50% - 51%		50%		53%

The weighted average grant date fair values of options granted to employees for fiscal, 2009, 2010 and 2011 and the three months ended May 1, 2010 and April 30, 2011 were $1.29, $0.25, $0.65, $0.85 and $0.84, respectively.

As the Company has no active trading history, expected volatility was derived from historical volatilities of several peer public companies deemed to be comparable to the Company’s business.

The expected term represents the period that the Company’s stock options are expected to be outstanding, and was estimated based on patterns of historical exercises and post vesting cancellations and the options’ contractual term. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to each option’s expected term. The expected dividend was assumed to be zero as the Company has never paid dividends and has no current plans to do so.

The absence of an active market for the Company’s common stock also required the Company’s Board of Directors, the members of which the Company believes have extensive business, finance and venture capital experience, to estimate the fair value of the Company’s common stock for purposes of granting options and for determining stock-based compensation expense for the periods presented. In response to these requirements, the Company’s Board of Directors’ practice has been to estimate the fair market value of common stock at each meeting at which options were granted. The Company has obtained contemporaneous third party valuations to assist the Company’s Board of Directors in determining fair market value. The Company has historically granted stock options at not less than the fair market value of its common stock as determined at the time of grant. These contemporaneous third party valuations used the methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accounts Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (AICPA Practice Guide).

Other factors taken into consideration in assessing the fair market value of the Company’s common stock include: the prices of the recent preferred stock sales to investors in arms-length transactions; our capital resources and financial condition; the preferences held by the preferred stock classes in favor of common shares; the likelihood and timing of achieving a liquidity event, such as an initial public offering or sale of the Company given prevailing market conditions; the Company’s historical operating and financial performance as well as estimates of future financial performance; recent acquisitions and valuations of comparable companies; the hiring of key

F-35

BlueArc Corporation

Notes to consolidated financial statements (continued)

personnel; the status of the Company’s development, product introduction and sales efforts; revenue growth; industry information such as market growth and volume and macro-economic events; and additional objective and subjective factors relating to the Company’s business.

Stock options granted under the 2000 Plan provide employee option holders the right to early exercise unvested options in exchange for common stock subject to a right of repurchase at the original issuance price in the event the optionee’s employment is terminated either voluntarily or involuntarily. The cash received from employees for the exercise of unvested options is accounted for as a refundable deposit and included in other liabilities on the balance sheet and reclassified into equity as the right of repurchase lapses. Proceeds from early exercises included in other liabilities were immaterial as of January 30, 2010, January 29, 2011 and April 30, 2011.

10. Warrants

Preferred stock warrants

As of January 30, 2010, outstanding warrants to purchase convertible preferred stock consisted of:

Original issue date	Term (years)		Convertible preferred stock		Exercise price		Number of shares underlying warrants		Fair value as of January 30, 2010
									(in thousands)
May 2005		5.5		Series CC	$	60.00		1,500	$	—
March and April 2008		10.0		Series FF	$	4.53		147,861		458
March 2009		10.0		Series FF	$	4.53		248,486		857
								397,847	$	1,315

The warrants to purchase Series CC expired unexercised in December 2010.

As of January 29, 2011 and April 30, 2011, outstanding warrants to purchase convertible preferred stock consisted of:

Original issue date	Term (years)		Convertible preferred stock		Exercise price		Number of shares underlying warrants		Fair value as of January 29, 2011		Fair value as of April 30, 2011
									(in thousands)
											(unaudited)
March and April 2008		10		Series FF	$	4.53		73,933	$	123	$	253
March and April 2008		10		Series FF-1	$	4.53		73,928		126		256
March 2009		10		Series FF	$	2.53		222,429		534		981
March 2009		10		Series FF-1	$	2.53		222,428		544		989
July 2010		5		Series GG	$	2.53		320,393		507		1,123
								913,111	$	1,834	$	3,602

F-36

BlueArc Corporation

Notes to consolidated financial statements (continued)

The Company used Black-Scholes option pricing model, or to the extent the warrant had antidilutive features, a binomial option pricing model, to estimate the fair value of the preferred stock warrants using the following assumptions:

Measurement date	Risk free interest rate		Remaining contractual term (years)		Dividend yield		Volatility
January 30, 2010		3.4-3.6%		5.3-9.0		—		65-77%
January 29, 2011		0.7-1.9%		2.2-5.0		—		53-58%
April 30, 2011		0.5-2.1%		1.6-5.3		—		47-54%

All preferred stock warrants are exercisable immediately and can be exercised for cash or net share settled.

In connection with the Series GG issuance in July 2010, the warrants issued in March and April 2008 to purchase Series FF were adjusted pursuant to their terms so that the warrants now allow the holder to purchase 73,933 shares of Series FF and 73,928 shares of Series FF-1. Also as a result of the Series GG issuance, the 248,486 warrants issued in March 2009 to Gold Hill Capital in connection with the $7.5 million growth capital facility adjusted pursuant to their terms to allow Gold Hill Capital to purchase 222,429 shares of Series FF and 222,428 shares of Series FF-1.

The Company recorded a gain of $0.1 million, a loss of $0.4 million and a loss of $5,000 for the changes in the estimated fair value of the preferred stock warrants for fiscal 2009, fiscal 2010 and fiscal 2011, respectively. For the three months ended April 30, 2011, the Company recorded a loss of $1.8 million for the changes in the estimated fair value of the preferred stock warrants.

Common stock warrants

As of January 30, 2010, January 29, 2011 and April 30, 2011, the Company had the following outstanding warrants to purchase the Company’s common stock:

							Number of shares underlying warrant as of
Holder	Original issue date		Term (years)		Exercise price		January 30, 2010		January 29, 2011		April 30, 2011
											(unaudited)
Consultant		July 2000		10	$	630.91		1,585		—		—
Consultant		May 2001		10	$	44,000		4		4		4
HDS		August 2007		3.25	$	5.22		302,836		—		—
HDS (Note 7)		April 2008		2.6	$	4.13		151,418		—		—
HDS (Note 7)		April 2010		7	$	1.94		—		206,184		206,184
Gold Hill Capital (Note 6)		April 2010		10	$	1.94		—		174,371		174,371
Gold Hill Capital (Note 6)		January 2011		10	$	1.71		—		100,170		100,170
								455,843		480,729		480,729

The outstanding warrants to purchase common stock as of April 30, 2011 are exercisable immediately and can only be exercised for cash or net share settled. The warrants to purchase the Company’s common stock that were issued in July 2000 to a consultant expired unexercised in July 2010. The warrants to purchase the Company’s common stock that were issued to HDS in August 2007 and April 2008 expired unexercised in November 2010.

F-37

BlueArc Corporation

Notes to consolidated financial statements (continued)

The warrants issued to Gold Hill Capital in April 2010 and January 2011 were initially classified as liabilities and carried at fair value as the number of shares subject to the warrants is subject to a one-time reduction if the Company did not achieve certain performance criteria tied to a measure of quarterly earnings. On January 29, 2011, the then-current fair value of the warrant issued in April 2010 of $0.2 million was reclassified into additional paid-in capital as the Company achieved the performance criteria applicable to this warrant, and the number of shares underlying the warrant is no longer subject to change. The warrant issued to Gold Hill Capital in January 2011 continues to be classified as a liability and was carried at fair value at January 29, 2011 and April 30, 2011. The Company used Black-Scholes option pricing model to estimate the fair value of the common stock warrants using the following assumptions:

Measurement date	Risk free interest rate		Remaining contractual term (years)		Dividend yield		Volatility
January 29, 2011		3%		9.2		—		60%
April 30, 2011		3%		9.8		—		62%

The change in the fair value of the common stock warrant issued to Gold Hill Capital in April 2010 during fiscal 2011 resulted in a gain to other income (expense), net in the amount of $64,000.

The change in the fair value of the common stock warrant issued to Gold Hill Capital in January 2011 during the three months ended April 30, 2011 resulted in a loss to other income (expense), net in the amount of $0.2 million.

11. Net loss per share of common stock

The Company’s basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share of common stock is computed by giving effect to all potential common stock equivalents outstanding for the period. For purposes of this calculation, convertible preferred stock, stock options to purchase common stock, warrants to purchase convertible preferred stock and warrants to purchase common stock are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share of common stock as their effect is antidilutive.

Pro forma basic and diluted net loss per share of common stock has been computed to give effect to the assumed conversion of the convertible preferred stock into common stock upon a qualifying IPO. Also, the numerator in the pro forma basic and diluted net loss per share calculation has been adjusted to remove gains and losses resulting from remeasurements of the preferred stock warrant liability as the related warrants will no longer be remeasured following a Qualified IPO.

F-38

BlueArc Corporation

Notes to consolidated financial statements (continued)

The following table sets forth the computation of the Company’s basic and diluted net loss per share of common stock during fiscal 2009, fiscal 2010 and fiscal 2011 and three months ended May 1, 2010 and April 30, 2011 (in thousands, except per share amounts).

	Year ended									Three months ended
	January 31, 2009			January 30, 2010			January 29, 2011			May 1, 2010			April 30, 2011
										(unaudited)
Net Loss	$	(19,578	)	$	(15,753	)	$	(9,425	)	$	(3,585	)	$	(4,329	)
Deemed dividend on exchange of preferred stock		—			—			(940	)		—			—
Net loss attributable to common stockholders	$	(19,578	)	$	(15,753	)	$	(10,365	)	$	(3,585	)	$	(4,329	)
Shares used in computing net loss attributable to common stockholders per share of common stock, basic and diluted		2,241			2,404			2,930			2,438			3,465
Net loss per share of common stock, basic and diluted	$	(8.74	)	$	(6.55	)	$	(3.54	)	$	(1.47	)	$	(1.25	)

The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been antidilutive (in thousands):

	Year ended						Three months ended
	January 31, 2009		January 30, 2010		January 29, 2011		May 1, 2010		April 30, 2011
							(unaudited)
Convertible preferred stock		28,935		28,935		36,451		28,935		36,451
Stock options to purchase common stock		4,541		5,998		6,811		6,161		7,019
Preferred stock warrants		149		398		913		398		913
Common stock warrants		456		456		481		662		481

The following table sets forth the computation of the Company’s pro forma basic and diluted net loss per share of common stock during fiscal 2011 and three months ended April 30, 2011 (in thousands, except per share data):

	Year ended January 29, 2011			Three months ended April 30, 2011
				(unaudited)
Net loss	$	(9,425	)	$	(4,329	)
Less: Change in fair value of preferred stock warrant liabilities		(5	)		1,768
Net loss used in computing pro forma net loss per share of common stock, basic and diluted	$	(9,420	)	$	(2,561	)
Shares used in computing net loss per share of common stock, basic and diluted		2,930			3,465
Pro forma adjustments to reflect assumed conversion of convertible preferred stock		36,433			39,819
Shares used in computing pro forma net loss per share of common stock, basic and diluted		39,363			43,284
Pro forma net loss per share of common stock, basic and diluted	$	(0.24	)	$	(0.06	)

F-39

BlueArc Corporation

Notes to consolidated financial statements (continued)

12. Income taxes

The domestic and foreign components of loss before benefit from income tax were as follows (in thousands):

	Year ended
	January 31, 2009			January 30, 2010			January 29, 2011
Domestic	$	(20,865	)	$	(11,490	)	$	(5,745	)
Foreign		405			(5,535	)		(5,100	)
Loss before benefit for income taxes	$	(20,460	)	$	(17,025	)	$	(10,845	)

Benefit (provision) from income taxes consisted of the following (in thousands):

	Year ended
	January 31, 2009			January 30, 2010			January 29, 2011
Current:
U.S. Federal	$	(20	)	$	(7	)	$	(53	)
State		(48	)		(1	)		(37	)
Foreign		950			1,280			1,510
Total current		882			1,272			1,420
Deferred:
U.S. Federal		—			—			—
State		—			—			—
Foreign		—			—			—
Total benefit from income taxes	$	882		$	1,272		$	1,420

Reconciliation of the statutory federal income tax rate to the Company’s effective tax rate was as follows:

	Year ended
	January 31, 2009			January 30, 2010			January 29, 2011
Tax at federal statutory rate		34	%		34	%		34	%
State income taxes, net of federal benefit		—			—			—
Nondeductible permanent difference		(1	)		—			(2	)
Foreign rate differential		5			(3	)		(2	)
Change in valuation allowance		(34	)		(23	)		(16	)
Research and development credits		1			1			1
Stock-based compensation		(1	)		(2	)		(2	)
Benefit from income taxes		4	%		7	%		13	%

F-40

BlueArc Corporation

Notes to consolidated financial statements (continued)

Deferred tax assets consist of the following (in thousands):

	January 30, 2010			January 29, 2011
Deferred tax assets:
Depreciation and amortization	$	841		$	893
Deferred revenue		1,603			1,532
Accrued liabilities and allowances		3,475			3,263
Federal and state credit carryforwards		1,608			1,758
Stock-based compensation		458			634
Other		148			185
Net operating loss carryforwards		31,239			29,809
Gross deferred tax assets		39,372			38,074
Deferred tax liability		—			—
Total deferred tax assets		39,372			38,074
Valuation allowance		(39,372	)		(38,074	)
Net deferred tax assets	$	—		$	—

Management believes that, based on a number of factors, it is more likely than not that the deferred tax assets will not be utilized. As a result, the Company recorded a full valuation allowance.

The following table sets forth the changes in the valuation allowance, for all periods presented (in thousands):

	Valuation Allowance
Balance, January 31, 2008	$	35,691
Decrease credited to operations		(820	)
Balance, January 31, 2009		34,871
Additions charged to operations		4,501
Balance, January 30, 2010		39,372
Decrease credited to operations		(1,298	)
Balance, January 29, 2011	$	38,074

The Internal Revenue Code limits the use of net operating loss and tax credit carry-forwards in certain situations where changes occur in the stock ownership of a company. A limitation in the amount of net operating losses that the Company may utilize in any one year may be caused by a cumulative change of more than 50% of the Company’s stock ownership, as defined in the Internal Revenue Code, over a three year period. The Company experienced an ownership change as defined in Section 382 of the Internal Revenue Code in July 2003. This change resulted in an annual limitation of $1.4 million on all net operating losses incurred prior to this date. As a result of this limitation, utilization of the net operating loss carry-forwards may be limited. The Company has not experienced another ownership change through January 31, 2011.

As of January 29, 2011, the Company had net operating loss carry-forwards of approximately $106.7 million and $83.7 million for federal and state tax purposes, respectively. The net operating loss carry-forwards expire between 2015 and 2030. The Company also had a United Kingdom net operating loss carry-forward of approximately $32.9 million, which can be carried forward indefinitely. As of January 29, 2011, the Company has federal and state research and

F-41

BlueArc Corporation

Notes to consolidated financial statements (continued)

development credit carry-forwards of approximately $2.0 million and $1.2 million, respectively. If not utilized, the federal research and development credit carry-forward will expire in various amounts beginning in 2024. The California credit can be carried forward indefinitely.

The Company received $0.7 million and $1.3 million in cash for research and development tax credits from the United Kingdom’s HM Revenue & Customs for research work completed during fiscal 2009 and fiscal 2010; this tax credit is estimated to total approximately $1.6 million for fiscal 2011.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balances as of January 31, 2008	$	9,839
Additions based on tax positions related to the current year		5,995
Balances as of January 31, 2009		15,834
Additions based on tax positions related to the current year		4,600
Balances as of January 30, 2010		20,434
Additional based on tax positions related to the current year		2,105
Reductions based on tax positions related to the prior year		(311	)
Balances as of January 29, 2011	$	22,228

The amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is approximately $0.2 million for fiscal 2011. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. At January 2011, the Company had no interest or penalties accrued related to uncertain tax positions

The Company files income tax returns in the United States, various states and certain foreign jurisdictions. As a result of net operating loss carry-forwards, all of the Company’s tax years are subject to federal, state and foreign tax examination.

Income tax benefit for the three months ended May 1, 2010 and April 30, 2011 was $0.3 million and $0.5 million, respectively, and was comprised of federal, state and foreign income tax benefits. The benefit from income taxes for the periods differs from the 34% U.S. federal statutory rate primarily due to maintaining a valuation allowance for world-wide losses and tax assets which the Company does not consider to be realizable. The Company benefited from the foreign losses it surrendered. The Company benefited from the provision for cash refundable research and development credit it receives in the United Kingdom.

As of May 1, 2010 and April 30, 2011, the Company had a valuation allowance against the full amount of any net deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion, or all, of its deferred tax assets will not be realized. As of January 29, 2011, the Company had a deferred tax asset of approximately $38.1 million, which was fully offset by a valuation allowance. If and when realized, the asset will be reflected on the Company’s balance sheet and the reversal of the corresponding valuation allowance will result in a tax benefit being recorded in the income statement in the respective period.

F-42

BlueArc Corporation

Notes to consolidated financial statements (continued)

As of April 30, 2011, the total amount of gross unrecognized benefits was $22.8 million. Included in this balance was approximately $0.2 million of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. The gross unrecognized tax benefits increased by $0.6 million during the three months ended April 30, 2011.

The Company does not expect any material change in its unrecognized tax benefits over the next 12 months.

13. Employee benefit plans

The Company has made available to all full-time United States employees a 401(k) retirement savings plan. Under this plan, employee and employer contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Code. The Company has not contributed to the plan.

The Company has a retirement savings plan available to all of its full-time United Kingdom employees. Under this United Kingdom plan, employee and employer contributions and accumulated plan earnings qualify for favorable tax treatment under Chapter IV, Part XIV, of the United Kingdom Income and Corporation Taxes Act of 1988. Company contributions to the United Kingdom plan totaled $0.4 million, $0.2 million and $0.5 million for fiscal 2009, 2010 and 2011, respectively.

14. Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results and plans below the consolidated level. Accordingly, the Company has a single reporting segment and operating unit structure.

F-43

BlueArc Corporation

Notes to consolidated financial statements (continued)

Geographical information

Operations outside of the United Sates consist principally of research and development and sales activities. Geographic revenue is identified by the location of the end customer and in the event that the Company ships its storage systems to an OEM, reseller or other channel partner and does not have end customer shipping information, geographic revenue is identified by the ship to location of the OEM, reseller or other channel partner. Identifiable long-lived assets are those assets that can be directly associated with a particular geographic area. The following table presents the Company’s revenues by geographic area and the Company’s long-lived assets held in each geographic region (in thousands):

	Year ended						Three months ended
	January 31, 2009		January 30, 2010		January 29, 2011		May 1, 2010		April 30, 2011
							(unaudited)
Revenue:
United States	$	51,645	$	50,295	$	59,492	$	12,549	$	17,218
Canada		8,830		1,932		3,943		1,915		806
EMEA		9,002		7,372		15,937		3,700		4,442
Other		4,753		6,276		6,217		450		2,246
Total	$	74,230	$	65,875	$	85,589	$	18,614	$	24,712

	January 30, 2010		January 29, 2011		April 30, 2011
			(unaudited)
Long-lived assets:
United States	$	3,926	$	4,858	$	5,371
United Kingdom		1,628		2,295		2,551
Total	$	5,554	$	7,153	$	7,922

15. Related party transactions

The Company has a contractual arrangement with a member of the board of directors for business advisory consulting services. The costs were expensed as incurred. There were no consulting expenses for fiscal 2009 and these consulting expenses were approximately $0.2 million for each of fiscal 2010 and 2011 and $45,000 for the three months ended April 30, 2011. In addition, the Company issued a total of 28,926 shares of its restricted stock, subject to a right of repurchase, to the director during fiscal 2011. The right of repurchase lapses monthly over 6 months from November 1, 2010. As of January 29, 2011 and April 30, 2011, no shares and 24,105 shares were vested, respectively.

16. Subsequent events

Between May 1, 2011 and June 22, 2011, the Company’s board of directors issued options to purchase 2,155,253 shares of its common stock to eligible service providers with a weighted average exercise price of $3.99.

F-44

BlueArc Corporation

Notes to consolidated financial statements (continued)

In June 2011, the Company’s board of directors approved the increase in the number of shares authorized for issuance under its 2000 Plan of 1,943,020 shares to an aggregate of 12,405,677 shares. The Company intends to seek the approval of its stockholders for the increase in the number of shares authorized for issuance under the 2000 Plan.

In June 2011, the Company’s board of directors approved an initial public offering of shares of the Company’s common stock by the Company and selling stockholders under the Securities Act of 1933.

In June 2011, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect the following:

• an increase in the number of authorized shares of the Company’s common stock from 50,540,389 shares to 75,950,000 shares;

• the reduction in the number of authorized shares of certain series of its preferred stock to eliminate authorized but unissued shares; and

• the removal of a formula to describe the liquidation preferences of the Company’s various series of preferred stock and replacement of the formula with the specified dollar amounts the application of the formula resulted in.

Additionally, in June 2011, the Company’s board of directors approved an amendment and restatement of the Company’s certificate of incorporation immediately prior to the closing of the IPO to:

• increase the number of authorized shares of its common stock from 75,950,000 to 500,000,000 shares;

• effect the creation and authorization of 50,000,000 shares of undesignated preferred stock, par value $0.001 per share;

• provide for the classification of the Company’s board of directors into three classes, with each such class serving a three year term and only one class subject to election in any given fiscal year;

• eliminate the right of stockholders to act by written consent; and

• provide for the removal of members of the Company’s board of directors only for cause.

These amendments to the Company certificate of incorporation are subject to the approval of the Company’s stockholders and will become effective after its filing of the amended and restated certificate of incorporation with the Secretary of State of the State of Delaware prior to completion of the offering.

F-45

BlueArc Corporation

Notes to consolidated financial statements (continued)

In June 2011, the Company’s board of directors approved and, unless otherwise noted, subject to the approval of the Company’s stockholders, the following actions to occur prior to or concurrently with the time the Company’s Registration Statement on Form S-1 is declared effective by the Securities and Exchange Commission:

• Termination of the 2000 Stock Plan as to future option grants other than pursuant to subplans for certain of the Company’s subsidiaries outside of the United States until such time as new sub-plans for these foreign subsidiaries have received any necessary qualification under applicable foreign laws. The Company does not expect to seek approval from its stockholders on this action.

• Adoption of the 2011 Equity Incentive Plan—The board of directors adopted a 2011 Equity Incentive Plan to replace the 2000 Plan. The 2011 plan will terminate in June 2021, unless the board of directors terminates it sooner. The Company intends to seek the approval of its stockholders for the 2011 Equity Incentive Plan.

In June 2011, the Company’s spare parts logistics provider suffered a fire at one of its depots and $350,000 of the Company’s spare parts inventory was destroyed. The Company put in place alternate arrangements to support customer part replacement needs. The Company believes that the losses it incurred as a result of the fire will be covered by insurance but cannot determine when, if and to what extent it will be reimbursed for its losses.

The Company evaluated subsequent events through June 23, 2011.

F-46

             shares

Common stock

Prospectus

J.P. Morgan	BofA Merrill Lynch	Credit Suisse
William Blair & Company
Pacific Crest Securities		ThinkEquity LLC

Through and including                     , 2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Part II

Information not required in prospectus

Item 13. Other expenses of issuance and distribution.

The following table presents the costs and expenses, other than underwriting discounts and commissions, payable by us for the sale of common stock being registered. All amounts are estimates except the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fees and The NASDAQ Global Market or New York Stock Exchange listing fee.

SEC registration fee	$	11,610
FINRA filing fee		10,500
NASDAQ Global Market or New York Stock Exchange, as applicable, listing fee		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Blue sky fees and expenses		*
Custodian and transfer agent fees		*
Miscellaneous fees and expenses		*
Total	$	*

* To be completed by amendment.

Item 14. Indemnification of directors and officers.

Our restated certificate of incorporation and amended and restated bylaws contain provisions relating to the limitation of liability and indemnification of directors and officers. The restated certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability:

• for any breach of the director’s duty of loyalty to us or our stockholders;

• for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

• in respect of unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

• for any transaction from which the director derives any improper personal benefit.

Our restated certificate of incorporation also provides that if Delaware law is amended after the approval by our stockholders of the certificate of incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law.

Our amended and restated bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred for their service for or on our behalf. Our amended and restated bylaws provide that we shall advance the expenses incurred by a director or officer in advance of the final disposition of an action or proceeding. The bylaws also

II-1

authorize us to indemnify any of our employees or agents and permit us to secure insurance on behalf of any officer, director, employee or agent for any liability arising out of his or her action in that capacity, whether or not Delaware law would otherwise permit indemnification.

We have entered into indemnification agreements with each of our directors and executive officers and certain other key employees, a form of which is attached as Exhibit 10.1. The form of agreement provides that we will indemnify each of our directors, executive officers and such other key employees against any and all expenses incurred by that director, executive officer or other key employee because of his or her status as one of our directors, executive officers or other key employees, to the fullest extent permitted by Delaware law, our restated certificate of incorporation and our amended and restated bylaws (except in a proceeding initiated by such person without board approval). In addition, the form agreement provides that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors, executive officers and other key employees for a legal proceeding.

Reference is made to Section     of the underwriting agreement contained in Exhibit 1.1 to this registration statement, indemnifying our directors and officers against limited liabilities. In addition, Section 2.8 of our amended and restated investors’ rights agreement contained in Exhibit 4.8 to this registration statement provides for indemnification of certain of our stockholders against liabilities described in our amended and restated investors’ rights agreement.

Item 15. Recent sales of unregistered securities.

Since February 1, 2008, we have issued the following securities that were not registered under the Securities Act:

(1) Sales of preferred stock

• In May, July and August 2008, we issued 5,140,814 shares of Series FF preferred stock to 24 accredited investors at a price of $4.52742 per share for aggregate gross proceeds of approximately $23.3 million.

• In July 2010, we issued 8,342,358 shares of Series GG preferred stock to 32 accredited investors at a price of $2.5289 per share for aggregate gross proceeds of approximately $21.1 million.

• In July 2010, we issued 2,691,061 shares of Series AA-1 preferred stock, 4,603,023 shares of Series BB-1 preferred stock, 3,279,749 shares of Series DD-1 preferred stock and 2,517,391 shares of Series FF-1 preferred stock to our existing stockholders pursuant to a recapitalization.

(2) Sale of convertible promissory notes

• In March and April 2008, we issued approximately $6.7 million in convertible promissory notes to accredited investors.

• In February 2010, we issued approximately $2.7 million in convertible promissory notes to accredited investors.

(3) Warrants

• In March and April 2008, in connection with the issuance of the convertible promissory notes, we issued warrants to accredited investors to purchase shares of our Series FF preferred stock or, if we did not issue any shares of Series FF preferred stock in a qualified financing, Series DD preferred stock.

II-2

• In February 2010, in connection with the issuance of the convertible promissory notes, we issued warrants to accredited investors to purchase shares of our Series GG preferred stock, or if we did not issue any shares of Series GG preferred stock in a qualified financing, Series FF preferred stock.

• In November 2006, we authorized the future issuance to an accredited investor, subject to certain performance milestones, of up to 9 warrants to purchase a total of 1,362,762 shares of common stock at the fair market value on date of issuance of the warrant. As of April 30, 2011, we have issued 6 warrants to purchase an aggregate of 480,729 shares of common stock.

• Between April 2010 and January 2011, we issued warrants to purchase an aggregate of 274,451 shares of common stock at the fair market value on the date of issuance of the warrants to an accredited investor.

(4) Issuances of Options and Stock Purchase Rights

• From February 1, 2008 through June 22, 2011, we issued and sold an aggregate of 258,540 shares of common stock upon the exercise of options and stock purchase rights issued to certain officers, directors, employees and consultants of the registrant’s 2000 Plan at exercise prices ranging from $0.03 to $5.22 per share, for an aggregate consideration of approximately $187,865.

• From February 1, 2008 through June 22, 2011, we granted direct issuances or stock options to purchase an aggregate of 9,552,874 shares of our common stock at exercise prices ranging from $0.83 to $5.22 per share to employees, consultants, directors and other service providers under our 2000 Plan.

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and the registrant believes the transactions were exempt from the registration requirements of the Securities Act in reliance on Section 4(2) thereof, with respect to the items (1), (2) and (3) above, and Rule 701 thereunder, with respect to the item (4) above, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701.

II-3

Item 16. Exhibits and financial statement schedules.

(a) Exhibits.

Exhibit number	Description
1.1†	Form of Underwriting Agreement.
3.1†	Amended and Restated Certificate of Incorporation of the Registrant (Delaware) to be effective upon closing of this offering.
3.2†	Amended and Restated Bylaws of the Registrant to be effective upon the closing of this offering.
4.1†	Form of Common Stock Certificate of the Registrant.
4.2	Warrant Agreement between the Registrant and Gold Hill Capital 2008, LP dated January 26, 2011.
4.3	Warrant Agreement between the Registrant and Gold Hill Capital 2008, LP dated April 2010.
4.4	Warrant Agreement between the Registrant and Gold Hill Capital 2008, LP dated March 30, 2009.
4.5	Form of Warrant to purchase Series FF Preferred Stock.
4.6	Form of Warrant to purchase Series GG Preferred Stock.
4.7	Form of Warrant Agreement between the Registrant and Hitachi Data Systems Corporation.
4.8	Amended and Restated Investor’s Rights Agreement dated July 14, 2010 by and among the Registrant and certain stockholders of the Registrant.
5.1†	Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1	Form of Indemnification Agreement for directors and executive officers.
10.2	2000 Stock Plan and form of agreements used thereunder.
10.3†	2011 Equity Incentive Plan and form of agreements used thereunder.
10.4*	OEM License and Distribution Agreement by and between the Registrant and LSI Logic Storage Systems, Inc. dated November 12, 2003.
10.5*	Manufacturing Services Agreement by and between the Registrant and Sanmina-SCI Corporation dated October 19, 2006.
10.6*	Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated November 15, 2006.
10.6A*	Amendment No. One to Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated October 21, 2008.
10.6B*	Amendment No. Two to Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated August 31, 2009.
10.6C*	Amendment No. Three to Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated March 19, 2010.
10.7	Change of Control Severance Agreement by and between the Registrant and Michael B. Gustafson dated June 1, 2009.

II-4

Exhibit number	Description
10.8	Change of Control Severance Agreement by and between the Registrant and Shmuel Shottan dated June 1, 2009.
10.9	Form of Change of Control Severance Agreement by and between the Registrant and each of Rick Martig, Christopher J. McBride and Bridget Warwick.
10.10	Form of First Year Executive Change of Control Severance Agreement by and between the Registrant and each of David De Simone and Christopher P. White.
10.11	Office Lease between the Registrant and Carr NP Properties, L.L.C. dated July 16, 2009.
10.12	Lease between the Registrant and the Scottish Provident Institution dated October 18, 2000.
10.13	Loan and Security Agreement between the Registrant and Gold Hill Capital 2008, LP dated as of March 30, 2009, as amended by that certain First Amendment to Loan and Security Agreement dated April 2010 and that certain Second Amendment to Loan and Security Agreement dated as of January 26, 2011.
10.14	Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of March 30, 2009.
10.14A	First Amendment to Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of April 26, 2010.
10.14B	Second Amendment to Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of November 1, 2010.
10.14C	Third Amendment to Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of June 2, 2011.
21.1	Subsidiaries.
23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
23.2†	Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (See Exhibit 5.1).
24.1	Power of Attorney (See Page II-8).

* Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

† To be filed by amendment.

(b) Financial Statements Schedules—All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Purchase Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-5

Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14 or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act of 1933, shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-6

Signatures

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 24^th day of June 2011.

BlueArc Corporation
By:	/s/ Michael B. Gustafson
	Michael B. Gustafson
	President, Chief Executive Officer and Director

II-7

Power of attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Michael B. Gustafson and Rick Martig, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, with full power of each to act alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the registration statement filed herewith and any and all amendments to said registration statement (including post-effective amendments and any related registration statements thereto filed pursuant to Rule 462 and otherwise), and file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitutes, may lawfully do or cause to be done hereby.

Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates shown:

Signature	Title	Date
/s/ Michael B. Gustafson Michael B. Gustafson	President, Chief Executive Officer and Director (Principal Executive Officer)	June 24, 2011
/s/ Rick Martig Rick Martig	Chief Financial Officer (Principal Financial and Accounting Officer)	June 24, 2011
/s/ Paul S. Madera Paul S. Madera	Director	June 24, 2011
/s/ David N. Martin David N. Martin	Director	June 24, 2011
/s/ Gary J. Morgenthaler Gary J. Morgenthaler	Director	June 24, 2011
/s/ Michael J. Stark Michael J. Stark	Director	June 24, 2011
/s/ José F. Suarez José F. Suarez	Director	June 24, 2011
/s/ Duston M. Williams Duston M. Williams	Director	June 24, 2011

II-8

Exhibit index

Exhibit number	Description
1.1†	Form of Underwriting Agreement.
3.1†	Amended and Restated Certificate of Incorporation of the Registrant (Delaware) to be effective upon closing of this offering.
3.2†	Amended and Restated Bylaws of the Registrant to be effective upon the closing of this offering.
4.1†	Form of Common Stock Certificate of the Registrant.
4.2	Warrant Agreement between the Registrant and Gold Hill Capital 2008, LP dated January 26, 2011.
4.3	Warrant Agreement between the Registrant and Gold Hill Capital 2008, LP dated April 2010.
4.4	Warrant Agreement between the Registrant and Gold Hill Capital 2008, LP dated March 30, 2009.
4.5	Form of Warrant to purchase Series FF Preferred Stock.
4.6	Form of Warrant to purchase Series GG Preferred Stock.
4.7	Form of Warrant Agreement between the Registrant and Hitachi Data Systems Corporation.
4.8	Amended and Restated Investor’s Rights Agreement dated July 14, 2010 by and among the Registrant and certain stockholders of the Registrant.
5.1†	Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1	Form of Indemnification Agreement for directors and executive officers.
10.2	2000 Stock Plan and form of agreements used thereunder.
10.3†	2011 Equity Incentive Plan and form of agreements used thereunder.
10.4*	OEM License and Distribution Agreement by and between the Registrant and LSI Logic Storage Systems, Inc. dated November 12, 2003.
10.5*	Manufacturing Services Agreement by and between the Registrant and Sanmina-SCI Corporation dated October 19, 2006.
10.6*	Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated November 15, 2006.
10.6A*	Amendment No. One to Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated October 21, 2008.
10.6B*	Amendment No. Two to Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated August 31, 2009.
10.6C*	Amendment No. Three to Master Distribution Agreement by and between the Registrant and Hitachi Data Systems Corporation dated March 19, 2010.
10.7	Change of Control Severance Agreement by and between the Registrant and Michael B. Gustafson dated June 1, 2009.
10.8	Change of Control Severance Agreement by and between the Registrant and Shmuel Shottan dated June 1, 2009.

Exhibit number	Description
10.9	Form of Change of Control Severance Agreement by and between the Registrant and each of Rick Martig, Christopher J. McBride and Bridget Warwick.
10.10	Form of First Year Executive Change of Control Severance Agreement by and between the Registrant and each of David De Simone and Christopher P. White.
10.11	Office Lease between the Registrant and Carr NP Properties, L.L.C. dated July 16, 2009.
10.12	Lease between the Registrant and the Scottish Provident Institution dated October 18, 2000.
10.13	Loan and Security Agreement between the Registrant and Gold Hill Capital 2008, LP dated as of March 30, 2009, as amended by that certain First Amendment to Loan and Security Agreement dated April 2010 and that certain Second Amendment to Loan and Security Agreement dated as of January 26, 2011.
10.14	Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of March 30, 2009.
10.14A	First Amendment to Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of April 26, 2010.
10.14B	Second Amendment to Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of November 1, 2010.
10.14C	Third Amendment to Second Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank dated as of June 2, 2011.
21.1	Subsidiaries.
23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
23.2†	Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (See Exhibit 5.1).
24.1	Power of Attorney (See Page II-8).

* Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

† To be filed by amendment.

EX-4.2

Exhibit 4.2

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

Company:	BLUEARC CORPORATION, a Delaware corporation
Number of Shares:	as set forth below
Class of Stock:	Common Stock
Warrant Price:	$1.71 per share
Issue Date:	January 26, 2011
Expiration Date:	The 10th anniversary after the Issue Date
Credit Facility:	This Warrant is issued in connection with the Second Amendment to Loan and Security Agreement dated as of January , 2011 (the “Second Amendment”), which amends the Loan and Security Agreement between the Company and Gold Hill Capital 2008, LP dated March 30, 2009 (as amended, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, GOLD HILL CAPITAL 2008, LP (Gold Hill Capital 2008, LP, together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the Company at the Warrant Price, all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

As used herein:

“Number of Shares” means 100,170 shares of Common Stock; provided, however, in the event that:

(i)        Borrower does not meet the First Performance Trigger (as defined in the Second Amendment), the “Number of Shares” shall be reduced by 89,040 shares and the “Number of Shares” shall equal 11,130 shares of Common Stock;

(ii)        Borrower meets the First Performance Trigger but does not meet the Second Performance Trigger (as defined in the Second Amendment), the “Number of Shares” shall be reduced by 55,650 shares and the “Number of Shares” shall equal 44,520 shares of Common Stock; and

(iii)        Borrower meets the First Performance Trigger and the Second Performance Trigger but does not meet the Third Performance Trigger (as defined in the Loan Agreement), the “Number of Shares” shall be reduced by 22,260 shares and the “Number of Shares” shall equal 77,910 shares of Common Stock.

ARTICLE 1    EXERCISE.

1.1         Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2         Conversion Right. In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Article 1.3.

1.3         Fair Market Value. If the Company’s common stock is traded in a public market and the Shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the “price to public” per share price specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company’s common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the initial “price to public” per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company’s common stock into which a Share is convertible. If the Company’s common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4         Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

1.5         Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to

-2-

the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6    Treatment of Warrant Upon Acquisition of Company.

1.6.1      “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities immediately before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity immediately after the transaction, other than a sale of the Company’s securities for capital raising purposes.

1.6.2      Treatment of Warrant at Acquisition.

(a)        Holder agrees that, in the event of an Acquisition in which the sole consideration is cash and the Company does not continue as a going concern, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide Holder with written notice of any such Acquisition (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

(b)        Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such True Asset Sale or (b) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide the Holder with written notice of its request relating to the True Asset Sale (together with such reasonable information as the Holder may request in connection with such contemplated True Asset Sale giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed True Asset Sale. As used herein “Affiliate” shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

(c)        Upon the closing of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

-3-

ARTICLE 2    ADJUSTMENTS TO THE SHARES.

2.1         Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on the Shares payable in common stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2         Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation upon the closing of a registered public offering of the Company’s common stock, but shall not include any conversions or reclassifications as a result of a failure to participate in any equity financings of the Company or any “right of first offer” or other pay to play provisions set forth in the Company’s Certificate of Incorporation as set forth in Section 2.4. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3         Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are preferred stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Company’s Certificate of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to Holder.

-4-

2.4        “Pay to Play”. In the event that any “pay to play” terms or conditions (i.e. terms or conditions that require a holder of the Company’s Preferred Stock to purchase securities in a future round of equity financing or else lose the benefit of antidilution protection applicable to the shares of Preferred Stock issuable upon the exercise of this Warrant or have such shares of Preferred Stock automatically convert to common stock or convert to another class and series of the Company’s capital stock) in the Company’s Certificate of Incorporation, are triggered in connection with the consummation of a Down Round (as defined below) or otherwise after the date hereof, then in such event, this Warrant shall automatically adjust to provide the Holder with the same securities and/or rights that the Holder would have received had the Holder participated in the Down Round to its full pro rata share with respect to the Preferred Stock issuable upon exercise of this Warrant (e.g., if this Warrant provides for the purchase of Series D Preferred Stock, and the Company after the date hereof consummates a Down Round in which those holders of Series D Preferred Stock who participate to their full pro rata share in such Down Round become entitled to exchange such Series D Preferred Stock for Series E Preferred Stock and those holders of Series D Preferred Stock who do not participate to their full pro rata share will have their Series D Preferred Stock converted into Common Stock, then this Warrant would automatically adjust to provide the right to purchase Series E Preferred Stock instead of Common Stock). A “Down Round” means any non-public offering of equity securities of the Company after the Issue Date of this Warrant at a price per share lower than the Warrant Price.

2.5        No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or through a 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 to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

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

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

ARTICLE 3    REPRESENTATIONS AND COVENANTS OF THE COMPANY.

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

-5-

(a)        The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which the Shares were valued in the most recent 409a valuation received by the Company.

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

(c)        The Company’s capitalization table attached hereto as Schedule 1 is true and complete as of the Issue Date.

3.2        Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale to its existing stockholders any shares of the Company’s capital stock (or other securities convertible into such capital stock), other than (i) pursuant to the Company’s stock option or other compensatory plans, (ii) in connection with commercial credit arrangements or equipment financings, or (iii) in connection with strategic transactions for purposes other than capital raising; (c) to effect any reclassification or recapitalization of any of its stock; (d) to effect an Acquisition, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company’s securities for cash, then, in connection with each such event, the Company shall give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights. Company will also provide information requested by Holder reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

3.3        Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall have certain “piggyback” and “S-3” registration rights pursuant to and as set forth in the Company’s Amended and Restated Investors’ Rights Agreement dated as of May 30, 2008 (as amended from time to time, the “Investors’ Rights Agreement”), to which the Holder has been made a party.

3.4        No Shareholder Rights. Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.

-6-

ARTICLE 4    REPRESENTATIONS, WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

4.1         Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2         Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3         Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4         Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5         The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

4.6         Standoff Agreement. Holder agrees it is bound by the standoff agreement set forth in Section 2.12 of the Investors’ Rights Agreement, as it may be amended from time to time.

ARTICLE 5    MISCELLANEOUS.

5.1         Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

-7-

5.2        Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

5.3        Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Gold Hill Capital 2008, LP (“Gold Hill”) to provide an opinion of counsel if the transfer is to any affiliate of Gold Hill. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4        Transfer Procedure. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Gold Hill and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, by execution of an Assignment substantially in the form of Appendix 2, provided, however, in connection with any such transfer, Gold Hill or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

5.5        Notices. All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such Holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to Holder shall be

-8-

addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

Gold Hill Capital 2008, LP

One Almaden Blvd., Suite 630

San Jose, CA 95113

Attention: Glenn Marasigan

Telephone: (408) 200-7857

Facsimile: (408) 200-7841

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

BlueArc Corporation

Attn: Chief Financial Officer, Rick Martig

50 Rio Robles Drive

San Jose, CA 95134

Telephone: (408) 576-6609

Facsimile: (408) 576-5741

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

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

5.8        Automatic Conversion upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to Holder.

5.9        Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

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

[Signature page follows.]

-9-

“COMPANY”
BLUEARC CORPORATION
By:	By:	/s/ Rick Martig

Name:		Name:	Rick Martig
	(Print)		(Print)
Title:	Chairman of the Board, President or Vice President	Title:	Chief Financial Officer, Secretary, Assistant Treasurer or Assistant Secretary

“HOLDER”
GOLD HILL CAPITAL 2008, LP
By:    Gold Hill Capital 2008, LLC, General Partner
By:	/s/ Rob Helm

Name:	Rob Helm
	(Print)
Title:	Partner

-10-

EX-4.3

Exhibit 4.3

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

Company:	BLUEARC CORPORATION, a Delaware corporation
Number of Shares:	as set forth below
Class of Stock:	Common Stock
Warrant Price:	$1.94 per share
Issue Date:	April     , 2010
Expiration Date:	The 10th anniversary after the Issue Date
Credit Facility:	This Warrant is issued in connection with the First Amendment to Loan and Security Agreement dated as of April     , 2010, which amends the Loan and Security Agreement between the Company and Gold Hill Capital 2008, LP dated March 30, 2009 (as amended, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, GOLD HILL CAPITAL 2008, LP (Gold Hill Capital 2008, LP, together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the Company at the Warrant Price, all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

As used herein:

“Number of Shares” means 174,371 shares of Common Stock; provided, however, in the event that:

(i)        Borrower does not meet the First Performance Trigger (as defined in the Loan Agreement), the “Number of Shares” shall be reduced by 130,778 shares and the “Number of Shares” shall equal 43,593 shares of Common Stock;

(ii)        Borrower meets the First Performance Trigger but does not meet the Second Performance Trigger (as defined in the Loan Agreement), the “Number of Shares” shall be reduced by 98,083 shares and the “Number of Shares” shall equal 76,288 shares of Common Stock;

(iii)        Borrower meets the First Performance Trigger and the Second Performance Trigger but does not meet the Third Performance Trigger (as defined in the Loan Agreement), the “Number

of Shares” shall be reduced by 65,389 shares and the “Number of Shares” shall equal 108,982 shares of Common Stock; and

(iv)        Borrower meets the First Performance Trigger, the Second Performance Trigger and the Third Performance Trigger but does not meet the Fourth Performance Trigger (as defined in the Loan Agreement), the “Number of Shares” shall be reduced by 32,694 shares and the “Number of Shares” shall equal 141,677 shares of Common Stock.

ARTICLE 1    EXERCISE.

1.1         Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2         Conversion Right. In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Article 1.3.

1.3         Fair Market Value. If the Company’s common stock is traded in a public market and the Shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the “price to public” per share price specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company’s common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the initial “price to public” per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company’s common stock into which a Share is convertible. If the Company’s common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4          Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

-2-

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

1.6    Treatment of Warrant Upon Acquisition of Company.

1.6.1    “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities immediately before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity immediately after the transaction, other than a sale of the Company’s securities for capital raising purposes.

1.6.2    Treatment of Warrant at Acquisition.

(a)    Holder agrees that, in the event of an Acquisition in which the sole consideration is cash and the Company does not continue as a going concern, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide Holder with written notice of any such Acquisition (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

(b)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such True Asset Sale or (b) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide the Holder with written notice of its request relating to the True Asset Sale (together with such reasonable information as the Holder may request in connection with such contemplated True Asset Sale giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed True Asset Sale. As used herein “Affiliate” shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

(c)    Upon the closing of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would

-3-

be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

ARTICLE 2    ADJUSTMENTS TO THE SHARES.

2.1         Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on the Shares payable in common stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2         Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation upon the closing of a registered public offering of the Company’s common stock, but shall not include any conversions or reclassifications as a result of a failure to participate in any equity financings of the Company or any “right of first offer” or other pay to play provisions set forth in the Company’s Certificate of Incorporation as set forth in Section 2.4. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3         Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are preferred stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Company’s Certificate of Incorporation relating to the above in effect as

-4-

of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to Holder.

2.4        “Pay to Play”. In the event that any “pay to play” terms or conditions (i.e. terms or conditions that require a holder of the Company’s Preferred Stock to purchase securities in a future round of equity financing or else lose the benefit of antidilution protection applicable to the shares of Preferred Stock issuable upon the exercise of this Warrant or have such shares of Preferred Stock automatically convert to common stock or convert to another class and series of the Company’s capital stock) in the Company’s Certificate of Incorporation, are triggered in connection with the consummation of a Down Round (as defined below) or otherwise after the date hereof, then in such event, this Warrant shall automatically adjust to provide the Holder with the same securities and/or rights that the Holder would have received had the Holder participated in the Down Round to its full pro rata share with respect to the Preferred Stock issuable upon exercise of this Warrant (e.g., if this Warrant provides for the purchase of Series D Preferred Stock, and the Company after the date hereof consummates a Down Round in which those holders of Series D Preferred Stock who participate to their full pro rata share in such Down Round become entitled to exchange such Series D Preferred Stock for Series E Preferred Stock and those holders of Series D Preferred Stock who do not participate to their full pro rata share will have their Series D Preferred Stock converted into Common Stock, then this Warrant would automatically adjust to provide the right to purchase Series E Preferred Stock instead of Common Stock). A “Down Round” means any non-public offering of equity securities of the Company after the Issue Date of this Warrant at a price per share lower than the Warrant Price.

2.5        No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or through a 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 to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

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

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

-5-

ARTICLE 3    REPRESENTATIONS AND COVENANTS OF THE COMPANY.

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

(a)        The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 of the Shares were sold.

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

(c)        The Company’s capitalization table attached hereto as Schedule 1 is true and complete as of the Issue Date.

3.2         Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale to its existing stockholders any shares of the Company’s capital stock (or other securities convertible into such capital stock), other than (i) pursuant to the Company’s stock option or other compensatory plans, (ii) in connection with commercial credit arrangements or equipment financings, or (iii) in connection with strategic transactions for purposes other than capital raising; (c) to effect any reclassification or recapitalization of any of its stock; (d) to effect an Acquisition, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company’s securities for cash, then, in connection with each such event, the Company shall give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights. Company will also provide information requested by Holder reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

3.3         Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall have certain “piggyback” and “S-3” registration rights pursuant to and as set forth in the Company’s Amended and Restated Investors’ Rights Agreement dated as of May 30, 2008 (as amended from time to time, the “Investors’ Rights Agreement”), to which the Holder has been made a party.

-6-

3.4         No Shareholder Rights. Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.

ARTICLE 4    REPRESENTATIONS, WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

4.1        Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2         Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3         Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4         Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5         The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

4.6         Standoff Agreement. Holder agrees it is bound by the standoff agreement set forth in Section 2.12 of the Investors’ Rights Agreement, as it may be amended from time to time.

-7-

ARTICLE 5    MISCELLANEOUS.

5.1         Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

5.2         Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

5.3         Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Gold Hill Capital 2008, LP (“Gold Hill”) to provide an opinion of counsel if the transfer is to any affiliate of Gold Hill. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4         Transfer Procedure. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Gold Hill and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, by execution of an Assignment substantially in the form of Appendix 2, provided, however, in connection with any such transfer, Gold Hill or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

-8-

5.5        Notices. All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such Holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

Gold Hill Capital 2008, LP

One Almaden Blvd., Suite 630

San Jose, CA 95113

Attention: Glenn Marasigan

Telephone: (408) 200-7857

Facsimile: (408) 200-7841

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

BlueArc Corporation

Attn: Chief Financial Officer, Rick Martig

50 Rio Robles Drive

San Jose, CA 95134

Telephone: (408) 576-6609

Facsimile: (408) 576-5741

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

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

5.8        Automatic Conversion upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to Holder.

5.9        Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

-9-

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

[Signature page follows.]

-10-

“COMPANY”
BLUEARC CORPORATION
By:		By:
Name:		Name:
	(Print)		(Print)
Title:	Chairman of the Board, President or Vice President	Title:	Chief Financial Officer, Secretary, Assistant Treasurer or Assistant Secretary
“HOLDER”
GOLD HILL CAPITAL 2008, LP
By: Gold Hill Capital 2008, LLC, General Partner
By:
Name:
	(Print)
Title:

-11-

SCHEDULE 1

CAPITALIZATION TABLE

[See attached.]

APPENDIX 1

NOTICE OF EXERCISE

1.        Holder elects to purchase                      shares of the Common/Series              Preferred [strike one] Stock of BlueArc Corporation pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

[or]

1.        Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                      of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2.        Please issue a certificate or certificates representing the shares in the name specified below:

Holder’s Name

(Address)

3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

HOLDER:

By:

Name:

Title:

(Date):

APPENDIX 2

ASSIGNMENT

For value received, Gold Hill Capital 2008, LP hereby sells, assigns and transfers

unto

Name:

Address:

Tax ID:

that certain Warrant to Purchase Stock issued by BlueArc Corporation (the

“Company”), on                     , 2010 (the “Warrant”) together with all rights, title

and interest therein.

GOLD HILL CAPITAL 2008, LP

By:

Name:

Title:

Date:                                                      

By its execution below, and for the benefit of the Company,                  makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

By:

Name:

Title:

“COMPANY”

BLUEARC CORPORATION

By: /s/ Michael B. Gustafson By: /s/ Rick Martig

Name:	Michael B. Gustafson	Name:	Rick Martig
	(Print)		(Print)
Title:	Chairman of the Board, President or Vice President	Title:	Chief Financial Officer, Secretary, Assistant Treasurer or Assistant Secretary

“HOLDER”

GOLD HILL CAPITAL 2008, LP

By: Gold Hill Capital 2008, LLC, General Partner

By:

Name:
	(Print)
Title:

“COMPANY”
BLUEARC CORPORATION
By:	By:

Name:		Name:
	(Print)		(Print)
Title:	Chairman of the Board, President or Vice President	Title:	Chief Financial Officer, Secretary, Assistant Treasurer or Assistant Secretary
“HOLDER”
GOLD HILL CAPITAL 2008, LP
By: Gold Hill Capital 2008, LLC, General Partner
By:	/s/ Rob Helm
Name:	Rob Helm
	(Print)
Title:	Managing Director

-4-

EX-4.4

Exhibit 4.4

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

Company:	BLUEARC CORPORATION, a Delaware corporation
Number of Shares:	as set forth below
Class of Stock:	Series FF Preferred Stock
Warrant Price:	as set forth below
Issue Date:	March 30, 2009
Expiration Date:	The 10th anniversary after the Issue Date
Credit Facility:	This Warrant is issued in connection with the Growth Capital Advances referenced in the Loan and Security Agreement between the Company and Gold Hill Capital 2008, LP dated March 30, 2009 (the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, GOLD HILL CAPITAL 2008, LP (Gold Hill Capital 2008, LP, together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the Company at the Warrant Price, all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

As used herein:

“Number of Shares” means the number of shares of Series FF Preferred Stock equal to: (i) One Million One Hundred Twenty Five Thousand Dollars ($1,125,000), divided by (ii) the Warrant Price.

“Next Round” means the Company’s next sale of its convertible preferred stock (other than Series FF Preferred Stock) to purchasers which include venture capital investors.

“Next Round Price” means the lowest effective price per share (on a common stock equivalent basis and taking into account any securities issued together with the preferred stock) at which shares of the Company’s convertible preferred stock are sold in the Next Round.

“Series FF Price” means $4.52742 per share.

“Warrant Price” means the lower of: (i) the Series FF Price, or (ii) the Next Round Price; provided, however, if this Warrant is exercised prior to the Next Round, then the Warrant Price shall be the Series FF Price.

ARTICLE 1    EXERCISE.

1.1         Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2         Conversion Right. In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Article 1.3.

1.3         Fair Market Value. If the Company’s common stock is traded in a public market and the Shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the “price to public” per share price specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company’s common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the initial “price to public” per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company’s common stock into which a Share is convertible. If the Company’s common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4         Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

-2-

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

1.6    Treatment of Warrant Upon Acquisition of Company.

1.6.1      “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities immediately before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity immediately after the transaction, other than a sale of the Company’s securities for capital raising purposes.

1.6.2      Treatment of Warrant at Acquisition.

A)    Holder agrees that, in the event of an Acquisition in which the sole consideration is cash and the Company does not continue as a going concern, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide Holder with written notice of any such Acquisition (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

B)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such True Asset Sale or (b) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide the Holder with written notice of its request relating to the True Asset Sale (together with such reasonable information as the Holder may request in connection with such contemplated True Asset Sale giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed True Asset Sale. As used herein “Affiliate” shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

C)    Upon the closing of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would

-3-

be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

ARTICLE 2    ADJUSTMENTS TO THE SHARES.

2.1         Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on the Shares payable in common stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2         Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation upon the closing of a registered public offering of the Company’s common stock, but shall not include any conversions or reclassifications as a result of a failure to participate in any equity financings of the Company or any “right of first offer” or other pay to play provisions set forth in the Company’s Certificate of Incorporation as set forth in Section 2.4. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3         Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are preferred stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Company’s Certificate of Incorporation relating to the above in effect as

-4-

of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to Holder.

2.4         “Pay to Play”. In the event that any “pay to play” terms or conditions (i.e. terms or conditions that require a holder of the Company’s Preferred Stock to purchase securities in a future round of equity financing or else lose the benefit of antidilution protection applicable to the shares of Preferred Stock issuable upon the exercise of this Warrant or have such shares of Preferred Stock automatically convert to common stock or convert to another class and series of the Company’s capital stock) in the Company’s Certificate of Incorporation, are triggered in connection with the consummation of a Down Round (as defined below) or otherwise after the date hereof, then in such event, this Warrant shall automatically adjust to provide the Holder with the same securities and/or rights that the Holder would have received had the Holder participated in the Down Round to its full pro rata share with respect to the Preferred Stock issuable upon exercise of this Warrant (e.g., if this Warrant provides for the purchase of Series D Preferred Stock, and the Company after the date hereof consummates a Down Round in which those holders of Series D Preferred Stock who participate to their full pro rata share in such Down Round become entitled to exchange such Series D Preferred Stock for Series E Preferred Stock and those holders of Series D Preferred Stock who do not participate to their full pro rata share will have their Series D Preferred Stock converted into Common Stock, then this Warrant would automatically adjust to provide the right to purchase Series E Preferred Stock instead of Common Stock). A “Down Round” means any non-public offering of equity securities of the Company after the Issue Date of this Warrant at a price per share lower than the Warrant Price.

2.5         No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or through a 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 to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

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

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

-5-

ARTICLE 3    REPRESENTATIONS AND COVENANTS OF THE COMPANY.

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

3.1.1    The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 of the Shares were sold.

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

3.1.3    The Company’s capitalization table attached hereto as Schedule 1 is true and complete as of the Issue Date.

3.2         Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale to its existing stockholders any shares of the Company’s capital stock (or other securities convertible into such capital stock), other than (i) pursuant to the Company’s stock option or other compensatory plans, (ii) in connection with commercial credit arrangements or equipment financings, or (iii) in connection with strategic transactions for purposes other than capital raising; (c) to effect any reclassification or recapitalization of any of its stock; (d) to effect an Acquisition, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company’s securities for cash, then, in connection with each such event, the Company shall give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights. Company will also provide information requested by Holder reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

3.3         Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall have certain “piggyback” and “S-3” registration rights pursuant to and as set forth in the Company’s Amended and Restated Investors’ Right Agreement dated as of May 30, 2008, to which the Holder has been made a party.

-6-

3.4         No Shareholder Rights. Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.

ARTICLE 4   REPRESENTATIONS, WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

4.1         Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2         Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3         Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4         Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5         The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

ARTICLE 5   MISCELLANEOUS.

5.1         Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

-7-

5.2         Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

5.3         Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Gold Hill Capital 2008, LP (“Gold Hill”) to provide an opinion of counsel if the transfer is to any affiliate of Gold Hill. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4         Transfer Procedure. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Gold Hill and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, by execution of an Assignment substantially in the form of Appendix 2, provided, however, in connection with any such transfer, Gold Hill or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

5.5         Notices. All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such Holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to Holder shall be

-8-

addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

Gold Hill Capital 2008, LP

One Almaden Blvd., Suite 630

San Jose, CA 95113

Attention: Glenn Marasigan

Telephone: (408) 200-7857

Facsimile: (408) 200-7841

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

BlueArc Corporation

Attn: Chief Financial Officer, Rick Martig

50 Rio Robles Drive

San Jose, CA 95134

Telephone: (408) 576-6609

Facsimile: (408) 576-5741

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

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

5.8         Automatic Conversion upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to Holder.

5.9         Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

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

[Signature page follows.]

-9-

“COMPANY”
BLUEARC CORPORATION
By:	/s/ Shmuel Shottan	By:	/s/ Rick Martig

Name: Shumel Shottan Name: Rick Martig

          (Print)               (Print)

Title: Chairman of the Board, President or
Vice President Title: Chief Financial Officer, Secretary,
Assistant Treasurer or Assistant
Secretary

“HOLDER”

GOLD HILL CAPITAL 2008, LP

By: Gold Hill Capital 2008, LLC, General

Partner

By: /s/ Rob Helm

Name:	Rob Helm
	(Print)

Title: Managing Member

-10-

SCHEDULE 1

CAPITALIZATION TABLE

[See attached.]

BlueArc Corporation

Pro Forma Cap Table 317/09

Liquidation Preference Price Per Share SHARES OUTSTANDING	Common		$6.00 Series AA		$3.00 Series 1313		$60.00 Series CC		54.14 Series DD		$5.19 Series EE		S4.53 Series FE		Total
															Number		%
Meritech		–		2,516,955		4,500,000		24,998		1,081,374				641,449		8,764,776		22.5	%
Crosslink		–		1,677,964		2,999,994				600,139				416,776		5,694,873		14.6	%
Morgenthaler										3,381,642				267,028		3,648,670		9.3	%
RW1		–		362,966		666,667				147,511				552,191		1,729,335		4.4	%
Weston Presideo		15,053		416,309		542,490				172,946						1,146,798		2.9	%
Ft. Washington		–		392,332		499,996				96,617				78,090		1,067,035		2.7	%
HDS												789,980		106,020		896,000		2.3	%
CTTV										483,091				38,148		521,239		1.3	%
Wasatch / CCC										471,013				666,691		1,137,704		2.9	%
Canion				333,333						143,211						476,544		1.2	%
Johnson				333,333						143,211						476,544		1.2	%
Onahru		200,068		166,666						72,082						438,816		1.1	%
Montague Newhall														1,159,601		1,159,601		3.0	%
Current Employees		1,390,284		4,162												1,394,446		3.6	%
Rattazzi		122,719														122,719		0.3	%
JVAX Holdings														1,104,382		1,104,382		2.8	%
Others		721,782		187,427		88,552		285,021		211,989				110,438		1,605,209		4.1	%
Total shares outstanding		2,449,906		6,391,447		9,297,699		310,019		7,004,826		789,980		5,140,814		31,384,691		80.4	%
Shares outstanding as converted												17,300				17,300
												807,280				31,401,991
OPTIONS/ WARRANTS OUTSTANDING
HDS (Warrants)		454,254														454,254		1.2	%
Employees		4,633,639														4,633,639		11.9	%
Directors/Others*		145,549						1,500						147,861		294,910		0.8	%
Total options outstanding		5,233,442		–		–		1,500		–		–		147,861		5,382,803		13.8	%
TOTAL OUTSTANDING		7,683,348		6,391,447		9,297,699		311,519		7,004,826		789,980		5,288,675		36,784,794		94,2	%
Options Available for grant		1,341,118		–		–		–								1,341,118		3,4	%
HDS warrants available for grant		908,508														908,508		2.3	%
TOTAL OUTSTANDING & AVAILABLE		9,932,974		6,391,447		9,297,699		311,519		7,004,826		789,980		5,288,675		39,034,420		100.0	%
WARRANT’S HDS 46 remaining [ranches only     anticipate that 3 will be earned)		454,254														454,254		1.2	%

Note: Do not anticipate HDS will achieve any of the 3 tranches in the current milestone period by March 31, 2009

*      including 1,589 warrants from Synaxia Warrant Plan

APPENDIX 1

NOTICE OF EXERCISE

1.        Holder elects to purchase                      shares of the Common/Series              Preferred [strike one] Stock of BlueArc Corporation pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

[or]

1.        Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                      of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2.        Please issue a certificate or certificates representing the shares in the name specified below:

Holder’s Name

(Address)

3.        By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

HOLDER:

By:

Name:

Title:

(Date):

APPENDIX 2

ASSIGNMENT

For value received, Gold Hill Capital 2008, LP hereby sells, assigns and transfers

unto

Name:

Address:

Tax ID:

that certain Warrant to Purchase Stock issued by BlueArc Corporation (the

“Company”), on                     , 2009 (the ‘Warrant”) together with all rights, title

and interest therein.

GOLD HILL CAPITAL 2008, LP

By:

Name:

Title:

Date:                                                  

By its execution below, and for the benefit of the Company,                      makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

By:

Name:

Title:

EX-4.5

Exhibit 4.5

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

Void after

[                    ]

BLUEARC CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to                                      by BlueArc Corporation a Delaware corporation (the “Company”), pursuant to the terms of that certain Note and Warrant Purchase Agreement of even date herewith, as it may be amended from time to time (the “Note Purchase Agreement”), in connection with the Company’s issuance to the holder of this Warrant of a Convertible Promissory Note (the “Note”).

1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth and set forth in the Note Purchase Agreement, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable Shares (as defined below), that equals the quotient obtained by dividing (a) the Warrant Coverage Amount (as defined below) by (b) the Exercise Price (as defined below).

2. Definitions.

(a) Exercise Price. The exercise price for the Shares shall be the price per share of equity securities sold to investors in a Qualified Equity Financing (as defined below) if such Qualified Equity Financing is consummated within six (6) months from the date hereof; provided, however, in the event of an IPO, a Change of Control (as defined below) or other repayment or settlement of the Notes other than by a Qualified Equity Financing consummated within six (6) months from the date hereof, the exercise price shall be $4.14 per share (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”.

(b) Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the earliest to occur of (i) the closing date of a Qualified Equity Financing, (ii) the closing of an IPO, (iii) immediately before a Change of Control or (iv) March 11, 2010; and ending on the expiration of this Warrant pursuant to Section 14 hereof.

(c) Warrant Coverage Amount. The term “Warrant Coverage Amount” shall mean that amount which equals 10% of the original principal amount of the Note divided by (1) the

price of the New Securities (as defined in the Note), or (2) in the event of an IPO, a Change of Control (as defined below) or other repayment or settlement of the Notes other than by a Qualified Equity Financing within six (6) months from the date hereof, $4.14.

(d) The Shares. The term “Shares” shall mean shares of the Company’s Series FF Preferred Stock (or such other series of preferred stock) issued to investors in a Qualified Equity Financing which occurs within six (6) months from the date hereof and before a Change of Control or an IPO. If an IPO occurs before a Qualified Equity Financing, the term Shares shall mean the Company’s Common Stock. If no qualified equity Financing occurs within six (6) months from the date hereof or no IPO occurs before a Change of Control, the term Shares shall mean the Series DD Preferred Stock.

(e) Qualified Equity Financing. The term “Qualified Equity Financing” is an equity financing pursuant to which the Company sells shares of its Series FF Preferred Stock (or other series of preferred stock) with an aggregate sales price of not less than $15,000,000, including all Notes issued under the Note Purchase Agreement which are converted into capital stock, and with the principal purpose of raising capital.

(f) Change of Control. The term “Change of Control” shall mean (i) any consolidation or merger involving the Company pursuant to which the Company’s stockholders own less than fifty percent (50%) of the voting securities of the surviving entity or (ii) the sale of all or substantially all of the assets of the Company.

(g) Initial Public Offering. The Term “IPO” shall have the same meaning as the term “Qualified IPO” as set forth in the Company’s Amended and Restated Certificate of Incorporation.

3. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

4. Net Exercise. In lieu of cash exercising this Warrant, the holder of this Warrant may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of Shares computed using the following formula:

	Y (A - B)
X =	A

Where

-2-

X —	The number of Shares to be issued to the holder of this Warrant.
Y —	The number of Shares purchasable under this Warrant.
A —	The fair market value of one Share.
B —	The Exercise Price (as adjusted to the date of such calculations).

For purposes of this Section 4, the fair market value of a Share shall mean the average of the closing bid and asked prices of Shares quoted in the over-the-counter market in which the Shares are traded or the closing price quoted on any exchange on which the Shares are listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the ten (10) trading days before the date of determination of fair market value (or such shorter period of time during which such stock was traded over-the-counter or on such exchange). If the Shares are not traded on the over-the-counter market or on an exchange, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company from authorized but unissued Shares, as such prices shall be determined in good faith by the Company’s Board of Directors.

5. Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice.

6. Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

7. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time before the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 7(a) above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right

-3-

at any time before the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately before such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c) Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

8. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

9. Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

10. Representations and Warranties by the Holder. The Holder represents and warrants to the Company as follows:

(a) This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

(b) The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the “California Law”) by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent expressed above.

(c) The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the

-4-

Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

(d) The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

(e) The Holder is a “qualified institutional buyer” as defined in Rule 144A promulgated under the Act

11. Restrictive Legend.

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.

(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE COMPANY. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SECURITIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING IF REQUESTED BY THE UNDERWRITERS IN ACCORDANCE WITH SUCH AGREEMENT.

12. Warrants Non-Transferable. This Warrant and all rights hereunder are not transferable, without the written consent of the Company.

13. Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares 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 herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have

-5-

been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

14. Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

(a) This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i) 5:00 p.m., California local time, on March 11, 2018; or

(ii) Any Change of Control.

(b) The Company shall provide at least five business days prior written notice of any event set forth in Section 14(a)(ii).

15. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the Schedule of Investors to the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), with a copy to Michael Danaher, Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, CA 94304 (which copy shall not be deemed to constitute notice to the Company) or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

16. “Market Stand-Off” Agreement. The Shares shall be subject to all the rights and obligations of “Registrable Securities” under that certain Investors’ Rights Agreement dated as of May 30, 2008 and as may be amended from time to time, including without limitation the market stand-off provision set forth in Section 2.12 thereof.

17. Registration Rights Agreement. The registration rights of the Holder (including Holders’ successors) with respect to the Common Stock issuable upon conversion of the Shares issuable upon exercise of this Warrant will be the same as granted to the holders of Shares issued in the Qualified Equity Financing.

18. Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of California, without regard to the conflicts of law provisions of California or of any other state.

(Signature Page Follows)

-6-

19. Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

Issued this              day of March, 2008.

BlueArc Corporation
By: Michael Gustafson
Title:	President and Chief Executive Officer

-7-

EXHIBIT A

NOTICE OF EXERCISE

TO: BlueArc Corporation

50 Rio Robles Dr.

San Jose, CA 95134

Attention: President

1. The undersigned hereby elects to purchase              Shares of BlueArc Corporation pursuant to the terms of the attached Warrant.

2. Method of Exercise (Please initial the applicable blank):

¨ The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

¨ The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

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

(Name)

(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 10 of the attached Warrant (including Section 10(e) thereof) are true and correct as of the date hereof.

	(Signature)
	(Name)
(Date)	(Title)

EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                       the right represented by the attached Warrant to purchase                      shares of                                                   of BLUEARC CORPORATION to which the attached Warrant relates, and appoints                              Attorney to transfer such right on the books of BLUEARC CORPORATION, with full power of substitution in the premises.

Dated:                                         

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

Address:

Signed in the presence of:

EX-4.6

Exhibit 4.6

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

Void after

July 14, 2015

BLUEARC CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to                      by BlueArc Corporation a Delaware corporation (the “Company”), pursuant to the terms of that certain Note and Warrant Purchase Agreement dated February 23, 2010, as it may be amended from time to time (the “Note Purchase Agreement”), in connection with the Company’s issuance to the holder of this Warrant of a Subordinated Convertible Promissory Note (the “Note”).

1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth and set forth in the Note Purchase Agreement, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable Shares (as defined below), that equals the quotient obtained by dividing (a) the Warrant Coverage Amount (as defined below) by (b) the Exercise Price (as defined below).

2. Definitions.

(a) Exercise Price. The exercise price for the Shares shall be the price per share of equity securities sold to investors in a Qualified Equity Financing (as defined below) (the “Exercise Price”).

(b) Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the closing date of a Qualified Equity Financing and ending on the expiration of this Warrant pursuant to Section 14 hereof.

(c) Warrant Coverage Amount. The term “Warrant Coverage Amount” shall mean that amount which equals 30% of the original principal amount of the Note divided by the price of the New Securities (as defined in the Note.

(d) The Shares. The term “Shares” shall mean shares of the Company’s capital stock issued to investors in a Qualified Equity Financing.

(e) Qualified Equity Financing. The term “Qualified Equity Financing” means a transaction or series of transactions, which occur after the date of the Note Purchase Agreement, pursuant to which the Company issues and sells shares (i) of its Preferred Stock for aggregate gross proceeds of at least $15,000,000 (including all proceeds from the incurrence of indebtedness that is converted into such Preferred Stock, or otherwise cancelled in consideration for the issuance of such Preferred Stock) with the principal purpose of raising capital or (ii) of its capital stock in a financing deemed to be a Qualified Equity Financing upon agreement of the Company and a Majority in Interest.

(f) Change of Control. The term “Change of Control” shall mean (i) any consolidation or merger involving the Company pursuant to which the Company’s stockholders own less than fifty percent (50%) of the voting securities of the surviving entity or (ii) the sale of all or substantially all of the assets of the Company.

(g) Initial Public Offering. The Term “IPO” shall have the same meaning as the term “Qualified IPO” as set forth in the Company’s Amended and Restated Certificate of Incorporation.

3. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

4. Net Exercise. In lieu of cash exercising this Warrant, the holder of this Warrant may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of Shares computed using the following formula:

	Y (A - B)
X =	A

Where

X —	The number of Shares to be issued to the holder of this Warrant.
Y —	The number of Shares purchasable under this Warrant.
A —	The fair market value of one Share.
B —	The Exercise Price (as adjusted to the date of such calculations).

-2-

For purposes of this Section 4, the fair market value of a Share shall mean the average of the closing bid and asked prices of Shares quoted in the over-the-counter market in which the Shares are traded or the closing price quoted on any exchange on which the Shares are listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the ten (10) trading days before the date of determination of fair market value (or such shorter period of time during which such stock was traded over-the-counter or on such exchange). If the Shares are not traded on the over-the-counter market or on an exchange, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for Shares sold by the Company from authorized but unissued Shares, as such prices shall be determined in good faith by the Company’s Board of Directors.

5. Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice.

6. Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

7. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time before the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 7(a) above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time before the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately before such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property

-3-

deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c) Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

8. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

9. Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

10. Representations and Warranties by the Holder. The Holder represents and warrants to the Company as follows:

(a) This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

(b) The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the “California Law”) by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent expressed above.

(c) The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

(d) The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

(e) The Holder is a “qualified institutional buyer” as defined in Rule 144A promulgated under the Act

-4-

11. Restrictive Legend.

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.

(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE COMPANY. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SECURITIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING IF REQUESTED BY THE UNDERWRITERS IN ACCORDANCE WITH SUCH AGREEMENT.

12. Warrants Non-Transferable. This Warrant and all rights hereunder are not transferable, without the written consent of the Company.

13. Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares 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 herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

14. Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

(a) This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i) 5:00 p.m., California local time, on July 14, 2015;

(ii) An IPO; or

-5-

(iii) Any Change of Control.

(b) The Company shall provide at least five business days prior written notice of any event set forth in Section 14(a)(iii).

15. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the Schedule of Investors to the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), with a copy to Michael Danaher, Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, CA 94304 (which copy shall not be deemed to constitute notice to the Company) or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

16. “Market Stand-Off” Agreement. The Shares shall be subject to all the rights and obligations of “Registrable Securities” under that certain Investors’ Rights Agreement dated as of May 30, 2008 and as may be amended from time to time, including without limitation the market stand-off provision set forth in Section 2.12 thereof.

17. Registration Rights Agreement. The registration rights of the Holder (including Holders’ successors) with respect to the Common Stock issuable upon conversion of the Shares issuable upon exercise of this Warrant will be the same as granted to the holders of Shares issued in the Qualified Equity Financing.

18. Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of California, without regard to the conflicts of law provisions of California or of any other state.

(Signature Page Follows)

-6-

19. Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

Issued this             day of July, 2010.

BlueArc Corporation

By: Michael Gustafson

Title: President and Chief Executive Officer

-7-

EXHIBIT A

NOTICE OF EXERCISE

TO: BlueArc Corporation

50 Rio Robles Dr.

San Jose, CA 95134

Attention: President

1. The undersigned hereby elects to purchase              Shares of BlueArc Corporation pursuant to the terms of the attached Warrant.

2. Method of Exercise (Please initial the applicable blank):

¨ The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

¨ The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

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

(Name)

(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 10 of the attached Warrant (including Section 10(e) thereof) are true and correct as of the date hereof.

	(Signature)
	(Name)
(Date)	(Title)

EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                       the right represented by the attached Warrant to purchase                      shares of                                                   of BLUEARC CORPORATION to which the attached Warrant relates, and appoints                              Attorney to transfer such right on the books of BLUEARC CORPORATION, with full power of substitution in the premises.

Dated:                                         

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

Address:

Signed in the presence of:

EX-4.7

Exhibit 4.7

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

	Void after
Warrant No.:	_______________

BLUEARC CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to Hitachi Data Systems, Inc. (“HDS”) by BlueArc Corporation, a Delaware corporation (the “Company”), in connection with revenues received from HDS.

1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to                  fully paid and nonassessable shares of the Company’s Common Stock (each a “Share” and collectively the “Shares”) at an exercise price of $             per Share (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).

2. Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the issuance date of this Warrant and ending at 5 p.m. California time on                      (the “Exercise Period”).

3. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the holder may exercise from time to time, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

4. Certificates for Shares; Amendments of Warrants. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice. Upon partial exercise, the Company shall promptly issue an amended Warrant representing the remaining number of Shares purchasable thereunder. All other terms and conditions of such amended Warrant shall be identical to those contained herein.

5. Issuance of Shares. The Company covenants that (i) the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof, (ii) during the Exercise Period the Company will reserve from its authorized and unissued Common Stock sufficient Shares in order to perform its obligations under this warrant.

6. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time before the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 6(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock (including because of a change of control) of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 6(a) above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time before the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately before such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c) Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

7. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

8. Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

9. Representations and Warranties by the Holder. The Holder represents and warrants to the Company as follows:

(a) This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

(b) The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the “California Law”) by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent expressed above.

(c) The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

(d) The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

(e) The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

10. Restrictive Legend.

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.

(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AMENDED AND RESTATED VOTING AGREEMENT AND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE COMPANY. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SECURITIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING IF REQUESTED BY THE UNDERWRITERS IN ACCORDANCE WITH SUCH AGREEMENT.

11. Warrants Transferable. Subject to compliance with the terms and conditions of this Section 11, this Warrant and all rights hereunder are transferable, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant before registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 11 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Each certificate representing this Warrant or the Shares transferred in accordance with this Section 11 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required. In order to ensure compliance with such laws, the Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

12. Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares 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 herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock,

change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

13. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the Schedule of Investors to the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), with a copy to Michael Danaher, Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, CA 94304 (which copy shall not be deemed to constitute notice to the Company) or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

14. Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of California, without regard to the conflicts of law provisions of California or of any other state.

15. Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

(Signature Page Follows)

BlueArc Corporation

By:

Its:

EXHIBIT A

NOTICE OF EXERCISE

TO: BlueArc Corporation

50 Rio Robles Drive

San Jose, CA 94034

Attention: President

1. The undersigned hereby elects to purchase                      shares of Common Stock of BlueArc Corporation (the “Shares”) pursuant to the terms of the attached Warrant.

2. The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

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

(Name)

(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 9 of the attached Warrant (including Section 9(e) thereof) are true and correct as of the date hereof.

	(Signature)
	(Name)
(Date)	(Title)

EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                                       the right represented by the attached Warrant to purchase                          shares of Common Stock of BLUEARC CORPORATION to which the attached Warrant relates, and appoints                                          Attorney to transfer such right on the books of BLUEARC CORPORATION, with full power of substitution in the premises.

Dated:                                     

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

Address:

Signed in the presence of:

EX-4.8

Exhibit 4.8

BLUEARC CORPORATION

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

TABLE OF CONTENTS

			Page
1.	Covenants, Representations and Warranties of the Company			1
	1.1	Information Rights		1
	1.2	Observer Rights		2
	1.3	Compensation Committee		3
	1.4	Stock Vesting		3
	1.5	BlueArc UK		3
	1.6	D&O Insurance		3
	1.8	Director Indemnification and Expense Reimbursement		4
	1.9	Confidentiality		4
	1.10	Termination of Covenants		4
2.	Registration Rights			4
	2.1	Certain Definitions		4
	2.2	Demand Registration		6
	2.3	Company Registration		7
	2.4	Registration on Form S-3		9
	2.5	Expenses of Registration		9
	2.6	Registration Procedures		10
	2.7	Delay of Registration		11
	2.8	Indemnification		11
	2.9	Information by Holder		13
	2.10	Rule 144 Reporting		13
	2.11	Transfer of Registration Rights		14
	2.12	Standoff Agreement		14
	2.13	Termination of Registration Rights		15
	2.14	Future Registration Rights		15
	2.15	Canadian Qualification Rights Upon IPO		15
	2.16	Canadian Qualification Rights After IPO		15
	2.17	Limitations on Canadian Prospectus Filing Obligations		15
	2.18	Definitions		16
3.	Preemptive Rights			16
	3.1	General		16
	3.2	Right of Proportionate Ownership		17
	3.3	Expiration of the Right of Proportionate Ownership		18
4.	Certain Purchase Rights			18
5.	Miscellaneous			20
	5.1	Additional Investors		20
	5.2	Waivers and Amendments		20

-i-

TABLE OF CONTENTS

(Continued)

		Page
5.3	Notices		21
5.4	Descriptive Headings		21
5.5	Governing Law		21
5.6	Counterparts		21
5.7	Attorney’s Fees and Expenses		21
5.8	Successors and Assigns		22
5.9	Entire Agreement		22
5.10	Waiver; Consent		22
5.11	Separability; Severability		22
5.12	Stock Splits		22
5.13	Aggregation of Stock		22
5.14	Amendment and Restatement		22

EXHIBITS
Exhibit A	—	Schedule of Investors

-ii-

BLUEARC CORPORATION

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

THIS AGREEMENT is made as of July 14, 2010, among BlueArc Corporation, a Delaware corporation (the “Company”), the undersigned holders of the Company’s Series AA Preferred Stock (the “Series AA Preferred Stock”), Series AA-1 Preferred Stock (the “Series AA-1 Preferred Stock,” and together with the Series AA Preferred Stock, the “Series AA Preferred”), Series BB Preferred Stock (the “Series BB Preferred Stock”), the Series BB-1 Preferred Stock (“Series BB-1 Preferred Stock,” and together with the Series BB Preferred Stock, the “Series BB Preferred”), Series CC Preferred Stock (the “Series CC Preferred”), Series DD Preferred (the “Series DD Preferred Stock”), the Series DD-1 Preferred Stock (the “Series DD-1 Preferred Stock,” and together with the Series DD Preferred Stock, the “Series DD Preferred”), Series EE Preferred Stock (the “Series EE Preferred”), Series FF Preferred Stock (the “Series FF Preferred Stock”), the Series FF-1 Preferred Stock (the “Series FF-1 Preferred Stock,” and together with the Series FF Preferred Stock, the “Series FF Preferred”), Series GG Preferred Stock (the “Series GG Preferred”), Common Stock that was converted from Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D 1 Preferred Stock, and any other person or entity listed on Exhibit A hereto (each an “Investor”, and collectively, the “Investors”).

RECITALS

WHEREAS, the Company, and certain Investors have entered into that certain Amended and Restated Investors’ Rights Agreement, dated as of May 30, 2008, as amended (the “Prior Agreement”);

WHEREAS, the Company and certain Investors are entering into that certain Series GG Preferred Stock Purchase Agreement (the “Series GG Agreement”) of even date herewith;

WHEREAS, certain Investors desire to obtain certain rights regarding registration of the Company’s securities under the Securities Act of 1933, as amended (the “Securities Act”), certain preemptive rights regarding the Company’s equity offerings, and certain rights to information; and

WHEREAS, as a condition of the closing of the financing provided for in the Series GG Agreement, and as an inducement to the additional financing of the Company provided for therein, the Company, the Investors desire to amend and restate in full the various covenants and restrictions set forth in the Prior Agreement, in the form set forth herein.

NOW, THEREFORE, the parties agree as follows:

1. Covenants, Representations and Warranties of the Company.

1.1 Information Rights. So long as an Investor (together with its affiliates) holds at least 166,500 shares of Preferred Stock (or Common Stock issued or issuable upon conversion of such Preferred Stock, or a combination thereof) (such investors individually, a “Major Investor”), the Company will:

(a) provide to each such Major Investor as soon as practicable after the end of each fiscal year, and in any event within 120 days thereafter (or such longer period as is unanimously approved by the Company’s Board of Directors (the “Board”)), an audited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of such fiscal year, and audited consolidated statements of income, stockholders’ equity, and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles (“GAAP”) consistently applied with prior practice for earlier periods and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and all audited and certified by a nationally recognized public accounting firm;

(b) provide such Major Investor as soon as practicable after the end of each quarter and in any event within 45 days thereafter, an unaudited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarter, an unaudited consolidated statements of income, and an unaudited consolidated statement of cash flow of the Company and its subsidiaries for such period and for the current fiscal year to date, and setting forth in each case in comparative form the figures for corresponding periods in the previous fiscal year, and setting forth in comparative form the budgeted figures for such period and for the current fiscal year then reported, prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP and provided that the foregoing shall not restrict the right of the Company to change its accounting principles consistent with GAAP, if the Board determines that it is in the best interest of the Company to do so), subject to changes resulting from year-end audit adjustments, all in reasonable detail and signed by the principal financial or accounting officer of the Company;

(c) provide to such Major Investor within thirty (30) days prior to the beginning of each fiscal year an annual operating plan and a budget for each fiscal year, prepared on a monthly basis, including balance sheets and sources and applications of funds statements for such months, and a strategic plan, each of which shall have been approved by the Board;

(d) provide to such Major Investor, on request, a capitalization summary of the Company as the close of each fiscal year; and

(e) allow such Major Investor to examine the books and records of the Company, inspect the Company’s facilities and request information, all at reasonable times and intervals, concerning the general status of the Company’s financial condition and operations, provided that the Company may restrict access to confidential proprietary information and facilities.

1.2 Observer Rights. The Company agrees that it will permit a representative of each of Meritech Capital Partners, Crosslink Capital, Morgenthaler Ventures, Montagu Newhall Global Partners IV, LP. and Investor Growth Capital, Inc. reasonably approved by the Board to attend all meetings of the Board and all committees thereof (whether in person, telephonic or other) in a non-voting, observer capacity and shall provide to such observers, concurrently with the members of the Board, and in the same manner, notice of such meeting and a copy of all materials provided to such members, provided, however, that such observers (i) shall not be permitted to attend any session of the Board (or committee thereof) or any portion of such meeting or receive

-2-

information provided to the Board (or committee thereof) if, after deliberation in a closed session in which they may exclude such observer, the Board (or committee thereof) votes to exclude such observer from such meeting or portion thereof; and (ii) shall not be permitted to attend any session of the Board (or committee thereof) or receive information provided to the Board (or committee thereof) if the Board (or committee thereof) determines in good faith, based on the advice of Company counsel, that such exclusion or omission may be necessary in order to preserve the Company’s attorney-client privilege; and provided further that a party shall have no right to designate an observer if such party, together with its affiliates, no longer constitutes a Major Investor.

1.3 Board Committees. The Company shall maintain a Compensation Committee and an Audit Committee, and if deemed advisable by the Board, a Finance Committee, each of which shall maintain a standard charter. Unless waived by the director designated by Morgenthaler Ventures, for so long as Morgenthaler Partners VIII, L.P. or any if its affiliates (collectively, “Morgenthaler Ventures”) is a Major Investor, the director designated by Morgenthaler Ventures shall be a member of the Compensation Committee. The Series GG Preferred Director (as defined in that certain Voting Agreement, dated as of even date herewith) shall be permitted to serve on each such committee created or maintained by the Board.

1.4 Stock Vesting. All stock and stock equivalents issued in consideration for their services to the Company to founders, employees and directors shall be subject to repurchase by the Company, with 25% vesting at the end of one year following the issuance date, with the remaining 75% vesting monthly over three years at 2.08% per month commencing at the end of the thirteenth month from the date of grant; provided, however, that the Board, including a majority of the Preferred Directors, may decide, with the recommendation of the Compensation Committee, to provide a different vesting schedule to key personnel if the Board, including a majority of the Preferred Directors, determines such vesting schedule is in the best interests of the Company. The Company’s repurchase option shall be exercisable at the original issuance price by the Company with respect any unvested shares, upon termination of the shareholder’s services to the Company, with or without cause. The Company further retains the option to cancel any unvested shares held by such stockholder.

1.5 BlueArc UK. So long as any of the Company’s patent rights are held by BlueArc UK, the Company shall continue to hold 100% of the outstanding shares of BlueArc UK.

1.6 D&O Insurance. The Company will maintain directors’ and officers’ liability insurance, with coverage amounts as determined appropriate by the Board. Such insurance shall include coverage for all members of the Board and their affiliated investment funds. Such insurance shall be reasonably satisfactory to Investor Growth Capital, Inc.

1.7 Retention Bonus Plan. The Company shall annually update the Company’s Retention Bonus Plan which shall then be submitted to the Board for approval, such approval to include a majority of the directors designated by holders of Preferred Stock (the “Preferred Directors”).

-3-

1.8 Director Indemnification and Expense Reimbursement. The Company shall enter into the standard form director indemnification agreement with each member of its Board. The Company shall reimburse each non-employee director for expenses reasonably incurred in connection with such director’s service on the Board, including travel and lodging expenses.

1.9 Confidentiality. Each Investor hereby agrees to hold in confidence and trust and not to misuse or disclose any confidential information provided pursuant to this Section 1, except that such Investor may disclose such confidential information (i) to any partner, limited partner, member, retired partner, retired member, shareholder, subsidiary, parent or affiliate of such Investor for the purpose of evaluating or monitoring its investment in the Company, (ii) at such time as it enters the public domain through no fault of such Investor, or (iii) that is developed by such Investor or its agents independently of and without reference to any confidential information communicated by the Company. The Company shall not be required to comply with Section 1.1 or 1.2 in respect of any Investor whom the Board reasonably determines to be a competitor or an officer, employee, director or holder of more than ten percent (10%) of the stock of a competitor (provided that the parties agree that an Investor shall not be a competitor or holder of more than 10% of a competitor for this purpose solely because such Investor is a venture capital investment firm that has made or may make portfolio investments in one or more companies that compete or may compete with the Company).

1.10 Termination of Covenants. The rights set forth in this Section 1 shall terminate and be of no further force or effect upon the earlier of (i) the closing of the first underwritten public offering of the Company’s securities pursuant to an effective registration statement filed by the Company under the Securities Act or (ii) the date the Company otherwise becomes subject to the reporting requirements under Section 13 or 15(d) of the Securities Exchange Act, as amended (the “Exchange Act”).

2. Registration Rights.

2.1 Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

(a) “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

(b) “Converted Preferred Stock” means shares of Common Stock issued on conversion of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D 1 Preferred Stock.

(c) “Holder” shall mean the Investors holding Registrable Securities or securities convertible or exercisable into Registrable Securities and any person who holds such securities and to whom rights under this Section 2 have been transferred in accordance with Section 2.11.

-4-

(d) “Initiating Holders” shall mean any Holder or Holders who in the aggregate hold at least 30% of the Common Stock issued or issuable upon conversion of the Series AA Preferred, Series BB Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred.

(e) “Participating Holders” shall mean any Holder or Holders who propose to distribute their securities through a registration pursuant to this Section 2.

(f) “Preferred Stock” shall mean the Series AA Preferred, Series BB Preferred, Series CC Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred.

(g) “Registrable Securities” means the Common Stock issued or issuable upon conversion of Preferred Stock and any Common Stock issued or issuable in respect of the Preferred Stock or other securities issuable pursuant to the conversion of the Preferred Stock or upon any stock split, stock dividend, recapitalization, or similar event, and, solely for the purposes of Section 2.3 of this Agreement, the Common Stock issued upon exercise of the Warrant dated March 8, 2002, by and between the Company and Pentech Financial Services, Inc.; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities (a) if and so long as they have not been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (b) prior to the date such securities have been sold in a transaction exempt from the prospectus delivery requirements of the Securities Act so that all transfer restrictions and legends with respect thereto are removed upon the consummation of such sale and such counsel provides, upon request, such an opinion to each Holder. Provided, further that shares held by a holder of less than 1% of the outstanding Common Stock of the Company (on an as-converted basis) shall not constitute Registrable Securities if all such shares may be sold within a 90 day period pursuant to Rule 144 of the Securities Act.

(h) The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

(i) “Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 2.2, 2.3 and 2.4 hereof (but excluding underwriting discounts and commissions).

(j) “Restricted Securities” shall mean the securities of the Company required to bear a legend indicating that transfer is restricted in the absence of registration.

(k) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar federal statute and the Rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

(l) “Selling Expenses” shall mean all underwriting discounts, selling commissions and stock transfer taxes, if any, applicable to the securities registered by the Holders.

-5-

2.2 Demand Registration.

(a) Request for Registration. In case the Company shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance with respect to shares of Registrable Securities with an expected aggregate offering price to the public of at least $25,000,000, the Company will (1) within ten days of the receipt by the Company of such notice, give written notice of the proposed registration, qualification or compliance to all other Holders and (2) as soon as practicable (but within 90 days after receipt of the request of the Initiating Holders), use its best efforts to effect such registration, qualification or compliance (including appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 20 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2.2(a):

(i) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction;

(ii) Prior to the earlier of July 14, 2012 or six months after the effective date of the Company’s first registered public offering of its securities;

(iii) During the period starting with the date 60 days prior to the Company’s good faith estimate of the date of filing of, and ending on the date 120 days immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction, with respect to an employee benefit plan or with respect to the Company’s first registered public offering of its stock), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective;

(iv) After the Company has effected two registrations pursuant to this Section 2.2(a), which registrations have been declared or ordered effective;

(v) If the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board it would be materially detrimental to the Company or its shareholders for a registration statement to be filed in the near future, then the Company’s obligation to use its best efforts to register, qualify or comply under this Section 2.2 shall be deferred for a period not to exceed 60 days from the date of receipt of written request from the Initiating Holders; provided, however, that any such deferral periods under this Section 2.2(a)(v) shall not exceed, in the aggregate, 60 days in any 12 month period.

-6-

(b) Underwriting. In the event that a registration pursuant to this Section 2.2 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 2.2(a). In such event, the right of any Holder to registration pursuant to this Section 2.2 shall be conditioned upon such Holder’s participation in the underwriting arrangements required by this Section 2.2, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein.

The Company shall, together with all Participating Holders, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company and reasonably acceptable to Participating Holders representing a majority of the Registrable Securities held by the Participating Holders. Notwithstanding any other provision of this Section 2.2, if the managing underwriter advises the Company in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated as follows: (i) first to holders of Series AA Preferred, Series BB Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred or Common Stock issued or issuable upon conversion of Series AA Preferred, Series BB Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred, (ii) next, to holders of Series CC Preferred (or Common Stock issued upon conversion of Series CC Preferred) and holders of Converted Preferred Stock, and (iii) then among all other Holders thereof, in each case in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement or in such other manner as shall be agreed to by the Company and Holders of a majority of the Registrable Securities proposed to be included in such registration; provided, however, that all securities other than Registrable Securities sought to be included in such underwriting shall first be excluded. No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

If any Holder of Registrable Securities disapproves of the terms of the underwriting, such Holder may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration.

2.3 Company Registration.

(a) Notice of Registration. If at any time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than a registration relating solely to employee benefit plans or a Commission Rule 145 transaction or pursuant to Section 2.2, the Company will (i) promptly give to each Holder written notice thereof, and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities

-7-

specified in a written request or requests, made within 20 days after receipt of such written notice from the Company, by any Holder.

(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.3(a). In such event the right of any Holder to registration pursuant to Section 2.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 2.3, if the managing underwriter or Company determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit or completely exclude the Registrable Securities and other securities to be distributed through such underwriting; provided, however, that Registrable Securities to be included in such registration may not be limited to less than 30% of the total amount of securities to be included in any registration other than the registration for Company’s initial underwritten public offering of its securities and provided, further that number of shares of Registrable Securities of the Holders to be included in such underwriting shall not be reduced unless all other securities (excluding those held by the Company) are first entirely excluded from the underwriting. The Company shall so advise all Holders distributing their securities through such underwriting of such limitation (or exclusion, if applicable) and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated (if applicable) as follows: (i) first to holders of Series AA Preferred, Series BB Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred or Common Stock issued or issuable upon conversion of Series AA Preferred, Series BB Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred, (ii) next, to holders of Series CC Preferred (or Common Stock issued or issuable upon conversion of Series CC Preferred) and holders of Converted Preferred Stock, and (iii) then among all other Holders thereof, in each case in proportion, as nearly as practicable, to the respective amounts of Registrable Securities to be registered by such Holders at the time of filing the registration statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder or holder to the nearest 100 shares.

If any Participating Holder disapproves of the terms of any such underwriting, such Participating Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. If shares are withdrawn from registration, the Company shall offer to all persons retaining the right to include securities in the registration the right to include additional securities in the registration, with such shares being allocated among all such Participating Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Participating Holders at the time of filing the registration statement.

-8-

(c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.5.

2.4 Registration on Form S-3.

(a) Request for Registration. Following the Company’s initial public offering, the Company shall use its best efforts to become eligible to register offerings of securities on Commission Form S-3 (or its successor form). After the Company has qualified for the use of Form S-3, Initiating Holders shall have the right to registration on Form S-3 upon request to the Company (which request shall be in writing and shall state the number of shares of Registrable Securities to be registered and the intended method of disposition of shares by such Initiating Holders). Upon such written request, the Company shall promptly give notice to all other Holders of such registration and effect, as soon as practicable, such registration in accordance with Section 2.6 below. The Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2.4(a):

(i) unless the Holders requesting registration propose to dispose of Registrable Securities having an anticipated aggregate price to the public (before deduction of underwriting discounts and expenses of sale) of at least $5,000,000;

(ii) during the period starting with the date 60 days prior to the Company’s estimated date of filing of, and ending on the date 120 days immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or

(iii) if the Company shall furnish to such Holder a certificate signed by the President of the Company stating that in the reasonable good faith judgment of the Board it would be materially detrimental to the Company or its stockholders for registration statements to be filed in the near future, then the Company’s obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed 60 days from the receipt of the request to file such registration by such Holder or Holders; provided, however, that any such deferral periods under this Section 2.4(a)(iii) shall not exceed, in the aggregate, 60 days in any 12 month period,

2.5 Expenses of Registration. All Registration Expenses, including the reasonable fees and expenses of counsel to the selling Holders, incurred in connection with registrations pursuant to Sections 2.2, 2.3 and 2.4 shall be borne by the Company. All Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the holders of securities included in such registration pro rata with the Company and each other on the basis of the number of shares so registered.

-9-

2.6 Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Section 2, the Company will keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will:

(a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective until the distribution described in the Registration Statement has been completed;

(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

(c) furnish to the Participating Holders and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities;

(d) register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Participating Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder shall also enter into and perform its obligations under such an agreement;

(f) notify each Participating Holder at any time when a prospectus relating thereto is required to be delivered under the Securities Act or upon 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 the light of the circumstances then existing;

(g) cause all securities covered by such registration statement to be listed on each securities exchange or authorized for quotation on each automated quotation system on which similar securities issued by the Company are then listed or authorized for quotation;

(h) provide a transfer agent and registrar for all securities covered by such registration statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and

-10-

(i) furnish, at the request of any Participating Holder, on the date that the securities are delivered to the underwriters for sale in connection with a registration being sold through underwriters, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Participating Holders and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.

2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 2:

(a) The Company will indemnify each Participating Holder, each of its officers, directors, partners, members, managers and legal counsel, and each person controlling such Participating Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Section 2, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act or any blue sky law, or any rule or regulation promulgated under the Securities Act or any blue sky law, or any other law, rule, or regulation applicable to the Company in connection with any such registration, qualification or compliance, and the Company will pay to each such Participating Holder, each of its officers, directors, partners, and legal counsel and each person controlling such Participating Holder, each such underwriter and each person who controls any such underwriter, as incurred, any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability, or action; provided, however, that the Company will not be liable to a particular Participating Holder in any such case to the extent that any such claim, loss, damage, liability, or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Participating Holder, controlling person, or underwriter and stated to be specifically for use therein; and provided, further, that the indemnity agreement contained in this subsection 2.8(a) shall not apply to amounts

-11-

paid in settlement of any such claim, loss, damage, liability, action or omission if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld.

(b) Each Participating Holder will, severally and not jointly, if Registrable Securities held by such Participating Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, and legal counsel, each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other Participating Holder, each of its officers, directors, partners and legal counsel and each person controlling such Participating Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, any violation by such Holder of the Securities Act or any blue sky law, or any rule or regulation promulgated under the Securities Act or any blue sky law, or any other law, rule, or regulation applicable to such Holder in connection with any such registration, qualification or compliance and will pay the Company, such Participating Holders, such directors, officers, persons, underwriters or control persons, as incurred any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein; provided, however, that the indemnity agreement contained in this subsection 2.8(b) shall not apply to amounts paid in settlement of any such claim, loss, damage, liability, action or omission if such settlement is effected without the consent of such Holder, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the liability of each Holder under this subsection (b) shall be limited in an amount equal to the net proceeds to each such Holder of Registrable Securities sold as contemplated herein. A Holder will not be required to enter into any agreement or undertaking in connection with any registration under this Section 2 providing for any indemnification or contribution on the part of such Holder greater than the Holder’s obligations under this Section 2.8(b).

(c) Each party entitled to indemnification under this Section 2.8 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this

-12-

Section 2 unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action, and the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or separate and different defenses but shall bear the expense of such defense nevertheless. 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 that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party a release from all liability in respect to such claim or litigation.

(d) If the indemnification provided for in Section 2.8(a) or Section 2.8(b) above is unavailable to an indemnified party in respect of any losses, claims, damages or liabilities referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified parties, on the other hand, in connection with the statements or omissions or violations which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The parties hereto acknowledge and agree that it would not be just and equitable if contribution pursuant to this Section 2.8(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities or actions in respect thereof referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.8(d), no Holder shall be required to contribute any amount in excess of the net proceeds from the sale of such Holder’s Registrable Securities in the offering. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

2.9 Information by Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities.

2.10 Rule 144 Reporting. With a view to making available the benefits of certain Rules and regulations of the Commission that may at any time permit the sale of the Restricted

-13-

Securities to the public without registration, after such time as a public market exists for the Common Stock of the Company, the Company agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act;

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and

(c) So long as a Holder owns any Restricted Securities, upon request, deliver (i) a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company and (iii) such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as a Holder may reasonably request in availing itself of any Rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

2.11 Transfer of Registration Rights. The rights to cause the Company to register securities granted Holders under Sections 2.2, 2.3 and 2.4 may be assigned (i) to a transferee or assignee in connection with any transfer or assignment of Registrable Securities by a Holder of not less than 25,000 shares of Registrable Securities (appropriately adjusted for stock splits, stock dividends, recapitalizations and similar events) (or all of Holder’s shares, if less than 25,000), (ii) to any transferee or assignee who is a constituent partner, retired partner, member, manager, shareholder or affiliate of a Holder which is a partnership, limited liability company or corporation; or (iii) to any transferee or assignee who is an immediate family member or trust for the sole benefit of any individual Holder; provided that, with respect to each such transfer or assignment, the Company be given prior written notice of the transfer, the transferee or assignee agree in writing to all provisions contained in this Section 2, and such transfer otherwise be effected in accordance with applicable securities laws.

2.12 Standoff Agreement. Each Holder agrees in connection with the Company’s initial public offering of the Company’s securities that causes automatic conversion of the Preferred Stock pursuant to the Amended and Restated Certificate of Incorporation (the “Amended Certificate”), upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the underwriters provided that each officer, director, holder of greater than 1% of the Company’s capital stock on a fully-diluted, as converted to Common Stock basis and other holders of registration rights of the Company shall agree to execute a similar document (the

-14-

“Market Standoff”). Notwithstanding anything in this Section 2.12, if the underwriters managing such initial public offering waives (in whole or in part) the Market Standoff for any Holder or Holders, then the Market Standoff shall be waived to the same extent for all Holders. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply to all Holders subject to such agreements pro rata based on the number of shares subject to such agreements.

2.13 Termination of Registration Rights. The rights granted under this Section 2 shall terminate on the fifth anniversary of the closing of the initial underwritten public offering of the Company’s securities that causes automatic conversion of the Preferred Stock pursuant to the Amended Certificate, pursuant to a effective registration statement filed under the Securities Act.

2.14 Future Registration Rights. The Company shall not grant registration rights on parity with or superior to any Holder without the consent of a majority of the Holders.

2.15 Canadian Qualification Rights Upon IPO. Subject to Section 2.17, at the request of any Holder then resident in a Canadian Qualifying Jurisdiction at the time of the Company’s Initial Public Offering, the Company will, prior to the completion of its Initial Public Offering, file a (final) prospectus under the Canadian Securities Laws of each Canadian Qualifying Jurisdiction in which holders of Registrable Securities are then resident, qualifying the distribution of the Registrable Securities issuable upon conversion of the Preferred Stock upon the Initial Public Offering, and use its best efforts to obtain a receipt (or equivalent document) therefor concurrently with the completion of the Initial Public Offering. In preparing for and completing an Initial Public Offering, the Company will keep each Holder whose Registrable Securities are being qualified under Canadian Securities Laws reasonably advised of the status of such qualification.

2.16 Canadian Qualification Rights After IPO. Subject to Section 2.17, to the extent that (i) any Preferred Stock is not converted into Common Stock concurrently with the Company’s Initial Public Offering, or (ii) no prospectus under Canadian Securities Laws was filed at the time of the Company’s Initial Public Offering pursuant to Section 2.15 above, at the request of any Holder then resident in a Canadian Qualifying Jurisdiction at any time after the Company’s Initial Public Offering, the Company will file a (final) prospectus under the Canadian Securities Laws of each Canadian Qualifying Jurisdiction in which holders of Registrable Securities are then resident, qualifying the distribution of such Registrable Securities issued or issuable upon conversion of the Preferred Stock, and use its best efforts to obtain a receipt (or equivalent document) therefor. If such request is made in connection with a registration pursuant to Section 2.2, 2.3 or 2.4 above, the Company will file such (final) prospectus prior to any registration statement filed with the Commission covering such Holder’s Registrable Securities becoming effective, and the Company will use its best efforts to obtain a receipt (or equivalent document) therefor concurrently with such registration statement filed with the Commission becoming effective.

2.17 Limitations on Canadian Prospectus Filing Obligations. Notwithstanding the provisions of Sections 2.15 or 2.16, the Company shall be under no obligation to file or obtain a receipt for a prospectus in any Canadian Qualifying Jurisdiction if, prior to the time at which the Company would otherwise be required to file a prospectus or obtain such receipt, the Company:

-15-

(a) obtains an order or ruling from the applicable Canadian Securities Commissions exempting the Holders resident in the Canadian Qualifying Jurisdictions from the prospectus requirements of Canadian Securities Laws with respect to sales of Registrable Securities on a stock exchange or market on which the Registrable Securities are listed;

(b) provides the Holders resident in the Canadian Qualifying Jurisdictions with evidence satisfactory to such Holders that the applicable Canadian Securities Commissions consider the sale of Registrable Securities of Holders resident in such Canadian Qualifying Jurisdictions on a stock exchange or market on which the Registrable Securities are listed as being exempt from, or not subject to, the prospectus requirements of such Canadian Qualifying Jurisdictions; or

(c) provides the Holders resident in the Canadian Qualifying Jurisdictions with an opinion (unqualified except with respect to customary qualifications contained in opinions of such nature) of legal counsel knowledgeable in matters of Canadian Securities Laws that the sale of Registrable Securities of Holders resident in the Canadian Qualifying Jurisdictions on a stock exchange or market on which the Registrable Securities are listed is exempt from, or not subject to, the prospectus requirements of Canadian Securities Laws.

Further, the obligations of the Company under Sections 2.15 or 2.16 of this Agreement shall be governed by the laws of the Province of Ontario and the Company shall not be required to comply with additional or contrary requirements of any other provinces or territories of Canada, including but not limited to the Province of Quebec.

2.18 Definitions. For the purposes of Sections 2.15 – 2.17 of this Agreement, the following terms shall have the following respective meanings:

(a) “Canadian Qualifying Jurisdictions” means the Province of Ontario and each of the other provinces and territories of Canada in which a Holder is resident at the time.

(b) “Canadian Securities Commissions” means the securities commission or other securities regulatory authority in each of the Canadian Qualifying Jurisdictions.

(c) “Canadian Securities Laws” means the securities legislation of the Canadian Qualifying Jurisdictions, and the rules, regulations and policies of the Canadian Securities Commissions, all as the same shall be in effect at the time.

(d) “Initial Public Offering” means the Company’s first public offering of its Common Stock in a firm commitment, underwritten public offering registered under the Securities Act and or pursuant to a prospectus filed with a Canadian Securities Commission.

3. Preemptive Rights.

3.1 General. Except for (i) shares of the Company’s Common Stock issued upon conversion of the Preferred Stock, (ii) shares of the Company’s capital stock issued pursuant to the

-16-

acquisition of another corporation by the Company by merger, purchase of substantially all of the assets, or other reorganization unanimously approved by the Board, (iii) shares of the Company’s Common Stock (or related options) issued to employees, officers, directors, consultants, or other persons performing services for the Company (including, but not by way of limitation, distributors and sales representatives) pursuant to any stock offering, plan, or arrangement approved by the Board (including at least a majority of the Preferred Directors), (iv) shares of the Company’s capital stock issued pursuant to the conversion or exercise of outstanding options, warrants or any other convertible or exercisable securities outstanding as of this date of this Agreement, (v) shares of the Company’s capital stock issued to financial institutions in connection with the extension of credit to the Company or to lessors in connection with the lease of equipment, approved by at least a majority of the Board (including at least a majority of the Preferred Directors), where such share issuance and related extension of credit is primarily for other than equity financing purposes of the Company, (vi) shares of the Company’s capital stock issued in connection with the acquisition of technology or licenses or other similar transactions unanimously approved by the Board, (vii) shares of the Company’s capital stock issued in connection with any stock split, stock dividend, or recapitalization by the Company, (viii) shares issued in a public offering in connection with which all of the Preferred Stock will be converted into Common Stock pursuant to the Amended Certificate, and (ix) up to 200,000 shares of the Company’s capital stock issued to consultants, suppliers or third party service providers to the Company, or affiliates of such parties, the Company will not, nor will it permit any subsidiary to, authorize or issue any shares of stock of the Company of any class and will not authorize, issue or grant any options, warrants, conversion rights or other rights to purchase or acquire any shares of stock of the Company of any class without offering the Major Investors the right of proportionate ownership described below.

3.2 Right of Proportionate Ownership. Each Major Investor shall have a right of participation to purchase an amount of securities of the Company of any class or kind which the Company proposes to sell (other than the issuance of shares described in Section 3.1(i) – 3.1(ix) above) (“Preemptive Securities”) sufficient to maintain such Holder’s proportionate beneficial ownership interest in the Company (as defined below). If the Company wishes to make any such sale of Preemptive Securities, it shall give the Major Investors written notice of the proposed sale. The notice shall set forth (i) the Company’s bona fide intention to offer Preemptive Securities and (ii) the material terms and conditions of the proposed sale (including the number of shares to be offered and the price, if any, for which the Company proposes to offer such shares), and shall constitute an offer to sell Preemptive Securities to the Major Investors on such terms and conditions. Any Major Investor may accept such offer by delivering a written notice of acceptance (an “Acceptance Notice”) to the Company within fifteen days after receipt of the Company’s notice of the proposed sale. Any Major Investor exercising its participation right shall be entitled to participate in the purchase of Preemptive Securities on a pro rata basis to the extent necessary to maintain such Holder’s proportionate beneficial ownership interest in the Company. For purposes hereof, the term “proportionate beneficial ownership interest” shall mean, as to any Holder, that percentage figure which expresses the ratio which (a) the aggregate number of shares of Series AA Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred then outstanding and owned by such Major Investor (including shares of Common Stock issued upon conversion of Series AA Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred

-17-

and Series GG Preferred) bears to (b) the aggregate number of shares of Common Stock then outstanding, assuming the exercise and/or conversion of all outstanding securities then exercisable and/or convertible, directly or indirectly, into Common Stock (such Major Investor’s “Pro Rata Portion”) (for purposes of determining such Major Investor’s Pro Rata Portion, any Holder or other security holder holding convertible or exercisable securities shall be treated as owning that number of shares of Series AA Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred or Series GG Preferred into which any such outstanding convertible securities may be converted and for which any such outstanding options may be exercised). The Company shall, in writing, inform each Major Investor which elects to purchase its Pro Rata Portion of Preemptive Securities of any other Major Investor’s failure to do so, in which case the Major Investors electing to purchase such shares of Preemptive Securities shall have the right to purchase all of such shares on a pro rata basis. If any Major Investor who elects to exercise its participation right does not complete the purchase of such Preemptive Securities on the later of fifteen days after delivery of its Acceptance Notice to the Company or the date any such transaction closes with respect to the Preemptive Securities, the Company may complete the sale of Preemptive Securities on the terms and conditions specified in the Company’s notice within the 90 day period following the expiration of such period. If the Company does not enter into an agreement for the sale of such shares within such period, or if such agreement is not consummated within such 90 day period, the right provided hereunder shall be deemed to be revived and all future shares of Preemptive Securities shall not be offered unless first re offered to the Major Investors in accordance with this Section 3.

3.3 Expiration of the Right of Proportionate Ownership. The right of proportionate ownership granted under this Agreement shall expire immediately prior to the consummation of the first sale of securities pursuant to a registration statement filed by the Company under the Securities Act in connection with a firm commitment underwritten offering of its securities to the general public that causes automatic conversion of all outstanding Preferred Stock to Common Stock pursuant to the Amended Certificate.

4. Certain Purchase Rights. In connection with the Company’s initial firm commitment underwritten public offering which causes automatic conversion of all of the Company’s Preferred Stock to Common Stock under the Company’s certificate of incorporation that occurs after 12 months from the date of the final closing of the sale of Series GG Preferred (a “Qualified Public Offering”), the Company shall use its best efforts to cause the managing underwriter or underwriters of such Qualified Public Offering to establish a program (the “Program”) whereby such managing underwriter or underwriters give to interested Investors then holding at least 166,666 shares (appropriately adjusted for stock splits, stock dividends, recapitalizations and similar events) of any of the Company’s Series AA Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred or Series GG Preferred (or Common Stock issued or issuable upon conversion of Series AA Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred, or a combination thereof) (each, a “Large Holder” and together, the “Large Holders”) priority, as described herein, with respect to the purchase of shares of the Company’s Common Stock available for sale pursuant to the Program.

-18-

Subject to the terms hereof, the aggregate number of shares of Common Stock available for sale pursuant to the Program (the “Program Shares”) shall be equal to the lesser of (i) the number of shares of Common Stock valued at $10,000,000 at the price per share to the public on the final prospectus related to the Qualified Public Offering or (ii) the number of shares equal to twenty percent (20%) of the shares issued in the Qualified Public Offering, excluding any shares issued in an over allotment.

The managing underwriter or underwriters shall offer to each Large Holder the right to purchase its Pro-Rata Share of the Program Shares. Each Large Holder’s “Pro-Rata Share” shall equal the quotient obtained by dividing (i) the number of shares of Registrable Securities then held by such Large Holder that have been issued and outstanding for at least 12 months, by (ii) the number of shares of Registrable Securities then held by all Large Holders that have been issued and outstanding for at least 12 months. The Company shall, in writing, inform each Large Holder which elects to purchase its Pro-Rata Share of Program Shares of any other Large Holder’s failure to do so, in which case the Large Holders electing to purchase such Program Shares shall have the right to purchase all of such shares on a pro rata basis. Each Large Holder shall be entitled to apportion its rights pursuant to this Section 4 among itself and its partners, members and affiliates (or their designees) in such proportion as the Large Holder deems appropriate. Each offeree of Program Shares, if such offeree wishes to purchase any Program Shares, must provide their commitment in writing prior to the printing of the preliminary “red herring” prospectuses for the Qualified Public Offering.

This arrangement between the Company and the Large Holders with respect to the purchase of the Program Shares is not an offer to sell or a solicitation of an offer to buy the Program Shares, and any decision a Large Holder makes with respect to the Program Shares shall be only be made with respect to the statutory prospectus in compliance with all applicable laws, rules and regulations. The Program may be amended, modified or eliminated if in the reasonable discretion of the Board, such action is necessary to comply with any applicable laws, rules or regulations, including, without limitation, Rule 134 of the Securities Act, and all applicable rules and regulations promulgated by the National Association of Securities Dealers, Inc. and other such self-regulating or quasi-public regulatory organizations. The Large Holders also understand that the provisions of Section 16 of the Securities Exchange Act of 1934 and other statutory and regulatory provisions may limit the Large Holders’ ability to resell the Program Shares.

The Company shall be relieved of any obligations under this Section 4 if (i) regulatory authorities object to this Section 4 after discussion and negotiation with the Company and its legal counsel; (ii) regulatory authorities allow the Company to fulfill its obligations under this Section 4 only on the condition that rescission rights or other extraordinary liability will be assumed by the Company or the underwriters; or (iii) the resolution with regulatory authorities relating to this Section 4 would delay the Company’s offering beyond delays caused by other comments from regulatory authorities, provided that the Company has used its commercially reasonable efforts to timely resolve any regulatory issues that arise in connection with this Section 4.

-19-

In the event the Company is relieved of its obligations under this Section 4 pursuant to the terms described in the preceding paragraph or that the Company’s initial public offering occurs within 12 months of the date of the final closing of the sale of Series GG Preferred, then the Company shall offer the Large Holders the right to purchase that number of shares of Common Stock equal to the number of shares of Common Stock the Large Holders would have been able to purchase in the Qualified Public Offering according to the terms detailed in this Section 4 in a private placement transaction contemporaneously with the Qualified Public Offering, provided that such private placement may be made in compliance with all applicable laws, rules and regulations and does not adversely impact the timing of the Qualified Public Offering. Any shares of Common Stock issued to interested Large Holders in such a private placement shall be purchased by interested Large Holders at the per share price to the public on the final prospectus related to the Qualified Public Offering.

This Section 4 in no way obligates the Company to make a registered public offering of its shares and applies only to the Company’s Qualified Public Offering, if and when it occurs.

Notwithstanding the foregoing, the Large Holders participating in the Program shall comply with all requirements and procedures required by the managing underwriter or underwriters of the Qualified Public Offering of purchasers participating in a directed share program, if any, or of purchasers in the Qualified Public Offering generally. Furthermore, the Large Holders agree to furnish upon request to the Company and the managing underwriter or underwriters of the Qualified Public Offering such further information, to execute and deliver to the Company and the managing underwriter or underwriters of the Qualified Public Offering such other documents, and to do such other acts and things, all as the Company and the managing underwriter or underwriters of the Qualified Public Offering may request for the purpose of carrying out the intent of this Section 4.

5. Miscellaneous.

5.1 Additional Investors. Additional Investors will be added to this Agreement; such Investors may become party to this Agreement, upon execution and delivery to the Company of signature pages hereto.

5.2 Waivers and Amendments. With the written consent of the record or beneficial holders of a majority of the Series AA Preferred, Series BB Preferred, Series DD Preferred, Series EE Preferred, Series FF Preferred, and Series GG Preferred, voting together as a single class on an as converted to Common Stock basis, the rights and obligations of the Company and the holders of Registrable Securities under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely), and with such consent, the Company, when authorized by resolution of its Board, may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement; provided, however, that no such modification, amendment or waiver shall reduce the percentage of Registrable Securities required to consent to a waiver as set forth in this Section 5.2 without the consent of all of the Purchasers of the Registrable Securities; and provided further that any waiver or amendment that affects (i) the holders of Series DD Preferred (as a separate class, in their capacity as such) in a manner that is materially

-20-

and adversely different than other series of Preferred Stock, the approval of the holders of a majority of the Series DD Preferred shall also be required, and (ii) the holders of Series GG Preferred (as a separate class, in their capacity as such) in a manner that is materially and adversely different than other series of Preferred Stock, the approval of the holders of a majority of the Series GG Preferred shall also be required, it being understood that differences primarily caused by the relative number of shares outstanding or the relative purchase price of a given series of Preferred Stock shall not constitute such a material adverse difference. Upon the effectuation of each such waiver, consent, agreement of amendment, or modification, the Company shall promptly give written notice thereof to the record holders of the Registrable Securities who have not previously consented thereto in writing. This Agreement or any provision hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, except to the extent provided in this Section 5.2 and provided further, however, that no provisions hereof be amended, modified, supplemented, or waived in a manner that adversely affects any Investor in a manner different from the other Investors without the prior written consent of the Investor(s) so affected.

5.3 Notices. Any notice required or permitted hereunder shall be given in writing and shall be conclusively deemed effectively given (i) three days after sending by first class U.S. mail postage prepaid, (ii) upon personal delivery, or (iii) one day after the sending if sent by commercial overnight courier addressed to the Company at 50 Rio Robles, San Jose, CA 95134 (or such other address as the Company shall have furnished to Investors in writing), Attn: Chief Financial Officer, with a copy (which copy shall not constitute notice) to Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, CA 94305, Attn: Michael J. Danaher, and if to an Investor, at such Investor’s address as set forth on Exhibit A or at such other address as the Company or such Investor may designate.

5.4 Descriptive Headings. The descriptive headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof.

5.5 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of California, without regard to its choice of law provisions.

5.6 Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument, but only one of which need be produced.

5.7 Attorney’s Fees and Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled, including without limitation such reasonable fees, costs, and necessary disbursements of attorneys, consultants and expert witnesses engaged in connection therewith, which shall include without limitation such reasonable fees, costs, and necessary disbursements of appeal.

-21-

5.8 Successors and Assigns. Except as otherwise expressly provided in this Agreement, this Agreement shall benefit and bind the successors, assigns, heirs, executors, and administrators of the parties to this Agreement.

5.9 Entire Agreement. This Agreement, the exhibits hereto, the Series GG Agreement and other documents delivered in connection therewith, constitute the full and entire understanding and agreement between the parties with regard to the subject matter of this Agreement and supersedes all prior discussions, understandings, and agreements (whether oral or written) between them with respect thereto.

5.10 Waiver; Consent. Investors who were parties to the Prior Agreement and who hold at least a majority of the Registrable Securities (as defined in the Prior Agreement) hereby consent to and waive any preemptive rights of all Investors (as defined in the Prior Agreement with respect to the sale of the Series GG Preferred (including any securities convertible into Series GG Preferred) pursuant to the Series GG Agreement, the conversion provisions in the Company’s Amended and Restated Certificate of Incorporation, and to the amendment and restatement of the Prior Agreement by this Agreement.

5.11 Separability; Severability. Unless expressly provided in this Agreement, the rights of each Investor under this Agreement are several rights, not rights jointly held with any other Investors. Any invalidity, illegality, or limitation on the enforceability of this Agreement with respect to any Investor shall not affect the validity, legality, or enforceability of this Agreement with respect to the other Investors. If any provision of this Agreement is judicially determined to be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not be affected or impaired.

5.12 Stock Splits. All references to numbers of shares in this Agreement shall be appropriately adjusted to reflect any stock dividend, split, combination, or other recapitalization of shares by the Company occurring after the date of this Agreement.

5.13 Aggregation of Stock. All shares of Preferred Stock held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

5.14 Amendment and Restatement. This Agreement amends and restates in its entirety the Prior Agreement.

(Signature Pages Follow)

-22-

IN WITNESS WHEREOF, the parties have executed this Amended and Restated Investors’ Rights Agreement on the day and year first set forth above.

THE COMPANY:	BLUEARC CORPORATION
	a Delaware corporation
	By: /s/ Michael Gustafson
	Name: Michael Gustafson
	Title: President and Chief Executive Officer

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	INVESTOR GROWTH CAPITAL LIMITED
	By: /s/ Liam Jones
	Name: Liam Jones
	Title: “A” Director
	By: /s/ Robert de Haus
	Name: Robert de Haus
	Title: B-Director
	INVESTOR GROUP LP
	By: IGVC LP, its General Partner
	BY: Investor Group GmbH, its General Partner
	By: /s/ A. Hünerwadel
	Name: A. Hünerwadel
	Title: Director
	By: /s/ Robert de Haus
	Name: Robert de Haus
	Title: Director

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	MERITECH CAPITAL PARTNERS II
	By:	Meritech Capital Associates II L.L.C. its General Partner
	By:	Meritech Management Associates II L.L.C. a managing member
	By:	/s/ Paul Madera
		Paul S. Madera, a managing member
	MERITECH CAPITAL AFFILIATES II
	By:	Meritech Capital Associates II L.L.C. its General Partner
	By:	Meritech Management Associates II L.L.C. a managing member
	By:	/s/ Paul Madera
		Paul S. Madera, a managing member
	MCP ENTREPRENEUR PARTNERS II
	By:	Meritech Capital Associates II L.L.C. its General Partner
	By:	Meritech Management Associates II L.L.C. a managing member
	By:	/s/ Paul Madera
		Paul S. Madera, a managing member

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	MORGENTHALER PARTNERS VIII, L.P.
	By:	Morgenthaler Management Partners VIII, LLC
		Its Managing Partner
	By:	/s/ Theodore Laufik
		Chief Financial Officer and Member

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	RWI VENTURES II, L.P.
	By RWI Ventures Management II, LLC, General Partner
	By:	/s/ William Baumel
		William R. Baumel
	Title:	Managing Member
	Address:	2440 Sand Hill Road, Suite 100
		Menlo Park, CA 94025

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:

MONTAGU NEWHALL GLOBAL PARTNERS IV – A, L.P.

By: Montagu Newhall General Partner IV, L.P.
By: Montagu Newhall GP IV, LLC
By:	/s/ Eric Thompson
Name:	Eric Thompson
Title:	CFO

MONTAGU NEWHALL GLOBAL PARTNERS IV – B, L.P.

By: Montagu Newhall General Partner IV, L.P.
By: Montagu Newhall GP IV, LLC
By:	/s/ Eric Thompson
Name:	Eric Thompson
Title:	CFO

MONTAGU NEWHALL GLOBAL PARTNERS IV – C, L.P.

By: Montagu Newhall General Partner IV, L.P.
By: Montagu Newhall GP IV, LLC
By:	/s/ Eric Thompson
Name:	Eric Thompson
Title:	CFO

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:

MONTAGU NEWHALL CROSSOVER VENTURES I, L.P.

Montagu Newhall Crossover Ventures I, L.P.
By: Montagu Newhall Crossover I GP, L.P.
By: Montagu Newhall Crossover I GP, LLC
By:	/s/ Eric Thompson
Name:	Eric Thompson
Title:	CFO

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	CROSS CREEK CAPITAL, L.P.
	By:	Cross Creek Capital GP, L.P. Its Sole General Partner
	By:	Cross Creek Capital, LLC Its Sole General Partner
	By:	Wasatch Advisors, Inc. Its Sole Member
	By:	/s/ Daniel Thurber
		Name: Daniel Thurber
		Title: Vice President
	CROSS CREEK CAPITAL EMPLOYEES’ FUND, L.P.
	By:	Cross Creek Capital GP, L.P. Its Sole General Partner
	By:	Cross Creek Capital, LLC Its Sole General Partner
	By:	Wasatch Advisors, Inc. Its Sole Member
	By:	/s/ Daniel Thurber
		Name: Daniel Thurber
		Title: Vice President

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	AMERICANBUOY & CO., FOR THE BENEFIT OF WASATCH GLOBAL SCIENCE AND TECHNOLOGY FUND
	Wasatch Global Science & Technology Fund
	By:	Wasatch Advisors, Inc. Its Investment Adviser
	By:	/s/ Daniel Thurber
		Name: Daniel Thurber
		Title: Vice President

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	WASATCH FUNDS, INC.
	Wasatch Global Science & Technology Fund
	By:	Wasatch Advisors, Inc. Its Investment Adviser
	By:	/s/ Daniel Thurber
		Name: Daniel Thurber Title: Vice President

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	WESTON PRESIDIO CAPITAL IV, L.P.
	By: /s/ Michael Cronin
	Name: Michael F. Cronin
	Title:
	WPC ENTREPRENEUR FUND II, L.P.
	By: /s/ Michael Cronin
	Name: Michael F. Cronin
	Title:

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:	JVAX INVESTMENT GROUP LLC
	By:	/s/ Terrance Drabant
		Terrance M. Drabant
		CEO and President

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:
	CTTV IN VESTMENTS, LLC
	By: /s/ John Hanten
	Name: John Hanten
	Title: Venture Executive

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:
	GOLD HILL CAPITAL 2008, LP
	By: /s/ Rob Helm
	Name: Rob Helm
	Title: Managing Director

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:

AG 1991 TRUST U/A/D 12/18/91

By: /s/ Joyce Gray                                                                                 

Name: Joyce Gray                                                                                 

Title: Trustee                                                                                          

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:

SHEA VENTURES, LLP
	By: /s/ John Morrissey
	Name: John Morrissey
	Title: Managing Director

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:
	WS INVESTMENT COMPANY, LLC (2006A)
	By: /s/ Michael Danaher
	Name: Michael J. Danaher
	Title: Member
	WS INVESTMENT COMPANY, LLC (2006C)
	By: /s/ Michael Danaher
	Name: Michael J. Danaher
	Title: Member
	WS INVESTMENT COMPANY, LLC (2010A)
	By: /s/ Michael Danaher
	Name: Michael J. Danaher
	Title: Member

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

THE INVESTORS:
	THOMAS J. ROSS, JR.
	By:	/s/ Thomas Ross

[Signature Page to BlueArc Corporation Amended and Restated Investors’ Rights Agreement]

EXHIBIT A

Schedule of Investors

Name and Address of Investors	Name and Address of Investors
4160487 Canada Inc. c/o Deborah L. Lewis Ogivly Renault 45 O’Connor Street, Suite 1600 Ottawa, Ontario Canada	David Adderley
AG 1991 TRUST U/A/D 12/18/91	APA Excelsior V, L.P. Patricof & Co. Ventures, Inc. c/o Evelyn Pellicone 445 Park Avenue New York, NY 10022
Apax WW Nominees Ltd AE4 15 Portland Place London W1B 1PT	Geoffrey Barrall
The Bass Trust	Susan Blanco
Pascal Buhler	Brobeck, Phleger & Harrison LLP Two Embarcadero Place 2200 Geng Road Palo Alto, CA 94303
Rod Canion	Celtic House Ventures Partners Fund IIA LP 555 Legget Drive, Tower B, Suite 530 Kanata, Ontario, Canada K2K 2X3 Attn: David Adderley

A-1

Name and Address of Investors	Name and Address of Investors
Cheview Limited Wington Centre, 29th Floor 111 Connaught Road Central HONG KONG	Crosslink Ventures IV, LP Crosslink Crossover Fund III, L.P. Crosslink Crossover Fund IV, L.P. Offshore Crosslink Omega Ventures IV Offshore Crosslink Crossover Fund III Omega Bayview IV, LLC Crosslink Omega Ventures IV GmbH & Co. KG Two Embarcadero Center, Suite 2200 San Francisco, CA 94111 Attention: Michael J. Stark
Cross Creek Capital, L.P. Cross Creek Capital Employee’s Fund, L.P. 150 Social Hall Avenue, 4th Floor Salt Lake City, Utah 84111	CTTV Investments LLC 3901 Briarpark Road Houston, TX 77042-5301
Michael Curry	Michael Danaher and Carol Danaher, TTEES of the Danaher Family Trust, DTD 6/29/04
Dell Ventures L.P. One Dell Way Round Rock, TX 78682	Ronald D. Eller
EuroQube S.A. 4 Rue Montagne Du Parc Brussels 1000 BELGIUM	Dr. Federico Faggin
Fort Washington Private Equity Investors II, L.P. Fort Washington Private Equity Investors III, L.P. 420 East Fourth Street Cincinnati, OH 45202	Sonny S. Gan
GC&H Investments, LLC Cooley Godward, LLP 3175 Hanover Street Palo Alto, CA 94304-1130	Louis Gray

A-2

Name and Address of Investors	Name and Address of Investors
Bruce Greiner	Mike Halliwushka
Gregory Harvey	Kurt Hoofnagle
Brian Horn	Jessica Hotz
I C Wild Ones c/o Rhegan Maggs Melksham Court Stinchcombe Gloucestershire, GL11 6AR UK	Interregnum Plc 22-23 Old Burlington St. London, W1X 1RL UK
Investor Group LP Investor Growth Capital Limited Canada Court, Upland Road, St. Peter Port, GY1 3BQ, Guernsey	Carol Johnson
With a copy to: Jose Suarez Investor Growth Capital, Inc. 333 Middlefield Road, Suite 110 Menlo Park, CA 94025 Fax: (650) 543-8110
Michael Jennings	JP Morgan Partners (BHCA) L.P. One Bush Street San Francisco, CA 94111

A-3

Name and Address of Investors	Name and Address of Investors
Peter Johnson	Kamin Investments, Inc. 99 Stradwick Ave Nepean Ontario K2J 2Z1 CANADA
Robert M. Kavner and Allyson P. Kavner, Trustees of the KAVNER FAMILY TRUST – 1999 u/i dtd May 17, 1999	Ravi Kulasekaran
Nigel Leavy	Steve Lee
Vittorio Levi	Eugene Levy
Bill Lewis	Robert Lloyd
Lumaca BVI P.O. Box 108 6906- Cassarate SWITZERLAND	J. Matthew Lyons
The Macpherson Family Trust Dated 2/10/96 Michele Dundas Macpherson and H. Gordon Macpherson	Roger Maggs

A-4

Name and Address of Investors	Name and Address of Investors
Jose Medeiros	Meritech Capital Partners II Meritech Capital Affiliates II MCP Entrepreneur Partners II 285 Hamilton Avenue, Suite 200 Palo Alto, CA 94301
Jonathan Meyer	Donald Mills
Ken Morgan	Morgenthaler Partners VIII, L.P. 2710 Sand Hill Road, Suite 100 Menlo Park, CA 94025
New York State Retirement Co Investment Fund LP Pacific Corporate Group 1200 Prospect Street, Suite 200 La Jolla, CA 92037	Mark O’Connor
Onabru Ltd. c/o Maples & Calder P.O. Box 309GT, Ugland House South Church Street George Town, Grand Cayman, Cayman Islands	Alberto Ormezzano
Scott W. Parsons	Patricof Private Investment Club II, L.P. Patricof & Co. Ventures, Inc. c/o Evelyn Pellicone 445 Park Avenue New York, NY 10022

A-5

Name and Address of Investors	Name and Address of Investors
Enrico Pesatori	George Pinkham
Jeff Pinkham	William Andre G. Pinkham
Mario Pompili	Prashanth Prahlad
Rational Ventures SA P.O. Box 3162 Road Town Tortola BRITISH VIRGIN ISLANDS	David Rogers
Thomas J. Ross, Jr.	RWI Ventures I, LP 2440 Sand Hill Road, Suite 100 Menlo Park, CA 94025
Santhanam Sampathkumar	The Muriel Schroeder LLC BlueArc Corporation Attn: Steve Schroeder 50 Rio Robles Drive San Jose, CA 95134
Ted Selbach	John Seminerio
Muriel Schroeder	Shea Ventures, LLP 655 Brea Canyon Road PO Box 489 Walnut Creek, CA 91788-1489

A-6

Name and Address of Investors	Name and Address of Investors
Mark Squires	Andrew Ivan Stanton
Tactics Sells High Tech, Inc. 1177 Brarham Lane, Suite 203 San Jose, CA 95118	William M. Tatham
Enzo Torresi	Louise Turner
Angela Tzanadamis	Tom Valis
Andrew Waitman	Michael Jamil Wakim
Wasatch Funds, Inc. 150 Socail Hall Ave., 4th Floor Salt Lake City, UT 84111	Wesley Clover Corporation 555 Legget Drive, Tower B, Suite 534 Kanata Ontario, K2K 2X3 CANADA

A-7

Name and Address of Investors	Name and Address of Investors
Weston Presidio Capital IV, L.P. WPC Entrepreneur Fund II, L.P. 200 Clarendon, 50th Floor Boston, MA 02116 Attn: Michael F. Cronin	Willowpark Limited Couvignac Bas 46800 Montcuq FRANCE
With a copy to:
Pier 1, Bay 2 San Francisco, CA 94111 Attn: Therese Mrozek
Steve M. Wilson	Matthew Winston
Simon Witts	WS Investment Company LLC WS Investment Company LLC (2006A) WS Investment Company, LLC (2006C) Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304-1050
Hitachi Data Systems Corporation Attn: General Counsel 750 Central Expressway, MS 3446 Santa Clara, California 95050-2627	Montagu Newhall Global Partners IV –A, L.P. 100 Painters Mill Road Suite 700 Owings Mills, MD 21117
JVax Investment Group LLC PO Box 5277 1010 Four O’Clock Rd Breckenridge CO 80424	Montagu Newhall Global Partners IV –B, L.P. 100 Painters Mill Road Suite 700 Owings Mills, MD 21117
Montagu Newhall Crossover Ventures I, L.P. 100 Painters Mill Road Suite 700 Owings Mills, MD 21117	Montagu Newhall Global Partners IV –C, L.P. 100 Painters Mill Road Suite 700 Owings Mills, MD 21117

A-8

EX-10.1

Exhibit 10.1

BLUEARC CORPORATION

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (this “Agreement”) is dated as of                     , and is between BlueArc Corporation, a Delaware corporation (the “Company”), and                              (“Indemnitee”).

RECITALS

A. Indemnitee’s service to the Company substantially benefits the Company.

B. Individuals are reluctant to serve as directors or officers of corporations or in certain other capacities unless they are provided with adequate protection through insurance or indemnification against the risks of claims and actions against them arising out of such service.

C. Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and any insurance as adequate under the present circumstances, and Indemnitee may not be willing to serve as a director or officer without additional protection.

D. In order to induce Indemnitee to continue to provide services to the Company, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, Indemnitee as permitted by applicable law.

E. This Agreement is a supplement to and in furtherance of the indemnification provided in the Company’s certificate of incorporation and bylaws, and any resolutions adopted pursuant thereto, and this Agreement shall not be deemed a substitute therefor, nor shall this Agreement be deemed to limit, diminish or abrogate any rights of Indemnitee thereunder.

The parties therefore agree as follows:

1. Definitions.

(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

(i) Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities;

(ii) Change in Board Composition. During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Company’s board of directors, and any new directors (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(a)(i), 1(a)(iii) or 1(a)(iv)) whose election by the board of directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously

so approved, cease for any reason to constitute at least a majority of the members of the Company’s board of directors;

(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and

(v) Other Events. Any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended, whether or not the Company is then subject to such reporting requirement.

For purposes of this Section 1(a), the following terms shall have the following meanings:

(1) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; provided, however, that “Person” shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(2) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended; provided, however, that “Beneficial Owner” shall exclude any Person otherwise becoming a Beneficial Owner by reason of (i) the stockholders of the Company approving a merger of the Company with another entity or (ii) the Company’s board of directors approving a sale of securities by the Company to such Person.

(b) “Corporate Status” describes the status of a person who is or was a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise.

(c) “DGCL” means the General Corporation Law of the State of Delaware.

(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) “Enterprise” means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary.

(f) “Expenses” include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees and costs of experts, witness fees, travel expenses, duplicating costs, printing and binding costs,

-2-

telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond or other appeal bond or their equivalent, and (ii) for purposes of Section 12(c), Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g) “Independent Counsel” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(h) “Proceeding” means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, including any appeal therefrom and including without limitation any such Proceeding pending as of the date of this Agreement, in which Indemnitee was, is or will be involved as a party, a potential party, a non-party witness or otherwise by reason of (i) the fact that Indemnitee is or was a director or officer of the Company, (ii) any action taken by Indemnitee or any action or inaction on Indemnitee’s part while acting as a director or officer of the Company, or (iii) the fact that he or she is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement.

(i) Reference to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

2. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not

-3-

opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

3. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court of Chancery or such other court shall deem proper.

4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. To the extent that Indemnitee is a party to or a participant in and is successful (on the merits or otherwise) in defense of any Proceeding or any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. To the extent permitted by applicable law, if Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, in defense of one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with (a) each successfully resolved claim, issue or matter and (b) any claim, issue or matter related to any such successfully resolved claim, issuer or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

5. Indemnification for Expenses of a Witness. To the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified to the extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

6. Additional Indemnification.

(a) Notwithstanding any limitation in Sections 2, 3 or 4, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with the Proceeding or any claim, issue or matter therein.

(b) For purposes of Section 6(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

(i) the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

-4-

(ii) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

7. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any Proceeding (or any part of any Proceeding):

(a) for which payment has actually been made to or on behalf of Indemnitee under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

(b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

(d) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees, agents or other indemnitees, unless (i) the Company’s board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (iii) otherwise authorized in Section 12(c) or (iv) otherwise required by applicable law; or

(e) if prohibited by applicable law.

8. Advances of Expenses. The Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made as soon as reasonably practicable, but in any event no later than 60 days, after the receipt by the Company of a written statement or statements requesting such advances from time to time (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice). Advances shall be unsecured and interest free and made without regard to Indemnitee’s ability to repay such advances. Indemnitee hereby undertakes to repay any advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. This Section 8 shall not apply to the extent advancement is prohibited by law and shall not apply to any Proceeding for which indemnity is not permitted under this Agreement, but shall apply to any Proceeding referenced in Section 7(b) or 7(c) prior to a determination that Indemnitee is not entitled to be indemnified by the Company.

-5-

9. Procedures for Notification and Defense of Claim.

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses as soon as reasonably practicable following the receipt by Indemnitee of notice thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of the Proceeding and the facts underlying the Proceeding. The failure by Indemnitee to notify the Company will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights, except to the extent that such failure or delay materially prejudices the Company.

(b) If, at the time of the receipt of a notice of a Proceeding pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of the Proceeding to the insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all commercially-reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c) In the event the Company may be obligated to make any indemnity in connection with a Proceeding, the Company shall be entitled to assume the defense of such Proceeding with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. Notwithstanding the Company’s assumption of the defense of any such Proceeding, the Company shall be obligated to pay the fees and expenses of Indemnitee’s counsel to the extent (i) the employment of counsel by Indemnitee is authorized by the Company, (ii) counsel for the Company or Indemnitee shall have reasonably concluded that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense such that Indemnitee needs to be separately represented, (iii) the Company is not financially or legally able to perform its indemnification obligations or (iv) the Company shall not have retained, or shall not continue to retain, such counsel to defend such Proceeding. The Company shall have the right to conduct such defense as it sees fit in its sole discretion. Regardless of any provision in this Agreement, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s personal expense. The Company shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Company.

(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as may be reasonably appropriate.

(e) The Company shall not be liable to indemnify Indemnitee for any settlement of any Proceeding (or any part thereof) without the Company’s prior written consent, which shall not be unreasonably withheld.

(f) The Company shall have the right to settle any Proceeding (or any part thereof) without the consent of Indemnitee.

10. Procedures upon Application for Indemnification.

(a) To obtain indemnification, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee

-6-

and as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Proceeding. The Company shall, as soon as reasonably practicable after receipt of such a request for indemnification, advise the board of directors that Indemnitee has requested indemnification. Any delay in providing the request will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial.

(b) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (ii) if a Change in Control shall not have occurred, if required by applicable law (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Company’s board of directors, by the stockholders of the Company. If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company, to the extent permitted by applicable law.

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(b), the Independent Counsel shall be selected as provided in this Section 10(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Company’s board of directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Company’s board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof and (ii) the final disposition of the Proceeding, the parties have not agreed upon an Independent Counsel, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(b) hereof. Upon the due commencement of any judicial proceeding pursuant to Section 12(a) of this

-7-

Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(d) The Company agrees to pay the reasonable fees and expenses of any Independent Counsel and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

11. Presumptions and Effect of Certain Proceedings.

(a) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

(b) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith to the extent Indemnitee relied in good faith on (i) the records or books of account of the Enterprise, including financial statements, (ii) information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, (iii) the advice of legal counsel for the Enterprise or its board of directors or counsel selected by any committee of the board of directors or (iv) information or records given or reports made to the Enterprise by an independent certified public accountant, an appraiser, investment banker or other expert selected with reasonable care by the Enterprise or its board of directors or any committee of the board of directors. The provisions of this Section 11(b) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(c) Neither the knowledge, actions nor failure to act of any other director, officer, agent or employee of the Enterprise shall be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

12. Remedies of Indemnitee.

(a) Subject to Section 12(d), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 or 12(c) of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10 of this Agreement within 90 days after the later of the receipt by the Company of the request for indemnification or the final disposition of the Proceeding, (iv) payment of indemnification pursuant to this Agreement is not made (A) within ten days after a determination has been made that Indemnitee is entitled to indemnification or (B) with respect to indemnification pursuant to Sections 4, 5 and 12(c) of this Agreement, within 30 days after receipt by the Company of a written request therefor, or (v) the Company or any other person or entity takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights

-8-

under Section 4 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication in accordance with this Agreement.

(b) Neither (i) the failure of the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders that Indemnitee has not met the applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has or has not met the applicable standard of conduct. In the event that a determination shall have been made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding commenced pursuant to this Section 12, the Company shall, to the fullest extent not prohibited by law, have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) To the extent not prohibited by law, the Company shall indemnify Indemnitee against all Expenses that are incurred by Indemnitee in connection with any action for indemnification or advancement of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company to the extent Indemnitee is successful in such action, and, if requested by Indemnitee, shall (as soon as reasonably practicable, but in any event no later than 60 days, after receipt by the Company of a written request therefor) advance such Expenses to Indemnitee, subject to the provisions of Section 8.

(d) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made prior to the final disposition of the Proceeding.

13. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amounts incurred by Indemnitee, whether for Expenses, judgments, fines or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events and transactions giving rise to such Proceeding; and (ii) the relative fault of Indemnitee and the Company (and its other directors, officers, employees and agents) in connection with such events and transactions.

14. Non-exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s certificate of incorporation or bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s certificate of incorporation and bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change, subject to the restrictions expressly set forth herein or therein. Except as expressly set forth herein, no right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Except as expressly set forth herein, the

-9-

assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

15. Primary Responsibility. The Company acknowledges that Indemnitee has or may have certain rights to indemnification and advancement of expenses provided by other entities and/or organizations (collectively, the “Secondary Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Secondary Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the certificate of incorporation or bylaws of the Company (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Secondary Indemnitors, and (iii) that, to the extent not in contravention of any insurance policy or policies providing liability or other insurance for the Company or any director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, it irrevocably waives, relinquishes and releases the Secondary Indemnitors from any and all claims against the Secondary Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Secondary Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Secondary Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Secondary Indemnitors are express third party beneficiaries of the terms of this Section 15.

16. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received payment for such amounts under any insurance policy, contract, agreement or otherwise.

17. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, trustees, general partners, managing members, officers, employees, agents or fiduciaries of the Company or any other Enterprise, Indemnitee shall be covered by such policy or policies to the same extent as the most favorably-insured persons under such policy or policies in a comparable position.

18. Subrogation. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

19. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of another Enterprise, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed from such position. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that any employment with the Company (or any of its subsidiaries or any Enterprise) is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, with or without notice, except as may be

-10-

otherwise expressly provided in any executed, written employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), any existing formal severance policies adopted by the Company’s board of directors or, with respect to service as a director or officer of the Company, the Company’s certificate of incorporation or bylaws or the DGCL. No such document shall be subject to any oral modification thereof.

20. Duration. This Agreement shall continue until and terminate upon the later of (a) ten years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of any other Enterprise, as applicable; or (b) one year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto.

21. Successors. This Agreement shall be binding upon the Company and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators.

22. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order or other applicable law, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

23. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

24. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Company’s certificate of incorporation and bylaws and applicable law.

25. Modification and Waiver. No supplement, modification or amendment to this Agreement shall be binding unless executed in writing by the parties hereto. No amendment, alteration or repeal of this Agreement shall adversely affect any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. No

-11-

waiver of any of the provisions of this Agreement shall constitute or be deemed a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

26. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:

(a) if to Indemnitee, to Indemnitee’s address, facsimile number or electronic mail address as shown on the signature page of this Agreement or in the Company’s records, as may be updated in accordance with the provisions hereof; or

(b) if to the Company, to the attention of the Chief Executive Officer or Chief Financial Officer of the Company at 50 Rio Robles Drive, San Jose, California 95134, or at such other current address as the Company shall have furnished to Indemnitee, with a copy (which shall not constitute notice) to Michael J. Danaher and Julia Reigel, Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California 94304.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.

27. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court of Chancery, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court of Chancery for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, Incorporating Services, Ltd., Dover, Delaware as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court of Chancery, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court of Chancery has been brought in an improper or inconvenient forum.

28. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

-12-

29. Captions. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

(signature page follows)

-13-

The parties are signing this Indemnification Agreement as of the date stated in the introductory sentence.

BLUEARC CORPORATION

(Signature)

(Print name)

(Title)

[INSERT INDEMNITEE NAME]

(Signature)

(Print name)

(Street address)

(City, State and ZIP)

(Signature page to Indemnification Agreement)

EX-10.2

Exhibit 10.2

2000 STOCK PLAN

BLUEARC CORPORATION

2000 STOCK PLAN

1. Purposes of the Plan. The purposes of this Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 hereof.

(b) “Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan.

(c) “Board” means the Board of Directors of the Company.

(d) “Code” means the Internal Revenue Code of 1986, as amended.

(e) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 hereof.

(f) “Common Stock” means the Common Stock of the Company.

(g) “Company” means BlueArc Corporation, a Delaware corporation.

(h) “Consultant” means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity.

(i) “Director” means a member of the Board.

(j) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(k) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months after the first (1^st) day of such leave, any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(m) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.

(n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(o) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

(p) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(q) “Option” means a stock option granted pursuant to the Plan.

(r) “Option Agreement” means a written or electronic agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(s) “Option Exchange Program” means a program whereby outstanding Options are exchanged for Options with a lower exercise price.

(t) “Optioned Stock” means the Common Stock subject to an Option or a Stock Purchase Right.

(u) “Optionee” means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.

(v) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(w) “Plan” means this 2000 Stock Plan.

(x) “Restricted Stock” means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under Section 11 below.

(y) “Service Provider” means an Employee, Director or Consultant.

(z) “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 below.

(aa) “Stock Purchase Right” means a right to purchase Common Stock pursuant to Section 11 below.

(bb) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares that may be subject to option and sold under the Plan is 8,432,184 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.

If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company or forfeited due to failure to vest, such Shares shall become available for future grant under the Plan.

4. Administration of the Plan.

(a) Administrator. The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder;

(iii) to determine the number of Shares to be covered by each such award granted hereunder;

(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(vi) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(e) instead of Common Stock;

(vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since the date the Option was granted;

(viii) to initiate an Option Exchange Program;

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

(x) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and

(xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan.

(c) Effect of Administrator’s Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees.

5. Eligibility.

(a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

(b) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

(c) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate such relationship at any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan.

7. Term of Option. The term of each Option shall be stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

8. Option Exercise Price and Consideration.

(a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(1) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of

stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(2) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

(b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion, (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, (6) net exercise, or (7) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.

9. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company receives (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, such Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least thirty (30) days) to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

10. Non-Transferability of Options and Stock Purchase Rights. The Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

11. Stock Purchase Rights.

(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator.

(b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.

(c) Other Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.

(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan.

12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.

(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of stock resulting from a stock split, reverse stock split, stock dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, repurchase, combination or reclassification of the stock, or any other increase or decrease in the number of issued shares of stock effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no

adjustment by reason thereof shall be made with respect to, the number or price of shares of stock subject to an Option or Stock Purchase Right. Notwithstanding the foregoing, the Administrator will make such adjustments to an Option or Stock Purchase Right required by Section 25102(o) of the California Corporations Code to the extent the Company is relying upon the exemption afforded thereby with respect to the Option or Stcok Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option or Stock Purchase Right prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option or Stock Purchase Right would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully exercisable for a period of time determined by the Administrator from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely Stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely Stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Stock in the merger or sale of assets.

13. Time of Granting Options and Stock Purchase Rights. The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the

determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each Service Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval. The Board shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

15. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an Option, the Administrator may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

16. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

17. Reservation of Shares. The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

18. Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws.

19. Compliance With Section 409A. Options and Stock Purchase Rights will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Option Agreement and Restricted Stock purchase agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Option or Stock Purchase Right is subject to Code Section 409A, the award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.

20. Information to Optionees. Beginning on the earlier of (i) the date that the aggregate number of Optionees under this Plan is five hundred (500) or more and the Company is relying on the exemption provided by Rule 12h-1(f)(1) under the Exchange Act and (ii) the date that the Company is required to deliver information to Optionees pursuant to Rule 701 under the Securities Act, and until such time as the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, is no longer relying on the exemption provided by Rule 12h-1(f)(1) under the Exchange Act or is no longer required to deliver information to Optionees pursuant to Rule 701 under the Securities Act, the Company shall provide to each Optionee the information described in paragraphs (e)(3), (4), and (5) of Rule 701 under the Securities Act not less frequently than every six (6) months with the financial statements being not more than one hundred eighty (180) days old and with such information provided either by physical or electronic delivery to the Optionees or by written notice to the Optionees of the availability of the information on an Internet site that may be password-protected and of any password needed to access the information. The Company may request that Optionees agree to keep the information to be provided pursuant to this section confidential. If an Optionee does not agree to keep the information to be provided pursuant to this section confidential, then the Company will not be required to provide the information unless otherwise required pursuant to Rule 12h-1(f)(1) under the Exchange Act or Rule 701 of the Securities Act.

BLUEARC CORPORATION

2000 STOCK PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.

1. NOTICE OF STOCK OPTION GRANT

«name»

The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

Date of Grant	«grantdate»
Vesting Commencement Date	«vestdate»
Exercise Price per Share	$«price»
Total Number of Shares Granted	«number» shares
Total Exercise Price	$«ttlprice»
Type of Option:	X   Incentive Stock Option
	Nonstatutory Stock Option
Term/Expiration Date:	«expire»

Vesting Schedule:

Twenty-five percent (25%) of the shares subject to the Option shall vest on the one-year anniversary of the Vesting Commencement Date and 1/48^th (one forty-eighth) of the total amount of the shares subject to the Option shall vest every month thereafter on the same day of the month as

the Vesting Commencement Date (and if there is no corresponding day, on the last day of the month), such that 100% of the shares shall be vested on the four-year anniversary of the Vesting Commencement Date, based upon the Optionee’s continuing to be a Service Provider through each vesting date.

Termination Period:

This Option shall be exercisable for three months after Optionee ceases to be a Service Provider. Upon Optionee’s death or disability, this Option may be exercised for one year after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.

II. AGREEMENT

(a) Grant of Option. The Plan Administrator of the BlueArc Corporation (the “Company”) hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the number of shares set forth in the Notice of Grant (the “Shares”), at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event shall the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Optionee (or any other person) due to the failure of the Option to qualify for any reason as an ISO.

(b) Exercise of Option. This Option shall be exercisable during its term in accordance with the provisions of Section 9 of the Plan as follows:

(i) Right to Exercise.

(1) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at the election of the Optionee, this option may be exercised in whole or in part at any time as to Shares which have not yet vested. For purposes of this Stock Option Agreement, Shares subject to the Option shall vest based on continued employment of Optionee with the Company.

-2-

Vested Shares shall not be subject to the Company’s repurchase right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit C-1).

(2) As a condition to exercising this Option for unvested Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.

(3) This Option may not be exercised for a fraction of a Share.

(ii) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.

No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.

(c) Optionee’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.

(d) Lock-Up Period. Optionee hereby agrees that Optionee shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).

-3-

Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Optionee shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.

(e) Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

(i) cash or check;

(ii) consideration received by the Company under a cashless exercise program implemented by the Company; or

(iii) surrender of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, will not result in any adverse accounting consequences to the Company.

(f) Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.

(g) Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

(h) Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.

(i) Tax Obligations.

(i) Tax Withholding. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to

-4-

the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.

(ii) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by Optionee.

(iii) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Optionee prior to the exercise of the Option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the Optionee. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant in a later examination. Optionee agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Optionee shall be solely responsible for Optionee’s costs related to such a determination.

(j) Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws but not the choice of law rules of California.

(k) No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

-5-

Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

OPTIONEE:	BLUEARC CORPORATION
Signature	By
«name»	President and CEO
	Title
Street Address
City/State/Zip Code

SSN

[2000 Stock Plan Stock Option Agreement Signature Page]

-6-

EXHIBIT A

2000 Stock Plan

EXERCISE NOTICE

BLUEARC CORPORATION

50 Rio Robles

San Jose, CA 95134

Attention: President

1. Exercise of Option. Effective as of today,                 ,             , the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase                  shares of the Common Stock (the “Shares”) of BlueArc Corporation (the “Company”) under and pursuant to the 2000 Stock Plan (the “Plan”) and the Stock Option Agreement dated «grantdate» (the “Option Agreement”).

2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all tax withholding due in connection with the exercise of the Option.

3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 12 of the Plan.

5. Company’s Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the “Right of First Refusal”).

a. Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee

(“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).

b. Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.

c. Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.

d. Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.

e. Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.

f. Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.

g. Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general

[2000 Stock Plan Exercise Notice Signature Page]

-2-

public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended.

6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

7. Restrictive Legends and Stop-Transfer Orders.

a. Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SHARES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING.”

b. Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

c. Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

[2000 Stock Plan Exercise Notice Signature Page]

-3-

8. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

9. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.

10. Governing Law; Severability. This Agreement is governed by the internal substantive laws, but not the choice of law rules, of California.

11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan, the Restricted Stock Purchase Agreement, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee.

Submitted by:	Accepted by:
OPTIONEE:	BLUEARC CORPORATION
Signature	By
«name»	Its
Address:	Address:
	50 Rio Robles
	San Jose, CA 95134
		Date Received

[2000 Stock Plan Exercise Notice Signature Page]

-4-

EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

OPTIONEE	:	«name»
COMPANY	:	BLUEARC CORPORATION
SECURITY	:	COMMON STOCK
AMOUNT	:
DATE	:

In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:

(a) Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

(b) Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their transfer without the consent of the Commissioner of Corporations of the State of California and any other legend required under applicable state securities laws.

(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at

the time of the grant of the Option to Optionee, the exercise shall be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction”, transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.

In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.

(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.

Signature of Optionee:

Date:

[2000 Stock Plan Investment Representation Statement Signature Page]

-2-

EXHIBIT C-1

BLUEARC CORPORATION

2000 Stock Plan

RESTRICTED STOCK PURCHASE AGREEMENT

THIS AGREEMENT is made between                          (the “Purchaser”) and BlueArc Corporation (the “Company”) as of                     ,             .

RECITALS

A. Pursuant to the exercise of the stock option granted to Purchaser under the Company’s 2000 Stock Plan (the “Plan”) and pursuant to the Stock Option Agreement (the “Option Agreement”) dated «grantdate» by and between the Company and Purchaser with respect to such grant, which Plan and Option Agreement are hereby incorporated by reference, Purchaser has elected to purchase                      of those shares which have not become vested under the vesting schedule set forth in the Option Agreement (“Unvested Shares”). The Unvested Shares and the shares subject to the Option Agreement which have become vested are sometimes collectively referred to herein as the “Shares”.

B. As required by the Option Agreement, as a condition to Purchaser’s election to exercise the option, Purchaser must execute this Restricted Stock Purchase Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option.

1. Repurchase Option.

(a) If Purchaser’s status as a Service Provider is terminated for any reason, including for cause, death, and Disability, the Company shall have the right and option to purchase from Purchaser, or Purchaser’s personal representative, as the case may be, all of the Purchaser’s Unvested Shares as of the date of such termination at the price paid by the Purchaser for such Shares (the “Repurchase Option”).

(b) Upon the occurrence of a termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his or her transferee or legal representative, as the case may be), within ninety (90) days of the termination, a notice in writing indicating the Company’s intention to exercise the Repurchase Option and setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Company’s office. At the closing, the holder of the certificates for the Unvested Shares being transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and the Company shall deliver the purchase price therefor.

(c) At its option, the Company may elect to make payment for the Unvested Shares to a bank selected by the Company. The Company shall avail itself of this option by a notice in writing to Purchaser stating the name and address of the bank, date of closing, and waiving the closing at the Company’s office.

(d) If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.

(e) The Repurchase Option shall terminate in accordance with the Vesting Schedule in Optionee’s Option Agreement.

2. Transferability of the Shares; Escrow.

(a) Purchaser hereby authorizes and directs the secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.

(b) To insure the availability for delivery of Purchaser’s Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the secretary, or any other person designated by the Company as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the secretary of the Company, or such other person designated by the Company, the share certificates representing the Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-3 hereto, until the Company exercises its purchase right as provided in Section 1, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition to the Company’s obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested Shares, the escrow agent shall promptly deliver to the Purchaser the certificate or certificates representing such Shares in the escrow agent’s possession belonging to the Purchaser, and the escrow agent shall be discharged of all further obligations hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.

(c) The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.

(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any

-2-

Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.

3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.

4. Legends. The share certificate evidencing the Shares issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable state securities laws):

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SALES. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SHARES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING.”

5. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.

6. Notices. Notices required hereunder shall be given in person or by registered mail to the address of Purchaser shown on the records of the Company, and to the Company at their respective principal executive offices.

7. Survival of Terms. This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

8. Section 83(b) Election. Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of an Option for unvested Shares, an election may be filed by the Purchaser with the Internal Revenue Service, within 30 days of the purchase of the Shares, electing pursuant to 83(b) of the Code to be taxed currently on any difference between the purchase

-3-

price of the Shares and their Fair Market Value on the date of purchase. In the case of a Nonstatutory Stock Option, this will result in a recognition of taxable income to the Purchaser on the date of exercise, measured by the excess, if any, of the fair market value of the Shares, at the time the Option is exercised over the purchase price for the Shares. Absent such an election, taxable income will be measured and recognized by Purchaser at the time or times on which the Company’s Repurchase Option lapses. In the case of an Incentive Stock Option, such an election will result in a recognition of income to the Purchaser for alternative minimum tax purposes on the date of exercise, measured by the excess, if any, of the fair market value of the Shares, at the time the option is exercised, over the purchase price for the Shares. Absent such an election, alternative minimum taxable income will be measured and recognized by Purchaser at the time or times on which the Company’s Repurchase Option lapses.

This discussion is intended only as a summary of the general United States income tax laws that apply to exercising Options as to Shares that have not yet vested and is accurate only as of the date this form Agreement was approved by the Board. The federal, state and local tax consequences to any particular taxpayer will depend upon his or her individual circumstances. Purchaser is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) of the Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-5 for reference.

PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S BEHALF.

9. Representations. Purchaser has reviewed with his or her own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he or she (and not the Company) shall be responsible for his or her own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

10. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. The Plan, the Option Agreement, the Exercise Notice, this Agreement, and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of California. Purchaser represents that he or she has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.

-4-

IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.

PURCHASER:	BLUEARC CORPORATION
Signature	By
	Title
Street Address

City/State/Zip Code

[2000 Stock Option Plan Restricted Stock Purchase Agreement Signature Page]

EXHIBIT C-2

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED I,                             , hereby sell, assign and transfer unto BlueArc Corporation (            ) shares of the Common Stock of BlueArc Corporation standing in my name of the books of said corporation represented by Certificate No.              herewith and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.

This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement of BlueArc Corporation and the undersigned dated                     ,             .

Dated:                         ,                                                                                                                    Signature:                                     

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its “repurchase option,” as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.

EXHIBIT C-3

JOINT ESCROW INSTRUCTIONS

                    ,         

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304-1050

Attn: Michael J. Danaher, Esq.

Dear Mr. Danaher:

As Escrow Agent for both BlueArc Corporation (the “Company”), and the undersigned purchaser of stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (“Agreement”) between the Company and the undersigned, in accordance with the following instructions:

1. In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the “Company”) exercises the Company’s repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s repurchase option.

3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state

blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.

4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company’s repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company’s repurchase option. Within 120 days after cessation of Purchaser’s continuous employment by or services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company’s repurchase option.

5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.

6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.

-2-

12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.

13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto.

COMPANY:	BlueArc Corporation
	50 Rio Robles
	San Jose, CA 95134
PURCHASER:
		Address:
ESCROW AGENT:		Wilson Sonsini Goodrich & Rosati
		650 Page Mill Road
		Palo Alto, CA 94304-1050
		Attn: Michael J. Danaher, Esq.

-3-

16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

[This Space Intentionally Left Blank]

-4-

(l) These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of California.

PURCHASER:	BLUEARC CORPORATION
Signature	By
	Title
ESCROW AGENT WILSON SONSINI GOODRICH & ROSATI
By:
Title:

[2000 Stock Plan Joint Escrow Instructions Signature Page]

EXHIBIT C-4

CONSENT OF SPOUSE

I,                     , spouse of                     , have read and approve the foregoing Agreement. In consideration of granting of the right to my spouse to purchase shares of BlueArc Corporation, as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.

Dated:
	Signature

:

EXHIBIT C-5

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income or alternative minimum taxable income, as the case may be, for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME:	TAXPAYER:	SPOUSE:
ADDRESS:
IDENTIFICATION NO.:	TAXPAYER:	SPOUSE:
TAXABLE YEAR:

2. The property with respect to which the election is made is described as follows: shares (the “Shares”) of the Common Stock of BlueArc Corporation (the “Company”).

3. The date on which the property was transferred is:                        .

4. The property is subject to the following restrictions:

The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.

5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $                    .

6. The amount (if any) paid for such property is: $                    .

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated:                    ,
	Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated:                    ,         

EX-10.4

Exhibit 10.4

OEM LICENSE AND DISTRIBUTION AGREEMENT

This OEM License and Distribution Agreement (the “Agreement”), effective as of November 12, 2003 (the, “Effective Date”) is entered into by and between LSI Logic Storage Systems, Inc., (“SSI”), a Delaware, corporation, with its principal place of business located at 1621 Barber Lane, Milpitas, California 95035, and, BlueArc Corporation (“OEM”), with its principal place of business located at 225 Baypointe Parkway, San Jose, California 95134. SSI and OEM may also be referred to herein collectively as “parties” and individually each as, a “party”.

RECITALS

A. SSI develops, manufactures, markets, sells and/or licenses computer equipment and software in conjunction with the sale of such equipment (the “Products” as defined below).

B. OEM is engaged in the manufacture, sale, and resale, or rent of electronic data processing equipment.

C. OEM desires to purchase, resell, and integrate the Products with the OEM Products (as defined below) and sublicense and distribute the SSI Software (as defined below) in conjunction with the sale and distribution of such OEM Products to OEM’s end users and resellers.

NOW THEREFORE, the parties, in consideration of the undertakings and commitments of each party to the other party set forth herein, agree as follows:

DEFINITIONS.

“Agent” of SSI or OEM means, an individual or entity that is authorized to act for or in place of and to bind SSI or OEM, as the case may be, with respect to dealings or contractual obligations with third parties.

“Affiliate” of SSI or OEM means, respectively, any entity that controls, is controlled by, or is under common control with such party, where “control” means ownership of fifty percent (50%) or more of the outstanding voting securities of the entity in question or the power to otherwise control the voting or affairs of such entity.

“Buffer Stock” means a stock of Product, per OEM’s forecasted agreement, which is used to offset unexpected rises in demand for the Products.

“Business Day” means any day other than Saturdays and Sundays during which banks are open for business in San Francisco, California.

“Customer” means, in the case of OEM, an OEM Reseller or End User or, in the case of an OEM Reseller, an End User.

“Documentation” means any documentation in any form provided by SSI to OEM related to the Products, Product Specifications and/or the SSI Software.

“End User” means any Person that has been granted a sublicense by OEM or OEM Resellers to use the SSI Software solely (i) in conjunction with the use of Products, and (ii) for their own internal use, and not for distribution or resale.

“Enhancement” means a modification, translation, improvement, derivative work, or enhancement of the SSI Software that contains new features and/or functionality. SSI, in its sole discretion, may

-1-

* * * Indicates that confidential treatment has been sought for this information

designate an Enhancement as a new software product for which it may charge a separate fee or that have been custom developed by SSI on behalf of an SSI OEM.

“Forecast” shall have the meaning set forth in Section 1.1.

“Major Change” means a material change to the specified performance, maintainability, operation, reliability of the SSI Hardware, or changes affecting appearance or interfaces (including electrical signal and/or power grounding interfaces).

“OEM Products” means OEM equipment and hardware as integrated with the Products.

“OEM Reseller” means any Person appointed by OEM to sell Products and to sublicense and distribute the SSI Software to End Users.

“OEM Trademark” means the trademark or logo of OEM set forth in Exhibit F.

“Order” means an OEM purchase order issued to SSI for Products in accordance with the terms and conditions of this Agreement.

“Order Acknowledgement” shall have the meaning set forth in Section 1.2.

“Parts” means the SSI hardware parts and components listed in Exhibit A that OEM may purchase for use with the Products.

“Person” or “person” means any corporation, partnership, limited liability, joint venture, other entity or natural person.

“Product(s)” means the SSI products as specified in Exhibit A including SSI Hardware, SSI Software, Documentation and Parts.

“Product Specifications” means the published functional specifications for the Products as specified in Exhibit E.

“Ship Date” means the date upon which SSI consigns Products to OEM’s designated carrier for shipment to OEM.

“SSI Hardware” means hardware and equipment portions of the Products provided to OEM hereunder as listed in Exhibit A attached hereto. SSI Hardware shall also include Parts.

“SSI Software” means computer software in machine executable object code format licensed to OEM under this Agreement as specified in Exhibit A and all Updates thereto. The software includes software imbedded that may be embedded in hardware or provided separately on disks or other media or provided electronically.

“SSI Trademark” means the specific trademark or logo of SSI set forth in Exhibit F.

“Statement of Work” means a document that describes the supported environment for a particular SSI Product Specification, as mutually agreed upon by the parties.

“Territory” shall have the meaning set forth on Exhibit B.

“Third Party Support Provider” means a third party who, pursuant to a written agreement between such party and OEM, provides technical support to OEM End Users regarding the Products.

-2-

* * * Indicates that confidential treatment has been sought for this information

“Updates” means modifications, revisions and new releases of the SSI Software that SSI generally makes available free of charge to its customers. Updates include, without limitation, error corrections, bug fixes, and workarounds, but do not include Enhancements.

“Upgrades” means a change to the SSI Hardware that may or may not impact form, fit, or function, but is not a substantially different Product or Part.

1. FORECAST AND ORDERS

1.1 Forecasting. OEM agrees to supply SSI with a * * * rolling forecast of OEM’s anticipated requirements for Products (“Forecast”). OEM will update and provide the Forecast to SSI * * *. The Forecast will include quantity and type of Product to be purchased. Such Forecasts shall not be binding on either party, but shall be made in good faith. Once per * * * OEM shall estimate Product requirements beyond * * *.

1.2 Purchase Requirements. All purchase orders and invoices under this Agreement shall be subject only to the terms and conditions of this Agreement. Each Order will specify quantity, price, part number, and requested delivery date(s) to OEM’s specified delivery location, and at OEM’s option, the method of shipment. Subject to SSI’s designation of an alternative expected ship date in its Order Acknowledgement, SSI will accept any Order that conforms to all terms and conditions of this Agreement, including, but not limited to, price, and delivery requirements. SSI shall use reasonable efforts to review each Order to confirm its compliance with the terms and conditions of this Agreement within * * * and to provide OEM with written acknowledgement of each Order within * * * with a goal of * * * (“Order Acknowledgement”). Any such Order Acknowledgement shall contain an expected ship date. An Order shall become effective on the date of SSI’s Order Acknowledgment.

1.3 Changes. During the term of the Agreement under the circumstances outline in this Section 1.3, OEM shall be permitted to submit Orders with certain terms that are contradictory to or different from the provisions of this Agreement. OEM shall be permitted to submit such an Order provided that, prior to submission of such Order the different terms have been consented to in writing by an SSI employee who’s title is Director or another title more senior than Director. For the purposes of this Section 1.3, the writing may be an email.

2. PRICES AND PAYMENT

2.1 Pricing. The prices of Products, including, without limitation, the license fees for the SSI Software (collectively the “Prices”) shall be as set forth in Exhibit A on the date of the Order and reviewed on a * * * basis.

2.2 Change in Pricing. SSI reserves the right to change Prices herein effective immediately upon the effective date as specified in the written notice of such Price change to OEM. In the event of a Price change, the new Price shall apply to all Orders received by SSI from OEM after the effective date of the Price increase as specified in the written notice.

2.3 Taxes, Tariffs & Fees. SSI’s Prices do not include any national, state or local sales, use, value added or other taxes, customs duties, or similar tariffs and fees which SSI may be required to pay or collect upon the delivery of Products or upon collection of the prices and license fees or otherwise. Except for taxes based on SSI’s income, net worth or similar taxes, should any tax or levy be made resulting from this Agreement, OEM agrees to pay such tax or levy and indemnify SSI for any claim for such tax or levy demanded, provided that OEM shall have the right to challenge any such claim for such tax or levy on behalf of SSI and SSI hereby grants OEM a power of attorney to exercise its rights under this Section 2.3, and SSI agrees to cooperate and assist in any such challenge. OEM shall provide SSI with appropriate resale certificate numbers and other documentation satisfactory to the applicable taxing authorities to substantiate any claim of exemption from any such taxes or fees. If, under the laws of the applicable jurisdiction, OEM is required to withhold any tax on such payments, then OEM may deduct such tax from payments and the amount of the payments shall be net of all taxes withheld. To assist SSI in obtaining credits for such withheld taxes, OEM shall furnish SSI with such evidence of withholding tax payments as requested by the taxing jurisdiction.

2.4 Invoicing and Credit.

-3-

* * * Indicates that confidential treatment has been sought for this information

2.4.1 Invoicing. SSI will submit invoices to OEM upon shipment of Products to the destination specified by OEM in it Order. Each invoice will, at a minimum, reference the OEM Order number, OEM part number, quantity, unit price and total price for the delivery (“correct invoice”). Payments for Orders are due and payable * * * from the date of invoice and shall be made in U.S. Dollars.

2.4.2 Credit. Establishment of a credit line for OEM, and OEM’s eligibility to purchase Products under the payment terms set forth herein, shall be contingent upon approval by SSI’s Credit Department, which approval may be granted or withheld at SSI’s sole discretion. If OEM is permitted to establish a credit line, such credit line may be revised or revoked at any time by SSI in its sole discretion.

2.5 Cancellation. OEM may cancel an Order, or any portion thereof, prior to delivery by SSI to a carrier, without payment of any penalty or other fee.

2.6 Delivery Terms.

2.6.1 Delivery. All deliveries shall be made FOB (domestic port of shipment) as defined in Section 2 -319 of UCC Article 2 or for international shipments, FCA (foreign port of shipment) as defined in the INCOTERMS -2000. Title and risk of loss or damage shall pass to OEM upon delivery of the Product to the carrier at the place of shipment. Unless OEM provides written shipping instructions, SSI may select the carrier and mode of shipment without assuming any liability, including without limitation, liability for loss, theft, or delay of shipment. SSI shall use reasonable efforts to observe OEM’s requirements specified in writing with respect to packing and transporting Products. OEM agrees to accept partial and/or installment shipments whenever mutually agreed by both OEM and SSI. SSI may, on a case-by-case basis, request OEM to authorize partial shipment of a Product on an Order Acknowledgement but in no event will such partial shipment be less than a fully functional Product as set forth in the Product Specifications.

2.6.2 Overshipments. If SSI ships a quantity of Product greater than that set forth in a specific Order Acknowledgement, OEM may keep the excess Product for credit against future orders, or return such Product to SSI pursuant to Section 5.4 “Return Material Authorization”, with the exception that SSI will pay for the cost of shipping the material back to SSI.

2.6.3 Lead Times. For Product ordered in quantities at or below Forecast, the lead-time is * * *. If the OEM does not order in accordance to the Forecast, then the lead-time shall be dependent on then-current production constraints.

2.7 Product Discontinuance.

2.7.1 SSI may discontinue the manufacture or sale of any Product at any time. SSI shall give OEM * * * written notice before discontinuing the manufacture or sale of any Product unless a discontinuation is the result of supply-line disruption, compliance with legal obligations, or the result of independent decisions of third parties, in which case SSI shall promptly notify OEM of such discontinuance. If OEM submits non-cancelable Orders for a discontinued Product within * * * after receiving the notice of discontinuance and those Orders specify delivery within * * * after receiving that notice, SSI will fulfill those Orders, except if a discontinuation is the result of supply-line disruption, compliance with legal obligations, or the result of independent decisions of third parties, SSI will use reasonable efforts to fulfill those Orders or provide a compatible replacement. Product discontinuance does not remove any other obligations under this Agreement.

2.7.2 Upon notice of discontinuation of the manufacture or sale of a Product, SSI agrees to maintain availability of spare Parts up to * * * after the date of the discontinuation notice. At SSI’s discretion spare Parts on discontinued Products may be new, refurbished or offered on an exchange basis. The cost of spare Parts shall be the then-current price for such spare Parts on the then-current SSI Spare Parts Price List as of the date upon which SSI acknowledges OEM’s Order for such Parts. The warranty period for any spare Parts shall be the unexpired portion of the warranty for the Product in which the spare Part is installed. OEM shall purchase from SSI appropriate amount of spare Parts at the time that it starts ordering production quantities of the Products. OEM, or the third-party service organization designated by OEM, shall stock and maintain an inventory of spare Parts that are deployed to provide timely service to End Users and OEM Resellers.

-4-

* * * Indicates that confidential treatment has been sought for this information

3. TECHNICAL SUPPORT AND MAINTENANCE

3.1 Support Contact. OEM shall appoint one (1) individual within OEM’s organization to serve as the primary support contact between OEM and SSI and to receive support through SSI’s telephone support center. All of OEM’s support inquiries shall be initiated through this contact.

3.2 Telephone Support. During the Hardware Warranty Period OEM, SSI will provide telephone consultation by SSI’s technical support pursuant to the terms of Exhibit C.

3.3 Software Maintenance and Support Services. Provided OEM is current in the payment of all Support and Maintenance Fees, OEM will be entitled to Software Support and Maintenance as specified in Exhibit C.

4. PRODUCT MODIFICATION

4.1 Non-Major Changes. SSI reserves the right to make changes or modifications to its Products in whole or in part which do not constitute a Major Change at any time prior to delivery thereof. Such changes may also include any electrical or mechanical refinements deemed appropriate by SSI that do not alter the form, fit, function, or part number of the Part or Product. Such modifications do not impose any liability on SSI to modify or change any Product previously delivered, or supplied in accordance with earlier specifications.

4.2 * * * Notice of Major Change. SSI shall notify OEM with * * * prior written notice of implementing a Major Change. Unless required for compliance with legal obligations, or from the independent decisions of third parties, within * * * after receiving the Major Change notice, OEM may provide written notification to SSI of its acceptance or rejection of that Major Change, and in the event of rejection may cancel without liability any orders for Products affected or made obsolete by that Major Change. In the event of rejection by OEM, SSI may, at its sole option and discretion, (i) continue to provide the applicable Products without such major change to OEM, for a time period and at a price to be agreed upon by the parties, or (ii) terminate this Agreement with respect to the applicable Products.

4.3 Notification of Non-Major Changes. SSI will notify OEM with * * * notice of Non-Major Changes if the change requires a new Part number from OEM.

4.4 Non-Cancelable Orders. If OEM submits non-cancelable Orders for a Product that is scheduled to be changed before the date on which that change is scheduled to become effective, and those Orders specify delivery within * * * after that effective date, SSI will use reasonable efforts to fill those orders.

4.5 Product Samples. At OEM’s request, SSI shall use reasonable efforts to furnish samples of changed Products to OEM for evaluation.

4.6 OEM Requested Changes. In the event OEM requests changes to the Products that would require SSI to perform engineering services, SSI will review OEM’s request and respond within * * * regarding the cost, feasibility, and desirability of such change. Any such change requires the mutual consent of both parties. If any change affects the price of the Product, SSI will provide a new quotation to OEM.

5. LICENSES

5.1 Software License to OEM. Subject to the terms and conditions of this Agreement, SSI hereby grants to OEM a non-exclusive, nontransferable (except as permitted under Section 11.5), revocable, royalty-free license in the Territory to:

5.1.1 use, reproduce, perform and display the SSI Software in machine executable object code form only for OEM’s internal purposes including integration work with OEM Products only, testing, OEM support, and demonstrations; and

5.1.2 reproduce and distribute the SSI Software, in machine executable object code form only, solely as part of a

-5-

* * * Indicates that confidential treatment has been sought for this information

Product that is incorporated or bundled with the OEM Products and not on a standalone basis.

Such licenses shall be subject to the restrictions set forth in Section 5.3. OEM may sublicense the rights granted in this Section 5.1 only as follows: (i) OEM may sublicense the rights to use the SSI Software incorporated with the OEM Products as part of a Product to OEM Resellers; (ii) OEM may sublicense the rights to use the SSI Software to its End User customers, solely for the purpose of allowing such End User customers to use the SSI Software with OEM Products as part of a Product; and (iii) to Third Party Support Providers for the sole purpose of such providers supporting OEM in their use of the Products.

5.2 Documentation License to OEM. SSI grants to OEM a non-exclusive, nontransferable (except as permitted under Section 11.5), revocable, royalty-free license to:

5.2.1 use, reproduce, perform, display, distribute, and to make, have made, offer for sale, import and sell the Documentation in hard copy and/or read-only soft copy formats solely to the extent that the Documentation is to be used in connection with the Products; and

5.2.2 translate, modify and create derivative works of the Documentation, for the sole purpose of distribution in hard copy and/or read-only soft copy form to (i) OEM Resellers and End Users who have purchased Products from OEM; and (ii) third-parties who provide support services for such Products; provided that such third parties have executed non-disclosure agreements with OEM with provisions substantially similar to those in Section 7.

OEM may sublicense (a) to its Resellers the right (i) to use the Documentation to provide technical support to its End User customers, and (ii) to reproduce and distribute the Documentation solely to the extent that it is to be used in connection with the Products, and (b) to Third Party Support Providers for the sole purpose of such providers supporting OEM in their use of the Products, and (c) to its End User customers, the right to use the Documentation solely for the purpose of allowing such End User customers to use the SSI Software with OEM Products as part of a Product.

5.3 Restrictions. OEM shall not itself, or through any Affiliate, Agent, or third party: (a) sell, lease, license, or sublicense the SSI Software or the Documentation (except as expressly permitted in Section 5.1 and 5.2), (b) decompile, disassemble, reverse engineer, or otherwise attempt to derive source code from the SSI Software, in whole or in part, except to the extent such restriction is prohibited by applicable law; (c) modify or create Derivative Works from the SSI Software; or (d) use the SSI Software to provide processing services to third parties or otherwise use the SSI Software on a service bureau basis, electronically distribute or timeshare the SSI Software or market the SSI Software by interactive cable or remote processing services. OEM may use or permit the use of SSI Software for purposes of conducting comparative analysis, evaluations, or product benchmarks, but may not knowingly allow publication of the results without SSI’s prior written approval.

5.4 Copyright Notices. OEM agrees that it will not remove any copyright notices, proprietary markings, trademarks, or trade names from the SSI Software or Documentation. OEM shall reproduce SSI’s copyright notice (if any) and all other proprietary notices on all copies of SSI Software or Documentation that OEM makes, including copies in machine-readable form. All copies of SSI Software and Documentation shall be and remain the property of SSI or, if applicable, SSI’s licensor.

5.5 Sublicense Obligations. With respect to each copy of the SSI Software that OEM distributes to a OEM End User or other third-party, OEM shall either (i) distribute the software with the SSI End User License Agreement that SSI includes with the software and appears to the End User when the software is booted, or (ii) include in OEM’s own software license agreement for the OEM Product provisions at least as protective of the SSI and the SSI Software as those set forth in Exhibit D. OEM shall indemnify and hold SSI harmless from and against warranty claims made by End Users for warranties made by OEM that exceed the scope of the warranty expressly set forth above.

5.6 Master CDs.

-6-

* * * Indicates that confidential treatment has been sought for this information

5.6.1 OEM shall acknowledge receipt of master versions of the SSI Software in machine executable object code format together with SSI’s label and Documentation artwork data files, in electronic format. OEM shall be responsible for copying the SSI Software and Documentation from the supplied master versions, packaging the SSI Software and Documentation for shipment, creating and generating labels, and printing copies of the Documentation. OEM will use labels and Documentation artwork substantially similar in design, layout, color and other details to the labels and artwork used by SSI, or will submit such labels and Documentation artwork to SSI for SSI’s prior written approval. Labels and Documentation will be submitted sufficiently in advance of distribution to provide SSI the reasonable opportunity to review such materials.

5.6.2 OEM will inspect the master versions of SSI software upon receipt thereof and may reject them for defects in materials and workmanship of the media by informing SSI in writing and returning the media to SSI for replacements.

5.6.3 Trademarks. With SSI’s prior written consent, OEM may place the name SSI, or any of SSI’s trademarks or service marks, on any Products sold hereunder, and, with such consent, may use such marks in advertising or promotional materials. Notwithstanding the foregoing, OEM shall not use the name SSI or any of SSI’s trademarks or service marks as part of its corporate or other legal name, or as part of the name under which it conducts business. OEM may not remove or alter the SSI name, or any of SSI’s trademarks or service marks, which are required by law, which SSI has placed on any Products, sold hereunder. Trademarks and service marks current as of the effective date of this Agreement are set forth in Exhibit H, (“SSI Trademarks”). SSI shall have the right to modify or add trademarks or service marks at any time in its sole discretion and agrees to provide OEM reasonable notice of such modifications and additions.

6. LIMITED WARRANTIES AND DISCLAIMER

6.1 Hardware.

6.1.1 Limited Hardware Warranty. SSI warrants that for a period of * * * from the date of SSI’s shipment of a Product to OEM (the “Hardware Warranty Period”), the SSI Hardware will (a) be free from defects in workmanship and materials, and (b) substantially conform to Specifications or other specifications accepted in writing by SSI. SSI’s sole obligation under this warranty is to use reasonable efforts to correct or replace any non-conforming SSI Software or, in SSI’s sole discretion, to require return of such SSI Software and refund to OEM all amounts paid by OEM hereunder with respect to the nonconforming Product of which the SSI Software is a part. Warranty claims must be made within * * * after the end of the Hardware Warranty Period, and must be made by OEM and not by End Users or OEM Resellers.

6.1.2 Exclusions from Hardware Warranty. The hardware warranties in Section 6.1.1 do not apply to any SSI Hardware that has been misused including, without limitation, static discharge, improper installation, repair, or accident), neglected, or modified, or is not capable of being tested by SSI under its normal test conditions.

6.1.3 Remedies. SSI’s obligations to OEM for a SSI Hardware failing to meet the hardware warranty in Section 6.1.1 is, at SSI’s discretion, to replace or repair the Product or part thereof, or to issue OEM a credit for the purchase price of the Product; provided that: (a) SSI has received written notice of the warranty claim within the Hardware Warranty Period; and (b) after SSI’s written authorization, OEM has returned the SSI Hardware to SSI, freight prepaid; and (c) SSI has determined that the SSI Hardware is defective or nonconforming. SSI warrants a replacement or repaired SSI Hardware only for the remaining term of the warranty applicable to the repaired or replaced SSI Hardware. THE FOREGOING PROVISIONS OF THIS SECTION 6.1 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF SSI, AND THE EXCLUSIVE REMEDY OF OEM WITH RESPECT TO BREACH OF THE HARDWARE WARRANTY IN SECTION 6.1.1.

-7-

*** Indicates that confidential treatment has been sought for this information

6.2 Return Material Authorization. During the Warranty Period, OEM may obtain a replacement Product, or Part by contacting OEM the currently assigned SSI customer service representative supporting OEM to request a Returned Material Authorization (“RMA”) number and providing the following information: (a) the serial number of the Product from which the failed Product, or Part originated; and (b) a brief, written description of the failure, such description to include how the failure was discovered, where the failure was discovered, and (c) what action was taken by OEM or the Third Party Support Provider to remedy the situation; and (d) the location where the replacement SSI Hardware is to be shipped; and (e) whether OEM is requesting that SSI perform a failure analysis. After receipt of the above information and verification that the specific SSI Hardware is within the Hardware Warranty Period, SSI will use reasonable efforts to issue an RMA number within * * * of receiving the request.

6.3 Replacement Product. Within * * * after issuing the RMA number, SSI will ship replacement Product or Part against OEM’s Order, at SSI’s expense freight prepaid, to the ship-to location specified by OEM and will invoice OEM for the cost of the replacement Product or Part as specified in the then-current SSI price list as of the shipment date. Packaging material and a return address label will be included with the replacement Product or Part. OEM shall use such material and label when returning the failed Product or Part to SSI. SSI must receive the failed Product or Part from OEM within * * * from the date of issuance of the RMA number. Upon receipt of the failed Product or Part within such * * * period, SSI will credit OEM for the cost of the replacement Product or Part. If OEM fails to return the failed Product or Part within such * * * period, OEM must pay for the replacement Product or Part.

6.4 Disk Drive. Upon expiration of the Hardware Warranty Period, to the extent permitted and feasible, SSI will pass through to OEM the benefits of any warranties provided to SSI by its applicable disk drive supplier, if any. SSI makes no representations of any kind regarding the existence, nature and duration of any such warranties.

6.5 Software Warranty.

6.5.1 Limited Warranty. SSI warrants that the SSI Software will perform substantially accordance with the Documentation for a period of * * * from the date of SSI’s shipment of a Product to OEM (the “Software Warranty Period”). SSI’s sole obligation under this warranty is to use reasonable efforts to correct or to replace any non-conforming SSI Software or, in SSI’s sole discretion, to require return of such SSI Software and refund to OEM all amounts paid by OEM hereunder with respect to the Product of which the nonconforming SSI Software is a part. THE FOREGOING PROVISIONS OF THIS SECTION 6.5.1 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF SSI, AND THE EXCLUSIVE REMEDY OF OEM WITH RESPECT TO BREACH OF THE SOFTWARE WARRANTY IN SECTION 6.5.1. The warranty in this Section 6.5.1 is made to and for the benefit of OEM only and is non-transferable to OEM Resellers or End Users. Warranty claims must be made within * * * after the * * * Software Warranty Period, and must be made by OEM and not by OEM Resellers or End Users.

6.5.2 Exclusions from Software Warranty. The warranty in Section 6.5.1 will apply only if: (a) the SSI Software has been properly installed and used at all times and in accordance with the instructions for use; and (b) no modification, alteration or addition has been made to the SSI Software by persons other than SSI or SSI’s authorized representative; and OEM has not requested modifications, alterations or additions to the SSI Software that cause it to deviate from the Documentation.

6.6 WARRANTY DISCLAIMER.

6.6.1 THE WARRANTIES AND REMEDIES STATED IN THIS ARTICLE 6 ARE EXCLUSIVE. SSI DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. SSI NEITHER

-8-

* * * Indicates that confidential treatment has been sought for this information

ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO ASSUME FOR IT ANY OTHER LIABILITY IN CONNECTION WITH THE SALE, INSTALLATION, OR USE OF ITS PRODUCTS.

6.6.2 SSI DISCLAIMS ANY AND ALL LIABILITY RELATED TO THE USE OF ANY PRODUCT IN ANY HIGH RISK APPLICATION WHERE THE FAILURE OF THE PRODUCT COULD CAUSE A LIFE-THREATENING SITUATION, INCLUDING BUT NOT LIMITED TO, MEDICAL, NUCLEAR, AVIATION, NAVIGATION, OR MILITARY APPLICATIONS. OEM WILL NOT USE THE PRODUCT IN ANY HIGH RISK APPLICATION WHERE THE FAILURE OF THE PRODUCT COULD CAUSE A LIFE-THREATENING SITUATION, INCLUDING BUT NOT LIMITED TO, MEDICAL, NUCLEAR, AVIATION, NAVIGATION, OR MILITARY APPLICATIONS AND AGREES TO DEFEND, INDEMNIFY, AND HOLD SSI HARMLESS AGAINST ANY LOSS, LIABILITY, OR DAMAGE OF ANY KIND THAT SSI INCURS AS A RESULT OF OEM’S BREACH OF THE FOREGOING COVENANT.

6.7 PROTOTYPES AS IS. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT, SSI PROVIDES PROTOTYPES “AS-IS”, WITHOUT WARRANTY OF ANY KIND.

6.8 Out of Warranty Repair. OEM may request out-of-warranty repair by contacting the currently assigned SSI customer service representative supporting OEM to request a Returned Material Authorization (“RMA”) number and provide the following information: (i) the serial number of the Product from which the failed Product, or Part originated; (ii) a brief, written description of the failure, such description to include how the failure was discovered, where the failure was discovered, and what action was taken by OEM or the third-party service organization to remedy the situation, and (iii) the location where the replacement part is to be shipped. OEM should also indicate whether a failure analysis is requested.

6.8.1 Procedure. After receipt and verification of the request, SSI will use reasonable efforts to issue an RMA number within * * * of receiving the request. OEM shall return such Products to SSI’s facility by freight prepaid. SSI shall return the repaired or replaced Products to OEM designated location at OEM’s expense. SSI shall repair or replace Product at the highest possible revision level unless otherwise specified by OEM and agreed to by SSI.

6.8.2 Unable to Repair. In the event SSI cannot repair the returned Product and notifies OEM of such, OEM shall notify SSI whether or not SSI shall scrap such defective Product. OEM shall bear all of the cost to return such un-repairable parts to OEM’s facility.

6.8.3 Replacement Product. SSI will ship a replacement Product or Part to the ship-to location specified by OEM within * * * after issuing the RMA number, and will invoice OEM for the cost of the replacement Product or Part as specified in the then-current price list. Packaging material and a return address label will be included with the replacement Product or Part for OEM’s use in returning the failed Product or Part to SSI. OEM must return the failed Product or Part within * * * from the date of issuance of the RMA number. Upon receipt of the failed Product or Part within such * * * period, SSI will credit OEM for the cost of the replacement Product or Part. If OEM fails to return the failed Product or Part within such * * * period, OEM must pay for the replacement Product or Part.

6.8.4 Failure Analysis Request. If OEM requests a failure analysis at the time of the RMA request, SSI will begin such failure analysis after receipt of the failed Part, if such Part was designed and manufactured by SSI. At SSI’s sole discretion, SSI may send Parts not designed and manufactured by SSI to the Part manufacturer for failure analysis. Upon completion of the failure analysis, SSI will provide to OEM a written failure analysis report when it is reasonable to do so, as well as a corrective action report where appropriate.

-9-

* * * Indicates that confidential treatment has been sought for this information

7. CONFIDENTIALITY

7.1 Definition. Each party desires to furnish to the other party certain information that the disclosing party regards as proprietary. Such information may include, but is not limited to, information relating to products, manufacturing processes, business strategies and plans, customer lists, research and development programs, quality and reliability information production disk drives, and failure analysis information (“Confidential Information”). Confidential Information may be furnished in any tangible or intangible form including, but not limited to, writings, drawings, computer tapes and other electronic media, samples, and oral communications. Any Confidential Information furnished in tangible form shall be conspicuously marked as “Confidential” or “Secret”. Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession; or (vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure.

7.2 Non-use and Non-disclosure. Each party agrees not to use any Confidential Information of the other party for any purpose except as necessary to perform its obligations or exercise its rights under this Agreement. For a period of * * * from the date of disclosure by the disclosing party each party agrees that, not to disclose any Confidential Information of the other party to third parties or to such party’s employees, except to those employees of the receiving party and third party contractors who have executed non-disclosure agreements at least as protective of the Confidential Information as this Agreement and who are required to have the Confidential Information in order to perform obligations or exercise rights under this Agreement.

7.3 Maintenance of Confidentiality. Each party agrees that it shall take reasonable measures to protect the secrecy of and avoid disclosure and unauthorized use of the Confidential Information of the other party. Without limiting the foregoing, each party shall take at least those measures that it takes to protect its own most highly confidential information and shall ensure that its employees who have access to Confidential Information of the other party have signed a non-use and non-disclosure agreement in content similar to the provisions hereof, prior to any disclosure of Confidential Information to such employees. Neither party shall make any copies of the Confidential Information of the other party unless the other party previously approves the same in writing. Each party shall reproduce the other party’s proprietary rights notices on any such approved copies, in the same manner in which such notices were set forth in or on the original.

7.4 Authorized Disclosure. Notwithstanding the provisions of this Agreement, each party may disclose the terms of this Agreement (i) in connection with the requirements of an initial public offering or securities filing; (ii) in confidence, to accountants, banks, financing sources, attorneys and their advisors; (iii) in confidence, in connection with the enforcement of this Agreement or rights under this Agreement; and (iv) in confidence, to any purchaser of such party’s assets or to any successor by way of merger, consolidation or otherwise.

8. INDEMNIFICATION

8.1 SSI.

8.1.1 SSI Infringement Indemnity. Subject to the remainder of this Article 8, SSI will at its expense defend or, in its sole discretion settle, any action brought against OEM by a third party to the extent that the action is based upon a claim that OEM’s use of the Product directly infringes any U.S. patent issued on or before the Effective Date or any copyright or misappropriates any trade secret recognized as such under the Uniform Trade Secret law, and will pay those costs and damages, including reasonable attorneys’ fees, finally

-10-

* * * Indicates that confidential treatment has been sought for this information

awarded against OEM or those costs and damages agreed to in a monetary settlement of such action, that are specifically attributable to such claim.

8.1.2 Required Cooperation. SSI’ s obligations under Section 8.1.1 are conditioned on (a) OEM notifying SSI promptly in writing of such action, (b) OEM giving SSI sole control of the defense thereof and any related settlement negotiations, and (c) OEM cooperating with and assisting SSI in such defense (including, without limitation, by making available to SSI all documents and information in OEM’s possession or control that are relevant to the infringement or misappropriation claims, and by making OEM’s personnel available to testify or consult with SSI or its attorneys in connection with such defense).

8.1.3 Exclusions. SSI will not be obligated to defend or be liable for costs or damages if the infringement or misappropriation occurred as a result of (i) OEM’s technology or compliance with OEM’s specifications, other than those expressly approved by SSI; (ii) OEM’s combining with, adding to, or modifying the Product or SSI Software after shipment by SSI, other than those expressly approved by SSI; or (iii) OEM’s failure to use materials or instructions provided by SSI in a timely manner that would have rendered the Product or SSI Software non-infringing, provided that such materials or instructions do not substantially affect the fit or function of the Product(s). If the infringement is alleged before SSI completes delivery of the affected Product or SSI Software under an Order, SSI may decline to make further shipments of that Product or SSI Software without breaching that Order.

8.1.4 Remedies. If the Product becomes, or in SSI’s opinion is likely to become, the subject of an infringement or misappropriation claim, SSI may, at its option and expense, either (a) procure for OEM the right to continue using the Product, (b) replace the Product with a non-infringing substitute product, (c) modify the Product so that it becomes non-infringing, or (d) give OEM a refund or credit for the fees actually paid by OEM to SSI for the infringing Products less a reasonable allowance for the period of time OEM has used the Products. THIS ARTICLE 8 CONTAINS OEM’S SOLE REMEDY AND SSI’S EXCLUSIVE LIABILITY FOR ANY AND ALL INTELLECTUAL PROPERTY INFRINGEMENT OR MISAPPROPRIATION RELATING TO THE PRODUCTS.

8.2 OEM. OEM shall defend, indemnify and hold SSI, and SSI’s officers, directors, and employees and agents harmless against any and all third party claims against SSI, including, without limitation, claims of infringement or misappropriation of intellectual property rights, arising from: (a) the OEM Products or services provided by OEM in conjunction with the OEM Products excluding the Product, or (b) OEM’s additions or changes to the Products, or use of the Products in combination with other materials not furnished by SSI or with systems, products or components not reasonably anticipated to be used with the Product or part thereof; and OEM shall pay in all such cases the costs, including reasonable attorney’s fees, finally awarded against SSI, provided that SSI: (i) timely notifies OEM of the claim, and (ii) gives OEM a copy of each communication relating to the claim, and (iii) gives OEM the authority, information, and assistance, at OEM’s expense, reasonably necessary to defend or settle the proceeding.

9. LIMITATION OF LIABILITY

IN NO EVENT SHALL SSI HAVE ANY LIABILITY TO OEM OR ANY THIRD PARTY FOR ANY (a) LOST PROFITS OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR (b) ANY DAMAGES WHATSOEVER RESULTING FROM THE PERFORMANCE OR A TEMPORARY OR PERMANENT LOSS OF USE OF PRODUCTS, PARTS, OR SSI SOFTWARE, OR LOSS OR CORRUPTION OF DATA, HOWEVER CAUSED UNDER ANY THEORY OF LIABILITY AND WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STATUTE OR OTHERWISE. THE FOREGOING LIMITATIONS SHALL APPLY EVEN IF SSI HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY STATED HEREIN. SSI’S MAXIMUM AGGREGATE LIABILITY UNDER, ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT, SHALL BE LIMITED TO THE AMOUNT PAID BY OEM FOR THE PRODUCT DEEMED RESPONSIBLE FOR THE LOSS OR DAMAGE.

-11-

* * * Indicates that confidential treatment has been sought for this information

10. TERM & TERMINATION

10.1 Term. The initial term of this Agreement shall be for two (2) years beginning on the Effective Date (“Initial Term”). Thereafter, this Agreement shall be automatically renewed for additional consecutive one (1) year terms (each a “Renewal Term”) unless either party gives the other party written notice of its intent not to renew at least thirty (30) days prior to the renewal date of its intent to not renew.

10.2 Termination.

10.2.1 Convenience. Either party shall have the right to terminate this Agreement for any reason upon giving the other party thirty (30) days prior notice of termination to the other party. If a party gives such notice then the Agreement shall automatically terminate at the end of that period.

10.2.2 Material Breach. If either party materially breaches any provision of this Agreement, then the non-breaching party shall give written notice to the breaching party that if the breach is not cured within * * * of the date of such notice, the Agreement will be terminated. If the non-breaching party gives such notice and the default is not cured during the * * * period, then the Agreement shall automatically terminate at the end of that period.

10.2.3 Bankruptcy. SSI may terminate the Agreement, effective immediately, upon written notice to OEM if OEM: (i) becomes insolvent or declares bankruptcy, (ii) becomes the subject of any proceedings seeking relief, reorganization, or rearrangement under any laws relating to insolvency, (iii) makes an assignment for the benefit of creditors, or (iv) begins the liquidation, dissolution, or winding up of its business.

10.2.4 Failure to Pay. SSI may terminate this Agreement, effective immediately, by written notice to the OEM if the OEM fails to pay any sum due under the terms of this Agreement which remains unpaid for * * * after receipt of notice in writing from SSI requesting such payment.

10.3 Return of Materials. Within * * * after the termination or expiration of this Agreement, both parties shall return to each other all Confidential Information in its possession or, if so instructed by SSI or OEM, destroy the Confidential Information and provide each other with written certification regarding such destruction. OEM or SSI shall not make, use, dispose of or retain any copies of any confidential items or information that may have been entrusted to it. Effective upon the termination or expiration of this Agreement, OEM or SSI shall cease to use of all Trademarks.

10.4 Fulfillment of Orders upon Termination. Upon termination of this Agreement for other than OEM’s breach or upon expiration thereof, SSI shall continue to fulfill, subject to the terms of Article 5, all Orders acknowledged by SSI prior to the date of termination or expiration.

10.5 Repurchase Option. Following termination, SSI may, at its option, elect to purchase Products remaining in OEM’s inventory at the Price paid by OEM for such Product. In the event, SSI does not make this election; OEM shall sell or license its remaining Products strictly in accordance with the terms of this Agreement.

10.6 Survival of Certain Terms. The following Articles and Sections shall survive the termination or expiration of this Agreement for any reason: Articles Definitions, 7, 8, 9 and 1 land Sections 1.4, 2.3, 2.4.1, 6.6, 6.7, 10.3, 10.4, 10.5, and 10.6. All other rights and obligations of the parties shall cease upon termination or expiration of this Agreement.

11. GENERAL

11.1 U. S. Export Control. OEM acknowledges that the Products are subject to regulation by agencies of the United States Government, including without limitation the United States Department of Commerce, which prohibit export or diversion of certain products and technology to certain countries. Any and all obligations of SSI to provide the Products, documentation, or any media in which any of the foregoing is contained, as well as any other technical assistance is subject in all respects to such United States laws and regulations as shall from time to

-12-

* * * Indicates that confidential treatment has been sought for this information

time govern the license and delivery of technology and products abroad by persons subject to the jurisdiction of the United States. OEM shall comply with the Export Administration Regulations and other United States laws and regulations governing exports in effect from time to time, and without limiting the above, OEM shall not export or re-export, or otherwise provide, the Products or any technical data related thereto, or the direct product of such technical data, to any country, or to a national of any country, as to which the U.S. Government has placed an embargo against the shipment of products. In the event that any SSI Software includes encryption or is to be modified to include encryption, SSI shall inform OEM of that fact at least * * * prior to availability of such modified SSI Software and shall make available to OEM any and all information that OEM may reasonably request with respect to such encryption, and assist OEM in obtaining an export license, subject to the nondisclosure provision in Article 7.

11.2 Publicity. Either party may publish a press release concerning this Agreement upon prior written consent of the other party. Each party may engage in ongoing advertising, publicity, releases, or other disclosures of information (other than Confidential Information) concerning this Agreement during the term of this Agreement, provided neither party engages in deceptive, misleading, or unethical practices in its marketing and selling of Products.

11.3 Language. All correspondence between OEM and SSI shall be conducted in English, with numbers presented in US dollars.

11.4 Independent Contractors. OEM and SSI are independent contractors. Nothing in this Agreement is intended to establish or authorize either party as an agent, partner, legal representative, joint venture, franchisee, employee, or servant of the other for any purpose. Neither party will make any contract, agreement, warranty, or representation on behalf of the other party, or incur any debt or other obligation in the name of the other party, or act in any manner that has the effect of making that party the apparent agent of the other. Neither party will assume liability for, or be deemed liable as a result of, any such action by the other party. Neither party will be liable by reason of any act or omission of the other party in the conduct of its business or for any resulting claim or judgment.

11.5 Assignment. OEM may not assign this Agreement or any of its respective rights and obligations under this Agreement without the express written consent of SSI before that assignment. Any assignment hereunder will not relieve OEM of its outstanding financial or other obligations, if any, incurred before the assignment. Subject to the foregoing, this Agreement will be binding upon, enforceable by, and inure to the benefit of the parties and their respective successors and assigns. Any attempted assignment in violation of this Section 11.5 shall be null and void. Consent must not be unreasonably withheld.

11.6 Choice of Law. This Agreement shall be construed and interpreted in accordance with the law of the State of California (except its choice of law rules).

11.7 Force Majeure. Neither party will incur any liability to the other party on account of any loss or damage resulting from any delay or failure to perform all or any part of this Agreement if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the reasonable control and without negligence of the parties. Such events, occurrences, or causes will include, without limitation, acts of God, strikes, lockouts, riots, acts of war, failures of the Internet, earthquakes, fire and explosions, but the inability to meet financial obligations is expressly excluded.

11.8 Waiver. Any waiver of the provisions of this Agreement or of a party’s rights or remedies under this Agreement must be in writing to be effective. Failure, neglect, or delay by a party to enforce the provisions of this Agreement or its rights or remedies at any time, will not be construed and will not be deemed to be a waiver of such party’s rights under this Agreement and will not in any way affect the validity of the whole or any part of this Agreement or prejudice such party’s right to take subsequent action. Except as expressly stated in this Agreement, no exercise or enforcement by either party of any right or remedy under this Agreement will preclude the enforcement by such party of any other right or remedy under this Agreement or that such party is entitled by law to enforce.

-13-

* * * Indicates that confidential treatment has been sought for this information

11.9 Severability. If any term, condition, or provision of this Agreement, or portion thereof, is found to be invalid, unlawful or unenforceable to any extent, the parties shall endeavor in good faith to agree to such amendments that will preserve, as far as possible, the intentions expressed in this Agreement. Such invalid term, condition or provision will be severed from the remaining terms, conditions and provisions, which will continue to be valid and enforceable to the fullest extent permitted by law.

11.10 Notices. All notices or reports permitted or required under this Agreement shall be in writing and shall be delivered in person, mailed by first class mail, postage prepaid, (registered or certified), or sent by telecopy, to the party to receive the notice at the address set forth at the beginning of this Agreement or such other address as either party may specify in writing. All such notices shall be effective upon receipt.

11.11 Amendments. No amendment to this Agreement will be binding unless agreed to in writing and executed by OEM and a vice president of SSI, and no approval, consent, or waiver will be enforceable unless signed by both parties. No document will be deemed to amend this Agreement by implication.

11.12 Counterparts. This Agreement may be executed in counterparts, each of which so executed will be deemed to be an original and such counterparts together will constitute one and the same agreement.

11.13 Headings. Article, Section, Exhibit and Schedule headings are for ease of reference only and do not form part of this Agreement.

11.14 Entire Agreement. This Agreement (including the Exhibits and any addenda hereto signed by both parties) contains the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes all previous communications, representations, understandings and agreements, either oral or written, between the parties with respect to said subject matter.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their duly authorized representatives as of the Effective Date.

LSI STORAGE SYSTEMS, INC.	BLUEARC CORPORATION
By:    /s/ Flavio Santoni	By:    /s/ Erik Milla
Print Name:    Flavio Santoni	Print Name:    Erik Milla
Title:    SVP Sales + Mktg	Title:    Sr. VP Finance + CFO

LSI Logic Legal Department

Approved as to form by

Audrey S. Garfield

Date: November 12, 2003

-14-

* * * Indicates that confidential treatment has been sought for this information

EXHIBIT A

PRODUCTS, PARTS, SSI SOFTWARE

Products:

* * *

SSI Software:

* * *

-15-

* * * Indicates that confidential treatment has been sought for this information

EXHIBIT B

APPROVED TERRORITY(IES)

* * *

-16-

* * * Indicates that confidential treatment has been sought for this information

EXHIBIT C

TECHNICAL SUPPORT AND MAINTENANCE TERMS

Scope

OEM shall cause each End User and OEM Reseller to receive technical support and maintenance services directly from OEM pursuant to a written support and maintenance agreement (“OEM Support and Maintenance Agreement”). OEM shall ensure that all questions regarding the use or operation of the Products are addressed to and answered by OEM, and OEM will not represent to any third party that SSI is available to answer any OEM questions directly. SSI may refer any OEM service questions relating to the Products distributed hereunder to OEM. End Users or OEM Resellers may not participate in OEM/SSI support calls unless specifically requested by SSI Technical Support.

SSI shall provide Level 3 and Level 4 Technical Support to OEM. It is expected that OEM be experienced in, capable of, and staffed to provide, Level 1 and Level 2 support (as defined below). SSI will provide Level 3 and Level 4 support (as defined below).

1. SUPPORT

1.1 Level 1 Support.

Level 1 support is 1st line, direct End User and OEM Reseller contact, via a telephone call-handling group provided by OEM. OEM agrees that it shall be responsible for supporting End Users and OEM Resellers to whom it distributes the Products in accordance with the OEM Support and Maintenance Agreement, but in no event shall the OEM’s hours for End User and OEM Reseller support be less than the hours which OEM shall receive technical support from SSI as indicated on this Exhibit C.

Level One Support shall include:

a) First contact and direct End User and OEM Reseller interaction

b) Clarification of functions and features of the Product and Documentation pertaining to the Product

c) Guidance in the operation of the Product, including, without limitation, the SSI Software

d) Error verification, analysis and correction to the extent possible by telephone.

e) Information collection and analysis

f) Identification of whether the problem is known and has a known solution

g) Troubleshooting and problem reproduction

h) Problem report administration and tracking

1.2 Level 2 Support.

Level 2 support is “technical support” provided by OEM personnel and is typically where the Product “experts” reside and serve as the escalation point for Level 1.

Level Two Support includes:

a) Resolution of all known problems

b) Installation and configuration issues

c) Assistance with the Product, including, without limitation, the SSI Software, including, without limitation, firmware or driver updates at the End User site

d) Search SSI posted Technical Notes, Knowledge Database, and other technical information supplied that will assist in providing problem resolutions

Should the Level 2 analyst be unable to resolve a problem, either because of lack of expertise, exhausted troubleshooting knowledge, or expiration of the allotted Level 2 resolution time, OEM may escalate the problem to SSI Level 3 Technical Support for resolution. OEM shall designate a limited and mutually agreed upon number

-17-

* * * Indicates that confidential treatment has been sought for this information

of support personnel (Level 2) as those authorized to contact SSI for Level 3 Technical Support (“Authorized Personnel”). OEM may change those Authorized Personnel upon written notice to SSI.

1.3 Level 3 Support.

When OEM escalates to SSI Level 3 Technical Support SSI shall use commercially reasonable resources and efforts to resolve reported problems. In order to escalate a problem to SSI Level 3, OEM must first create an Incident Report. To create an Incident Report, OEM can either (a) directly access the SSI support tracking system (the “WINS System”) via SSI’s Support Web. Site at http://www.SSIlogicstorage.com/supoort/ or (b) contact SSI Technical Support by calling SSI’s technical support number 866-625-3993 or (c) email the problem to an established “support” alias. SSI Level 3 technical support personnel are available seven (7) days a week, twenty four (24) hours a day and every day of the year. Regardless of the method OEM uses to create an Incident Report, OEM shall provide SSI with at least the following information to the extent where reasonably possible given the availability of such information in order to open a Level 3 Support Incident Report with SSI:

¡ End User or OEM Reseller information

¡ OEM call reference number

¡ Version & build number of the Product SYMplicity/SANtricity

¡ Host OS version (including service pack info. for NT and/or patch base)

¡ Appware/Bootware/Firmware version(s) on the module(s)

¡ What types of controllers (3240, 3621, 4766, 4774, N7400, etc.)

¡ ESM Firmware version (if applicable)

¡ Drives and drive firmware (if applicable)

¡ Controller mode (Active/Active, Active/Passive)

¡ How many controllers/modules are in the configuration

¡ How are the modules configured (agent, network, switch, hub, etc.)

¡ What is the host platform (Sun E4500, Sun Ultra 5, HP K570, Dell PowerEdge 4300, etc.)

¡ Host adapter(s) name and firmware driver version

¡ Current Module Profile if possible

¡ Log files from the Backup Application Software.

¡ Names and firmware revisions of hardware equipment.

¡ The server’s OS log files

¡ Support log output from other devices or software in the configuration.

¡ A detailed description of the problem that is the subject of the Incident Report and any/all events, actions, and information leading up to the reported problem.

-18-

* * * Indicates that confidential treatment has been sought for this information

1.4 Level 4 Support

Level 4 Support is the highest, level of escalation support available from SSI. This escalation process is used for complex problems requiring assistance from SSI Engineering Development, or other personnel that have more in depth knowledge of the Products. A “Defect” is defined as the assigned Severity level for a given Incident Report. SSI will use reasonable efforts to correct the problem described in the Incident Report in accordance with the procedures set forth in this Exhibit. After receiving an Incident Report SSI shall assign the Incident Report a Defect Severity level in accordance with the table below. SSI shall have no obligation to correct any problem that cannot be duplicated by SSI.

2. SEVERITY

DEFECT SEVERITY LEVEL	DEFINITION	SERVICE OBJECTIVE RESPONSE TIME	TARGET DEFECT RESOLUTION TIME
Severity 1	SSI Product is not operational and all data is inaccessible. Data flow is completely stopped resulting in critical impact to the End User’s business. Support personnel will require continuous availability of OEM contact until resolution of the problem	Provide OEM with a Response to its initial request within 30 minutes. For the purpose of this Exhibit a “Response” is defined as a fax, e-mail or telephone call from SSI acknowledging that an Incident Report has been received, details on what SSI has learned about the problem as of the time of communication, that appropriate technical personnel have been assigned to work on the problem and SSI’s initial analysis of, and initial action plan for resolving (to the extent any such action plan is available), the reported problem. Provide OEM with a Response to its initial request within 1 hour.	SSI resources will be applied continuously until a solution or acceptable work-around is developed SSI will use reasonable efforts to provide an interim solution or resolve the Defect in less than 5 days from the date of the initial Incident Report. If SSI provides a work-around, fix or patch the Severity level of the problem will be downgraded.
Severity 2	Product is operational, but has severely restricted functionality or degradation that is impacting the End User’s business.	Provide OEM with a response to its initial request within 1 hour	Resources applied continuously, during SSI’s normal business hours, until a solution or work-around is developed. SSI will use reasonable efforts to provide an interim solution or resolve the Defect in less than 15 days from the date the initial Incident Report. If SSI provides a work-around, fix or patch the Severity level of the problem will be downgraded.
Severity 3	Product is operational with functional limitations or restrictions that are not critical to the overall OEM	Provide OEM with a Response to its initial request within 1 hour.	SSI will use reasonable efforts to provide a solution to the issue raised as a Severity 3 Defect in the next maintenance release after the date of

-19-

* * * Indicates that confidential treatment has been sought for this information

DEFECT SEVERITY LEVEL	DEFINITION	SERVICE OBJECTIVE RESPONSE TIME	TARGET DEFECT RESOLUTION TIME
	operations.		problem intake. SSI resources will be applied on an as available basis. If SSI provides an interim solution the Severity level of the problem will be downgraded.
Severity 4	Low or no impact problems or questions associated with product usage, implementation, performance or any other inquiries.	Provide OEM with a Response to its initial request within 1 hour	SSI will use reasonable efforts to answer generic questions or provide path to answers within reasonable time frames. The SSI web site will be the prime repository for this type of information. Enhancement requests will be reviewed on a case-by-case basis and may be implemented in the next major release, where feasible, or to meet specific commitments made.

The goal for initial response time to all telephone support requests is thirty (30) minutes or less during normal SSI working hours. The Goal for after hours telephone requests is one (1) hour or less. The targeted response time for requests submitted by other means, such as email, or fax, is four (4) hours.

OEM agrees to provide SSI with reasonable access to all necessary personnel to answer questions about any problems reported by OEM regarding the Products. OEM also agrees to promptly implement all Updates, workarounds, fixes and patches provided by SSI under this Agreement.

3. PROBLEM TRACKING

SSI will open a ticket in its problem tracking database system for all problems reported by OEM.

3.1 OEM will maintain its own internal problem database and record all problems reported to SSI Technical Support. OEM will be responsible for tracking and updating its internal problem reports.

3.2 OEM will have Internet access to SSI’s problem tracking database system for all open/closed tickets for their account to get immediate ticket status.

3.3 OEM will have Internet access to SSI’s Knowledge Database of resolved Defects

4. ESCALATION GUIDELINES FOR OEM AND SSI.

SSI shall escalate those Defects for which a work-around, fix or patch or interim solution is not found through its Support and Maintenance Services organization in accordance with the following time frames:

-20-

* * * Indicates that confidential treatment has been sought for this information

Severity 1 Defect Elapsed Time	Severity 1 Defect Escalation	Severity 2 Defect Elapsed Time	Severity 2 Defect Escalation
1 hour	OEM: 1st level management SSI: Level 3 Technical Support	4 hours	OEM: 1st level management SSI: Level 3 Technical Support
2 hours	OEM: 1st level management SSI: Mgr Level 3 Technical Support	12 hours	OEM: 1st level management SSI: Mgr Level 3 Technical Support
4 hours	OEM: Director Level SSI: Director or VP of Support	48 hours	OEM: Director Level SSI: Director or VP of Support
Severity 3 Defect Elapsed Time	Severity 3 Defect Escalation	Severity 4 Defect Elapsed time	Severity 4 Defect Escalation
48 hours	OEM: 1st level management SSI: Level 3 Technical Support	72 hours	OEM: 1st level management SSI: Level 3 Technical Support
72 hours	OEM: 1st level management SSI: Level 3 Technical Support	96 hours	OEM: 1st level management SSI: Level 3 Technical Support
5 Business Days	OEM: Director Level SSI: Director or VP of Support	7 Business Days	OEM: Director Level SSI: Director or VP of Support

Table 2

Escalation Guidelines for OEM and SSI

5. DOCUMENTATION

5.1 SSI shall provide OEM with available Product information including, without limitation, FRU theories of operation, system diagnostics for problem determination, instructions for the replacement of FRU’s, calibration and error code information and recommended maintenance parts as outlined in the current OEM agreement.

5.2 OEM may request SSI provide all Technical Documentation in electronic format. SSI grants OEM a non-exclusive, nontransferable (except as permitted under Section 11.5 of the Agreement), revocable, royalty-free license to modify, reproduce and distribute copies of all the Technical Documentation at no cost, provided that these copies include all copyright and related proprietary rights of SSI and may only be used for OEM’s internal use.

For the purpose of this Exhibit “Technical Documentation” shall include all technical support documentation relating to the Product including, without limitation, service bulletins, maintenance manuals, diagnostic manuals, technical tips, and training information.

6. DIAGNOSTICS

SSI shall provide OEM with the diagnostics tools and tests to verify the operation of the Product, and diagnostic problems and failures.

7. ON-SITE SUPPORT

If a Product, Part or SSI Software that is still under warranty poses a particularly difficult problem, and SSI and OEM agree that it is warranted, a member of SSI Technical Support may accompany OEM to an End User or OEM Reseller site in an effort to resolve such problem. If SSI determines that the reported problem was attributable to a breach of an applicable SSI warranty in this Agreement, SSI shall cover the costs and expenses incurred by the SSI Technical Support representative in making such site visit. If the problem was not attributable to a breach of warranty, OEM shall reimburse SSI for all reasonable costs and expenses incurred in making such site visit. OEM will provide SSI with written notice of a request for on-site assistance at least ninety-six (96)

-21-

* * * Indicates that confidential treatment has been sought for this information

hours prior to the date upon which such request is sought. In the case of an emergency and upon mutual agreement, the prior notice may be waived.

8. SSI SOFTWARE UPDATES

Updates. SSI shall provide OEM notification in writing of Updates to the SSI Software as they become available. The contents of all Updates shall be decided upon by SSI in its sole discretion and will generally include Updates to the most current release of the SSI Software then being generally marketed by SSI. OEM shall obtain Updates by download from the SSI Technical Support Internet site. Updates will be accompanied by a release report detailing any special installation procedures, product problems corrected, and/or End User Documentation changes.

Update Documentation. SSI will provide standard product Documentation for each Update for distribution to End Users and OEM Resellers in accordance with the licenses in this Agreement.

Emergency Fixes. SSI will provide OEM with software release documentation to accompany all releases of emergency software fixes. This documentation will be available in an agreed upon electronic format. SSI grants OEM a non-exclusive license to use, reproduce and distribute such documentation to End Users and OEM Resellers only.

On-Line Technical Information. SSI will provide technical information to OEM in an on-line Internet accessible format. This information shall include, without limitation, release reports, frequently asked questions and technical tips.

9. TECHNICAL SUPPORT TRAINING

9.1 General technical Training.

These courses are intended to train a limited number of OEM employees on the technical aspects of the Products. These employees will, in turn, train other OEM personnel. SSI will provide up to * * * technical training classes related to SSI products for up to * * * OEM personnel (each class) at * * *. Upon a Major Change to an SSI Product, SSI will provide * * * technical training class relating to the Major Change for up to * * * OEM personnel at * * *. This training will be held at either SSI’s Wichita, Kansas training facility, or at SSI’s option, SSI’s Milpitas, California facility. OEM also requires * * * non-formal training class to be held in the BlueArc facility in the United Kingdom. Additional technical training classes may be provided for OEM employees at SSI’s then-current training rates as of the date of such training.

9.2 Level 3 Technical Training.

Level 3 Technical Training will be available only for OEM Level 3 technical support personnel. SSI will provide * * * Level 3 training class related to SSI products for up to * * * OEM Technical Support Engineers at * * *. SSI Technical Support Engineers will conduct these training classes. Training will be held at SSI’s Wichita, Kansas facility.

9.3 OEM Training Expenses

* * *.

9. EXCLUSIONS

SSI shall not be responsible for a breach of its obligations under this Support and Maintenance Services Exhibit to the extent such breach is caused by: (a) OEM’s failure to implement any Update delivered to OEM by SSI, provided that SSI has provided OEM with written notice that implementation of such Update is required to eliminate such breach and provided further that such Update has successfully completed the testing process for such Update; (b) any alterations of or additions to the Product or part thereof, including, without limitation, the SSI Software performed by a party other than SSI

-22-

* * * Indicates that confidential treatment has been sought for this information

or a third party acting on SSI’s behalf or at its direction; (c) use of the Product or part thereof, including, without limitation, the SSI Software in a manner not consistent with the Documentation and specifications; (d) use of the Product or part thereof including, without limitation, the SSI Software in a configuration not set forth in the Documentation, including, without limitation, the SSI Interoperability Matrix, or specifications, or in conjunction with systems, products or components not reasonably anticipated to be used with the Product or part thereof, including, without limitation, the SSI Software; or (e) any act or omission of OEM or any of its third party subcontractors that causes the breach by SSI.

10. TECHNICAL SUPPORT PRICING AND PAYMENT

Level 3 & 4 support

7 days/week, 24 hrs/day, 365 days/year Annual contract fee and payment schedule as specified in Exhibit A (“Annual Support and Maintenance Fee”).

SSI may change the Annual Support and Maintenance Fee due under this Agreement by providing OEM with written notice at least ninety (90) days prior to the date upon which OEM commenced receipt of support and maintenance under this Exhibit (“Renewal Date”).

Payment. SSI will offer * * * after hours service to OEM after initial OEM release, not to exceed * * * incidents. After such time, OEM shall issue a purchase order for the Support and Maintenance Fee to be bundled in * * * incident packages that will be * * * pre-paid. OEM may purchase call incident bundles at any time. If OEM receives any support services in addition to those covered by the Annual Support and Maintenance Fees, such services shall be mutually agreed upon by the parties and charges for such services will be invoiced monthly. The payment of such invoices shall be payable upon receipt by the OEM of the related invoice.

Taxes. The Annual Support and Maintenance Fee does not include any taxes, duties or charges of any kind (including any withholding or value-added taxes) imposed by any federal, state or local governmental entity for products or services provided under this Agreement, excluding only taxes based solely on OEM’s net income. When appropriate, amount shall be due upon invoice to OEM and shall be paid as provided above unless OEM provides OEM with a valid tax exemption certificate authorized by the appropriate taxing authority.

-23-

* * * Indicates that confidential treatment has been sought for this information

EXHIBIT D

MINIMUM REQUIRED TERMS FOR SSI SOFTWARE LICENSE AGREEMENT

Any agreement between either OEM or a OEM Reseller and any OEM End User with regard to such End User’s use of the SSI Software shall include terms consistent with those set forth in this Exhibit D.

a. The End User will have a non-exclusive, non-transferable license to use the SSI Software only on or in connection with the Product, only for the term as agreed to between Reseller and the End User. The End User may not make any copies of the SSI Software.

b. The End User must at all times maintain the confidentiality of the SSI Software and any other material relating to the SSI Software and may not sublicense, transfer, sell, rent, disclose, make available or otherwise communicate the SSI Software to any other person, or use the SSI Software.

c. The SSI Software may only be used by the End User, and the End User shall not sublicense or otherwise permit the SSI Software to be used by or for the benefit of any other party, nor use the SSI Software at any time after the Agreement terminates or after the term of the End User’s license to use the SSI Software expires.

d. The SSI Software and all copies thereof shall at all times remain the sole and exclusive property of SSI Logic or its SSI, and the End User shall obtain no title to the same.

e. The End User shall not disassemble, reverse assemble or decompile the SSI Software.

f. The End User must comply with all applicable laws, which control or apply in respect of the SSI Software, including without limitation United States export regulations.

g. The End User shall be restricted from use of the SSI Software in any high risk applications.

h. SSI disclaims all warranties, express and implied, including the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement and those arising from a course of performance, a course of dealing, or trade usage. SSI Logic does not warrant that the operation of the SSI Software will be uninterrupted or error free or that all deficiencies or errors will be corrected.

i. The Agreement shall automatically terminate in the event of breach of any provision contained herein by the End User, including the license restrictions. The license restrictions shall survive the termination of the Agreement.

j. IN NO EVENT WILL SSI OR ITS SSI’S BE LIABLE TO THE OTHER PARTY OR ANY OTHER ENTITY FOR LOSS OF DATA, COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES OR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, UNDER ANY CAUSE OF ACTION, WHETHER FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, AND WHETHER OR NOT SUCH PARTY OR ITS AGENTS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THIS LIMITATION WILL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

k. SSI is a third party beneficiary of such license agreement to the extent that SSI seeks to enforce its rights regarding the SSI Software.

-24-

* * * Indicates that confidential treatment has been sought for this information

EXHIBIT E

LSI LOGIC STORAGE SYSTEMS, INC.

PRODUCT FUNCTIONAL SPECIFICATIONS

SSI Functional Specifications:

* * *

-25-

* * * Indicates that confidential treatment has been sought for this information

EX-10.5

Exhibit 10.5

MANUFACTURING SERVICES AGREEMENT

THIS AGREEMENT (the “Agreement”) is effective as of October 19, 2006 (the “Commencement Date”), by and between Blue Arc Corporation, a Delaware corporation having a principal place of business at 50 Rio Robles, San Jose, Ca 95134, on behalf of itself and its affiliates or majority-owned subsidiaries (collectively “CUSTOMER”) and SANMINA-SCI CORPORATION, a Delaware corporation having its principal place of business at 2700 North First Street, San Jose, California 95134, on behalf of itself and its affiliates or majority owned subsidiaries (“SANMINA-SCI”). CUSTOMER and SANMINA-SCI are sometimes collectively referred to herein as the “Parties.”

1. TERM

The initial term of this Agreement shall commence on the Commencement Date and shall continue through the first anniversary of the Commencement Date unless sooner terminated by mutual agreement or in accordance with this Agreement. Upon the expiry of the initial term, this Agreement shall continue from year to year until one Party terminates the Agreement by giving at least thirty (30) days’ prior written notice to the other Party. Notwithstanding the foregoing, the term of this Agreement shall automatically extend to include the term of any purchase order (“Order”) issued hereunder.

2. PRICING

2.1 Pricing. During the term, CUSTOMER may purchase from SANMINA-SCI the products specified in Exhibit A hereto, as such Exhibit may be amended from time to time (the “Products”) at the prices set forth in Exhibit A (the “Prices”). Prices (a) are in U.S. Dollars, (b) include SANMINA-SCI standard packaging, (c) exclude the items set forth in Section 2.2, and (d) are based on (i) the configuration set forth in the specifications provided to SANMINA-SCI on which SANMINA-SCI’s quotation was based (the “Specifications”) and (ii) the projected volumes, minimum run rates and other assumptions set forth in SANMINA-SCI’s quotation and/or Exhibit A. The Prices shall remain fixed for the term of the Agreement, subject to CUSTOMER’s prior written approval, which shall not be unreasonably withheld, SANMINA-SCI shall have the right to revise Prices (x) to account for any material variations on the market prices of components, parts and raw material (collectively “Components”), including any such variations resulting from allocations or shortages; (y) the price adjustments set forth in Section 2.3.

2.2 Exclusions from Price. Prices specifically exclude (a) export licensing of the Product and payment of broker’s fees, duties, tariffs and other similar charges; (b) taxes or charges (other than those based on net income of SANMINA-SCI) imposed by any taxing authority upon the manufacture, sale, shipment, storage, “value add” or use of the Product; and (c) setup, tooling, or non-recurring engineering activities (collectively “NRE Charges”).

2.3 Other Price Adjustments:

(a) CUSTOMER acknowledges that the Prices set forth in Exhibit A are based on the forecasted volumes provided by CUSTOMER to SANMINA-SCI. In the event

* * * Indicates that confidential treatment has been sought for this information.

CUSTOMER fails to purchase Product in sufficient volumes consistent with the quoted prices, SANMINA-SCI reserves the right to billback CUSTOMER for the difference between the Prices paid and the prices associated with such lower volumes.

(b) CUSTOMER acknowledges that the Prices are based on the Specifications and the assumptions set forth in SANMINA-SCI’s quotation and in Exhibit A. In the event SANMINA-SCI experiences an increase in cost as a result of changes in the pricing assumptions or the Specifications, SANMINA-SCI shall be entitled to the Price adjustment set forth in Section 6.1.

(c) SANMINA-SCI recognizes that CUSTOMER must remain cost competitive in its market to be successful. Both parties recognize that product costs are not controlled entirely by either party. SANMINA-SCI, working jointly with CUSTOMER, shall follow a predefined periodic review of all elements of cost. As a part of this process, Component costs will be reviewed by both Parties on a quarterly basis. Any SANMINA-SCI identified cost reductions in Components or assembly and test processes will be for the benefit of SANMINA-SCI for the first ninety (90) days after effective date of such cost reductions, and will be for the exclusive benefit of CUSTOMER thereafter. Cost reductions identified by CUSTOMER will be for the exclusive benefit of CUSTOMER immediately upon the effective date of such cost reduction. For purposes of the foregoing, the “effective date of such cost reductions” will be the date on which all Components “on hand” or “on order” have either been (i) consumed, (ii) returned to Vendor or (iii) Revalued. For purposes of the foregoing, “Revalued” means a payment by CUSTOMER of the difference between the old price of the Component, Subassembly or Finished Good and the new price of the Component, Subassembly or Finished Good, times the quantity of Components, Subassemblies or Finished goods either on hand, or inbound at the old price. In the case where the new price is higher than the old price, this calculation will yield a negative number, representing a credit to the CUSTOMER. Pricing of subassemblies and finished goods used for revaluation calculations shall include markups in accordance with the cost model used to generate the prices in Exhibit A.

(d) Cost review process detail. On the first business day of the twelfth week of any calendar quarter, SANMINA-SCI shall submit proposed pricing for the coming quarter to CUSTOMER, and any inventory Revaluation amount that may be due on on-hand Components, Subassemblies or Finished Goods, calculated as detailed in subsection (c) above. CUSTOMER shall approve new pricing and provide an amended Order that reflects the new pricing and a PO for the revaluation amount due, if any, by the 2nd day of the last week of the quarter. SANMINA-SCI shall cut in the new pricing with the first shipments of the new quarter.

(e) Notwithstanding the foregoing, in the event SANMINA-SCI experiences a decrease in the cost of any Component or a decrease in cost as a result of changes in the pricing assumptions or the Specifications or changes in the exchange rate between the currency in which the pricing is calculated and the currency in which SANMINA-SCI pays for its labor, overhead and Components, the Prices shall be reduced accordingly to reflect any such cost decrease. Routine changes in pricing will be adjusted at the regular quarterly pricing reviews. Significant, sudden material price changes will result in immediate pricing change, subject to mutual agreement and upon payment of any on hand inventory revaluation.

* * * Indicates that confidential treatment has been sought for this information.

3. PAYMENT TERMS

3.1 Payment Terms. Payment terms are * * * after the ship date. In the event CUSTOMER disputes any portion of any invoice, then (a) CUSTOMER shall pay the undisputed portion as set forth above and (b) within five (5) business days CUSTOMER shall deliver to SANMINA-SCI a notice that sets forth the basis of the dispute. The parties shall work in good faith to resolve the dispute for a period of * * * following SANMINA-SCI’s receipt of the notice. In the event the dispute has not been resolved by the parties within such * * * period, the dispute shall follow an escalation path as follows:

CUSTOMER	SANMINA-SCI
VP of Operations	Rapid City VP
SrVP	SrVP Storage Systems
EVP	EVP Computing & Storage
CEO	President, EMS

Both parties shall use their respective commercially reasonable efforts to immediately resolve the dispute. On any undisputed invoice not paid within thirty (30) days after CUSTOMER’s receipt of a properly issued invoice, SANMINA-SCI may require CUSTOMER to pay interest from the past due date to date of payment at the rate of * * * per month. Unless otherwise stated, payment shall be made in U.S. Dollars.

3.2 Setoffs. Setoffs shall not be permitted.

3.3 Credit Limit. SANMINA-SCI’s Credit Department shall provide CUSTOMER with an initial credit limit, which shall be reviewed (and, if necessary, adjusted) from time to time. SANMINA-SCI shall have the right to reduce the credit limit upon * * * prior written notice to CUSTOMER. In the event CUSTOMER exceeds this credit limit or has any outstanding invoice that is past due more than * * * after receipt of a written notice of payment delinquency, SANMINA-SCI shall have the right to stop shipments of Product to CUSTOMER until CUSTOMER makes a sufficient payment to bring its account within the credit limit provided.

3.4 Security Interest. CUSTOMER grants SANMINA-SCI a security interest in the Products delivered to CUSTOMER until CUSTOMER has paid for the Products and all Product-related charges. CUSTOMER agrees to promptly execute any documents reasonably requested by SANMINA-SCI to perfect and protect such security interest.

4. PURCHASE ORDERS/FORECAST/RESCHEDULE

4.1 Purchase Orders.

(a) CUSTOMER will issue to SANMINA-SCI specific Orders for Product covered by this Agreement. Each Order shall be in the form of a written or electronic communication and shall contain the following information: (i) the part number of the Product; (ii) the quantity of the Product; (iii) the delivery date or shipping schedule; (iv) the location to which the Product is to be shipped; and (v) transportation instructions. Each Order shall contain a number for billing purposes, and may include other instructions and terms (provided that such terms do not conflict with this Agreement) as may be appropriate under the circumstances.

* * * Indicates that confidential treatment has been sought for this information.

(b) All Orders shall be confirmed by SANMINA-SCI within five (5) business days of receipt. If SANMINA-SCI does not accept or reject the Order within the five (5)-day period, the Order shall be deemed rejected by SANMINA-SCI unless SANMINA-SCI has commenced performance, in which case the Order shall be deemed accepted to the extent of such performance. In the event SANMINA-SCI is unable to meet the delivery schedule set forth in a proposed Order, or finds the schedule or Order to be unacceptable for some other reason, the Parties shall negotiate in good faith to resolve the disputed matter(s).

4.2 Forecast; Minimum Buys; Excess and Obsolete Inventory.

(a) Initial Forecast. Upon the execution of this Agreement, CUSTOMER shall provide SANMINA-SCI with (i) an initial ninety (90) day firm purchase order (“Order”) and (ii) a forecast for Product requirements (in monthly buckets) for an additional nine (9) months (“Forecast”). All Orders shall be binding and may be rescheduled only in accordance with Section 4.2(d), or cancelled upon payment of (1) the purchase price of the Product (if the cancellation is made within 30 days of the scheduled delivery date) or (2) the amounts set forth in Section 4.2(f) (if cancellation is made outside of such 30-day period) SANMINA-SCI shall make purchase commitments (including purchase commitments for Long Leadtime Components) to its Component suppliers (“Vendors”) based upon the Order and Forecast (solely with respect to Long Leadtime Components and Class C Components demand driven by forecast), and CUSTOMER shall be responsible for all such Components purchased in support of CUSTOMER’s Order and then-current Forecast (solely with respect to Long Leadtime Components and Class C Components demand driven by forecast and minimum order multiples). For all other purposes, however, the Forecast shall be non-binding and will be provided to SANMINA-SCI for estimation purposes only.

(b) Subsequent Forecasts. On the first business day of each calendar month after the initial Order and Forecast, the first Forecast month shall automatically become part of the Order, a new Forecast month shall be added, and a new firm Order issued, so that a rolling Order of ninety (90) days is always maintained. CUSTOMER shall have the right to revise, modify, cancel or otherwise alter the initial Forecast and any subsequent Forecasts provided to SANMINA at any time prior to such Forecast automatically becoming part of the Order in accordance with this Section 4.2(b). CUSTOMER accepts that Long Lead Components and class C components ordered in support of such Forecast shall be subject to the Excess & Obsolete terms in Section 4.2.e.

(c) MRP Process.

(1) SANMINA-SCI shall take the Order and Forecast and generate a Master Production Schedule (“MPS”) for a twelve-month period in accordance with the process described in this Section. The MPS shall define the master plan on which SANMINA-SCI shall base its procurement, internal capacity projections and commitments. SANMINA-SCI shall use CUSTOMER’s Order to generate the first three (3) months of the MPS and shall use CUSTOMER’s Forecast to generate the subsequent nine (9) months of the MPS.

* * * Indicates that confidential treatment has been sought for this information.

(2) SANMINA-SCI shall process the MPS through industry-standard software (the “MRP Software”) that will break down CUSTOMER’s Product requirements into Component requirements.

(3) SANMINA-SCI will release (launch) purchase orders to Vendors (including other SANMINA-SCI facilities) prior to the anticipated date that the Components are needed at SANMINA-SCI. The date on which these orders are launched will depend on the lead time determined between the Vendor and SANMINA-SCI and SANMINA-SCI’s manufacturing or materials planning systems.

(4) A list of all Components with lead times greater than * * * (or the Order period, if the Order period is less than * * *) (“Long Leadtime Components”) is set forth in Exhibit B to this Agreement. SANMINA-SCI shall use reasonable efforts to update the list of Long Leadtime Components every quarter and present an updated list of Long Leadtime Components to CUSTOMER at the time SANMINA-SCI presents the CUSTOMER with the E&O List described in Section 4.2(e). Each revised Long Leadtime Item list shall be deemed an amendment to Exhibit B, whether or not it has been formally designated as such. In the event SANMINA-SCI fails to present an updated list of Long Leadtime Components, (i) the Parties shall continue to rely on the preceding list (as updated in writing by the Parties) and (ii) CUSTOMER will accept responsibility for Long Leadtime Components ordered outside the leadtimes set forth in the list provided that SANMINA-SCI can demonstrate to CUSTOMER’s reasonable satisfaction that such Components were ordered in accordance with the then-current Vendor leadtimes and consistent with CUSTOMER’s Forecast.

(5) CUSTOMER acknowledges that SANMINA-SCI will order Components in quantities sufficient to support CUSTOMER’s Forecast. In determining the quantity of Components to order, SANMINA-SCI divides the Components into three classes, “Class A,” “Class B” and “Class C.” Class A Components are comprised of the approximately * * * of Components constituting approximately * * * of the Product’s total Component cost. Class C Components are comprised of the approximately * * * of Components constituting approximately * * * of the Product’s total Component cost. Class B Components are comprised of the remaining * * * of Components constituting approximately * * * of the Product’s total Component cost. SANMINA-SCI will place orders with its Vendors for * * * worth of Class A Components, * * * worth of Class B Components and six months’ worth of Class C Components. A summary of SANMINA-SCI’s purchase commitments is set forth in the table below.

Part Class	Expected Percentage of Total Parts	Expected Percentage of Total Value (of Gross Requirements)	Periods Worth of Supply to be Bought with Each Order
A	* * *	* * *	* * *
B	* * *	* * *	* * *
C	* * *	* * *	* * *

(6) CUSTOMER acknowledges that SANMINA-SCI will be required to order Components in accordance with the various minimum buy quantities, tape and reel quantities, and multiples of packaging quantities required by the Vendor. In addition, CUSTOMER

* * * Indicates that confidential treatment has been sought for this information.

acknowledges that there is a lag time between any CUSTOMER cancellation and the cancellation of the Components required to support production; provided, however, that any such lag time shall not exceed seven (7) business days. Both parties recognize that the lag time of seven (7) business days may exist due to the accepted practice of performing an MRP regeneration only once per week. On an emergency basis and upon request by CUSTOMER, SANMINA-SCI will use reasonable commercial efforts to cancel large, NCNR items on a manual basis, not waiting for the scheduled MRP regeneration.

(7) CUSTOMER acknowledges that the Vendor leadtimes can be significant, and understands that it is possible for SANMINA-SCI to have Components on order which would support the last week of CUSTOMER’s Forecast. For example, assuming a Vendor leadtime of 40 weeks and a “B” Component, SANMINA-SCI would place an order for 3 months’ worth (see table above) of such Component approximately 40 weeks prior to the date on which the first Component is expected to be used.

(d) Reschedule. CUSTOMER may reschedule for a later delivery date all or part of a scheduled delivery (per Order or Forecast) not more that two (2) times per quarter for a period not to exceed * * * days in accordance with the table below. At the end of this * * * period, CUSTOMER shall either accept delivery of rescheduled finished units and/or pay SANMINA-SCI’s Delivered Cost (as defined in Section 4.2(e)) associated with rescheduled units not yet built. As an example, * * *.

Days Before P.O. Delivery Date	Percentage Downside Reschedule Allowance
0-30	* * *
31-60	* * *
61-90	* * *
>90	* * *

SANMINA-SCI shall use reasonable commercial efforts to accommodate any upside schedule changes. It is recognized by both Parties that the downside flexibility and upside efforts described above are intended to apply to the overall business levels and total shipments of systems within the various time periods specified. Since CUSTOMER’s Product is highly configurable and will be configured and shipped to final order, actual orders received will vary in mix, configuration and timing. SANMINA-SCI will use commercially reasonable efforts to accommodate any reasonable variation in mix or order timing, consistent with the materials on hand, test time and capacity available at the time or final order receipt, and lead time to order shipment.

(e) Excess and Obsolete Inventory. Within fifteen (15) days after the end of each calendar month, SANMINA-SCI shall advise CUSTOMER in writing of any excess or obsolete Components purchased solely for the manufacture of CUSTOMER’s Products but remaining in its inventory and the Delivered Cost of such Components (the “E&O List”). For the purpose of this Agreement, (i) the phrase “Obsolete Component” shall mean any on-hand Component, ordered in accordance with this Section, for which there is no demand for the next six (6) month period, according to the most current Order and Forecast (whether as a result of an ECO or otherwise), (ii) the term “Excess Component” shall mean any on-hand Component, ordered in

* * * Indicates that confidential treatment has been sought for this information.

accordance with this Section, which is not required to meet CUSTOMER’s requirements (1) for the ensuing thirty (30)-day period for “A” Components, (2) for the ensuing ninety (90)-day period for “B” Components or (3) for the ensuing one hundred eighty (180)-day period for “C” Components (ii) the term “Delivered Cost” shall mean SANMINA-SCI’s quoted cost of Components as stated on the bill of materials, exclusive of any material burdens, delivered to the point of manufacture. Within five (5) business days of receiving SANMINA-SCI’s E&O List, CUSTOMER shall advise SANMINA-SCI of any Component that it believes is not excess or obsolete. Within five (5) business days after receiving SANMINA-SCI’s E&O List, SANMINA-SCI and CUSTOMER shall finalize the E&O List, and CUSTOMER (i) shall issue to SANMINA-SCI an Order for all obsolete Components on the E&O List at a price equal to the Delivered Cost of such Component plus a seven and one-half percent (7.5%) markup on such Component, and (ii) shall issue an Order to SANMINA-SCI for any carrying charge due on the Excess Components. The carrying charge shall be an amount equal to * * * CUSTOMER shall pay SANMINA-SCI in accordance with Section 3.

(f) Customer Component Liability. CUSTOMER acknowledges that it shall be financially liable for all Components ordered in accordance with this Article. Specifically, CUSTOMER’s Component Liability shall be equal to the lesser of (a) the Price of the Products for which such Components were purchased or (b) SANMINA-SCI’s Delivered Cost of all Components ordered in support of any Order or Forecast, including any excess Components resulting from any minimum buy quantities, tape and reel quantities, and multiples of packaging quantities required by the Vendor less the actual cost (per the bill of materials) of those Components which are returnable to Vendor (less any cancellation or restocking charges). At CUSTOMER’s request, SANMINA-SCI shall use commercially reasonable efforts to minimize CUSTOMER’s Component Liability by attempting to return Components to the Vendor; provided, however, that SANMINA-SCI shall not be obligated to attempt to return to Vendor Components which are, in the aggregate, worth less than $1,000.

5. DELIVERY AND ACCEPTANCE

5.1 Delivery. All Product shipments (including shipments made in accordance with Section 7 (Warranty)) shall be Ex Works (Incoterms 2000) from SANMINA-SCI’s facility of manufacture (or repair). Title to and risk of loss or damage to the Product shall pass to CUSTOMER upon SANMINA-SCI’s tender of the Product to the common carrier. SANMINA-SCI shall be solely responsible for the importation into the United States of all Components that will be incorporated by SANMINA-SCI into the Products, as well as all transportation costs associated with transporting all Components, whether imported or otherwise, to SANMINA-SCI’s manufacturing facility, and SANMINA-SCI shall comply with all applicable import and export laws in connection therewith. CUSTOMER shall be responsible for obtaining any required export licenses and preparing all import and export documentation required under all applicable law. SANMINA-SCI shall provide CUSTOMER with a certificate of origin for the Products if applicable. CUSTOMER shall be the exporter and importer of record for all Products, including any repaired or replacement Products, from and after shipment from SANMINA-SCI’s manufacturing facility; SANMINA-SCI is not the importer or exporter of the Products from and after shipment from SANMINA-SCI’s manufacturing facility. SANMINA-SCI shall mark, pack, package, crate, transport, ship and store Product to ensure (a) delivery of the Product to its ultimate destination in safe condition, (b) compliance with

* * * Indicates that confidential treatment has been sought for this information.

all requirements of the carrier and destination authorities, and (c) compliance with any special instructions of CUSTOMER. SANMINA-SCI shall use commercially reasonable efforts to deliver the Products on the agreed-upon delivery dates and shall use commercially reasonable efforts to notify CUSTOMER of any anticipated delays. In the event that SANMINA-SCI is more than five (5) days late in making shipments from its facility of manufacture against the mutually agreed-upon shipment date (SANMINA-SCI COMMIT DATE), then CUSTOMER, at its option, may demand that expedited shipment methods be utilized by SANMINA-SCI to ship Products. SANMINA-SCI shall thereupon utilize expedited shipment methods for such Orders, the incremental cost of which (i.e., the difference between the cost of normal delivery and expedited delivery) will be SANMINA-SCI’s responsibility).

5.2 Acceptance. Acceptance of the Product shall occur no later than Thirty (30) days after shipment of Product by CUSTOMER and shall be based solely on whether the Product passes a mutually agreeable acceptance test procedure or inspection designed to demonstrate compliance with the Specifications. Product cannot be rejected based on criteria that were unknown to SANMINA-SCI or based on test procedures that SANMINA-SCI has not approved or does not conduct. Notwithstanding anything to the contrary, Product shall be deemed accepted if not rejected within this thirty-day period. Once a Product is accepted, all Product returns shall be handled in accordance with Article 7 (Warranty). Prior to returning any rejected Product, CUSTOMER shall obtain an Authorized Return Material (“RMA”) number from SANMINA-SCI, and shall return such Product in accordance with SANMINA-SCI’s instructions; CUSTOMER shall specify the reason for such rejection in all RMAs. In the event a Product is rejected, SANMINA-SCI shall have a reasonable opportunity to cure any defect which led to such rejection.

6. CHANGES

6.1 General. SANMINA-SCI shall not make any changes in the Specifications or any other process that affects form, fit or function of the Product and/or design changes in the Products without prior written approval from CUSTOMER. CUSTOMER may upon sufficient notice make changes within the general scope of this Agreement. Such changes may include, but are not limited to changes in (1) drawings, plans, designs, procedures, Specifications, test specifications or bill of material (“BOM”), (2) methods of packaging and shipment, (3) quantities of Product to be furnished, (4) delivery schedule, or (5) Customer-Furnished Items. All changes other than changes in quantity of Products to be furnished shall be requested pursuant to an Engineering Change Notice (“ECN”) and finalized in an Engineering Change Order (“ECO”). If any such change causes either an increase or decrease in SANMINA-SCI’s cost or the time required for performance of any part of the work under this Agreement (whether changed or not changed by any ECO) the Prices and/or delivery schedules shall be adjusted in a manner which would adequately compensate the Parties for such change.

6.2 ECN’s. SANMINA-SCI will respond to up to ten (10) ECN request per month without a non-recurring administrative fee; responses to additional ECN’s will incur an administrative fee of * * *. Within five (5) business days after an ECN is received, or by mutual agreement, SANMINA-SCI shall advise CUSTOMER in writing (a) of any change in Prices or delivery schedules resulting from the ECN and (b) the Delivered Cost of any Finished Product,

* * * Indicates that confidential treatment has been sought for this information.

Work-in-Process or Component rendered excess or obsolete as a result of the ECN (collectively the “ECN Charge”). Unless otherwise stated, ECN Charges are valid from thirty (30) days from the date the CUSTOMER receives notice of the ECN Charge. In the case where SANMINA-SCI negotiates the terms and conditions with the Component supplier, such as but not limited to; price, lot size, lead time, SANMINA-SCI shall provided the documentation, first obtained from CUSTOMER, to the Component supplier. To enable SANMINA-SCI to perform this service, CUSTOMER shall, with every ECN, supply SANMINA-SCI with documentation that is accurate, complete and completely describes the desired change and Component specifications. SANMINA-SCI accepts no liability for Components that are defective or unusable due to incorrect, inaccurate or incomplete documentation. Documentation supplied by CUSTOMER, whether or not by electronic means, ftp or Agile site, or some other industry standard method, shall be clearly labeled so as to eliminate the chance of a document mix. In the case where CUSTOMER negotiates the terms and conditions with the component supplier, such as Brocade and Engenio, CUSTOMER shall be responsible to provide documentation to the supplier.

6.3 ECO’s. In the event CUSTOMER desires to proceed with the change after receiving the ECN Charge pursuant to Section 6.2, CUSTOMER shall advise SANMINA-SCI in writing and shall immediately issue a PO for the portion of the ECN Charge set forth in Section 6.2(b) according to Section 3. In the event CUSTOMER does not desire to proceed with the Change after receiving the ECN Charge, it shall so notify SANMINA-SCI. In the event SANMINA-SCI does not receive written confirmation of CUSTOMER’s desire to proceed with the change within thirty days after SANMINA-SCI provides CUSTOMER with the ECN Charge, the ECN shall be deemed cancelled.

6.4 PCN’s. Process Change Notices (each a “PCN”) shall be issued by SANMINA-SCI to CUSTOMER as needed for changes in the manufacturing process that affect form, fit, or function of the Product and will be subject to CUSTOMER’s prior written approval, which approval shall not be unreasonably withheld or delayed.

7. WARRANTY

SANMINA-SCI Warranty. SANMINA-SCI warrants that all Products (except for Components consigned by CUSTOMER) purchased by and delivered to CUSTOMER pursuant to this Agreement or any extension or renewal thereof, shall be free and clear of all liens, encumbrances, security interests, or other adverse interests or claims. SANMINA-SCI warrants that, for a period of one year from the date of manufacture of the Product, the Product will be free from defects in workmanship. Products shall be considered free from defects in workmanship (and CUSTOMER shall have no warranty claim) if they are manufactured in accordance with the latest version of IPC-A-600 or IPC-A-610 and successfully complete any mutually agreed product acceptance test. SANMINA-SCI shall, at its option and at its expense (and as CUSTOMER’s sole and exclusive remedy for breach of any warranty), repair, replace or issue a credit for Product found defective during the warranty period. In addition, SANMINA-SCI will pass on to CUSTOMER all Vendor’s (and manufacturers’) Component warranties to the extent that they are transferable, but will not independently warrant any Components. All warranty obligations will cease upon the earlier of the expiration of the warranty period set forth above or the return (at CUSTOMER’s request) of any

* * * Indicates that confidential treatment has been sought for this information.

test equipment or test fixtures. ALL CLAIMS FOR BREACH OF WARRANTY MUST BE RECEIVED BY SANMINA-SCI NO LATER THAN THIRTY (30) DAYS AFTER THE EXPIRATION OF THE WARRANTY PERIOD.

7.1 RMA Procedure. SANMINA-SCI shall concur in advance on all Product to be returned for repair or rework CUSTOMER shall obtain a RMA number from SANMINA-SCI prior to return shipment. All returns shall state the specific reason for such return, and will be processed in accordance with SANMINA-SCI’s RMA Procedure, a copy of which is available from SANMINA-SCI upon request. SANMINA-SCI shall pay all transportation costs for valid returns of the Products to SANMINA-SCI and for the shipment of the repaired or replacement Products to CUSTOMER, and shall bear all risk of loss or damage to such Products while in transit; CUSTOMER shall pay these transportation and shipping charges, plus a * * * for invalid or “no defect found” returns. Any repaired or replaced Product shall be warranted as set forth in this Article for a period equal to the greater of (i) the balance of the applicable warranty period relating to such Product or (ii) sixty (60) days after it is received by CUSTOMER.

7.2 Exclusions From Warranty. Except as caused by SANMINA-SCI’s workmanship, this warranty does not include Products that have defects or failures resulting from (a) CUSTOMER’s design of Products including, but not limited to, design functionality failures, specification inadequacies, failures relating to the functioning of Products in the manner for the intended purpose or in the specific CUSTOMER’s environment; (b) accident, disaster, neglect, abuse, misuse, improper handling, testing, storage or installation including improper handling in accordance with static sensitive electronic device handling requirements; (c) alterations, modifications or repairs by CUSTOMER or third parties or (d) defective CUSTOMER-provided test equipment or test software. CUSTOMER bears all design responsibility for the Product.

7.3 Remedy. THE SOLE REMEDY UNDER THIS WARRANTY SHALL BE THE REPAIR, REPLACEMENT OR CREDIT FOR DEFECTIVE PARTS AS STATED ABOVE. THIS WARRANTY IS THE SOLE WARRANTY GIVEN BY SANMINA-SCI AND IS IN LIEU OF ANY OTHER WARRANTIES EITHER EXPRESS OR IMPLIED. SANMINA-SCI DOES NOT MAKE ANY WARRANTIES REGARDING MERCHANTABILITY, NONINFRINGEMENT, COMPLIANCE WITH ROHS AND WEEE (OR SIMILAR LEGISLATION), OR FITNESS FOR A PARTICULAR PURPOSE, AND SPECIFICALLY DISCLAIMS ANY SUCH WARRANTY, EXPRESS OR IMPLIED.

8. CUSTOMER FURNISHED EQUIPMENT AND COMPONENTS

8.1 Customer-Furnished Items. CUSTOMER shall provide SANMINA-SCI with the Product design and related specifications, applicable regulatory requirements, equipment, tooling, Components or documentation set forth in Exhibit C (collectively the “Customer-Furnished Items”). CUSTOMER hereby represents and warrants that the Customer-Furnished Items are or will be fit for their intended purposes, meet all applicable regulatory requirements, and will be delivered to SANMINA-SCI in a timely manner. Documentation (including BOM’s, drawings and artwork) shall be current and complete. CUSTOMER shall be responsible for schedule delay, reasonable inventory carrying charges and allocated equipment down time charges associated with the incompleteness, late delivery or non-delivery of the Customer-Furnished Items.

* * * Indicates that confidential treatment has been sought for this information.

8.2 Care of Customer-Furnished Items. All Customer-Furnished Items shall remain the property of CUSTOMER. SANMINA-SCI shall clearly identify all Customer-Furnished Items by an appropriate tag and shall utilize such Customer-Furnished Items solely in connection with the manufacture of CUSTOMER’s Product. SANMINA-SCI shall not make or allow modifications to be made to the Customer-Furnished Items without CUSTOMER’s prior written consent. SANMINA-SCI shall use best commercial efforts to care for and protect any Customer-Furnished Items and shall perform routine maintenance and repairs of any Customer-Furnished equipment, but shall not be responsible for any major repairs or replacements unless such failure was caused by SANMINA-SCI’s negligence or willful misconduct. All Customer-Furnished Items shall be returned to CUSTOMER at CUSTOMER’s expense upon request SANMINA-SCI’s production and warranty obligations which require the utilization of the returned Customer-Furnished Items will cease upon SANMINA-SCI’s fulfillment of CUSTOMER’s request. SANMINA-SCI shall (a) maintain each Customer-Furnished Item at the mutually agreed-upon SANMINA-SCI manufacturing facility, and may not remove it from said location without CUSTOMER’s prior written consent; (b) not sell, assign its rights hereunder, or in any manner encumber, pledge or otherwise cause a lien on the Customer-Furnished Items; (c) not place any liens, encumbrances or otherwise impair CUSTOMER’s use of the Customer-Furnished Items; (d) use the Customer-Furnished Items exclusively for the purpose for which it was provided by CUSTOMER; (e) preserve and maintain the Customer-Furnished Items in the condition in which it was received, normal wear & tear excepted; (f) notify CUSTOMER immediately, by telephone and in writing, of any claim, demand, labor dispute, litigation, or any other lien that might affect the Customer-Furnished Items; (g) notify CUSTOMER in writing of any change in or discontinuance of SANMINA-SCI’s business or SANMINA-SCI’s place or places of business, or SANMINA-SCI’s insolvency, bankruptcy or proposed reorganization under bankruptcy laws; and (h) maintain insurance policies insuring the Customer-Furnished Items net book value against loss in transit, loss by fire, theft and other hazards and naming CUSTOMER as an additional insured.

8.3 Customer-Furnished Components. Customer-furnished Components shall be handled in accordance with SANMINA-SCI’s procedures regarding Customer-Furnished Material, incorporated by reference herein, copies of which are available upon request.

9. INDEMNIFICATION AND LIMITATION OF LIABILITY

9.1 SANMINA-SCI’s Indemnification. SANMINA-SCI shall indemnify, defend, and hold CUSTOMER and CUSTOMER’s affiliates, shareholders, directors, officers, employees, contractors, agents and other representatives (the “Customer-Indemnified Parties”) harmless from all third party demands, claims, actions, causes of action, proceedings, suits, assessments, losses, damages, liabilities, settlements, judgments, fines, penalties, interest, costs and expenses (including fees and disbursements of counsel) of every kind (each a “Claim,” and, collectively “Claims”) (i) based upon personal injury or death or injury to property (other than damage to the Product itself, which is handled in accordance with Article 7/Warranty) to the extent any of the foregoing is proximately caused either by any manufacturing defect or the negligent or willful acts or omissions

* * * Indicates that confidential treatment has been sought for this information.

of SANMINA-SCI or its officers, employees, subcontractors or agents and/or (ii) arising from or relating to any actual or alleged infringement or misappropriation of any patent, trademark, mask work, copyright, trade secret or any actual or alleged violation of any other intellectual property rights arising from or in connection with SANMINA-SCI’s manufacturing processes.

9.2 CUSTOMER’s Indemnification. CUSTOMER shall indemnify, defend, and hold SANMINA-SCI and SANMINA-SCI’s affiliates, shareholders, directors, officers, employees, contractors, agents and other representatives (the “SANMINA-SCI-Indemnified Parties”) harmless from all third party Claims (i) based upon personal injury or death or injury to property to the extent any of the foregoing is proximately caused either by a defective Product, by the negligent or willful acts or omissions of CUSTOMER or its officers, employees, subcontractors or agents and/or (ii) arising from or relating to any actual or alleged infringement or misappropriation of any patent, trademark, mask work, copyright, trade secret or any actual or alleged violation of any other intellectual property rights arising from or in connection with the Products, except to the extent that such infringement exists as a result of use by CUSTOMER of SANMINA-SCI’s manufacturing processes.

9.3 Procedure. A Party entitled to indemnification pursuant to this Article (the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) in writing of any Claims covered by this indemnity. Promptly after receipt of such notice, the Indemnitor shall assume the defense of such Claim with counsel reasonably satisfactory to the Indemnitee. If the Indemnitor fails, within a reasonable time after receipt of such notice, to assume the defense with counsel reasonably satisfactory to the Indemnitee or, if in the reasonable judgment of the Indemnitee, a direct or indirect conflict of interest exists between the Parties with respect to the Claim, the Indemnitee shall have the right to undertake the defense, compromise and settlement of such Claim for the account and at the expense of the Indemnitor. Notwithstanding the foregoing, if the Indemnitee in its sole judgment so elects, the Indemnitee may also participate in the defense of such action by employing counsel at its expense, without waiving the Indemmtor’s obligation to indemnify and defend. The Indemnitor shall not compromise any Claim (or portions thereof) or consent to the entry of any judgment without an unconditional release of all liability of the Indemnitee as to each claimant or plaintiff.

9.4 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SPECIAL DAMAGES, OR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS, EVEN IF SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. FOR THE PURPOSE OF THIS SECTION, BOTH LOST PROFITS AND DAMAGES RESULTING FROM VALUE ADDED TO THE PRODUCT BY CUSTOMER SHALL BE CONSIDERED CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL SANMINA-SCI’s LIABILITY FOR A PRODUCT (WHETHER ASSERTED AS A TORT CLAIM OR CONTRACT CLAIM) EXCEED THE AMOUNTS PAID TO SANMINA-SCI FOR SUCH PRODUCT HEREUNDER. IN NO EVENT WILL SANMINA-SCI BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCT BY CUSTOMER. IN ADDITION, IN NO EVENT SHALL SANMINA-SCI’s LIABILITY FOR ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED $2,000,000.

* * * Indicates that confidential treatment has been sought for this information.

THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. Notwithstanding the foregoing, the caps set forth herein shall not apply to limit (i) CUSTOMER’s obligation for termination payments in accordance with Section 10, (ii) a Party’s obligation to indemnify the other Party against any third party Claim for personal injury or property damage, or (iii) actual damages required to be paid to any third party as a result of any infringement claim, or (iv) damages resulting from either Party’s breach of its obligations under Section 13. THE LIMITATION SET FORTH IN THIS SECTION SHALL APPLY WHERE THE DAMAGES ARISE OUT OF OR RELATE TO THIS AGREEMENT.

10. TERMINATION

10.1 Termination for Cause. Subject to Section 10.4, either Party may terminate this Agreement or an Order hereunder for default if the other Party materially breaches this Agreement; provided, however, no termination right shall accrue until thirty (30) days after the defaulting Party is notified in writing of the material breach and has failed to cure or give adequate assurances of performance within the thirty (30) day period after notice of material breach. Notwithstanding the foregoing, there shall be no cure period for payment-related breaches.

10.2 Termination For Convenience. Subject to Section 10.4, CUSTOMER may terminate this Agreement hereunder for any reason upon thirty (90) days’ prior written notice and may terminate any Order hereunder for any reason upon sixty (90) days (before scheduled shipment) prior written notice Subject to Section 10.4, SANMINA-SCI may terminate this Agreement for any reason upon sixty (60) days’ notice.

10.3 Termination by Operation of Law. Subject to Section 10.4, this Agreement shall immediately and automatically terminate should either Party (a) become insolvent; (b) enter into or file a petition, arraignment or proceeding seeking an order for relief under the bankruptcy laws of its respective jurisdiction; (c) enter into a receivership of any of its assets or (d) enter into a dissolution or liquidation of its assets or an assignment for the benefit of its creditors.

10.4 Consequences of Termination.

(a) Termination by CUSTOMER for Convenience or by Operation of Law; Termination by SANMINA-SCI for Cause. In the event (i) this Agreement or an Order hereunder is terminated by CUSTOMER in accordance with Section 10.2 (termination for convenience) or as a result of Section 10.3 (termination by operation of law), or (ii) SANMINA-SCI terminates this Agreement or an Order hereunder in accordance with Section 10.1 (termination for cause), CUSTOMER shall pay SANMINA-SCI, termination charges equal to (1) the contract price for all finished Product existing at the time of termination, (2) SANMINA-SCI’s cost (including labor, Components and a * * * mark-up on Components and labor) for all work in process, and (3) CUSTOMER’s Component Liability pursuant to Section 4.2(f).

(b) Termination by CUSTOMER for Cause; Termination by SANMINA-SCI for Convenience or by Operation of Law; Termination following Force Majeure Event. In the event (i) CUSTOMER terminates this Agreement or any Order hereunder in accordance with 10.1

* * * Indicates that confidential treatment has been sought for this information.

(termination for cause), (ii) this Agreement is terminated by SANMINA-SCI in accordance with Section 10.2 (termination for convenience) or as a result of Section 10.3 (termination by operation of law), or (iii) either Party terminates this Agreement in accordance with Section 12.5 following the occurrence of Force Majeure Event, CUSTOMER shall pay SANMINA-SCI, termination charges equal to (1) the contract price for all finished Product existing at the time of termination; (2) SANMINA-SCI’s cost (including labor, Components) for all work in process; and (3) CUSTOMER’s Component Liability pursuant to Section 4.2(f); provided, however, that for the purposes of this subsection only, CUSTOMER’s Component Liability shall be calculated based on the quoted cost of Components as stated on the BOM rather than the Delivered Cost (e.g., exclusive of any markup).

(c) Any Termination. In the event of any expiration or termination of this Agreement, (i) any payment or production obligations of either Party under any surviving Order shall survive, (ii) SANMINA-SCI shall immediately return to CUSTOMER all Customer-Furnished Items and any of CUSTOMER’s Confidential Information and (iii) SANMINA-SCI shall furnish CUSTOMER with a statement, showing the quantity of the Products both in the finished and unfinished state and the Components, which are in the possession of SANMINA-SCI. Upon payment of any applicable termination charges, SANMINA-SCI shall immediately deliver all such finished Products, work in process and paid for Components to CUSTOMER. In addition, the following sections shall survive Section 4.2 and Articles 7, 9, 13, 14 and 15, as well as any other section which, by its nature, shall be reasonably expected to survive.

(d) Termination Assistance. Immediately upon receipt of written notice of termination, expiration or cancellation of this Agreement for any reason, for the entire period until the effective date of termination, SANMINA-SCI shall (a) provided CUSTOMER continues to pay invoices in a timely fashion, continue to meet CUSTOMER’s Forecast and Order requirements as stated herein; (b) render reasonable assistance to CUSTOMER and provide the names of all CUSTOMER’ component vendors; (c) use its commercially reasonable efforts to transfer the manufacture of Products and otherwise cooperate fully with CUSTOMER to transfer manufacturing of the Products from SANMINA-SCI’s facilities to CUSTOMER or to any third party designated by CUSTOMER in a manner that (i) minimizes the time to complete such transfer, (ii) maintains the highest quality of Products per this Agreement without interruption, and (iii) minimizes any disruption to CUSTOMER’s requirements; and (d) make available to CUSTOMER all reasonable documentation, with the exception of SANMINA-SCI proprietary data, personnel, equipment, training, consultation and other resources in addition to such personnel, equipment and other resources that are necessary under the circumstances to maintain CUSTOMER’s manufacturing operations fully operational at the same level at which it was operating on the Commencement Date CUSTOMER shall bear the costs for the termination assistance with prior written approval by CUSTOMER. CUSTOMER shall have a license to use the items provided under Sub-section (d) solely for the purpose of manufacturing the Products. SANMINA-SCI shall be reimbursed for its transfer obligations under its normal schedule of licensing and other fees, except that SANMINA-SCI shall be reimbursed at SANMINA-SCI’s “direct cost” if the termination is due to the exercise by CUSTOMER of its termination rights based upon a breach by SANMINA-SCI. Notwithstanding anything to the contrary herein contained, nothing herein shall require SANMINA-SCI to transfer any of SANMINA-SCI’s proprietary technology, trade secret or similar item to any third party, and without limiting the generality of Section 13, CUSTOMER shall not transfer such proprietary technology, trade secret or similar item to any third party.

* * * Indicates that confidential treatment has been sought for this information.

11. QUALITY

11.1 Specifications. Product shall be manufactured by SANMINA-SCI in accordance with the Specifications, as modified via written ECOs in accordance with this Agreement. Neither Party shall make any change to the Specifications, to any Components described therein, or to the Products (including, without limitation, changes in form, fit, function, design, appearance or place of manufacture of the Products or changes which would affect the reliability of any of the Products) unless such change is made in accordance with Section 6.1. Notwithstanding the foregoing, SANMINA-SCI shall be permitted to make changes in its manufacturing process at any time, so long as such changes do not affect the form, fit or function of the Products.

11.2 Content of Specifications. The Specifications shall include, but shall not be limited to (i) detailed electrical, mechanical, performance and appearance specifications for each model of Product, (ii) the BOM, (iii) tooling specifications, along with a detailed description of the operation thereof, (iv) art work drawings, (v) Component specifications, (vi) Vendor cross references.

11.3 Components. SANMINA-SCI shall use in its production of Products such Components of a type, quality, and grade specified by CUSTOMER to the extent CUSTOMER chooses to so specify, and shall purchase Components only from Vendors appearing on CUSTOMER’s approved vendor list (“AVL”); provided, however, that in the event SANMINA-SCI cannot purchase a Component from a Vendor on CUSTOMER’s AVL for any reason, SANMINA-SCI shall be able to purchase such Component from an alternate Vendor, subject to CUSTOMER’s prior written approval, which approval shall not be unreasonably withheld or delayed. SANMINA-SCI shall use commercially reasonable efforts to manage all Vendors, but shall not be responsible for any Component (including the failure of any Component to comply with the Specifications).

11.4 Quality Specifications. SANMINA-SCI shall comply with the quality specifications set forth in its Quality Manual, incorporated by reference herein, a copy of which is available from SANMINA-SCI upon request.

11.5 Inspection of Facility. Upon reasonable advance written notice and, upon SANMINA-SCI’s request, the execution of an appropriate nondisclosure agreement, CUSTOMER may inspect the Products and Components held by SANMINA-SCI for CUSTOMER at SANMINA-SCI’s facilities during SANMINA-SCI’s regular business hours; provided that such inspection does not unduly affect SANMINA-SCI’s operations. CUSTOMER and its representatives shall observe all security and handling measures of SANMINA-SCI while on SANMINA-SCI’s premises. CUSTOMER and its representatives acknowledge that their presence on SANMINA-SCI’s property is at their sole risk. Inspection may include such activities as witnessing operations in progress, witnessing inspections and tests, performing Product, Component and inventory inspections, reviewing quality assurance documents and records, and performing audits. SANMINA-SCI also agrees that it will accord commercially reasonable cooperation and assistance to the personnel of CUSTOMER in the inspection.

* * * Indicates that confidential treatment has been sought for this information.

11.6 Quality Records. SANMINA-SCI shall have a system for the collection and maintenance of quality assurance records. A document describing such system shall be submitted to CUSTOMER (for information and approval) prior to beginning work. Quality assurance records, whether written or electronic, shall be adequately protected from deterioration or damage, and shall be made available for CUSTOMER’s inspection on reasonable notice. SANMINA-SCI shall maintain all quality assurance records pertaining to this Agreement during the term of this Agreement and for a period of one (1) year following any expiration or termination of this Agreement.

11.7 Reports. SANMINA-SCI shall provide CUSTOMER daily, weekly, and monthly reports, including reports that are specific to CUSTOMER, as identified and requested by CUSTOMER. These reports shall include, but shall not be limited to tracking of on-line defects, process quality and final inspection reports (i.e.in-line inspection, finished goods, sampling and source inspection, and out-of-box inspection reports), reliability testing reports (i.e. early life performance, ORT (on-going reliability)/rolling reliability, and long-term life), and test data of the on-going production stage.

11.8 Certifications. SANMINA-SCI hereby represents and warrants to CUSTOMER that it has obtained, will maintain and implement throughout the term of this Agreement its ISO 9002-2000 certifications (or higher) and any other applicable certifications for the factories in which the Products will be manufactured or processed.

11.9 Testing. SANMINA-SCI shall maintain and preserve, and make available to CUSTOMER, copies of reports of actual test results, indicating part, serial, and test specification/procedure numbers. Test results shall not be averaged, deleted, nor omitted from the record, unless specifically required by the test specification.

11.10 Remedial Actions. If the Products so manufactured hereunder fail to meet the quality requirements as provided to SANMINA-SCI and accepted by SANMINA-SCI, of this Agreement (as provided to SANMINA-SCI prior to the Commencement Date), CUSTOMER shall give written notice thereof to SANMINA-SCI together with such directions as CUSTOMER may deem necessary in order to enable SANMINA-SCI to improve the quality of the Products so as to meet the quality requirements. SANMINA-SCI agrees that upon receipt of such notice it will, at its sole cost and expense, take such reasonable steps as may be necessary by the Parties in order to meet the quality requirements in the manner directed by CUSTOMER until SANMINA-SCI receives written notice from CUSTOMER that the Products meet such quality requirements. CUSTOMER acknowledges that any changes in its quality requirements shall be made through the ECO process and may result in an increase or decrease in the Product price.

* * * Indicates that confidential treatment has been sought for this information.

12. FORCE MAJEURE

12.1 Force Majeure Event. For purposes of this Agreement, a “Force Majeure Event” shall mean (i) the occurrence of unforeseen circumstances beyond a Party’s control and without such Party’s negligence or intentional misconduct, including, but not limited to, any act by any governmental authority, act of war, natural disaster, strike, boycott, embargo, shortage, not, lockout, labor dispute, civil commotion and (ii) the failure of a Vendor to timely deliver a Component to SANMINA-SCI (unless the Vendors failure to timely deliver directly results from SANMINA-SCI’s failure to order the Component in accordance with sound MRP practices outlined in Section 4.2.c).

12.2 Notice of Force Majeure Event. Neither Party shall be responsible for any failure to perform due to a Force Majeure Event provided that such Party gives notice to the other Party of the Force Majeure Event as soon as reasonably practicable, but not later than five (5) days after the date on which such Party knew or should reasonably have known of the commencement of the Force Majeure Event, specifying the nature and particulars thereof and the expected duration thereof; provided, however, that the failure of a Party to give notice of a Force Majeure Event shall not prevent such Party from relying on this Section except to the extent that the other Party has been prejudiced thereby.

12.3 Termination of Force Majeure Event. The Party claiming a Force Majeure Event shall use reasonable efforts to mitigate the effect of any such Force Majeure Event and to cooperate to develop and implement a plan of remedial and reasonable alternative measure to remove the Force Majeure Event; provided, however, that neither Party shall be required under this provision to settle any strike or other labor dispute on terms it considers to be unfavorable to it Upon the cessation of the Force Majeure Event, the Party affected thereby shall immediately notify the other Party of such fact, and use its best efforts to resume normal performance of its obligations under the Agreement as soon as possible.

12.4 Limitations. Notwithstanding that a Force Majeure Event otherwise exists, the provisions of this Article shall not excuse (i) any obligation of either Party, including the obligation to pay money in a timely manner for Product actually delivered or other liabilities actually incurred, that arose before the occurrence of the Force Majeure Event causing the suspension of performance; or (ii) any late delivery of Product, equipment, materials, supplies, tools, or other items caused solely by negligent acts or omissions on the part of such Party.

12.5 Termination for Convenience. In the event a Party fails to perform any of its obligations for reasons defined in this Article 12 for a cumulative period of ninety (90) days or more from the date of such Party’s notification to the other Party then the other Party at its option may extend the corresponding delivery period for the length of the delay, or terminate this Agreement for convenience immediately upon delivery of written notice.

* * * Indicates that confidential treatment has been sought for this information.

13. CONFIDENTIALITY AND NON-SOLICITATION OF EMPLOYEES

13.1 Definitions. For the purpose of this Agreement,

(a) “Confidential Information” means information (in any form or media) regarding a Party’s customers, prospective customers (including lists of customers and prospective customers), methods of operation, engineering methods and processes (include any information which may be obtained by a Party by reverse engineering, decompiling or examining any software or hardware provided by the other Party under this Agreement), programs and databases, patents and designs, billing rates, billing procedures, vendors and suppliers, business methods, finances, management, or any other business information relating to such Party (whether constituting a trade secret or proprietary or otherwise) which has value to such Party and is treated by such Party as being confidential; provided, however, that Confidential Information does not include information that (i) is known to the other Party prior to receipt from the Disclosing Party hereunder, which knowledge shall be evidenced by written records, (ii) is independently developed as evidenced by written records, (iii) is or becomes in the public domain through no breach of this Agreement, or (iv) is received from a third party without breach of any obligation of confidentiality.

(b) “Person” shall mean and include any individual, partnership, association, corporation, trust, unincorporated organization, limited liability company or any other business entity or enterprise.

(c) “Representative” shall mean a Party’s employees, agents, or representatives, including, without limitation, financial advisors, lawyers, accountants, experts, and consultants.

13.2 Nondisclosure Covenants.

(a) In connection with this Agreement, each Party (the “Disclosing Party”) may furnish to the other Party (the “Receiving Party”) or its Representatives certain Confidential Information. For a period of three (3) years from the date of the last disclosure under this Agreement, the Receiving Party (a) shall maintain as confidential all Confidential Information disclosed to it by the Disclosing Party, (b) shall not, directly or indirectly, disclose any such Confidential Information to any Person other than (i) those Representatives of the Receiving Party whose duties justify the need to know such Confidential Information and then only after each Representative has agreed to be bound by this Confidentiality Agreement and clearly understands his or her obligation to protect the confidentiality of such Confidential Information and to restrict the use of such Confidential Information or (ii) if SANMINA-SCI is the Receiving Party, a third party Vendor for which a limited disclosure of such Confidential Information is absolutely necessary for the purpose of obtaining price quotations and then only after first obtaining CUSTOMER’s written approval of such any disclosure and, at CUSTOMER’s request, only after such Vendor has agreed in writing to protect such Confidential Information under terms no less restrictive than those of this Agreement and (c) shall treat such Confidential Information with the same degree of care as it treats its own Confidential Information (but in no case with less than a reasonable degree of care). For each new Product pricing requested by CUSTOMER, CUSTOMER shall supply written approval for SANMINA-SCI to release required documents (confidential or otherwise) to the appropriate vendors.

* * * Indicates that confidential treatment has been sought for this information.

(b) The disclosure of any Confidential Information is solely for the purpose of enabling each Party to perform under this Agreement, and the Receiving Party shall not use any Confidential Information disclosed by the Disclosing Party for any other purpose.

(c) Except as otherwise set forth in this Agreement, all Confidential Information supplied by the Disclosing Party shall remain the property of the Disclosing Party, and will be promptly returned by the Receiving Party upon receipt of written request therefor.

(d) If the Receiving Party or its Representative is requested or becomes legally compelled to disclose any of the Confidential Information, it will provide the Disclosing Party with prompt written notice. If a protective order or other remedy is not obtained, then only that part of the Confidential Information that is legally required to be furnished will be furnished, and reasonable efforts will be made to obtain reliable assurances of confidentiality.

13.3 Non-Solicitation of Employees. During the term of this Agreement and for a period of two (2) years thereafter, without the consent of the other Party, neither Party shall directly or indirectly solicit, recruit or hire (or attempt to solicit, recruit or hire) any of the other Party’s employees; provided, however, that this shall not prohibit a Party from (a) advertising for open positions provided that such advertisements are not targeted solely at the employees of the other Party; (b) or employing any individual who initiates contact with such Party on his or her own initiative, whether in response to an advertisement or otherwise.

13.4 Injunctive Relief Authorized. Any material breach of this Article by a Party or its Representatives may cause irreparable injury and the non-breaching Party may be entitled to equitable relief, including injunctive relief and specific performance, in the event of a breach. The above will not be construed to limit the remedies available to a Party. In addition, the prevailing Party will be entitled to be reimbursed for all of its reasonable attorneys’ fees and expenses at all levels of proceedings and for investigations, from the non-prevailing Party.

13.5 No Publicity. Each Party agrees not to publicize or disclose the existence or terms of this Agreement to any third Party without the prior consent of the other Party (which shall not be unreasonably withheld) except as required by law (in which case, the Party seeking to disclose the information shall give reasonable notice to the other Party of its intent to make such a disclosure). Neither Party shall make any press release or similar public statement without the prior consent of the other Party.

14. INSURANCE

SANMINA-SCI agrees, at its own cost and expense, to maintain during the term of this Agreement (a) workers’ compensation insurance as prescribed by the law of the state in which SANMINA-SCI’s services are performed; (b) employer’s liability insurance with limits of at least $500,000 per occurrence; (c) commercial automobile liability insurance if the use of motor vehicles is required, with limits of at least $1,000,000 for bodily injury and property damage for each occurrence; (d) commercial general liability insurance, including blanket contractual liability and broad form property damage, with limits of at least $1,000,000 combined single limit for personal

* * * Indicates that confidential treatment has been sought for this information.

injury and property damage for each occurrence; and (e) commercial general liability insurance endorsed to include products liability and completed operations coverage in the amount of $1,000,000 for each occurrence. The policy of such insurance will name CUSTOMER as an additional insured thereunder. SANMINA-SCI shall furnish to CUSTOMER certificates or evidence of the foregoing insurance indicating the amount and nature of such coverage and the expiration date of each policy. Each Party agrees that it, its insurer(s) and anyone claiming by, through, under or in its behalf shall have no claim, right of action or right of subrogation against the other Party and the other Party’s affiliates, directors, officers, employees and customers based on any loss or liability insured against under the insurance required by this Agreement.

15. MISCELLANEOUS

15.1 Integration Clause. This Agreement (including the Exhibits and Schedules to this Agreement) constitutes the entire agreement of the parties, superseding all previous Agreements covering the subject matter. This Agreement shall not be changed or modified except by written agreement, specifically amending, modifying and changing this Agreement, signed by an authorized representative of SANMINA-SCI and of CUSTOMER.

15.2 Order of Precedence. All quotations, Orders, acknowledgments and invoices issued pursuant to this Agreement are issued for convenience of the Parties only and shall be subject to the provisions of this Agreement and the Exhibits hereto. When interpreting this Agreement, precedence shall be given to the respective parts in the following descending order (a) this Agreement; (b) Schedules and Exhibits to this Agreement; and (c) if Orders are used to release product, those portions of the Order that are not pre-printed and which are accepted by SANMINA-SCI. The Parties acknowledge that (y) the preprinted provisions on the reverse side of any such quotation, Order, acknowledgment or invoice and (z) all terms other than the specific terms set forth in Section 4.1(a)(i)-(iv) shall be deemed deleted and of no effect whatsoever. No modification to this Agreement, the Exhibits or any Order shall be valid without the prior written consent of the purchase agreement coordinators of SANMINA-SCI and CUSTOMER.

15.3 Assignment. Neither this Agreement nor any rights or obligations hereunder shall be transferred or assigned by either Party without the written consent of the other Party, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, without the necessity of obtaining consent but upon written notice to the other Party, this Agreement may be assigned in whole or in part by either Party to (i) any Affiliate of such Party provided that such Party remains secondarily liable under this Agreement or (ii) any person or entity acquiring such Party by merger or acquiring all or substantially all of such Party’s business or assets and the other party will be notified of such merger or acquisition as soon as the information is made public.

15.4 Notices. Wherever one Party is required or permitted or required to give written notice to the other under this Agreement, such notice will be given by hand, by certified U.S. mail, return receipt requested, by overnight courier, or by fax and addressed as follows:

* * * Indicates that confidential treatment has been sought for this information.

If to CUSTOMER:	with a copy to:
Blue Arc Corporation 225 Baypointe Parkway San Jose, California 95134 Att’n: President Phone: (408) 576-6600 Fax: (408) 576-6601	Blue Arc Corporation 225 Baypointe Parkway San Jose, California 95134 Att’n: Vice President, Operations Phone: (408) 576-6600 Fax: (408) 576-6601
If to SANMINA-SCI:	with a copy to:
SANMINA-SCI Corporation 222 Disk Drive Rapid City, SD 57701 Att’n: Plant manager Phone: (408) 964-3600 Fax: (408) 964-3888	SANMINA-SCI Corporation 2700 N. First Street San Jose, California 95134 Att’n: Vice President & Corporate Counsel Phone: (408) 964-3600 Fax: (408) 964-3636

All such notices shall be effective upon receipt. Either Party may designate a different notice address from time to time upon giving ten (10) days’ prior written notice thereof to the other Party.

15.5 Disputes/Choice of Law/Attorneys Fees. The Parties shall attempt to resolve any disputes between them arising out of this Agreement through good faith negotiations. In the event the Parties cannot resolve a dispute, the Parties acknowledge and agree that the state courts of Santa Clara County, California and the federal courts located in the Northern District of the State of California shall have exclusive jurisdiction and venue to adjudicate any and all disputes arising out of or in connection with this Agreement. The Parties consent to the exercise by such courts of personal jurisdiction over them and each Party waives any objection it might otherwise have to venue, personal jurisdiction, inconvenience of forum, and any similar or related doctrine. This Agreement shall be construed in accordance with the substantive laws of the State of California (excluding its conflicts of laws principles). The provisions of the United Nations Conventions on Contracts for the International Sale of Goods shall not apply to this Agreement. The prevailing party shall be entitled to recover its costs and reasonable attorney’s fees from the non-prevailing party in any action brought to enforce this Agreement.

15.6 Independent Contractor. It is understood and agreed that in performing the services for CUSTOMER hereunder, SANMINA-SCI shall act in the capacity of an independent contractor and not as an employee or agent of CUSTOMER. Both Parties agree that they shall not represent themselves as the agent or legal representative of the other party for any purpose whatsoever. Both Parties shall be solely responsible for the remuneration of and the payment of any and all taxes with respect to their employees and subcontractors and any claims with respect thereto and shall be solely responsible for the withholding and payment of all U.S. and/or foreign federal, state, and local income taxes as well as all FICA and FUTA taxes applicable to it, its employees, and its subcontractors. SANMINA-SCI acknowledges that as an independent contractor, neither it nor any of its employees or subcontractors shall be eligible for any CUSTOMER employee benefits, including, but not limited to, vacation, medical, dental, or pension benefits.

* * * Indicates that confidential treatment has been sought for this information.

15.7 Trademark. SANMINA-SCI acknowledges that CUSTOMER is the sole owner of the trademarks to be used on and with the Products and Product packaging (the “Trademarks”). SANMINA-SCI agrees that it will restrict the use of the Trademarks to only such Products as are manufactured by SANMINA-SCI for sale to CUSTOMER under and pursuant to and in full compliance with all of the terms of this Agreement. The size, design, position, and appearance of the Trademarks to be placed on the Products shall be as described by CUSTOMER.

15.8 Governmental Regulations. Both Parties shall, at their own cost and expense, promptly comply with all laws and ordinances and notices, orders, decrees, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof of the country in which the Products are manufactured (collectively, “Governmental Regulations”) relating to either parties performance of any services required under this Agreement including but not limited to occupational safety, environment, transportation, importation and exportation. All applicable certificates and associated data shall be maintained on site by SANMINA-SCI. Each Party shall defend, indemnify and hold the other Party harmless from and against any and all Claims by reason of violations of Governmental Regulations or arising from or incidental to their failure to obtain and maintain any permits, approvals and licenses it is obligated to obtain or maintain under this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective as of the date on page one, by their officers, duly authorized.

SANMINA-SCI CORPORATION		BLUEARC CORPORATION
By:	/s/ Ken Haney	By:	/s/ Michael S. Hasley
	Signature		Signature
Ken Haney		Michael S. Hasley
Typed Name		Typed Name
Sr. VP of Business Development		CFO
Title		Title
Oct. 23rd, 2006		Oct. 19, 2006
Date		Date

* * * Indicates that confidential treatment has been sought for this information.

INDEX

1. TERM

2. PRICING

3. PAYMENT TERMS

4. PURCHASE ORDERS/FORECAST/RESCHEDULE

5. DELIVERY AND ACCEPTANCE

6. CHANGES

7. WARRANTY

8. CUSTOMER FURNISHED EQUIPMENT AND COMPONENTS

9. INDEMNIFICATION AND LIMITATION OF LIABILITY

10. TERMINATION

11. QUALITY

12. FORCE MAJEURE

13. CONFIDENTIALITY AND NON-SOLICITATION OF EMPLOYEES

14. INSURANCE

15. MISCELLANEOUS

EXHIBITS

A. PRICES

B. LONG LEAD-TIME COMPONENTS

C. CUSTOMER FURNISHED EQUIPMENT, COMPONENTS AND DOCUMENTATION

-23-

EXHIBIT A

PRICING

* * *

-24-

EXHIBIT B

LONG LEAD-TIME COMPONENTS

* * *

-25-

EXHIBIT C

CUSTOMER FURNISHED EQUIPMENT/CONSIGNED COMPONENTS

List of CUSTOMER FURNISHED EQUIPMENT/CONSIGNED COMPONENTS to be provided by Customer, and included here

-26-

EXHIBIT D

NTF Charges

* * *

-27-

EX-10.6

Exhibit 10.6

MASTER DISTRIBUTION AGREEMENT

BY AND BETWEEN

BLUEARC CORPORATION AND

HITACHI DATA SYSTEMS CORPORATION

This Master Distribution Agreement is made, as of the Effective Date set forth below, between BlueArc Corporation, a Delaware corporation (“BlueArc”) and Hitachi Data Systems Corporation, a Delaware corporation (“HDS”).

Effective Date: November 14, 2006

HDS and BlueArc each agree to be bound by this Master Distribution Agreement, including all exhibits (as listed in Section 39 of the Agreement) and disclosure schedules attached hereto and incorporated by this reference (collectively, “Agreement”).

HDS	BlueArc
Hitachi Data Systems Corporation	BlueArc Corporation
/s/ David Roberson	/s/ Michael B. Gustafson
Signature	Signature
David Roberson	Michael B. Gustafson
Name	Name
President and CEO	President and CEO
Title	Title
November 15, 2006	November 15, 2006
Date	Date

* * * Indicates that confidential treatment has been sought for this information. 1

MASTER DISTRIBUTION AGREEMENT BY AND BETWEEN BLUEARC CORPORATION. AND

HITACHI DATA SYSTEMS CORPORATION

TERMS AND CONDITIONS

RECITALS

A. BlueArc is engaged in the business of providing network attached storage or NAS servers and other related products.

B. HDS is a provider of information management solutions that wishes to purchase NAS products from BlueArc to directly or indirectly co-brand, re-brand, market, resell, sell, support and distribute worldwide both directly and indirectly as described below.

NOW, THEREFORE, the Parties agree as follows:

1. DEFINITIONS.

In this Agreement, the following words will have the meanings below.

“Acceptance” means a written memorandum from HDS to BlueArc accepting and acknowledging the validation of a particular Product, including any new release based on the testing procedures performed by HDS pursuant to Exhibit C.

“Affiliate” means an entity controlling, controlled, or under common control with a Party. An HDS Affiliate will include without limitation, Hitachi Ltd., a Japanese corporation and any Regional Affiliate. For these purposes, “control” means: (a) the possession, directly or indirectly, of the power to direct the management or policies of an entity, whether through the ownership of voting securities, by contract or otherwise; or (b) the ownership, directly or indirectly, of at least fifty percent (50%) of the voting securities or other ownership interest of an entity.

“Alliance Manager” means the day-to-day manager appointed by each Party to work together in administering this Agreement and furthering the mutual goals of this relationship. The initial Alliance Manager for each Party is listed in Exhibit Q.

“Authorized Service Provider” or “ASP” means any corporation or other entity contractually authorized by HDS or its Affiliates to Support the Product for End Users in accordance with the terms and conditions of Exhibit B. For clarification purposes, an ASP will have a maintenance agreement directly with the End User.

“Bankruptcy Code” the United States Bankruptcy Code, 11 U.S.C. Section 101, et seq., or any amended or successor statutes.

“BlueArc Trademarks” means those trademarks listed on Exhibit K, which BlueArc may periodically update.

* * * Indicates that confidential treatment has been sought for this information. 2

“Change in Control” of BlueArc means the occurrence, in a single transaction or a series of related transactions, of at least one of the following events: (a) any Person who is not already an Affiliate of BlueArc becomes BlueArc’s “beneficial owner” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of BlueArc’s securities representing fifty percent (50%) or more of the combined voting power of BlueArc’s then-outstanding securities; (b) there is consummated a merger, consolidation, or similar transaction directly or indirectly involving BlueArc and, immediately after that consummation, the stockholders of BlueArc immediately prior to the consummation of that merger, consolidation, or similar transaction do not “beneficially own” (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, outstanding voting securities representing fifty percent (50%) or more of the combined outstanding voting power of the surviving entity in that merger, consolidation, or similar transaction or fifty percent (50%) or more of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation, or similar transaction; (c) there is consummated a sale, lease, exclusive and irrevocable license or other disposition of substantially all of the assets of BlueArc provided, however, the sale and issuance of securities of BlueArc for the purpose of raising additional capital shall not constitute an “Change in Control”.

“Channel Partner” means any person or entity who engages in conduct, including without limitation marketing and promotion activities, relating to the solicitation and procurement of purchase orders for Products and Support to be ordered from BlueArc by HDS or a Regional Affiliate.

“Claims” mean: (i) third-party actions, claims, or demands, and/or (ii) any damages awarded or liabilities incurred, and any expenses (including without limitation reasonable attorneys’ fees, related costs and expenses) incurred in the defense of, such action, claim or demand.

“Committed Forecast” means the * * * of the Forecast provided by HDS to BlueArc pursuant to Section 5.16; each of which calendar month in such * * * period will be fixed. For clarification purposes, once a calendar month in the Forecast becomes the * * *, the amount of Product forecasted for such calendar month will become fixed in the Committed Forecast, regardless of whether such calendar month is the * * * of the Committed Forecast; so that the amount of Product specified for the * * * of a Committed Forecast will be the same as the amount of Product specified for the * * * of the immediately preceding Committed Forecast.

“Confidential Information” means any confidential or proprietary information of either Party (“Disclosing Party”) which is provided to the other Party (“Receiving Party”) pursuant to this Agreement and which, if provided in written (including electronic) form is clearly marked confidential or carries a similar designation, or, if provided verbally is identified at the time of disclosure as confidential and is reduced to a written document submitted to the Receiving Party within ten (10) business days after disclosure. Confidential Information excludes information that is: (a) publicly available through no

* * * Indicates that confidential treatment has been sought for this information. 3

act of the Receiving Party, (b) in the Receiving Party’s possession independent of its relationship with the Disclosing Party, (c) developed by or becomes known to the Receiving Party without access to any Confidential Information of Disclosing Party, or (d) obtained by the Receiving Party rightfully from third parties not bound by a confidentiality obligation.

“Consultant” means any individual who is an independent contractor engaged by HDS and who has executed HDS’ standard form nondisclosure agreement.

“Customer Documentation” means BlueArc’s then current administrator and programmer’s guides, customer manuals, installation manuals, and other similar information and related Product information documentation, provided by BlueArc to HDS.

“Deliverables” mean the deliverables for the Engineering Services provided by BlueArc to HDS pursuant to this Agreement.

“Derivative Works” mean a work that is based on one or more preexisting works, including without limitation a revision, enhancement, modification, translation, abridgement, condensation, expansion, or any other form in which the preexisting works may be recast, transformed, or adapted, and which, if prepared without authorization of the copyright owner of that preexisting work, would constitute a copyright infringement. For clarification purposes, Derivative Works specifically include any compilation that incorporates the preexisting work.

Development Source Code” means:(a) the most recent Source Code version of the products in development by BlueArc pursuant to the Product Requirements Document (“PRD”) or otherwise pursuant to Article 8 and/or pursuant to a SOW for Engineering Services, and (b) all Improvements for existing Products, which are not deposited in escrow on the date HDS receives the Source Code pursuant to Section 3.7 but which are required to be deposited in the future pursuant to this Agreement.

“Documentation” means Customer Documentation and Sales Documentation for the Products provided by BlueArc to HDS, including without limitation Manuals.

“EAR” means the Export Administration Regulations promulgated by the U.S. Department of Commerce, as amended.

* * *

“End User” means an end user customer who is a purchaser of Products or Support and/or licensee of Software who acquires such Products from HDS or a Regional Affiliate.

“End User Expiration Date” means the expiration of the last maintenance contract or renewal purchased by an End User.

* * * Indicates that confidential treatment has been sought for this information. 4

“Engineering Services” means the engineering services that BlueArc may provide to HDS under an SOW.

“Escrow Agent” means Iron Mountain Intellectual Property Management, Inc.

“Escrow Agreement” means an agreement substantially in the form of Exhibit N.

“Executive Alliance Manager” means the senior executive appointed by each Party responsible for administering this Agreement and furthering the mutual goals of this relationship. The initial Executive Alliance Manager for each Party is listed in Exhibit Q.

“Existing Customer Sales” means sales of Products to HDS and Regional Affiliates which were ordered for sales to End Users prior to the Effective Date.

“Forecast” means a rolling * * * forecast, broken down by calendar month, for hardware by product model and configuration.

“EULA” means BlueArc’s End User License Agreement in the form of Exhibit I.

“GAAP” means generally accepted accounting principles in the United States, consistently applied.

“Gold Master” means a magnetic or magnetic–optical or optical disk containing the Software in object code form, which HDS and a Regional Affiliate may use to generate copies of Software for distribution pursuant to the terms of this Agreement.

“Hardware” means BlueArc’s NAS equipment and firmware and Spares.

“Hitachi Indemnified Party” means each of HDS and its Affiliates (including without limitation Hitachi, Ltd.) and all of their directors, officers, employees, agents. Hitachi Indemnified Party does not include an Affiliate in its capacity as an End User.

“Hitachi Trademarks” means those trademarks listed on Exhibit L, which HDS may periodically update.

“Improvements” mean collectively, Major Releases, Minor Releases and Patch Releases of Software, all of which BlueArc will provide to HDS pursuant to this Agreement.

“Initial Term” mean the period commencing on the Effective Date and continuing for a period of 5 years, subject to the termination provisions below.

“Intellectual Property Right” means any intellectual property rights throughout the Territory, including copyrights, patents, patent applications, trademarks, service marks, trade dress rights, trade secrets, methodology, know-how, and other similar proprietary rights, whether or not any of these rights is registered, and including, without limitation, applications for registration of and rights to apply for any such rights.

* * * Indicates that confidential treatment has been sought for this information. 5

“Lab Access Agreement” means HDS’ standard form lab access agreement set forth on Exhibit G.

“License Key” means a unique, encrypted software program that is created and issued to activate the Product.

“Licensed Patents” means all U.S. and foreign patents and patent applications now or hereafter, owned by, or licensable (without payment to any third party unless such payment is assumed by HDS) by, BlueArc with a priority date prior to the effective date of the Change in Control of BlueArc referenced in Section 3.6, and any and all substitutions, extensions, continuations, continuations-in-part, divisions and renewals, and letters patent granted on any of the foregoing, and all reissues, re-examinations and extensions thereof, which patent absent a license would be infringed by any of the Products as released from the escrow or provided by BlueArc to HDS under Section 3.8.

“Licensed Products” * * *.

“Maintenance Lapse” * * *.

“Maintenance Modifications” will have the meaning in Section 3.1 below.

“Major Release” means generally released Software or to the extent applicable Hardware: (a) that has been substantially recoded and enhanced to add extensive, new functionality from their earlier versions to constitute new or substantially improved products; or (b) that has been ported from existing supported platforms to substantially different platforms. Major Releases include all related Documentation. Major Releases or Software are generally identified by a change in the digit(s) to the left of the tenths digit [(X).x.x] (i.e.-1.01, 2.01, 3.01), but may also be given new names and re-sequenced numbering; provided, however, these numerical changes will not be considered Major Releases unless the criteria in the definition are met.

“Managed Services” means information technology management services provided by HDS and its Affiliates to End Users.

“Material Breach” means either Party’s breach of any material term, condition, representation, warranty, covenant or obligation under this Agreement. For clarification purposes a failure to pay a material amount not reasonably in dispute is a Material Breach.

“Manuals” mean electronic files, leaflets, books and other guides related to Products or Support, including without limitation service or maintenance programs, that are intended by BlueArc to be distributed with the Products to End Users, such as by way of example

* * * Indicates that confidential treatment has been sought for this information. 6

only, Support or maintenance documentation, configuration information, sales, training, articles, and any other Documentation BlueArc provides under this Agreement intended for distribution to End Users.

“Manufacturing Agreement” means the Sanmina Contract Manufacturing Agreement dated October 19, 2006, between Sanmina-SCI Corporation (“Sanmina”) and BlueArc and any amendments now or hereafter executed pursuant to which Sanmina manufactures the Products as a contract manufacturer on behalf of BlueArc.

“Minor Release” means a generally released enhanced Software with unique functional and/or feature improvements that do not qualify as a Major Release but still add significant new functionality or improved operations, quality, functional capability, and/or performance by significant changes in system design or coding, including all related Documentation. Minor Releases are generally identified by a change in the tenths digit [x.(X).x] (i.e.-1.10, 1.20, 1.30), however, these numerical changes will not qualify such Software as a Minor Release unless the criterion in the definition is met. A Minor Release may be considered or commonly referred to as an upgrade by the industry.

“MPSA” means the Master Professional Services Agreement in the form of Exhibit J. For clarification purposes, the Professional Services will be governed by the MPSA and a corresponding statement of work executed under the MPSA.

* * *

“Open Source Software” means the software licensed pursuant to the open source licenses listed on Exhibit O attached hereto, which BlueArc may periodically update for any Improvement or new Product.

“Party” means BlueArc or HDS and “Parties” mean both HDS and BlueArc.

“Patch Release” means generally released functional and/or feature improvements made to Software and may include substantially numerous: (a) corrections of bugs, errors, malfunctions, or other nonconformities; and/or (b) minor improvements in operational performance, quality and/or functional capability. Patch Releases include all related Documentation other than Sales Documentation. Patch Releases are typically identified by a change in the digit(s) to the right of the tenths digit [x.x.(X)] (i.e.-1.01, 1.02, 1.03), however, these numerical changes will not qualify the Software as a Patch Release unless the criteria in the definition are met. A Patch Release may be considered and commonly referred to as an update by the industry.

“Person” means any natural person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act).

“Product(s)” means Hardware and Software included with the Hardware as set forth in Exhibit A, and which may be amended from time to time upon the Parties’ mutual agreement. For clarification purposes, Software is included with Products unless expressly stated in Exhibit A.

* * * Indicates that confidential treatment has been sought for this information. 7

“Product Price” means the fixed price for any Product as specified on Exhibit A. Exhibit A may be updated periodically as mutually agreed by the Parties.

“Professional Methodology” means BlueArc’s general skills and industry knowledge that BlueArc develops supplies or uses in providing the Services described in an SOW.

“Professional Services” means the planning for, and the actual configuration, installation and integration of, the Products for End Users pursuant to the MPSA.

“Regional Affiliate” means Hitachi Data Systems Ltd, P/a Fiscal Representatives, European Distribution Centre located at Achterweg 29, 4181AD Waardenburg, The Netherlands, and any other Affiliate of HDS that HDS may periodically designate as a Regional Affiliate.

“Residual Information” means intangible generic knowledge, ideas and techniques that can be retained in the unaided memory of an employee or other personnel of the Receiving Party exposed to Confidential Information of the Disclosing Party in connection with this Agreement, without any specific or intentional memorization that is not protected as a trade secret or by any other Intellectual Property Right.

“RoHS” means the European Union’s Restriction of Hazardous Substances Directive.

“Rules of Engagement” shall have the meaning set forth in Section 4.6.

“Sales Documentation” means marketing, promotion and other information related to the marketing, promotion and sale of the Products.

“Sales Support” means the sales support activities and related obligations of each Party in connection with the sales support provided by BlueArc, all as set forth on Exhibit D.

“Sell-Off Period” means the period not to exceed * * * following the expiration or termination of this Agreement for any reason other than HDS’ uncured Material Breach.

“Software” means any software supplied by BlueArc and included with the Hardware and which may be configured to be accessible through a License Key.

“Source Code” means the human-readable, fully annotated (with programmers’ notes) source code versions of all Products (including without limitation Software and firmware) that are being shipped at the time HDS is given access to such source code and that is used by BlueArc, and including all of the Source Code Items that BlueArc has that will assist a competent party in building, maintaining, supporting and/or enhancing the software products (including build instructions for incorporation of Third Party Software). The Source Code will exclude any Third Party Software. For clarification purposes the Source Code must be executable as an independent module and consistent with the most recent Documentation, including without limitation, technical specifications and Customer Documentation.

* * * Indicates that confidential treatment has been sought for this information. 8

“Source Code Items” means all technical and design documentation, requirements documents, documented use cases, user interface mockups, wire-frames and architectural specifications, any other specifications, test plans, technical support databases, build scripts, build instructions, schematics, maintenance tools (test programs and program specifications), compiler and assembler descriptions, and a description of the system/program generation.

“SOW” means a written statement of work between the Parties pursuant to which BlueArc will provide Engineering Services directly under this Agreement. For clarification purposes, any Professional Services may be provided under the MPSA and the statement of work issued under pursuant to the MPSA.

“Spares” shall have the meaning set forth in Exhibit B.

“Support” means the maintenance and support services and related obligations of each Party set forth under the support schedule on Exhibit B. For clarification purposes, HDS will be entitled to receive Support from BlueArc under Exhibit B for its purchased internal use Products.

“Support Failure” * * *.

“Technical Information” means all specifications, drawings, technical data, details, and control instrument specifications pertaining to the manufacture, servicing, or use of the Hardware Products, as well as all parts lists, operations manuals and any other documentation or information relating to the manufacture, marketing, sale, servicing or use of the Licensed Products.

“Term” means the Initial Term, which will be thereafter automatically renewed for successive one (1) year terms unless either Party provides written notice to the other Party of its intent to terminate this Agreement at least sixty (60) days prior to the end of the then-current term, all subject to the other termination provisions specified below.

“Territory” means worldwide.

“Third Party Purchase Price” means the cash value of: (i) the cash paid or payable, market value of marketable equity securities or interests, fair value of unmarketable equity securities or interests, and face amount of straight and convertible debt instruments or obligations issued or issuable (including any amounts paid into escrow) to BlueArc or BlueArc’s security holders (or any entity affiliated with BlueArc or BlueArc’s security holders) in connection with a Change in Control on, PLUS (ii) the amount of indebtedness of BlueArc assumed directly or indirectly by an acquiring Person (or any entity affiliated with an acquiring Person) in connection with a Change in

* * * Indicates that confidential treatment has been sought for this information. 9

Control on the Change in Control Closing Date (as defined in Section 15.1 hereof); provided, however, in the event the Change in Control is effected via the acquisition of less than 100% of BlueArc’s securities, the calculation of the Third Party Purchase Price shall be pro-rated as if 100% of BlueArc’s outstanding securities were acquired.

The Third Party Purchase Price shall be determined on the Change in Control Closing Date; provided, however, if the Change in Control results from a series of related transactions, the Third Party Purchase Price shall be:

(a) for assets or securities in a related transaction occurring prior to the Change in Control Closing Date, the cash value of such consideration determined as of the date of such related transaction for such securities or assets in accordance with the provisions of this definition, PLUS

(b) for assets or securities on or after the Change in Control Closing Date, the cash value thereof determined as of the Change in Control Closing Date in accordance with the provisions of this definition.

Contingent payments to BlueArc or BlueArc’s security holders shall not be included in the calculation of “Third Party Purchase Price” unless and until such contingent payments are actually made. In the case in which a contingent payment is actually made to BlueArc or BlueArc’s security holders, HDS shall have thirty (30) days from the date BlueArc gives HDS notice of the receipt of such payment in which to pay the balance of any Third Party Purchase Price due under Section 3.8 hereof.

If the market value of such marketable equity securities or interests is specified in the definitive Change in Control agreement (or binding agreement for related transactions occurring prior to the Change in Control Closing Date) (“Specified Market Value”), then the market value will be the Specified Market Value. If there is no such Specified Market Value, then the market value of such marketable equity securities or interests shall be either: (a) the average of the closing prices of the marketable equity securities as reported on the applicable securities exchange (if listed on a national securities exchange) or (b) the average of the closing sale prices of the marketable equity securities or interests; each over the thirty (30) day period ending three (3) days prior to the date the acquiring Person transfers such securities to the seller of such securities, (if traded over the counter). The fair value of unmarketable equity securities and interests shall be the fair market value thereof as of the date the definitive Change in Control agreement (or binding agreement for related transactions occurring prior to the Change in Control Closing Date) is entered into by BlueArc as determined in good faith by the board of directors of BlueArc. The hypotheticals on Appendix I are examples but do not limit possible the calculations of “Third Party Purchase Price.”

“Third Party Software” means the software products listed on Exhibit O, including without limitation all Open Source Software. BlueArc may periodically update Exhibit O for new Products and Improvements.

* * * Indicates that confidential treatment has been sought for this information. 10

“Trademarks” mean either the BlueArc Trademarks or Hitachi Trademarks, as the case may be.

“Warranty Period” means: (a) ninety (90) days for Software and (b) thirty-six (36) months for Hardware, in each case commencing on the date of delivery at the End User site.

“WEEE” means the European Union’s Waste Electrical and Electronic Equipment Directive.

Additional capitalized terms are defined in Sections 14 and 15 below.

2. APPOINTMENT OF HDS, DISTRIBUTION, MAINTENANCE, EVALUATION AND DEMONSTRATION LICENSES AND SUBLICENSES.

2.1 Distribution Appointment. During the Term and the Sell-Off Period, BlueArc authorizes HDS and its Affiliates to market, sell, resell and distribute, either directly or indirectly through Channel Partners the Products (including Spares in the performance of HDS’ warranty or Support obligations to End Users) in the Territory either alone or bundled and/or integrated with the software or hardware products sold or distributed by HDS or any HDS Affiliates, under either the Party’s brand name or as co-branded by the Parties; provided that any BlueArc Trademark shall be applied only to Products supplied by BlueArc, all in accordance with the terms and conditions of Exhibit M. The right granted pursuant to this Section will be non-transferable except that HDS, a Regional Affiliate and other Affiliates may authorize Channel Partners to market, sell, resell and distribute Products in the Territory. Neither HDS, nor any of its Affiliates, nor Channel Partners, nor ASPs will have any obligation to promote, sell, market, Support or distribute any Products as authorized herein if Acceptance for that Product has not occurred. During the Term and subject to Section 17.6 below, HDS and its Affiliates will also have the right to internally develop, promote, sell, resell distribute and support any other products which are similar to and/or competitive with the Products, through any means, including without limitation, directly or indirectly, through other resellers, HDS and Affiliates and/or through any agent or representative in the Territory. HDS acknowledges and agrees that the foregoing appointment is non-exclusive and BlueArc may grant to any number of third parties similar rights to those granted to HDS hereunder.

2.2 Software License. During the Term and the Sell-Off Period, BlueArc grants HDS and its Affiliates, under all of BlueArc’s Intellectual Property Rights in and to the Software included in the Products, a nonexclusive, nontransferable license in the Territory to distribute either directly or indirectly through Channels, in object code form only, such Software (and copies thereof made in accordance with Section 2.3 or for distribution purposes) and to sublicense such Software to End Users under a license containing terms substantially similar to the EULA; provided, however HDS shall have the option, in its sole discretion, to have BlueArc license the Software distributed under this Agreement directly to End Users under the EULA. The Gold Master will include a click-through version of the EULA, if and when available.

* * * Indicates that confidential treatment has been sought for this information. 11

2.3 Support License. BlueArc grants to HDS and its Affiliates, under all of BlueArc’s Intellectual Property Rights in and to the Software included in the Products: (a) a non-exclusive, non-transferable license to use the Gold Master to duplicate the Software, or portions thereof, in object code form only, for Support purposes, and directly, or indirectly through ASPs, Support the Products, through the sale of End User maintenance contracts in the Territory; and (b) a fully paid up, non-exclusive, non-transferable license to use the Software included in the Products provided by BlueArc pursuant to its Support obligations, for HDS’, its Affiliates’ and ASP’s internal use, solely for technical evaluation, lab certification, qualification, performance testing, problem recreation and diagnosis in a non-production environment in connection with providing Support. The term of the licenses granted under this Section 2.3 will commence on the Effective Date and terminate on the End User Expiration Date. BlueArc shall provide such numbers of Gold Masters as HDS may reasonably request for it and its Affiliates to exercise their rights under the foregoing license.

2.4 End User Evaluation. HDS may provide Products to End Users for evaluation purposes and any Software included with the Product will be subject to the terms of a software evaluation license from BlueArc to the potential End User. Promptly following the Effective Date BlueArc will provide HDS with its form of license and the Parties will cooperate to finalize the form of such evaluation license.

2.5 Internal Use License. BlueArc grants to HDS and its Affiliates, under all of BlueArc’s Intellectual Property Rights in and to the Software included in the Products a non-exclusive, non-transferable, perpetual license to the Software included in the Products solely for internal use for non-production purposes, including without limitation for sales and training demonstration purposes, Support, and lab testing purposes.

2.6 Documentation License.

2.6.1 License. BlueArc grants to HDS and its Affiliates, under all of BlueArc’s copyrights in the Documentation, a non-exclusive, non-transferable fully paid up license, in the Territory solely to: (a) use, copy, prepare Derivative Works of and incorporate the Documentation into HDS’ and its Affiliates’ own documentation for HDS’ products; (b) duplicate and distribute such Documentation and such Derivative Works of the Documentation in connection with the marketing, distribution, sale, promotion and Support of the Products as authorized by this Agreement; and (c) sublicense the rights under the foregoing license to Channel Partners. The term of the forgoing license shall continue until the End User Expiration Date to Support End Users with maintenance contracts and any renewals thereof that extend beyond or are renewed after the expiration of termination of the Term. BlueArc shall only be required to provide to HDS its then existing Documentation and shall not be required to create any specific Documentation for HDS except as otherwise provided in this Agreement or mutually agreed between the Parties.

* * * Indicates that confidential treatment has been sought for this information. 12

2.6.2 Copies. HDS, and Affiliates (and ASPs in the case of Support) may make a reasonable number of copies of the Manuals or other Documentation, including computer-based training courses, relating to the Products to provide technical evaluation, lab certification, qualification, performance testing, and Support for the Products pursuant to this Article 2.

2.6.3 Derivative Works of Documentation. HDS and its Affiliates may reproduce and prepare Derivative Works (including without limitation translations or excerpts) of the Documentation and display and distribute the Documentation and the Derivative Works as needed to Support HDS’, ASP’s and End Users’ use of HDS products. This authorized use will include distribution and display of the Manuals and all Derivative Works on HDS’ website.

2.6.4 IP Ownership. Unless otherwise mutually agreed by the Parties, as between HDS and BlueArc, HDS will own all right, title, and interest, including Intellectual Property Rights, in and to any Derivative Works of the Documentation made under this Section 2.6 provided HDS grants BlueArc a perpetual, irrevocable worldwide, royalty-free, transferable, nonexclusive, sublicensable right and license to such Derivative Works, excluding any Hitachi Trademarks and any other Intellectual Property Right owned by or licensed by third parties to HDS and included within such Derivative Works except to the extent that such third party Intellectual Property is freely licensable without restriction by HDS to BlueArc. For clarification purposes, HDS will designate any such third party Intellectual Property Rights included in the Derivative Works.

2.7 Option for Additional Products. Subject to the terms of this Section 2.7, BlueArc will offer HDS all new Products and Improvements concurrently when offering any of them, or substantially similar products to any other reseller or distributor. Upon request, HDS shall have the right to add any additional current or future BlueArc products and services to this Agreement, and the Parties shall negotiate in good faith the prices for such products and services, subject to Sections 5.13 and 5.19. BlueArc will not be obligated to offer any new products which have been developed alone, with or by a third party for exclusive distribution by that third party and/or BlueArc. For clarification purposes, the preceding sentence will not apply to any such new products with minor modifications in functionality or marking or trade dress changes.

2.8 Managed Services. The Parties may, but are not obligated to, enter into an agreement with each other to provide Managed Services related to the Products. Such agreement may include a license, during the Term, in the Territory to directly or indirectly market, resell, distribute, sell, use, and maintain the Products in connection with Managed Services, either alone, or as integrated, re-branded, repackaged, branded or bundled with the software or hardware products provided by HDS or any Affiliate in connection with Managed Services. The execution and terms of these rights will be granted upon mutually agreed upon terms, including but not limited to, licensing restrictions, territory, pricing and term.

* * * Indicates that confidential treatment has been sought for this information. 13

3. SOURCE CODE LICENSES AND RELATED ESCROW; MANUFACTURING RIGHTS AND LICENSES.

3.1 Source Code License for Maintenance Modifications. BlueArc grants to HDS under all of BlueArc’s Intellectual Property Rights in and to the Source Code, an immediately effective, fully paid-up, royalty-free, worldwide, non-exclusive right and license to use, reproduce, adapt and otherwise internally create Derivative Works of the Source Code and related Documentation received by HDS pursuant to Sections 3.7(a), (b), (c), (d), (e), (f) or (g), below (collectively, “Maintenance Modifications”) solely to support and maintain the Products and to reproduce and distribute directly or indirectly the Maintenance Modifications (including without limitation any related object code of the underlying Source Code) to End Users in the Territory in object code form only (except for Documentation which may be provided in written form) for Support and maintenance of the Products under the terms of the licenses granted in Section 2.3 and all of its subsections. Subject to BlueArc’s rights in the underlying Intellectual Property Rights in the underlying Source Code, HDS will own all right, title and interest, in, under and to (including without limitation all Intellectual Property Rights to) any Maintenance Modifications created by or on behalf of HDS under this Section 3.1. The term of the foregoing license to HDS shall commence on the Effective Date and shall expire on the End User Expiration Date. HDS hereby grants to BlueArc a perpetual, fully paid-up, royalty-free, irrevocable, worldwide, nonexclusive right and license to use, reproduce, adapt and otherwise create Derivative Works of the Maintenance Modifications, and to distribute directly or indirectly such Maintenance Modifications without restriction, in both source code and object code form. HDS acknowledges and agrees that although HDS has a currently effective license with respect to the Source Code under this Section 3.1, HDS will refrain from exercising their rights under the license granted under this Section 3.1 until the occurrence of one of the events set forth in Sections 3.7(a), (b), (c), (d), (e), (f) or (g). For clarification purposes the license granted to HDS only applies to then existing Products and will exclude any upgrades for which an End User may be required to pay an additional fee, including without limitation new FGI heads. For clarification purposes, nothing in this Section 3.1 shall be deemed a grant to HDS any ownership in or to any underlying BlueArc technology or Software including any Intellectual Property Rights therein.

3.1.1 Manufacturing License for Hardware. BlueArc grants to HDS under all of BlueArc’s Intellectual Property Rights in and to the Products, an immediately effective, fully paid-up, royalty-free, worldwide, non-exclusive right and license to: (a) manufacture, have manufactured, use, import, export, offer to sell, and sell such components of the Products including, but not limited to, Spares, only for the limited purposes of providing Support to End Users, including without limitation correction of defects; and (b) use the Technical Information in connection with the foregoing license granted under the foregoing Section 3.1.1(a), including without limitation the manufacturing design and architecture for the Hardware. HDS acknowledges and agrees that although HDS has a

* * * Indicates that confidential treatment has been sought for this information. 14

currently effective license under this Section 3.1.1, HDS will refrain from exercising their rights under the license granted under this Section 3.1.1 until the occurrence of one of the events set forth in Sections 3.7(a), (b), (c), (d), (e), (f) or (g). The term of the foregoing license to HDS shall commence on the Effective Date and shall expire on the End User Expiration Date. For clarification purposes the license only applies to then existing Licensed Products and will exclude any upgrades for which an End User may be required to pay an additional fee, including without limitation new FGI heads. Subject to BlueArc’s rights in the underlying Intellectual Property Rights in the underlying Products, HDS will own all right, title and interest, in, under and to (including without limitation all Intellectual Property Rights to) any correction of defects relating to the Licensed Products (“Licensed Product Modifications”), whether or not patentable, which may be developed, created or acquired by or on behalf of HDS under the foregoing license. HDS hereby grants to BlueArc a perpetual, fully paid-up, royalty-free, irrevocable, worldwide, nonexclusive right and license to manufacture, have manufactured, use, import, export, offer to sell, and sell Licensed Product Modifications, including the right to distribute directly or indirectly such Licensed Product Modifications without restriction. For clarification purposes, nothing in this Section 3.1.1 shall be deemed a grant to HDS any ownership in or to any underlying BlueArc technology or Products including any Intellectual Property Rights therein.

3.2 Change in Control Source Code License. Upon the occurrence of the events described in Section 3.8 HDS will have under all of BlueArc’s Intellectual Property Rights in and to the Software and Source Code and Development Source Code, an immediately effective, fully paid-up, royalty-free, perpetual, irrevocable, worldwide, nonexclusive right and license to:

(a) use the Software (in both Source Code, and Development Source Code and object code form) and Documentation without restriction for HDS’ and Hitachi Ltd.’s internal purposes;

(b) * * *

(c) compile the Source Code and Development Source Code, * * *, into machine readable binary code and/or object code;

(d) duplicate, demonstrate and distribute the Documentation and Software (in binary or object code form only) to End Users, * * *, and in any form or format (including digital electronic, downloadable form), directly or indirectly through sublicensed OEMs, resellers and other distributors (who shall have the right to duplicate and demonstrate the Software and Documentation and distribute the Software and Documentation to End Users or other OEMs, resellers and other distributors); and

* * * Indicates that confidential treatment has been sought for this information. 15

(e) sublicense the use of the Software in object code form to End Users, directly or through third parties, pursuant to end user license agreements on such terms and conditions as HDS shall determine in their sole discretion.

For the purposes of clarification, except for the restriction that HDS and its Affiliates may only distribute the Software * * * in object code form, they shall have no other restrictions of any kind on the license, demonstration, marketing, distribution, support or maintenance of the Software.

3.3 Manufacturing License for Hardware. Upon the occurrence of the events described in Section 3.8 HDS will have under all of BlueArc’s Intellectual Property Rights existing at the time, including without limitation the Licensed Patents, an immediately effective, fully paid-up, royalty-free, perpetual, irrevocable, worldwide, nonexclusive right and license to: (a) * * *, and sell the Licensed Products without restriction; and (b) use and otherwise exploit the Technical Information in connection with the foregoing license granted under Section 3.3(a), * * *. HDS will own all right, title and interest, in, under and to (including without limitation all Intellectual Property Rights to) any developments, improvements, changes or modifications relating to the Licensed Products, whether or not patentable, which may be developed, created or acquired by or on behalf of HDS or its Affiliates after the effective date of the license granted in this Section 3.3.

3.4 Transition Period Assistance. Following the delivery of any Source Code to HDS after the events specified in Section 3.8, BlueArc will provide the following transition assistance and information to HDS and its Affiliates at industry standard rates:

3.4.1 Support. BlueArc shall continue to provide HDS with Level 3 Support pursuant to Exhibit B, and upon payment by HDS to BlueArc at then prevailing market rates in addition, use commercially reasonable efforts to provide HDS with training and reasonable assistance requested by HDS so that HDS can provide Level 3 Support to an End User, all for a period not to exceed * * * from HDS’ receipt of the Source Code.

3.4.2 Technical Information Transfer. BlueArc shall promptly provide the Technical Information to HDS, and all software, firmware and other technology necessary for the manufacture of the Hardware. BlueArc shall facilitate introductions to Sanmina and other contract manufacturers used by BlueArc to manufacture Products, but BlueArc makes no representations and makes no guarantees regarding HDS’ ability to contract with Sanmina for the manufacture of Products.

3.5 Establishing Escrow. Within sixty (60) days after the Effective Date, BlueArc will deposit a copy of the Source Code into escrow pursuant to an Escrow Agreement to be entered into among HDS, BlueArc and Escrow Agent.

3.5.1 The Escrow Agreement will provide for the release of the Source Code from escrow upon the occurrence of any one of the events set forth in Sections 3.7 or 3.8.

* * * Indicates that confidential treatment has been sought for this information. 16

3.5.2 HDS will be responsible for all costs of maintaining the escrow.

3.5.3 The Escrow Agreement will be supplementary to this Agreement, pursuant to Section 365(n) of the Bankruptcy Code.

3.5.4 After the initial deposit under this Section 3.5, BlueArc thereafter will promptly deposit into the escrow account copies of the (i) Source Code of (a) Major Releases, (b) Minor Releases and (c) any new Products that have been added to Exhibit A, and (ii) related Documentation, which in each case have been added to Exhibit A. Any other Improvements and related Documentation will be deposited once every six (6) months or more frequently as determined by BlueArc.

3.5.5 At any time, HDS may verify with Escrow Agent at its own cost that BlueArc has complied with its deposit obligations under this Section 3.5 and the Escrow Agreement.

3.6 Updated Source Code. In addition to the Development Source Code received by HDS pursuant to Section 3.8, the Source Code licensed pursuant to Sections 3.1 and 3.2 will be the then current, most updated version that is required to be on deposit with the Escrow Agent pursuant to Section 3.5 and all related Documentation.

3.7 Release of Source Code from Escrow. The Escrow Agreement will provide for the release to HDS of Source Code held in escrow if any one of the following events occurs:

(a) a receiver or trustee is appointed for BlueArc;

(b) BlueArc becomes insolvent, admits in writing its inability to pay debts as they mature, is adjudicated bankrupt, or makes an assignment for the benefit of its creditors or another arrangement of similar import;

(c) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced against BlueArc and are not released within sixty (60) days,

(d) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced by BlueArc,

(e) an entry of an order for relief by or on behalf of BlueArc under Chapter 7 or Chapter 11 of the Bankruptcy Code;

(f) BlueArc has suspended or ceased its on-going business operations or that portion of its business operations relating to the sale or Support of the Products;

* * * Indicates that confidential treatment has been sought for this information. 17

(g) there is a Maintenance Lapse; or

(h) HDS has requested Escrow Agent release to HDS, all Source Code held in Escrow pursuant to Section 3.8 below.

3.8 Further Source Code Possession. If: (a) a Change in Control * * * occurs * * *, and (b) BlueArc * * *, and (c) cumulative Product purchased by HDS and its Affiliates (excluding for Products held in inventory and for stocking and not yet resold but nonetheless for which HDS has paid BlueArc) exceed * * *, and (d) HDS has tendered or paid BlueArc * * *, then in consideration of the payment, HDS will at its option have a fully paid-up, royalty-free, perpetual, irrevocable, worldwide, nonexclusive right and license to use the Source Code and the Development Source Code pursuant to Section 3.2 above, and to manufacture Licensed Products pursuant to Section 3.3 above. After HDS has paid BlueArc pursuant to this Section 3.8, HDS may obtain all Source Code held in escrow pursuant to Section 3.7(h) above and BlueArc will provide all Development Source Code and the Technical Information to HDS. For clarification purposes the * * * purchase commitment of HDS under Section 5.17.1 will apply to the * * * referenced in this Section 3.8.

3.9 HDS Source Code Obligations. For any Source Code or Development Source Code received by HDS pursuant to Sections 3.7 or 3.8, HDS shall not disclose, transfer, make available, sublicense, market, sell, re-sell, distribute or otherwise disseminate the Source Code or Development Source Code to Channel Partners or End Users. * * * As soon as reasonably possible following the End User Expiration Date HDS shall return to BlueArc or at BlueArc’s request, destroy and erase any copies of the Source Code received pursuant to Section 3.1 and any Maintenance Modifications created by HDS pursuant to Section 3.1. * * *.

3.10 Termination of Rights upon IPO. If BlueArc completes an initial public offering of its securities prior to the occurrence of any of the release conditions set forth in Section 3.8, then notwithstanding anything to the contrary in this Article 3, all rights and obligations of the Parties under this Article 3 shall thereafter immediately terminate.

3.11 Reorganization. If BlueArc has completed a Chapter 11 reorganization and received a final order for completion of the Chapter 11 reorganization from the bankruptcy court no later three months following the filing date of an entry for an order for relief by or on behalf of BlueArc under Chapter 11 of the Bankruptcy Code, HDS will reasonably consider entering, but will have no obligation to enter, into an agreement with BlueArc to support End Users of the Product on terms mutually acceptable to BlueArc and HDS.

3.12 Executive Escalation. At any time after BlueArc has received notice of a Support Failure either Party may request an executive escalation, which shall mean a discussion between executive officers of both Parties for a period not to exceed fifteen (15) days, to attempt in good faith to correct, cure or otherwise agree on a mutually acceptable solution, which the Parties may ultimately agree does not constitute a

* * * Indicates that confidential treatment has been sought for this information. 18

Support Failure for purposes of the Maintenance Lapse. This escalation will not, however, delay the occurrence of a Maintenance Lapse beyond the fifteen (15) day period.

3.13 Sublicensing. HDS shall have the right to sublicense to Hitachi Ltd. any or all of the above licenses provided that HDS shall remain responsible for the performance of Hitachi Ltd.

3.14 Consultants. HDS and its permitted sublicensees are permitted to use Consultants to assist it in exercising the licenses granted to it hereunder solely for HDS’ benefit and provided that HDS shall be liable to BlueArc for any act of the Consultant which if committed by HDS would be a breach of this Agreement.

4. PRODUCT CERTIFICATION, ADDITIONS, MARKETING, SALES AND SUPPORT.

4.1 Certification of Products. Periodically, one Party may loan the other Party, free of charge, Products, or certain equipment related to the Products, solely for internal evaluation and certification purposes for use in a designated lab until the Product is qualified for interoperability with HDS storage products, or one hundred twenty (120) days, whichever occurs first. The Parties will mutually agree on the number of and designated location of the loaned Product or equipment. Any loaned Product or equipment will be subject to both Parties’ execution of a loan agreement in the form of Exhibit F (“Equipment Loan Agreement”) for loan of its products. This Equipment Loan Agreement will include Product updates, replacement products, Software and updates, transportation, installation and maintenance of the Product or equipment free of charge.

4.2 New or Replacement Products. In the event BlueArc is obligated to offer HDS products pursuant to Section 2.7, BlueArc will supply loaner products pursuant to Section 4.1 at the time of notification of discontinuance of the Product to be replaced. After HDS has accepted a Product pursuant to Exhibit C, the Parties will update Exhibit A.

4.3 Maintenance Support. During the Term, HDS, its Affiliates, or ASPs will use commercially reasonable efforts to offer End User maintenance contracts and renewals. For each maintenance contract or renewal so purchased by an End User, BlueArc will provide Support to HDS for the Products pursuant to its obligations under Exhibit B and until the End User Expiration Date.

4.4 Training. HDS, its Affiliates and ASPs will be entitled to the training as further described in Exhibit H. Each Party will comply with its obligations set forth in Exhibit B and Exhibit H.

4.5 Marketing Support. Each Party will provide the marketing support for the Products pursuant to the joint marketing program set forth on Exhibit E.

* * * Indicates that confidential treatment has been sought for this information. 19

4.6 Sales Support. Each Party will comply with all of its obligations related to Sales Support pursuant to the terms of Exhibit D. The Parties shall prepare and agree upon written rules of engagement with respect to their sales channel marketing efforts with respect to the Products (“Rules of Engagement”), * * *, and the Parties shall comply with such Rules of Engagement in their marketing and sales efforts with respect to the Products. For clarification purposes, the Rules of Engagement will include an escalation and resolution process consistent with each Party’s policies for any failure to comply.

5. PRICES, PAYMENT AND FULFILLMENT.

5.1 Product Fees. HDS or a Regional Affiliate, as applicable, will pay BlueArc for each Product purchased under this Agreement an amount equal to the mutually agreed upon fixed price as set forth in Exhibit A. The Alliance Managers for HDS and BlueArc, and their designees, shall meet on a quarterly basis to review the Product Price and adjust as mutually agreed. The Parties will amend Exhibit A upon reaching agreement on any price change. Prices for Products will be set and paid in U.S. Dollars. Unless otherwise stated, prices are EXW (Incoterms 2000) BlueArc’s manufacturing or warehousing facilities. Without limiting the foregoing, prices do not include, and HDS shall pay, any and all fees, expenses or charges for special packaging, transportation, storage, and insurance.

5.1.1 Evaluation Units. If HDS and its Regional Affiliates elect to provide evaluation Product units to End Users in anticipation of Product sales, such evaluation units will be provided to End Users out of HDS’ and Regional Affiliates’ Product inventory. BlueArc will refurbish any returned evaluation units at the prices and discounts set forth in Exhibit A, plus will charge HDS and its Regional Affiliates for parts as specified in Exhibit A and shipping back to HDS and its Regional Affiliates.

5.1.2 Demonstration, Lab and Training Products. Product to be used by HDS and its Affiliates for demonstration, lab and training shall be provided at the prices set forth in Exhibit A. If, at the end of the Product life, HDS or a Regional Affiliate wishes to resell such units to End Users, BlueArc shall quote a reasonable price for such refurbishment of such Products, taking into account discounted pricing originally charged to HDS and Regional Affiliates’ for such units.

5.1.3 Spares. Spares shall be provided at the prices set forth in Exhibit A.

5.2 Fees for Support Services. HDS or a Regional Affiliate, as applicable, will pay BlueArc a Support fee for each Product sale, paid annually in advance (or as paid in different increments by the End User) following a Product sale to an End User, and in connection with each End User maintenance renewal, whether Support is provided by HDS, its Affiliates or ASPs, in accordance with the prices set forth in Exhibit A.

* * * Indicates that confidential treatment has been sought for this information. 20

5.3 Taxes. All prices contemplated under this Agreement will exclude any applicable taxes, including without limitation income taxes, value-added tax (Ad Valorum Tax or “VAT”), government sales (“GST”) or national sales tax (“NST”), sales or use tax, withholding tax, or excise tax. Any taxes arising under this Agreement will be the sole responsibility of the Party owing such tax, which liability will be determined by the specific law governing such tax assessment; provided, however, any sales or use tax, GST, NST, or excise taxes will be the responsibility of the Party purchasing the goods or services contemplated under this Agreement.

5.3.1 Withholding Obligations. For any transaction arising under this Agreement, to the extent the governing law of any taxing authority imposes a withholding or collection obligation on the invoicing Party for any tax properly associated with a billing or collection process on amounts due under this Agreement, the invoicing Party will exercise due professional care in discharging such withholding or collection obligation, and will invoice in addition to the fees provided herein, an additional amount equal to such taxes due. The invoicing Party will remit to the proper authorities these additional taxes as required by applicable law.

The withholding Party will provide to the other Party within a commercially reasonable time period, appropriate written evidence supporting the nature and amount of the tax involved.

5.3.2 Exemptions. If a resale certificate, treaty-benefits exemption certificate, or other exemption document is required to reduce or eliminate any taxes arising on transactions contemplated herein, the invoiced Party will be solely responsible for providing to the invoicing Party such documentation, and the invoiced Party will using all commercially reasonable efforts fully cooperate to establish the validity of the documentation.

If it is ever determined that any tax withheld or paid relative to this Agreement was not required to be paid, and that a refund of such taxes is appropriate, both Parties agree to provide all commercially reasonable cooperation and assistance towards the timely collection of such refund.

5.4 End User Pricing. HDS, its Affiliates, ASPs and Channel Partners will have the unrestricted right to determine the prices at which they sell any Product or Support to End Users. No BlueArc representative has the authority to suggest that HDS, its Affiliates, ASPs or Channel Partners charge a particular sale or resale price for any such Product or Support.

5.5 Purchase Orders. HDS and Regional Affiliates will each generate and submit purchase orders (“PO”) to BlueArc for Products. The PO shall contain the End User name, Product names, descriptions and Product codes, Product installation location, Product installation date, and price for the Products and all related Support, training, and if applicable, educational materials ordered. No other terms and conditions on POs

* * * Indicates that confidential treatment has been sought for this information. 21

or other sales documents of either Party that add to or vary from the terms and conditions of this Agreement shall be binding upon the other Party unless expressly approved by an authorized company representative in writing by the other Party in each instance, nor shall any custom or usage in the industry, nor any prior dealing or course of conduct between the Parties alter the terms of this Agreement. HDS and Regional Affiliates may submit a PO without a signature to BlueArc by email or other transmission method.

5.6 Purchase Order Acceptance. Subject to BlueArc’s firm commitments and delivery obligations under Section 5.16, BlueArc will accept or reject HDS’ or a Regional Affiliate’s PO within two (2) U.S. business days of receipt from HDS or the Regional Affiliate respectively. If BlueArc does not reject a PO within two (2) U.S. business days of its receipt, the PO will be deemed accepted. BlueArc may accept or reject a PO by telephone, electronic mail, or any other method agreed to by the Parties.

5.7 Allocation. Subject to BlueArc’s firm commitments and delivery obligations under Section 5.16, if BlueArc is unable to meet its delivery commitments due to matters beyond its reasonable control (for example due to industry wide shortages in supply of the components used in producing the Products or failures of its suppliers for reasons unrelated to a breach of BlueArc’s obligations to such supplier) and must therefore allocate the Products, then BlueArc will allocate a portion of its inventory of Products to HDS on a pro rata basis based on historical orders for the previous six (6) months.

5.8 Delivery. If BlueArc accepts the PO, BlueArc will ship the Products EXW (Incoterms 2000) BlueArc’s manufacturing or warehousing facilities, pursuant to the PO terms and this Agreement. BlueArc will use commercially reasonable efforts to meet HDS’ or a Regional Affiliate’s requested delivery date specified in the accepted PO, subject to HDS’ and its Regional Affiliates’ right to reschedule or cancel delivery as provided for in Section 5.11, and further subject to BlueArc’s firm commitments and delivery obligations under Section 5.16.

5.9 Notification of Anticipated Delay. Subject to BlueArc’s firm commitments and delivery obligations under Section 5.16, if BlueArc anticipates or becomes aware that it will not be able to supply the ordered Products on the delivery date set forth in the accepted PO for any reason, or that only a portion of the ordered Products will be available to meet a delivery date, BlueArc shall notify HDS or the Regional Affiliate, as applicable, as soon as practicable after BlueArc has knowledge of the situation. The notification may be communicated by facsimile, telephone, electronic mail, or any other method agreed to by the Parties. If BlueArc is unable to meet the delivery date specified in the accepted PO, HDS shall have the option of (a) rescheduling the delivery date, (b) canceling the affected PO without incurring any reconfiguration, restocking or administrative fees or any other charges, or (c) working with BlueArc to jointly develop an alternative to resolve the late delivery of Product (which may include renegotiation of the time period for HDS to meet its purchase obligation under Section 5.16.1 or Section 5.17). If BlueArc is required to expedite Product pursuant to this provision, any additional expenses shall be paid by BlueArc.

* * * Indicates that confidential treatment has been sought for this information. 22

5.10 Lead Times. Except for and subject to BlueArc’s firm commitments and delivery obligations under Section 5.16, HDS and Regional Affiliates shall place their POs for Products with BlueArc allowing for * * * lead time from the day HDS’ PO is accepted by BlueArc until the delivery date specified in the accepted PO.

5.11 Cancellation or Change of POs. Except as set forth in Section 5.9, for all orders within forecast HDS may, cancel delivery, or part thereof, or cancel or change the terms of a PO, provided it is done no later than * * * prior to the delivery date set forth in the accepted PO. BlueArc shall not be obligated to deliver on the original delivery date for such changes in POs but will provide a new delivery date on acceptance of such change. Purchases of Product by HDS shall be at HDS’ own risk and for its own account. Subject to Section 5.9, BlueArc reserves the right to reject changes to Orders for any reason however HDS may delay the delivery dates of POs in excess of HDS purchase commitments under the Committed Forecast for up to * * *. If a PO is cancelled or changed by HDS in accordance with the foregoing HDS shall reimburse BlueArc for any actual, reasonable, direct, out of pocket costs incurred by BlueArc as a result of such change or cancellation; provided that such costs shall not exceed the original value of the PO. For clarification purposes, no cancellation by HDS under this Section 5.11 will reduce HDS’ obligation under Section 5.16 to purchase * * *.

5.12 Payments. BlueArc will invoice HDS and Regional Affiliates separately, based on each PO accepted by BlueArc from HDS and a Regional Affiliate. HDS and Regional Affiliates will pay BlueArc in US dollars (US$) for Products correctly invoiced by BlueArc, due * * * from the date of a correct invoice (i.e. one that matches the respective PO). Undisputed amounts outstanding more than * * * will be subject to a monthly charge at the rate of * * * or the maximum permitted by law, whichever is less. For orders from a Regional Affiliate, BlueArc will look first to that Regional Affiliate for payment and performance of applicable contractual obligations under this Agreement, except as otherwise expressly set forth in Section 6.3 below.

5.13 Special Pricing. Upon request by HDS or a Regional Affiliate, and in addition to any other adjustment pursuant to this Article 5, BlueArc will consider in good faith reducing Product or Support prices for specific transactions and generally based on market conditions, market data and End User information available to the Parties, in accordance with the provisions set forth in Exhibit D and the Rules of Engagement.

5.14 Payment Obligation. HDS’ and Regional Affiliates’ payment obligations to BlueArc are not in any manner contingent upon payment by any Channel Partner or End User.

5.15 Title and Risk of Loss. Title and risk of loss or damage to the Products shall pass to HDS when BlueArc places the Product with the carrier at BlueArc’s loading dock. Risk of loss or damage to any of the Products in transit after delivery, without

* * * Indicates that confidential treatment has been sought for this information. 23

regard to whether BlueArc paid the shipping charges therefor or whether any third party is designated as consignee thereof, is HDS’, whose responsibility it will be to file claims with the carrier.

5.16 Forecasts and Order Fulfillment. HDS and Regional Affiliates will provide BlueArc with the Forecast no later than thirty (30) days following the Effective Date and thereafter on or before the fifteenth (15^th) day of each calendar month. The Forecast shall be non-binding, except as set forth in Section 5.16.1 and as otherwise limited by Section 5.16.5:

5.16.1 Binding Forecast. * * *.

5.16.2 Orders in Excess of Forecast. * * *.

5.16.3 Order Fulfillment. For all Products falling within the Committed Forecast, BlueArc shall deliver such Products subject to Section 5.8, within the lead times in accordance with Section 5.10, unless a later delivery date is specified in the PO, in which case BlueArc shall deliver the Products on the later delivery date.

5.16.4 BlueArc Suppliers. The Parties acknowledge that the Products to be supplied by BlueArc hereunder will be manufactured by third parties for BlueArc. Accordingly, provided that BlueArc places the necessary orders with such third party suppliers and BlueArc is not in material breach of the manufacturing agreement with such third party which excuses that third party from its obligation to deliver such Product, BlueArc will not be liable for a failure to deliver Products in accordance with the terms hereof due to a failure of its supplier to fulfill its delivery commitments to BlueArc.

5.16.5 Phase In Period. The Parties will mutually agree within fifteen (15) days of the Effective Date on the initial Forecast and delivery schedule (“Phase In Period”) * * *; provided however, the Phase In Period will not exceed * * * from the Effective Date. HDS will provide a committed PO for such agreed upon Phase In Period forecast and delivery schedule.

5.17 Purchase Obligation. HDS and its Regional Affiliates will purchase sufficient Products to result in a minimum sum of * * * to BlueArc through * * *.

5.17.1 HDS and it Affiliates will order, within * * * following the Effective Date, not less than * * * of Products for * * *.

5.17.2 HDS and its Affiliates will order * * * from the Effective Date until * * *. Existing Customer Sales shall count towards the total commitment under this Section 5.17.2. * * *. BlueArc will invoice HDS for such payment and HDS shall pay pursuant to the terms of Section 5.12. For clarification purposes, any orders that BlueArc is obligated to but unable to deliver pursuant to this Article 5 will be credited against HDS’ purchase obligation under both Sections 5.17.2 and 5.16.1.

* * * Indicates that confidential treatment has been sought for this information. 24

5.18 Installation of Software. Unless otherwise agreed by the Parties, BlueArc shall install the Software on the Products prior to shipment to HDS or a Regional Affiliate.

5.19 Most Favored Distributor. If during the Term, BlueArc sells any Products or Support, or any functional equivalents thereof, to any similarly situated distributor or reseller, with substantially similar projected or actual Product sales volume as HDS and its Affiliates, upon substantially similar terms and conditions when considered in their entireties, and charges such distributor or reseller a fee lower in the aggregate than the fees payable by HDS or its Affiliates to BlueArc pursuant to this Article 5, BlueArc shall promptly notify HDS. Distributor or a Regional Affiliate, as applicable, may elect to substitute such lower fee for the fees set forth in this Agreement, but BlueArc will not be required to refund any amounts previously paid under this Agreement. This requirement will not apply to one-time End User transactions involving a distributor or reseller.

6. HDS’ OBLIGATIONS.

6.1 Export Controls. HDS acknowledges that the Products and Confidential Information (“Technical Data”) may be subject to United States export controls, pursuant to the EAR, and HDS will comply with all applicable requirements of the EAR regarding the Technical Data. Without prior written authorization of BlueArc and the United States Government, HDS will not, and will not cause its representatives (including its Affiliates and Channel Partners), to: (a) export, re-export, divert or transfer any such Technical Data, or any direct product thereof, to any destination, company, or person restricted or prohibited by the United States export controls, or (b) disclose any such Technical Data to any national of any country when such disclosure is restricted or prohibited by the United States export controls. BlueArc shall provide HDS with reasonable assistance and information in order for HDS to comply with the provisions of this Section 6.1, including without limitation performing its obligations under Sections 7.1 and 7.2.

6.2 Compliance with Other Laws by HDS. HDS will comply, at its own expense, with all applicable federal, state, local and foreign laws, ordinances, regulations and codes, including the United States Foreign Corrupt Practices Act, and shall identify and procure all legally required permits, certificates, licenses, insurance, approvals and inspections, in the performance of this Agreement. For the purposes of BlueArc’s rights under Section 6.3, this Section 6.2 will apply to HDS’ Affiliates, but not Channel Partners or other third parties.

6.3 Affiliate Remedy. HDS will ensure that its Affiliates comply with all applicable terms and conditions of this Agreement, as if the Affiliates were a party to this Agreement. If any act or omission by any HDS Affiliate violates any applicable term or condition of this Agreement, then BlueArc may enforce the violated term or condition

* * * Indicates that confidential treatment has been sought for this information. 25

exclusively against HDS and seek any remedy from HDS to which BlueArc would be entitled if the Affiliate were a signatory to this Agreement. HDS’ obligations under this Section 6.3 will not be conditioned upon BlueArc’s enforcement of this Agreement against the HDS Affiliate; provided, however, BlueArc will not seek monetary damages from or against an HDS Affiliate for any breach by the HDS Affiliate, if BlueArc has elected to first seek monetary damages against HDS or (ii) HDS has satisfied such obligation or liability of its Affiliate. For clarification purposes, this section is intended to prohibit double recovery and provide for an election of remedies, once BlueArc has elected to proceed against HDS.

6.4 Intellectual Property Markings. HDS will display or cause to be displayed, on, with, or by the Products, all patent, markings and other intellectual Property markings as may be reasonably directed by BlueArc.

6.5 Monthly Reports. HDS shall provide a monthly POS report to BlueArc for each month no later than the fifteenth (15) of the following month. * * *.

7. BLUEARC’S OBLIGATIONS.

7.1 Export Controls Product Information. BlueArc will comply with the Export Act, as amended, and the EAR and any other United States law, regulation or treaty or any other international treaty or agreement to which the United States adheres or complies as they relate to export of the Products in the Territory. BlueArc will provide the following Product information within ten (10) business days after the addition of a Product to Exhibit A.

(a) Product Name

(b) Product Model Number

(c) Product Part Number

(d) Short Product Description

(e) Schedule B/Harmonized Tariff Number

(f) Country of Manufacture/Origin

(g) U.S. Export Control Classification Number (ECCN)

(h) Patent or other Intellectual Property markings to be displayed pursuant to Section 6.4.

(i) Any Federal Communication Commission information required for importation into the U.S.

(j) Any Food and Drug Information required for importation into the U.S. (typically for products containing lasers).

The foregoing information will be directed to:

Global Trade Compliance Department

Hitachi Data Systems Corporation

750 Central Expressway, MS 34-46

Santa Clara, CA 95050

Tel: (408) 970-5953

Fax: (408) 496-6315

* * * Indicates that confidential treatment has been sought for this information. 26

7.2 Shipment of Products Outside of the United States. BlueArc will use commercially reasonable efforts under U.S. and foreign law to qualify its Products for export to a particular country in the Territory as soon as possible following notification from HDS of a particular country to which it intends to ship the Products.

7.3 Hazardous Substance and Environmental Laws and Directives. BlueArc will comply with all applicable state, federal, and where applicable, country-specific hazardous substance and environmental laws, rules and regulations, including without limitation, WEEE and RoHS. Upon request from HDS, BlueArc will provide HDS with written certification of its then current compliance with RoHS.

7.4 Compliance with Other Laws by BlueArc. BlueArc will comply, at its own expense, with all applicable federal, state, local and foreign laws, ordinances, regulations and codes, including the United States Foreign Corrupt Practices Act, and shall identify and procure all legally required permits, certificates, licenses, insurance, approvals and inspections, in the performance of this Agreement.

7.5 Support. BlueArc will provide Support pursuant to the terms and conditions set forth in Exhibit B.

7.6 Product Changes. BlueArc will make reasonable efforts to notify HDS no later than * * * prior to the discontinuance or change of any Product during the Term, if known that far in advance. If discontinuance or change of any Product is less than * * *, notice shall be as soon as reasonably possible. Notice shall include any foreseen changes in or modification to a Product’s BIOS but may exclude any changes needed due to error conditions and corrections. Any discontinuance or change will not affect BlueArc’s warranty obligations under this Agreement.

7.7 Business Review Meetings. Upon request by HDS, but no less frequently than once every calendar quarter during the Term Alliance Managers of the Parties, and their designees, shall meet at a mutually agreeable time and location to discuss and document future Product shipment schedules, Support activities, sales and marketing activities, pricing, forecasting and any other issues that need resolution or review.

7.8 Lab Access Requirements. BlueArc will execute the Lab Access Agreement set forth in Exhibit G as a condition to HDS’ granting BlueArc access to HDS’ laboratories pursuant to the terms of this Agreement. BlueArc will, and will cause any of its employees, contractors or other personnel using HDS’ laboratories pursuant to this Agreement, to comply with all of the terms of the Lab Access Agreement.

7.9 Branding and Co-Branding Requirements. The Parties shall adhere to the branding and co-branding requirements set forth in Exhibit E and Exhibit M.

* * * Indicates that confidential treatment has been sought for this information. 27

7.10 Covenant to Deliver Financial Statements. BlueArc covenants that, promptly upon HDS’ request, if reasonably practicable, and in no event later than fourteen (14) days thereafter, BlueArc will give to HDS a copy of BlueArc’s most recently audited financial statements, including the related statements of income, changes in stockholders’ equity and cash flow, and balance sheet. If BlueArc’s most recent financial statements are un-audited, BlueArc will give to HDS a copy of such un-audited financial statements in addition to the materials given pursuant to the previous sentence. BlueArc represents and warrants and covenants that each of the financial statements delivered in accordance with this Section 7.10 (including in all cases the notes thereto, if any) will be accurate and complete in all material respects, consistent with the books and records of BlueArc (which, in turn, will be accurate and complete in all material respects), will present fairly in all material respects the financial condition and results of operations and cash flows of BlueArc as of and for the periods referred to therein, and all audited financial statements will be prepared in accordance with GAAP; provided however, in the case of un-audited financial statements not yet certified by BlueArc’s outside accountants as GAAP compliant, BlueArc will endeavor, unless otherwise disclosed to HDS, to prepare such unaudited financial statements in accordance with GAAP subject, to changes resulting from normal year end adjustments for recurring accruals (which shall not be material individually or in the aggregate) and to the absence of footnote disclosure and other presentation items.

7.11 License Keys. The Parties agree to work together and reasonably cooperate to create and issue License Keys in accordance with the existing BlueArc process and the Parties will use commercially reasonable efforts to incorporate BlueArc’s License Key system into the HDS license key management process promptly following the Effective Date.

8. ROADMAP DEVELOPMENT.

8.1 Roadmaps. BlueArc will conduct product development activity in connection with this Agreement. HDS and BlueArc will work cooperatively to define the activity based on market activity and customer requirements to develop a list of development items (“PRD”). The initial obligated activities and responsibilities of the Parties, including deliverables, specifications and development schedules for the strategic roadmap items (“Initial Roadmap Items”) are set forth in Exhibit Q. Additional strategic roadmap items that are subject to the terms of this Section 8.1 are set forth in Exhibit M. Upon request by either Party, but no less frequently than once every calendar quarter during the Term, the Parties, and their designees, will meet to discuss and document future road map activities. For clarification purposes the PRD will be revisited through the quarterly business reviews between the Parties.

8.2 Failure to Meet Roadmap Schedules. The BlueArc Alliance Manager will provide the HDS Alliance Manager with written notice (“Slippage Notice”) of any material slippage in a development schedule for an Initial Roadmap Item (“Slippage”).

* * * Indicates that confidential treatment has been sought for this information. 28

8.2.1 Technical Issue. If HDS: (a) receives a Slippage Notice stating in good faith that: or (b) otherwise in good faith reasonably believes or has knowledge that: a technical problem related to BlueArc’s obligations has caused a Slippage that prevents BlueArc from delivering an Initial Roadmap Item on the date specified on Exhibit Q, then BlueArc will use commercially reasonable efforts to promptly resolve the Slippage related issue and discuss the next steps with HDS. HDS will reasonably assist and cooperate with BlueArc on the resolution although HDS will not be required to spend any additional sums unless otherwise specified on Exhibit Q or mutually agreed by the Parties. If BlueArc has been working in good faith to resolve the Slippage for * * * and at that time HDS believes in good faith that the Slippage will adversely affect HDS’ ability to sell Products during the period prior to * * * and therefore meet its purchase obligation to BlueArc under Section 5.17 and its subsections, then HDS will so notify BlueArc and HDS may terminate this Agreement without cause on not less than * * * prior written notice to BlueArc. Following this termination neither Party will have any further obligations under this Agreement except to pay for Products and Services received by HDS on the termination date and with respect to each Party’s surviving obligations. For clarification purposes, a Slippage caused by the action or inaction of HDS or Hitachi Ltd. (that is not otherwise the direct result of a failure by BlueArc or any of BlueArc’s contractors) resulting directly in a Slippage by BlueArc will not be deemed a Slippage that permits HDS to exercise its termination rights under this Section. In addition, any Slippage resulting from a force majeure event as described in Section 29 will not permit HDS to exercise its termination rights under this Section.

8.2.2 Committed Resource Issue. If: (a) (i) HDS receives a Slippage Notice, or (ii) HDS in good faith reasonably believes or has knowledge that a Slippage has occurred, because BlueArc has reallocated human or other resources that BlueArc committed to provide to HDS in connection with BlueArc’s obligations under Exhibit Q and (b) BlueArc has failed to attend a meeting requested by HDS regarding the foregoing Slippage within * * * of the HDS request, then an HDS officer may request a face-to-face or telephonic meeting(s) between executive officers of both Parties for a period not to exceed * * * to attempt in good faith to correct, cure or otherwise agree on a mutually acceptable solution. If BlueArc’s executive officer fails to be available to meet within * * * of HDS’ request, and/or after the Parties have met for * * * as required by this Section they have not reached a mutually acceptable solution, then HDS may notify BlueArc that it is in Material Breach under this Agreement and HDS may exercise its rights and remedies pursuant to Section 16.1. For clarification purposes, provided that HDS has notified BlueArc pursuant to this Section and Section 16.1, * * *. Reallocation or reprioritization of resources by mutual agreement shall not be covered under this Section.

8.3 Compatibility. During the Term, each Party will give the other Party at least * * * advanced notice of a new product to be released by such Party. The Parties will mutually agree in the quarterly business reviews whether and how the new products will be made compatible. For clarification purposes, neither Party will be required to notify the other Party of any new products that are outside the scope of this agreement.

* * * Indicates that confidential treatment has been sought for this information. 29

8.4 Interoperability. During the quarterly business reviews, the Parties will mutually define the priorities, timing, deliverables and obligations of each Party with regard to interoperability testing of either Party’s products and the mutually agreed upon interoperability support matrix.

9. ENGINEERING AND PROFESSIONAL SERVICES.

9.1 Engineering Services. The Parties may mutually agree to have BlueArc perform Engineering Services to create new software, incremental features, change features, accelerate features or software development included in the Roadmap, or to develop independent products unrelated to the Products on mutually acceptable terms as set forth in a SOW. Such Engineering Services may include Deliverables, specifications, non-recoverable expense (“NRE”) charges and development schedules for items on Exhibit Q as specified under a SOW pursuant to the process described in Section 9.2. * * *. Further branding will be based on mutually agreed terms and conditions.

9.2 SOW Process. Any SOW for Engineering Services will: (a) incorporate this Agreement; (b) describe the Deliverables; (c) set forth specifications for the Deliverables; (d) contain a milestone development and delivery schedules for the Deliverables; (e) specify acceptance testing criteria and procedures for the Engineering Services; (f) specify pricing; (g) specify who is supporting the costs and will specify any HDS NRE charges and (g) be executed by both Parties. Absent an executed SOW, HDS makes no commitment to purchase any Engineering Services. The SOW will control any conflict between an SOW and this Agreement.

9.3 Ownership of Deliverables. Unless expressly stated otherwise in the applicable SOW or provided in the subsections below, BlueArc will own all rights, title, and interest in Deliverables for the particular Engineering Services created for HDS by BlueArc under the SOW, including all related Intellectual Property Rights therein, and will grant HDS a license to such Deliverables as set forth above with respect to Products and Software, as applicable.

9.3.1 Unless expressly provided in an SOW, all rights, title, and interest in and to the Professional Methodology will remain the property of BlueArc.

9.3.2 To the extent Professional Methodology is contained within a Deliverable provided under the applicable SOW, BlueArc grants HDS and its Affiliates a non-exclusive, perpetual, irrevocable, sublicensable but otherwise non-transferable, fully paid-up, license within the Territory to use that Professional Methodology.

9.4 Professional Services. The Parties may agree that BlueArc will deliver Professional Services under the MPSA and any statement of work executed pursuant

* * * Indicates that confidential treatment has been sought for this information. 30

thereto. Professional Services will be governed by the MPSA and any statement of work executed under the MSPA, however, HDS makes no commitment to purchase any Professional Services. If there is any conflict between this Agreement, the MPSA and a statement of work executed pursuant to the MPSA, the documents will control in the following order: the statement of work, MPSA and all other portions of this Agreement.

10. TRADEMARK OBLIGATIONS.

10.1 BlueArc Trademarks. HDS recognizes the exclusive rights of BlueArc in the BlueArc Trademarks and the associated goodwill. HDS will conduct its business in a manner consistent with the protection of these exclusive rights. Except as expressly permitted by this Agreement, HDS will not use in its corporate or business name, any BlueArc Trademark and will on expiration or termination of this Agreement, discontinue any representations that it is a Product distributor or reseller of BlueArc.

10.2 Hitachi Trademarks. BlueArc recognizes the exclusive rights of HDS and its Affiliates in the Hitachi Trademarks and the associated goodwill. BlueArc will conduct its business in a manner consistent with the protection of these exclusive rights. Except as expressly permitted this Agreement, BlueArc will not use in its corporate or business name, any Hitachi Trademarks and on expiration or termination of this Agreement, will discontinue any representations that it is a supplier to HDS of Products.

10.3 BlueArc Trademark License. Subject to this Section 10.3, BlueArc grants to HDS and its Affiliates a non-exclusive, non-transferable, non-sublicensable, fully paid-up right and license in those countries in the Territory in which BlueArc has such rights, including without limitation those countries set forth on Appendix K-1, to the extent to the rights in those countries, to use the BlueArc Trademarks in connection with the use, sale, licensing, distribution, promotion, co-branding, marketing, advertising and maintenance of the Products pursuant to the terms of this Agreement (including without limitation the joint marketing plan and co-branding contemplated pursuant to Exhibit E and Exhibit M) for so long as the BlueArc Trademarks are used by HDS and its Affiliates but not beyond the Term unless otherwise expressly provided in this Agreement for continued distribution or support rights or otherwise. HDS may sublicense its rights granted under this Section to Channel Partners solely in connection with the distribution, promotion, advertising and marketing of the Products. BlueArc will update Appendix K-1 for any new BlueArc Trademarks that are used pursuant to this Agreement, which new BlueArc Trademarks will be subject to the terms of this Agreement.

10.3.1 Approval Process. All use by HDS and its Affiliates of the BlueArc Trademarks will be subject to BlueArc’s prior written approval, which will not be unreasonably withheld or delayed. If BlueArc fails to respond to a written approval request within five (5) business days from BlueArc’s receipt, HDS and/or its Affiliates proposed use will be deemed approved.

* * * Indicates that confidential treatment has been sought for this information. 31

10.4 Reference to HDS by BlueArc. BlueArc will not use the Hitachi Trademarks in connection with any use, licensing, provision of access or other disposition of the Products; provided, however, BlueArc may inform third parties that the Products are licensed to HDS and its Affiliates and reference HDS’ product name; provided, however, BlueArc will have no right to use any logo of HDS or its Affiliates without the prior written consent of Hitachi, Ltd. In addition, during the Term, BlueArc will have a limited right to distribute the marketing and promotional materials prepared pursuant to Exhibit E. All of the rights granted under this Section 10.4 will terminate immediately upon the expiration or termination of this Agreement.

10.5 BlueArc Trademark Covenants. During the Term and any period following the expiration or termination thereof where HDS is expressly permitted to use the BlueArc Trademarks under this Agreement, BlueArc will not permit the BlueArc Trademark registrations in the United States (or in any new country where BlueArc registers the BlueArc Trademarks during the Term) to expire and will not abandon any use of the BlueArc Trademarks.

10.6 Negative Covenants. Each Party will: (a) avoid any action that diminishes the value of the other Party’s Trademarks; (b) not adopt, use or attempt to register any of the other Party’s Trademarks (i) in combination with such Party’s Trademarks in a manner that would create combination marks, or (ii) that would be confusingly similar to the other Party’s Trademarks; (c) neither seek, nor obtain any trademark or trade name registration embodying the other Party’s Trademarks, nor register nor cause to be registered any of the other Party’s Trademarks in such other Party’s name. All goodwill resulting from any permitted use of the other Party’s Trademarks under this Agreement will inure solely to such other Party. Each Party’s unauthorized use of the other Party’s Trademarks is strictly prohibited.

10.7 Domain Name. In no event will either Party establish, operate, sponsor or contribute content to any site on the Internet, which incorporates the name of the other Party as its URL address or any part of such address.

10.8 BlueArc’s Additional Trademark Requirements. BlueArc will use commercially reasonable efforts to address the issues related to the BlueArc trademark in Germany.

11. REPRESENTATIONS, WARRANTIES, COVENANTS AND DISCLAIMERS.

11.1 BlueArc’s Obligations. BlueArc represents, warrants to HDS as of the Effective Date, and where applicable below during the Term covenants to HDS that:

(a) Ownership. BlueArc is the sole and exclusive owner of all rights in and to BlueArc’s Trademarks, Products and related Documentation, including all Intellectual Property Rights therein; provided, however, that the Products contain Third Party Software under license to BlueArc under separate license terms;

* * * Indicates that confidential treatment has been sought for this information. 32

(b) No Infringement. To the best of BlueArc’s knowledge, BlueArc’s Trademarks, Source Code, Products and related Documentation, do not violate, infringe or misappropriate any third party Intellectual Property Right;

(c) Trademark Registration. BlueArc has registered the BlueArc Trademarks in the countries set forth in Appendix K-1, and none of such trademark registrations have expired or been abandoned;

(d) Right to License. Except for the owners of the Third Party Software, to BlueArc’s best knowledge, no other person or entity has or will have any claim of ownership to or lien or encumbrance on the BlueArc Trademarks, BlueArc’s Source Code, Products, or related Documentation, and BlueArc has the right to grant the licenses granted to HDS under this Agreement;

(e) Lawsuits. As of the Effective Date, no claim, suit or other action is pending or, to the best of BlueArc’s knowledge is threatened by any third party which would limit, cancel or question the validity, enforceability, ownership or use of the BlueArc Trademarks, BlueArc’s Source Code, Products, or related Documentation or the ability of BlueArc to perform its obligations hereunder, and BlueArc has not received any cease and desist letter or any other notice alleging any such actual or potential claim, suit or other action , with the exception of the NetApp Suit and the dispute in Germany relating to the BlueArc TradeMark.

(f) Third Party Software. BlueArc has the right to grant HDS the right to use and re-distribute any Third Party Software not included on Exhibit O but which is used by, included in or embedded in the Products;

(g) Open Source Software. Unless otherwise disclosed to HDS prior to the Effective Date and until such time as HDS has the right to access such Source Code,, BlueArc has not and will not :

(i) modify, change or otherwise create Derivative Works of the source code for any Open Source Software used in connection with the Source Code,

(ii) combine the source code for any Open Source Software with the Source Code, and/or

(iii) utilize the source code for any Open Source Software,

in such a manner (under clauses (i), (ii) or (iii) above) as to require BlueArc to release its Source Code under the terms of the GNU GPL or other similar open source license. In addition, the use in or distribution of any Open Source Software with BlueArc’s products does not breach or violate the Open Source Software licenses that apply to such Open Source Software and the actions contemplated pursuant to this Agreement do not violate the terms of any such Open Source Software licenses.

* * * Indicates that confidential treatment has been sought for this information. 33

(h) Product Performance. The Products (including without limitation, any subsequent Improvements) licensed under this Agreement will perform according to the Product specifications in all material respects, and BlueArc will use commercially reasonable efforts to promptly correct any errors in the Products discovered by HDS.

(i) No Viruses. The Products will be free from any viruses or other malicious code at the time of receipt by HDS.

(j) Preventative Programs. The Products and the design thereof will not contain preprogrammed preventative routines or similar devices which prevent HDS from exercising the rights under this Agreement.

(k) Engineering Services. BlueArc will perform Engineering Services in a workmanlike and competent manner in accordance with professional standards in the trade or industry, and will meet the descriptions, specifications, and performance standards stated in this Agreement and in any applicable SOW.

(l) Authority. BlueArc has taken all necessary action and has all necessary authority and has taken all necessary corporate and other action to enter into this Agreement and perform its covenants, duties and obligations hereunder.

(m) Capitalization. Immediately prior to the execution of this Agreement, the authorized capital stock of BlueArc consists of (i) 40,000,000 shares of Common Stock, of which 1,890,954 shares are issued and outstanding, and (ii) 23,795,471 shares of Preferred Stock, of which 6,391,447 shares are designated Series AA Preferred Stock (the “Series AA Preferred”), of which 6,391,447 shares are issued and outstanding, 9,297,699 shares are designated Series BB Preferred Stock (the “Series BB Preferred”), of which 9,297,699 shares are issued and outstanding, 311,519 shares are designated Series CC Preferred Stock (the “Series CC Preferred”), of which 310,019 shares are issued and outstanding, 7,004,826 shares are designated Series DD Preferred Stock (the “Series DD Preferred”), of which 7,004,826 shares are issued and outstanding, and 789,980 shares are designated Series EE Preferred Stock (the “Series EE Preferred”), none of which are issued and outstanding prior to the closing of the Series EE Preferred Stock Purchase Agreement dated as of even date between BlueArc and HDS. All such issued and outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable and were issued in accordance with the registration or qualification provisions of the Securities Act of 1933, as amended (the “Securities Act”) and any relevant state securities laws, or pursuant to valid exemptions therefrom. BlueArc has reserved (u) 6,391,447 shares of Common Stock issuable upon conversion of the Series AA Preferred, (v) 9,297,699 shares of Common Stock issuable upon conversion of the Series BB Preferred, (w) 311,519 shares of Common Stock issuable upon conversion of the Series CC Preferred, (x) 7,004,826 shares of Common Stock issuable upon conversion of the Series DD Preferred, (y) 789,980 shares of Common Stock issuable upon conversion of the Series EE Preferred, and (z) 5,777,184 shares of Common Stock for issuance under BlueArc’s 2000 Stock Option Plan (of which 3,359,921 options to purchase common stock are issued and outstanding, 662,896 shares remain available for future grants

* * * Indicates that confidential treatment has been sought for this information. 34

and 1,754,367 shares issued under the Stock Plan have been exercised. There are options to purchase 61 shares of Common Stock that have been issued outside of the Stock Plan. The Company has issued warrants to purchase up to an aggregate of 1,589 shares of its Common Stock, and has also issued warrants to purchase up to an aggregate of 1,500 shares of its Series CC Preferred.

(n) Manufacturing Agreement. BlueArc is not, and to its knowledge Sanmina is not, in material breach of the Manufacturing Agreement. Neither BlueArc nor Sanmina has provided the other with a written notice of a claim of breach of the Manufacturing Agreement as of the Effective Date and during the Term, BlueArc will notify HDS reasonably promptly if BlueArc receives a written notice form Sanmina alleging that BlueArc is in material breach of the Manufacturing Agreement. BlueArc will use reasonable commercial effort to comply with the terms of the Manufacturing Agreement in so far such failure to comply may adversely effect HDS.

11.2 HDS Representations and Warranties. HDS represents and warrants to BlueArc that, as of the Effective Date, HDS has taken all necessary action and has all necessary authority and has taken all necessary corporate and other action to enter into this Agreement and perform its covenants, duties and obligations hereunder.

11.3 Warranty Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS AGREEMENT, THE PARTIES MAKE NO WARRANTIES OF ANY KIND, AND THE PARTIES HEREBY DISCLAIM ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ARISING FROM THE COURSE OF DEALING BETWEEN THE PARTIES OR USAGE OF TRADE.

11.4 Product Warranty. HDS’ supply of Products for End Users hereunder is subject to BlueArc’s warranty terms and conditions included with the Products when shipped by BlueArc to HDS. HDS is responsible for providing the BlueArc warranty End Users as a direct contract between an End User and BlueArc. HDS shall not provide different, extended or additional warranties concerning the Products without BlueArc’s prior written authorization. Regardless of whether such authorization is provided, HDS shall be solely responsible for all Claims arising out of any HDS warranty which differs from or is in addition to that extended by BlueArcBlueArc.

12. INDEMNITY AND LIABILITY LIMITATIONS.

12.1 BlueArc’s Intellectual Property Indemnity. Subject to Section 12.3, BlueArc will defend, indemnify and hold harmless each HITACHI Indemnified Party of, from and against any Claims to the extent arising from any claim of infringement, misuse, violation or misappropriation of any third party Intellectual Property Right arising from the copying, distribution, sale, resale, use, branding, licensing or provision of BlueArc Trademarks, Products, Documentation or Deliverables, by a HITACHI Indemnified Party in accordance with the terms of this Agreement. BlueArc will not have any obligation to

* * * Indicates that confidential treatment has been sought for this information. 35

a Hitachi Indemnified Party hereunder unless: (a) BlueArc is promptly notified of any threats or Claims related thereto, (b) the Hitachi Indemnified Party provides BlueArc with reasonable requested assistance (at BlueArc’s expense) in conducting the defense or settlement of such Claim or related proceeding, (c) BlueArc has the option to assume sole control over defense and settlement of such Claim and related proceedings provided that the Hitachi Indemnified Party may participate in the defense or Claim solely at its own expense after BlueArc has assumed control. BlueArc will not accept any settlement that imposes liability not covered by this indemnification or restrictions on the Hitachi Indemnified Party without the Hitachi Indemnified Party’s prior written consent. For clarification purposes, notwithstanding anything to the contrary contained in Section 10.3 or any other portion of this Agreement, the indemnity under this Section 12.1 with respect to the BlueArc Trademarks is intended to cover copying, use, distribution and sale of the Products and Documentation under the BlueArc Trademarks anywhere in the Territory and is not limited to the countries covered by the licenses in Section 10.3 or specified on Appendix K-1.

12.2 HDS’ Remedies. Subject to Section 12.3, if any of the BlueArc Trademarks BlueArc Products, Software, Documentation, or Deliverables are held to infringe, violate, misappropriate or misuse any third party Intellectual Property Rights and as a result the use, reproduction, distribution, or sale pursuant to this Agreement , or any portion thereof is enjoined, or BlueArc concludes is likely to be enjoined, then BlueArc will, at its own expense and option: (i) procure for each Hitachi Indemnified Party the right to continue to use such Product, Software, Trademark Documentation or Deliverables pursuant to this Agreement; or (ii) replace the infringing, misappropriated or otherwise offending components with other components with the same or substantially similar functionality reasonably acceptable to HDS in HDS’ reasonable discretion or, if (i) and (ii) are not commercially feasible, BlueArc will refund the amounts paid for the affected BlueArc Trademarks Products, Software, Documentation or Deliverables. For clarification purposes, this remedy will be in addition to BlueArc’s obligations under Section 12.1

12.3 Limitation on BlueArc’s IP Indemnity. BlueArc will not have any obligation to indemnify any Hitachi Indemnified Party under Section 12.1 to the extent any Claim of infringement, violation, misuse or misappropriation from: (a) any combination of the Products or Deliverables, with other products not approved or provided by BlueArc, where the infringement, violation, misuse or misappropriation would not have occurred but for such combination, (b) the modification of BlueArc Trademarks, Products, Documentation, Deliverables, by any party other than BlueArc or party approved by BlueArc pursuant to this Agreement or otherwise, where the infringement, misuse, violation or misappropriation would not have occurred but for such modification, (c) a use of BlueArc Trademarks not approved by BlueArc pursuant to Section 10.3.1, (d) a claim based on Intellectual Property Rights owned by a Hitachi Indemnified Party (including without limitation any modifications made to Source Code delivered to HDS pursuant to Article 3), or (e) the compliance by BlueArc with any specific requirement, instruction or specification of HDS, unless to BlueArc’s knowledge, the following of such instructions or specifications or requirement of HDS will result in infringement of any third party Intellectual Property Right.

12.4 HDS IP Indemnity. If BlueArc is not required to indemnify a Hitachi Indemnified Party for a Claim pursuant to Section 12.3 above, and to the extent such Claim is based on a claim: (a) that HDS performed as described in Sections 12.3 (a), (b) or (c) above,

* * * Indicates that confidential treatment has been sought for this information. 36

or (b) directly arising from Intellectual Property Rights owned by HDS, then HDS will indemnify, defend and hold harmless BlueArc and it Affiliates, and their directors, officers and employees (“BlueArc Indemnified Party”) of, from and against any and all such Claims, to the extent arising from such Claim. HDS shall have no obligation to indemnify BlueArc unless: (i) HDS is promptly notified of any threats or Claims; (ii) BlueArc provides HDS with reasonable requested assistance (at HDS’ expense) in conducting the defense or settlement of such Claim; (iii) HDS has the option to assume sole control over defense and settlement of the Claim and related proceedings (provided that BlueArc may participate in the defense or Claim solely at its own expense after Hitachi Indemnified Party has assumed control). HDS will not accept any settlement that imposes liability not covered by this indemnification or restrictions on BlueArc without BlueArc’s prior written consent. BlueArc Indemnified Party does not include a BlueArc Affiliate in its capacity as an End User.

12.5 Claim Apportionment. For clarification purposes, if a Claim is based partially on an indemnified Claim described in either Section 12.1 or 12.4 above and partially on a non-indemnified Claim or, or is based partially on a Claim indemnified by one Party and partially on a Claim indemnified by the other Party pursuant to Sections 12.1 and 12.4, then any payments and reasonable attorneys’ fees incurred in connection with such Claims will be apportioned between the Parties in accordance with the degree of cause attributed to each Party.

12.6 Indemnity for Source Code and Development Source Code Received Under Section 3.8. ***

12.7 Exclusive Remedy. This Article 12 will be the Hitachi Indemnified Party’s and the BlueArc Indemnified Party’s sole remedy and the indemnifying Party’s exclusive liability for any Claim of any infringement, misuse, violation or misappropriation of any third party Intellectual Property Rights.

13. LIABILITY LIMITATIONS.

13.1 Damage Limitations.

13.1.1 EXCEPT FOR DAMAGES ARISING AS A RESULT OF BREACH OF ARTICLE 17 (Confidential Information), AND AS PROVIDED IN SECTION 13.1.2, IN NO EVENT WILL EITHER PARTY’S LIABILITY TO THE OTHER FOR ACTUAL DAMAGES FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT EXCEED $1,000,000.

13.1.2 IN NO EVENT WILL BLUEARC’S MAXIMUM LIABILITY TO HITACHI INDEMNIFIED PARTIES UNDER BLUEARC’S INDEMNITY OBLIGATIONS UNDER SECTION 12.1, EXCEED THE GREATER OF TEN MILLION DOLLARS ($10,000,000) OR THE HIGHEST TWO (2) FULL CALENDAR QUARTERS OF PRODUCT REVENUE PAID BY HDS TO BLUEARC OUT OF THE LAST FOUR (4) FULL CALENDAR QUARTERS PRECEDING THE CLAIM. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE IMMEDIATELY PRECEDING SENTENCE, IN NO EVENT WILL BLUEARC’S MAXIMUM LIABILITY TO HITACHI INDEMNIFIED PARTIES FOR TRADEMARK MATTERS INCLUDING BLUEARC’S TRADEMARK INDEMNITY OBLIGATIONS UNDER SECTION 12.1 EXCEED $3,500,000.

* * * Indicates that confidential treatment has been sought for this information. 37

13.2 Consequential Damages Limitation. EXCEPT FOR (a) AMOUNTS PAYABLE TO THIRD PARTIES IN CONNECTION WITH CLAIMS SUBJECT TO THE INDEMNIFICATION PROVISIONS OF ARTICLE 12 (Indemnity), or (b) DAMAGES ARISING AS A RESULT OF BREACH OF ARTICLE 17 (Confidential Information), NEITHER PARTY WILL, UNDER ANY CIRCUMSTANCES, BE LIABLE TO THE OTHER PARTY OR ANY INDEMNIFIED PARTY FOR ANY INDIRECT, INCIDENTAL, EXEMPLARY, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF ANTICIPATED PROFITS, OR GOODWILL EVEN IF HDS OR BLUEARC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS WILL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

14. RIGHT OF FIRST REFUSAL.

14.1 Definitions. Terms used in this Article 14 but not otherwise defined in this Agreement shall have the meanings below.

“CIC Notice Period” has the meaning given such term in Section 14.2.1 hereof.

“Deadline” has the meaning given such term in Section 14.3.2 hereof.

“Offer” means a bona fide offer or series of related offers, whether written or oral, to BlueArc or the holders of BlueArc’s securities that, if accepted and consummated, would result in a Change in Control. For the avoidance of doubt, an Offer can be a mere statement of interest in effecting a Change in Control and does not require a letter of intent, memorandum of understanding, term sheet or similar document.

“Second Offer” has the meaning given such term in Section 14.3.3 hereof.

“Selling Holders” has the meaning given such term in Section 14.2.3 hereof.

“Selling Holders Notice Period” has the meaning given such term in Section 14.2.3 hereof.

14.2 Change in Control, Generally.

14.2.1 BlueArc shall provide written notice to HDS as soon as practicable after BlueArc has entered into discussions regarding a possible Change in Control and BlueArc has determined that such discussions are meaningful. HDS shall have * * * from the date it receives such notice (the “CIC Notice Period”) to present HDS’ own Offer. At the request of HDS, and subject to HDS’ execution of an appropriate non-disclosure agreement, BlueArc shall expeditiously provide or make available to HDS

* * * Indicates that confidential treatment has been sought for this information. 38

all diligence information, including BlueArc confidential information, provided to the other prospective acquirer(s), including access to BlueArc’s management. If BlueArc provides BlueArc diligence information to other prospective acquirer(s), BlueArc shall promptly notify HDS of that fact in writing and permit HDS to execute an appropriate non-disclosure agreement for the receipt of confidential information.

14.2.2 During the CIC Notice Period and subject to HDS’ rights and BlueArc’s obligations under Section 14.3 below, BlueArc may not enter any binding or non-binding agreement with any third party regarding a Change in Control unless (i) this Section 14.2 has been provided to the third party, (ii) such third party agreement includes specific language acknowledging HDS’ rights and BlueArc’s obligations under this Section 14.2, and (iii) the third party agreement preserves the right of BlueArc to negotiate and conclude a Change in Control agreement with HDS, without any termination fee, penalty or other possible liability of either BlueArc or HDS to the third party except that BlueArc may commit to pay transaction expenses actually incurred by the third party. After the CIC Notice Period has ended, BlueArc may enter into any agreement with a third party regarding a Change in Control free of the restrictions described here, provided that, if no binding Change in Control agreement is entered into within * * * of the end of the CIC Notice Period, the procedures set forth in this Section 14.2 shall again apply.

14.2.3 If (a) BlueArc gains actual knowledge that one or more of its security holders desires to effect a Change in Control, and (b) such security holders (the “Selling Holders”) have the combined voting power to effect a Change in Control, then BlueArc shall provide written notice to HDS as soon as practicable once BlueArc gains actual knowledge that Selling Holders desire to effect a Change in Control. HDS shall have * * * from the date it receives such notice (the “Selling Holders Notice Period”) to negotiate with the Selling Holders regarding a possible Change in Control by HDS. At the request of HDS, BlueArc shall facilitate negotiations between the Selling Holders and HDS, and BlueArc shall provide due diligence information to HDS under the terms described in Section 14.2.1. During the Selling Holders Notice Period, BlueArc shall cause the Selling Holders not to enter into any binding or non-binding agreement with any third party regarding a Change in Control unless such agreement complies with the requirements of Section 14.2.2. If no such agreement is entered into within * * * of the end of the Selling Holders Notice Period, the procedures set forth in this Section 14.2 shall again apply. If HDS has made an Offer, BlueArc will not accept, endorse, approve or otherwise recommend approval of an Offer by any third party unless such Offer is materially superior to an Offer made by HDS, if any, prior to such acceptance, endorsement, approval or other recommendation, as determined by BlueArc’s Board of Directors.

* * * Indicates that confidential treatment has been sought for this information. 39

14.3 Change in Control * * *.

14.3.1 In the event of a proposed Change in Control * * *, in addition to the rights described in Section 14.2 above, HDS shall have a right of first refusal to match Offers * * * on the terms described herein, and BlueArc shall cause its security holders to comply with such terms. These terms are intended to provide BlueArc the flexibility to run an auction process if it wishes and to ensure that no Offer * * * will be accepted by BlueArc or its security holders unless such Offer is materially superior to an Offer by HDS, if any. HDS shall have the right to respond to and match any Offer * * *. If, in the good faith determination of BlueArc’s Board of Directors, HDS’ Offer is superior or substantially similar to a third party’s final Offer, BlueArc and/or its security holders, as the case may be, shall accept HDS’ Offer. In no event shall BlueArc or its security holders accept an Offer * * * unless such Offer is materially superior to an Offer by HDS, if any.

14.3.2 At the outset of any auction process or other discussions * * * regarding a possible Change in Control, BlueArc shall disclose * * * the rights granted to HDS hereunder. If BlueArc receives an Offer * * * that BlueArc intends to accept, then prior to entering into any binding or non-binding agreement for a Change in Control * * * or communicating such Offer to BlueArc’s shareholders, BlueArc shall inform HDS in writing of such Offer and describe in detail all material terms of such Offer, including the identity of the Offeror. If HDS does not, by the date * * * after BlueArc’s written notice is given to HDS of the Offer * * * (the “Deadline”), submit an Offer that is superior or substantially similar to the Offer * * *, a binding Change in Control agreement may be entered into with such Offeror at any time within the * * * immediately following the Deadline on the same terms and conditions as (or on terms and conditions more favorable to BlueArc and its security holders than) those contained in the proposed acquirer’s Offer as described by BlueArc in its written notice to HDS. If no binding Change in Control agreement is entered into within such * * * period, the notification procedures set forth in this Section 14.3 shall again apply.

14.3.3 If HDS does submit an Offer superior or substantially similar to the Offer * * *, then BlueArc and/or its security holders, as the case may be, may accept the Offer from HDS, or BlueArc may notify * * * of HDS’ Offer. If * * * makes a new Offer (the “Second Offer”) that is materially superior to HDS’ Offer, then the notification procedures set forth in this Section 14.3 shall again apply except that the time for further responses by HDS shall be * * * after BlueArc’s written notice to HDS of the Second Offer * * *. For any new materially superior Offers made * * * after the Second Offer, the time for further responses by HDS to such Offers shall be * * * after BlueArc’s written notice to HDS of such Offer.

* * * Indicates that confidential treatment has been sought for this information. 40

14.3.4 BlueArc’s Board of Directors shall have the responsibility and the discretion, acting in good faith, to determine the relative value of competing Offers, taking into account the relative perceived value of the consideration, whether cash, registered shares and unregistered shares, the timing of payment, the effect on valuation of escrows, earn-outs and other contingencies, and other pertinent economic terms, including the effect of closing conditions.

14.4 Remedies. Each Party acknowledges and agrees irreparable harm may result (the amount of which may be difficult to ascertain), money damages may be inadequate to compensate for such harm, and there might be no adequate remedy at law if any of the covenants or agreements of such Party herein were not performed in accordance with its terms and therefore agrees that the other Party may be entitled to enforce the terms herein by an action or actions for specific performance, injunctive and/or other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity, without the posting of a bond.

14.5 Termination. The provisions of this Article 14 shall terminate and be of no further force or effect upon the * * * the consummation of the first underwritten public offering of BlueArc’s Common Stock; provided, however, that the Parties shall retain until the expiration of the applicable statute of limitations any and all remedies available to them on the date of such termination for claims that accrued prior to such termination.

15. WARRANTS.

15.1 Definitions. Terms used in this Article 15 but not otherwise defined in this Agreement shall have the meanings below.

“Actual BlueArc Fees” means, subject to Section 15.3.4 hereof, for any Year, the aggregate fees payable to BlueArc for that Year under this Agreement and the Existing Customer Sales, including, without limitation, all Product license fees provided by BlueArc; provided, however, “Actual BlueArc Fees” shall not include fees payable to BlueArc hereunder that BlueArc cannot book under GAAP as having been received by BlueArc for a sale of goods.

“Change in Control Closing Date” means the date on which a transaction, either as a single transaction or in a series of related transactions, closes, resulting in a Change in Control.

“CiC Warrant” means: * * *

“CiC Year” means a Year during which a Change in Control Close Date is expected to occur, based on BlueArc’s good faith estimate of the Change in Control Closing Date as set forth in the written notice provided under Sections 15.4.1 and/or Section 15.4.5 hereof.

* * * Indicates that confidential treatment has been sought for this information. 41

“Effective Date” means the effective date of this Agreement as set forth on the cover page of this Agreement.

“Fair Market Value” means the fair market value of one Share (or, if securities other than Shares are to be subject to a Warrant as contemplated by Section 6(b) of Exhibit P attached hereto, one such other security) as determined periodically by BlueArc’s board of directors in good faith, which determination may be made in reliance upon an independent appraisal, and shall be consistent with the exercise price of stock options or common stock sales recently approved by BlueArc’s board of directors at the time of such determination; provided, however, if Shares are traded on a securities exchange or the NASDAQ Stock Market, “Fair Market Value” means the average of the closing prices of a Share on such exchange or market over the thirty (30) -day period ending three (3) days prior to the issuance of a Warrant, and if Shares are actively traded over-the-counter, “Fair Market Value” means the average of the closing bid prices for a Share over the thirty (30) -day period ending three (3) days prior to the issuance of a Warrant.

“High Revenue Target” means, for Year 1, * * *; for Year 2, * * *; and for Year 3, * * *.

“High/Medium Revenue Target Difference” means the difference of (a) the High Revenue Target for the CiC Year minus (b) the Medium Revenue Target for the CiC Year.

“Low Revenue Target” means, for Year 1, * * *; for Year 2, * * *; for Year 3, * * *; and for Year 4, * * *.

“Medium Revenue Target” means, for Year 1, * * *; for Year 2, * * *; and for Year 3, * * *.

“Medium/Low Revenue Target Difference” means the difference of (a) the Medium Revenue Target for the CiC Year minus (b) the Low Revenue Target for the CiC Year.

“Revenue Target” means any of the Low Revenue Target, the Medium Revenue Target or the High Revenue Target, as the context requires.

“Share” means one share of BlueArc’s Common Stock.

“Shortfall Notice” has the meaning set forth in Section 15.4.3 hereof.

“Warrant” means a warrant entitling HDS to purchase 151,418 Shares, as may be adjusted under Section 15.2.2 hereof, issued in accordance with this Article 15 and in the form of Exhibit              attached hereto.

“Year” means any of Year 1, Year 2 or Year 3, as the context requires.

“Year 1” means the period beginning on October 1, 2006 through and including March 31, 2008.

* * * Indicates that confidential treatment has been sought for this information. 42

“Year 2” means the period beginning on April 1, 2008 through and including March 31, 2009.

“Year 3” means the period beginning on April 1, 2009 through and including March 31, 2010.

15.2 Warrants.

15.2.1 Subject to the following subsections of this Article 15, BlueArc will issue up to nine (9) Warrants to HDS. Unless expressly provided otherwise herein, a Warrant issuable to HDS under any subsection of this Article 15 for any Year will be without limitation to, and in addition to, any other Warrants issuable under this Article 15 for that Year or for any other Year. Each Warrant shall be valid until the later of (a) the fourth (4th) anniversary of the Effective Date, and (b) the second anniversary of the issuance date of the Warrant, and, except as set forth in Section 15.4.2 hereof, shall have a per Share exercise price equal to the Fair Market Value on the Warrant’s issuance date.

15.2.2 The number and kind of Shares or other securities to be subject to a Warrant issuable under this Article 15 shall be subject to adjustment from time to time after the Effective Date (but prior to the issuance of such Warrant) in accordance with Section 6 of Exhibit P attached hereto as if such Warrant had been issued on the Effective Date; provided, however, that in no event shall the “Exercise Price” (as defined in Exhibit P attached hereto) of such Warrant be determined other than in accordance with this Article 15. Notwithstanding anything to the contrary, this Section 15.2.2 shall have no force or effect with respect to any Warrant after the issuance of such Warrant but shall continue to apply only with respect to Warrants that have not yet been issued.

15.3 Issuance of Warrants Upon Achievement of Revenue Targets.

15.3.1 If the Actual BlueArc Fees during any Year equal or exceed the Low Revenue Target for that Year, BlueArc will issue a Warrant to HDS within thirty (30) days of the date on which the Low Revenue Target was achieved.

15.3.2 If the Actual BlueArc Fees during any Year equal or exceed the Medium Revenue Target for that Year, BlueArc will issue a Warrant to HDS within thirty (30) days of the date on which the Medium Revenue Target was achieved.

15.3.3 If the Actual BlueArc Fees during any Year equal or exceed the High Revenue Target for that Year, BlueArc will issue a Warrant to HDS within thirty (30) days of the date on which the High Revenue Target was achieved.

* * * Indicates that confidential treatment has been sought for this information. 43

15.3.4 Notwithstanding anything to the contrary, if, within the last thirty (30) days of a Year, the difference of (a) the “Actual BlueArc Fees” for that Year (without regard to this Section 15.3.4) minus the (b) the Revenue Target most recently achieved during that Year (or, if no Revenue Target has been achieved during that Year, $0), equals or exceeds * * * of the difference of (x) the lowest Revenue Target not yet achieved during that Year minus (y) the Revenue Target most recently achieved during that Year (or, if no Revenue Target has been achieved during that Year, $0), HDS may place non-cancellable orders for Products from BlueArc prior to * * * before the end of end of that Year, the fees payable to BlueArc for which shall be included within the calculation of “Actual BlueArc Fees” for that Year regardless of whether or not those orders are completed by BlueArc prior to the end of that Year.

15.4 Change in Control.

15.4.1 If BlueArc expects in good faith to close a Change in Control during any Year, BlueArc will, at least thirty (30) days prior to the Change in Control Closing Date, issue a CiC Warrant to HDS, and the provisions of Section 15.3 hereof shall not apply after such issuance; provided, however:

(a) a CiC Warrant shall not be issuable unless the Actual BlueArc Fees are on pace, as of the first business day before the date on which the CiC Warrant is to be issued, to achieve the next highest Revenue Target during the CiC Year if a Change in Control were not to occur;

(b) a CiC Warrant shall not be issuable if a Warrant has already been determined to be issuable for the CiC Year due to achievement of the High Revenue Target for the CiC Year; and

(c) if a CiC Warrant is issued but a Change in Control Closing Date does not occur within [sixty (60)] days of the issuance date of the CiC Warrant, the provisions of Section 15.3 hereof shall again apply; provided, further, that if, after the issuance of the CiC Warrant, any further Warrants become issuable under Section 15.3 hereof (by virtue of this Section 15.4.1(c)) for the Year that otherwise was considered the CiC Year, the number of Shares purchasable under the CiC Warrant shall be subtracted from the first such further Warrant issuable under Section 15.3 hereof for that Year.

A written notice of BlueArc’s good faith estimate of the Change in Control Closing Date shall accompany the CiC Warrant.

* * * Indicates that confidential treatment has been sought for this information. 44

For purposes of this Section 15.4.1, Actual BlueArc Fees shall be considered on pace if, on the date such determination is made, “A” is equal to or greater than “B,” where:

A	=	Actual BlueArc Fees for the CiC Year prior to the determination date
		the lowest Revenue Target not yet achieved in the CiC Year

and

B	=	Number of days elapsed in the CIC Year prior to the determination date
		365

15.4.2 Notwithstanding anything herein to the contrary, a CiC Warrant shall have a per Share exercise price equal to the higher of (a) * * * and (b) * * *.

15.4.3 If BlueArc has not issued a CiC Warrant and determines in good faith approximately * * * before it expects a Change in Control Closing Date to occur that HDS is not entitled to a CiC Warrant due to the provisions of Section 15.4.1(a) hereof, BlueArc will promptly give a written notice to HDS in writing of such determination, which notice shall include BlueArc’s detailed calculations supporting such determination (a “Shortfall Notice”). If HDS agrees with such calculations and a Change in Control Closing Date occurs within * * * after the Shortfall Notice is given, no CiC Warrant shall be issuable to HDS. If a Change in Control Closing Date does not occur within * * * after the Shortfall Notice is given, the provisions of Section 15.3 hereof shall again apply.

15.4.4 BlueArc will not take any action or fail to take any action, including, without limitation, intentionally canceling or delaying a Change in Control Closing Date, for the primary purpose of preventing the issuance of any Warrant to HDS or minimizing the number of Shares purchasable under any Warrant that may become issuable to HDS hereunder.

15.4.5 After the issuance of any Warrant(s) to HDS, BlueArc will give HDS written notice at least * * * in advance of closing a Change in Control to permit HDS to determine whether it will exercise such Warrant(s). The written notice required by this Section 15.4.5 shall include BlueArc’s good faith estimate of the Change in Control Closing Date.

15.5 Restriction. The Shares, when received by HDS upon exercise of a Warrant, shall be subject to the same restrictions attaching to the BlueArc Series EE Preferred Stock, including, without limitation, drag-along and market stand-off, issued to HDS under the Series EE Preferred Stock Purchase Agreement dated as of even date between BlueArc and HDS.

* * * Indicates that confidential treatment has been sought for this information. 45

15.6 No Further Warrants. Subject to Sections 15.4.1(c) and 15.4.3 hereof, no Warrant shall be issuable on account of Actual BlueArc Fees payable after (a) the issuance of a Warrant for Year 3 under Section 15.3.3 hereof, (b) the issuance of a CiC Warrant under Section 15.4.1 hereof, provided that a Change in Control Closing Date occurs within * * * of such issuance, (c) the delivery of a Shortfall Notice under Section 15.4.3, provided that HDS agrees with the calculations in the Shortfall Notice and a Change in Control Closing Date occurs within sixty (60) days of such delivery, or (d) the end of Year 3, whichever shall occur first.

16. TERMINATION.

16.1 Material Breach. Both BlueArc and HDS will have the right to terminate this Agreement prior to the end of the Term on * * * prior written notice if the other Party commits a Material Breach that has not been cured within such thirty-day period.

16.2 Cessation of Business or Insolvency. Either Party may terminate this Agreement immediately by providing written notice to the other Party if: (a) the other Party ceases to carry on its business, or that portion of its business operations relating to this Agreement; (b) a receiver or trustee is appointed for the other Party and is not discharged within sixty (60) days; (c) the other Party becomes insolvent, admits in writing its inability to pay debts as they mature, is adjudicated bankrupt, or makes an assignment for the benefit of its creditors or another arrangement of similar import; or (d) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced by or against the other Party and are not dismissed within sixty (60) days.

16.3 Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by BlueArc to HDS are, and will otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that HDS, and its Affiliates, as licensees of such rights and licenses, will retain and may fully exercise all of their respective rights, powers, privileges, immunities and elections under such licenses pursuant to the Bankruptcy Code. The Parties further agree that, in the event of the commencement of bankruptcy proceedings by or against BlueArc under the Bankruptcy Code, HDS and its Affiliates will be entitled to retain all of their rights under this Agreement. Any failure by HDS or its Affiliates to elect to retain their rights under Section 365(n)(1)(B) of the Bankruptcy Code will not be deemed or constitute a termination under Section 365(n)(1)(A) of the Bankruptcy Code except as provided in the Bankruptcy Code. The terms of this Section will apply notwithstanding any other term or condition of this Agreement to the contrary.

16.4 Further Liability Limitation. Neither BlueArc nor HDS will be liable to the other Party or to any End-User for compensation, reimbursement or damages because of the loss of prospective profits on anticipated sales, or because of expenditures made in connection with the business or goodwill of the other Party.

* * * Indicates that confidential treatment has been sought for this information. 46

17. CONFIDENTIAL INFORMATION.

17.1 Use of Confidential Information. For * * * after receipt of the Disclosing Party’s Confidential Information, or in the case of Source Code, until such Source Code no longer qualifies as Confidential Information under the definition of Confidential Information in Section 1, and subject to the exceptions in Section 17.2 below, the Receiving Party will maintain such Confidential Information in confidence using the same degree of care the Receiving Party uses to protect its own similar confidential information, but in no event less than reasonable care. Except as otherwise permitted by the Disclosing Party in writing, the Receiving Party will: (a) disclose Disclosing Party’s Confidential Information only to employees of the Receiving Party, who have a need to know such Confidential Information; and (b) duplicate, copy, or use the Disclosing Party’s Confidential Information only as necessary for such performance. In addition, HDS will have the right to disclose Disclosing Party’s Confidential Information to employees of HDS Affiliates, Channel Partners, ASPs who agree to be bound by confidentiality obligations and Consultants who have a need to know such Confidential Information in connection with HDS’ and its Affiliates rights and obligations under this Agreement. All of these individuals will have the same duplication rights as HDS under this Section 17.1. The employees of Receiving Party and Receiving Party’s Affiliates may utilize for any purpose any Residual Information resulting from having access to Confidential Information.

17.2 Exceptions to Disclosure Restrictions. Receiving Party may disclose this Agreement or portion thereof or any Confidential Information of Disclosing Party: (a) to the extent required by any court or other governmental body provided that the Receiving Party required to disclose under a court order, deposition or subpoena uses all commercially reasonable efforts to notify the Disclosing Party of such pending disclosure as far in advance as possible of the required disclosure; (b) to the extent required by GAAP or any regulatory laws; (c) to legal counsel of each Party; or (d) in confidence, to accountants, banks, potential investors, and financial sources and their advisors. In addition, Section 17.1 will not apply to information related to the tax treatment or the tax structure of the transactions contemplated herein. For this purpose, “tax structure” is limited to any facts relevant to the U.S. federal income tax treatment of the transaction and does not include information relating to the identity of the Parties.

17.3 Return of Confidential Information. Upon and pursuant to the request of the Disclosing Party, the Receiving Party will promptly return or destroy all Disclosing Party Confidential Information.

17.4 Equitable Relief. The Receiving Party agrees that no remedy at law is adequate to compensate the Disclosing Party for a breach of the provisions of this Article 17, and that the Disclosing Party may seek temporary and/or permanent injunctive relief against any such breach, or the threat of any such breach, without having to prove actual damages or the inadequacy of money damages.

* * * Indicates that confidential treatment has been sought for this information. 47

17.5 No License. No license to Receiving Party of any Intellectual Property right is either granted or implied by the conveying of Confidential Information to Receiving Party except as otherwise provided in this Agreement.

17.6 Independent Development. Neither this Article 17, nor any other provisions of this Agreement, will limit either Party’s right to independently develop information, materials, technology, or other products or services for itself or for other third parties which may compete with the Disclosing Party’s products or which may be similar to the Confidential Information, so long as no Confidential Information is used in the development. Without limiting the generality of the foregoing, BlueArc acknowledges and agrees that HDS or its Affiliates, in their sole discretion, may develop products or product features that are competitive with BlueArc’s current Products and future products.

18. NON-SOLICITATION. Each Party agrees that during the Term, and for one (1) year thereafter, it will not (except with the other Party’s prior written consent), solicit the employment of any person employed then or within the preceding twelve (12) months by the other Party. The foregoing notwithstanding, nothing herein will prohibit either Party from employing an employee of the other Party who initiated discussions regarding employment, or who responded to a generally publicized advertisement for employment. For clarification purposes, this Section 18 shall apply if HDS acquires Source Code following a Change in Control pursuant to Section 3.8.

19. INTELLECTUAL PROPERTY RIGHTS OF EACH PARTY. BlueArc’s execution of this Agreement will not transfer any right, title, interest or license in or to BlueArc’s Intellectual Property Rights except as otherwise expressly set forth in this Agreement. In addition, BlueArc will retain all rights to its Intellectual Property Rights not expressly granted pursuant to this Agreement. Similarly, HDS’ execution of this Agreement will not transfer any right, title, interest or license in or to HDS’ or its Affiliates’ Intellectual Property Rights, except as otherwise expressly set forth in this Agreement. In addition, HDS and all of its Affiliates will retain all rights to their Intellectual Property Rights not expressly granted pursuant to this Agreement.

20. NO BRANDING OR CO-BRANDING OBLIGATIONS. Although HDS and its Affiliates shall have the right to use the BlueArc Trademarks in connection with the branding and co-branding of the Products as set forth in Article 10, HDS and its Affiliates shall not be obligated to use the BlueArc Trademarks in connection with the use, sale, licensing, distribution, promotion, marketing, advertising and maintenance of the Products under this Agreement.

21. ENTIRE AGREEMENT. Any previous agreements, letter agreements and arrangements made by BlueArc or any of its affiliated companies and HDS and relating to the subject matter hereof are hereby superseded and this Agreement embodies the entire understanding of the Parties related to the subject matter hereof, there being no promises, terms, conditions or obligations, oral or written, express or implied, other than those contained herein related to the subject matter hereof. This Agreement may only be amended by a writing signed by authorized representatives of BlueArc and HDS.

* * * Indicates that confidential treatment has been sought for this information. 48

22. NOTICES. Any notice required to be given hereunder will be in writing and may be given by personal delivery, mailing (by first class certified, return requested prepaid mail), or overnight courier with a delivery tracking system to: BlueArc Corporation, 50 Rio Robles Drive, San Jose, CA 95134, Attention: General Counsel with a separate copy to Wilson, Sonsini, Goodrich & Rosati at 650 Page Mill Road, Palo Alto, CA 94304-1050, Attention: Mike Danaher and to HDS at Hitachi Data Systems Corporation, 750 Central Expressway, Santa Clara, CA 95050, Attention: General Counsel, MS 32-02 with a separate copy at such address to Attention: Executive Vice President, GSSD, or such other mailing address as BlueArc or HDS may designate from time to time. In the case of personal delivery and overnight courier, notice will be deemed to have been given upon the date of delivery. In the case of mailing, notice will be deemed to have been given three (3) days after such mailing.

23. GOVERNING LAW AND VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of California, USA, without regard to its provisions concerning the applicability of the laws of other jurisdictions, and specifically excluding the United Nations Convention on the International Sale of Goods. The Parties hereby consent to exclusive jurisdiction and venue in the courts located in Santa Clara County, California, and hereby waive all rights to other venues.

24. ATTORNEY’S FEES. In any litigation court proceeding between BlueArc and HDS and/or an Affiliate with respect to this Agreement, the prevailing Party will be entitled to recover, in addition to any other amounts awarded, reasonable attorney’s fees and all costs of proceedings incurred in enforcing this Agreement.

25. INDEPENDENT CONTRACTORS. Nothing in this Agreement or any other document or agreement between the Parties, including any document in which HDS or Regional Affiliates may be referred to as a “partner”, will constitute or be deemed to constitute a partnership or joint venture between the Parties. The relationship between BlueArc and HDS will be that of independent seller and buyer. HDS, its officers, agents and employees, will under no circumstances be considered the agents, employees or representatives of BlueArc and neither Party will have the right to enter into any contracts or binding commitments in the name of or on behalf of the other Party.

26. ASSIGNMENT.

(a) Neither BlueArc nor HDS may assign this Agreement or any of their respective rights hereunder, whether voluntarily or by operation of law, without the prior written consent of the other Party, except as permitted in Section 26(b) below. Such consent to assign will not be unreasonably withheld or delayed.

(b) Notwithstanding the foregoing, and subject to Section 26(e) below, a Party may assign or transfer, directly, indirectly, or by operation of law, this Agreement in its sole discretion and without the consent of the other Party in the event of or through a Change in Control of such Party.

* * * Indicates that confidential treatment has been sought for this information. 49

(c) Notwithstanding the provisions of Section 26(b), solely in the case of a Change in Control of BlueArc * * *, BlueArc may not assign this Agreement without the prior written consent of HDS, which consent may be withheld in HDS’ sole discretion. BlueArc may, in its discretion, choose to seek or not to seek HDS’ prior written consent. * * *.

(d) Any assignment of this Agreement, regardless of whether consent is required, will be conditioned on the assignee’s or successor’s (as the case may be) express assumption of the assigning Party’s representations, warranties, covenants and obligations under this Agreement, including all surviving obligations under Section 28. Subject to such express assumption, this Agreement shall inure to the benefit of, and be binding upon, the successors of, or assigns to, the assigning Party. For any Change in Control of BlueArc which results in termination of this Agreement under Section 26(c) or Section 26(f), the surviving obligations under Section 28 will be binding on all of BlueArc’s successors and assigns in, and after, the Change in Control, regardless of whether this Agreement is assigned by operation of law, or directly by BlueArc.

(e) In the event of a Change in Control of BlueArc (other than a Change in Control to * * *) in which this Agreement may be assigned to or assumed by the acquirer of or successor to BlueArc, BlueArc or such acquirer or successor shall have the option, notwithstanding such assignment or assumption of this Agreement, to terminate this Agreement without breach, upon * * *written notice to HDS, such termination notice to be given within * * * after the consummation (i.e., the closing) of such Change in Control; provided, however, such termination option may only be exercised if at the time such termination notice is given, HDS has not met the Low Revenue Target (as set forth in Section 15) for Year 1 if the notice is given in Year 1, or the Low Revenue Target for the Year immediately preceding the Year in which the termination notice is given if the notice is given after Year 1. Each Year after such Change in Control, the acquirer or successor of BlueArc may to terminate this Agreement without breach, upon * * * written notice to HDS, such termination notice to be given within * * * after the anniversary of the consummation of such Change in Control; provided, however, such termination option may only be exercised if at the time such termination notice is given, HDS has not met the Low Revenue Target for the Year immediately preceding the Year in which the termination notice is given. Solely for the purposes of this Section 26(e), for any Year beyond Year 4, the Low Revenue Target for such Year shall be equal to the Year 4 Low Revenue Target.

(f) Any purported assignment of this Agreement not in accordance with the foregoing shall be void unless such assignment occurs by operation of law in which case upon such prohibited assignment this Agreement shall terminate without breach.

27. NO END USER BENEFICIARIES. This Agreement is by and between BlueArc and HDS, and no End User is a party to this Agreement, and no End User will have any rights hereunder, including, without limitation, any rights as a third party beneficiary.

* * * Indicates that confidential treatment has been sought for this information. 50

28. SURVIVAL. Any provision of this Agreement that by its express terms, or by its nature reasonably should be interpreted to survive, will survive the expiration or termination this Agreement. Notwithstanding the generality of the foregoing, and by way of example only and not by way of limitation:

(A) the following provisions shall survive—(a) any provisions that expressly survive during the Sell-Off Period or through the end of the End User Expiration Date, (b) Sections 3.1, 3.1.1, 3.7, 3.9, and 3.13, (c) any licenses granted pursuant to Sections 3.2 & 3.3, and (d) Articles 1, 5, 12, 13, 17 and 26; and

(B) the following provisions shall not survive the expiration or termination this Agreement – (a) Sections 3.8 and 5.19, and (b) Articles 8, 14 and 15 (except for such provisions as may apply to Warrants issued or issuable pursuant to Article 15 prior to such termination or expiration).

For the purposes of clarification, this Section 28 shall not extend the length of the term of any surviving rights and obligations beyond any expressly stated term of such surviving rights and obligations contained in the surviving provisions.

29. FORCE MAJEURE. Neither Party will be liable for any failure to perform any of its obligations hereunder (other than the payment of money) which results from an act of God, strikes, labor disputes, component shortages, legal restrictions, or any cause beyond the reasonable control of such Party.

30. WAIVER. The waiver of, or failure to enforce, any breach or default hereunder shall not constitute the waiver of such breach or default, or any other or subsequent breach or default, absent an express, written statement of such waiver.

31. SEVERABILITY. If any term or provision of this Agreement shall be found to be invalid, illegal or otherwise unenforceable, such finding shall not effect the other terms or provisions of this Agreement, or the whole of this Agreement, but such term or provision shall be deemed modified to the extent necessary to render such term or provision enforceable, and the rights and obligations of the Parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreements of the Parties set forth in this Agreement.

32. HEADINGS. The captions and headings of this Agreement are for convenience of reference only and will not affect the interpretation of this Agreement.

33. PUBLICITY. Neither Party will issue any press release or public statements regarding the terms and conditions of this Agreement, and/or the details of the relationship between the Parties contemplated hereby, without the prior written approval of the other Party.

* * * Indicates that confidential treatment has been sought for this information. 51

34. FURTHER ASSURANCES. The Parties will each take such actions and execute such documents as may be necessary to accomplish the provisions of this Agreement, including without limitation, executing separate assignment documents as may be necessary to make the provisions regarding ownership of Intellectual Property Rights set forth in this Agreement.

35. CUMULATIVE REMEDIES. The rights and remedies provided herein, including without limitation those regarding termination, will be cumulative and in addition to any other remedies provided by law or equity.

36. PLURAL/SINGULAR. Unless the context otherwise expressly requires another meaning, a reference to the singular includes the plural and vice versa.

37. LICENSE GRANTS. All licenses granted under this Agreement are subject to all other contractual terms, conditions and obligations set forth under this Agreement.

38. COUNTERPARTS AND SIGNATURES. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. The Parties hereby acknowledge and agree that facsimile, photocopy, scanned or other electronic representations of the final, executed version of this Agreement and the signatures hereto shall be deemed to be originals for all purposes hereunder and shall be fully enforceable in accordance with its terms.

39. EXHIBIT LIST. The exhibits and the appendices listed below are attached hereto and incorporated into this Agreement by reference.

Exhibit A	Products and Pricing
Exhibit B	Warranty and Support Services
Exhibit C	Acceptance Process
Exhibit D	Sales Support
Exhibit E	Marketing
Exhibit F	HDS Equipment Loan Agreement
Exhibit G	HDS Lab Access Agreement
Exhibit H	Training
Exhibit I	EULA
Exhibit J	MPSA
Exhibit K	BlueArc Trademarks
Exhibit L	Hitachi Trademarks
Exhibit M	Strategic Items
Exhibit N	Escrow Agreement
Exhibit O	Third Party Software
Exhibit P	Warrant
Exhibit Q	Product Requirements for GARD and GA Releases
Appendix I	Examples of Third Party Purchase Price Calculations

* * * Indicates that confidential treatment has been sought for this information. 52

EXHIBIT A

PRODUCTS AND PRICING

* * *

* * * Indicates that confidential treatment has been sought for this information. 53

EXHIBIT B

WARRANTY AND SUPPORT SERVICES

This exhibit to the Master Distribution Agreement (the “Agreement”) is effective as of the Effective Date, and is incorporated by reference into this Agreement. Defined terms have the same meaning as in this Agreement unless they are otherwise defined herein. Except as expressly provided herein, in the event of any conflicts between the terms set forth hereunder and the terms and conditions of this Agreement, this Agreement shall control.

BlueArc and HDS agree as follows:

RECITALS

WHEREAS, HDS anticipates that it will provide Level 0 as of the Effective Date, and;

WHEREAS, HDS anticipates that it will provide Level 1 Support, which includes installation of Product into an HDS storage solution and onsite labor for hardware replacement (“POH”) as defined below on the earlier of the time that HDS is sufficiently trained to provide such Level 1 Support or HDS’ general availability date of any Product. HDS will provide Level 1 Support upon HDS’ general availability to all subsequent Products or Major Releases, and;

WHEREAS, HDS anticipates it will provide Level 2 Support after the Start-Up Period and thereafter on HDS’ general availability date of any Product or Major Release, and

WHEREAS, BlueArc will deliver Level 3 Support to HDS’ organization as of the Effective Date and Level 1 and Level 2 Support as requested by HDS;

NOW THEREFORE, the Parties hereby agree as follows:

DEFINITIONS. The following terms shall have the following meanings in this exhibit.

1.1 “Advance Support Training” means additional technical training, as requested by HDS, to attain enhanced Product Support knowledge. Such training shall be requested by HDS under mutually acceptable terms.

1.2 “Case” shall mean a trouble ticket within HDS’ or BlueArc’s Problem tracking system, as the context may require.

1.3 “BlueArc Knowledge Base” shall mean the BlueArc database of support issues and resolutions, provided by BlueArc to its partners and customers, which is accessible via the internet.

* * * Indicates that confidential treatment has been sought for this information. 54

1.4 “End User Documentation” shall mean the user manual and all revisions thereto generally provided by BlueArc to purchasers of Products.

1.5 “Level 0 Support” means accepting the initial call from the Customer, call logging, entitlement verification, routing such call to BlueArc for resolution. Level “0” Support shall specifically exclude any obligation on the part of HDS to provide technical support with respect to the Product covered under this Agreement.

1.6 “Level 1 Support” shall mean the services provided by a Qualified Support Employee who is responsible to respond to an End User’s initial notification of a suspected Problem. These services include without limitation, call logging, entitlement verification, initial Problem analysis, and closing the Case with the End User after Problem Resolution. If escalation is required, all necessary information will be gathered pursuant to the SIP. Level 1 Support shall include POH as defined below.

1.7 “Level 2 Support” shall mean technical support provided by one or more Technical Services Engineers or Qualified Support Employees for detailed installation problems, configuration issues, problem isolation, troubleshooting, and determination of whether there is a Problem, with the intent to resolve the End User’s Problem. For clarification purposes, Level 2 Support does not include POH.

1.8 “Level 3 Support” shall mean services provided by one or more BlueArc Technical Services Engineers working in conjunction with BlueArc development engineers to resolve Problems with the Products that cannot be resolved with Level 2 Support or are determined to be, or are highly probable to be, the result of a design, implementation or Product defect. The Problem may also be related to compatibility issues due to complex interaction between the Product and a third party vendor’s product.

1.9 “Pair of Hands” or “POH” shall mean the service organization responsible for installation of hardware, hardware updates, and/or replacement of failed parts or units at the End User site by.

1.10 “Problem” shall mean an incident where the Products do not substantially conform to the Documentation.

1.11 “Problem Resolution” shall mean the process where: (a) HDS takes the initial lead in resolving the Problem, and opens a Case; (b) if HDS cannot resolve the Problem with the level(s) of support HDS must provide pursuant to this exhibit, HDS escalates the Problem to BlueArc; (c) BlueArc notifies HDS of the resolution; and (d) HDS closes the service request when the Problem is resolved to the End User’s satisfaction.

1.12 “Qualified Support Employees” shall mean those HDS, Affiliate, Subcontractor or ASP employees that have successfully completed: (a) the designated BlueArc training course for each Product for which such employee will provide Support services, (b) all Continuing SRT for each new Product for which such employee will provide support services.

* * * Indicates that confidential treatment has been sought for this information. 55

1.13 “SIP” shall mean the Service Implementation Plan as agreed to by the Parties, and further defined in Section 4.1.

1.14 “Spare(s)” shall mean a replacement part or unit of the Product for which an inventory shall be maintained by HDS for use in providing POH.

1.15 “SRT” shall mean Support Readiness Training, including, without limitation, training required for personnel providing the Level 1 and, if applicable, Level 2 Support for all Products features. SRT will be provided for Products and related features as they become available.

1.16 “Start-Up Period” means the period of time following the Effective Date in which HDS will provide Level 1 Support and will train to provide Level 2 Support. This Start-Up Period is part of SRT to ensure HDS’ readiness to provide Level 2 Support and shall end when HDS, in its sole discretion, is sufficiently trained to provide such Level 2 Support.

1.17 “Subcontractor” shall mean an entity that performs Product support obligations to End Users on behalf of HDS, as a subcontractor of HDS.

1.18 “Technical Services Engineer” shall mean a BlueArc Support employee trained in the applicable level of Support.

1.19 “Update” shall mean Releases, bug fixes, and improvements, to the Product (if Software is included in the Product), if and when available, which are generally provided by BlueArc to end users directly or indirectly purchasing support from BlueArc. Updates exclude, Releases that contain new additional features, localizations, translations or other options which increase the basic functionality of the Product and for which BlueArc elects to charge separately to end users generally.

1.20 “Workaround” shall mean a temporary resolution to a Problem.

Section 2. TERM

The term of this exhibit shall terminate on the same date that the Support and maintenance license pursuant to Section 2.2 of the Agreement expires.

Section 3. SUPPORT RESPONSIBILITIES

3.1 BlueArc Obligations

(a) BlueArc shall provide to HDS the access specified below to its Technical Services Engineers to enable HDS, directly or indirectly, to respond to End User reported Problems with Products. BlueArc’s Technical Services Engineers shall

* * * Indicates that confidential treatment has been sought for this information. 56

be available to respond to telephone inquiries by HDS twenty-four (24) hours a day, 365 days a year, in accordance with the provisions and response times specified in Section 9 [Problem Severity Definitions and Response Requirements].

(b) BlueArc Technical Service Engineers will not contact End Users directly without HDS Qualified Support Employee present or without HDS’ consent.

(c) During the Term, BlueArc will adhere to standard call policy/procedures and release policy/procedures, as defined by the SIP, in relation to HDS logging calls with BlueArc.

(d) If HDS cannot resolve a Problem with Level 1 or, when applicable, Level 2 Support then HDS shall contact BlueArc for higher-level Support in accordance with the applicable SIP. In the event BlueArc believes improperly escalated calls has become an issue, the Parties will mutually agree on an action plan to resolve the issue, which may include additional training, adjustments to the Support fees paid, and term for resolution.

(e) BlueArc Technical Service Engineers will respond to HDS’ technical Support organization’s documented report of a Product Problem in accordance with this Exhibit B and the applicable SIP. Depending on the severity of the Problem, BlueArc Technical Services Engineers will contact HDS as described in the SIP.

(f) BlueArc will provide Case numbers for each Case opened by HDS, and will respond to information requests using the Template (as defined in Section 4.1(a) below) with that Case number. BlueArc will record the HDS Case number for each Case opened for cross-reference purposes, provided such number is included with the submitted Template.

(g) Subject to BlueArc’s confidentiality obligations, BlueArc will provide HDS with access to the BlueArc Knowledge Base for commonly reported Problems, technical information, patches and bug fixes. BlueArc hereby grants HDS permission to reproduce unmodified published BlueArc knowledge resolutions for inclusion in HDS’ related knowledge base. If HDS makes any material modification to a BlueArc knowledge resolution, HDS must obtain prior written or electronic approval from a BlueArc Technical Services Engineer before HDS includes such knowledge resolution in HDS’ related knowledge base.

(h) BlueArc will repair or replace, in accordance with its Limited Warranty, at no charge to HDS any Spare, which, during the Warranty Period, is returned as defective utilizing the RMA Process set forth in Section 10. HDS shall pay the cost of shipment of defective Spare to BlueArc and BlueArc shall pay the cost of shipment for the repaired or replaced Spare to the HDS facility in either the US or Netherlands.

* * * Indicates that confidential treatment has been sought for this information. 57

(i) If HDS or its ASP elects to continue to maintain a Product pursuant to a specific End User request, which is no longer covered under the BlueArc Limited Warranty; BlueArc is no longer obligated to Support as specified in Section 3.1(l), BlueArc and HDS may engage in good faith negotiations to define the terms for BlueArc to continue to provide Support and Problem Resolution for a defined period of time for such Product. Such terms may include (without limitation) length of time for extended support, reasonable fees, and terms relating to Product. BlueArc shall be under no obligation to extend Support beyond the Warranty timeframe offered with Product.

(j) BlueArc will provide BlueArc Technical Services Engineer(s) on-site at an End User location or other on-site location to resolve a suspected Problem, if such on-site Support has been mutually agreed upon by BlueArc and HDS Support management team.

(k) Upon HDS’ request, BlueArc will provide HDS with BlueArc’s call volume histories and projections on the specific Product that HDS will be procuring from BlueArc in order for HDS to develop forecasting for call volumes and Spares planning.

(l) Conditions to BlueArc’s Support Obligation. BlueArc may use authorized service providers or contractors to provide services to HDS. BlueArc shall have no obligation to provide Support as provided Section 3.1 (i) through (iv) below, unless BlueArc has otherwise agreed to provide such. Otherwise, BlueArc shall not be liable for repair or replacement of Products, or additions thereto, for:

(i) Improper use, theft, natural disasters, strikes, riots, sabotage, acts of war, changes or modifications by individuals other than BlueArc personnel or by individuals without BlueArc’s supervision or authority, shock, electrical damage, accident, fire, water damages, air conditioning failure, and/or failure by End User to maintain the site specifications recommended by BlueArc or HDS or other items normally excluded as part of BlueArc’s Limited Warranty as amended from time to time.

(ii) Support services the performance of which would pose a health or safety risk to BlueArc’s personnel.

(iii) Any End User that has failed to perform any of End User obligations set forth in this exhibit or in the applicable license for the Product, after a thirty (30) day written notice thereof by BlueArc to HDS.

(iv) Any or all End Users to the extent that HDS has failed to pay BlueArc all undisputed amounts due to BlueArc for its Support obligations hereunder.

* * * Indicates that confidential treatment has been sought for this information. 58

(m) If HDS requires Support from BlueArc because of any of the causes listed in Section 3.1(k) above, BlueArc may in its sole discretion provide such Support and subject to availability and at prevailing time and materials rates, plus actual documented expenses incurred.

(n) If any Spare is returned for repair or replacement to BlueArc after the Warranty Period, BlueArc may provide an estimate of the cost of repair and upon HDS’ approval, which such approval will be at HDS’ sole and absolute discretion, invoice HDS for such service, repair or replace such Spare, and return such Spare to HDS.

(o) In the event that BlueArc renders any Spare obsolete by a design change, HDS shall have the right within ninety (90) days from HDS’ receipt of written notice from BlueArc of the design change to return such obsolete Spare to BlueArc and receive full credit for the purchase price of the returned Spare in the event that BlueArc cannot provide to HDS, via rework or replacement, a current Spare. For clarification purposes, new product transitions are not considered obsolete design changes.

3.2 Support Readiness Training. BlueArc shall provide HDS and its ASPs with SRT and periodically provide HDS and its ASPs with continuing SRT, as described in Exhibit H.

3.3 HDS Obligations

(a) Upon the Effective Date HDS will be responsible for providing Level 0 Support to End User(s) for all Products. HDS will assume Level 1 Support at such time, as determined by HDS, that Qualified Support Employees (including subcontractors and ASPs) are sufficiently trained to provide Level 1 Support to End Users. Further, HDS will assume Level 2 Support at such time, as mutually agreed by the Parties such Qualified Support Employees are proficient in providing Level 2 Support. HDS shall adhere to the following guidelines in reference to Qualified Support Employees:

(i) Qualified Support Employees must have sufficient technical training and experience to be capable of fulfilling the responsibilities described in the applicable Level 1 or Level 2 Support definition, as applicable.

(ii) Qualified Support Employees must successfully complete the training required by BlueArc.

(iii) Qualified Support Employees shall perform the activities for the Level of Support provided by HDS prior to contacting a BlueArc Technical Services Engineer for the next level of Support.

* * * Indicates that confidential treatment has been sought for this information. 59

(b) HDS shall establish twenty-four (24) hours a day, 365 days a year Support services. HDS’ Support organization(s) must have documented Support plans and procedures as outlined in the SIP.

(c) HDS agrees to maintain complete, clear and accurate records of its End User Support information, including Case tracking numbers, and agrees to provide End User support information to BlueArc when transferring a call to BlueArc for the next level of Support, or upon written request from BlueArc in connection with BlueArc’s obligations under this exhibit.

(d) HDS and its Affiliates shall inform End Users and ASPs that all calls should be made to HDS. HDS shall also maintain an open Case throughout the Problem resolution process and will hold the primary responsibility for the End User contact.

(e) As mutually agreed, HDS will participate in a quarterly review with BlueArc to address incident metrics and current End User’s account status, which includes current and non-current Support and maintenance contracts, and any outstanding issues. HDS shall provide a quarterly report detailing all calls received, problem description and resolutions and call open and close dates.

(f) End User(s) under warranty or who subscribe to HDS’ Support and maintenance services shall receive or have access to all Software Updates and all End User Software Documentation updates, as they are made available to HDS for End Users pursuant to the Agreement. HDS will be responsible for providing all Updates to End Users that have paid the applicable annual Support services fee as such Updates are made available to HDS.

(g) HDS shall provide to BlueArc, all reasonably requested information to enable BlueArc to support HDS with its End Users issues.

(h) HDS shall purchase Spares from BlueArc at the prices specified in Exhibit A.

Section 4. SERVICE DELIVERY IMPLEMENTATION

4.1 As of the Effective Date, the following will be available and /or will be under development by BlueArc and HDS:

(a) BlueArc and HDS will develop a service implementation plan (“SIP”) that will define the specific procedures for call handling, Problem escalation, Products information exchange and management, and establishes a template for communications between the Parties when exchanging End User Support information (the “Template”).

(b) BlueArc will provide information necessary for Support of the Products set forth herein.

(c) BlueArc and HDS will jointly develop a training plan for Products.

* * * Indicates that confidential treatment has been sought for this information. 60

4.2 HDS and BlueArc will make reasonable efforts to provide each other with all non-confidential information obtained regarding Product Problems, solutions and End User(s) feedback. HDS shall provide BlueArc with all information reasonably requested by BlueArc in connection with BlueArc’s performance of Support, including without limitation, information required by BlueArc to reproduce and/or resolve a Problem (including, without limitation, log files, collecting configuration information, capturing error messages and Release number).

4.3 BlueArc will use reasonable efforts to provide HDS with software support tools it may have or develop that will assist HDS’ Support personnel in isolating/resolving Problems with the Product that include Software.

4.4 BlueArc will provide HDS Qualified Support Employees with the troubleshooting techniques, methodologies, and procedures that BlueArc uses in support of its Products, which shall at all times remain the Intellectual Property of BlueArc.

4.5 BlueArc hereby grants HDS the right to use and distribute to Qualified Support Employees appropriate troubleshooting techniques, methodologies, and procedures in support of the Products subject to the terms and conditions of the Agreement, including this exhibit.

Section 5. SUPPORT PRICING.

HDS, its Affiliates and ASPs have the unrestricted right to determine the price at which it sells Support to its End Users.

Section 6. MAINTENANCE AND SUPPORT

6.1 Maintenance Updates. End Users who maintain a current support contract for the HDS Storage Solution with HDS (or any ASP) and for whom HDS or a Regional Affiliate has submitted and maintained a current order with BlueArc shall be eligible for Updates as they are made generally available by BlueArc to its end users of similar BlueArc products. The process for delivery of Updates to End Users shall be described in the SIP. This section shall only apply to Products which include Software.

Section 7. BlueArc TECHNICAL SUPPORT ESCALATION STAFFING

7.1 Named Technical Escalation Contact. BlueArc shall at all times have a designated technical escalation contact, and at least one backup, assigned to HDS on a continuous basis and responsible for responding to Problems that have been reported by HDS and have not been resolved through the normal escalation paths that are identified in the SIP.

Section 8. ESCALATION LEVELS.

Escalation to a Level 3 Technical Services Engineer will occur if both HDS and BlueArc Level 1 Support and Level 2 Support resources, as applicable, have been exhausted as

* * * Indicates that confidential treatment has been sought for this information. 61

described in this Section 8. Following the completion of information gathered during the provision of Level 1 Support, Level 2 Support escalation will occur. The Qualified Support Employees or Technical Services Engineers performing Level 2 Support shall review all resources within reason including documentation, the BlueArc Knowledge Base and/or patch matrix before escalating a Problem to Level 3 Support.

Section 9. PROBLEM SEVERITY DEFINITIONS AND RESPONSE REQUIREMENTS.

HDS and BlueArc will agree to the appropriate rules of engagement between the HDS Qualified Support Employees and the BlueArc Technical Service Engineers. Communication will include, but not be limited to, phone and web information exchange based on the required response time by HDS and as identified in the SIP. Examples of HDS’ Problem Severity Definitions and Response Requirements are listed below:

9.1 Severity 1 Problems

(a) Definition: A Problem has been identified by a End User that makes the continued use of one or more functions by such End User impossible (or severely restricted) on a critical system and prevents End User from continued production or severely risks critical business operations. Problem may cause loss of data and/or restrict data availability and/or cause significant financial impact to the End User.

(b) Response Time: A BlueArc Technical Services Engineer will use reasonable efforts to respond to HDS to a Severity 1 Problem request within one (1) hour of BlueArc’s receipt of a completed Support Communication Template from HDS with respect thereto.

9.2 Severity 2 Problems

(a) Definition: A Problem has been identified by an End User (1) that severely affects or restricts such End User’s ability to use major functionality, (2) that is time sensitive and is important to the End User’s long-term productivity, (3) that is not causing an immediate substantial work stoppage, and (4) for which no Workaround is available.

(b) Response Time: A BlueArc Technical Services Engineer will use reasonable efforts to respond to HDS to a Severity 2 Problem request within two (2) hours of BlueArc’s receipt of a completed Support Communication Template as defined in the SIP.

9.3 Severity 3 Problems

(a) Definition: A minor Problem reported by an End User that does not have major effect on the End User’s business operations or a major Problem for which a reasonable Workaround exists.

* * * Indicates that confidential treatment has been sought for this information. 62

(b) Response Time: A BlueArc Technical Services Engineer will use reasonable efforts to respond to HDS to a Severity 3 Problem request within eight (8) business hours of BlueArc’s receipt of a completed Support Communication Template as provided in the SIP.

9.4 Severity 4 Problems

(a) Definition: A minor condition or Documentation error reported by an End User that has no significant affect on the End User’s operations, including without limitation, requests and suggestions for new feature or functionality in existing Products.

(b) Response Time: A BlueArc Technical Services Engineer will use reasonable efforts to respond to HDS to a Severity 4 Problem request within the next business day after BlueArc’s receipt of the completed Support Communication Template as provided in the SIP.

9.5 Assigning Severity. HDS shall assign a Severity Level to a Problem using its reasonable judgment in good faith.

Section 10. RMA PROCESS.

10.1 In the event that HDS or a Regional Affiliate receives from BlueArc: (a) dead on arrival (DOA) Product(s) or Spares; or (b) Product or Spares not meeting applicable BlueArc specifications, HDS or the Regional Affiliate shall so notify BlueArc by requesting a return material authorization (“RMA”) number to return the DOA Product or Spare. BlueArc shall provide repaired or replacement Product(s) or Spare(s), within five (5) days of receiving such Product or Spare from HDS or a Regional Affiliate. No Product(s) or Spare(s) may be returned without a BlueArc RMA number.

10.2 In the event a Qualified Support Employee needs to return a Spare for repair or replacement under the Warranty, HDS or a Regional Affiliate shall so notify BlueArc by requesting a RMA number to return the defective Spare. BlueArc shall provide a repaired or replacement Spare within the US within ten (10) days of receipt of such defective Spare. No Spare may be returned without a BlueArc RMA number.

10.3 In the event BlueArc believes improperly returned Spares has become an issue or there are an excessive number of “no defect found”, the Parties will mutually agree on an action plan to resolve the issue, which may include additional training and adjustments to the Support fees paid and term for resolution.

* * * Indicates that confidential treatment has been sought for this information. 63

EXHIBIT C

ACCEPTANCE PROCESS

Unless otherwise defined, capitalized terms hereunder shall have the same meaning as in the Master Distribution Agreement (the “Agreement”), to which this Exhibit C is attached and incorporated by reference therein. Except as expressly provided herein, in the event of any conflicts between the terms set forth hereunder and the terms and conditions of the Agreement, the Agreement shall control.

* * *

Verification and validation of a particular Product and any Major Release (singularly “Product Component” and collectively, “Product Components”) shall be required, at HDS’ discretion, for any Product Components including items referenced in Exhibit M, in the PRD, a Statement of Work, or any mutually agreed to requirements.

The verification and validation testing shall be based on the following procedures, which shall be performed by HDS at its sole expense in an environment sufficient to exercise the full functionality of the developed Product Component(s), unless mutually agreed:

• Verification and validation of the installation of each Product Component.

• * * *.

• Verification and validation of the documentation with respect to operational and functional behaviors of the Products or any Product Component.

• * * *.

• * * *.

• Verify compatibility of relevant software and hardware components directly or indirectly sold, marketed or distributed by HDS or any Affiliate of HDS and the Product Components.

• * * *.

• When new HDS hardware support is required, verify that new hardware is supported by the Product Components.

• * * *.

• Once all other procedures have been completed, testing on the Gold Master for each Product Component prior to release shall be performed.

* * * Indicates that confidential treatment has been sought for this information. 64

EXHIBIT D

SALES SUPPORT

Unless otherwise defined, capitalized terms hereunder shall have the same meaning as in the Master Distribution Agreement (the “Agreement”), to which this Exhibit D is attached and incorporated by reference therein. Except as expressly provided herein, in the event of any conflicts between the terms set forth hereunder and the terms and conditions of the Agreement, the Agreement shall control.

The Parties covenant and agree to the terms of this exhibit in connection with the sales support provided by BlueArc in connection with the Agreement.

1. Field Engagement

For a period of * * * from the Effective Date BlueArc will use reasonable efforts to provide sales support as requested by HDS or any of its Affiliates. Such sales support will be at levels agreed to by the Parties depending on the nature of the engagement and may include phone support. After the * * * transition period, sales support shall be provided on a time and material basis, unless agreed to by the parties.

2. Sales Incentive and Sales Compensation Plan

(a) HDS shall pay its sales organization commission and quota credit on the sale of Products and Support as it would on any other HDS product sales.

(b) BlueArc shall pay its sales organization commission and quota credit on the sale of Products and Support by HDS as it would any sale of substantially similar BlueArc products and services if sold directly by BlueArc. The intent of this Section 2 is for the Parties to create a channel neutral sales model.

(c) Either Party may create programs that are approved in advance by HDS, such as bonuses/sales performance incentives for quarter end business, to provide incentives to the HDS sales team to maximize the sale of Products.

(d) HDS and BlueArc will hold quarterly meetings which will include reviewing the status of sales programs.

(e) Section 2 (a) through (d) shall be further governed by the mutually agreed upon Rules of Engagement compensation policies.

* * * Indicates that confidential treatment has been sought for this information. 65

(f) Both Parties reserve the right to set their own respective quotas and territories.

3. Pricing Information

End User pricing shall be established at HDS’, Affiliate’s, ASPs or Channel Partner’s sole discretion and control.

4. Sales Support Requirements

(a) BlueArc will use reasonable efforts to provide HDS’ sales teams with Sales and Systems Engineering Support, at levels to be agreed to by the Parties depending on the nature of the engagement, for sales campaigns to sell Products to local HDS (or Affiliate) sales teams. “Sales and Systems Engineering Support” may include on-site End User sales assistance (subject to mutually agreeable tasks, scheduling and fees, including reimbursement of travel expenses), Sales Support, technical systems engineering support, configuration support and account planning, via telephone or online web support, on a mutually agreed upon schedule. Such support shall be provided free of charge for the transition period described in Section 1 (a) and thereafter on a time and materials basis.

(b) In addition BlueArc will reasonably provide HDS’ central sales and marketing operations, for distribution to HDS related sales organizations, with access to the materials further defined in Exhibit E.

HDS agrees that materials provided under Exhibit E are valuable property of BlueArc, and shall be deemed “Confidential Information” if marked as “Confidential”, “Proprietary” or a similar designation, and shall be deemed governed by Section 17 of the Agreement.

5. Geographic Coverage

5.1 BlueArc will make available pre and post Sales overlay Support coverage based upon a mutually agreed upon rollout schedule. If local resources are not available at such time because of the schedule for the rollout, BlueArc will designate go-to back-up resources to support the sales teams.

5.2 BlueArc will make available pre and post Sales overlay support for minimum coverage in the following locations. In some instances, multiple locations may be covered by a single BlueArc resource. For clarification

* * * Indicates that confidential treatment has been sought for this information. 66

purposes, such geographical Sales and overlay support coverage can be achieved via phone or on a face to face basis, as applicable. HDS and BlueArc mutually agree on coverage, timing and a phase roll out plan for geographic coverage

* * *

6. HDS Sales Support Training

HDS will make available training for BlueArc employees as necessary to support their Sales Support obligations under this Exhibit.

7. Legacy Accounts and Shared Accounts.

(a) The Legacy Accounts for HDS shall be further defined in Attachment 1 to this Exhibit.

(b) The Legacy Accounts of BlueArc shall be further defined in Attachment 2 to this Exhibit.

* * * Indicates that confidential treatment has been sought for this information. 67

Attachment 1 to Exhibit D

HDS Legacy Accounts

* * *

* * * Indicates that confidential treatment has been sought for this information. 68

Attachment 2 to Exhibit D

BlueArc Legacy Accounts

* * *

* * * Indicates that confidential treatment has been sought for this information. 69

EXHIBIT E

MARKETING

Unless otherwise defined, capitalized terms hereunder shall have the same meaning as in the Master Distribution Agreement (“Agreement”), to which this Exhibit E is attached and incorporated by reference therein. Except as expressly provided herein, in the event of any conflicts between the terms set forth hereunder and the terms and conditions of the Agreement, the Agreement shall control.

1. Joint Marketing Programs

At HDS’ request, HDS and BlueArc may, upon mutual agreement develop a series of marketing programs to create awareness of the BlueArc integrated/HDS solution to existing and potential End Users, including but not limited to the following:

• Press release announcing the relationship, covering the intent of the Agreement and approved in advance in writing by both parties. HDS shall have the right to determine the dates, materials and forum for such announcement.

• Briefing of the press and financial and industry analysts at relationship announcement and other mutually agreed upon occasions. HDS shall have the right to determine the appropriate involvement of BlueArc for these briefings.

• Mutual links between BlueArc and HDS websites which communicate the benefits of the parties’ relationship.

• The Parties may engage in mutually agreed upon marketing activities which may include Product and company promotions, marketing campaigns, lead generation and sharing programs, and joint customer visits. Joint seminar programs and marketing campaigns acceptable to HDS.

• The Parties may cooperate on sharing customer references, success stories, etc and as appropriate.

• The Parties will jointly agree upon an annual marketing plan to include content, events and programs.

Notwithstanding anything to the contrary contained in this Section 1, BlueArc shall have no right to conduct any of the above announcements, joint programs or joint initiatives, unless BlueArc has obtained the prior written approval of

* * * Indicates that confidential treatment has been sought for this information. 70

HDS, which may be withheld in its sole and absolute discretion. Nothing in this section should be deemed to prevent BlueArc from engaging in its own press and financial and industry analyst briefings, product and company promotions, marketing campaigns, lead generation and sharing programs, seminar programs and marketing campaigns, etc. For clarification press releases will require prior written approval by both Parties.

2. Branding

2.1 For any Product co-branded with a product directly or indirectly sold, marketed or distributed by HDS or any HDS Affiliate under the Agreement, the HDS product name (including, without limitation, any reference to the name Hitachi or Hitachi, Ltd.) will be the dominant brand with a “powered by BLUEARC^®” or “Powered by BLUEARC^®” notice, or similar phrase(s) as designated in writing by BLUEARC, appearing in the key branding areas of the application, in a font size at least sixty percent (60%) the size of that used for the larger of the HiCommand, HDS, or Hitachi Trademarks. Such areas shall include the: (i) welcome screen, (ii) login screen and (iii) bottom left hand corners of the frame throughout the application, and on any marketing literature, website, electronic or published media, press release, advertising banner, trade-show booth, or any other form of marketing or sales material published by HDS as it relates to the Products. HDS collateral materials that describe the licensed product(s) will have the HDS look and feel, with Hitachi, Ltd. or Hitachi Data Systems as the dominant brand, with a “powered by BLUEARC^®” notice appearing in the first mention of the Product name within the body text.

2.2 For any web-page, including but not limited to the branding banner portion of the Product, on which the notice “powered by BLUEARC^®” exists that is viewable through a Internet web-browser, the notice “powered by BLUEARC^®” must be accompanied by a hyperlink to the website http://www.BlueArc.com. This does not include PDF documents that may be viewable through a web-browser.

2.3 HDS agrees not to attach any logos, trademarks, or trade names to the Product, other than those set forth in this Agreement or as mutually agreed by the Parties. The Product shall not be branded with any trademark, trade name or service mark of any Channel or End User or any other trademark not approved in writing in advance by BlueArc.

2.4 The BLUEARC trademark must always be represented in capital letters.

2.5 The placement of the “powered by BLUEARC^®” notice must adhere to the logo usage guidelines provided by the Hitachi Data Systems Style Guide and the Hitachi Group Identification Standards Manual.

2.6 All Documentation, including user guides and maintenance manuals will have the HDS product name and the HDS look and feel with Hitachi, Ltd. or Hitachi

* * * Indicates that confidential treatment has been sought for this information. 71

Data Systems as the dominant brand, with a “powered by BLUEARC^®” notice appearing in the Documentation in the first mention of the product name within the body text.

2.7 The Parties will mutually agree on any changes or new directions, if any, to be taken from the current branding strategy.

2.8 Unless otherwise expressly set forth in the Agreement, all branding will immediately cease upon the termination of HDS’ license to distribute, and Support the Product.

3.0 BlueArc Obligations

3.1 BlueArc will highlight HDS in marketing materials where appropriate.

3.2 BlueArc will provide sales and technical presentations, data sheets, case studies, sales guides, FAQ’s, application and white papers, as available, to HDS to use in development of HDS marketing materials.

* * * Indicates that confidential treatment has been sought for this information. 72

EXHIBIT F

HDS EQUIPMENT LOAN AGREEMENT

Reference No.:

Company:                                                  

Address:                                                                                                                                                                                                     

                        Attention:                                                   Telephone:                                                  

Email:                                                  

Date of Non Disclosure Agreement with Company:                                                              

Configuration:            See Exhibit A

This Equipment Loan Agreement (“Loan Agreement”) is made between Hitachi Data Systems Corporation of 750 Central Expressway, Santa Clara, CA (“HDS”) and                                                                                                               , with its respective principal place of business at the address indicated above (“Company”), effective as of                                                  . This Loan Agreement grants certain limited rights to the party identified as “Company” above and such rights are not transferable, assignable, applicable to or usable by any third party, with the term “third party” specifically including corporate affiliates of the Company.

HDS and Company agree as follows:

1. Subject to availability, the Company may use the HDS equipment and related software as described in Exhibit A at no cost to Company. The purposes of the loan (“Activities”), the equipment configuration and related software, including documentation (“Equipment”), the duration of the loan (“Loan Period”), the shipment date and the delivery address are specified in Exhibit A to this Loan Agreement. Notwithstanding the foregoing, either party may terminate this Loan Agreement as to any or all items of Equipment at any time upon at least ten (10) business days’ written notice. In addition, HDS may terminate this Loan Agreement immediately in the event of a merger or other transaction with Company in which a constituent party is a competitor of HDS. At the end of the Loan Period for any item of Equipment, if that Loan Period is not extended pursuant to a written agreement signed by both parties, Company will make the Equipment available to HDS for removal.

2. The Equipment may not be used for commercial or production purposes or for any other activities not expressly authorized hereunder. The Equipment may not be moved from the initial install site as indicated in Exhibit A except with the prior written permission of HDS. Company will perform its Activities in a professional and workmanlike manner, in accordance with the highest standards of the industry, and in compliance with its contractual obligations under this Loan Agreement. In performing such Activities, Company shall in no way damage, modify or reverse engineer the Equipment, except upon the prior written authorization and instruction of HDS.

* * * Indicates that confidential treatment has been sought for this information. 73

3. Information disclosed by HDS to Company relating to the Equipment or which is derived or developed by Company from its Activities shall be deemed to be confidential between Company and HDS and may not be disclosed to third parties absent HDS’ prior written consent and is governed under the provisions of the Non Disclosure Agreement effective as of the date above. These restrictions on use and disclosure shall not apply to information which is or becomes generally known to the public.

4. HDS’ insurance will cover the Equipment under this Loan Agreement against any loss or damage. HDS will bear all transportation, installation and de-installation costs associated with the Equipment evaluation.

5. Company is responsible to maintain environmental conditions at the Equipment location according to HDS’ published specifications. During the Loan Period, HDS will provide at no-charge, its standard maintenance services to maintain the Equipment in accordance with the manufacturer’s specifications. In order to maintain the Equipment, HDS may locate certain HDS Service Tools at the Company’s site, subject to the conditions stated in the attached Exhibit.

6. Company will return the Equipment to HDS in good repair, condition and working order (ordinary wear and tear from proper use excepted). HDS will be entitled to inspect the Equipment during reasonable business hours and subject to Company’s reasonable security requirements.

7. Software programs and/or internal computer code accompany or are pre-installed on Equipment, and are covered under the licenses accompanying the Equipment or attached as Exhibit B (including its sub-parts) hereto (“Software”). Company’s use of the Software will be governed by those license(s).

8. The Equipment is, and at all times remains, the exclusive property of HDS. Company has no right, title, or interest therein. Company shall not assign, transfer, pledge or hypothecate this Loan Agreement, the Equipment or Software or any related interest. Any such attempt by Company will be void and will be a breach of this Loan Agreement.

* * * Indicates that confidential treatment has been sought for this information. 74

9. (a) Company will indemnify HDS and hold HDS harmless from and against all loss, claims, liability or damage and related expenses (“claims”), including court costs and reasonable attorneys’ fees, or direct damages arising from or related to: (1) the Company’s misuse of Equipment which causes injury to a third party or property, (2) the Company’s (or its agent’s) fault, misconduct or negligence, (3) Company’s use of the Equipment for purposes other than the Activities specified in Exhibit A, and (4) alterations or attachments to the Equipment which were not authorized by HDS either in writing or verbally and thereafter confirmed by HDS in writing.

(b) HDS will have NO liability whatsoever to Company for any direct damages arising out of or in connection with Company’s use of the Equipment.

(c) HDS and Company will have NO liability whatsoever to one another for any indirect, special, incidental or consequential damages, including but not limited to loss of data or records, lost profits or other economic loss, arising out of or in connection with Company’s use of the Equipment.

(d) HDS will have NO liability whatsoever to any third party for any direct, indirect, special, incidental or consequential damages, including but not limited to loss of data or records, lost profits or other economic loss, arising out of or in connection with Company’s use of the Equipment.

10. Equipment is provided “as is.” HDS makes no express or implied warranties of any kind whatsoever. HDS EXPRESSLY DISCLAIMS ALL WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY STATUTORY WARRANTY OF NON-INFRINGEMENT.

11. Company’s sole remedy for breach of this Agreement by HDS is termination of this Agreement.

12. Company may not transfer all or any portion of the Equipment outside the United States without HDS’ prior written consent, and Company agrees to comply with all United States export regulations which control the Equipment, including the Export Administration Regulations administered by the U. S. Department of Commerce and the International Traffic in Arms Regulations administered by the U.S. Department of State.

13. (a) This Loan Agreement is governed by under New York law, excluding its conflict of laws rules. (b) No delay or failure to exercise or enforce any provision of this Loan

* * * Indicates that confidential treatment has been sought for this information. 75

Agreement will be considered a waiver. A waiver must be in writing to be valid. No single waiver will constitute a continuing or subsequent waiver. (c) Any terms of this Loan Agreement which by their nature survive beyond the expiration or termination of the Loan Agreement will remain in effect until they are satisfied. (d) This Loan Agreement is the full and final agreement between the parties with respect to the subject matter hereof, and supersedes all prior oral or written communications, proposals and agreements between the parties regarding the subject matter hereof. This Loan Agreement may only be modified in a writing signed by authorized representatives of the parties.

HDS: HITACHI DATA SYSTEMS CORPORATION	COMPANY:
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:

* * * Indicates that confidential treatment has been sought for this information. 76

EQUIPMENT LOAN AGREEMENT

Exhibit A-1

a) Activities (purpose of loan): Equipment will be used by Company for

b) Loan Period:              days from date of shipment

c) Equipment: (List Hardware here)

Inventory Code Description Qty

d) Software Programs & Documentation

Inventory Code Description Qty

e) Delivery Address (install site):

(Note: Add Exhibit A-2 for additional equipment)

* * * Indicates that confidential treatment has been sought for this information. 77

EXHIBIT B to the EQUIPMENT LOAN AGREEMENT

for the HDS Storage Products (“Equipment”)

1. Software License: Certain software programs and internal computer code (collectively “Software) are pre-installed on or accompany the Equipment. The Software has been licensed to HDS and HDS hereby grants to Company a nonexclusive and nontransferable license to use the Software as set forth herein. HDS, or its direct or indirect licensors (collectively, “Licensor”), own all right, title and interest in and to the Software. The Software includes the object code version of the software, related user documentation and any enhancements, revisions or other updates which HDS provides to Company. The term “Software” specifically excludes the Licensor’s diagnostic programs, and Company receives no license to use the diagnostic programs. Company may only use the Software to enable the Equipment to function according to its specifications. Company may make one backup copy of the Software provided that Company reproduces on that backup copy all of the original copyright notices and other statements. Except as permitted under this license or applicable law, Company will not copy, modify, reverse engineer, decompile or disassemble the Software, or sublicense, rent, lease, assign or otherwise transfer the Software or this license to anyone. Software incorporates confidential and proprietary information of the Licensor. Company will take all reasonable precautions to safeguard the confidentiality of the Software. The placement of copyright notices on the Software will not constitute publication or otherwise impair its confidential nature.

2. License Termination: This license is co-terminous with the Loan Agreement, and terminates when Company no longer possesses the Equipment or if Company violates the terms of the Loan Agreement or this license, and Company must stop using the Software and must return to HDS all Software and related copies in its possession and purge any remaining Software.

3. Warranty on Software: Software is provided on an as-is basis, and with no warranty.

4. Other Software: Other software (“Other Software”) may be the subject of a click-wrap or shrink-wrap license accompanying the Equipment (or a feature) depending on the configuration, or an end-user license attached to this Exhibit, and Company’s use of such Other Software shall be subject to and governed by the related shrink-wrap or end-user license, including any restrictions on transferability. Company will have no recourse against HDS regarding such Other Software, except where HDS is the licensor of the Other Software.

5. Government Restricted Rights: With respect to any acquisition of Software or Other Software by or for any unit or agency of the U.S. Government, it will be classified as “commercial computer software” as defined in the applicable provisions of the Federal Acquisition Regulation (“FAR”) and supplements thereto, including the Department of Defense (“DoD”) FAR Supplement (“DFARS”). The Software or Other Software was developed entirely at private expense and no part of it was first produced in the performance of a U.S. Government Contract. If the Software or Other Software is

* * * Indicates that confidential treatment has been sought for this information. 78

supplied for use by DoD, it is delivered subject to the terms of its license and either (i) in accordance with DFARS 227.7202-1(a) and 227.7202-3(a), or (ii) with restricted rights in accordance with DFARS 252.227-7013(c)(1)(ii) (OCT 1988), as applicable. If the Software or Other Software is supplied for use by a Federal agency other than DoD, it is restricted computer software delivered subject to the terms of its license and (i) FAR 12.212(a); (ii) FAR 52.227-19; or (iii) FAR 52.227-14 (ALT III), as applicable.

6. Services and HDS Service Tools: During the Loan Period, HDS will provide its standard maintenance services for the Equipment. HDS or its subcontractors may locate diagnostic code, maintenance manuals, other documentation or other service tools at Company’s site, or provide other proprietary information (collectively, “HDS Service Tools”) to Company in connection with the maintenance services. HDS Service Tools (and their copies) are, and at all times will remain, the sole property of HDS, its licensors and vendors. HDS Service Tools are proprietary and confidential to HDS, and Company will take all commercially reasonable efforts to protect all HDS Service Tools as such. HDS Service Tools are solely for the use of HDS to provide maintenance services to Company under this Loan Agreement. Company receives no license or other right to use or access HDS Service Tools. Company will not copy, modify, decompile, disassemble, reverse engineer, license, assign, lease, sell, distribute or otherwise attempt to transfer the HDS Service Tools. If Company does not purchase the Equipment at the termination or expiration of the Loan Agreement or if HDS maintenance services are terminated, Company shall grant HDS ready access to the Equipment to remove or disable the HDS Service Tools.

* * * Indicates that confidential treatment has been sought for this information. 79

EXHIBIT G

HDS LAB ACCESS AGREEMENT

Agreement Number:                         

This Lab Access Agreement is entered into as of                                     , 2006, (the “Effective Date”) by and between Hitachi Data Systems Corporation, a Delaware Corporation, having its principal place of business at 750 Central Expressway, Santa Clara, California 95050 (“HDS”), and                                              , a                              Corporation, having its principal place of business at                                                       (“Lab User”).

RECITALS

HDS operates a Lab (as defined below), which provides users access, either physical or remote, to HDS and third party software and hardware vendors for the purpose of testing their products.

Lab User wishes to access the Lab on the date(s) and for the purpose as set forth in the applicable Statement of Work (as defined below).

1. DEFINITIONS.

1.1 “Agreement” means this Lab Access Agreement and Statements of Work attached to it.

1.2 “HDS Technology” means any HDS software and hardware made available by HDS for Lab User’s use in the Lab during the Lab Access Period.

1.3 “HDS’ Confidential Information” means: (i) any passwords and other information provided to Lab User in order to allow Lab User to have remote access to the Lab; and (ii) and information relating to the HDS Technology, HDS’ product plans, designs, customer names, finances, marketing plans, business opportunities, personnel, research, development or know-how that is delivered in tangible form and marked as “confidential” or “proprietary” in writing, and/or, if disclosed visually or orally, is designated in writing as confidential within thirty (30) days after the initial disclosure; provided, however that “HDS Confidential Information” shall not include information that: (i) is or becomes generally known or available by publication, commercial use or otherwise through no fault of Lab User; (ii) is known and has been reduced to tangible form by Lab User prior to the time of disclosure and is not subject to restriction; (iii) is independently developed or learned by Lab User without reference to HDS’ Confidential Information (iv) is lawfully obtained from a third party who has the right to make such disclosure; (v) is released for publication by HDS in writing.

* * * Indicates that confidential treatment has been sought for this information. 80

1.4 “Lab” means HDS’ Test Lab.

1.5 “Lab Access Period” means Lab User’s scheduled time(s) to access the Lab, either physically or remotely. The Lab Access Period will be identified in the applicable Statement of Work.

1.6 “Lab User’s Confidential Information” means: any information relating to Lab User’s Products, product plans, designs, customer names, finances, marketing plans, business opportunities, personnel, research, development or know-how that is delivered in tangible form and marked as “proprietary,” or “confidential,” and/or, if disclosed visually or orally, is confirmed as “confidential” at the time of the disclosure and designated as confidential in a writing delivered to HDS within thirty (30) days after the initial disclosure; provided, however that “Lab User’s Confidential Information” shall not include information that: (i) is or becomes generally known or available by publication, commercial use or otherwise through no fault of HDS; (ii) is known and has been reduced to tangible form by HDS prior to the time of disclosure and is not subject to restriction; (iii) is independently developed or learned by HDS without reference to Lab User’s Confidential Information; (iv) is lawfully obtained from a third party who has the right to make such disclosure; (v) is released for publication by Lab User in writing.

1.7 “Lab User’s Product(s)” means Lab User’s product(s) to be tested in the Lab, as specified in the relevant Statement of Work.

1.8 “Statements of Work” means sequentially numbered documents that document and constitute a description of Lab User’s access to the Lab, including the information described in Section 2.

1.9 “Third Party Technology” means any third party software and hardware made available by HDS for Lab User’s use in the Lab during the Lab Access Period.

2. LAB USAGE.

2.1 Lab Access. Access (remote or physical) to the Lab will be provided by HDS to Lab User as described in and pursuant to the terms of this Agreement, including any applicable Statement of Work executed by the parties. Each Statement of Work shall include: (a) a detailed description of the configuration of required resources and networking requirements; (b) a description of Lab User’s Product(s) to be tested in the Lab; (c) a description of the type of access (remote or physical) to be provided to the

* * * Indicates that confidential treatment has been sought for this information. 81

Lab User; (d) a description of any HDS Technology and Third Party Technology, if any, to be provided to Lab User in connection with usage of the Lab during the Lab Access Period; (e) supplemental license terms, if any; (f) a description of any services, if any, to be provided to Lab User by HDS during the Lab Access Period; (g) a detailed description of any equipment or software which the Lab User intends to bring into the Lab; (h) the date(s) and hour(s) during which Lab User will have access to the Lab; (i) the names of all Lab User personnel who will have access to the Lab; and (j) payment terms. Any Statement of Work attached hereto or hereafter executed that is related to this Agreement are incorporated into and made a part of this Agreement.

2.2 Scheduling. HDS, in its sole discretion, will schedule all uses of the Lab. All Lab use will be scheduled with the Lab Manager, and will be in accordance with this Agreement and the applicable Statement of Work.

2.3 Rescheduling by HDS. HDS may reschedule the Lab Access Period upon at least twenty four (24) hours notice to Lab User, provided that access to the Lab is provided to the Lab User within sixty (60) days after the initially scheduled Lab Access Period. HDS shall have no liability to Lab User for any rescheduled Lab access.

2.4 Lab Conduct. Lab User, including all of Lab User’s personnel, shall abide by all applicable Lab policies and procedures, and shall use Lab resources in accordance with this Agreement, including any applicable Statement of Work. HDS reserves the right to monitor and audit Lab User’s use of the Lab in order to ensure Lab User’s compliance with Lab policies. Lab User’s personnel shall have no access to the Lab or the secure area of the Lab without the assistance and permission of HDS Lab personnel.

2.5 Removal of Access. HDS reserves the right to refuse and/or remove Lab User’s access to the Lab at any time if Lab User, including any of Lab User’s personnel, fails to adhere to all applicable Lab policies or engages in any unauthorized activity.

3. PAYMENT FOR LAB ACCESS.

3.1 Payment. Lab User shall pay HDS for access to the Lab in accordance with and on the payment date specified in the Statement of Work. If no payment date is specified in the Statement of Work, payment in full shall be due forty-five (45) business days after the conclusion of the applicable Lab Access Period.

3.2 Taxes. Lab User shall pay any taxes resulting from this Agreement, or any activities hereunder, exclusive of taxes based upon HDS’ net income.

* * * Indicates that confidential treatment has been sought for this information. 82

4. LICENSE TERMS.

4.1 License Grant. HDS hereby grants to Lab User a nontransferable, non-exclusive, and limited license to use the HDS Technology solely for the purpose described in the applicable Statement of Work, during the Lab Access Period at the Lab.

4.2 Use Restrictions. Lab User shall not (and shall not permit any other person or entity to) (i) use, merge, adapt, decode, copy, display, transfer, modify, distribute, extract, reverse assemble, disassemble, reverse compile, decompile, reverse engineer, translate, or create derivative works based on, developed from, or that incorporate portions of any of the HDS Technology or Third Party Technology, or (ii) sublicense, rent, lease, assign, transfer or to otherwise dispose to any person or entity any of the HDS Technology or Third Party Technology.

4.3 Supplemental License Terms and Use Restrictions. Supplemental license terms and use restrictions, if any, are specified in the applicable Statement of Work.

4.4 Ownership. Except as licensed in this Section 4, HDS retains all right, title and interest in and to the HDS Technology, including any derivative works of the HDS Technology made by Lab User during the Lab Access Period or otherwise.

4.5 Third Party Technology. Supplemental terms and conditions, if any, pertaining to any Third Party Technology will be specified in the applicable Statement of Work.

5. CONFIDENTIAL INFORMATION.

5.1 HDS’ Confidential Information. Lab User will not disclose, publish, or disseminate HDS’ Confidential Information to anyone other than those of its employees with a need to know, and Lab User agrees to take reasonable precautions to prevent any unauthorized use, disclosure, publication, or dissemination of HDS’ Confidential Information. Lab User agrees to use HDS’ Confidential Information solely for the purpose of effecting the permitted uses of the HDS Technology in accordance with the relevant Statement of Work. Lab User agrees not to use HDS’ Confidential Information otherwise for its own or any third party’s benefit without the prior written approval of an authorized representative of HDS in each instance.

5.2 Lab User’s Confidential Information. HDS will not disclose, publish, or disseminate Lab User’s Confidential Information to anyone other than those of its employees with a need to know, and HDS agrees to take reasonable precautions to prevent any unauthorized use, disclosure, publication, or dissemination of Lab User’s Confidential Information. Lab User shall be responsible for securing all copies of Lab User’s Confidential Information during use of the Lab. It shall be

* * * Indicates that confidential treatment has been sought for this information. 83

Lab User’s responsibility, upon completion of the applicable Lab Access Period, to remove Lab User’s Confidential Information from the Lab. Any data, information, or materials left in the Lab, including on any Lab equipment, after the Lab Access Period will not be deemed to be Lab User’s Confidential Information. EW: Reference confidentially agreement in the contract, use consistent terminology

6. INDEMNITY.

6.1 Infringement Indemnification. Each party (the “Indemnifying Party”) will defend or settle, at its option and expense, any legal proceeding brought against the other (the “Indemnified Party”) to the extent it is based on a claim that any Product (as defined below) used in connection with activities performed under this Agreement infringes a third party’s trade secret, or infringes or misappropriates any other third party intellectual property right. The term “Product” as used throughout this Section 6 shall refer to HDS Technology with respect to Lab User as the Indemnified Party, and to any equipment, software or other materials brought into the Lab by Lab User with respect to HDS as the Indemnified party. The Indemnifying Party will indemnify the Indemnified Party against all costs and damages attributable to such claims, provided that the Indemnified Party: (a) gives written notice of the claim promptly to Indemnifying Party; (b) gives Indemnifying Party sole control of the defense and settlement of the claim; (c) provides reasonable information and assistance to Indemnifying Party, at the expense of the Indemnifying Party; and (d) does not compromise or settle such claim without prior written approval of the Indemnifying Party.

If an infringement or misappropriation claim is asserted with respect to any Products provided by the Indemnifying Party, or if the Indemnifying Party reasonably believes such a claim likely, the Indemnifying Party may do one or more of the following, with its commercially reasonable effort and in its discretion: (i) procure, by defending against the claim or otherwise, for the Indemnified Party the right to use the Product at issue; (ii) modify or substitute the Product as appropriate to avoid a rightful claim of infringement or misappropriation, as long as modification or substitution for this purpose does not materially alter or impair the operation of the Product; or, if options (i) and (ii) are not reasonably commercially available, (iii) cease delivering the Product and terminate this Agreement.

No party has any obligation under this Section 6 to the extent a claim results from:

(a) modification of the Product provided by the Indemnified Party;

(b) use of the Product in combination (if the infringement or misappropriation would not have happened but for the combination) with any third party equipment, software or data not furnished by the Indemnifying Party; or

* * * Indicates that confidential treatment has been sought for this information. 84

(c) use of an allegedly infringing or misappropriating version of the Product if the alleged infringement or misappropriation could have been avoided by the use of a different version made available to the Indemnified Party.

This Section 6.1 states the entire liability of each party (as Indemnifying Party) and the exclusive remedies of each party (as Indemnified Party) for claims that a Product infringes a third party’s intellectual property rights.

6.2 General Indemnification. Lab User will indemnify and defend HDS from and against any and all claims, damages, costs, and expenses (including reasonable attorneys’ fees) arising from or related to: (a) any damage to HDS’ or a third party’s premises that is caused by Lab User in connection with use of the Lab; (b) any damage or loss of HDS’ or a third party’s tangible or intangible personal property that is caused by Lab User in connection with use of the Lab; (c) Lab User’s misappropriation of any third parties’ intellectual property while on HDS’ premises.

7. DISCLAIMER OF WARRANTY.

HDS and its licensors make no express or implied warranties of any kind whatsoever. The HDS Technology and Third Party Technology, if any, is provided AS IS, and HDS AND ITS LICENSORS EXPRESSLY DISCLAIM ALL WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ANY STATUTORY WARRANTY OF NON-INFRINGEMENT.

8. LIMITATION OF LIABILITY.

EXCEPT FOR BREACHES OF SECTION 5 (CONFIDENTIAL INFORMATION) OR INDEMNIFICATION OBLIGATIONS UNDER SECTION 6 (INDEMNITY), IN NO EVENT SHALL HDS BlueArc want to change to “either party”, BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE ARISING OUT OF OR IN CONNECTION WITH THE USE OR PERFORMANCE OF USE OF THE HDS TECHNOLOGY OR ANY PERFORMANCE UNDER THIS AGREEMENT.

9. TERM AND TERMINATION.

9.1 Term. This Agreement will commence on the Effective Date and continue for a term of two (2) year, align with agreement term/termination in main contract unless terminated sooner in accordance with Sections 9.2 and 9.3 below.

9.2 Termination for Convenience. Either party may terminate this Agreement for its convenience upon written notice to the other party. Notwithstanding the preceding sentence, this Agreement may not be terminated under this Section 9.2 while any Statement of Work is in effect.

* * * Indicates that confidential treatment has been sought for this information. 85

9.3 Termination for Cause: Either party will have the right to terminate this Agreement or suspend its performance immediately upon written notice at any time if the other party:

(a) is in material breach of any warranty, term, condition or covenant of this Agreement and fails to cure that breach within (30) days after written notice of that breach and of the first party’s intention to terminate;

(b) has breached Sections 2.5 (Lab Conduct), 4 (License Terms), or 5 (Confidential Information); or

(c) becomes insolvent, fails to pay its debts or perform its obligations in the ordinary course of business as they mature; admits in writing its insolvency or inability to pay its debts or perform its obligations as they mature; or makes an assignment for the benefit of creditors.

9.4 Survival. Sections 1, 4.4, 5, 6, 7, 8, 9.4 and 10 shall survive termination of this Agreement.

10. GENERAL.

10.1 Modification; Waiver. This Agreement and any related Statement of Work may be modified only by a written agreement executed by authorized representatives of HDS and Lab User. Failure by either party to enforce any provision of this Agreement shall not be deemed a waiver of future enforcement of that or any other provision.

10.2 Governing Law. This Agreement, its interpretation and enforcement will be governed by the laws of the State of New York, without regard to its conflicts of law principles.

10.3 Severability. If for any reason a court of competent jurisdiction finds any provision of this Agreement, or portion thereof, to be unenforceable, that provision of the Agreement shall be enforced to the maximum extent permissible so as to effect the intent of the parties and the remainder of this Agreement shall continue in force and effect.

10.4 Assignment. The rights and liabilities of the parties hereto will bind and inure to the benefit of their respective successors, executors and administrators, as the case may be, provided that Lab User may not assign or delegate its obligations under this Agreement either in whole or in part, without the prior written consent of HDS. Any attempted assignment in violation of the provisions of this Section 10.4 will be void.

* * * Indicates that confidential treatment has been sought for this information. 86

10.5 No Endorsement. Nothing in this Agreement shall be construed by Lab User as a qualification, certification or other endorsement by HDS of Lab User’s Product(s). HDS shall have no duty, fiduciary or otherwise, to market, co-market, sell, distribute, support, or otherwise promote the Lab User’s Product(s). Lab User shall not reference in any announcement, statement, advertisement or printed material that the Lab User’s Product(s) were tested in HDS’ Lab.

10.6 Trademark Usage. Lab User will not, without HDS’ prior written consent, use any HDS trademarks, service marks, trade names, logos or other commercial or product designations, for any purpose, including, but not limited to, use in connection with any Lab User’s products, promotions, advertisements or exhibitions.

10.7 Insurance. Lab User will procure and maintain throughout the Term of this Agreement, at its own costs, the following insurance policies: (a) Worker’s Compensation per all applicable laws, and Employers’ Liability of not less than $1 million; (b) Commercial General Liability of not less than $3 million with ISO CGL form or equivalent with no coverage deletions, and adding HDS as an additional insured; and (c) Professional Liability of not less than $2 million, with coverage appropriate to Lab User’s operations. Insurance companies for the above policies shall be reasonably acceptable to HDS. Lab access will be available upon HDS’ annual receipt of a certificate of insurance evidencing the above current insurance. End User will provide thirty (30) days’ prior written notice to HDS of any material changes or cancellations.

10.8 Export Compliance. Both parties acknowledge that U.S. laws and regulations control the export of U.S. origin products and technology, and prohibit their export if either party knows, or has reason to know, that such products or technology are for use in connection with the design, development, production, stockpiling or use of nuclear, chemical or biological weapons or missiles.

10.9 Entire Agreement. This Agreement is the entire agreement of the parties with respect to the subject matter hereof, and supersedes and replaces all prior or contemporaneous understandings or agreements, written or oral, regarding such subject matter.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

Hitachi Data Systems Corporation	Lab User
By:	By:
Title:	Title:
Date:	Date:

* * * Indicates that confidential treatment has been sought for this information. 87

EXHIBIT H

TRAINING

Unless otherwise defined, capitalized terms hereunder shall have the same meaning as in the Master Distribution Agreement (the “Agreement”), to which this Exhibit H is attached and incorporated by reference therein. Except as expressly provided herein, in the event of any conflicts between the terms set forth hereunder and the terms and conditions of the Agreement, the Agreement shall control.

1. Training by BlueArc

Pursuant to the Agreement, HDS will distribute, install and configure the Products, including but not limited to providing the required (or optional) customization, as well as providing implementation services, and integrating solutions for the Products. HDS shall be provided with the following:

(a) All BlueArc sales and technical training material, source documentation, graphics, and Support documentation for HDS to use in its development of its own training on the Product, at no charge. All source materials will be provided in soft copy. BlueArc will also provide a Subject Matter Expert (“SME”) to assist HDS with any questions or concerns in developing such training.

(b) Materials to support the Training Services will include white papers and general sales literature on the Products, including Documentation, Product manuals and training course materials, which include but are not limited to student guides, instructor guides, presentation materials, FAQs, tutorials and lab guides.

(d) BlueArc’s SME will assist HDS, at no cost for the first four (4) months following the Effective Date and for four (4) months following any new product addition to Exhibit A, in any certification planning, learning path creation, training roadmap development, and education lab configurations; and thereafter, for fees to be mutually agreed upon.

(e) Any existing virtual training, web based training, or CD based training material will be offered to HDS at no charge.

2. Initial Sales and Technical Training Requirements (including requirements for BlueArc updates to SW, HW, Solution)

BlueArc will provide HDS with technical training for POH, pre-sales and post sales support, professional services, and lab personnel on a schedule to be agreed between the Parties. Such training shall be provided on or around the first week of each month and conducted at either BlueArc’s or HDS’ facility, the location of which shall be mutually agreed by the Parties.

* * * Indicates that confidential treatment has been sought for this information. 88

(a) The initial Product Training will be a * * *, which may include HDS training staff. Such training will be priced at * * * per employee and will be provided at the BlueArc facility in San Jose, CA. HDS shall be solely responsible for any expenses (including travel, meals, and lodging) incurred by HDS, and Affiliates employees attending any of the training set forth in this Exhibit E. Initial Product Training will be scheduled at the BlueArc facility with two (2) classes provided each month following the Execution Date.

(b) Following the initial Product Training, HDS will develop their own training course to further train its staff. BlueArc shall have the right to review such training course for accuracy and completeness.

(c) HDS shall be provided with the same or substantially similar sales and technical training materials that BlueArc provides to its own sales force and support staff.

3. Documentation Requirements

BlueArc will provide HDS with training materials that pertain to the Products, including Updates (as such Updates are developed) related to current and future training offerings (formal or informal), which BlueArc currently, or may, during the Term, use for BlueArc’ internal technical and sales training. In addition, BlueArc agrees that HDS may use or modify such training materials or make derivative materials in providing training to its own employees, End Users, Channels or ASPs. All BlueArc related derivative training materials developed by HDS shall be reviewed by BlueArc for accuracy.

BlueArc shall retain all Intellectual Property Rights in and to training materials, including derivative training materials, developed by BlueArc.

* * * Indicates that confidential treatment has been sought for this information. 89

4. Support Readiness Training (“SRT”)

The initial SRT, as defined in Exhibit B, shall be a * * * on the Products at * * *, which shall include HDS training personnel. BlueArc shall provide SRT training prior to HDS’ general availability of the initial Products and for each Major Release or new product to be added to Exhibit A.

The training for subsequent Major Releases and new products shall be for a mutually agreed number of HDS employees at no charge to HDS. Such training, as defined by BlueArc, may be provided on CD, web based training or instructor led training at BlueArc’s sole discretion, provided that such training is sufficient to provide HDS employees with the knowledge to Support the Products.

5. Additional Training

HDS employees, End Users, ASPs, or Channels may attend training provided by BlueArc at a BlueArc training facility and as scheduled by BlueArc, at * * *. HDS may request BlueArc to conduct training at any adequately equipped HDS facility. Should BlueArc agree to such remote training, BlueArc shall be reimbursed for actual travel related expenses in providing training at a HDS facility.

6. General

6.1 BlueArc agrees that the Parties anticipate that the training set forth herein will be sufficient for HDS and its Affiliates to launch and Support the launch of the Products in the Territory

6.2 BlueArc further agrees that, as appropriate and necessary for the successful launch of the Products, BlueArc will support training for End Users and/or provide HDS with supplemental End User training, per the agreed-to pricing training rates in Exhibit A

6.3 At its sole discretion, HDS may work independently or jointly with BlueArc, and may take some or all sales, technical and customer training in-house, with the intention of becoming partially or wholly self-sufficient with all or portions of HDS’ training needs. BlueArc shall work with HDS to reasonably support HDS’ initial training and such on-going training as HDS may require. If HDS decides to take any of the training in-house, then HDS will have the express right, at its sole discretion, to sell such training to End Users and/or its channel partners or distributors. If HDS sells the BlueArc related training materials for external use, HDS shall pay BlueArc a training revenue share fee, the amount of which will be mutually agree to by the Parties. Notwithstanding the foregoing, all SRT and Continuing SRT will be provided by BlueArc.

* * * Indicates that confidential treatment has been sought for this information. 90

6.4 BlueArc shall provide HDS with substantially similar training material for any new Products to be specified on Exhibit A, including “train-the-trainer” sessions and, if requested by HDS, a subject matter expert, to allow HDS to modify, develop and deliver the current or future curriculum that BlueArc makes available. Dates and locations for all such training shall be mutually agreed to by the Parties. BlueArc shall retain all Intellectual Property Rights in and to the training materials developed by BlueArc and provided to HDS pursuant to this Section 6.4.

* * * Indicates that confidential treatment has been sought for this information. 91

EXHIBIT I

EULA

Software License for BlueArc Storage System

IMPORTANT: READ THIS AGREEMENT CAREFULLY BEFORE USING THE SOFTWARE.

THIS AGREEMENT (“AGREEMENT”) GOVERNS THE USE OF THIS SOFTWARE (“SOFTWARE”). BY DOWNLOADING, INSTALLING OR USING THIS SOFTWARE, YOU AND YOUR FIRM (“CUSTOMER”) HAVE ACCEPTED THIS AGREEMENT IN ITS ENTIRETY. IF CUSTOMER DOES NOT AGREE WITH THESE AGREEMENT TERMS, CUSTOMER MUST RETURN THIS SOFTWARE UNUSED, WITH ALL MANUALS AND DOCUMENTATION, AND PROOF OF PAYMENT, TO BLUEARC, INC. (“BLUEARC”) WITHIN THIRTY (30) CALENDAR DAYS OF FIRST ACQUIRING THIS SOFTWARE. CUSTOMER WILL THEN RECEIVE A REFUND FOR THE SOFTWARE. THIS AGREEMENT IS ENFORCEABLE EVEN IF CUSTOMER HAS NOT GIVEN WRITTEN APPROVAL. CUSTOMER’S RIGHT TO RETURN AND REFUND EXPIRES THIRTY (30) CALENDAR DAYS AFTER PURCHASE FROM BLUEARC OR AN AUTHORIZED BLUEARC DISTRIBUTOR OR RESELLER, AND APPLIES ONLY IF CUSTOMER IS THE ORIGINAL PURCHASER. The Software may operate or interface with software or other technology (“In-Licensed Code”) that is identified in the BlueArcBlueArc technical documentation or in licenses agreements attached hereto (“Third Party Licenses”) and which is licensed to BlueArcBlueArc from, and owned by, third parties (“Third Party Licensors”). You agree that (i) you will use In-Licensed Code in accordance with this Agreement and any applicable Third Party License.

Definitions.

“Defect” means a failure of the applicable Software to conform substantially to its then-current Documentation.

“Documentation” means the BlueArc documentation made available in hard copy or in electronic form shipped with the Software or otherwise provided to Customer. Documentation does not include advertising or marketing materials.

Confidential Information. Customer agrees to treat as strictly confidential the Software and any confidential information regarding the Software and any other information provided by BlueArc hereunder that would reasonably be understood to be confidential (“Confidential Information”) and use such Confidential Information only for the purposes of using the Software as permitted hereunder. In the event that Customer is compelled by law to disclose the Confidential Information, Customer will first notify BlueArc. Without limiting the foregoing, Customer shall not allow any third party other than Customers affiliates to use or otherwise have access to the Software.

Indemnity. Subject to the limitations hereinafter set forth, Customer agrees that BlueArc has the right to defend, or at its option to settle, and BlueArc agrees, at its own expense, to defend or at its option to settle, any claim, suit or proceeding (collectively, “Action”) brought against Customer alleging that the Software infringes any U.S. patent or copyright. BlueArc shall have sole control of any such Action or settlement negotiations, and BlueArc agrees to pay, subject to the limitations set forth in Section 6 (Limitation of Liability), any final judgment entered against Customer as a result of such infringement in any such Action defended by BlueArc. Customer agrees that BlueArc at its sole option shall be relieved of the foregoing obligations unless Customer notifies BlueArc promptly in writing of such Action and gives BlueArc written authorization to proceed as contemplated herein, and, at BlueArc’s expense, gives BlueArc proper and full information and assistance to settle and/or defend such Action. If the Software, or any

* * * Indicates that confidential treatment has been sought for this information. 92

part thereof, is, or in the opinion of BlueArc may become, the subject of any Action for infringement, or if use or distribution of the Software is enjoined, then BlueArc may, at its option and expense: (i) procure for Customer the right to distribute or use, as appropriate, the Software; (ii) replace the Software with other suitable software; (iii) suitably modify the Software; or (iv) if the foregoing alternatives cannot be accomplished on a commercially reasonable basis as determined in BlueArc’s sole discretion, require Customer to return such Software and refund the aggregate payments paid therefor by Customer, less a reasonable sum for use and damage. BlueArc shall not be liable for any costs or expenses incurred without its prior written authorization. Notwithstanding the foregoing, BlueArc assumes no liability for any claims arising from the following: (a) the combination or use of the Software with other products, hardware, software or other items not provided by BlueArc; (b) the modification of the Software, or any part thereof; or (c) Customer’s specifications or designs. The foregoing provisions of this Section 3 (Indemnity) state the entire liability and obligation of BlueArc and the exclusive remedy of Customer with respect to any alleged infringement.

Intellectual Property Rights.

Ownership. BlueArc shall retain all title, copyright, patent rights and other proprietary rights in and to the Software. Customer does not acquire any rights, express or implied, in the Software other than those specified in this Agreement. The Software is licensed only, and no title to, or ownership of, the Software is transferred to Customer. Except to the extent any of the following provisions are prohibited by applicable law, Customer shall not copy, modify or create a derivative work of, disassemble, decompile, reverse-engineer , translate or otherwise attempt to derive the source code of the Software, or permit a third party to do so. Customer shall not disclose any performance information, metrics or other similar information related to the Software.

Software License. BlueArc grants to Customer and its Affiliates [Note, the affiliate issue comes up a lot w/our large customers] a personal, nonexclusive and nontransferable license to use the specific modules, features and capacity of the Software for which Customer has paid the applicable fees, only in object code form, for internal use by Customer and its Affiliates only and not for or on behalf of any third party. Customer may not transfer the license or the Software to any third party other than its Affiliates, including as part of the sale of any associated equipment, and any attempted transfer shall be null and void and shall constitute a material breach of this Agreement. Customer’s use of the Software shall be limited to the modules, features and capacity for which the Software has been originally configured. Use of additional capacity requires written authorization from BlueArc, payment of the applicable fees, and use of the appropriate key provided by BlueArc. Customer shall not circumvent the key mechanism, obtain a key other than from BlueArc pursuant to an upgrade for which customer has paid the applicable fees or use modules, features or capacity that BlueArc has not configured and authorized for Customer’s use. Unless otherwise expressly provided in the Documentation, Customer’s use of the Software shall be limited to use on a single server. Customer shall use the Software only in accordance with the Documentation. All Customer’s rights under this Section 4.2 (Software License) will terminate immediately without notice from BlueArc in the event that Customer breaches (a) any provision of this Section 4 (Intellectual Property Rights) or (b) any other provision of this Agreement. Any updates or upgrades to the Software subsequently provided to Customer shall be governed by this Agreement unless BlueArc provides a separate license agreement expressly identified as governing such upgrade or update. Customer agrees to be bound by the terms of any such separate license agreement provided by BlueArc.

Limited Warranty.

Warranty. BlueArc warrants that, for a period of ninety (90) days from the date of original purchase (“Software Warranty Period”), the media upon which the Software is furnished will be free from defects in material and workmanship under normal use and service. BlueArc’s entire liability and Customer’s exclusive remedy for breach of warranty of this Section 5.1 (Warranty) shall be for BlueArc to, at its option, upon return to BlueArc of the defective media: (i) repair or replace such media during the Software Warranty Period or (ii) upon return of the defective media to BlueArc, refund the amount of fees paid by Customer for the affected Software or a pro-rated amount of the purchase price that applies to the affected Software.

Disclaimer of Warranty. THE SOFTWARE IS NOT DESIGNED, MANUFACTURED OR INTENDED FOR USE IN HAZARDOUS OR CRITICAL ENVIRONMENTS OR IN ACTIVITIES REQUIRING EMERGENCY OR FAIL-SAFE OPERATION, SUCH AS APPLICATIONS TO SUPPORT OR SUSTAIN LIFE, THE OPERATION OF NUCLEAR FACILITIES, AIRCRAFT NAVIGATION OR COMMUNICATION SYSTEMS OR IN ANY OTHER APPLICATIONS OR ACTIVITIES IN

* * * Indicates that confidential treatment has been sought for this information. 93

WHICH FAILURE OF THE SOFTWARE MAY POSE THE RISK OF ENVIRONMENTAL HARM OR PHYSICAL INJURY OR DEATH (“DANGEROUS APPLICATIONS”). BLUEARC SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR ANY DANGEROUS APPLICATION, AND ANY SUCH USE SHALL BE AT CUSTOMER’S SOLE RISK. THIS WARRANTY DOES NOT COVER ANY DAMAGE TO THE SOFTWARE WHICH RESULTS FROM ACCIDENT, ABUSE, MISUSE, THIRD PARTY PRODUCTS, NATURAL OR PERSONAL DISASTER, OR ANY UNAUTHORIZED DISASSEMBLY, REPAIR OR MODIFICATION OR ANY FAILURE TO MAINTAIN AND USE THE SOFTWARE IN A MANNER CONSISTENT WITH ITS PURPOSE AND THE DOCUMENTATION AND INSTRUCTIONS FROM BLUEARC. EXCEPT FOR THE FOREGOING, THE SOFTWARE IS PROVIDED ON AN “AS IS” BASIS. THIS WARRANTY SETS FORTH THE ENTIRE LIABILITY AND OBLIGATION OF BLUEARC AND ITS SUPPLIERS WITH RESPECT TO BREACH OF WARRANTY, AND THE WARRANTIES SET FORTH OR LIMITED HEREIN ARE THE SOLE AND EXCLUSIVE WARRANTIES AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING WARRANTIES OF NONINFRINGEMENT, FITNESS FOR PARTICULAR PURPOSE AND MERCHANTABILITY. TO THE EXTENT AN IMPLIED WARRANTY CANNOT BE EXCLUDED, SUCH WARRANTY IS LIMITED IN DURATION TO THE SOFTWARE WARRANTY PERIOD.

Limitation of Liability. NEITHER BLUEARC NOR ITS SUPPLIERS SHALL BE LIABLE FOR ANY INDIRECT, CONDITIONAL, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSS (INCLUDING DAMAGES FOR LOSS OR CORRUPTION OF DATA, LOSS OF BUSINESS, LOSS OF PROFITS, OR THE LIKE), HOWEVER CAUSED, ON ANY THEORY OF LIABILITY (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE, BREACH OF CONTRACT OR OTHERWISE), EVEN IF BLUEARC OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. BLUEARC’S CUMULATIVE LIABILITY FOR ALL CAUSES OF ACTION ARISING OUT OF THIS AGREEMENT AND/OR SALE OR PROVISION OF THE SOFTWARE (INCLUDING UNDER ANY WARRANTY EXTENDED IN CONNECTION THEREWITH) SHALL BE LIMITED TO THE AMOUNT PAID BY CUSTOMER FOR THE SOFTWARE GIVING RISE TO THE CLAIM. THIS LIABILITY LIMIT IS CUMULATIVE AND NOT PER INCIDENT.

Miscellaneous. Customer shall obtain all government licenses and approvals and shall comply with all applicable laws and regulations including without limitation U.S. export controls. Any notice required to be given hereunder shall be given in writing at the address of each party set forth above, or to such other address as either party may substitute by written notice to the other. This Agreement and any dispute related to the Software shall be governed in all respects by the laws of California and the parties consent to the exclusive personal jurisdiction of and venue in the state and federal courts of Santa Clara County, California. This Agreement represents the entire agreement between BlueArc and Customer with respect to the subject matter, and Customer agrees that all prior or contemporaneous negotiations, understandings, representations and/or agreements of the parties relating to the subject matter hereof, whether oral or written, are merged herein and superseded in their entirety by the terms of this Agreement. This Agreement may be modified only by a writing signed by both parties. Other than for express payment obligations, neither party shall be liable for any delay or failure in performance due to events outside the defaulting party’s reasonable control, including without limitation strikes, shortages of supplies, riots, war, earthquake, fire, epidemics, criminal or malicious acts of third parties, failure of utilities or common carriers, or other circumstances beyond its reasonable control. Neither this Agreement nor any rights under this Agreement shall be assigned or otherwise transferred by (including by operation of law, sale of any equipment associated with the Software or otherwise) Customer ) without the prior written consent of BlueArc. BlueArc shall have the right to assign all or part of this Agreement without Customer’s approval. This Agreement shall bind and inure to the benefit of the successors and permitted assigns of the parties. BlueArc’s or Customer’s failure to exercise any of its rights hereunder shall not constitute or be deemed a waiver or forfeiture of such rights. In the event that any of the terms of this Agreement become or are declared to be illegal or otherwise unenforceable by any court of competent jurisdiction, all remaining terms of this Agreement shall remain in full force and effect. BlueArc or its authorized representative shall have the right, upon reasonable prior notice and not more than once per year, to audit Customer’s compliance with the terms of this Agreement.

* * * Indicates that confidential treatment has been sought for this information. 94

EXHIBIT J

MPSA

Agreement No:

MASTER PROFESSIONAL SERVICES AGREEMENT

1. SCOPE AND STRUCTURE OF AGREEMENT

A. This Master Professional Services Agreement (“MPSA”) provides a framework under which You will provide Services to Us on an “as ordered” basis.

B. This MPSA does not create any obligation to execute any specific SOW or a minimum number of SOWs. Individual SOWs, must be agreed to in writing and signed by both of us for each project. Each SOW becomes a separate agreement between both of us.

Executed as an agreement pursuant to the terms and conditions on                      (“Effective Date”).

HDS Entity (“Us”, “We”, “Our” or “HDS”):

Authorized Signatory:

Signature:

Address:

Date:

Co-provider (“You” or “Your”):

Authorized Signatory:

Signature:

Address:

Date:

* * * Indicates that confidential treatment has been sought for this information. 95

TERMS AND CONDITIONS APPLICABLE TO THIS MPSA AND EACH SOW

1. SERVICES

1.1. Supply of Services. You will provide the Services to Us under a SOW. If HDS enters into a contract with a Client that includes Services covered by a SOW, then You will provide Services under the SOW provided that this Agreement shall be solely between You and Us.

Services performed outside of the United States may be performed by Your Affiliates under the terms of this MPSA. Each of our Affiliates may enter into SOWs directly with the Affiliates of the other party. These SOWs may be written in local languages, may provide for invoicing and payment in local currencies, and may include other provisions that reflect local conditions and considerations. These SOWs will refer to this MPSA, as amended, which will apply to these SOWs to the extent enforceable under local law.

1.2. Obligations. You will use reasonable commercial efforts to:

(a) provide the Services specified in the SOW;

(b) at all times keep Us informed of the progress of the Services;

(c) promptly advise Us of any problems which arise regarding the Services;

(d) advise Us of any permits, approvals or licenses that may be required, obtain them at Your cost (unless otherwise agreed to in the applicable SOW), and provide Us with copies, prior to starting any Services

(e) timely complete the Services;

(f) ensure that Your employees and subcontractors, if any, comply with Client’s rules and regulations, including those regarding conduct of personnel, onsite security, and system security, provided that We have notified You in writing of these rules and regulations prior to Your acceptance of the SOW for such Services.; and

(g) comply with obligations contained in HDS’ agreement with Client that relates to the Services, provided that We have notified You in writing of these obligations prior to Your acceptance of the SOW for such Services.

2. STATEMENTS OF WORK

Each SOW forms a specific agreement. A SOW may amend this MPSA for a particular project but only if the SOW expressly identifies the section(s) of this MPSA amended for that project.

3. FEES AND PAYMENT

3.1 Fees. The SOW will state the Service Fees and other payments required to be made by Us to You.

3.2 Expenses. We will reimburse You for pre-approved expenses listed in the SOW or approved in writing by an HDS authorized representative during the course of You providing the Services.

3.3 Payment Terms. We will pay each invoice within 45 days of receipt of a correct and undisputed invoice. If We dispute in good faith any invoice rendered or amount paid, We will timely pay the undisputed portion and promptly notify You, and the parties will promptly use their best efforts to resolve the disputed portion. Except for Services or Work Product provided pursuant to Section 9.3(a), or as otherwise may be provided in the SOW, if this MPSA or any SOW is terminated for any reason, HDS will be required to pay You only for Services and Work Product actually performed, and accepted by HDS, as of the termination date.

4. INTELLECTUAL PROPERTY

4.1. Pre-Existing IP Ownership. Each party will retain ownership of its Intellectual Property Rights that existed prior to the date of a SOW (“Existing IP”),provided, however, that

* * * Indicates that confidential treatment has been sought for this information. 96

the SOW may provide that You grant Us a license to Your Existing IP as may be necessary for Us and the Client to fully use the Work Product created by You. Further, in the event that the Existing IP is a commercial product of Yours that is not already licensed to the Client, You will license such product to the Client on Your standard commercial terms.

4.2. Work Product. Unless otherwise specified in a SOW, We will own, and You will assign to HDS, all of Your Intellectual Property Rights in and to Work Product, other than Existing IP, provided that You may retain a fully paid-up, perpetual, non-terminable license to such Intellectual Property Rights to provide the Services specified in the applicable SOW and for any other purpose. At Our expense, You will execute and assist Us in preparing all paperwork (including applications and registrations for patents, copyrights or other Intellectual Property Rights) which We reasonably determine necessary to vest or reflect Our ownership of Work Product that You assign to Us.

4.3. General Methodologies. Without limiting either party’s confidentiality obligations under this MPSA, neither party will be restricted from using for any purpose general underlying methodologies, knowledge, information, or techniques learned or used in the course of performing, or developed during the performance of Services; provided that the foregoing shall not be construed as a grant of a patent or copyright license by one party to the other.

4.4. Software License. During the period covered by the applicable SOW, We grant You a nonexclusive, non-transferable, nonsublicensable, limited license to use HDS Software specified in the SOW in object code form only and related documents solely to provide Services pursuant to the SOW. You must not (i) copy, modify, reverse engineer, (except to the extent this restriction is prohibited by law), sublicense or transfer the HDS Software; (ii) delete or tamper with any proprietary notice in or on the HDS Software, (iii) access or attempt to access the source code for the HDS Software or (v) use the HDS Software in violation of applicable laws. All rights in and to the HDS Software not specifically granted to You are retained by HDS and/or its licensors.

5. INDEMNITY

5.1 Infringement Indemnity. You will defend, indemnify and hold Us and our Affiliates harmless against all Claims brought against Us relating to any actual or alleged infringement of any third party’s (other than the Client’s) Intellectual Property Right by any Services. (including any Work Product) or Existing IP provided to Us (collectively, “IP Claim”) except to the extent that the infringement arises from (i) Your performance of the Services or creation of Work Product in accordance with Our (or the Client’s) specifications or requirements, or (ii) Our (or the Client’s) combination of the Work Product with any other technology or product if such infringement would have been avoided but for such combination. You will control the defense or settlement of any IP Claim at no cost to Us. You will pay any damage award payable by Us as a result of such IP Claim. If an IP Claim is made or You believe that an IP Claim is likely to be made with respect to the Service, Work Product or Existing IP, You will use reasonable commercial efforts to do one or both of the following: (i) secure the rights for Us to continue to use the Service, Work Product or Existing IP without infringement or (ii) modify or substitute the Service, Work Product or Existing IP so that it is not infringing, so long as modification or substitution does not materially impair or alter the operation of the Service, Work Product or Existing IP. If neither option is reasonably practicable, You will, at Our option, provide Us with a credit or refund of the Service Fee; provided that in such case We will return to You all Work Product, reassign to You any rights We may have in such Work Product, and all licenses that may have been granted to Us or the Client with respect to such Work Product or any Existing IP shall terminate.

* * * Indicates that confidential treatment has been sought for this information. 97

6. WARRANTIES

6.1. General Warranties and Covenants. Each party represents and warrants to the other party that, as of the Effective Date and on the execution date of each SOW:

(a) it has full authority and power to execute, and perform its obligations under, this MPSA and any SOW;

(b) it has all licenses, authorizations, consents, approvals and permits required by all applicable laws and regulations to perform its obligations under this MPSA and any SOW;

(c) it will comply with all applicable laws and regulations in performing its obligations under this MPSA and any SOW; and

(d) Its entering into and performance of its obligations under this MPSA and each SOW will not breach or conflict with any other agreement or obligation by which it is bound.

6.2. Services Performance:

(a) You will provide the Services, including any Work Product, with due diligence and in a professional manner in accordance with the requirements specified in each SOW, and in a manner consistent with industry standards reasonably applied to Your performance; and

(b) You will ensure that Your employees and subcontractors, if any, will satisfactorily perform all Services, and comply with all applicable laws and regulations, and with Client’s security, safety and document retention procedures when performing Services.

6.3. Remedies. If You breach the warranty or covenant in Sections 6.1(b), 6.1(c), 6.1(d) or 6.2, You will at Our request, without charge and without delay, either re-perform or modify the affected Service or Work Product so as to promptly correct such breach, or if re-performance or modification so as to comply with the warranty is not possible, then credit Us for the price of the Service; provided that in such latter case, We will return to You all Work Product, reassign to You any rights We may have in such Work Product and all licenses that may have been granted to Us with respect to such Work Product or any Existing IP shall terminate. In addition, if We, or Our Client, are not reasonably satisfied with the performance of an individual providing Services, or if You breach the warranty in Section 6.2(b), You will immediately remove and replace that individual with someone meeting the requirements of this MPSA. Nothing in this Section 6 will limit any other rights or remedies available to Us under this MPSA, at law or in equity.

6.4. EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 6, EACH PARTY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OR MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT AND THOSE ARISING FROM A COURSE OF DEALING.

7. CONFIDENTIAL INFORMATION

Each party will maintain all Confidential Information in confidence and will use it solely in the discharge of its obligations under this MPSA, including any related SOW. Nothing in this MPSA will be deemed to restrict a party from disclosing Confidential Information to its employees and authorized subcontractors in the discharge of its obligations. Each party will use commercially reasonable efforts to protect all Confidential Information received. These obligations do not apply to Confidential Information that (i) is held by the recipient at the time of receipt from the disclosing party, (ii) was lawfully received from another person

* * * Indicates that confidential treatment has been sought for this information. 98

who is not required to hold it in confidence, (iii) was developed independently, (iv) is required by applicable law or regulation to disclose (in which case the recipient will promptly notify the disclosing party) or (v) that is or becomes public knowledge through no fault of the recipient. Before starting work on a project, the Client, You and Your subcontractors will execute any additional nondisclosure agreements which may be required by You or the Client; provided that any such requirements will be specified in the applicable SOW.

8. LIMITATIONS OF LIABILITY

A. EXCEPT FOR LIABILITY RELATED TO BREACH OF SECTION 7 (CONFIDENTIALITY), AND AS PROVIDED IN SECTION 8(B), A PARTY WILL BE LIABLE ONLY FOR ACTUAL, DIRECT LOSSES OR DAMAGES INCURRED (INCLUDING COST OF COVER), LIMITED TO THE AMOUNT OF FEES CONTRACTED FOR UNDER THE SOW THAT IS THE SUBJECT OF THE CLAIM.

B. IN NO EVENT WILL YOUR MAXIMUM LIABLITY TO US WITH RESPECT TO YOUR INDEMNITY OBLIGATIONS UNDER SECTION 5, EXCEED THE GREATER OF TWO MILLION DOLLARS ($2,000,00) OR THE AMOUNT RECEIVED BY YOU UNDER THE SOW(S) TO WHICH THE INDEMNITY OBLIGATION ARISES.

C. EXCEPT FOR LIABILITY RELATED TO BREACH OF SECTION 7 (CONFIDENTIALITY), OR AMOUNTS PAID PURSUANT TO INDEMNIFICATION UNDER SECTION 5, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST PROFITS, OR LOST DATA, OR ANY OTHER INDIRECT DAMAGES, WHETHER ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN INFORMED OF THE POSSIBILITY THEREOF.

9. TERM AND TERMINATION

9.1. Term. This MPSA will start on the Effective Date and continue until it is terminated in accordance with this Section 9.

9.2. Termination.

(a) We may terminate this MPSA at any time without cause (i.e. for convenience) by giving sixty (60) days prior written notice to You. We may terminate any SOW, with or without cause by giving thirty (30) days prior written notice to You. If We terminate due to Your material breach of any SOW, We shall offer You the opportunity to cure within the thirty (30) day notice period.

(b) Either party may terminate this MPSA and/or any SOW if the other party breaches a material provision of this MPSA or any SOW and fails to cure the breach within thirty (30) days of receipt of written notice of the breach from the non-breaching party.

(c) Notwithstanding the foregoing, this MPSA and any SOW or both, may be terminated immediately by either party: for (a) breach of Section 7 (Confidentiality) or Section 4 (Intellectual Property); or (b) Insolvency.

9.3. Effect of Termination.

(a) Upon termination of this MPSA for any reason other than Our uncured material breach, You will on Our request, complete any SOWs and perform the relevant SOW(s) in accordance with their terms. In addition, We will pay You for Services in accordance with Section 3.3 for Services acceptably performed up to the termination date and for reimbursable expenses incurred prior to the termination date. In addition, if a SOW is terminated prior to its completion, then You will promptly give Us a full written description of the status of the Service. If the MPSA or SOW is terminated for any reason other than for Our uncured material breach in accordance with Section 9.2(a), You will promptly deliver to Us all work in progress (and subject to Section 4) with sufficient written explanation to enable HDS to provide work in progress to another subcontractor for completion. You are under no obligation to provide Existing IP to any other subcontractor. We may suspend all payments to You for the related SOW until You comply with this obligation.

* * * Indicates that confidential treatment has been sought for this information. 99

(b) Except as specified in Section 9.3(a), upon termination of this MPSA or any SOW, You will (i) immediately cease work on the terminated project(s), performing only efforts reasonably necessary to wind down and preserve work that has been performed; (ii) deliver all Work Product in Your possession to HDS; and (iii) at HDS’ request, either return or destroy all HDS Software and Confidential Information in Your possession or control.

(c) Notwithstanding the foregoing, if a SOW is terminated by Us without cause in accordance with Section 9.2(a), We will pay You all outstanding amounts invoiced prior to such termination plus any amounts for work completed but not yet invoiced, return to You all Work Product created under such SOW, reassign to You any rights We may have in such Work Product, and all licenses that may have been granted to Us or Client with respect to such Work Product or any Existing IP shall terminate.

10. INSURANCE

Prior to commencing any Services, You will provide Us with current insurance certificates (from an insurance company reasonably acceptable to Us, and updated annually) evidencing Your insurance for the following:

Coverage Minimum Limits
Comprehensive General Liability	$1,000,000/occurrence; $2,000,000/aggregate
Errors and Omissions	$1,000,000 each claim; $1,000,000 annual aggregate
Workers’ Compensation	Statutory Limits
Employer’s Liability	$500,000

In addition, You will provide Us with a separate form of endorsement to the Comprehensive General Liability policy, naming Us as an additional insured and providing that the insurance will not be cancelled without 30 days’ prior written notice to You and Us. At Our request, You will provide Us with Your current insurance certificates.

11. GENERAL

11.1. Export Compliance. You acknowledge that in various countries, laws and regulations regulate the export of products, services and information which may prohibit use, sale or re-export of such products, services or information if You know or have reason to know that such products, services or information are for use in connection with the design, development, production, stock piling or use of nuclear, chemical or biological weapons or missiles.

11.2. Dispute Resolution. In the event of a dispute, We will use reasonable efforts to get an appropriate person from Our respective management teams to meet and attempt to resolve the dispute in good faith. If these executives are unable to resolve the dispute within 30 days, either party may resort to alternate dispute resolution such as arbitration or otherwise or seek recourse from the courts. Either party may seek injunctive or other urgent equitable relief at any time.

11.3. Governing Law. This MPSA will be governed by and construed in accordance with California law and both parties consent to jurisdiction and venue in Santa Clara County, California.

11.4. Reasonable Control. Neither of us will be responsible for any failure to meet any obligations due to matters beyond its reasonable control provided the affected party makes reasonable to perform.

11.5. Assignment. You must not assign, or otherwise transfer any of Your rights or delegate any of Your duties under this MPSA without Our prior written agreement; provided that in the event

* * * Indicates that confidential treatment has been sought for this information. 100

that We do not agree to the assignment of this MPSA in connection with a change of control of You, at Our option (i) You (or Your successor) will have the right to complete any outstanding SOWs in accordance with its terms and may terminate this MPSA without fault or obligation or (ii) We may terminate this MPSA and any outstanding SOWs for convenience in accordance with Section 9.2(a).

11.6. Subcontractors. You may not use subcontractors to perform any of Your obligations, without Our prior written consent. If We authorize use of a subcontractor, You will execute an agreement with Your subcontractor that requires compliance with this MPSA and the related SOW, including any assignments of Intellectual Property Rights necessary for compliance with Section 4 (Intellectual Property).

11.7. Notices. Notices made under this MPSA must be in writing to the appropriate representative of the receiver at the address identified above Notices will be deemed given: where they are hand delivered, when a duly authorized employee or representative of the recipient gives written acknowledgement of receipt; for email communication, at the time the communication enters into the information system of the recipient; for posting, three days after dispatch and for fax, on receipted transmission of the fax.

11.8. Independent Contractors. We are each independent contractors and there is no actual or deemed partnership, franchise, joint venture, agency, employment or other fiduciary relationship between us. You are solely responsible for Your own taxes, withholding and other similar statutory obligations relating to this MPSA.

11.9. Survival. Rights and obligations under this MPSA which by their nature should survive the termination or expiry, including without limitation Sections 4, 7 and 8, will remain in effect after termination.

11.10. Waiver. No delay or failure by either party to exercise any right hereunder, or to enforce any provision of this MPSA will be considered a waiver thereof. Nor will it be deemed to be a waiver of such party’s right thereafter to exercise or enforce the same or any other right or provision. To be valid, a waiver must be in writing, but need not be supported by consideration. No single waiver will constitute a continuing a continuing or subsequent waiver.

11.11. Entire Agreement/Conflict. This MPSA, together with the SOWs is the entire agreement relating to its subject matter and supersedes all prior or contemporaneous oral or written communications, understandings, proposals of the parties relating to the subject matter of this MPSA. This MPSA may not be modified except by a writing executed by both parties. If there is a conflict between the MPSA and the SOWs, the SOWs will control.

12. DEFINITIONS

The capitalized terms below will have the following meanings in this MPSA:

“Affiliates” mean any person or other entity controlling, controlled by or under common control with either party to this MPSA.

“Claims” mean claims, demands, liabilities, damages and costs, including without limitation reasonable attorneys’ fees and expenses.

“Client” means Our client who is the ultimate recipient of the Services and Work Product.

“Confidential Information” information that if disclosing in writing is clearly marked as confidential at the time of disclosure. Our Confidential Information includes any Confidential Information of a Client which We or Client may provide to You in connection with an actual or potential SOW.

“Fees” means the fees payable by Us for Services at the rates specified in a SOW.

“HDS Software” means any software owned by or licensed to HDS by any of its Affiliates or an unrelated third party in object code form, and any new releases, updates, or upgrades, that is to be utilized by You in connection with the delivery of a Service.

* * * Indicates that confidential treatment has been sought for this information. 101

“Insolvent” means the inability of a party to pay its debts as they fall due, the appointment of a receiver or administrator, liquidator or similar person to the party’s affairs under the laws of any jurisdiction; the calling of a meeting of creditors or for any reason, ceasing to carry on business.

“Intellectual Property Rights” means collectively all intellectual property rights throughout the world, including copyrights, patents, patent applications, trademarks, service marks, trade dress rights, trade secrets, know-how, and other similar proprietary rights, whether or not any of these rights is registered, and including, without limitation, applications for registration of and rights to apply for any of these rights.

“Services” means the services that You will provide Us and Our Clients as Our subcontractor and which are described in any SOW.

“SOW” means a statement of work executed by You and Us which incorporates this MPSA by reference and describes Your Services and Work Product.

“Work Product” means all items and information that You may deliver or cause to be delivered in connection with Your Services, whether in hard copy or electronic form, including but not limited to all deliverables specified in a SOW.

* * * Indicates that confidential treatment has been sought for this information. 102

EXHIBIT K

BLUEARC TRADEMARKS

BLUEARC

* * * Indicates that confidential treatment has been sought for this information. 103

APPENDIX K-1

REGISTERED BLUEARC TRADEMARKS

BlueArc Trademark Summary

United States

http://tess2.uspto.gov/bin/

Word Mark BLUEARC Goods and Services IC 009. US 021 023 026 036 038. G & S: Computer hardware, computer networking hardware, computer servers and network-attached storage systems, namely, an operating system and network of storage discs and servers for data storage and retrieval. FIRST USE: 20010800. FIRST USE IN COMMERCE: 20010800

IC 016. US 002 005 022 023 029 037 038 050. G & S: Printed publications, computer manuals, data sheets, informational leaflets, informational pamphlets, and informational brochures and reports, all featuring information regarding data storage. FIRST USE: 20010800. FIRST USE IN COMMERCE: 20010800

Mark Drawing Code (5) WORDS, LETTERS, AND/OR NUMBERS IN STYLIZED FORM Design Search Code Serial Number 76240833 Filing Date April 13, 2001 Current Filing Basis 1A Original Filing Basis 1B Published for Opposition September 17, 2002 Registration Number 2764965 Registration Date September 16, 2003 Owner (REGISTRANT) BLUEARC CORPORATION CORPORATION DELAWARE 339 N. Bernardo Avenue Mountain View CALIFORNIA 94043 Attorney of Record Carole F. Barrett Type of Mark TRADEMARK Register PRINCIPAL Live/Dead Indicator LIVE

http://tess2.uspto.gov

Word Mark BLUEARC Goods and Services IC 009. US 021 023 026 036 038. G & S: Computer hardware, computer networking hardware and servers. FIRST USE: 20010800. FIRST USE IN COMMERCE: 20010800

IC 016. US 002 005 022 023 029 037 038 050. G & S: Printed publications, namely, computer manuals, data sheets, leaflets, pamphlets, brochures, and reports, all in the field of data storage. FIRST USE: 20010800. FIRST USE IN COMMERCE: 20010800

Mark Drawing Code (1) TYPED DRAWING Design Search Code Serial Number 76135814 Filing Date September 25, 2000 Current Filing Basis 1A Original Filing Basis 1B Published for Opposition July 2, 2002 Registration Number 2767302 Registration Date September 23, 2003 Owner (REGISTRANT) BLUEARC CORPORATION CORPORATION DELAWARE 339 N. BERNARDO AVENUE MOUNTAIN VIEW CALIFORNIA 94043 Assignment Recorded ASSIGNMENT RECORDED Attorney of Record Carole F. Barrett Type of Mark TRADEMARK Register PRINCIPAL Live/Dead Indicator LIVE

* * * Indicates that confidential treatment has been sought for this information. 104

European Union

EU: Trademark Rights in BLUE ARC Marks

BlueArc Corporation currently owns European Community trademark (CTM) registrations for the following marks:

1. BLUE ARC (CTM Reg. No. 002062339), registered on February 2, 2006 and covers “data sheets; leaflets; pamphlets; brochures and reports” in Class 16.

2. (CTM Reg. No. 002063683), registered on May 2, 2003 and covers the following goods and services:

Computer software; computers; computer hardware; computer networking hardware; servers in Class 9;

Printed publications, computer manuals, data sheets, leaflets, pamphlets, brochures and reports in Class 16; and

Installation, repair and maintenance of computers, computer hardware and computer networking hardware in Class 37.

* * * Indicates that confidential treatment has been sought for this information. 105

Global Trademark Schedule

* * * Indicates that confidential treatment has been sought for this information. 106

EXHIBIT L

HITACHI TRADEMARKS

Hitachi Ltd. registered trademarks:

HiCommand®

* * * Indicates that confidential treatment has been sought for this information. 107

EXHIBIT M

STRATEGIC REQUIREMENTS

1. Character Support For International Languages

a. The BlueArc server currently has limited capabilities to utilize international characters. See the attached chart for additional details on the current implementation.

b. BlueArc will implement support for the UCS-2 character set using the Unicode UTF-8 implementation. This will take place across multiple releases, beginning with BlueArc’s Parrot/Davos release, scheduled for July 1, 2007.

c. BlueArc and HDS will review and agree on milestones for UTF-8 implementation beyond the Parrot/Davos release within the framework of the quarterly roadmap reviews.

d. BlueArc will provide copies of test plans for character support (which will be developed concurrently with implementing support) and results of tests as they become available.

2. Replication

a. BlueArc server will be integrated with TrueCopy (target before 12/31/07, dependent upon complexity, cooperation with Hitachi Ltd and access to necessary APIs).

b. BlueArc server will be integrated with ShadowImage (target before 12/31/2007, dependent upon complexity, cooperation with Hitachi Ltd and access to necessary APIs).

c. BlueArc server will be integrated with Universal Replicator (same technology) dependent upon complexity, cooperation with Hitachi Ltd in Japan and access to necessary APIs.

3. HiCommand Integration

a. HDS has a major HiCommand release scheduled for December 2007, which is target for initial integration.

b. BlueArc support for HiCommand integration will be a phased approach

c. Device Manager in 2007 with high confidence, mapping LUNs to file systems/storage pools and reporting to HiCommand, plus Provisioning Manager integration.

d. The creation of the Tuning manager agent with the collection of essential performance metrics will be in 2007. Adding this data to Tuning manager correlation engine has some risk and may come after 2007, as it is more complicated and BlueArc hasn’t seen the API

e. Replication Manager may be after 2007, as it is more complicated and there is no SDK, no documented API

* * * Indicates that confidential treatment has been sought for this information. 108

4. Multi-node Cluster,

a. 4-node support is included in the Razor/Copper release (HDS scheduled GA release).

b. 8-node support is on the roadmap for subsequent release, target for completion by 12/31/07

c. * * *.

5. New Bezel for BlueArc Server: HDS has designed a new, Hitachi branded bezel to replace the standard BlueArc bezel on the BlueArc server and desires that this bezel be used on production BlueArc servers shipped to HDS as of the General Availability date. BlueArc will make reasonable commercial efforts to accomplish this goal, subject to the following:

a. BlueArc cannot make a commitment to a specific availability date until HDS has provided BlueArc with detailed design and manufacturing specifications and until BlueArc has been given a reasonable amount of time to obtain production timing and pricing proposals from prospective vendors.

b. BlueArc’s ability to meet the target date will be dependent upon the complexity of the tooling required, which is out of BlueArc’s control, and external vendors’ ability to produce such tooling and parts from that tooling before GA date.

c. BlueArc will select a vendor for the new bezel who, based on BlueArc’s evaluation, is best qualified to meet the target date for production with quality parts at an acceptable price.

d. HDS bears the responsibility for prompt inspection and acceptance of first article parts. Delays in conducting first article inspection will directly affect when the bezel is available for production.

e. HDS agrees to pay Non-Recurring Engineering fees sufficient to cover the costs of tooling and other manufacturing preparations associated with producing this bezel. These fees will be paid by HDS directly to the vendor that BlueArc selects. HDS further agrees to review the price of the BlueArc server in the event the HDS designed bezel is substantially more expensive than the standard BlueArc bezel.

6. Integration with Hi Track

a. Both parties agree to work together to enable the HDS Hi Track support application to work with Titan. HDS bears the primary responsibility for this activity, with BlueArc providing the available technical information so that HDS can program Hi Track to interface with the BlueArc server.

b. There are no NRE charges associated with the Hi Track integration.

7. 10Gb Ethernet Switches:

* * * Indicates that confidential treatment has been sought for this information. 109

a. For n-way clustering: The Foundry EdgeIron8x 10G (8 port) and SMC SMC8708L2 (8 port) switches will be supported along with their then-current firmware for 4-way clustering when released.

b. For 10 Gb LAN connections (with NIM3): BlueArc’s intent is to support switches that comply with the applicable RFC standards when it releases 10 Gb LAN connections in mid-2007.

c. HDS and BlueArc will agree upon additional switches to be qualified and who bears the responsibility of testing them, as they become available.

8. Performance Testing

a. BlueArc and HDS will collaborate on SPECsfs testing using the Razor release and 4-way clustering.

b. Both parties will agree when testing should take place based on product readiness and available resources.

c. Both parties will collaborate to submit results for listing by SPEC.org.

d. HDS will loan the necessary storage arrays and any tuning support necessary for the testing at no charge to BlueArc. BlueArc will conduct the tests at no charge to HDS.

9. Support for Older HDS Products

a. BlueArc will provide support for HDS products “one generation back” from the then current product.

b. BlueArc will test and provide support for the HDS Thunder 9500v and HDS Lightning 9900v series. HDS will provide the necessary equipment and technical specifications to enable this testing and support. Both parties will agree on a schedule to complete this testing.

* * * Indicates that confidential treatment has been sought for this information. 110

BlueArcBlueArc Character Support

SU4.2 (Octopus/Beech) and SU4.3 (Razor/Copper) Releases

	Titan Server		SMU
	Windows / CIFS	Linux, Unix / NFS
File Names	Supports UCS-2 names1,3	ISO-8859-1 (Latin-1) only	US-ASCII only
Directory Names	Supports UCS-2 names1,3,6	ISO-8859-1 (Latin-1) only	US-ASCII only
Share/Export Names	ISO-8859-1 (Latin-1) only4,5	US-ASCII only	US-ASCII only5
Logs	ISO-8859-1 (Latin-1) or US-ASCII depending upon the log	ISO-8859-1 (Latin-1) or US-ASCII depending upon the log	US-ASCII only
User Names	Supports UCS-2 names2	ISO-8859-1 (Latin-1) only	US-ASCII only
Group Names	Supports UCS-2 names2	ISO-8859-1 (Latin-1) only	US-ASCII only

Notes:

  1. The top level directory in a backup or replication job must consist of only ASCII characters. File and folder names below the top level directory can contain any character, but may be incorrectly reported in logs.

  2. Windows/CIFS user/group names consisting of Unicode characters outside the US-ASCII range cannot be mapped to NFS groups.

  3. File names using Unicode characters outside the US-ASCII range can be migrated by Data Migrator, but DM Rules entered via the GUI can only use US-ASCII and reports/logs of migrations will not display paths/files correctly.

  4. Windows/CIFS shares using characters outside the US-ASCII range must be created and managed using Microsoft Computer Manager. They cannot be managed using the Titan SMU at this time.

  5. A share name such as “größe” will appear as “gr?” on the Shares page in the SMU GUI. If a share has an ASCII name (“share1”) but it’s path contains a directory named “größe”, then the path will appear as “gr\u00f6\u00dfe” in the Share Details page. If a user attempts to to modify that share via the GUI, it will actually create a path with the ASCII characters “gr\u00f6\u00dfe” and ignore the original “größe” path. That is, the share will point to a different dir.

  6. Directories within a CNS tree must be composed of only US-ASCII characters. Once you traverse from the CNS through a branch into a real file system, you can then use UTF-8 subject to the other restrictions listed herein.

  7. Paths to iSCSI logical units can only contain US-ASCII characters.

  8. Paths to FTP mount points can only contain US-ASCII characters.

  9. Paths to ViVol roots can only contain US-ASCII characters.

* * * Indicates that confidential treatment has been sought for this information. 111

10. Logs are generated from a variety of sources, and consist of 8859-1 (Latin-1) or US-ASCII characters only depending upon the log.

Definitions:

UTF-8 /UCS-2:	http://unicode.org/unicode/faq/utf_bom.html
Code Page 8859-1:	http://en.wikipedia.org/wiki/ISO_8859-1
US-ASCII	http://en.wikipedia.org/wiki/ASCII

* * * Indicates that confidential treatment has been sought for this information. 112

EXHIBIT N

ESCROW AGREEMENT

MASTER THREE-PARTY ESCROW SERVICE AGREEMENT

Master Deposit Account Number:                                     

1. Introduction.

This Escrow Service Agreement (the “Agreement”) is entered into by and between Hitachi Data Systems Corporation, located at 750 Central Expressway, Santa Clara, CA 95050 (“Beneficiary”) and its affiliates and subsidiaries, and by any additional party signing the Acceptance Form attached as Exhibit E to this Agreement (“Depositor”) and by Iron Mountain Intellectual Property Management, Inc. (“Iron Mountain”). The Effective Date of the Agreement is the date of the last signature on the applicable Exhibit E (the “Effective Date”). Beneficiary, Depositor, and Iron Mountain may be referred to individually as a “Party” or collectively as the “Parties” throughout this Agreement.

Depositor and Preferred Beneficiary have entered into a Master Distribution Agreement dated November 13, 2006, regarding certain proprietary technology of Depositor (referred to in this Agreement as the “License Agreement”). Depositor desires to avoid disclosure of its proprietary technology except under certain limited circumstances. Since the availability of Depositor’s proprietary technology is critical to Preferred Beneficiary in the conduct of its business, Preferred Beneficiary needs access to the proprietary technology under certain limited circumstances. Depositor and Preferred Beneficiary desire to establish an escrow with IMIPM to provide for the retention, administration and controlled access of the proprietary technology materials of Depositor.

The use of the term “Services” in this Agreement shall refer to Iron Mountain Services that facilitate the creation, management, and enforcement of software and/or other technology escrow accounts as described in Exhibit A attached hereto. A Party shall request Services under this Agreement (i) by submitting a work request associated for certain Iron Mountain Escrow Services via the online portal maintained at the Website located at www.ironmountainconnect.com or any other Websites or Web pages owned or controlled by Iron Mountain that are linked to that Website (collectively the “Iron Mountain Website”), or (ii) by submitting a written work request attached hereto as Exhibit A (each, individually, a “Work Request”). The Parties desire this Agreement to be supplementary to the License Agreement and pursuant to Chapter 11 United States [Bankruptcy] Code, Section 365(n).

2. Depositor Responsibilities.

(a) Depositor shall provide all information designated as required to fulfill a Work Request (“Required Information”) and may also provide other information (“Optional Information”) at their discretion to assist Iron Mountain in the fulfillment of requested Services.

(b) Depositor must authorize and designate one or more persons whose action(s) will legally bind the Depositor (“Authorized Person(s)” who shall be identified in the Authorized Person(s)/Notices Table of Exhibit E to this Agreement) and who may manage the Iron Mountain escrow account through the Iron Mountain Website or via written Work Request. Authorized Person(s) will maintain the accuracy of their name and contact information provided to Iron Mountain during the Term of this Agreement (the “Depositor Information”).

* * * Indicates that confidential treatment has been sought for this information. 113

(c) Depositor shall make an initial deposit that is complete and functional of all proprietary technology and other materials covered under this Agreement and specified in the License Agreement (“Deposit Material”) to Iron Mountain within thirty (30) days of the Effective Date. Depositor may also update Deposit Material from time to time during the Term of this Agreement provided a minimum of one (1) complete and functional copy of Deposit Material is deposited with Iron Mountain at all times. At the time of each deposit or update, Depositor will provide an accurate and complete description of all Deposit Material sent to Iron Mountain via the Iron Mountain Website or using the form attached hereto as Exhibit B. Unless otherwise provided by the License Agreement, Depositor shall update the Deposit Materials within 60 days of each Major Release, Upgrade and Update of a product that is subject to the License Agreement.

(d) Depositor consents to Iron Mountain’s performance of any level(s) of verification Services described in Exhibit A attached hereto and further consents to Iron Mountain’s use of a subcontractor (who shall be bound by the same confidentiality obligations as Iron Mountain and who shall not be a direct competitor to either Depositor or Beneficiary) to provide such Services as needed.

(e) Depositor represents that it lawfully possesses all Deposit Material provided to Iron Mountain under this Agreement free of any liens or encumbrances as of the date of their deposit. Any Deposit Material liens or encumbrances made after their deposit will not prohibit, limit, or alter the rights and obligations of Iron Mountain under this Agreement;

(f) Depositor represents that all Deposit Material is readable and useable in its then current form; if any portion of such Deposit Material is encrypted the necessary decryption tools and keys to read such material are deposited contemporaneously.

(g) Depositor represents that all Deposit Material is provided with all rights necessary for Iron Mountain to verify such proprietary technology and materials upon receipt of a Work Request for such Services; and

(h) Depositor warrants that Iron Mountain’s use of the Deposit Material or other materials supplied by Depositor to perform the verification Services described in Exhibit A is lawful and does not violate the rights of any third parties. Depositor agrees to use commercially reasonable efforts to provide Iron Mountain with any necessary use rights or permissions to use materials necessary to perform verification of the Deposit Material. Depositor agrees to reasonably cooperate with Iron Mountain by providing its facilities, computer software systems, and technical personnel for verification Services whenever reasonably necessary.

(i) Depositor warrants that the Deposit Materials consist of the proprietary technology and other materials identified in the License Agreement

3. Beneficiary Responsibilities.

(a) Beneficiary shall provide all information designated as required to fulfill any Beneficiary Work Request (“Required Information”) and may also provide other information (“Optional Information”) at their discretion to assist Iron Mountain in the fulfillment of requested Services.

(b) Beneficiary must authorize and designate one or more persons whose action(s) will legally bind the Beneficiary (“Authorized Person(s)” who shall be identified in the Authorized Person(s)/Notices Table of the signature page or Exhibit E to this Agreement) who shall manage the Iron Mountain escrow account through the Iron Mountain Website or via written Work Request. Authorized Person(s) will maintain the accuracy of their name and contact information provided to Iron Mountain during the Term of this Agreement (the “Beneficiary Information”).

(c) Beneficiary acknowledges, in the absence of a Work Request for verification Services, that it assumes all responsibility for the completeness and/or functionality of all Deposit Material. Beneficiary may submit a verification Work Request to Iron Mountain for one of more of the Services defined in Exhibit A attached hereto and further consents to Iron Mountain’s use of a subcontractor if needed to provide such Services.

(d) Beneficiary warrants that Iron Mountain’s use of any materials supplied by Beneficiary to perform the verification Services described in Exhibit A is lawful and does not violate the rights of any third parties.

* * * Indicates that confidential treatment has been sought for this information. 114

4. Iron Mountain Responsibilities.

(a) Iron Mountain agrees to use commercially reasonable efforts to provide the Services requested by authorized Depositor and Beneficiary representatives in a Work Request. Iron Mountain may reject a Work Request (in whole or in part) that does not contain all Required Information at any time upon notification to the Party originating the Work Request.

(b) Iron Mountain will conduct a deposit inspection upon receipt of any Deposit Material and associated Exhibit B. If Iron Mountain determines that the Deposit Material does not match the description provided by Depositor represented in Exhibit B attached hereto, Iron Mountain will provide Depositor with notice by electronic mail, telephone, or regular mail of such discrepancies. Iron Mountain will work directly with the Depositor to resolve any such discrepancies prior to accepting Deposit Material. Iron Mountain will provide Depositor with notice from time to time during the first ninety (90) days from the Effective Date as a reminder that submission of initial Deposit Material is required. Iron Mountain may also send notices every ninety (90) days thereafter to Depositor and/or Beneficiary related to Deposit Material activity if such Services are requested in a Work Request.

(c) Iron Mountain will provide notice by electronic mail, telephone, or regular mail to the Beneficiary of all Deposit Material that is accepted and deposited into the escrow account under this Agreement.

(d) Iron Mountain will work with a Party who submits any verification Work Request for Deposit Material covered under this Agreement to either fulfill any standard verification Services Work Request or develop a custom Statement of Work (“SOW”). If Iron Mountain and the requesting Party develop a custom Statement of Work, it will include the following terms and conditions: description of Deposit Material to be tested; description of verification testing; requesting Party responsibilities; Iron Mountain responsibilities; Service Fees; invoice payment instructions; designation of the Paying Party; designation of authorized SOW representatives for both the requesting Party and Iron Mountain with name and contact information; and description of any final deliverables prior to the start of any fulfillment activity. After the start of fulfillment activity, each SOW may only be amended or modified in writing with the mutual agreement of both Parties, in accordance with the change control procedures set forth therein.

(e) Iron Mountain will hold and protect all Deposit Material in physical and/or electronic vaults that are either owned or under the direct control of Iron Mountain. Iron Mountain represents and warrants that the Deposit Materials will be the same in all respects in accordance with the specifications contained in any verification report or Services that Iron Mountain conducts on behalf of Preferred Beneficiary for the term of this Agreement.

(f) Iron Mountain will permit the replacement and/or removal of previously submitted Deposit Material upon Work Request that may be subject to the written joint instructions of the Depositor and Beneficiary.

(g) Iron Mountain will strictly follow the procedures set forth in Exhibit C attached hereto to process any Beneficiary Work Request to release Deposit Material.

5. Payment.

The Paying Party shall pay to Iron Mountain all fees as set forth in the Work Request form attached hereto as Exhibit A (“Service Fees”). Except as set forth below, all Service Fees are due to Iron Mountain within forty-five (45) calendar days from the date of invoice in U.S. currency and are non-refundable. Iron Mountain may update Service Fees with a ninety (90) calendar day written notice to the Paying Party during the Term of this Agreement. The Paying Party is liable for any taxes related to Services purchased under this Agreement or shall present to Iron Mountain an exemption certificate acceptable to the taxing authorities. Applicable taxes shall be billed as a separate item on the invoice, to the extent possible. Any Service Fees not collected by Iron Mountain when due shall bear interest until paid at a rate of .8333.% per month (10% per annum) or the maximum rate permitted by law, whichever is less. Delinquent accounts may be referred to a collection agency at the sole discretion of Iron Mountain. Notwithstanding, the non-performance of any obligations of Depositor to deliver Deposit Material under the License Agreement or this Agreement, Iron Mountain is entitled to be paid all Service Fees during the Term of this Agreement. All Service Fees will not be subject to offset except as specifically provided hereunder. If invoiced fees are not paid, Iron Mountain may terminate this Agreement in accordance with Section 6.

* * * Indicates that confidential treatment has been sought for this information. 115

6. Term and Termination.

(a) The initial “Term” of this Agreement is for a period of one (1) year from the Effective Date and will automatically renew for additional one (1) year Terms and continue in full force and effect until one of the following events occur: (i) Depositor and Beneficiary provide joint written instructions of their intent to cancel this Agreement within sixty (60) days to Iron Mountain; (ii) Beneficiary provides a sixty (60) day written notice regarding cancellation of this Agreement to both Depositor and Iron Mountain; or (iii) Iron Mountain provides a sixty (60) day written notice to the Depositor and Beneficiary Authorized Persons that it can no longer perform the Services under this Agreement.

(b) In the event this Agreement is terminated under Sections 6(a)(i) or 6(a)(iii) above, Depositor and Beneficiary may provide Iron Mountain with joint written instructions authorizing Iron Mountain to forward the Deposit Material to another escrow company and/or agent or other designated recipient. If Iron Mountain does not receive joint written instructions within sixty (60) calendar days after the date of the notice of termination, Iron Mountain shall return or destroy the Deposit Material.

(c) In the event of the nonpayment of Service Fees owed to Iron Mountain, Iron Mountain shall provide all Parties to this Agreement with notice by electronic mail and/or regular mail. Any Party to this Agreement shall have the right to make the payment to Iron Mountain to cure the default. If the past due payment is not received in full by Iron Mountain within forty-five (45) calendar days of the date of such notice, then Iron Mountain shall have the right to terminate this Agreement at any time thereafter by sending notice by electronic mail and/or regular mail of termination to all Parties. Iron Mountain shall have no obligation to take any action under this Agreement so long as any Iron Mountain invoice issued for Services rendered under this Agreement remains uncollected.

7. General Indemnity.

Each Party shall defend, indemnify and hold harmless the others, their corporate affiliates and their respective officers, directors, employees, and agents and their respective successors and assigns from and against any and all claims, losses, liabilities, damages, and expenses (including, without limitation, reasonable attorneys’ fees), arising under this Agreement from the negligent or intentional acts or omissions of the indemnifying Party or its subcontractors, or the officers, directors, employees, agents, successors and assigns of any of them.

8. Warranties.

(a) Iron Mountain. ANY AND ALL SERVICES PROVIDED HEREUNDER SHALL BE PERFORMED IN A WORKMANLIKE MANNER. EXCEPT AS SPECIFIED IN THIS SECTION AND SECTION 4(e), ALL EXPRESS OR IMPLIED CONDITIONS, REPRESENTATIONS, AND WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, SATISFACTORY QUALITY, AGAINST INFRINGEMENT OR ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE, ARE HEREBY EXCLUDED TO THE EXTENT ALLOWED BY APPLICABLE LAW. AN AGGRIEVED PARTY MUST NOTIFY IRON MOUNTAIN PROMPTLY OF ANY CLAIMED BREACH OF ANY WARRANTIES AND SUCH PARTY’S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF WARRANTY SHALL BE RETURN OF THE PORTION OF THE FEES PAID TO IRON MOUNTAIN BY PAYING PARTY FOR SUCH NON-CONFORMING SERVICES. THIS DISCLAIMER AND EXCLUSION SHALL APPLY EVEN IF THE EXPRESS WARRANTY AND LIMITED REMEDY SET FORTH ABOVE FAILS OF ITS ESSENTIAL PURPOSE. THE WARRANTY PROVIDED IS SUBJECT TO THE LIMITATION OF LIABILITY SET FORTH IN SECTION 11 HEREIN.

(b) Depositor. Depositor warrants that all Depositor Information provided hereunder is accurate and reliable and undertakes to promptly correct and update such Depositor Information during the Term of this Agreement.

* * * Indicates that confidential treatment has been sought for this information. 116

(c) Beneficiary. Beneficiary warrants that all Beneficiary Information provided hereunder is accurate and reliable and undertakes to promptly correct and update such Beneficiary Information during the Term of this Agreement.

9. Insurance.

Iron Mountain shall, at its sole cost and expense, throughout the term of this Agreement, procure and maintain in full force and effect, the following insurance coverage, with an insurance carrier that is rated B+ or better by A.M. Best.

TYPE OF INSURANCE	COVERAGE AMOUNT	TYPE OF INSURANCE	COVERAGE AMOUNT
General Liability	$2,000,000 General Aggregate	Crime Insurance	$2,000,000 Each Occurrence
General Liability	$1,000,000 Each Occurrence	Umbrella Coverage	$5,000,000 General Aggregate
Professional Liability	$1,000,000 Each Occurrence

All certificates of insurance shall name the Parties as additional beneficiaries with respect to General Liability coverage. All certificates of insurance shall require that the Parties be provided with advance written notice of cancellation of the stated coverage, and Iron Mountain shall request that its insurer use its best efforts to provide at least thirty (30) days’ advance written notification of such cancellation.

10. Confidential Information.

Iron Mountain shall have the obligation to reasonably protect the confidentiality of the Deposit Material. Except as provided in this Agreement Iron Mountain shall not disclose, transfer, make available or use the Deposit Material. Iron Mountain shall not disclose the terms of this Agreement to any third Party. If Iron Mountain receives a subpoena or any other order from a court or other judicial tribunal pertaining to the disclosure or release of the Deposit Material, Iron Mountain will immediately notify the Parties to this Agreement unless prohibited by law. It shall be the responsibility of Depositor and/or Beneficiary to challenge any such order; provided, however, that Iron Mountain does not waive its rights to present its position with respect to any such order. Iron Mountain will not be required to disobey any order from a court or other judicial tribunal, including, but not limited to, notices delivered pursuant to Section 13(g) below.

11. Limitation of Liability.

NOTWITHSTANDING ANYTHING ELSE HEREIN, ALL LIABILITY, IF ANY, WHETHER ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, OF ANY PARTY TO THIS AGREEMENT SHALL BE LIMITED TO THE GREATER OF ONE HUNDRED THOUSAND DOLLARS ($100,000) OR THE AMOUNT EQUAL TO TEN TIMES THE THEN CURRENT ANNUAL FEES PAID OR OWED TO IRON MOUNTAIN UNDER THIS AGREEMENT THIS LIMIT SHALL NOT APPLY TO ANY PARTY FOR: (I) ANY CLAIMS OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER PROPRIETARY RIGHT; (II) LIABILITY FOR DEATH OR BODILY INJURY; (III) DAMAGE TO TANGIBLE PROPERTY (EXCLUDING THE DEPOSIT ITEMS); (IV) THEFT; OR (V) PROVEN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

12. Consequential Damages Waiver.

IN NO EVENT SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE TO ANOTHER PARTY FOR ANY INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST PROFITS OR LOST DATA OR INFORMATION, ANY COSTS OR EXPENSES FOR THE PROCUREMENT OF SUBSTITUTE SERVICES, OR ANY OTHER INDIRECT DAMAGES, WHETHER ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE EVEN IF THE POSSIBILITY THEREOF MAY BE KNOWN IN ADVANCE TO ONE OR MORE PARTIES.

* * * Indicates that confidential treatment has been sought for this information. 117

13. General.

(a) Incorporation of Work Requests. All Depositor and/or Beneficiary Work Requests are incorporated into this Agreement. Any Work Requests submitted for an additional deposit account (“Auxiliary Deposit Account”) will be incorporated by reference into this Agreement and governed by the same terms and conditions that govern the initial deposit account (“Initial Deposit Account”).

(b) Purchase Orders. The terms and conditions of this Agreement prevail regardless of any conflicting or additional terms on any Purchase Order or other correspondence for any Initial Deposit Account or Auxiliary Deposit Account. Any contingencies or additional terms contained on any Purchase Order are not binding upon Iron Mountain. All Purchase Orders are subject to approval and acceptance by Iron Mountain.

(c) Right to Make Copies. Iron Mountain shall have the right to make copies of all Deposit Material as reasonably necessary to perform this Agreement. Iron Mountain shall copy all copyright, nondisclosure, and other proprietary notices and titles contained on Deposit Material onto any copies made by Iron Mountain. Any copying expenses incurred by Iron Mountain as a result of a Work Request to copy will be borne by the Party requesting the copies. Iron Mountain may request Depositor’s reasonable cooperation in promptly copying Deposit Material in order for Iron Mountain to perform this Agreement.

(d) Choice of Law. The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of California, United States of America, as if performed wholly within the state and without giving effect to the principles of conflicts of laws.

(e) Right to Rely on Instructions. Iron Mountain may act in reliance upon any instruction, instrument, or signature reasonably believed by Iron Mountain to be genuine. Iron Mountain may assume that any employee of a Party to this Agreement who gives any written notice, request, or instruction has the authority to do so. Iron Mountain will not be required to inquire into the truth or evaluate the merit of any statement or representation contained in any notice or document. Iron Mountain shall not be responsible for failure to act as a result of causes beyond the reasonable control of Iron Mountain.

(f) Force Majeure. Except for the obligation to pay monies due and owing, no Party shall be liable for any delay or failure in performance due to events outside the defaulting Party’s reasonable control, including without limitation acts of God, earthquake, labor disputes, shortages of supplies, riots, war, acts of terrorism, fire, epidemics, or delays of common carriers or other circumstances beyond its reasonable control. The obligations and rights of the excused Party shall be extended on a day-to-day basis for the time period equal to the period of the excusable delay.

(g) Notices. All notices regarding Exhibit C shall be sent by commercial express mail. All other correspondence, including invoices, payments, and other documents and communications, shall be sent by (i) electronic mail or (ii) via regular mail to the Parties at the addresses specified in the Authorized Persons/Notices Table which shall include the title(s) of the individual(s) authorized to receive notices. It shall be the responsibility of the Parties to notify each other as provided in this Section in the event of a change of physical or e-mail addresses. The Parties shall have the right to rely on the last known address of the other Parties. Any correctly addressed notice or last known address of the other Parties that is relied on herein that is refused, unclaimed, or undeliverable because of an act or omission of the Party to be notified as provided herein shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by electronic mail, the postal authorities by mail, through messenger or commercial express delivery services.

(h) No Waiver. No waiver of rights under this Agreement by any Party shall constitute a subsequent waiver of this or any other right under this Agreement.

(i) Assignment. No assignment of this Agreement by Depositor and/or Beneficiary or any rights or obligations of Depositor and/or Beneficiary under this Agreement is permitted without the written consent of Iron Mountain, which shall not be unreasonably withheld or delayed.

(j) Severability. In the event any of the terms of this Agreement become or are declared to be illegal or otherwise unenforceable by any court of competent jurisdiction, such term(s) shall be null and void and shall be deemed deleted from this Agreement. All remaining terms of this Agreement shall remain in full

* * * Indicates that confidential treatment has been sought for this information. 118

force and effect. Notwithstanding the foregoing, if this paragraph becomes applicable and, as a result, the value of this Agreement is materially impaired for either Party, as determined by such Party in its sole discretion, then the affected Party may terminate this Agreement by notice to the others.

(k) Independent Contractor Relationship. Depositor and Beneficiary understand, acknowledge, and agree that Iron Mountain’s relationship with Depositor and Beneficiary will be that of an independent contractor and that nothing in this Agreement is intended to or should be construed to create a partnership, joint venture, or employment relationship.

(l) Attorneys’ Fees. In any suit or proceeding between the Parties relating to this Agreement, the prevailing Party will have the right to recover from the other(s) it’s costs and reasonable fees and expenses of attorneys, accountants, and other professionals incurred in connection with the suit or proceeding, including costs, fees and expenses upon appeal, separately from and in addition to any other amount included in such judgment. This provision is intended to be severable from the other provisions of this Agreement, and shall survive and not be merged into any such judgment.

(m) No Agency. No Party has the right or authority to, and shall not, assume or create any obligation of any nature whatsoever on behalf of the other Parties or bind the other Parties in any respect whatsoever.

(n) Disputes. Any dispute, difference or question relating to or arising among any of the Parties concerning the construction, meaning, effect or implementation of this Agreement or any Party hereof will be submitted to, and settled by arbitration by a single arbitrator chosen by the regional office of the American Arbitration Association in accordance with the Commercial Rules of the American Arbitration Association. The arbitrator shall apply California law. Unless otherwise agreed by the Parties, arbitration will take place in the State of California, U.S.A. Any court having jurisdiction over the matter may enter judgment on the award of the arbitrator. Service of a petition to confirm the arbitration award may be made by regular mail or by commercial express mail, to the attorney for the Party or, if unrepresented, to the Party at the last known business address. If however, Depositor and/or Beneficiary refuse to submit to arbitration, the matter shall not be submitted to arbitration and Iron Mountain may submit the matter to any court of competent jurisdiction for an interpleader or similar action. Unless adjudged otherwise, any costs of arbitration incurred by Iron Mountain, including reasonable attorney’s fees and costs, shall be divided equally and paid by Depositor and Beneficiary.

(o) Regulations. All Parties are responsible for and warrant - to the extent of their individual actions or omissions—compliance with all applicable laws, rules and regulations, including but not limited to: customs laws; import; export and re-export laws; and government regulations of any country from or to which the Deposit Material may be delivered in accordance with the provisions of this Agreement.

(p) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

(q) Survival. Sections 6 (Term and Termination), 7 (General Indemnity), 8 (Warranties), 10 (Confidential Information), 11 (Limitation of Liability), 12 (Consequential Damages Waiver), and 13 (General) of this Agreement shall survive termination of this Agreement or any Exhibit attached hereto.

The Parties agree that this Agreement is the complete agreement between the Parties hereto concerning the subject matter of this Agreement and replaces any prior or contemporaneous oral or written communications between the Parties. There are no conditions, understandings, agreements, representations, or warranties, expressed or implied, which are not specified herein. Each of the Parties herein represents and warrants that the execution, delivery, and performance of this Agreement has been duly authorized and signed by a person who meets statutory or other binding approval to sign on behalf of its business organization as named in this Agreement. This Agreement may only be modified by mutual written agreement of the Parties.

BENEFICIARY – Hitachi Data Systems Corporation IRON MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.

* * * Indicates that confidential treatment has been sought for this information. 119

SIGNATURE:	Signature:
PRINT NAME:	PRINT NAME:
TITLE:	TITLE:
DATE:	DATE:
EMAIL ADDRESS	EMAIL ADDRESS:	ipmcontracts@ironmountain.com

NOTE: AUTHORIZED PERSONS/NOTICES TABLE, AND BILLING CONTACT INFORMATION TABLE WILL BE PROVIDED IN EXHIBIT E – ENROLLMENT FORM.

IRON MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.

All notices should be sent to ipmcontracts@ironmountain.com OR Iron Mountain, Attn: Contract

Administration, 2100 Norcross Parkway, Suite 150, Norcross, Georgia, 30071, USA.

* * * Indicates that confidential treatment has been sought for this information. 120

EXHIBIT A ESCROW SERVICE WORK REQUEST

Account Number                                                                                  

SERVICE Check box (es) to order service	SERVICE DESCRIPTION	ONE-TIME FEES			ANNUAL FEES		PAYING PARTY Check box to identify the Paying Party for each service below.
¨ Add and Manage New Escrow Account	Iron Mountain will open a new escrow deposit account that includes a minimum of one (1) Depositor and one (1) complete set of Deposit Material. All Deposit Material will be securely stored in controlled vaults that are owned and/or operated by Iron Mountain. Account services include unlimited deposits, electronic vaulting, access to Iron Mountain Connect™ Escrow Management Center for secure online account management and submission of electronic Work Requests, and secure destruction of deposit materials upon account termination. Iron Mountain will assign a Client Manager for each escrow account. These Managers will provide training from time to time to facilitate secure Internet access to escrow account(s). Assigned Managers will also ensure timely fulfillment of Work Requests (e.g., deposit updates, new beneficiary enrollment) and communication of status.	$	2,050		$	950	¨ Depositor - OR - ¨  Beneficiary
¨ Add and Manage Auxiliary Account	Iron Mountain will open and manage an Auxiliary Deposit Account for a new product or depositor in accordance with the service description immediately above and the Agreement that governs the Initial Deposit Account #                                                                                   .		N/A		$	950	¨ Depositor - OR - ¨  Beneficiary
¨ Add Beneficiary	Iron Mountain will fulfill a Work Request to add a new Beneficiary to an escrow account, where possible, and provide notice as appropriate to all relevant Parties.		N/A		$	650	¨ Depositor - OR - ¨  Beneficiary
¨ Add Deposit Tracking Notification	Iron Mountain will send periodic notices to Depositor and/or Beneficiary related to Deposit Material as specified within the terms of the Agreement.		N/A		$	350	¨ Depositor - OR - ¨ Beneficiary
¨ Add File Comparison and Analysis Test	Iron Mountain will fulfill a Work Request to perform a File Comparison and Analysis Test, which includes a final report sent to Client, on Deposit Material to ensure consistency between Depositor’s representations (i.e., Exhibit B and Supplementary Questionnaire) and stored Deposit Material.	$	2,500			N/A	¨ Depositor - OR - ¨ Beneficiary
¨ Add Deposit Compile Test	Iron Mountain will fulfill a Work Request to perform a Deposit Compile Test, which includes a final report sent to Client, on Deposit Material. Client and Iron Mountain will agree on a custom Statement of Work (“SOW”) prior to the start of fulfillment.		Custom Quote			N/A	¨ Depositor - OR - ¨ Beneficiary
Add Deposit Usability Test – Binary Comparison	Iron Mountain will fulfill a Work Request to perform one a Deposit Compile Test Binary Comparison which includes a final report sent to Client, on Deposit Material. Client and Iron Mountain will agree on a custom Statement of Work (“SOW”) prior to the start of fulfillment.		Custom Quote			N/A	¨ Depositor - OR - ¨ Beneficiary
Add Deposit Usability Test – Full Usability Test	Iron Mountain will fulfill a Work Request to perform one a Deposit Compile Test Full Usability which includes a final report sent to Client, on Deposit Material. Client and Iron Mountain will agree on a custom Statement of Work (“SOW”) prior to the start of fulfillment.		Custom Quote			N/A	¨ Depositor - OR - ¨ Beneficiary
¨ Add Dual Vaulting	Iron Mountain will fulfill a Work Request to store deposit materials in one additional location as defined within the Service Agreement. Duplicate storage request may be in the form of either physical media or electronic storage.		N/A		$	500	¨ Depositor - OR - ¨ Beneficiary
¨ Release Deposit Material	Iron Mountain will process a Work Request to release Deposit Material by following the specific procedures defined in Exhibit C “Release of Deposit Materials” the Escrow Service Agreement.	$	500			N/A	¨ Depositor - OR - ¨ Beneficiary
¨ Add Custom Services	Iron Mountain will provide its Escrow Expert consulting Services based on a custom SOW mutually agreed to by all Parties.	$	150	/hour		N/A	¨ Depositor - OR - ¨ Beneficiary
¨ Delete Account	Iron Mountain will fulfill a Work Request to terminate an existing escrow account by providing notice to all Parties to the Agreement, removing Deposit Material from the vault and then either securely destroying or returning the Deposit Material via commercial express mail carrier as instructed. All accrued Services Fees must be collected by Iron Mountain prior to completing fulfillment to terminate an existing escrow account.		No Charge			No Charge	No Charge
¨ Replace/Delete Deposit Materials	Iron Mountain will replace/delete deposit material in accordance with the terms of the Agreement. Materials will be returned as directed by depositor or destroyed using Iron Mountain Secure Shredding.		No Charge			No Charge	No Charge

* * * Indicates that confidential treatment has been sought for this information. 121

Upon Escrow Service Agreement execution, please provide your initials below in the appropriate location to indicate your acceptance of this Escrow Services Work Request inclusive of agreed Services pricing and indication of which Party is financially responsible for payment of specific Services.

DEPOSITOR INITIALS                                      BENEFICIARY INITIALS                                 

Note: Work Requests may be submitted electronically through their escrow account online OR may complete this form along with any other supporting exhibits required and email and/or fax this Work Request to their assigned Client Manager at Iron Mountain for fulfillment.

* * * Indicates that confidential treatment has been sought for this information. 122

VERIFICATION SERVICES OPTIONS

1. File Comparison and Analysis.

1.1. This series of verification tests provides insight into whether the materials that have been deposited have basic information in a form that allows for additional testing to be performed. These tests detect errors that often inhibit effective use of the escrow deposit.

1.2. Steps include: Analyzing deposit media readability, file listing, creation of file classification table, virus scan, assurance of completed deposit questionnaire, analysis of completed deposit questionnaire.

1.3. Deliverables: At completion of testing, Iron Mountain will distribute a report to all parties detailing Iron Mountain’s results. This report will include readability results, file listing, file classification table(s), virus scan results, completed deposit questionnaire, and an analysis of the completed deposit questionnaire.

2. Deposit Compile Test.

2.1. This series of tests includes a standard effort to compile the Deposit Material and build executable code.

2.2. Steps include: Analyzing deposit media readability, file listing, creation of file classification table, virus scan, assurance of completed deposit questionnaire, analysis of completed deposit questionnaire, recreating the Depositor’s software development environment, compiling source files and modules, linking libraries and recreating executable code, pass/fail determination, creation of comprehensive build instructions.

2.3. Deliverables: Iron Mountain will provide a report detailing the steps necessary to recreate the software/hardware development environment, problems encountered with testing, and Iron Mountain’s analysis of the deposit. In addition, the report will list required software development materials, including, without limitation, required source code languages and compilers, third-Party software, libraries, operating systems, and hardware, as well as Iron Mountain’s analysis of the deposit. When identifying materials required to re-create Depositor’s software development environment, Iron Mountain will rely on information provided in Depositor’s completed questionnaire (obtained via a Iron Mountain verification representative) and/or information gathered during Iron Mountain’s testing experience.

2.4. Deposit Usability Test.

2.5. This series of tests includes testing the functionality of the compiled Deposit Material (in a production setting or similar environment) and can be accomplished through one of the following two options:

2.5.1. Binary Comparison – a comparison of the files built from the Deposit Compile Test to the actual licensed technology on the customer’s site to ensure a full match in file size.

2.5.2. Full Usability Test – a confirmation that the built applications work properly when installed.

2.5.3. Services may be provided by Iron Mountain or individuals or organizations employed by or under contract with Iron Mountain, at the discretion of Iron Mountain.

* * * Indicates that confidential treatment has been sought for this information. 123

EXHIBIT B

DEPOSIT MATERIAL DESCRIPTION

COMPANY NAME: ESCROW ACCOUNT NUMBER:

DEPOSIT NAME AND DEPOSIT VERSION               (Deposit Name will appear in account history reports)

DEPOSIT MEDIA (PLEASE LABEL ALL MEDIA WITH THE DEPOSIT NAME PROVIDED ABOVE)

MEDIA TYPE	QUANTITY	MEDIA TYPE	QUANTITY
¨ CD-ROM / DVD		¨ 3.5” Floppy Disk
¨ DLT Tape		¨ Documentation
¨ DAT Tape		¨ Hard Drive / CPU
		¨ Circuit Board

	TOTAL SIZE OF  TRANSMISSION (SPECIFY IN BYTES)	# OF FILES	# OF FOLDERS
¨ Internet File Transfer
¨ Other (please describe below):

DEPOSIT ENCRYPTION (Please check either “Yes” or “No” below and complete as appropriate)

Is the media or are any of the files encrypted?    ¨  Yes     or     ¨  No

If yes, please include any passwords and decryption tools description below. Please also deposit all necessary encryption software with this deposit.

Encryption tool name Version

Hardware required

Software required

Other required information

DEPOSIT CERTIFICATION (Please check the box below to Certify and Provide your Contact Information)

¨ I certify for Depositor that the above described Deposit Material has been transmitted electronically or sent via commercial express mail carrier to Iron Mountain at the address below.	¨ Iron Mountain has inspected and accepted the above described Deposit Material either electronically or physically. Iron Mountain will notify Depositor of any discrepancies.
NAME:	NAME:
DATE:	DATE:
EMAIL ADDRESS:
TELEPHONE NUMBER:
FAX NUMBER:

Note: If Depositor is physically sending Deposit Material to Iron Mountain, please label all media and mail all Deposit Material with the appropriate Exhibit B via commercial express carrier to the following address:

* * * Indicates that confidential treatment has been sought for this information. 124

Iron Mountain Intellectual Property Management, Inc.

Attn: Vault Administration

2100 Norcross Parkway, Suite 150

Norcross, GA 30071

Telephone: (770) 239-9200

Facsimile: (770) 239-9201

* * * Indicates that confidential treatment has been sought for this information. 125

EXHIBIT C

Release Of Deposit material

Deposit Account Number:                                         

Iron Mountain will use the following procedures, unless otherwise amended by the parties in writing, to process any Beneficiary Work Request to release Deposit Material.

1. Release Conditions. Depositor and Beneficiary agree that Iron Mountain will provide notice via commercial express mail to the Depositor if a Beneficiary under this Agreement submits a Deposit Material release Work Request based on one or more of the following conditions (defined as “Release Conditions”):

(a) a receiver or trustee is appointed for Depositor;

(b) Depositor becomes insolvent, admits in writing its inability to pay debts as they mature, is adjudicated bankrupt, or makes an assignment for the benefit of its creditors or another arrangement of similar import;

(c) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced against Depositor and are not released within sixty (60) days,

(d) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced by Depositor,

(e) an entry of an order for relief by or on behalf of Depositor under Chapter 7 or Chapter 11 of the Bankruptcy Code;

(f) Depositor has suspended or ceased its on-going business operations or that portion of its business operations relating to the sale or Support (as defined in the License Agreement) of the Products (as defined in the License Agreement);

(g) there is a Maintenance Lapse (as defined in the License Agreement); or

(h) Beneficiary has requested Iron Mountain to release to Beneficiary the Deposit Materials in accordance with Section 3.8 of the License Agreement and the conditions of Section 3.8 of the License Agreement have been met.

2. Release Work Request. A Beneficiary may submit a Work Request to Iron Mountain to release the Deposit Material covered under this Agreement. Iron Mountain will send a written notice of this Beneficiary Work Request within five (5) business days to the authorized Depositor representative(s).

3. Contrary Instructions. From the date Iron Mountain mails written notice of the Beneficiary Work Request to release Deposit Material covered under this Agreement, Depositor representative(s) shall have ten (10) business days to deliver to Iron Mountain contrary instructions (“Contrary Instructions”). Contrary Instructions shall mean the written representation by Depositor that a Release Condition has not occurred or in the case of Section 1(c) above has been cured. Contrary Instructions shall be on company letterhead and signed by an authorized Depositor representative. Upon receipt of Contrary Instructions, Iron Mountain shall send a copy to an authorized Beneficiary representative by commercial express mail. Additionally, Iron Mountain shall notify both Depositor representative(s) and Beneficiary representative(s) that there is a dispute to be resolved pursuant to the Disputes provisions of this Agreement. Iron Mountain will continue to store Deposit Material without release pending (i) joint instructions from Depositor and Beneficiary that accept release of Deposit Material; or (ii) dispute resolution pursuant to the Disputes provisions of this Agreement; or (iii) receipt of an order from a court of competent jurisdiction.

* * * Indicates that confidential treatment has been sought for this information. 126

4. Release of Deposit Material. If Iron Mountain does not receive Contrary Instructions from an authorized Depositor representative, Iron Mountain is authorized to release Deposit Material to the Beneficiary or, if more than one Beneficiary is registered to the deposit, to release a copy of Deposit Material to the Beneficiary. Iron Mountain is entitled to receive any uncollected Service fees due Iron Mountain from the Beneficiary before fulfilling the Work Request to release Deposit Material covered under this Agreement. This Agreement will terminate upon the release of Deposit Material held by Iron Mountain.

5. Right to Use Following Release. Notwithstanding the release of the Deposit Materials under this Agreement, Beneficiary shall only have such right to the Deposit Materials as set forth in the License Agreement.

* * * Indicates that confidential treatment has been sought for this information. 127

EXHIBIT D

AUXILIARY DEPOSIT ACCOUNT TO MASTER ESCROW AGREEMENT

Master Deposit Account Number:                                         

Auxiliary Account Number                                         

                                          (“Beneficiary”) has entered into a Master Escrow Agreement with Iron Mountain Intellectual Property Management, Inc. (“Iron Mountain”).

Beneficiary desires that new Deposit Material be held in a separate account and be maintained separately from the initial account. By execution of this Exhibit E, Iron Mountain will establish a separate account for the new Deposit Material. The new account will be referenced by the following name:                                         .

Beneficiary hereby agrees that all terms and conditions of the existing Master Escrow Agreement previously entered into by Beneficiary and Iron Mountain will govern this account. The termination or expiration of any other account of Beneficiary will not affect this account.

BENEFICIARY	IRON MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.
SIGNATURE:	Signature:
PRINT NAME:	PRINT NAME:
TITLE:	TITLE:
DATE:	DATE:
EMAIL ADDRESS	EMAIL ADDRESS:	ipmcontracts@ironmountain.com

AUTHORIZED PERSON(S)/NOTICES TABLE

Please provide the name(s) and contact information of the Authorized Person(s) under this Agreement. All Notices will be sent electronically and/or through regular mail to the appropriate address set forth below.

PRINT NAME:	PRINT NAME:
TITLE:	TITLE:
EMAIL ADDRESS	EMAIL ADDRESS
STREET ADDRESS 1	STREET ADDRESS 1
PROVINCE/CITY/STATE	PROVINCE/CITY/STATE
POSTAL/ZIP CODE	POSTAL/ZIP CODE
PHONE NUMBER	PHONE NUMBER
FAX NUMBER	FAX NUMBER

* * * Indicates that confidential treatment has been sought for this information. 128

EXHIBIT E

Enrollment Form

Deposit Account Number:                                         

Depositor, Beneficiary and Iron Mountain Intellectual Property Management, Inc. (“Iron Mountain”), hereby acknowledge that Hitachi Data Systems Corporation is the Beneficiary referred to in the Master Three-Party Escrow Services Agreement (Master Deposit Account Number: 29726-7022) with Iron Mountain as the escrow agent and BlueArc Corporation is the Depositor enrolling under this Agreement. Depositor hereby agrees to be bound by all provisions of such Agreement by signing this Exhibit E.

All parties to the Agreement (excluding any Depositor other than BlueArc Corporation) agree to amend the agreement as follows solely in connection with the Deposit Account Number specified above. Defined terms used herein and not otherwise defined shall have the meanings set forth in the License Agreement.

The Release Conditions are as follows:

(a) a receiver or trustee is appointed for Depositor;

(b) Depositor becomes insolvent, admits in writing its inability to pay debts as they mature, is adjudicated bankrupt, or makes an assignment for the benefit of its creditors or another arrangement of similar import;

(c) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced against Depositor and are not released within sixty (60) days,

(d) proceedings under bankruptcy or insolvency laws for the purposes of bankruptcy, reorganization or liquidation are commenced by Depositor,

(e) an entry of an order for relief by or on behalf of Depositor under Chapter 7 or Chapter 11 of the Bankruptcy Code;

(f) Depositor has suspended or ceased its on-going business operations or that portion of its business operations relating to the sale or Support (as defined in the License Agreement) of the Products (as defined in the License Agreement);

(g) there is a Maintenance Lapse (as defined in the License Agreement); or

(h) Beneficiary has requested Iron Mountain to release to Beneficiary the Deposit Materials in accordance with Section 3.8 of the License Agreement and the conditions of Section 3.8 of the License Agreement have been met.

DEPOSITOR COMPANY NAME:                                                                                  

DEPOSITOR AUTHORIZED PERSON(S)/NOTICES TABLE

Please provide the name(s) and contact information of the Authorized Person(s) under this Agreement. All Notices will be sent electronically and/or through regular mail to the appropriate address set forth below. Please complete all information as applicable. Incomplete information may result in a delay of processing.

* * * Indicates that confidential treatment has been sought for this information. 129

PRINT NAME:	PRINT NAME:
TITLE:	TITLE:
EMAIL ADDRESS	EMAIL ADDRESS
STREET ADDRESS	STREET ADDRESS
PROVINCE/CITY/STATE	PROVINCE/CITY/STATE
POSTAL/ZIP CODE	POSTAL/ZIP CODE
PHONE NUMBER	PHONE NUMBER
FAX NUMBER	FAX NUMBER

PAYING PARTY COMPANY NAME: HITACHI DATA SYSTEMS CORPORATION

BENEFICIARY AUTHORIZED PERSON(S)/NOTICES TABLE

Please provide the name(s) and contact information of the Authorized Person(s) under this Agreement. All Notices will be sent electronically and/or through regular mail to the appropriate address set forth below. Please complete all information as applicable. Incomplete information may result in a delay of processing.

PRINT NAME:	PRINT NAME:
TITLE:	TITLE:
EMAIL ADDRESS	EMAIL ADDRESS
STREET ADDRESS	STREET ADDRESS
PROVINCE/CITY/STATE	PROVINCE/CITY/STATE
POSTAL/ZIP CODE	POSTAL/ZIP CODE
PHONE NUMBER	PHONE NUMBER
FAX NUMBER	FAX NUMBER

BILLING CONTACT INFORMATION TABLE

Please provide the name and contact information of the Billing Contact under this Agreement. All Invoices will be sent to this individual at the address set forth below.

PRINT NAME:

TITLE:

EMAIL ADDRESS

STREET ADDRESS 1

PROVINCE/CITY/STATE

POSTAL/ZIP CODE

PHONE NUMBER

FAX NUMBER

IRON MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.

All notices should be sent to ipmcontracts@ironmountain.com OR Iron Mountain, Attn: Contract Administration, 2100 Norcross Parkway, Suite 150, Norcross, Georgia, 30071, USA.

* * * Indicates that confidential treatment has been sought for this information. 130

The Parties agree that this Agreement is the complete agreement between the Parties hereto concerning the subject matter of this Agreement and replaces any prior or contemporaneous oral or written communications between the Parties. There are no conditions, understandings, agreements, representations, or warranties, expressed or implied, which are not specified herein. Each of the Parties herein represents and warrants that the execution, delivery, and performance of this Agreement has been duly authorized and signed by a person who meets statutory or other binding approval to sign on behalf of its business organization as named in this Agreement. This Agreement may only be modified by mutual written agreement of the Parties.

DEPOSITOR:	HITACHI DATA SYSTEMS
CORPORATION
SIGNATURE:	Signature:
PRINT NAME:	PRINT NAME:
TITLE:	TITLE:
DATE:	DATE:
EMAIL ADDRESS	EMAIL ADDRESS:

IRON MOUNTAIN INTELLECTUAL PROPERTY MANAGEMENT, INC.

Signature:
PRINT NAME:
TITLE:
DATE:
EMAIL ADDRESS:	ipmcontracts@ironmountain.com

* * * Indicates that confidential treatment has been sought for this information. 131

EXHIBIT O

THIRD PARTY SOFTWARE

Name of Product/Product Component + Version	Developer (e.g. Apache Foundation)	Website Reference	License (e.g. The Apache Software License Version 1.1)	License Type (e.g. GPL, LGPL, APL or BSD)
Ant	Apache	ant.apache.org	Apache 2	Apache
Arcfour RC4 work-alike	anonymous	http://en.wikipedia.org/wiki/RC4	Public domain, although the copy that’s probably being referred to here (libs/mgmtcrypto) appears to have been ripped off from some version of OpenSSL and has Eric Young copyright notices. There’s another copy in the Kerberos code which doesn’t have those notices.	unclassified
Base64	Kevin Kelley	http://www.koders.com/java/fid26922004685B 8AE3BC95C0C9200347D2F6E08716.aspx	LGPL	LGPL
Bastille	Jay Beale	www.bastille-linux.org	GPL 2	GPL
bitstring.h	Paul Vixie at UCB	eg http://fxr.watson.org/fxr/source/sys/bitstring.h	BSD	BSD
Boost library 1.29.0	many	http://boost.org/	The Boost Software License	unclassified
C library str... and mem... functions with atoi, msort, qsort, pagecopy, wordcopy and stp... variants	FSF	http://www.gnu.org/software/libc/	LGPL	LGPL
C++ standard template library	HP and SGI	http://www.sgi.com/tech/stl/index.html	The STL license	BSD
C3p0	Machinery for Change	www.mchange.com/projects/c3p0/	LGPL	LGPL

* * * Indicates that confidential treatment has been sought for this information. 132

Cglib	Hibernate	Cglib.sourceforge.net	Apache 2	Apache
Cryptix	Cryptix	www.cryptix.org/LICENSE.TXT	Cryptix General License	unclassified
Crypto layer from MIT Kerberos	MIT	http://web.mit.edu/Kerberos/	MIT and others	BSD
Dce_guid	Microsoft, HP, Open Software Foundation	http://www.ietf.org/rfc/rfc4122.txt	libs/dce_guid/copyrt.h (previously provided)	unclassified
ehcache	Ehcache	ehcache.sourceforge.net/license.html	Apache 2	Apache
FlexLexer.h	UCB	http://flex.sourceforge.net/	BSD	BSD
gcc’s exceptions header	FSF	http://gcc.gnu.org/	GPL	GPL
gcc’s limits header	FSF	http://gcc.gnu.org/	GPL	GPL
Henry Spencer’s regex library (BSD version)	Henry Spencer	http://arglist.com/regex/	Henry Spencer’s regex library license	BSD
Hibernate	Jboss	www.hibernate.org/356.html	LGPL	LGPL
Jakarta Java Libraries	Jakarta Apache	jakarta.apache.org	Apache 2.0	Apache
JDOM	Jason Hunter	www.jdom.org	Apache	Apache
Jfreechart	Jfree	www.jfree.org/jfreechart/	LGPL	LGPL
Junit	Junit	www.junit.org	Common Public License v1	Common Public License
libbzip2 1.0.3	Julian R Seward	http://www.bzip.org/	The bzip2 license	unclassified
libpcap 0.9.1	LBNL and others	http://www.tcpdump.org/	Sourceforge BSD	BSD
log4cpp	Bastiaan Bakker	log4cpp.sourceforge.net/	LGPL	LGPL
Log4j	Apache	logging.apache.org/log4j/docs/	Apache 2	Apache
Loki (dates from 2002)	Andrei Alexandrescu	http://sourceforge.net/projects/loki-lib/	MIT	BSD
LWM	Elliott Hughes	www.jfc.org.uk/software/lwm.html	GPL	GPL
Message Digests (MD5) (We seem to have deleted our own copy of an md4 implementation and are now deferring to openssl’s.)	Rivest and RSA	http://tools.ietf.org/html/rfc1321	Various versions claim to be under the copyright of Eric Young, FundsXpress INC, RSA and FSF	BSD or LGPL depending on which version you look at

* * * Indicates that confidential treatment has been sought for this information. 133

nb++	Bo Lorentsen	lue.dk/prj/nbpp/	LGPL	LGPL
Ndmjob (sic)	Traakan	http://ndmjob.sourceforge.net/	Sourceforge BSD	BSD
ndmpcopy	Network Appliance	http://www.ndmp.org/download/ ndmpcopy/index.shtml	The ndmpcopy license	BSD
NFSv4 constants	RFC 3530	http://www.ietf.org/rfc/rfc3530.txt	BSD-style	BSD
Nutch	Apache	Lucene.apache.org/nutch	Apache 2	Apache
OpenLDAP 2.2.18	OpenLDAP Software	http://www.openldap.org/	The OpenLDAP Public License	BSD
OpenSSL 0.9.7d	Eric Young and the OpenSSL Project	http://www.openssl.org/	http://www.openssl.org/source /license.html	BSD
Postgresql	PostgresQL	http://www.postgresql.org/about/licence	BSD	BSD
Postgresql-jdbc	Postgresql	jdbc.postgresql.org/license.html	BSD	BSD
Profiling support library	UCB, Cygnus Solutions	http://cygwin.com/cgi-bin/cvsweb.cgi/src/winsup/cygwin/?cvsroot=src	BSD and GPL	BSD and GPL
Quartz	Open Symphony	www.opensymphony.com/quartz/	Apache 2	Apache
Redhat Linux	RedHat	www.redhat.com/licenses/gpl.html	GPL 2	GPL
stdint.h	Danny Smith	none	Public domain	unclassified
Tomcat	Apache	tomcat.apache.org	Apache 2.0	Apache
Turbine & dependant libs	Jakarta Apache	jakarta.apache.org	Apache 2.0	Apache
ua.js	Bob Clary, Netscape	http://archive.bclary.com/xbProjects-docs/ua/	BSD-style	BSD
Velocity	Apache	Jakarta.apache.org/velocity	Apache 2	Apache
Xalan	Apache	Xalan.apache.org	Apache 2	Apache
XDR library	Sun	http://tools.ietf.org/rfc/rfc1014.txt	The Sun RPC license	BSD
xdDOM.js	Netscape	http://archive.bclary.com/lib/js/xbDOM.js	LGPL 2.1	LGPL
Xerces	Apache	Xerces.apache.org	Apache 2	Apache
Zlib library 1.2.1	Jean-loup Gailly and Mark Adler	http://zlib.net/	The zlib license	unclassified

* * * Indicates that confidential treatment has been sought for this information. 134

EXHIBIT P

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

Void after

[4 years from distribution agreement date or 2 years from issuance]

BLUEARC CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to Hitachi Data Systems, Inc. (“HDS”) by BlueArc Corporation, a Delaware corporation (the “Company”), in connection with revenues received from HDS.

Purchase of Shares. Subject to the terms and conditions hereinafter set forth, the holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to 151,418 fully paid and nonassessable shares of the Company’s Common Stock (each a “Share” and collectively the “Shares”) at an exercise price of $             per Share (such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).

Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the issuance date of this Warrant and ending at 5 p.m. California time on [4 years from distribution agreement date or 2 years from issuance] (the “Exercise Period”).

Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 0 above, the holder may exercise from time to time, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

Certificates for Shares; Amendments of Warrants. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice. Upon partial exercise by either cash or net exercise, the Company shall promptly issue an amended Warrant representing the remaining number of Shares purchasable thereunder. All other terms and conditions of such amended Warrant shall be identical to those contained herein.

* * * Indicates that confidential treatment has been sought for this information. 135

Issuance of Shares. The Company covenants that (i) the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof, (ii) during the Exercise Period the Company will reserve from its authorized and unissued Common Stock sufficient Shares in order to perform its obligations under this warrant.

Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

Subdivisions, Combinations and Other Issuances. If the Company shall at any time before the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 0 shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock (including because of a change of control) of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 0 above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time before the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately before such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

Representations of the Company. The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

* * * Indicates that confidential treatment has been sought for this information. 136

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

This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the “California Law”) by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent expressed above.

The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

Restrictive Legend.

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN [            ] BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE COMPANY. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SECURITIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING IF REQUESTED BY THE UNDERWRITERS IN ACCORDANCE WITH SUCH AGREEMENT.

* * * Indicates that confidential treatment has been sought for this information. 137

Warrants Transferable. Subject to compliance with the terms and conditions of this Section 0, this Warrant and all rights hereunder are transferable, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by written instructions of transfer. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant before registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 0 that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Each certificate representing this Warrant or the Shares transferred in accordance with this Section 0 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required. In order to ensure compliance with such laws, the Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares 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 herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the Schedule of Investors to the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), with a copy to Michael Danaher, Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, CA 94304 (which copy shall not be deemed to constitute notice to the Company) or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

* * * Indicates that confidential treatment has been sought for this information. 138

Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of California, without regard to the conflicts of law provisions of California or of any other state.

Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

(Signature Page Follows)

Issued as of                     .

BlueArc Corporation

By:

Its:

* * * Indicates that confidential treatment has been sought for this information. 139

EXHIBIT A

NOTICE OF EXERCISE

TO:	BlueArc Corporation
	50 Rio Robles Drive
	San Jose, CA 94034
Attention:	President

1. The undersigned hereby elects to purchase                      shares of Common Stock of BlueArc Corporation (the “Shares”) pursuant to the terms of the attached Warrant.

2. The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

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

(Name)

(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 0 of the attached Warrant (including Section 0 thereof) are true and correct as of the date hereof.

	(Signature)
	(Name)
(Date)	(Title)

* * * Indicates that confidential treatment has been sought for this information. 140

EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                               the right represented by the attached Warrant to purchase                      shares of Common Stock of BLUEARC CORPORATION to which the attached Warrant relates, and appoints                      Attorney to transfer such right on the books of BLUEARC CORPORATION, with full power of substitution in the premises.

Dated:                     

(Signature must conform in all respects to name of

Holder as specified on the face of the Warrant)

Address:

Signed in the presence of:

* * * Indicates that confidential treatment has been sought for this information. 141

EXHIBIT Q

ROADMAP ACTIVITIES

Product Requirements for * * * and GA Releases

Introduction

This document constitutes the agreed upon product requirements for the Hitachi High Performance NAS Platform product for the * * * and General Availability (GA) releases.

The requested delivery dates in the document are based on anticipated completion of the OEM agreement on the effective date, and may be adjusted as necessary by mutual agreement during the quarterly business review meetings.

Release schedules are as follows:

* * *

General Availability: February 27, 2007

Non Recurring Charges:

There are no NRE charges associated with the requirements listed in Exhibit Q.

Base Product Assumption

This specification assumes that the starting points for all specifications listed below are the standard BlueArc Titan 2000 series (2100 and 2200) servers, as defined on BlueArc’s published data sheet. The underlying specifications of the base system will not be detailed in this document, only the changes required from that base system to meet HDS requirements.

* * *

HDS GA Release

BlueArc Server

Beginning with the General Availability date of February 27, 2007, all orders will be fulfilled with standard BlueArc Server loaded with a version of the BlueArc SU4.3 (Razor) release modified to meet agreed upon HDS requirements.

The BlueArc SU4.3 (Razor) release will be delivered to HDS for qualification testing no later than December 15, 2006.

BlueArc SMU

Beginning with the General Availability date of February 27, 2007, all orders will be fulfilled with the standard BlueArc SMU loaded with a version of the BlueArc SMU 4.3 (Copper) software modified to meet agreed upon HDS requirements.

The SMU 4.3 (Copper) release will be delivered to HDS for qualification testing with the Razor release, no later than December 15, 2006. Additional changes to the GUI and on-disk documentation may be added as part of an update release prior to the GA date.

* * * Indicates that confidential treatment has been sought for this information. 142

Graphical User Interface

BlueArc has provided HDS with a mock up of the proposed SMU login page (in the form of an HTML file) that was based upon a sample file provided by HDS. See attached print-out of this mock up. To complete this page HDS must provide BlueArc with the type font specifications and correct product name to be used on the page. HDS will either approve this page design and supply the needed information, or provide an HTML file for an alternate design no later than November 9, 2006.

The standard BlueArc “blue” color will be replaced throughout the GUI with the HDS standard purple color used to designate storage management software. HDS will determine if the Gray and Teal colors on the status console need to be changed, and provide appropriate color specifications no later than November 9, 2006.

* * * Indicates that confidential treatment has been sought for this information. 143

Documentation

Updated documentation for the SU4.3 release will be produced with the same level of branding support as provided with SU4.2 There will be separate server and storage manuals, with HDS logo and front text as provided by HDS. HDS branded documentation will not mention other storage product brand names.

HDS is redesigning the documentation template. HDS will provide BlueArc with the new front cover no later than December 15, 2006. BlueArc will use the new front cover for the SU4.3 documentation.

Screen shots will be unbranded (i.e., neither HDS nor BlueArc).

The newly formatted documentation will not be available with BlueArc’s initial release of SU4.3. Online documentation will be incorporated into an updated SMU load, with the Gold Master provided to HDS no later than February 23, 2007.

BlueArc to provide the standard BlueArc source documentation once the doc has passed BlueArc QA for BlueArc release (December) to allow HDS to develop contents on storage configuration with SU4.3. The work to split the manual into separate server and storage manuals may not be complete by this date.

Titan Firmware Features

The standard BlueArc SU 4.3 release feature set will be supported.

WORM will be hidden in the GUI and documentation, but will be accessible via CLI. The feature can be enabled from the CLI if a customer has purchased a license for WORM. BlueArc will provide supplementary documentation which HDS can distribute to customers who purchase a WORM license.

* * * Indicates that confidential treatment has been sought for this information. 144

APPENDIX I

* * *

* * * Indicates that confidential treatment has been sought for this information. 145

EX-10.6A

Exhibit 10.6A

AMENDMENT NO. ONE

TO

MASTER DISTRIBUTION AGREEMENT

BY AND BETWEEN

BLUEARC CORPORATION AND

HITACHI DATA SYSTEMS CORPORATION

This Amendment No. One to the Master Distribution Agreement otherwise known as the Managed Inventory Services Amendment (“MISA”) is made as of the last date of signature (“Commencement Date”) of the Parties below by and between BlueArc Corporation, a Delaware corporation (“BlueArc”) and Hitachi Data Systems Corporation, a Delaware corporation (“HDS”) to modify the Master Distribution Agreement (“Agreement”) between the Parties dated November 14, 2006.

HDS	BlueArc
Hitachi Data Systems Corporation	BlueArc Corporation
/s/ John E. Mansfield	/s/ Rick Martig
Signature	Signature
John E. Mansfield	Rick Martig
Name	Name
Senior Vice President HDS	Chief Financial Officer
Title	Title
10/21/2008	10/14/2008
Date	Date

* * * Indicates that confidential treatment has been sought for this information

1

MISA Recitals

A. Under the Agreement, BlueArc supplies and HDS purchases Products to resell directly and through multiple distribution channels to End Users in the Territory.

B. In place of the forecast formula under Section 5.16 of the Agreement, the Parties desire that BlueArc implement a managed inventory process with Blue Arc’s contract manufacturer to permit HDS to purchase MISA Products in any supported configuration on BlueArc’s published price list (“Program”) under the terms below.

NOW, THEREFORE, the Parties agree as follows:

1. DEFINITIONS

1.1 “Base Quantity” means in any consecutive * * * period, * * * MISA Products in any configuration outlined in the BlueArc published price list and specified by HDS in the relevant PO. BlueArc will increase the Base Quantity in increments of * * * additional MISA Products commencing * * * or other mutually agreeable time frame after payment by HDS of a mutually agreed upon additional amount.

1.2 “Calendar Day (s)” means any day other than a United States federally mandated holiday.

1.3 “Deadline” means the * * * following the Commencement Date.

1.4 “End of Life” or “EOL” means the date on which a MISA Product ceases to be made generally available by BlueArc for sale to end users.

1.5 “MISA Effective Date” means that date on which BlueArc completed all necessary actions to implement and commence providing the Base Quantity of MISA Products pursuant to the terms of the MISA, which date must be no later the Deadline. BlueArc will notify HDS of its ability to commence the MISA and HDS will acknowledge such notification as the MISA Effective Date.

1.6 “Nonbinding Forecast” means a non-binding rolling * * * forecast of potential MISA Product orders broken down by model and hardware configuration.

1.7 “Non-performance Notice” means written notice from HDS to BlueArc stating BlueArc’s non-performance under Sections 4.2, 4.3, 4.4, 4.8 and 4.13.

2. TERM OF MISA.

2.1 This MISA will commence on the MISA Effective Date and, unless sooner terminated under this Section 2.1 or otherwise terminated under Section 16.1 of the Agreement, will remain effective for * * *, or (b) * * * of all MISA Products (“MISA Term”), whichever is sooner. HDS may not terminate this MISA without cause during the * * * of the MISA Term. Thereafter, HDS may terminate this MISA without cause, on not less than * * * written notice. For clarification purposes, this means that the minimum MISA Term is * * * unless terminated pursuant to Section 16.1 of the Agreement.

* * * Indicates that confidential treatment has been sought for this information

2

2.2 The Parties will start renewal negotiations of the MISA no later than * * * prior to of the end of MISA Term. If no such renewal is mutually agreed prior to the end of the MISA Term, Parties will revert to the original terms of the Agreement.

3. REPRESENTATIONS AND WARRANTS. BlueArc represents, warrants and covenants to HDS that:

3.1 no amendment to the Manufacturing Agreement is necessary for BlueArc to implement and commence the Program and perform its obligations under this Program no later than the Deadline,

3.2 on the MISA Effective Date and continuing for the remainder of the MISA Term, BlueArc will be able to administer the Program and comply with its obligations under this MISA,

3.3 as of the Commencement Date and the MISA Effective Date, BlueArc is not, and to its knowledge Sanmina is not, in material breach of the Manufacturing Agreement, and neither BlueArc nor Sanmina has provided the other with a written notice of a claim of breach of the Manufacturing Agreement,

3.4 BlueArc will notify HDS in writing at least * * * prior to the End of Life for any MISA Product.

4. MANAGED INVENTORY SERVICES.

4.1 Order Fulfillment for Base Quantity. Effective on the MISA Effective Date, Sections 5.16, 5.16.1, 5.16.2, 5.16.3 and 5.16.4 of the Agreement are entirely superseded by this Section 4 which will govern the Base Quantity ordering and supply commitments for the remainder of the MISA Term, as may be extended under Section 2 above. Section 5.16.5 has been satisfied prior to the commencement of the MISA Term. In addition, as specified in this MISA, certain Sections of Article 5 are modified as more specifically described in Section 4.2 below.

4.2 Ordering Process for Base Quantity. During the MISA Term, HDS may place POs for MISA Products up to the Base Quantity, and BlueArc must deliver these MISA Products, in the configuration outlined In the BlueArc published price list and specified by HDS in the PO that BlueArc accepts or must accept under Sections 4.2 and 4.3. HDS will generate POs pursuant to Section 5.5 of the Agreement. BlueArc will accept or reject HDS’ or a Regional Affiliate’s PO within * * * of receipt from HDS or Regional Affiliate respectively. If BlueArc does not reject a PO for up to the Base Quantity within * * * of its receipt, the PO will be deemed accepted. BlueArc may accept or reject a PO by electronic mail only. BlueArc must accept any such PO for up to Base Quantity, unless it contains: (a) incorrect part number(s), (b) pricing error, (c) incorrect maintenance term, (d) incorrect MISA Product quantity, (e) MISA Product in excess of Base Quantity, or (f) incorrect address (in the case of a drop shipment). If HDS subsequently submits a corrected PO for up to Base Quantity, then BlueArc must accept or reject the PO pursuant to this Section 4.2. For PO’s BlueArc accepts (or must accept) pursuant to this Section 4.2, BlueArc will ship the MISA Products EXW (Incoterms 2000) BlueArc’s manufacturing or warehousing facilities (“delivery”, “deliver” or “delivered”), pursuant to the PO, the Agreement and this MISA, however, delivery must occur no later than * * * after BlueArc’s receipt of such PO (or corrected PO) from either HDS or Regional Affiliate. For example, if BlueArc receives a PO for up to Base Quantity on * * *, the MISA Product must be configured and delivered by the * * * after such receipt.

* * * Indicates that confidential treatment has been sought for this information

3

Notwithstanding anything to the contrary contained in this MISA from and after the MISA Effective Date, HDS must purchase * * *, which may be ordered in any configuration, in any given * * *, during the MISA Term.

4.3 HDS Change or Cancellation of Base Monthly Quantity POs. If prior to delivery, HDS cancels a PO for a MISA Product subject to BlueArc’s Base Quantity delivery obligations, then the MISA Product (or parts inventory on hand) for the canceled PO will remain in inventory. If HDS changes a PO for a MISA Product subject to BlueArc’s Base Quantity delivery obligations, then BlueArc will not be obligated to deliver the MISA Product by the * * * following the date of receipt of the original PO. Instead, the acceptance and delivery requirements under Section 4.2 will apply and BlueArc will deliver the MISA Product no later than * * * following BlueArc’s receipt of such changed PO that BlueArc accepts (or must accept) under Section 4.2 above. If HDS so changes a PO subject to the Base Quantity, the MISA Product (or parts inventory on hand) for the changed PO will remain in inventory.

4.4 Allocation. Except as otherwise provided in this Section 4.4, if BlueArc cannot meet its full Base Quantity delivery commitments due to matters beyond its reasonable control (for example due to industry wide shortages in supply of the components used in producing the MISA Products or failures of its suppliers for reasons unrelated to a breach of BlueArc’s obligations to such supplier) and must therefore allocate Base Quantity, then BlueArc will allocate a portion of its inventory of MISA Products to HDS on a pro rata basis based on historical orders for the previous * * *. If this happens, monthly fees payable under Section 5.1 will be prorated based on the amount of Base Quantity BlueArc actually supplied during the allocation period. BlueArc will not be entitled to allocate any Base Quantity pursuant to this Section 4.4 for the first * * * BlueArc is unable to meet its delivery commitments as set forth in this Section. BlueArc will notify HDS in writing promptly after BlueArc learns of any such matter beyond its reasonable control and will also promptly notify HDS after such matter no longer exists.

4.5 Orders Exceeding Base Quantity. If at any time HDS submits POs for more than the Base Quantity, then BlueArc will use commercially reasonable efforts to accept those POs under Section 5.6 of the Agreement (as restated on Attachment A) and deliver those MISA Products, but makes no guarantee to HDS that BlueArc will be able to do so. Any acceptance of these incremental POs will not have any impact on the Base Quantity requirements.

4.6 Invoicing. BlueArc will invoice HDS or Regional Affiliate for all payments of amounts due under POs, Section 5.1 (b) of this MISA and all payments will be due and payable pursuant the terms of Section 5.12 of the Agreement

4.7 Agreement Terms Modified. From and after the MISA Effective Date, Sections 5.6, 5.7, 5.8, 5.9, 5.10, and 5.11 of the Agreement, which are amended and restated on Attachment A, will not apply to the Base Quantity that is subject the requirements under Sections 4.1 - 4.4 above.

4.8 Inventory. All parts inventory on hand and finished MISA Products inventory will be held at Sanmina’s facilities at BlueArc’s sole risk and expense, and HDS shall have no right to access such inventory. BlueArc will hold title and bear all risk of loss to such inventory until delivered pursuant to this MISA.

4.9 Nonbinding Forecast. As soon as possible following the Commencement Date, HDS will provide BlueArc with a Nonbinding Forecast provided, however, the Nonbinding Forecast or

* * * Indicates that confidential treatment has been sought for this information

4

HDS’ failure to provide it will not affect BlueArc’s obligations under Section 4.2, 4.3, and 4.4 above. HDS will provide such Non-Binding Forecast on a * * * throughout the term of this MISA.

4.10 Liquidated Damages. BlueArc understands that time is of the essence for MISA Effective Date and agrees that damages resulting from any delay in the MISA Effective Date will be difficult, if not impossible, to determine. Therefore, if BlueArc fails to meet the MISA Effective Date by the Deadline, BlueArc will be in breach of this MISA and will pay to HDS as fixed, agreed and liquidated damages, and not as a penalty, the sum of * * * per day that BlueArc delays the MISA Effective Date beyond the Deadline, as HDS’ sole and exclusive remedy for such breach.

4.11 Reporting. At the end of each calendar month and at the end of each week of each calendar month during the MISA Term, BlueArc will provide to HDS, electronic reports that include POs, shipments, capacity and inventory on hand. No later than * * * following HDS’ request, BlueArc will also provide HDS with daily electronic status reports. All such reports will be provided in the form attached as Attachment B.

4.12 Addition of New Products. New Products may be added to this MISA and included within the MISA Product definition upon mutual agreement by the Parties. HDS will pay mutually agreed on fees necessary to include such new Products in the MISA.

4.13 Excusable Delays. For clarification purposes, if BlueArc allocates Base Quantity and HDS’ monthly service fees are reduced as permitted under Section 4.4, then HDS may not issue a Non-Performance Notice for failure to supply the full Base Quantity. HDS may only issue a Non-Performance Notice if BlueArc fails to provide the allocated amount during the allocation period.

5. CONSIDERATION.

5.1 MISA. Subject to all other terms of this Section 5, in return for BlueArc’s Program administration under this MISA, HDS will pay BlueArc:

a. * * * within * * * following the Commencement Date, provided BlueArc is not otherwise in breach of any provision of Section 3 on the Commencement Date, and

b. * * * on the last day of each calendar month of the MISA Term starting on the last day of the * * * following the actual MISA Effective Date and continuing for the next * * *. For the succeeding * * *, the fee will be * * * to * * *. If the MISA Effective Date through the last day of the * * * constitutes a partial month, then HDS will pay a prorata portion of the monthly fee for such partial month as the first payment. HDS will not have any such monthly payment obligation on any of these dates if BlueArc is in material uncured breach of this MISA, in which case the applicable monthly payment otherwise due will not be payable and all future monthly payments will not be payable. Also, if HDS issues a Non-performance Notice, and BlueArc has not cured such non-performance within * * * from BlueArc’s receipt of the Non-Performance Notice, then HDS will reduce such monthly payment on a prorata basis for all days BlueArc was not performing from and after BlueArc’s receipt of the Non-performance Notice, based on a thirty (30) day month. Further, if HDS has issued * * * Non-Performance Notices during any consecutive * * * period, BlueArc waives any cure period for such * * * Non-performance Notice and any succeeding Non-performance Notices until BlueArc has not received a Non-Performance Notice for * * * following the date of the most recent Non-performance Notice (“Waiver Period”). For clarification purposes: (i) the Waiver Period applies whether or not BlueArc has cured * * * of the previous * * * non-performance

* * * Indicates that confidential treatment has been sought for this information

5

incidents, and (ii) during the Waiver Period, BlueArc must fully perform for a minimum of * * * (including following any subsequent Non-performance Notice received during the Waiver Period) before the cure period will be reinstated. During the Waiver Period the pro-rata monthly fee reduction for any incidences of non-performance will begin on the Non-performance Notice date.

As an example, if BlueArc receives * * * Non-performance Notices within * * * but has cured * * * such non-performance incidents, no fee deduction will occur. If HDS issues a * * * Non-Performance Notice within the next succeeding * * * following the * * * notice and regardless of whether BlueArc has cured the previous * * * non-performance incidents, BlueArc waives the cure period and HDS will reduce its payment for all days of non-performance from and after the date of the * * * Non-performance Notice on a prorata basis. If BlueArc performs for a minimum of * * * following any Non-Performance Notice, the cure period is automatically reinstated.

This Section 5.1 (b) contemplates that both MISA Products will be available for the entire MISA Term. If both such MISA Product(s) are EOL then the payments under this Section 5.1(b) will cease, effective on the EOL date of the last MISA Product to EOL hereunder, until Parties agree on the correct payments for the new situation.

5.2 Product Pricing. For avoidance of doubt, nothing in this MISA modifies in any way the Product pricing and payment terms for the purchase of Products as set forth in the following Sections: 5.1 and its subsections, 5.2, 5.3 and its subsections, 5.5, 5.12, 5.13, 5.14, and 5.15 provided, however, the Parties acknowledge that HDS has satisfied its obligations under Section 5.17 of the Agreement and its subsections.

6. MISCELLANEOUS. All capitalized terms not otherwise defined in this MISA will have the meaning ascribed to them in the Agreement. The provisions of this MISA shall prevail and govern over any conflicting provisions in the Agreement. Except as expressly modified by this MISA, the Agreement shall remain in full force and effect. From and after the Commencement Date, this MISA shall be incorporated into and become part of the Agreement.

* * * Indicates that confidential treatment has been sought for this information

6

Attachment A

Amended and Restated Sections of the Agreement

The following Sections of the Agreement are amended and restated in their entirety as set forth below: Sections 5.6, 5.7, 5.8, 5.9, 5.10, and 5.11. In addition, the sections below will apply ONLY to MISA Products in excess of BlueArc’s Base Quantity commitments and delivery obligations under Sections 4 of this MISA.

5.6 Purchase Order Acceptance. BlueArc will accept or reject HDS’ or a Regional Affiliate’s PO within * * * U.S. business days of receipt from HDS or the Regional Affiliate respectively. If BlueArc does not reject a PO within * * * U.S. business days of its receipt, the PO will be deemed accepted. BlueArc may accept or reject a PO by telephone, electronic mail, or any other method agreed to by the Parties.

5.7 Allocation. Subject to Section 4.4 above, if BlueArc is unable to meet any additional delivery commitments due to matters beyond its reasonable control (for example due to industry wide shortages in supply of the components used in producing the MISA Products or failures of its suppliers for reasons unrelated to a breach of BlueArc’s obligations to such supplier) and must therefore allocate the MISA Products, then BlueArc will allocate a portion of its inventory of MISA Products to HDS on a pro rata basis based on historical orders for the previous * * *.

5.8 Delivery. If BlueArc accepts the PO, BlueArc will ship the MISA Products EXW (Incoterms 2000) BlueArc’s manufacturing or warehousing facilities, pursuant to the PO terms and this MISA. BlueArc will use commercially reasonable efforts to meet HDS’ or a Regional Affiliate’s requested delivery date specified in the accepted PO for any MISA Products ordered, subject to HDS’ and its Regional Affiliates’ right to reschedule or cancel delivery as provided for in Section 5.11.

5.9 Notification of Anticipated Delay. If BlueArc anticipates or becomes aware that it will not be able to supply the ordered MISA Products on the delivery date set forth in the accepted PO for any reason, or that only a portion of the ordered MISA Products will be available to meet a delivery date, BlueArc shall notify HDS or the Regional Affiliate, as applicable, as soon as practicable after BlueArc has knowledge of the situation. The notification may be communicated by electronic mail to an email address provided by HDS which may be changed from time to time. If BlueArc is unable to meet the delivery date specified in the accepted PO, HDS shall have the option of (a) rescheduling the delivery date, (b) canceling the affected PO without incurring any reconfiguration, restocking or administrative fees or any other charges, or (c) working with BlueArc to jointly develop an alternative to resolve the late delivery of MISA Product. If BlueArc is required to expedite MISA Product pursuant to this provision, any additional expenses shall be paid by BlueArc.

5.10 Lead Times. Subject to the ramp-up mechanism specified in the definition of “Base Quantity” above, HDS and Regional Affiliates shall place their POs for MISA Products with BlueArc allowing for * * * lead time from the day HDS’ PO is accepted by BlueArc until the delivery date specified in the accepted PO.

5.11 Cancellation or Change of POs. Except as set forth in Section 5.9, HDS may, cancel delivery, or a part thereof, or cancel or change the terms of a PO, provided it is done no later than * * * prior to the delivery date set forth in the accepted PO. Purchases of MISA Product by HDS shall

* * * Indicates that confidential treatment has been sought for this information

7

be at HDS’ own risk and for its own account. Subject to Section 5.9, BlueArc reserves the right to reject changes to POs for any reason, however, HDS may delay the delivery dates of POs for up to * * *. If a PO is cancelled or changed by HDS in accordance with the foregoing HDS shall reimburse BlueArc for any actual, reasonable, direct, out of pocket costs incurred by BlueArc as a result of such change or cancellation; provided that such costs shall not exceed the original value of the PO.

* * * Indicates that confidential treatment has been sought for this information

8

Attachment B

Report Template

	Rolling * * * Supply Status
	Item Code	Period Start Date	Period End Date	Qty Shipped	Qty Remaining
1
2
3
4
5
6
7
8
9
10

* * * Indicates that confidential treatment has been sought for this information

9

EX-10.6B

Exhibit 10.6B

AMENDMENT NO. TWO

TO

MASTER DISTRIBUTION AGREEMENT

BY AND BETWEEN

BLUEARC CORPORATION AND

HITACHI DATA SYSTEMS CORPORATION

This Amendment No. Two (“Amendment 2”) to the Master Distribution Agreement is made as of August 31, 2009 (“Amendment 2 Effective Date”) by and between BlueArc Corporation, a Delaware corporation (“BlueArc”) and Hitachi Data Systems Corporation, a Delaware corporation (“HDS”) to modify the Master Distribution Agreement between the Parties dated November 14, 2006 (“Original Agreement”), as amended (collectively “Agreement”).

HDS	BlueArc
Hitachi Data Systems Corporation	BlueArc Corporation
/s/ Brian Householder
Signature	Signature
Brian Householder
Name	Name
Sr. Vice President Bus. Plan. & Dev.
Title	Title
9/29/2009
Date	Date

* * * Indicates confidential treatment has been sought for this information

1

RECITALS

A. WHEREAS, under the Agreement, BlueArc supplies and HDS purchases Products to resell directly and through multiple distribution channels to End Users in the Territory.

B. WHEREAS, BlueArc and HDS have previously entered into MISA amending the Original Agreement in order to implement a managed inventory process on the terms and as further described in the MISA.

C. WHEREAS, BlueArc and HDS wish to further amend the Agreement in order to (i) further modify certain terms set forth in the MISA, as further described below, (ii) allow HDS to make certain prepayments, and (iii) provide for a limited non-solicitation by BlueArc, all as further described and on the terms and conditions expressly set forth below.

NOW THEREFORE, in consideration of mutual covenants and promises set forth herein and for other good and valuable consideration, the receipt of which both Parties hereby acknowledge, HDS and BlueArc agree as follows:

1. REPRESENTATIONS AND WARRANTIES. Section 3 of the MISA is hereby deleted in its entirety and restated as follows:

“BlueArc represents, warrants and covenants to HDS that:

3.1 no amendment to the Manufacturing Agreement is necessary for BlueArc to implement and perform its obligations under this Amendment,

3.2 on the Amendment 2 Effective Date and continuing for the remainder of the Amendment 2 Term, BlueArc will be able to comply with its obligations under this Amendment 2,

3.3 as of the Amendment 2 Effective Date, BlueArc is not, and to its knowledge Sanmina is not, in material breach of the Manufacturing Agreement, and neither BlueArc nor Sanmina has provided the other with a written notice of a claim of breach of the Manufacturing Agreement.

3.4 BlueArc will notify HDS in writing at least * * * for any MISA Product

2. DEFINITIONS

Section 1.1 of the MISA (“Base Quantity”) is deleted and replaced with the following definition:

* * *

The following new definitions shall be added to the Agreement for the purposes only of this Amendment 2 provided however, Section 2.7 will refer to the entire Agreement:

2.2 * * *

* * * Indicates confidential treatment has been sought for this information

2

2.3 “Fees” mean any sums payable by HDS or Regional Affiliate under the Agreement, for the purchase of MISA Product, Software or Support.

2.4 * * *

2.5 * * *

2.6 “Interim Term” means the period commencing on the date this Amendment 2 is fully executed by the Parties (regardless of the Amendment 2 Effective Date) and ending ninety (90) days thereafter, unless mutually extended by written agreement of the Parties.

2.7 “MISA Product” means the BlueArc * * * Products resold as HNAS by HDS and the * * * Products as listed in the BlueArc published price list.

2.8 “Prepayment” means a single payment of * * *.

3. CONSIDERATION.

The following new provisions shall be added to the Agreement:

3.1 Amendment 2 Prepayments. Subject to all other terms of this Amendment 2, and provided there is no uncured Material Breach of BlueArc under the Agreement at any time from and after the Amendment 2 Effective Date until all Prepayments are made, HDS will make * * * Prepayments in the total amount of * * * to BlueArc as follows:

a. The first Prepayment (“Prepayment One”) will be due and payable, at HDS’ sole discretion as to the exact payment date, (but subject to the other conditions of this Amendment 2), at any time on or before * * *. Prepayment One will be an advance payment of Fees for orders placed by HDS pursuant to the Agreement commencing on * * * and ending on and including * * *.

b. The second Pre-payment (“Prepayment Two”) will be due and payable, at HDS’ sole discretion as to the exact payment date, (but subject to the other conditions of this Amendment 2), at any time between the period commencing on * * * and ending on and including * * *. Prepayment Two will be an advance payment of Fees for orders placed by HDS pursuant to the Agreement commencing on * * * and ending on and including * * *. If HDS has not placed orders under the Agreement for this period that are equal to Prepayment Two by * * *, then HDS will provide Blue Arc with a PO dated on or before * * * for the purchase of additional MISA Product, Software and/or Support, at HDS’ sole discretion in any combination, to make up the shortfall.

c. If (i) there are Severity 1 Problems reported by HDS to BlueArc (as defined in Exhibit B of the Original Agreement) determined by the Parties to be caused by any MISA Product (including without limitation any Software) distributed by HDS hereunder resulting in a lack of MISA Product availability to the End User or to the inability to use the MISA Product by an End User, and (ii) such Severity 1 Problems are attributable solely to BlueArc, or its suppliers, vendors or subcontractors, to the exclusion of third party components supplied by HDS and not authorized by BlueArc or modifications by HDS not authorized by BlueArc or combinations by HDS with any third party products not authorized by BlueArc, that but for such HDS components, modification or combination would not have resulted in

* * * Indicates confidential treatment has been sought for this information

3

such Severity 1 Problems, and (iii) such Severity 1 Problem lasts more than * * * from the notice of commencement date of such unavailability or non-use, then the timeline for any Prepayments not already made and the issuance date for any corresponding un-issued Warrants HDS may receive pursuant to this Amendment 2 will be adjusted in proportion to the timeline affected by such Severity 1 Problem. (As an example, if on * * *, Bluearc received notice that an existing End User had a Severity 1 Problem caused by firmware in Installed * * * Product that remains un-resolved for * * * from such notice, then the deadline for both Prepayments and the issue date for the Warrants would be extended * * * in the future.)

d. * * *.

e. BlueArc will invoice HDS for Prepayment One no later than * * *. BlueArc will invoice HDS for Prepayment Two no later than * * *. Subject to the payment by HDS of both Prepayments hereunder, all POs submitted by HDS to BlueArc commencing on * * * and ending and including * * * solely for MISA Product, Software, Support, and as applicable, pursuant to Section 3.1 (d), NRE funds, as well as any POs for shortfall as further described in Section 3.1 (a) and (b), will be considered paid in full up to the combined total amount of Prepayment One and Prepayment Two. For clarification, upon payment of each, Prepayment One and Prepayment Two, HDS will receive a credit against each Prepayment for the POs submitted during the applicable periods in this Amendment 2 for the items described in the preceding sentence.

3.2 HDS will provide POs for all ordered MISA Products, Software and Support to include the MISA Product description, quantity and sales price.

3.3 All MISA Products, Software and associated Support ordered under this Amendment 2 will be provided using the then most current Product pricing. MISA Products and Software will be shipped no later than * * * for Pre-Payment One and * * * for Pre-Payment Two, subject to any applicable Base Quantity and other limitations and processes set forth in the MISA, including Article 4 of the MISA.

3.4 In the event the Software and/or Support ordered by HDS are not in the configuration subsequently sold to End Users, HDS will have the option to trade in such Software and/or Support Services for the required configurations on a dollar for dollar basis credit against the applicable Prepayment with * * * and using * * *. If a MISA Product is not in the configuration subsequently sold to an End User, and provided HDS orders the MISA Product in the minimum configuration, HDS may upgrade this MISA Product to the End User required configuration. In this case, HDS will receive a credit against the applicable Prepayment for the increased amount payable to BlueArc for the required End User configuration. * * *.

3.5 Exhibit A to the Agreement will be amended under Refurbishment Services to limit the number of Evaluation Units conversion for sale to * * * units per * * *.

4. NON-SOLICITATION AND RELATED MODIFICATIONS.

The following new provisions shall be added to the Agreement:

* * * Indicates confidential treatment has been sought for this information

4

4.1 Non-solicitation. Notwithstanding anything to the contrary contained in the first sentence of Section 14.2.1 of the Original Agreement, during the Interim Term, BlueArc irrevocably agrees that neither BlueArc nor any of BlueArc’s officers, directors, employees, representatives, or agents will directly or indirectly: (a) solicit or initiate discussions, or solicit any proposal or offer from any third party other than HDS or an HDS Affiliate concerning or related to any Change in Control, or (b) participate in any discussions regarding or furnish any information with respect to, assist or participate in or facilitate in any other manner, any such BlueArc solicited or initiated discussion, proposal or offer, provided, however, all other terms of Sections 14.2 and 14.3 will apply during the Interim Term, including without limitation BlueArc’s notification and other obligations under Sections 14.2 and 14.3. The foregoing restrictions shall not apply if HDS or an HDS Affiliate makes an Offer during the Interim Term, in which case the first sentence of this Section 4.1 shall be of no further force or effect. For the avoidance of doubt, if, during the Interim Term, BlueArc receives from a third party an unsolicited offer concerning or related to a Change in Control, or if a third party (other than HDS or an HDS Affiliate) initiates discussions concerning or related to a Change in Control, BlueArc may participate in discussions with such third party regarding a Change in Control, including running an auction process subsequent to receiving such unsolicited offer, subject to the terms and conditions of Section 14.2 and 14.3. Notwithstanding anything to the contrary, BlueArc shall not accept any offer or proposal for a Change in Control without having provided to HDS the written notice described in the first sentence of Section 14.2.1 of the Agreement, in which case all other terms of Section 14.2 will apply

4.2 * * *.

4.3 * * *.

5. WARRANTS.

The following new provisions shall be added to the Agreement:

5.1 Subject to the last sentence of this Section 5.1, upon paying Prepayment One, HDS shall be entitled to a warrant in the form of Exhibit P-1 (attached hereto). The warrant shall entitle HDS to purchase up to $125,000 worth of fully paid and nonassessable Shares at an exercise price per Share to be determined by BlueArc’s Board of Directors, in good faith, to be the then Fair Market Value of a Share following the receipt by BlueArc, after the date hereof and on or before February 28, 2010, of a valuation report pertaining to the Company’s capital stock prepared by a reputable third-party valuation firm, which valuation report BlueArc hereby covenants to obtain no later than February 28, 2010. The warrant shall be issued to HDS immediately following such determination by BlueArc’s Board of Directors and shall be exercisable until the seventh (7th) anniversary of the date of its issuance.

5.2 Subject to the last sentence of this Section 5.2, upon paying Prepayment Two, HDS shall be entitled to an additional warrant in the form of Exhibit P-1 (attached hereto). The warrant shall entitle HDS to purchase up to $125,000 worth of fully paid and nonassessable Shares at the same exercise price per Share as set forth in the warrant issuable pursuant to Section 5.1 above. The warrant issuable pursuant to this Section 5.2 shall be issued to HDS, if at all, immediately following the later of (i) the payment of Prepayment Two and (ii) the determination by BlueArc’s Board of Directors of the exercise price of the warrant

* * * Indicates confidential treatment has been sought for this information

5

described in Section 5.1 above in accordance with the terms thereof, and shall be exercisable until the seventh (7th) anniversary of the date of its issuance.

For clarification, Exhibit P-1 attached hereto shall be added to the Agreement.

6. EXPIRATION. Section 4 of this Amendment 2 shall terminate and will not apply following the expiration of the Interim Term.

7. MISCELLANEOUS. All capitalized terms not otherwise defined in this Amendment 2 will have the meaning ascribed to them in the Agreement, as amended. The provisions of this Amendment 2 shall prevail and govern over any conflicting provisions in the Agreement. Except as expressly modified by this Amendment 2, the Agreement will remain in full force and effect From and after the Amendment 2 Effective Date this Amendment 2 shall be incorporated into and become part of the Agreement

* * * Indicates confidential treatment has been sought for this information

6

EXHIBIT P-1 WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

	Void after
Warrant No.:     -	, 201

BLUEARC CORPORATION

WARRANT TO PURCHASE SHARES

This Warrant is issued to Hitachi Data Systems, Inc. (“HDS”) by BlueArc Corporation, a Delaware corporation (the “Company”), in connection with revenues received from HDS.

1. PURCHASE OF SHARES. SUBJECT TO THE TERMS AND CONDITIONS HEREINAFTER SET FORTH, THE HOLDER OF THIS WARRANT IS ENTITLED, UPON SURRENDER OF THIS WARRANT AT THE PRINCIPAL OFFICE OF THE COMPANY (OR AT SUCH OTHER PLACE AS THE COMPANY SHALL NOTIFY THE HOLDER HEREOF IN WRITING), TO PURCHASE FROM THE COMPANY UP TO             FULLY PAID AND NONASSESSABLE SHARES OF THE COMPANY’S COMMON STOCK (EACH A “SHARE” AND COLLECTIVELY THE “SHARES”) AT AN EXERCISE PRICE OF $ PER SHARE (SUCH PRICE, AS ADJUSTED FROM TIME TO TIME, IS HEREIN REFERRED TO AS THE “EXERCISE PRICE”).

2. EXERCISE PERIOD. THIS WARRANT SHALL BE EXERCISABLE, IN WHOLE OR IN PART, DURING THE TERM COMMENCING ON THE ISSUANCE DATE OF THIS WARRANT AND ENDING AT 5 P.M. CALIFORNIA TIME ON              , 201 (THE “EXERCISE PERIOD”).

3. METHOD OF EXERCISE. WHILE THIS WARRANT REMAINS OUTSTANDING AND EXERCISABLE IN ACCORDANCE WITH SECTION 2 ABOVE, THE HOLDER MAY EXERCISE FROM TIME TO TIME, IN WHOLE OR IN PART, THE PURCHASE RIGHTS EVIDENCED HEREBY. SUCH EXERCISE SHALL BE EFFECTED BY:

(a) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(b) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

4. CERTIFICATES FOR SHARES; AMENDMENTS OF WARRANTS. UPON THE EXERCISE OF THE PURCHASE RIGHTS EVIDENCED BY THIS WARRANT, ONE OR MORE CERTIFICATES FOR THE NUMBER OF SHARES SO PURCHASED SHALL BE ISSUED AS SOON AS PRACTICABLE THEREAFTER, AND IN ANY EVENT WITHIN THIRTY (30) DAYS OF THE DELIVERY OF THE SUBSCRIPTION NOTICE UPON PARTIAL EXERCISE, THE COMPANY

* * * Indicates confidential treatment has been sought for this information

7

SHALL PROMPTLY ISSUE AN AMENDED WARRANT REPRESENTING THE REMAINING NUMBER OF SHARES PURCHASABLE THEREUNDER. ALL OTHER TERMS AND CONDITIONS OF SUCH AMENDED WARRANT SHALL BE IDENTICAL TO THOSE CONTAINED HEREIN.

5. ISSUANCE OF SHARES. THE COMPANY COVENANTS THAT (I) THE SHARES, WHEN ISSUED PURSUANT TO THE EXERCISE OF THIS WARRANT, WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE AND FREE FROM ALL TAXES, LIENS, AND CHARGES WITH RESPECT TO THE ISSUANCE THEREOF, (II) DURING THE EXERCISE PERIOD THE COMPANY WILL RESERVE FROM ITS AUTHORIZED AND UNISSUED COMMON STOCK SUFFICIENT SHARES IN ORDER TO PERFORM ITS OBLIGATIONS UNDER THIS WARRANT.

6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. THE NUMBER OF AND KIND OF SECURITIES PURCHASABLE UPON EXERCISE OF THJS WARRANT AND THE EXERCISE PRICE SHALL BE SUBJECT TO ADJUSTMENT FROM TIME TO TIME AS FOLLOWS:

6.1 Subdivisions, Combinations and Other Issuances. If the Company shall at any time before the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 6.1 shall become effective at the dose of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

6.2 Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock (including because of a change of control) of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 6.1 above), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time before the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately before such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

6.3 Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

* * * Indicates confidential treatment has been sought for this information

8

7. NO FRACTIONAL SHARES OR SCRIP. NO FRACTIONAL SHARES OR SCRIP REPRESENTING FRACTIONAL SHARES SHALL BE ISSUED UPON THE EXERCISE OF THIS WARRANT, BUT IN LIEU OF SUCH FRACTIONAL SHARES THE COMPANY SHALL MAKE A CASH PAYMENT THEREFOR ON THE BASIS OF THE EXERCISE PRICE THEN IN EFFECT.

8. REPRESENTATIONS OF THE COMPANY. THE COMPANY REPRESENTS THAT ALL CORPORATE ACTIONS ON THE PART OF THE COMPANY, ITS OFFICERS, DIRECTORS AND STOCKHOLDERS NECESSARY FOR THE SALE AND ISSUANCE OF THIS WARRANT HAVE BEEN TAKEN.

9. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. THE HOLDER REPRESENTS AND WARRANTS TO THE COMPANY AS FOLLOWS:

9.1 This Warrant and the Shares issuable upon exercise thereof are being acquired for its own account, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment and not with a view toward distribution or resale.

9.2 The Holder understands that the Warrant and the Shares have not been registered under the Act by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements of the Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Act or is exempted from such registration. The Holder further understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the “California Law”) by reason of their issuance in a transaction exempt from the qualification requirements of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent expressed above.

9.3 The Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant to the terms of this Warrant and of protecting its interests in connection therewith.

9.4 The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms of this Warrant.

9.5 The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act.

10. RESTRICTIVE LEGEND. THE SHARES (UNLESS REGISTERED UNDER THE ACT) SHALL BE STAMPED OR IMPRINTED WITH A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM:

(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH

* * * Indicates confidential treatment has been sought for this information

9

SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.

(b) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AMENDED AND RESTATED VOTING AGREEMENT AND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM THE COMPANY. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SECURITIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING IF REQUESTED BY THE UNDERWRITERS IN ACCORDANCE WITH SUCH AGREEMENT.

11. WARRANTS TRANSFERABLE. SUBJECT TO COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS SECTION 11, THIS WARRANT AND ALL RIGHTS HEREUNDER ARE TRANSFERABLE, WITHOUT CHARGE TO THE HOLDER HEREOF (EXCEPT FOR TRANSFER TAXESV UPON SURRENDER OF THIS WARRANT PROPERLY ENDORSED OR ACCOMPANIED BYWRITTEN INSTRUCTIONS OF TRANSFER, WITH RESPSCT TO ANY OFFER SALE OR OTHER DISPOSITION OF THIS WARRANT OR ANY SHARES ACQUIRED PURSUANT TO THE EXERCISE OF THIS WARRANT BEFORE REGISTRATION OF SUCH WARRANT OR SHARES, THE HOLDER HEREOF AGREES TO GIVE WRITTEN NOTICE TO THE COMPANY PRIOR THERETO, DESCRIBING BRIEFLY THE MANNER THEREOF-TOGETHER WITH A WRITTEN OPINION OF SUCH HOLDER’S COUNSEL, OR OTHER EVIDENCE, IF REQUESTED BY THE COMPANY, TO THE EFFECT THAT SUCH OFFER, SALE OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION OR QUALIFICATION (UNDER THE ACT AS THEN IN EFFECT OR ANY FEDERAL OR STATE SECURITIES LAW THEN IN EFFECT) OF THIS WARRANT OR THE SHARES AND INDICATING WHETHER OR NOT UNDER THE ACT CERTIFICATES FOR THIS WARRANT OR THE SHARES TO BE SOLD OR OTHERWISE DISPOSED OF REQUIRE ANY RESTRICTIVE LEGEND AS TO APPLICABLE RESTRICTIONS ON TRANSFERA8ILITY IN ORDER TO ENSURE COMPLIANCE WITH SUCH LAW. UPON RECEIVING SUCH WRITTEN NOTICE AND REASONABLY SATISFACTORY OPINION OR OTHER EVIDENCE, IF SO REQUESTED, THE COMPANY, AS PROMPTLY AS PRACTICABLE, SHALL NOTIFY SUCH HOLDER THAT SUCH HOLDER MAY SELL OR OTHERWISE DISPOSE OF THIS WARRANT OR SUCH SHARES, ALL IN ACCORDANCE WITH THE TERMS OF THE NOTICE DELIVERED TO THE COMPANY. IF A DETERMINATION HAS BEEN MADE PURSUANT TO THIS SECTION 11 THAT THE OPINION OF COUNSEL FOR THE HOLDER OR OTHER EVIDENCE IS NOT REASONABLY SATISFACTORY TO THE COMPANY. THE COMPANY SHALL SO NOTIFY THE HOLDER PROMPTLY WITH DETAILS THEREOF AFTER SUCH DETERMINATION HAS BEEN MADE. EACH CERTIFICATE REPRESENTING THIS WARRANT OR THE SHARES TRANSFERRED IN ACCORDANCE WITH THIS SECTION 11 SHALL BEAR A LEGEND AS TO THE APPLICABLE RESTRICTIONS ON TRANSFERABILITY IN ORDER TO ENSURE COMPLIANCE WITH SUCH LAWS, UNLESS IN THE AFORESAID OPINION OF COUNSEL FOR THE HOLDER, SUCH LEGEND IS NOT REQUIRED. IN ORDER

* * * Indicates confidential treatment has been sought for this information

10

TO ENSURE COMPLIANCE WITH SUCH LAWS, THE COMPANY MAY ISSUE STOP TRANSFER INSTRUCTIONS TO ITS TRANSFER AGENT IN CONNECTION WITH SUCH RESTRICTIONS.

12. RIGHTS OF STOCKHOLDERS. NO HOLDER OF THIS WARRANT SHALL BE ENTITLED, AS A WARRANT HOLDER, TO VOTE OR RECEIVE DIVIDENDS OR BE DEEMED THE HOLDER OF THE SHARES 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 HEREIN BE CONSTRUED TO CONFER UPON THE HOLDER OF THIS WARRANT, AS SUCH, ANY OF THE RIGHTS OF A STOCKHOLDER OF THE COMPANY OR ANY RIGHT TO VOTE FOR THE ELECTION OF DIRECTORS OR UPON ANY MATTER SUBMITTED TO STOCKHOLDERS AT ANY MEETING THEREOF, OR TO GIVE OR WITHHOLD CONSENT TO ANY CORPORATE ACTION (WHETHER UPON ANY RECAPITALIZATION, ISSUANCE OF STOCK, RECLASSIFICATION OF STOCK, CHANGE OF PAR VALUE, CONSOLIDATION, MERGER, CONVEYANCE, OR OTHERWISE) OR TO RECEIVE NOTICE OF MEETINGS, OR TO RECEIVE DIVIDENDS OR SUBSCRIPTION RIGHTS OR OTHERWISE UNTIL THE WARRANT SHALL HAVE BEEN EXERCISED AND THE SHARES PURCHASABLE UPON THE EXERCISE HEREOF SHALL HAVE BECOME DELIVERABLE, AS PROVIDED HEREIN.

13. NOTICES. ALL NOTICES AND OTHER COMMUNICATIONS REQUIRED OR PERMITTED HEREUNDER SHALL BE IN WRITING, SHALL BE EFFECTIVE WHEN GIVEN, AND SHALL IN ANY EVENT BE DEEMED TO BE GIVEN UPON RECEIPT OR, IF EARLIER, (A) FIVE (5) DAYS AFTER DEPOSIT WITH THE U.S. POSTAL SERVICE OR OTHER APPLICABLE POSTAL SERVICE, IF DELIVERED BY FIRST CLASS MAIL, POSTAGE PREPAID, (B) UPON DELIVERY, IF DELIVERED BY HAND, (C) ONE BUSINESS DAY AFTER THE BUSINESS DAY OF DEPOSIT WITH FEDERAL EXPRESS OR SIMILAR OVERNIGHT COURIER, FREIGHT PREPAID OR (D) ONE BUSINESS DAY AFTER THE BUSINESS DAY OF FACSIMILE TRANSMISSION, IF DELIVERED BY FACSIMILE TRANSMISSION WITH COPY BY FIRST CLASS MAIL, POSTAGE PREPAID, AND SHALL BE ADDRESSED (I) IF TO THE HOLDER, AT THE HOLDER’S ADDRESS AS SET FORTH ON THE SCHEDULE OF INVESTORS TO THE NOTE PURCHASE AGREEMENT, AND (II) IF TO THE COMPANY, AT THE ADDRESS OF ITS PRINCIPAL CORPORATE OFFICES (ATTENTION: PRESIDENT), WITH A COPY TO MICHAEL DANAHER, WILSON SONSINI GOODRICH & ROSATI, P.C., 650 PAGE MILL ROAD, PALO ALTO, CA 94304 (WHICH COPY SHALL NOT BE DEEMED TO CONSTITUTE NOTICE TO THE COMPANY) OR AT SUCH OTHER ADDRESS AS A PARTY MAY DESIGNATE BY TEN DAYS ADVANCE WRITTEN NOTICE TO THE OTHER PARTY PURSUANT TO THE PROVISIONS ABOVE.

14. GOVERNING LAW. THIS WARRANT AND ALL ACTIONS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS OF CALIFORNIA OR OF ANY OTHER STATE.

15. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. UNLESS OTHERWISE PROVIDED HEREIN, THE RIGHTS AND OBLIGATIONS Of THE COMPANY, OF THE HOLDER OF THIS WARRANT AND OF THE HOLDER OF THE SHARES ISSUED UPON EXERCISE OF THIS WARRANT, SHALL SURVIVE THE EXERCISE OF THIS WARRANT.

(Signature Page Follows)

* * * Indicates confidential treatment has been sought for this information

11

Issued as of September __, 2009.

BlueArc Corporation

By:

Its:

* * * Indicates confidential treatment has been sought for this information

12

EXHIBIT A

NOTICE OF EXERCISE

TO: BlueArc Corporation

   50 Rio Robles Drive

   San Jose, CA 94034

Attention: President

1. The undersigned hereby elects to purchase                  shares of Common Stock of BlueArc Corporation (the “Shares”) pursuant to the terms of the attached Warrant.

2. The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

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

(Name)

(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations and warranties of the undersigned set forth in Section 9 of the attached Warrant (including Section 9.5 thereof) are true and correct as of the date hereof.

	(Signature)
	(Name)
(Date)	(Title)

* * * Indicates confidential treatment has been sought for this information

13

EXHIBIT B

FORM OF TRANSFER

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                                                                       the right represented by the attached Warrant to purchase                      shares of Common Stock of BLUEARC CORPORATION to which the attached Warrant relates, and appoints                      Attorney to transfer such right on the books of BLUEARC CORPORATION, with full power of substitution in the premises.

Dated:                     

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

Address:

Signed in the presence of:

* * * Indicates confidential treatment has been sought for this information

14

EX-10.6C

Exhibit 10.6C

AMENDMENT NO. THREE

TO

MASTER DISTRIBUTION AGREEMENT

BY AND BETWEEN

BLUEARC CORPORATION AND

HITACHI DATA SYSTEMS CORPORATION

This Amendment No. Three (“Amendment 3”) is made as of March 19, 2010 (“Amendment 3 Effective Date”) by and between BlueArc Corporation, a Delaware corporation (“BlueArc”) and Hitachi Data Systems Corporation, a Delaware corporation (“HDS”) to modify the Master Distribution Agreement between the Parties dated November 14, 2006 (“Original Agreement”), as amended (collectively “Agreement”).

HDS	BlueArc
Hitachi Data Systems Corporation	BlueArc Corporation
/s/ Brian Householder	/s/ Michael B. Gustafson
Signature	Signature
Brian Householder	Michael B. Gustafson
Name	Name
Sr. Vice President Bus. Plan. & Dev.	President & CEO
Title	Title

*  *  * Indicates that confidential treatment has been sought for this information

RECITALS

A. WHEREAS, under the Agreement, BlueArc supplies and HDS purchases Products for HDS to resell directly and through multiple distribution channels to End Users in the Territory.

B. WHEREAS, BlueArc and HDS wish to amend the Agreement in order to change the payment structure and reporting when ordering Products as further described and on the terms and conditions expressly set forth below and provide for additional rights and remedies for the Parties related to such payment structure.

NOW THEREFORE, in consideration of mutual covenants and promises set forth herein and for other good and valuable consideration, the receipt of which both Parties hereby acknowledge, HDS and BlueArc agree as follows:

1. Amendment 3 Term.

1.1 This “Amendment 3 Term” will become effective on the Amendment 3 Effective Date, continue in full force and effect, and end on March 31, 2012, unless sooner terminated by either Party for the other Party’s uncured Material Breach of the Agreement pursuant to Section 16.1 of the Original Agreement. Concurrently on the Amendment 3 Effective Date, the Initial Term of the Agreement will be extended through March 31, 2012. For clarification purposes, Amendment 3 will expire or otherwise terminate on or before March 31, 2012 under these terms, regardless of whether the Original Agreement (as amended from time to time other than by this Amendment 3) is further renewed pursuant to Section 1 of the Original Agreement or otherwise. For clarification, (i) following the expiration of this Amendment 3, (ii) upon the termination of this Amendment 3 by BlueArc for HDS’ uncured Material Breach, or (iii) upon the termination of this Amendment 3 by HDS other than for uncured Material Breach of BlueArc as permitted hereby, the Original Agreement shall remain in full force and effect in accordance with its terms.

1.2 If BlueArc reasonably expects to undertake an initial public offering of its securities (“IPO”), then BlueArc may, in its sole discretion, notify HDS in writing no less than * * * prior to making any applicable filings for the IPO and, subject to the terms and conditions of the Agreement and all applicable amendments thereto (including termination rights set forth in Section 3.10 in the Original Agreement), unilaterally elect in such notice to extend the Initial Term of the Original Agreement, but not this Amendment 3 Term (which shall expire on or before March 31, 2012 as described in Section 1.1 above), through July 31, 2013. If, after such election, BlueArc in fact does not file a registration statement to sell securities of BlueArc to the public, or such registration is filed but subsequently withdrawn or effectiveness thereof is not diligently sought by BlueArc, the extension elected in this Section 1.2 may be invalidated upon written notice by HDS to BlueArc, in which case the Agreement will expire on the later of the date the Agreement would otherwise expire if not for such election or the date such notice is given by HDS to BlueArc.

1

*  *  * Indicates that confidential treatment has been sought for this information

2. HDS Commitments.

2.1 Selected Definitions. For purposes of this Amendment 3, the following terms will have the following meanings.

“Particular Quarter” means the Quarter in which True-Ups are being applied to satisfy the Quarterly Commitment or Quarterly Target.

“Pipeline Purchase” means an order for Product by HDS or its Regional Affiliate, with a PO, for inventory in anticipation (as determined by HDS) of pipeline transactions, including without limitation large End User transactions and Channel Partner opportunities.

“Product Orders” mean (i) Product ordered by HDS or Regional Affiliate with a PO for any of the following purposes notwithstanding anything to the contrary contained in the Original Agreement: (a) End User orders of Product, (b) Channel Partner orders of Product for End Users, (c) End User and Channel Partner Product evaluations, (d) Lab equipment for testing, training, demonstration and support by HDS and HDS Affiliates, (e) HDS and HDS Affiliates’ Product Support requirements and obligations pursuant to the Original Agreement, (f) Spares, and (g) Pipeline Purchase , Quarter” means a successive three (3) calendar month period commencing on April 1, July 1, October 1, or January 1. The Quarter commencing on April 1 is “Q1”, the Quarter commencing on July 1 is “Q2”, the Quarter commencing on October 1 is “Q3” and the Quarter commencing on January 1 is “Q4”.

“Quarterly Commitment” means, for the Quarters identified in the left-hand column of the table below, the respective amounts set forth in the right-hand column of the table below.

Quarter	Quarterly Commitment
Q1, FY 10 (April 1, 2010 through June 30, 2010)	* * *
Q2, FY 10 (July 1, 2010 through September 30, 2010)	* * *
Q3, FY 10 (October 1, 2010 through December 31, 2010)	* * *
Q4, FY 10 (January 1, 2011 through March 31, 2011)	* * *
Q1, FY 11 (April 1, 2011 through June 30, 2010)	* * *
Q2, FY 11 (July 1, 2011 through September 30, 2011)	* * *

“Quarterly Commitment, As Adjusted” means Quarterly Commitment which may be adjusted pursuant to section 2.3.3 and section 2.3.7.

2

*  *  * Indicates that confidential treatment has been sought for this information

“Quarterly Deadline” means the last day of the first calendar month immediately following the Quarter just ended. Specifically, Quarterly Deadlines occur on July 31, October 31, January 31 and April 30.

2.2 * * *

2.3 True-Up and Satisfaction of Commitments.

HDS shall satisfy the Quarterly Commitment, As Adjusted for each Quarter through POs issued for Product Orders for the Particular Quarter, and HDS’ use of any other credits and debits from the immediately preceding or succeeding Quarters as specified under Sections 2.2, 2.3.1, 2.3.2, 2.3.4 or 2.3.5 (collectively “True-Up”). True-Ups are subject to the additional limitations, obligations and clarifications specified under Sections 2.3.6, 2.3.8, and 2.3.9 below. Therefore, the Parties will use the True-Up processes to satisfy HDS’ Quarterly Commitment, As Adjusted, for a Particular Quarter. Because HDS may exercise certain Quarterly Commitment adjustment options under this Section 2.3, the date for determining whether HDS has met its Quarterly Commitment, As Adjusted, for a Particular Quarter pursuant to this Section 2 will be a date no later than the Quarterly Deadline. Schedule A attached provides examples of some True-Up mechanisms used in various combinations, where such combinations are permitted under this Section 2.

2.3.1 Overages. If HDS Product Orders exceed its Quarterly Commitment, As Adjusted (“Overage”) for any Particular Quarter, then such excess will be applied toward the achievement of the Quarterly Commitment, As Adjusted for the immediately succeeding Quarter only, and no other subsequent Quarters. In no event, however, may an Overage applied to the immediately succeeding Quarter exceed the Quarterly Commitment, As Adjusted for such immediately succeeding Quarter. The Quarterly Commitment, As Adjusted for such immediately succeeding Quarter is the limit on the amount of Overage that HDS may apply to such Quarter from the Quarter just ended, and the remainder of Overage, if any, may not be applied to any other Quarter.

2.3.2 * * * Delay Option. For any Particular Quarter, HDS, in its sole discretion, may elect to include, the POs issued for Product Orders for the * * * immediately following the Particular Quarter with the POs issued for Product Orders for that Particular Quarter (“* * * Delay Option”). HDS will use commercially reasonable efforts to notify BlueArc in writing of HDS’ exercise of the * * * Delay Option at least * * * prior to end of the Particular Quarter for which it will apply. If HDS exercises its * * * Delay Option, Product POs for the * * * immediately following the Particular Quarter will count towards the achievement of the Quarterly Commitment, As Adjusted for that Particular Quarter up to the amount required to achieve such Quarterly Commitment, As Adjusted. Any additional Product POs will count towards the achievement of the Quarterly Commitment, As Adjusted for the Quarter

3

*  *  * Indicates that confidential treatment has been sought for this information

in which the * * * occurs. There is no limit on the number of times HDS may elect to utilize the * * * Delay Option during the Amendment 3 Term (other than once for each Quarter).

2.3.3 * * * Roll Over Option. HDS, in it is sole discretion, may elect to delay up to * * * of the Quarterly Commitment to the immediately succeeding Quarter (“Roll Over”), subject to the limitation specified in this Section 2.3.3. To exercise the Roll Over for any Particular Quarter, HDS must so notify BlueArc in writing no later than * * * the Particular Quarter and indicate the Roll Over amount in the notice. If HDS, however, has applied an Overage to a Particular Quarter that exceeds * * * of the Quarterly Commitment for such Quarter, then HDS cannot apply a Roll Over to that Quarter’s Quarterly Commitment. An example of the Roll Over option used concurrently with the * * * Delay Option is also set forth on Schedule A, Example 5, Q4. For clarification purposes, if the Overage applied to a Particular Quarter was less than * * * of that Particular Quarter’s Quarterly Commitment, then the amount equal to the difference between * * * of the Quarterly Commitment for such Particular Quarter and the Overage amount may be used as a Roll Over(see Schedule A, Example 1 Q7).

2.3.4 Pipeline Purchase Option. HDS may elect to make one or more Pipeline Purchases to achieve its Quarterly Commitments, As Adjusted; provided that the following conditions are met:

a. HDS will issue a PO for a Pipeline Purchase, if at all, to achieve its Quarterly Commitment, As Adjusted, for a Particular Quarter (“Pipeline Purchase Quarter”), during the calendar month immediately following such Pipeline Purchase Quarter (“Pipeline Purchase PO Month”), but in no event later than the Quarterly Deadline for the Pipeline Purchase Quarter; provided that any POs issued in the last * * * of the Pipeline Purchase PO Month may only be for Product that is Software, unless otherwise agreed between the Parties.

2.3.5 Monetary True-Up. To achieve the Quarterly Commitment, As Adjusted, for a Particular Quarter, HDS may elect as part of the True-Up to pay BlueArc monetary compensation equal to * * *of the shortfall amount required to achieve such Quarterly Commitment As Adjusted for the Particular Quarter subject to the limits set forth in Sections 2.3.5 (a) – (c) below (“Monetary True-Up”). For clarification purposes, Monetary True-up shall be counted towards attainment of Quarterly Commitment, As Adjusted at the amount before the monetary compensation formula (specifically, * * * of the shortfall amount) is applied. An example of the Monetary True-Up is set forth on Schedule A Example 5, Q5.

To exercise the Monetary True-Up option, HDS will notify BlueArc in writing stating both the Quarterly Commitment or Quarterly Target shortfall and the resulting Monetary True-Up, to permit a commercially reasonable time for BlueArc to prepare an invoice for such Monetary True-Up before the Quarterly Deadline. The exact timing of HDS notice is an operational issue to be mutually agreed upon by the

4

*  *  * Indicates that confidential treatment has been sought for this information

Parties’ operational teams following the Amendment 3 Effective Date. BlueArc may invoice HDS for the Monetary True-up after the Quarterly Deadline, provided however that if BlueArc does so HDS will not be in breach of its obligations under Section 2.3. HDS will pay Monetary True-Up invoices under the payment terms of the Agreement. HDS will have the following additional restrictions on the use of Monetary True-Up.

a. Monetary True-Up may not exceed * * * of the Quarterly Commitment, As Adjusted for the Particular Quarter. For clarification purposes, * * * may only be multiplied against a shortfall number between * * * of the Quarterly Commitment, As Adjusted.

b. HDS may use Monetary True-Up for up to, but no more than, * * * during the Amendment 3 Term, but such  *  *  * may not be successive.

c. For a Particular Quarter, Monetary True-Up may not be used in combination with a Roll-Over in such Quarter in which up to * * * of Quarterly Commitment is deducted. If HDS has previously elected to use a Roll Over in any amount that defers a portion of the Quarterly Commitment out of a Particular Quarter, and then subsequently HDS elects Monetary True-Up for that Quarter, then the Roll Over election that had been made previously will be reversed entirely, and the Monetary True-Up will be based on the original Quarterly Commitment for that Particular Quarter.

2.3.6 Additional Restrictions on the True-up. For the Quarter ending September 30, 2011 (Q2, FY11), HDS may True-Up, if at all, only using the * * * Delay Option, Overages from the immediately preceding Quarter, Pipeline Purchase and/or Monetary True-Up. A Roll Over may not be used to True-Up for such Quarter. For clarification purposes, any Overages earned during the Quarter ending September 30, 2011 may be applied to the immediately succeeding Quarter to count towards the Quarterly Target, As Adjusted (as defined in Section 3.1 below).

2.3.7 Severity 1 Issues. If (a) there are Severity 1 Problems reported by HDS to BlueArc (as defined in Exhibit B of the Original Agreement) determined by the Parties to be caused by any generally available Product (including without limitation any Software) distributed by HDS , and (b) such Severity 1 Problems are attributable solely to BlueArc, or its suppliers, vendors or subcontractors, to the exclusion of: (i) third party components supplied by HDS or (ii) modifications by HDS or (iii) combinations by HDS with any third party products, that but for such HDS components, modification or combination would not have resulted in such Severity 1 Problems, and (c) such Severity 1 Problem lasts more than * * * from the receipt by BlueArc of the Support Communication Template for the Severity 1 Problem, then the Quarterly Commitment or the Quarterly Target for the Particular Quarter in which such * * * occurs will be decreased by * * *. In addition, for each additional consecutive * * * period during which the Severity 1 Problem is not solved by

5

*  *  * Indicates that confidential treatment has been sought for this information

BlueArc, the Quarterly Commitment or the Quarterly Target for that Particular Quarter will be reduced by an additional * * *. For example, if on October 1, 2010 BlueArc received the Support Communication Template for a Severity 1 Problem caused by firmware in installed Product that remains un-resolved for * * * from such notice date, then Quarterly Commitment of * * * would be reduced * * * to equal * * * (the Quarterly Commitment, As Adjusted).

2.3.8 Additional True-Up Clarifications. Notwithstanding anything set forth in Section 2.3, HDS must satisfy: (i) no less than * * * of the Quarterly Commitment in any given Quarter during the Amendment 3 Term, and (ii) no less than * * * of the sum of its Quarterly Commitments, As Adjusted for any * * * consecutive Quarters during the Amendment 3 Term. For clarification purposes, item 2 above will always be true if HDS performs a True-Up by the mechanisms defined in section 2.

2.3.9 Survival and Cessation of Quarterly Commitments. HDS Quarterly Commitments under this Section 2 will survive the completion by BlueArc of an initial public offering of its securities (“IPO”). Upon the consummation of any Change in Control, including the consummation of a Change in Control following (not as a part of) an IPO, all of HDS Quarterly Commitments under this Section 2 will cease beginning with the Quarter in which such consummation of the Change in Control occurs; provided that any payments accrued prior thereto shall be payable by HDS in accordance with the terms hereof.

2.4 Total Commitment Payment. If at any time, HDS elects, in its sole discretion, not to satisfy its Quarterly Commitments As Adjusted pursuant to Section 2.3 for a Particular Quarter, then HDS will pay BlueArc all the remaining Quarterly Commitments in one payment (“Total Commitment Payment”) and subject to the surviving obligations set forth in Section 13, this Amendment will terminate effective on the date that HDS makes the Total Commitment Payment to BlueArc. Remaining Quarterly Commitments equal the sum of the shortfall to achieve the Quarterly Commitment, As Adjusted for the Particular Quarter when HDS makes the foregoing election, plus the sum of all subsequent Quarterly Commitments, As Adjusted. For example, if HDS elects to make a Total Commitment Payment in Q1, FY11, at a point in time within that Particular Quarter where the True-Up would be * * *, then the Total Commitment Payment is * * * plus the full Quarterly Commitment, As Adjusted for Q2, FY11. Any remaining prepayment balance of the funds paid by HDS pursuant to Section 10 below (“Prepayment”) will be applied towards the Total Commitment Payment. HDS may make a Total Commitment Payment without any prior written notice to BlueArc.

2.5 Termination Fee.

2.5.1 For purposes of this Amendment 3, the following terms will have the following meanings.

6

*  *  * Indicates that confidential treatment has been sought for this information

“Large True-Up” means collectively the Pipeline Purchases in the Pipeline Purchase PO Month which, in the aggregate, exceed * * * of the Quarterly Commitment. For clarification, any amount in excess of what is required to achieve such Quarterly Commitment, As Adjusted, shall not constitute part of a Large True-Up.

“Large True-Up Notice” means a written notice by HDS to BlueArc, on or before the Quarterly Deadline, stating that HDS has made a Large True-Up, or a Pipeline Purchase greater than * * *, whichever is greater, for a Particular Quarter.

“Termination Fee” means the following sums in the right hand column corresponding to the Quarter in which the Termination Fee is made.

Quarter	Termination Fee
Q1, FY10 (April 1, 2010 through June 30, 2010)	* * *
Q2, FY10 (July 1, 2010 through September 30, 2010)	* * *
Q3, FY10 (October 1, 2010 through December 31, 2010)	* * *
Q4, FY10 (January 1, 2011 through March 31, 2011)	* * *
Q1, FY11 (April 1, 2011 through June 30, 2010)	* * *
Q2, FY11 (July 1, 2011 through September 30, 2011)	* * *

2.5.2 * * *

2.5.3 HDS may also terminate this Amendment 3 in Q1, FY11 or Q2, FY11 by paying a Termination Fee (as described below), subject to the following conditions precedent:

(a) In either Q4, FY10 or Q1, FY11 (for the purposes of this Section, each, the “Particular Quarter”), HDS makes a Large True-Up, and

(b) HDS provides BlueArc a Large True-Up Notice for the Particular Quarter by the Quarterly Deadline, and

(c) the Particular Quarter has ended.

In this case, the Termination Fee will be the amount set forth in the table above corresponding to the first Quarter following the Particular Quarter. For clarification

7

*  *  * Indicates that confidential treatment has been sought for this information

purposes, HDS can make a Large True-Up for Q4, FY10, provide a Large True-Up Notice in Q1 , FY11 and pay a Termination Fee of * * * at any time in Q1, FY11, commencing on the first day Q1, FY11.

2.5.4 HDS, in its sole discretion, may exercise its rights pursuant to Sections 2.5.2 and 2.5.3 at any time permitted thereunder on written notice to BlueArc (“Termination Notice”). If HDS so delivers a Termination Notice to BlueArc, then subject to the surviving obligations set forth in Section 13 below, then Amendment 3 will terminate effective on the later of the date: (a) HDS delivers such Termination Notice or (b) BlueArc receives the Termination Fee. Any remaining Prepayment balance will be applied towards the Termination Fee paid by HDS pursuant to this Section 2.5.

2.6 Limitation on HDS Use of True-Ups and Termination Fee Trigger.

If HDS makes a Large True-Up in any * * *consecutive Quarters during the Amendment 3 Term (following and not including Q1, FY10), BlueArc may, in its sole discretion, terminate this Amendment 3 by notifying HDS in writing of BlueArc’s election and requiring HDS to pay the Termination Fee (“Trigger Notice”), subject to the following conditions (collectively, “Termination Fee Trigger”):

(a) BlueArc has issued a Trigger Notice no later than * * * business days following the Quarterly Deadline of the Quarter for which HDS has made the * * *consecutive Large True-Up, and

(b) HDS makes another Large True-Up in the Quarter following the * * * Quarters that were the subject of the Trigger Notice (“* * * Large True-Up Quarter”), and

(c) The * * * Large True-Up Quarter has ended.

For clarification purposes, if HDS made a Large True-Up * * *, BlueArc sent to HDS a Trigger Notice no later than the * * * of the * * * month in Q4, FY10 and HDS made another Large True-Up for * * *, then in * * *, BlueArc may terminate this Amendment 3 upon sending HDS a BlueArc Termination Notice (as defined below) and require HDS to pay a Termination Fee (without any True-Up) for Q1, FY11 equal to * * *.

2.6.1 BlueArc, in its sole discretion, may exercise its rights pursuant to Section 2.6 no later than the Quarterly Deadline of the * * * Large True-Up Quarter, by notifying HDS in writing that HDS must pay a Termination Fee pursuant to Section 2.6 (“BlueArc Termination Notice”). * * *. Subject to the surviving obligations under Section 13, this Amendment 3 will terminate effective on the date HDS pays BlueArc the Termination Fee. The remaining Prepayment balance will be applied towards the Termination Fee paid by HDS pursuant to this Section 2.6.

2.6.2 BlueArc’s failure to send a Trigger Notice by the * * * following the applicable Quarterly Deadline pursuant to Section 2.6(a) will result in a waiver of

8

*  *  * Indicates that confidential treatment has been sought for this information

BlueArc’s right to require a Termination Fee Trigger process pursuant to Section 2.6 and BlueArc must wait for another immediately succeeding consecutive Quarter where HDS has made a Large True-Up. For clarification purposes in the example in Section 2.6 above, BlueArc would need to wait until the * * * to send the Trigger Notice.

3. HDS Targets.

3.1 Selected Definitions. For purposes of this Amendment 3, the following terms will have the following meanings.

“Quarterly Target” means, for the Quarters identified in the left-hand column of the table below, the respective amounts set forth in the right-hand column of the table below.

Quarter	Quarterly Target
Q3, FY11 (October 1, 2011 through December 31, 2011)		*	* *
Q4, FY11 (January 1, 2012 through March 31, 2011)		*	* *

“Quarterly Target, As Adjusted” means Quarterly Target which may be adjusted pursuant to section 2.3.3 and 2.3.7.

3.2 True-Up and Satisfaction of Quarterly Targets. HDS may elect to satisfy the Quarterly Target, As Adjusted through POs for Product Orders, and HDS’ use of any other credits and debits from the immediately preceding or succeeding Quarters specified under Section 2.3. In addition, the terms of Sections 2.3.7 and 2.3.8 shall also apply to the Quarterly Targets, As Adjusted. HDS may use all of the same True-Up mechanisms set forth under Section 2.3; provided, however, the date for determining whether HDS has met its Quarterly Target, As Adjusted, for a Particular Quarter pursuant to this Section 3 will be a date no later than the Quarterly Deadline. In addition, during the Quarter ending March 31, 2012 (Q4, FY11), HDS may True-Up, if at all, only by the * * * Delay Option, Overages from the immediately preceding Quarter, Pipeline Purchase and/or Monetary True-Up. A Roll Over may not be used to True-Up for such Quarter.

4. Executive Escalation for True-Ups. If BlueArc believes HDS has failed to meet its Quarterly Commitment, As Adjusted or Quarterly Target, As Adjusted for a Particular Quarter, then BlueArc must notify HDS of such belief in writing in the form specified in Attachment 1 of this Amendment 3. Notwithstanding anything to the contrary contained in Section 22 of the Original Agreement, all of the following HDS employees separately must also receive such notice from BlueArc: (i) General Counsel, (ii) Director of Operations GSSD, (iii) Legal Director GSSD, (iv) SVP WW Marketing and Business Development, and (v) SVP GSSD, all at the address for HDS’ notice set forth in Section 22 for HDS. BlueArc must use the form specified as Attachment 1

9

*  *  * Indicates that confidential treatment has been sought for this information

and must notify all such HDS employees under the terms of this Section 4 to constitute valid notice and to permit the exercise of each Party’s rights and obligations under this Section. If BlueArc does so Confidential notify HDS, then HDS and BlueArc senior management will promptly meet [HDS-Ok] and confer in good faith to attempt to resolve the issue for a period of no less than * * *following the notification. If, however, HDS does not respond to BlueArc’s notice by the * * * from the date of BlueArc’s notice, then HDS will be obligated to pay BlueArc the amount of True-Up allegedly owed by HDS specified in BlueArc’s notice given pursuant to this Section 4. In such case HDS must make such payment no later than * * * from the date of notice by BlueArc. If the senior management of the Parties meet and confer under the terms of this Section 4 and agree that HDS has failed to meet its Quarterly Commitment, As Adjusted or Quarterly Target, As Adjusted, then HDS will have * * * from the date the Parties agree on the amount payable, to pay such amount in order to meet its applicable Quarterly Commitment, As Adjusted or Quarterly Target, As Adjusted. If the Parties fail to resolve the disputed issue by the end of the * * * discussion period, then HDS must either pay the disputed True-Up amount alleged in BlueArc’s notice to HDS given pursuant to this Section 4 or provide a Mediation Notice to BlueArc no later than * * * following the end of the * * * discussion period. If Mediation is requested, the Parties will proceed under Section 6 below, which can also include arbitration described in Section 6. If there is no Mediation Notice at the end of such * * * period, then HDS will be required to pay BlueArc the Total Commitment Payment remaining at that point in time (e.g. on such * * *), and this Amendment 3 shall terminate. “Mediation Notice” means the written notice by either Party requesting mediation pursuant to Section 6. To assist with any potential dispute resolution pursuant to this Section, the Parties have agreed on an interactive spreadsheet (“Spreadsheet”) that each Party agrees to provide to their respective legal counsels and HDS Legal Department on the Amendment 3 Effective Date to hold in their respective files. To facilitate interpretation of each Party’s obligations under Section 2 and Section 3, a static form of the Spreadsheet is attached as Exhibit R, will become part of this Amendment 3.

5. * * *

6. Mediation and Arbitration.

6.1 Mediation. If the Parties fail to resolve any dispute under Section 4 or 5 of this Amendment 3 through executive escalation, and either Party has requested mediation pursuant to Sections 4 or 5.5, then either Party may submit the dispute to JAMS, or its successor, for mediation, and if the first mediation meeting has not begun within 30 days of delivery of the Mediation Notice, then it may be submitted to JAMS, or its successor, for final and binding arbitration as provided in this Section 6.1 and pursuant to Section 6.2. The Parties will cooperate with JAMS and with one another in selecting a mediator from JAMS panel of neutrals, and in scheduling the mediation proceedings. The Parties will participate in the mediation in good faith, and will share equally in its costs. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by the Parties, their agents, employees, experts and attorneys, and by the mediator or any JAMS employees, are Confidential Information, privileged and inadmissible for any purpose, including impeachment, in any arbitration or other proceeding involving the Parties, provided that otherwise admissible or discoverable evidence will not be rendered inadmissible

10

*  *  * Indicates that confidential treatment has been sought for this information

or non-discoverable as a result of its use in the mediation. Either Party may initiate arbitration with respect to the matters submitted to mediation by filing a written demand for arbitration at any time following 45 days after the date of the first mediation meeting, which first mediation meeting will take place within 30 days of delivery of the Mediation Notice. The mediation may continue after the commencement of arbitration if the Parties so desire. Unless the Parties otherwise agree, the mediator will be disqualified from serving as arbitrator in the case. Any court of competent jurisdiction (pursuant to Section 23 of the Original Agreement) may enforce this Section 6.1, and a Party successfully seeking enforcement will be entitled to an award of all costs, fees and expenses, including attorneys’ fees, to be paid by the party against whom enforcement is ordered.

6.2 Arbitration. Binding arbitration shall be the exclusive means for resolving any disputes under Section 4 or 5 not resolved through mediation as provided in Section 6.1, Arbitration may be requested by either Party. The arbitration shall be administered by JAMS pursuant to its then-current Comprehensive Arbitration Rules and Procedures the “JAMS Rules”), and shall be conducted by a single arbitrator chosen by agreement of the parties or, in the absence of agreement, pursuant to the JAMS Rules. Nothing in this Section 6.2 precludes a Party from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction.

6.2.1 The Parties shall cooperate in any arbitration proceeding as necessary so that the final hearing may be held within 120 days from the date JAMS processes a request for arbitration. The Parties may take discovery limited to two fact witness depositions of seven hours per side, one expert witness deposition of seven hours per side, and ten requests for production and ten written interrogatories per side. Additional discovery may be taken with the consent of the parties or in the event the arbitrator finds that a request for further discovery is supported by substantial good cause.

6.2.2 In making the award, the arbitrator shall have discretion to allocate between the Parties all or part of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the prevailing Party.

6.2.3 Any Court of competent jurisdiction may enforce the Parties’ agreement to arbitrate in this Section 6.2 and/or confirm and enter judgment on the award of the arbitrator. In the event a Party successfully seeks enforcement of the agreement to arbitrate, that Party shall be entitled to an award of all costs, fees and expenses, including attorneys’ fees, to be paid by the party against whom enforcement is ordered.

6.2.4 Arbitration under this section will stay any concurrent Escrow Arbitration. If either Party requests or commences Escrow Arbitration, the Parties agree to stay the Escrow Arbitration until the outcome of the arbitration pursuant to this Section 6.2 is decided (“General Arbitration”). This decision and award of the arbitrator in the General Arbitration will be enforced as the final outcome under the Escrow

11

*  *  * Indicates that confidential treatment has been sought for this information

Arbitration solely with respect to the issue of whether there has been a Competitive Product Release. All other issues in the Escrow Arbitration shall not be stayed but determined in the Escrow Arbitration which may continue after the completion of the General Arbitration to the extent not resolved. The transcript, if any, from the General Arbitration may be provided to the arbitrator in the Escrow Arbitration for his or her consideration but such transcript is not conclusive of any matters not otherwise determined by the award entered in the General Arbitration.

6.2.5 Notwithstanding anything to the contrary, no provision hereof shall be construed as prohibiting any Party from applying to any court of competent jurisdiction for such injunctive or other provisional relief as may be necessary to protect that party from irreparable harm or injury or to preserve the status quo pending resolution of a dispute.

7. * * *

7.1 * * *

7.2 * * *

7.3 * * *

7.4 Revision of Source Code Language. “Source Code,” as defined in the Original Agreement, is hereby amended and restated in its entirety as follows:

“Source Code” means the human-readable, fully annotated (with programmers’ notes) source code versions of all Products (including without limitation Software and firmware) that are being shipped at the time HDS is given access to such source code and that is used by BlueArc, and including all of the Source Code Items that BlueArc has that will assist a competent party in building, maintaining, supporting and/or enhancing the software products (including build instructions for incorporation of Third Party Software). The Source Code will exclude any Third Party Software and any additional third party proprietary code developed by BlueArc specifically for another third party using that third party’s proprietary or Confidential information. For any such proprietary code or other Third Party Software used within the Product or Development Source Code, however, Source Code will contain such instructions, which BlueArc will provide without infringing or violating any rights or sharing trade secrets of any third party, as may be reasonably necessary for a competent hardware or software development engineer, proficient in the applicable art, to understand the relationship between such proprietary code and Third Party Code and all other source code used in BlueArc’s Products and in the Development Source Code. For clarification purposes, notwithstanding anything to the contrary stated in this definition, the Source Code in combination with identified Third Party Software must be operable and consistent with the most recent

12

*  *  * Indicates that confidential treatment has been sought for this information

Documentation, including without limitation, technical specifications and Customer Documentation.

7.5 HDS Waiver of Change in Control Source Code Rights. Notwithstanding HDS’ rights under Section 7 at any time prior to the consummation of a Change in Control, BlueArc may request in writing that HDS waive its rights under New Section 3.8 for a Change in Control and consent to an assignment of the Agreement by BlueArc in connection with such a Change in Control on terms to be agreed between the Parties. Notwithstanding anything to the contrary contained in the Agreement, including without limitation this Amendment 3, HDS will have sole and absolute discretion whether to consent to BlueArc’s written request. BlueArc’s request under this Section 7.5 will in no way prejudice or otherwise be deemed to waive any of HDS’ rights or remedies under the Agreement including without limitation this Amendment 3, if HDS fails to respond to BlueArc’s written request.

7.6 Source Code Related Representations, Warrants and Covenants. If BlueArc fails to deposit a copy of the most recent version of Source Code for all Products into escrow described under Sections 3.5.4 and 3.6 of the Original Agreement by the * * * following the Amendment 3 Effective Date, then BlueArc will be deemed to be in Material Breach solely for BlueArc’s failure to make a deposit by such date. In addition, BlueArc covenants to HDS during the Amendment 3 Term that:

(a) BlueArc will update Exhibit O of the Original Agreement with each Source Code deposit.

(b) From and after the Amendment 3 Effective Date, BlueArc will: (i) use all commercially reasonable efforts to timely comply with Escrow Agent’s requests in connection with Escrow Agent’s audit of the Source Code deposited in escrow pursuant to the Escrow Agreement, including this Amendment 3, and (ii) comply with HDS’ reasonable requests to update the versions of the Source Code deposited in escrow which may result from such Source Code audit, which HDS intends to request as soon as possible after the first Source Code update is deposited into Escrow as required after the Amendment 3 Effective Date,

Notwithstanding anything to the contrary contained in this Section 7.6, HDS will provide BlueArc with reasonable opportunity to remedy any deficiencies revealed by the Escrow audit contemplated under clause (b) in this Section 7.6.

7.7 Exceptions to Change in Control. The definition of “Change in Control” in Section 1 of the Original Agreement will be amended and restated effective as of the Amendment 3 Effective Date and for the duration of the Amendment 3 Term to read, in its entirety, as follows:

“Change in Control” of BlueArc means the occurrence, in a single transaction or a series of related transactions, of at least one of the following events: (a) any Person

13

*  *  * Indicates that confidential treatment has been sought for this information

who is not already an Affiliate of BlueArc becomes BlueArc’s “beneficial owner” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of BlueArc’s securities representing fifty percent (50%) or more of the combined voting power of BlueArc’s then-outstanding securities; (b) there is consummated a merger, consolidation, or similar transaction directly or indirectly involving BlueArc and immediately after that consummation, the stockholders of BlueArc immediately prior to the consummation of that merger, consolidation, or similar transaction do not “beneficially own” (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, outstanding voting securities representing fifty percent (50%) or more of the combined outstanding voting power of the surviving entity in that merger, consolidation, or similar transaction or fifty percent (50%) or more of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation, or similar transaction; (c) there is consummated a sale, lease, exclusive and irrevocable license or other disposition of substantially all of the assets of BlueArc provided, however, that (i) the sale and issuance of securities of BlueArc for the primary purpose of raising additional capital shall not constitute a “Change in Control,” and (ii) the acquisition, directly or indirectly, of BlueArc’s securities representing fifty percent (50%) or more of the combined voting power of BlueArc’s then-outstanding securities by a regionally recognized private equity fund that is not Affiliated with any officer, director or stockholder of BlueArc, shall not constitute a “Change in Control.”

8. Rights Under Article 14 (Right of First Refusal) of the Original Agreement.

Notwithstanding anything to the contrary under Section 14.5 of the Original Agreement, only Section 14.3 of the Original Agreement will terminate on the date originally set forth in Section 14.5. All other provisions of Article 14 of the Original Agreement will terminate and be of no further force or effect upon the earlier of (a) expiration or sooner termination of the Amendment 3 Term, and (b) the consummation of the first underwritten public offering of BlueArc’s Common Stock; provided, however, that the Parties will retain until the expiration of the applicable statute of limitations any and all remedies available to them on the date of such termination for claims that accrued prior to such termination.

9. Most Favored Distributor.

9.1 Revision of Original Language. Section 5.19 of the Original Agreement will be amended and restated commencing on the Amendment 3 Effective Date and continuing through the expiration or sooner termination of the Term as follows:

“5.19 Most Favored Distributor. If during the Term, BlueArc sells any Products or Support, or any functional equivalents thereof, to any distributor, reseller or OEM, with substantially similar sales volume commitments as HDS and/or its Affiliates, and charges such distributor, reseller or OEM a fee lower than the fees payable by HDS or its Affiliates to BlueArc pursuant to Article 5 of the Original Agreement, then BlueArc will promptly notify HDS in writing. HDS or a Regional Affiliate, as

14

*  *  * Indicates that confidential treatment has been sought for this information

applicable, may elect to substitute such lower fee for the fees set forth in this Agreement, but BlueArc will not be required to refund any amounts previously paid under this Agreement. This requirement will not apply to one-time End User transactions involving a distributor or reseller. BlueArc will use good faith efforts to maintain and honor established field sales engagement procedures, for example, the account registration process, and approval of special pricing requests, with no material adverse changes to procedures that would impede or impair HDS’: (a) resale efforts under the Agreement and (b) ability to meet its Quarterly Commitments.

9.2 Audit Right.

“Auditor” means an independent outside accounting firm mutually acceptable to both Parties. At any time during the Term, HDS: may designate an Auditor to audit the books and records of BlueArc only to the extent required to determine BlueArc’s compliance with Section 5.19 no more frequently than * * *each calendar year. HDS shall provide BlueArc with no less than * * * prior written notice of the audit. If HDS so notifies BlueArc, then BlueArc will permit an audit of its applicable books and records and will obtain and provide Auditor with copies of the applicable books and records to permit the audit pursuant to this Section 9.2 The audit shall occur at the offices of BlueArc in San Jose, California. If the audit shows that BlueArc failed to comply with Section 5.19, then HDS will, receive a credit in amount of such noncompliance as determined by the Auditor that HDS may use against (a) any pending or future Product purchases under this Agreement, or (b) against the * * * payable by HDS pursuant to New Section 3.8(e) above. If the audit shows that BlueArc complied with Section 5.19, then BlueArc will not be required to take any further action. HDS will pay all fees and costs of the Auditor unless the audit reveals that BlueArc failed to comply with Section 5.19, in which case BlueArc shall pay for all fees and costs of the Auditor. HDS may conduct an audit no more frequently than * * * during any * * * period during the Term. This Section will survive the expiration or termination of the Agreement for * * *.

10. Warrants and Prepayments.

10.1 Prepayments. HDS (i) will make a mandatory one-time prepayment “to BlueArc in the total amount of * * *, and (ii) will have the right, but not the obligation, after mutual written agreement with BlueArc to make a discretionary one-time prepayment to BlueArc in the total amount of * * * during the Amendment 3 Term. The prepayment(s) will constitute credits that may be applied by HDS, in whole or in part, from time to time, and in HDS’ sole discretion, in any combination of one or more of the following:

(a) toward HDS’ Product Orders and/or Support. To apply the credit HDS will issue a PO to which the prepayment, or portion thereof, will apply.

(b) toward the * * * True-Up for Q2 FY10 and thereafter. To apply the credit toward the * * * True-Up, HDS will notify BlueArc in writing at or about the

15

*  *  * Indicates that confidential treatment has been sought for this information

time that HDS pays an invoice described in Section 2.3.5 above with the amount of credit that will be applied toward the * * * True-Up.

(c) toward the Termination Fee described in Section 2.5 above. To apply the credit toward the Termination Fee, HDS will indicate in its written notice to BlueArc electing to pay the Termination Fee, the amount of the credit that will be applied toward the Termination Fee.

10.2 Warrants.

(a) In consideration of making the prepayment(s) described in Section 10.1 above, HDS will, for each such prepayment, be entitled to a warrant in the form of Exhibit P-1 attached to Amendment 2 to the Original Agreement. Each warrant will, subject to adjustment in accordance with Section 10.2(b) below (and any further adjustment by mutual agreement of the Parties), entitle HDS to purchase 77,320 fully paid and nonassessable Shares (as defined in Exhibit P-1) at an exercise price equal to the Fair Market Value of one Share on the date the warrant is issued as determined by BlueArc’s Board of Directors, in good faith. Any warrant issuable pursuant to the foregoing will be issued to HDS immediately following a prepayment by HDS under Section 10.1, and will be exercisable until the seventh (7th) anniversary of the date of its issuance.

(b) The number and kind of Shares or other securities to be subject to a warrant issuable under Section 10.2(a) above shall be subject to adjustment from time to time after the Amendment 3 Effective Date (but prior to the issuance of such warrant) in accordance with Section 6 of Exhibit P-1 as if such warrant had been issued on the Amendment 3 Effective Date; provided, however, that in no event shall the “Exercise Price” (as defined in Exhibit P-1) of such warrant be determined other than in accordance with Section 10.2(a) above. Notwithstanding anything to the contrary, this Section 10.2(b) shall have no force or effect with respect to any warrant issuable under Section 10.2(a) after the issuance of such warrant but shall continue to apply only with respect to such warrants that have not yet been issued.

11. BlueArc Additional Obligations.

* * *

12. Voting Agreement. The Voting Agreement in the form of attached Exhibit S will be executed concurrently with this Amendment 3 and become effective as of the Amendment Three Effective Date.

13. MISCELLANEOUS. All capitalized terms not otherwise defined in this Amendment 3 will have the meaning ascribed to them in the Original Agreement, as amended other than by this Amendment 3. The provisions of this Amendment 3 shall prevail and govern over any conflicting

16

*  *  * Indicates that confidential treatment has been sought for this information

provisions in the Original Agreement, as amended throughout the Amendment 3 Term and over any conflicting provisions in any Exhibits or Schedules to this Amendment 3. The following sections which will survive the expiration or sooner termination of this Amendment 3 and the Original Agreement, as amended: 1, 4, 6, 7.4, 7.6, excluding clause (b), 9, 10, 11, and 13. Except as expressly modified by this Amendment 3, the Original Agreement (as amended other than by this Amendment 3) will remain in full force and effect. From and after the Amendment 3 Effective Date, this Amendment 3 shall be incorporated into and become part of the Agreement.

17

*  *  * Indicates that confidential treatment has been sought for this information

ATTACHMENT 1

* * *

18

*  *  * Indicates that confidential treatment has been sought for this information

ATTACHMENT 2

* * *

19

*  *  * Indicates that confidential treatment has been sought for this information

Schedule A

* * *

20

*  *  * Indicates that confidential treatment has been sought for this information

EXHIBIT R

True-Up Spreadsheet

* * *

21

*  *  * Indicates that confidential treatment has been sought for this information

EXHIBIT S

Voting Agreement

BLUEARC CORPORATION

VOTING AGREEMENT

This Voting Agreement (this “Agreement”) is made as of March 31, 2010 by and among BlueArc Corporation, a Delaware corporation (the “Company”), Hitachi Data systems Corporation, a Delaware corporation (“HDS”), and the persons and entities listed on Exhibit A attached hereto (each a “Majority Stockholder,” and collectively the “Majority Stockholders”). WHEREAS, the Company and HDS entered into a Master Distribution Agreement, effective November 14, 2006, pursuant to which, among other things, the Company agreed to sell, and HDS agreed to purchase, products that HDS would directly or indirectly co-brand, re-brand, market, resell, sell, support and distribute worldwide both directly and indirectly (the “Original Agreement,” and as amended, the “Agreement”);

WHEREAS, the Company and HDS entered into Amendment No. One to the Master Distribution Agreement on October 21, 2008, and Amendment No. Two to the Master Distribution Agreement on August 31, 2009;

WHEREAS, the Company and HDS have been in discussions to further amend the Agreement, pursuant to which amendment, among other things, HDS would commit to making certain payments to the Company; and

WHEREAS, to induce HDS to agree to further amend the Agreement and commit to make certain payments to the Company in accordance with the terms of such amendment, which HDS otherwise would not do, the Company and the Majority Stockholders agree to enter into this Voting Agreement to provide for certain voting restrictions, among other things.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, and other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined herein have the respective meanings ascribed to them in the Agreement.

2. Voting. During the term of this Agreement, the Majority Stockholders each agree to vote all voting securities of the Company now or hereafter owned by them, whether beneficially or otherwise, or as to which they have voting power (the “Majority Shares”) in accordance with the provisions of this Agreement.

3. Certain Transactions.

(a) * * *

*  *  * Indicates that confidential treatment has been sought for this information

(b) Without limiting the generality of Section 3(a) hereof, from and after * * * through and including * * *, the Company (i) will not (and the Majority Stockholders will not cause or permit Company to) (A) solicit, initiate or encourage submission of any proposal or offer from any Person relating to a Change in Control, alone or together, by * * *, or (B) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in or facilitate in any other manner, any effort or attempt by any Person to pursue, approve or effect a Change in Control, alone or together, * * * and (ii) will notify HDS promptly if any Person makes any proposal, offer, inquiry or contact with respect to a Change in Control, alone or together, by * * *.

(c) Prior to * * *:

(d) Without limiting the generality of Sections 3(a) or 3(c) hereof, prior to * * *:

(i) At each meeting in which the Company’s stockholders are entitled to vote on the approval of a Change in Control, alone or together, by * * *, the Majority Stockholders shall vote all of their Majority Shares against and disapprove such Change in Control;

(ii) The Majority Stockholders shall not sign any written consent in which a Change of Control, alone or together, by * * *, is approved;

(iii) The Majority Stockholders shall not approve, ratify or confirm any Change in Control, alone or together, by * * *;

(iv) The Majority Stockholders shall not execute any documents, agreements or other instructions, or otherwise take any actions, to approve or effect a Change in Control, alone or together, by * * *, and

(v) Neither the Board of Directors nor the officers of the Company shall recommend to the Company’s stockholders the approval of any Change in Control, alone or together, by * * *.

4. Proxy. To secure the Majority Stockholders’ obligations to vote their Majority Shares in accordance with this Agreement, each Majority Stockholder hereby appoints the Chairman of the Board of Directors or the Chief Executive Officer of HDS, or either of them from time to time, or their designees, as such Majority Stockholder’s true and lawful proxy and attorney, with the power to act alone and with full power of substitution, to vote all of such Majority Stockholder’s Majority Shares as set forth in this Agreement and to execute all appropriate instruments consistent with this Agreement on behalf of such Majority Stockholder if, and only if, such Majority Stockholder fails to vote all of such Majority Stockholder’s Majority Shares in accordance with the provisions of this Agreement. The proxy and power granted by each Majority Stockholder pursuant to this Section are coupled with an interest and are given to secure the performance of such Majority Stockholder’s duties under this Agreement. Each such proxy and power will be irrevocable for the term hereof. The proxy and power, so long as any party hereto is an individual, will survive the death, incompetency and disability of such party or any other individual holder of the Majority

-2-

*  *  * Indicates that confidential treatment has been sought for this information

Shares and, so long as any party hereto is an entity, will survive the merger or reorganization of such party or any other entity holding any Majority Shares.

5. Termination. This Agreement shall terminate on the earlier of (a) * * * or (b) the consummation of an initial public offering by the Company of its securities, or (c) the effective date of termination of Amendment No. Three to the Original Agreement.

6. Representations and Warranties.

(a) In executing this Agreement, the Company makes the following representations and warranties with the knowledge and intent that DHS shall be entitled to rely thereon:

(i) The authorized capital stock of the Company consists of 55,045,000 shares of Common Stock, 2,449,037 shares of which are issued and outstanding; 6,391,447 shares of Series AA Preferred Stock, 6,391,447 of which are issued and outstanding; 9,297,699 shares of Series BB Preferred Stock, 9,297,699 of which are issued and outstanding; 311,519 shares of Series CC Preferred Stock, 310,019 of which are issued and outstanding; 11,604,826 shares of Series DD Preferred Stock, 7,004,826 of which are issued and outstanding; 789,980 shares of Series EE Preferred Stock, 789,980 of which are issued and outstanding; and 5,566,908 shares of Series FF Preferred Stock, 5,140,814 of which are issued and outstanding. All such issued and outstanding shares have been duly authorized and validly issued, have been issued in compliance with all applicable state and federal securities laws, and are fully paid and nonassessable. The Board of Directors of the Company has reserved 8,732,184 shares of Common Stock for issuance under the Company’s 2000 Stock Option Plan (the “Plan”). Of such reserved shares of Common Stock, options to purchase 5,968,915 shares have been granted and are currently outstanding, and 450,640 shares of Common Stock remain available for issuance pursuant to the Plan. All issued and outstanding shares of the Company’s Preferred Stock are currently convertible into shares of the Company’s Common Stock at a one-to-one conversion ratio. There is no agreement, contract, lease, license, instrument, understanding or other arrangement to which the Company is a party or by which the Company is bound that would require or permit the Company to repurchase, redeem or otherwise acquire from any Person any securities or voting interest in the Company (except shares of Common Stock issued to employees, directors and consultants of the Company pursuant to the Plan upon their early exercise of stock options granted to them under the Plan but who cease to provide services to the Company prior to full vesting of such stock options). Except as set forth in this Section 6(a)(i), aside from shares of the Company’s Common Stock into which issued and outstanding shares of the Company’s Preferred Stock are convertible, no shares of capital stock of the Company are authorized, issued, outstanding or reserved for issuance, and there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities.

(ii) Meritech Capital Partners II, Meritech Capital Affiliates II and MCP Entrepreneur Partners II (collectively, “Meritech”) are the sole record owners of the number, class and series of Majority Shares set forth beside their names on Appendix A hereto. Meritech is the

-3-

*  *  * Indicates that confidential treatment has been sought for this information

record owner of 27.9123% of the outstanding voting power of the Company on a fully anti-diluted basis.

(iii) Crosslink Ventures IV, L.P., Crosslink Crossover Fund III, Crosslink Crossover Fund IV, L.P., Offshore Crosslink Omega Ventures IV, Offshore Crosslink Crossover Fund III, Omega Bayview IV, LLC, Crosslink Crossover Fund V, L.P. and Crosslink Omega Ventures IV GmbH & Co. KG (collectively, “Crosslink”) are the sole record owners of the number, class and series of Majority Shares set forth beside their names on Appendix A hereto. Crosslink is the record owner of 18.1359% of the outstanding voting power of the Company on a fully anti-diluted basis.

(iv) Morgenthaler Partners VIII, L.P. (“Morgenthaler”) is the sole record owner of the number, class and series of Majority Shares set forth beside its name on Appendix A hereto. Morgenthaler is the record owner of 11.6195% of the outstanding voting power of the Company on a fully anti-diluted basis.

(b) In executing this Agreement, each Majority Stockholder makes the following representations and warranties as to itself with the knowledge and intent that HDS shall be entitled to rely thereon:

(i) Such Majority Stockholder is a company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed.

(ii) Such Majority Stockholder has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered by such Majority Stockholder and constitutes a valid and binding obligation of such Majority Stockholder, enforceable against such Majority Stockholder and such Majority Stockholder’s successors and assigns, in accordance with its terms, except to the extent that enforceability may be limited or affected by laws relating to bankruptcy, reorganization, insolvency or other similar laws affecting the enforcement of creditors’ rights generally and general equitable principles.

(iii) None of the execution, delivery or performance by such Majority Stockholder of this Agreement will conflict with, contravene or result in any violation or breach of (i) any provision of such Majority Stockholder’s charter documents, (ii) any agreement, arrangement, contract, lease, license, instrument, understanding or other arrangement to which such Majority Stockholder is a party or by which it is bound or to which any of its assets is bound, or (iii) any statute, rule, regulation, judgment, order, decree or other restriction of any court, administrative agency or other governmental authority applicable to such Majority Stockholder or any of its assets. Without limiting the generality of the foregoing, such Majority Stockholder has not granted an irrevocable proxy and is not a party to any voting or shareholder agreement with respect to any Majority Shares other than the Amended and Restated Voting Agreement dated as of May 30, 2008.

(iv) There are no actions, suits, proceedings or orders pending or threatened in writing against or affecting such Majority Stockholder at law or in equity, or before or

-4-

*  *  * Indicates that confidential treatment has been sought for this information

by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would seek to enjoin, restrain or otherwise prohibit such Majority Stockholder’s performance under this Agreement.

(v) Such Majority Stockholder is the sole owner, beneficially and of record, of the number, class and series of Majority Shares set forth beside its name on Appendix A hereto, free and clear of all liens, mortgages, encumbrances and security interests of any kind whatsoever other than transfers on restriction.

7. Restrictive Legend. Each certificate outstanding on the date first written above that represents any of the Majority Shares subject to this Agreement shall be returned to the Company and canceled, and new certificates representing the Majority Shares shall be issued to the Majority Stockholders and marked by the Company with a legend reading as follows:

“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT (A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER) BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY, AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON HOLDING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT.”

Each new certificate representing Majority Shares issued after the date first written above, including to those Persons described in Section 8(a) hereof, shall bear the above legend.

8. Further Covenants of the Company. In addition to the other obligations of the Company hereunder, the Company shall:

(a) not issue to any Person, in one or more transactions, (i) any Preferred Stock, or (ii) any securities representing ten percent (10%) or more of the outstanding voting power of the Company on a fully anti-diluted basis, calculated on a pre-issuance basis, unless and until such Person has first signed a counterpart to this Agreement, agreeing to be bound hereby as a Majority Stockholder;

(b) with limiting the generality of Section 8(a) hereof, not issue to any Person any securities if such issuance would result in such Person owning securities representing twenty percent (20%) or more of the outstanding voting power of the Company on an as-converted basis immediately after such issuance, unless and until such Person has first signed a counterpart to this Agreement, agreeing to be bound hereby as a Majority Stockholder;

(c) provide the same notice and materials to HDS as is provided to other stockholders of the Company regarding special and annual meetings of the Company’s stockholders;

(d) provide written notice to HDS promptly after the Company becomes aware that written consent of the Company’s stockholders is being sought prior to or on September 30, 2011 to a Change in Control;

-5-

*  *  * Indicates that confidential treatment has been sought for this information

(e) not take or facilitate any action or assist any Person in any action that could reasonably be expected to result in a violation or this Agreement. Without limiting the generality of the foregoing, the Company shall not honor the transfer of any Majority Shares by any Majority Stockholder in violation of this Agreement; and

(f) not, through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company or the Majority Stockholders, and will take all such actions as may be necessary or appropriate in order to prevent (i) * * *, and (ii) any Change in Control by * * *, prior to * * *.

9. Further Covenants of the Majority Stockholders. In addition to the other obligations of the Majority Stockholders hereunder:

(a) The Majority Stockholders shall not give any proxies or enter into any voting agreements or voting trusts, or any other agreement, that would conflict with, contravene or result in any violation or breach of this Agreement or otherwise transfer their right to vote on a Change in Control.

(b) The Majority Stockholders shall not transfer their Majority Shares, or any interest in them whatsoever (including voting interest), to any Person unless and until such Person has first signed and delivered to both the Company and HDS a counterpart agreeing to be bound hereby as a Majority Stockholder; provided, however, that in no event shall the Majority Stockholders transfer any of their Majority Shares, or any interest in them whatsoever (including voting interest), to a Person if, immediately after such transfer, such Person would be the beneficial or record owner of securities representing more than fifty percent (50%) of outstanding voting power of the Company.

10. Acknowledgements. The Company and each of the Majority Stockholders acknowledge and agree that HDS is a provider of information management solutions and that HDS makes no representation, warranty or covenant that HDS will not make available to the general public any products or services that are competitive with the Company’s products or services, it being further acknowledged and agreed that the Agreement contains provisions addressing the possibility of any acquisition by HDS of a Competing Product or Competing Technology. Specifically, it is understood that HDS and/or its Affiliates have strategic plans to develop mid-range NAS. HDS may currently or in the future be developing products internally, or acquiring a third party that has developed or is developing products or services, that may be similar to or compete with the Company’s products or services. Accordingly, nothing in this Agreement will be construed as a representation, inference or prohibition that HDS will not or may not develop any products or services or acquire a third party that has developed or is developing products or services, or have products developed or services performed on its behalf, that compete with the Company’s products or services.

11. Miscellaneous.

-6-

*  *  * Indicates that confidential treatment has been sought for this information

(a) Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and faxed, mailed, or delivered to each party as follows: (i) if to the Company, at 50 Rio Robles Drive, San Jose, CA 95134, facsimile: (408) 576-6601, Attn: Chief Executive Officer, or at such other address or facsimile number as the Company shall have furnished to HDS and the Majority Stockholders in writing, with a copy (which copy shall not constitute notice) to Michael J. Danaher, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, facsimile: (650) 493-6811, or at such other addresses or facsimile numbers as the Company shall have furnished to HDS and the Majority Stockholders in writing, or (ii) if to HDS, at 750 Central Expressway, Santa Clara, CA 95050, facsimile: (408) 496-6315, Attn: Chief Executive Officer, or at such other address or facsimile number as HDS shall have furnished to the Company and the Majority Stockholders in writing, with a copy (which copy shall not constitute notice) to David A. Salzman, Squire, Sanders & Demsey L.L.P., 600 Hansen Way, Palo Alto, California 94304, facsimile: (650) 843-8777, or at such other addresses or facsimile numbers as HDS shall have furnished to the Company and the Majority Stockholders in writing, or (iii) if to a Majority Stockholder, at such Majority Stockholder’s address or facsimile number set forth in Appendix A hereto. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing for delivery the next business day or (v) four days after being deposited in the U.S. mail, first class with postage prepaid.

(b) Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. The Company shall not permit the transfer of any Majority Shares on its books or issue a new certificate representing any Majority Shares unless and until the person to whom such security is to be transferred shall have executed a written agreement pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person was a Majority Stockholder hereunder.

(c) Governing Law. The formation, construction, and performance of this Agreement shall be governed in all respects by the internal laws of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware, without regard to principles of conflicts of law.

(d) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and appendices shall, unless otherwise provided, refer to sections and paragraph hereof and appendices attached hereto.

(e) Further Assurances. Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and so all such other acts and things as may be necessary to more fully effectuate this Agreement.

-7-

*  *  * Indicates that confidential treatment has been sought for this information

(f) Entire Agreement. This Agreement and the appendix hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof. No party hereto shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein.

(g) No Grant of Proxy. Except as set forth in Section 4, this Agreement does not grant any proxy and should not be interpreted as doing so. Nevertheless, should the provisions of this Agreement be construed to constitute the granting of proxies, such proxies shall be deemed coupled with an interest and are irrevocable for the term of this Agreement.

(h) Not a Voting Trust. This Agreement is not a voting trust governed by Section 218 of the Delaware General Corporation Law and should not be interpreted as such.

(i) Specific Performance. It is agreed and understood that monetary damages would not adequately compensate an injured party for the breach of this Agreement by any party, that this Agreement shall be specifically enforceable, and that any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order. Further, each party hereto waives any claim or defense that there is any adequate remedy at law for such breach or threatened breach.

(j) Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by (i) the Company, (ii) HDS, and (iii) the holders of a majority of the Majority Shares, voting together as a single class on an as-converted basis; provided, however, that Appendix A hereto shall be appropriately amended each time a Person becomes a new Majority Stockholder or any of the information set forth on Appendix A becomes inaccurate. Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each Majority Stockholder that has entered into this Agreement.

(k) No Waiver. The failure or delay by a party to enforce any provision of this Agreement will not in any way be construed as a waiver of any such provision or prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are cumulative and will not constitute a waiver of either party’s right to assert any other legal remedy available to it.

(l) Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.

-8-

*  *  * Indicates that confidential treatment has been sought for this information

(m) Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. Facsimile copies of signed signature pages will be deemed binding originals.

-9-

*  *  * Indicates that confidential treatment has been sought for this information

The parties have executed this Voting Agreement as of the date first above written.

THE COMPANY		HDS
BLUEARC CORPORATION,		HITACHI DATA SYSTEMS
a Delaware corporation		CORPORATION
By:	/s/ Michael B. Gustafson	By:	/s/ Brian Householder

Name: Michael B. Gustafson Name: Brian Householder

Title: President & CEO Title Sr. VP Business Planning & Development

MAJORITY STOCKHOLDERS:
Meritech Capital Partners II		Meritech Capital Affiliates II
BY:	/s/ Paul Madera	BY:	/s/ Paul Madera

NAME: Paul Madera NAME: Paul Madera

TITLE: Managing Director TITLE: Managing Director

MCP Entrepreneur Partners II		Crosslink Ventures IV, L.P.
BY:	/s/ Paul Madera	BY:	/s/ Michael J. Stark

NAME: Paul Madera NAME: Michael J. Stark

TITLE: Managing Director TITLE: Managing Member

Crosslink Crossover Fund III		Crosslink Crossover Fund IV, L.P.
BY:	/s/ Michael J. Stark	BY:	/s/ Michael J. Stark

NAME: Michael J. Stark NAME: Michael J. Stark

TITLE: Managing Member TITLE: Managing Member

[Signature Page to BlueArc Corporation Voting Agreement]

*  *  * Indicates that confidential treatment has been sought for this information

Offshore Crosslink Omega Ventures IV		Offshore Crosslink Crossover Fund III
BY:	/s/ Michael J. Stark	BY:	/s/ Michael J. Stark

NAME: Michael J. Stark NAME: Michael J. Stark

TITLE: Managing Member TITLE: Managing Member

Omega Bayview IV, LLC		Crosslink Crossover Fund V, L.P.
BY:	/s/ Michael J. Stark	BY:	/s/ Michael J. Stark

NAME: Michael J. Stark NAME: Michael J. Stark

TITLE: Managing Member TITLE: Managing Member

Crosslink Omega Ventures IV		Mergenthaler Partners VIII, L.P.
GmbH & Co. KG
BY:	/s/ Michael J. Stark	BY:	/s/ Gary J. Morgenthaler

NAME: Michael J. Stark NAME: Gary J. Morgenthaler

TITLE: Managing Member TITLE: Member

[Signature Page to BlueArc Corporation Voting Agreement]

*  *  * Indicates that confidential treatment has been sought for this information

APPENDIX A

TO VOTING AGREEMENT

MAJORITY STOCKHOLDERS

Name and Address of Majority Stockholders	Number, Class and Series of Majority Shares
Meritech Capital Partners II	2,435,657 Series AA Preferred Stock 4,354,650 Series BB Preferred Stock 24,192 Series CC Preferred Stock 1,046,446 Series DD Preferred Stock 620,731 Series FF Preferred Stock
Meritech Capital Affiliates II	62,672 Series A Preferred Stock 112,050 Series BB Preferred Stock 622 Series CC Preferred Stock 26,926 Series DD Preferred Stock 15,972 Series FF Preferred Stock
MCP Entrepreneur Partners II	18,626 Series AA Preferred Stock 33,300 Series BB Preferred Stock 184 Series CC Preferred Stock 8,002 Series DD Preferred Stock 4,746 Series FF Preferred Stock
Crosslink Ventures IV, L.P.	650,046 Series AA Preferred Stock 1,162,200 Series BB Preferred Stock 232,495 Series DD Preferred Stock 161,461 Series FF Preferred Stock
Crosslink Crossover Fund III	1,080,598 Series BB Preferred Stock
Crosslink Crossover Fund IV, L.P.	604,404 Series AA Preferred Stock 216,171 Series DD Preferred Stock
Offshore Crosslink Omega Ventures IV	230,384 Series AA Preferred Stock 411,900 Series BB Preferred Stock 82,399 Series DD Preferred Stock 57,224 Series FF Preferred Stock
Offshore Crosslink Crossover Fund III	115,611 Series AA Preferred Stock 206,699 Series BB Preferred Stock 41,349 Series DD Preferred Stock 28,713 Series FF Preferred Stock

*  *  * Indicates that confidential treatment has been sought for this information

Name and Address of Majority Stockholders	Number, Class and Series of Majority Shares
Omega Bayview IV, LLC	49,162 Series AA Preferred Stock 87,898 Series BB Preferred Stock 17,583 Series DD Preferred Stock 12,209 Series FF Preferred Stock
Crosslink Crossover Fund V, L.P.	150,127 Series FF Preferred Stock
Crosslink Omega Ventures IV GmbH & Co. KG	28,357 Series AA Preferred Stock 50,699 Series BB Preferred Stock 10,142 Series DD Preferred Stock 7,042 Series ff Preferred Stock
Morgenthaler Partners VIII, L.P.	3,381,642 Series DD Preferred Stock 267,028 Series FF Preferred Stock

A-2

*  *  * Indicates that confidential treatment has been sought for this information

EX-10.7

Exhibit 10.7

BLUEARC CORPORATION

CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between Michael B. Gustafson (“Executive”) and BlueArc Corporation (the “Company”), effective as of June 1, 2009 (the “Effective Date”).

RECITALS

A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein) of the Company.

B. The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

C. The Board believes that it is imperative to provide Executive with certain benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

D. Certain capitalized terms used in the Agreement are defined in Section 5 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement will terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive will not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or as provided in any employment agreement entered into between the Company and Employee, and the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses.

3. Severance Benefits.

(a) Involuntary Termination without Cause and Not in Connection with a Change of Control. If the Company (or any parent or subsidiary of the Company) terminates Executive’s employment without Cause and Executive signs and does not revoke a standard release of claims with the Company in a form reflected in Exhibit “A” hereto, provided that such release of claims becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the release agreement (such deadline, the “Release Deadline”), then subject to this Section 3, Executive will receive the following:

(i) Severance Payment. Executive will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to six (6) months of Executive’s base salary (as in effect immediately prior to Executive’s termination).

(ii) Continued Employee Benefits. If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for periods of coverage beyond that permitted by COBRA for Executive and Executive’s eligible dependents within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of six (6) months from the last date of employment of the Executive with the Company, or (B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.

(b) Involuntary Termination Following a Change of Control. If on or within twelve (12) months following a Change of Control the Company (or any parent or subsidiary of the Company) terminates Executive’s employment without Cause, or the Executive resigns from such employment for Good Reason, and Executive signs and does not revoke a standard release of claims with the Company in a form reflected in Exhibit “A” hereto, provided that such release of claims becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the release agreement (such deadline, the “Release Deadline”), then subject to this Section 3 and in lieu of any severance benefits under Section 3(a), Executive will receive the following:

(i) Severance Payment. Executive will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to six (6) months of Executive’s base salary (as in effect immediately prior to (A) the Change of Control, or (B) Executive’s termination, whichever is greater).

(ii) Continued Employee Benefits. If Executive elects continuation coverage pursuant to COBRA for periods of coverage beyond that permitted by COBRA for Executive and Executive’s eligible dependents within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of six (6) months] from the last date of employment of the Executive with the Company, or

-2-

(B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.

(iii) Equity Awards. One hundred percent (100%) of Executive’s then outstanding and unvested awards relating to the Company’s common stock (whether stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares, performance units or otherwise (collectively, the “Equity Awards”)) will vest and thereafter otherwise will remain subject to the terms and conditions of the applicable Equity Award agreement.

(c) Timing of Payments.

(i) If the release of claims does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the release of claims becomes effective and irrevocable. In the event the termination occurs at a time during the calendar year when the release of claims could become effective in the calendar year following the calendar year in which Executive’s termination occurs (whether or not it actually becomes effective in the following year), then any severance payments or benefits under this Agreement that would be considered Deferred Compensation Severance Benefits (as defined in Section 3(g)(i) will be paid on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, the latest to occur of: (A) the date the release of claims becomes effective and irrevocable, (B) such time as required by the payment schedule applicable to each payment or benefit as set forth in Section 3(a) or 3(b), as applicable, or (C) such time as required by Section 3(g).

(ii) Unless otherwise required by Section 3(g), the Company will pay any severance payments set forth in Section 3(a) or Section 3(b), as applicable, in a lump-sum payment payable within fifteen (15) days following Executive’s termination date; provided, however, that no severance or other benefits, other than the accrued compensation set forth in Section 3(h), will be paid or provided until the release of claims becomes effective and irrevocable, and such severance amounts or benefits otherwise payable between Executive’s termination date and the date such release becomes effective and irrevocable will be paid on the date the release becomes effective and irrevocable. If Executive should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump-sum payment promptly following such event to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(d) Voluntary Resignation; Termination For Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason during the period that is on or within twelve (12) following a Change of Control) or (ii) for Cause by the Company (or any parent or subsidiary of the Company), then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans or pursuant to other written agreements with the Company.

-3-

(e) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his death, then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary of the Company), the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no benefits, compensation or other payments or rights upon termination of employment other than those benefits expressly set forth in this Section 3.

(g) Section 409A.

(i) Notwithstanding anything to the contrary in this Agreement, no severance payable to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Compensation Separation Benefits”) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service but prior to the six (6) month anniversary of the separation, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(iii) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(iv) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of

-4-

the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(v) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

(h) Accrued Wages and Vacation; Expenses. Without regard to the reason for, or the timing of, Executive’s termination of employment: (i) the Company will pay Executive any unpaid base salary due for periods prior to the Termination Date; (ii) the Company will pay Executive all of Executive’s accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by Executive, the Company will reimburse Executive for all expenses reasonably and necessarily incurred by Executive in connection with the business of the Company prior to the Termination Date. These payments will be made promptly upon termination and within the period of time mandated by law.

4. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits under Section 4(a)(i) will be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: reduction of cash payments; cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), cancellation of accelerated vesting of equity awards; reduction of employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Employee’s equity awards.

Unless the Company and Executive otherwise agree in writing, any determination required under this Section 4 will be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making

-5-

the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 4.

5. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a) Cause. “Cause” is defined as: (i) acts or omissions constituting gross negligence or willful misconduct with respect to your obligations or otherwise relating to the business of the Company; (ii) felony conviction of, or felony plea or nolo contender for fraud, misappropriation or embezzlement, or a felony crime of moral turpitude or conviction of fraud, misappropriation or embezzlement; (iii) willfully or negligently exposing the Company to a risk of civil or criminal legal damages, liabilities or penalties; (iv) violation or breach of any fiduciary duty or (v) violation of breach of any contractual duty to the Company which duty is material to the performance of your duties or responsibilities or results in material damage to the company or its business; (vi) breach of your Confidential Information Agreement with the Company; or (vii) engaging in any other act of dishonesty, fraud, intentional misrepresentation, illegality or harassment, which, as determined in good faith by the Board, is reasonably likely to materially adversely affect the business or reputation of the Company with its current or prospective customers, suppliers, lenders and/or other third parties with whom it does or might do business. The determination as to whether Executive is being terminated for Cause will be made in good faith by the Company and will be final and binding on Executive.

(b) Change of Control. “Change of Control” of the Company is defined as:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) a change in the composition of the Board occurring within a two (2) year period, as a result of which less than a majority of the directors are Incumbent Directors.

-6-

“Incumbent Directors” means directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors of the Company at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

(c) Disability. “Disability” will mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative (such Agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate will automatically be deemed to have been revoked.

(d) Good Reason. “Good Reason” will mean Executive’s termination of employment within ninety (90) days following the expiration of any cure period (discussed below) following the occurrence of one or more of the following, without Executive’s consent: (a) a significant reduction of Executive’s duties, position or responsibilities relative to Executive’s duties, position or responsibilities in effect immediately prior to such reduction, or the removal of Executive from such position, duties and responsibilities, unless Executive is provided with comparable or greater duties, position and responsibilities; provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when the Chief Financial Officer of the Company remains the Chief Financial Officer of the Company following a Change in Control where the Company becomes a wholly owned subsidiary of the acquirer, but is not made the Chief Financial Officer of the acquiring corporation) will not constitute “Good Reason;” (b) a material reduction by the Company of Executive’s base salary and/or benefits as in effect immediately prior to such reduction, other than substantially similar reductions that are also applied to substantially similar employees of the Company; (c) the imposition of a requirement for the relocation of Executive to a facility or location more than fifty (50) miles from Executive’s current work location; (d) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 6, below; or (e) a material breach by the Company of any term or condition of this Agreement, offer letter dated June 20, 2005 with Executive, or any other agreement between the Company and Executive. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the occurrence of the Good Reason event and a reasonable cure period of not less than thirty (30) days following the date of such notice.

(e) Section 409A Limit. “Section 409A Limit” will mean the lesser of two (2) times: (i) Employee’s annualized compensation based upon the annual rate of pay paid to Employee during the Employee’s taxable year preceding the Employee’s taxable year of Employee’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued

-7-

with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Employee’s employment is terminated.

6. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this Agreement and will agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7. Notice.

(a) General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices will be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its President.

(b) Notice of Termination. Any termination by the Company for Cause or as a result of a voluntary resignation will be communicated by a notice of termination to the other party hereto given in accordance with Section 7(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).

8. Arbitration.

(a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, will be resolved by binding arbitration to be conducted by the Judicial Arbitration and Mediation Services (“JAMS”) in Santa Clara, California, in accordance with the Employment Arbitration Rules and Procedures of JAMS (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive

-8-

and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) The arbitrator will apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

(c) Executive understands that nothing in this Section 8 modifies Executive’s at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause.

(d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 8, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;

(e) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

-9-

9. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b) Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including, but not limited to, any rights to severance and/or change of control benefits set forth in Executive’s offer letter dated June 20, 2005. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.

(e) Choice of Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

(h) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

-10-

COMPANY:	BLUEARC CORPORATION
		/s/ Paul Madera
	By:	Paul Madera
	Title:	Chairman, Board of Directors
	Date:

EXECUTIVE:	MICHAEL GUSTAFSON, AN INDIVIDUAL.
		/s/ Michael B. Gustafson
	By:	Michael B. Gustafson
	Date:	6/15/09

-11-

EX-10.8

Exhibit 10.8

BLUEARC CORPORATION

CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between Shmuel Shottan (“Executive”) and BlueArc Corporation (the “Company”), effective as of June 1, 2009 (the “Effective Date”).

RECITALS

A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein) of the Company.

B. The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

C. The Board believes that it is imperative to provide Executive with certain benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

D. Certain capitalized terms used in the Agreement are defined in Section 5 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement will terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive will not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or as provided in any employment agreement entered into between the Company and Employee, and the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses.

3. Severance Benefits.

(a) Involuntary Termination without Cause and Not in Connection with a Change of Control. If the Company (or any parent or subsidiary of the Company) terminates Executive’s employment without Cause and Executive signs and does not revoke a standard release of claims with the Company in a form reflected in Exhibit “A” hereto, provided that such release of claims becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the release agreement (such deadline, the “Release Deadline”), then subject to this Section 3, Executive will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to six (6) months of Executive’s base salary (as in effect immediately prior to Executive’s termination).

(b) Involuntary Termination Following a Change of Control. If on or within six (6) months following a Change of Control the Company (or any parent or subsidiary of the Company) terminates Executive’s employment without Cause, or the Executive resigns from such employment for Good Reason, and Executive signs and does not revoke a standard release of claims with the Company in a form reflected in Exhibit “A” hereto, provided that such release of claims becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the release agreement (such deadline, the “Release Deadline”), then subject to this Section 3 and in lieu of any severance benefits under Section 3(a), Executive will receive the following:

(i) Severance Payment. Executive will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to six (6) months of Executive’s base salary (as in effect immediately prior to (A) the Change of Control, or (B) Executive’s termination, whichever is greater).

(ii) Continued Employee Benefits. If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for periods of coverage beyond that permitted by COBRA for Executive and Executive’s eligible dependents within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of six (6) months from the last date of employment of the Executive with the Company, or (B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.

(iii) Equity Awards. Fifty percent (50%) of Executive’s then outstanding and unvested awards relating to the Company’s common stock (whether stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares, performance units or otherwise (collectively, the “Equity Awards”)) will vest and thereafter otherwise will remain subject to the terms and conditions of the applicable Equity Award agreement.

-2-

(c) Timing of Payments.

(i) If the release of claims does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the release of claims becomes effective and irrevocable. In the event the termination occurs at a time during the calendar year when the release of claims could become effective in the calendar year following the calendar year in which Executive’s termination occurs (whether or not it actually becomes effective in the following year), then any severance payments or benefits under this Agreement that would be considered Deferred Compensation Severance Benefits (as defined in Section 3(g)(i) will be paid on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, the latest to occur of: (A) the date the release of claims becomes effective and irrevocable, (B) such time as required by the payment schedule applicable to each payment or benefit as set forth in Section 3(a) or 3(b), as applicable, or {C) such time as required by Section 3(g).

(ii) Unless otherwise required by Section 3(g), the Company will pay any severance payments set forth in Section 3(a) or Section 3(b), as applicable, in a lump-sum payment payable within fifteen (15) days following Executive’s termination date; provided, however, that no severance or other benefits, other than the accrued compensation set forth in Section 3(h), will be paid or provided until the release of claims becomes effective and irrevocable, and such severance amounts or benefits otherwise payable between Executive’s termination date and the date such release becomes effective and irrevocable will be paid on the date the release becomes effective and irrevocable. If Executive should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump-sum payment promptly following such event to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(d) Voluntary Resignation; Termination For Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason during the period that is on or within six (6) months following a Change of Control) or (ii) for Cause by the Company (or any parent or subsidiary of the Company), then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans or pursuant to other written agreements with the Company.

(e) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his death, then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.

(f) Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary of the Company), the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this

-3-

Agreement. Executive will be entitled to no benefits, compensation or other payments or rights upon termination of employment other than those benefits expressly set forth in this Section 3.

(g) Section 409A.

(i) Notwithstanding anything to the contrary in this Agreement, no severance payable to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Compensation Separation Benefits”) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service but prior to the six (6) month anniversary of the separation, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(iii) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(iv) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(v) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

-4-

(h) Accrued Wages and Vacation; Expenses. Without regard to the reason for, or the timing of, Executive’s termination of employment: (i) the Company will pay Executive any unpaid base salary due for periods prior to the Termination Date; (ii) the Company will pay Executive all of Executive’s accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by Executive, the Company will reimburse Executive for all expenses reasonably and necessarily incurred by Executive in connection with the business of the Company prior to the Termination Date. These payments will be made promptly upon termination and within the period of time mandated by law.

4. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits under Section 4(a)(i) will be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: reduction of cash payments; cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), cancellation of accelerated vesting of equity awards; reduction of employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Employee’s equity awards.

Unless the Company and Executive otherwise agree in writing, any determination required under this Section 4 will be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 4.

5. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a) Cause. “Cause” is defined as: (i) acts or omissions constituting gross negligence or willful misconduct with respect to your obligations or otherwise relating to the

-5-

business of the Company; (ii) felony conviction of, or felony plea or nolo contender for fraud, misappropriation or embezzlement, or a felony crime of moral turpitude or conviction of fraud, misappropriation or embezzlement; (iii) willfully or negligently exposing the Company to a risk of civil or criminal legal damages, liabilities or penalties; (iv) violation or breach of any fiduciary duty or (v) violation of breach of any contractual duty to the Company which duty is material to the performance of your duties or responsibilities or results in material damage to the company or its business; (vi) breach of your Confidential Information Agreement with the Company; or (vii) engaging in any other act of dishonesty, fraud, intentional misrepresentation, illegality or harassment, which, as determined in good faith by the Board, is reasonably likely to materially adversely affect the business or reputation of the Company with its current or prospective customers, suppliers, lenders and/or other third parties with whom it does or might do business. The determination as to whether Executive is being terminated for Cause will be made in good faith by the Company and will be final and binding on Executive.

(b) Change of Control. “Change of Control” of the Company is defined as:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) a change in the composition of the Board occurring within a two (2) year period, as a result of which less than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors of the Company at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

(c) Disability. “Disability” will mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative (such Agreement as to acceptability not to be unreasonably

-6-

withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate will automatically be deemed to have been revoked.

(d) Good Reason. “Good Reason” will mean Executive’s termination of employment within ninety (90) days following the expiration of any cure period (discussed below) following the occurrence of one or more of the following, without Executive’s consent: (a) a significant reduction of Executive’s duties, position or responsibilities relative to Executive’s duties, position or responsibilities in effect immediately prior to such reduction, or the removal of Executive from such position, duties and responsibilities, unless Executive is provided with comparable or greater duties, position and responsibilities; provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when the Chief Financial Officer of the Company remains the Chief Financial Officer of the Company following a Change in Control where the Company becomes a wholly owned subsidiary of the acquirer, but is not made the Chief Financial Officer of the acquiring corporation) will not constitute “Good Reason;” (b) a material reduction by the Company of Executive’s base salary and/or benefits as in effect immediately prior to such reduction, other than substantially similar reductions that are also applied to substantially similar employees of the Company; (c) the imposition of a requirement for the relocation of Executive to a facility or location more than fifty (50) miles from Executive’s current work location; (d) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 6, below; or (e) a material breach by the Company of any term or condition of this Agreement, offer letter dated June 1, 2006 with Executive, or any other agreement between the Company and Executive. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the occurrence of the Good Reason event and a reasonable cure period of not less than thirty (30) days following the date of such notice.

(e) Section 409A Limit. “Section 409A Limit” will mean the lesser of two (2) times: (i) Employee’s annualized compensation based upon the annual rate of pay paid to Employee during the Employee’s taxable year preceding the Employee’s taxable year of Employee’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Employee’s employment is terminated.

6. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this Agreement and will agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the

-7-

absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7. Notice.

(a) General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices will be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its President.

(b) Notice of Termination. Any termination by the Company for Cause or as a result of a voluntary resignation will be communicated by a notice of termination to the other party hereto given in accordance with Section 7(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).

8. Arbitration.

(a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, will be resolved by binding arbitration to be conducted by the Judicial Arbitration and Mediation Services (“JAMS”) in Santa Clara, California, in accordance with the Employment Arbitration Rules and Procedures of JAMS (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) The arbitrator will apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

-8-

(c) Executive understands that nothing in this Section 8 modifies Executive’s at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause.

(d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 8, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;

(e) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

9. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b) Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

-9-

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including, but not limited to, any rights to severance and/or change of control benefits set forth in Executive’s offer letter dated June 1, 2006; provided; however, that to the extent any agreement covering Executive’s equity awards outstanding as of the date of this Agreement provide for vesting acceleration provisions more favorable than that provided for in Section 3 hereof, then the terms of that agreement will govern with respect to that particular equity award. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.

(e) Choice of Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

(h) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

-10-

COMPANY:		BLUEARC CORPORATION
		/s/ Michael B. Gustafson
	By:	Michael B. Gustafson
	Title:	Chief Executive Officer and President
	Date:	6/15/2009

EXECUTIVE:		SHMUEL SHOTTAN, AN INDIVIDUAL
		/s/ Shmuel Shottan
	By:	Shmuel Shottan
	Date:	1/11/2010

-11-

EX-10.9

Exhibit 10.9

BLUEARC CORPORATION

CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between                     (“Executive”) and BlueArc Corporation (the “Company”), effective as of                      (the “Effective Date”).

RECITALS

A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein) of the Company.

B. The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

C. The Board believes that it is imperative to provide Executive with certain benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

D. Certain capitalized terms used in the Agreement are defined in Section 5 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement will terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause. If Executive’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, Executive will not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or as provided in any employment agreement entered into between the Company and Employee, and the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses.

3. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If on or within [        ] months following a Change of Control the Company (or any parent or subsidiary of the Company) terminates Executive’s employment without Cause, or the Executive resigns from such employment for Good Reason, and Executive signs and does not revoke a standard release of claims with the Company in a form reflected in Exhibit “A” hereto, provided that such release of claims becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the release agreement (such deadline, the “Release Deadline”), then subject to this Section 3, Executive will receive the following:

(i) Severance Payment. Executive will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to six (6) months of Executive’s base salary (as in effect immediately prior to (A) the Change of Control, or (B) Executive’s termination, whichever is greater).

(ii) Continued Employee Benefits. If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for periods of coverage beyond that permitted by COBRA for Executive and Executive’s eligible dependents within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of six (6) months from the last date of employment of the Executive with the Company, or (B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.

(iii) Equity Awards. [    ] percent ([    ]%) of Executive’s then outstanding and unvested awards relating to the Company’s common stock (whether stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares, performance units or otherwise (collectively, the “Equity Awards”)) will vest and thereafter otherwise will remain subject to the terms and conditions of the applicable Equity Award agreement.

(b) Timing of Payments.

(i) If the release of claims does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the release of claims becomes effective and irrevocable. In the event the termination occurs at a time during the calendar year when the release of claims could become effective in the calendar year following the calendar year in which Executive’s termination occurs (whether or not it actually becomes effective in the following year), then any severance payments or benefits under this Agreement that would be considered Deferred Compensation Severance Benefits (as defined in Section 3(f)(i) will be paid on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, the latest to occur of: (A) the date the release of claims becomes

-2-

effective and irrevocable, (B) such time as required by the payment schedule applicable to each payment or benefit as set forth in Section 3(a), or (C) such time as required by Section 3(f).

(ii) Unless otherwise required by Section 3(f), the Company will pay any severance payments set forth in Section 3(a) in a lump-sum payment payable within fifteen (15) days following Executive’s termination date; provided, however, that no severance or other benefits, other than the accrued compensation set forth in Section 3(g), will be paid or provided until the release of claims becomes effective and irrevocable, and such severance amounts or benefits otherwise payable between Executive’s termination date and the date such release becomes effective and irrevocable will be paid on the date the release becomes effective and irrevocable. If Executive should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump-sum payment promptly following such event to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination For Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason during the period that is on or within [        ] months following a Change of Control) or (ii) for Cause by the Company (or any parent or subsidiary of the Company), then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his death, then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.

(e) Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary of the Company) on or within [        ] months following a Change of Control, the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no benefits, compensation or other payments or rights upon termination of employment on or within [        ] months following a Change of Control other than those benefits expressly set forth in this Section 3.

(f) Section 409A.

(i) Notwithstanding anything to the contrary in this Agreement, no severance payable to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Compensation Separation Benefits”) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

-3-

(ii) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service but prior to the six (6) month anniversary of the separation, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(iii) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(iv) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(v) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

(g) Accrued Wages and Vacation; Expenses. Without regard to the reason for, or the timing of, Executive’s termination of employment: (i) the Company will pay Executive any unpaid base salary due for periods prior to the Termination Date; (ii) the Company will pay Executive all of Executive’s accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by Executive, the Company will reimburse Executive for all expenses reasonably and necessarily incurred by Executive in connection with the business of the Company prior to the Termination Date. These payments will be made promptly upon termination and within the period of time mandated by law.

4. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 4, would be subject to the

-4-

excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits under Section 4(a)(i) will be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: reduction of cash payments; cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), cancellation of accelerated vesting of equity awards; reduction of employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Employee’s equity awards.

Unless the Company and Executive otherwise agree in writing, any determination required under this Section 4 will be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 4.

5. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a) Cause. “Cause” is defined as: (i) acts or omissions constituting gross negligence or willful misconduct with respect to your obligations or otherwise relating to the business of the Company; (ii) felony conviction of, or felony plea or nolo contender for fraud, misappropriation or embezzlement, or a felony crime of moral turpitude or conviction of fraud, misappropriation or embezzlement; (iii) willfully or negligently exposing the Company to a risk of civil or criminal legal damages, liabilities or penalties; (iv) violation or breach of any fiduciary duty or (v) violation of breach of any contractual duty to the Company which duty is material to the performance of your duties or responsibilities or results in material damage to the company or its business; (vi) breach of your Confidential Information Agreement with the Company; or (vii) engaging in any other act of dishonesty, fraud, intentional misrepresentation, illegality or harassment, which, as determined in good faith by the Board, is reasonably likely to materially adversely affect the business or reputation of the Company with its current or prospective customers, suppliers, lenders and/or other third parties with whom it does or might do business.

-5-

The determination as to whether Executive is being terminated for Cause will be made in good faith by the Company and will be final and binding on Executive.

(b) Change of Control. “Change of Control” of the Company is defined as:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) a change in the composition of the Board occurring within a two (2) year period, as a result of which less than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors of the Company at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

(c) Disability. “Disability” will mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative (such Agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate will automatically be deemed to have been revoked.

(d) Good Reason. “Good Reason” will mean Executive’s termination of employment within ninety (90) days following the expiration of any cure period (discussed below) following the occurrence of one or more of the following, without Executive’s consent: (a) a significant reduction of Executive’s duties, position or responsibilities relative to Executive’s duties, position or responsibilities in effect immediately prior to such reduction, or the removal of

-6-

Executive from such position, duties and responsibilities, unless Executive is provided with comparable or greater duties, position and responsibilities; provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when the Chief Financial Officer of the Company remains the Chief Financial Officer of the Company following a Change in Control where the Company becomes a wholly owned subsidiary of the acquirer, but is not made the Chief Financial Officer of the acquiring corporation) will not constitute “Good Reason;” (b) a material reduction by the Company of Executive’s base salary and/or benefits as in effect immediately prior to such reduction, other than substantially similar reductions that are also applied to substantially similar employees of the Company; (c) the imposition of a requirement for the relocation of Executive to a facility or location more than fifty (50) miles from Executive’s current work location; (d) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 6, below; or (e) a material breach by the Company of any term or condition of this Agreement, offer letter dated                      with Executive, or any other agreement between the Company and Executive. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the occurrence of the Good Reason event and a reasonable cure period of not less than thirty (30) days following the date of such notice.

(e) Section 409A Limit. “Section 409A Limit” will mean the lesser of two (2) times: (i) Employee’s annualized compensation based upon the annual rate of pay paid to Employee during the Employee’s taxable year preceding the Employee’s taxable year of Employee’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Employee’s employment is terminated.

6. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this Agreement and will agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

-7-

7. Notice.

(a) General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices will be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its President.

(b) Notice of Termination. Any termination by the Company for Cause or as a result of a voluntary resignation will be communicated by a notice of termination to the other party hereto given in accordance with Section 7(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).

8. Arbitration.

(a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, will be resolved by binding arbitration to be conducted by the Judicial Arbitration and Mediation Services (“JAMS”) in Santa Clara, California, in accordance with the Employment Arbitration Rules and Procedures of JAMS (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) The arbitrator will apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

(c) Executive understands that nothing in this Section 8 modifies Executive’s at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause.

(d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 8, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES

-8-

TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;

(e) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

9. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b) Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including, but not limited to, any rights to severance and/or change of control benefits set forth in Executive’s offer letter dated                     . No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.

-9-

(e) Choice of Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

(h) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY:	BLUEARC CORPORATION
	By: Michael B. Gustafson
	Title: Chief Executive Officer and President
	Date:
EXECUTIVE:	NAME, AN INDIVIDUAL
	By:
	Date:

-10-

EX-10.10

Exhibit 10.10

BLUEARC CORPORATION

FIRST YEAR CHANGE OF CONTROL SEVERANCE AGREEMENT

This First Year Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between [name of executive] (“Executive”) and BlueArc Corporation (the “Company”), effective as of [date of agreement] (the “Effective Date”).

RECITALS

A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein) of the Company.

B. The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

C. The Board believes that it is imperative to provide Executive with certain benefits upon Executive’s termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

D. Certain capitalized terms used in the Agreement are defined in Section 5 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement. This Agreement will have a term of one (1) year from the Effective Date, unless terminated earlier under this Agreement’s provisions, Notwithstanding the foregoing provisions of this paragraph, in the event of a Change of Control, the term of this Agreement will automatically extend through the eighteen-month anniversary of such Change of Control. If Executive becomes entitled to severance benefits pursuant to Section 3 hereof, this Agreement will not terminate until all of the obligations under this Agreement have been satisfied.

2. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause. If Executive’s employment terminates for any reason, including (without limitation) any termination

prior to a Change of Control, Executive will not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or as provided in any employment agreement entered into between the Company and Employee, and the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses.

3. Severance Benefits.

(a) Involuntary Termination Following a Change of Control. If on or within six (6) months following a Change of Control the Company (or any parent or subsidiary of the Company) terminates Executive’s employment without Cause, or the Executive resigns from such employment for Good Reason, and Executive signs and does not revoke a standard release of claims with the Company in a form reflected in Exhibit “A” hereto, provided that such release of claims becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the release agreement (such deadline, the “Release Deadline”), then subject to this Section 3, Executive will receive the following:

(i) Severance Payment. Executive will receive severance pay (less applicable withholding taxes) in the form of a lump sum payment equivalent to six (6) months of Executive’s base salary (as in effect immediately prior to (A) the Change of Control, or (B) Executive’s termination, whichever is greater).

(ii) Continued Employee Benefits. Whether or not Executive elects to continue and pay his health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination of his Employment, the Company shall pay him an amount equal to twice what the monthly premium would be under COBRA for Executive and his covered dependents until the earlier of (A) a period of six (6) months from the last date of employment of the Executive with the Company, or (B) the date upon which Executive and/or Executive’s eligible dependents becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.

(iii) Equity Awards. Twenty-five percent (25%) of Executive’s then outstanding and unvested awards relating to the Company’s common stock (whether stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares, performance units or otherwise (collectively, the “Equity Awards”)) will vest and thereafter otherwise will remain subject to the terms and conditions of the applicable Equity Award agreement.

(b) Timing of Payments.

(i) If the release of claims does not become effective by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the release of claims becomes effective and irrevocable. In the event the termination occurs at a time during the calendar year when the release of claims could become effective in the calendar year following the calendar year in which Executive’s termination occurs (whether or not it actually becomes effective in the following year), then any severance payments or benefits under this Agreement that would be

-2-

considered Deferred Compensation Severance Benefits (as defined in Section 3(f)(i) will be paid on the first payroll date to occur during the calendar year following the calendar year in which such termination occurs, or, if later, the latest to occur of: (A) the date the release of claims becomes effective and irrevocable, (B) such time as required by the payment schedule applicable to each payment or benefit as set forth in Section 3(a), or (C) such time as required by Section 3(f).

(ii) Unless otherwise required by Section 3(f), the Company will pay any severance payments set forth in Section 3(a) in a lump-sum payment payable within fifteen (15) days following Executive’s termination date; provided, however, that no severance or other benefits, other than the accrued compensation set forth in Section 3(g), will be paid or provided until the release of claims becomes effective and irrevocable, and such severance amounts or benefits otherwise payable between Executive’s termination date and the date such release becomes effective and irrevocable will be paid on the date the release becomes effective and irrevocable. If Executive should die before all of the severance amounts have been paid, such unpaid amounts will be paid in a lump-sum payment promptly following such event to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate.

(c) Voluntary Resignation; Termination For Cause. If Executive’s employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason during the period that is on or within six (6) months following a Change of Control) or (ii) for Cause by the Company (or any parent or subsidiary of the Company), then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans or pursuant to other written agreements with the Company.

(d) Disability; Death. If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to his death, then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.

(e) Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary of the Company) on or within six (6) months following a Change of Control, the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no benefits, compensation or other payments or rights upon termination of employment on or within six (6) months following a Change of Control other than those benefits expressly set forth in this Section 3.

(f) Section 409A.

(i) Notwithstanding anything to the contrary in this Agreement, no severance payable to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final

-3-

regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Compensation Separation Benefits”) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service but prior to the six (6) month anniversary of the separation, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(iii) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(iv) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(v) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

(g) Accrued Wages and Vacation; Expenses. Without regard to the reason for, or the timing of, Executive’s termination of employment: (i) the Company will pay Executive any unpaid base salary due for periods prior to the Termination Date; (ii) the Company will pay Executive all of Executive’s accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by Executive, the Company will reimburse Executive for all expenses reasonably and necessarily incurred by Executive in connection with the business of the Company prior to the Termination Date. These payments will be made promptly upon termination and within the period of time mandated by law.

-4-

4. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits under Section 4(a)(i) will be either:

(a) delivered in full, or

(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: reduction of cash payments; cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), cancellation of accelerated vesting of equity awards; reduction of employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Employee’s equity awards.

Unless the Company and Executive otherwise agree in writing, any determination required under this Section 4 will be made in writing by the Company’s independent public accountants immediately prior to Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 4.

5. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a) Cause. “Cause” is defined as: (i) acts or omissions constituting gross negligence or willful misconduct with respect to your obligations or otherwise relating to the business of the Company; (ii) felony conviction of, or felony plea or nolo contender for fraud, misappropriation or embezzlement, or a felony crime of moral turpitude or conviction of fraud, misappropriation or embezzlement; (iii) willfully or negligently exposing the Company to a risk of civil or criminal legal damages, liabilities or penalties; (iv) violation or breach of any fiduciary duty or (v) violation of breach of any contractual duty to the Company which duty is material to the performance of your duties or responsibilities or results in material damage to the company or its business; (vi) breach of your Confidential Information Agreement with the Company; or (vii) engaging in any other act of dishonesty, fraud, intentional misrepresentation, illegality or harassment, which, as determined in good faith by the Board, is reasonably likely to materially

-5-

adversely affect the business or reputation of the Company with its current or prospective customers, suppliers, lenders and/or other third parties with whom it does or might do business. The determination as to whether Executive is being terminated for Cause will be made in good faith by the Company and will be final and binding on Executive.

(b) Change of Control. “Change of Control” of the Company is defined as:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;

(ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

(iv) a change in the composition of the Board occurring within a two (2) year period, as a result of which less than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors of the Company at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

(c) Disability. “Disability” will mean that Executive has been unable to perform his Company duties as the result of his incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative (such Agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate will automatically be deemed to have been revoked.

(d) Good Reason. “Good Reason” will mean Executive’s termination of employment within ninety (90) days following the expiration of any cure period (discussed below) following the occurrence of one or more of the following, without Executive’s consent: (a) a

-6-

significant reduction of Executive’s duties, position or responsibilities relative to Executive’s duties, position or responsibilities in effect immediately prior to such reduction, or the removal of Executive from such position, duties and responsibilities, unless Executive is provided with comparable or greater duties, position and responsibilities; provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity, whether as a subsidiary, business unit or otherwise (as, for example, when the Chief Financial Officer of the Company remains the Chief Financial Officer of the Company following a Change in Control where the Company becomes a wholly owned subsidiary of the acquirer, but is not made the Chief Financial Officer of the acquiring corporation) will not constitute “Good Reason;” (b) a material reduction by the Company of Executive’s base salary and/or benefits as in effect immediately prior to such reduction, other than substantially similar reductions that are also applied to substantially similar employees of the Company; (c) the imposition of a requirement for the relocation of Executive to a facility or location more than fifty (50) miles from Executive’s current work location; (d) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 6, below; or (e) a material breach by the Company of any term or condition of this Agreement, promotion letter dated January 16, 2006 with Executive, or any other agreement between the Company and Executive. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the occurrence of the Good Reason event and a reasonable cure period of not less than thirty (30) days following the date of such notice.

(e) Section 409A Limit. “Section 409A Limit” will mean the lesser of two (2) times: (i) Employee’s annualized compensation based upon the annual rate of pay paid to Employee during the Employee’s taxable year preceding the Employee’s taxable year of Employee’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Employee’s employment is terminated.

6. Successors.

(a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this Agreement and will agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

-7-

7. Notice.

(a) General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices will be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its President.

(b) Notice of Termination. Any termination by the Company for Cause or as a result of a voluntary resignation will be communicated by a notice of termination to the other party hereto given in accordance with Section 7(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).

8. Arbitration.

(a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, will be resolved by binding arbitration to be conducted by the Judicial Arbitration and Mediation Services (“JAMS”) in Santa Clara, California, in accordance with the Employment Arbitration Rules and Procedures of JAMS (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) The arbitrator will apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

(c) Executive understands that nothing in this Section 8 modifies Executive’s at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause.

(d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION 8, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES

-8-

TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq;

(e) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

9. Miscellaneous Provisions.

(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b) Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including, but not limited to, any rights to severance and/or change of control benefits set forth in Executive’s promotion letter dated January 16, 2006; provided; however, that to the extent any agreement covering Executive’s equity awards outstanding as of the date of this Agreement provide for vesting acceleration provisions more favorable than that provided for in Section 3 hereof, then the terms of that agreement will govern with respect to that particular equity

-9-

award. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.

(e) Choice of Law. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

(f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

(h) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY:	BLUEARC CORPORATION
	By:
	Title:
	Date:
EXECUTIVE:	[NAME OF EXECUTIVE], an individual
	By:
	Date:

-10-

EX-10.11

Exhibit 10.11

OFFICE LEASE

RIO ROBLES TECHNOLOGY CENTRE

Between

CARR NP PROPERTIES, L.L.C.,

a Delaware limited liability company

as Landlord,

and

BLUEARC CORPORATION,

a Delaware corporation

as Tenant

TABLE OF CONTENTS

	Page
ARTICLE 1 PREMISES AND COMMON AREAS		3
ARTICLE 2 LEASE TERM		7
ARTICLE 3 RENT		10
ARTICLE 4 EXPENSES AND TAXES		11
ARTICLE 5 USE OF PREMISES		15
ARTICLE 6 SERVICES		16
ARTICLE 7 REPAIRS		16
ARTICLE 8 ADDITIONS AND ALTERATIONS		19
ARTICLE 9 COVENANT AGAINST LIENS		21
ARTICLE 10 INDEMNIFICATION; INSURANCE		21
ARTICLE 11 DAMAGE AND DESTRUCTION		25
ARTICLE 12 NONWAIVER		26
ARTICLE 13 CONDEMNATION		27
ARTICLE 14 ASSIGNMENT AND SUBLETTING		27
ARTICLE 15 SURRENDER OF PREMISES; REMOVAL OF PERSONAL PROPERTY AND TRADE FIXTURES		32
ARTICLE 16 HOLDING OVER		33
ARTICLE 17 ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS		34
ARTICLE 18 SUBORDINATION		34
ARTICLE 19 DEFAULTS; REMEDIES		35
ARTICLE 20 RIGHTS RESERVED TO LANDLORD		38
ARTICLE 21 LANDLORD EXCULPATION		39
ARTICLE 22 SECURITY DEPOSIT		40
ARTICLE 23 INTENTIONALLY OMITTED		41
ARTICLE 24 SIGNS		41
ARTICLE 25 COMPLIANCE WITH LAW; HAZARDOUS SUBSTANCES		41
ARTICLE 26 LATE CHARGES		47
ARTICLE 27 LANDLORD’S RIGHT TO CURE DEFAULT		47
ARTICLE 28 ENTRY BY LANDLORD		47

-i-

TABLE OF CONTENTS

(Continued)

	Page
ARTICLE 29 TENANT PARKING		48
ARTICLE 30 MISCELLANEOUS PROVISIONS		49

EXHIBITS
A	OUTLINE OF PREMISES
B	TENANT WORK LETTER
B-1	APPROVED BLUEARC TENANT IMPROVEMENTS
C	FORM OF NOTICE OF LEASE TERM DATES
D	RULES AND REGULATIONS
E	HAZARDOUS SUBSTANCES DISCLOSURE CERTIFICATE

-ii-

OFFICE LEASE

This Office Lease (this “Lease”), dated as of the date set forth in Section 1 of the Summary of Basic Lease Information (the “Summary”), below, is made by and between CARR NP PROPERTIES, L.L.C., a Delaware limited liability company (“Landlord”), and BLUEARC CORPORATION, a Delaware corporation (“Tenant”).

SUMMARY OF BASIC LEASE INFORMATION

	TERMS OF LEASE		DESCRIPTION
1.	Date:		July 16, 2009
2.	Premises (Article 1).
	2.1	“Building”	40-50 Rio Robles Drive, San Jose, California
	2.2	“Premises”	Approximately 41,772 rentable square feet of space, comprising the entirety of the Building, the outline and location of which is set forth in Exhibit A to this Lease.
	2.3	“Property”	The Building, the parcel(s) of land upon which it is located, and, at Landlord’s discretion, any parking facilities and other improvements serving the Building and the parcel(s) of land upon which such parking facilities and other improvements are located.
	2.4	“Project”	The office/R&D project, consisting of seven (7) buildings, and commonly known as RIO ROBLES TECHNOLOGY CENTRE, including (i) the Common Areas (as defined in Section 1.2 below), and (ii) the land (which is improved with landscaping, above ground and subterranean parking facilities and other improvements) upon which such buildings and the Common Areas are located.
3.	Lease Term (Article 2).
	3.1	Lease Term:	The term of this Lease (the “Lease Term”) shall commence on the Lease Commencement Date and end on the Lease Expiration Date (or any earlier date on which this Lease is terminated as provided herein).
	3.2	“Lease Commencement Date	September 1, 2009
	3.3	“Lease Expiration Date”:	August 31, 2014

4. “Base Rent” (Article 3):

Period During Lease Term	Monthly Base Rent Per Rentable Square Foot (rounded to the nearest 100th of a dollar)		Monthly Installment of Base Rent		Annual Base Rent
Lease Commencement Date – August 31, 2010	$	0.85	$	35,463.70	$	425,564.40
September 1, 2010 – August 31, 2011	$	0.88	$	36,527.61	$	438,331.33
September 1, 2011 – August 31, 2012	$	0.90	$	37,623.44	$	451,481.27
September 1, 2012 – August 31, 2013	$	0.93	$	38,752.14	$	465,025.71
September 1, 2013 – August 31, 2014	$	0.96	$	39,914.71	$	478,976.48

Notwithstanding anything to the contrary in this Lease, including Article 4, so long as no Default (defined in Section 19.1 below) exists, Tenant shall be entitled to an abatement of Base Rent, in the amount of $35,463.70, and all Direct Expenses for the month of September 2009.

5.	“Tenant’s Share” (Article 4):	100%
6.	“Permitted Use” (Article 5):	General office, laboratory, research and development and related purposes consistent with a “Class A” office/R&D building and in conformity with municipal zoning requirements of the City of San Jose and other applicable Laws (as defined in Section 25.1 below)
7.	“Security Deposit” (Article 22):	$250,000.00, as more particularly described, and subject to the reduction contained, in Article 22 below.
	Prepaid Base Rent (Article 3):	$35,463.70, as more particularly described in Article 3 below.
	Prepaid Additional Rent (Article 3):	$16,271.58, as more particularly described in Article 3 of this Lease.
8.	Parking (Article 29):	One hundred sixty-eight (168) unreserved parking spaces
9.	Address of Tenant (Section 30.16):	50 Rio Robles San Jose, CA 95134 Attention: Lease Administration
10.	Address of Landlord (Section 30.16):	Carr NP Properties, L.L.C. 2655 Campus Drive, Suite 100 San Mateo, CA 94403

-2-

		Attn: Market Officer and Equity Office 2655 Campus Drive, Suite 100 San Mateo, CA 94403 Attn: Managing Counsel and Equity Office Two North Riverside Plaza Suite 2100 Chicago, IL 60606 Attn: Lease Administration
11.	Tenant’s Broker(s) (Section 30.22):	NAI BT Commercial
12.	“Tenant Improvements”:	Defined in the Tenant Work Letter attached hereto as Exhibit B.
13.	“Guarantor”:	As of the date of this Lease, there is no Guarantor.

ARTICLE 1

PREMISES AND COMMON AREAS

1.1 The Premises.

1.1.1 Subject to the terms hereof, Landlord hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord. Landlord and Tenant acknowledge and agree that the rentable square footage of the Premises are as set forth in Section 2.2 of the Summary. Tenant acknowledges and agrees that this Lease is made upon the condition that Tenant will perform each of its obligations hereunder and that Tenant’s agreement to perform each such obligation is a material part of the consideration for this Lease. The parties acknowledge that Exhibit A is intended only to show the approximate location of the Premises in the Project, and not to constitute an agreement, representation or warranty as to the construction or precise area of the Premises or as to the specific location or elements of the Common Areas (defined in Section 1.2 below) or of the access ways to the Premises or the Project.

1.1.2 Tenant acknowledges and agrees that its possession of the Premises as of the Lease Commencement Date is a continuation of Tenant’s possession of the Premises under its existing sublease of the Premises (“Existing Sublease”), and that, except as specifically set forth in

-3-

this Lease (including in the Tenant Work Letter attached hereto as Exhibit B (“Tenant Work Letter”)), Tenant agrees to accept possession of the Premises in their “as is” condition and configuration on the date of this Lease, without any obligation of Landlord to provide or pay for any work or services related to the improvement of the Premises, and without any representation or warranty regarding the condition of the Premises or the Project or their suitability for the conduct of Tenant’s business. Notwithstanding anything to the contrary in the Existing Sublease or Landlord’s consent or similar agreement delivered in connection therewith, Landlord agrees that, if the Existing Sublease or the existing master lease of the Premises as to which the Existing Sublease is subordinate (“Existing Master Lease”) is terminated for any reason on or before August 31, 2009, then, notwithstanding Section 3.2 of the Summary, the Term of this Lease shall commence concurrently with such early termination, subject, however, to the provisions of Article 11 and Article 13 below. Landlord shall not require any leasehold improvements or other alterations currently existing in the Premises to be removed upon the expiration or earlier termination of the Existing Sublease and agrees that the then-existing condition of the Premises satisfies the surrender condition under the Existing Lease; provided, however, that the foregoing shall not affect Tenant’s removal and restoration obligations set forth in Section 8.5 below.

1.1.3 Landlord shall use reasonable diligence to cause the PG&E Power Upgrades (as more particularly described in the Tenant Work Letter) to be completed as soon as reasonably practicable, and shall use commercially reasonable efforts to cause the Substantial Completion Date (as defined in Tenant Work Letter) to occur concurrently with the substantial completion of the PG&E Power Upgrades. Tenant acknowledges and agrees that “Landlord’s Work” (as defined in the Tenant Work Letter) may be conducted during normal business hours and may create disruption, noise, dust or temporarily leave debris in the Premises, but that Landlord shall use commercially reasonable efforts not to unreasonably interfere with Tenant’s business as a result thereof. So long as Landlord uses such commercially reasonable efforts, Tenant hereby agrees that Landlord’s Work and Landlord’s actions in connection therewith shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent and that Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant’s business arising from Landlord’s Work, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant’s personal property or improvements resulting from Landlord’s Work or Landlord’s actions in connection therewith, or for any inconvenience or annoyance occasioned thereby or Landlord’s actions.

1.2 Common Areas. Tenant shall have the non-exclusive right to use, in common with Landlord and other parties and subject to the Rules and Regulations (defined in Exhibit D attached hereto), any portions of the Property that are designated from time to time by Landlord for such use (the “Common Areas”). The manner in which the Common Areas are maintained and operated shall be at the sole and reasonable discretion of Landlord. Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas, and any inconvenience suffered by Tenant in connection therewith shall not subject Landlord to any liability for any loss or damage resulting therefrom, constitute a constructive eviction, or entitle Tenant to any abatement of Rent; provided, however, that no such closures of or changes to the Common Areas shall unreasonably interfere with Tenant’s use of the Premises or

-4-

Tenant’s parking rights or materially increase the obligations or decrease the rights of Tenant under this Lease.

1.3 Temporary Lab Space.

1.3.1 Upon the mutual execution and delivery of this Lease, and continuing thereafter until the Substantial Completion Date or the substantial completion of the PG&E Power Upgrades, whichever occurs later, Tenant shall have the right to use and occupy the existing lab space in the building located at 90 Rio Robles Drive, San Jose, California (the “Temporary Lab Space”); provided, however, that, upon thirty (30) days’ prior written notice to Tenant (which notice Landlord may deliver at any time, including before the substantial completion of the PG&E Power Upgrades, but only if Landlord has negotiated and is prepared to enter into a letter of intent or similar agreement [which Tenant acknowledges may be non-binding and may be conditioned on execution of subsequent lease documentation] with a bona fide third-party to lease the Temporary Lab Space) (“Landlord’s TLS Termination Notice”), Tenant shall surrender the Temporary Lab Space to Landlord in the same condition as when received, reasonable wear and tear, repairs that are specifically made the responsibility of Landlord hereunder and, subject to Articles 11 and 13 below, damage from casualty or condemnation. Tenant’s use and occupancy of the Temporary Lab Space shall be subject to all of the terms, covenants and conditions of this Lease, including, without limitation, Tenant’s indemnity obligations set forth in Article 10 below, except that Landlord agrees that Tenant’s obligation to pay Base Rent and Direct Expenses for the Temporary Lab Space shall be waived; and, provided, however, that, unless necessitated by Tenant’s particular use of the Temporary Lab Space, the particular manner in which Tenant conducts business in the Temporary Lab Space or any Alterations to the Temporary Lab Space made by or on behalf of Tenant, Tenant shall have no obligation to make alterations or improvements to the Temporary Lab Space to comply with any Laws or Underlying Documents. In addition, notwithstanding the provisions of Section 7.1.4 below, if, at any time during Tenant’s occupancy of the Temporary Lab Space, any capital repairs, replacements or improvements (as determined in accordance with generally accepted accounting principles) are required to be made to the Building Systems (as defined in Section 7.1.1 below), or portions thereof, exclusively serving the Temporary Lab Space (excluding any Building Systems installed by Tenant, any Specialty Systems [as defined in Section 7.1.1 below], and any other equipment or facilities relating to the particular use or manner of use of the Temporary Lab Space by Tenant or any Tenant Parties [as defined in Section 10.1.2 below]), then, unless such repairs, replacements or improvements are required by the act or omission of Tenant or any Tenant Parties, or any Alterations to the Temporary Lab Space made by or on behalf of Tenant, Landlord shall perform such capital repairs, replacements or improvements at no cost to Tenant. Tenant shall pay the cost of all utilities and other services provided to the Temporary Lab Space during Tenant’s occupancy.

1.3.2 Except as expressly provided in this Section 1.3, Tenant agrees to accept possession of the Temporary Lab Space in its “as is” condition and configuration on the date of this Lease, without any obligation of Landlord to provide or pay for any work or services related to the improvement of the Temporary Lab Space, except maintenance and repairs required to be performed by Landlord pursuant to Articles 7 and 11 below, and without any representation or warranty

-5-

regarding the condition of the Temporary Lab Space or its suitability for the conduct of Tenant’s business. Tenant shall bear all costs related to furnishing, equipping, and moving into and out of the Temporary Lab Space, including, without limitation, the installation of any necessary “Lines” (as defined in Section 30.28 below). Upon the earlier to occur of (i) the Substantial Completion Date or (ii) thirty (30) days following Tenant’s receipt of Landlord’s TLS Termination Notice, Tenant shall surrender the Temporary Lab Space to Landlord in the same condition as when received; and, without limiting the provisions of Section 8.5 below, Tenant agrees that, unless otherwise instructed by Landlord in writing, Tenant shall, at Tenant’s expense, before Tenant’s surrender of the Temporary Lab Space to Landlord, (a) remove from the Temporary Lab Space any Alterations made by Tenant thereto, (b) repair any damage to the Temporary Lab Space caused by such removal, and (c) restore the affected portion of the Temporary Lab Space to its condition existing before the installation of such Alterations; provided, however, that if Tenant’s request for Landlord’s approval of any proposed Alterations contains a request that Landlord identify any portion of such Alterations that Landlord will require Tenant to remove as provided above, then Landlord will, at the time it approves such Alterations, identify such portion of the Alterations, if any, that Landlord will require Tenant to so remove. If Tenant fails to complete the removal, repair or restoration required by this Section within thirty (30) days following the earlier to occur of (1) the Substantial Completion Date or (2) Tenant’s receipt of Landlord’s TLS Termination Notice, Landlord may do so and may charge the cost thereof to Tenant.

1.3.3 Notwithstanding the foregoing provisions of this Section 1.3, Landlord shall deliver possession of the Temporary Lab Space to Tenant in good, vacant, broom clean condition, with all TS Base Building Systems (as defined below) in good working order (without regard, however, to Tenant’s proposed use of the Temporary Lab Space). For purposes of this Lease, the “TS Base Building Systems” means the heating, ventilation and air conditioning equipment, and base building electrical, plumbing and fire and life safety systems located in or on the Temporary Lab Space on the Temporary Lab Space Delivery Date that serve the Temporary Lab Space generally (as distinguished from the portions of such systems that may be installed or modified by Tenant). Without limiting the foregoing, the TS Base Building Systems exclude interior lighting (including, without limitation, switches, light bulbs and ballasts) and any interior controls or design features that are customarily installed as part of the leasehold improvements in the Temporary Lab Space.

1.3.4 Notwithstanding the provisions of Section 1.3.2 above, (a) if it is determined that any of the TS Base Building Systems were not in good working order as of the date of mutual execution and delivery of this Lease, Landlord shall not be liable to Tenant for any damages, but as Tenant’s sole remedy, Landlord, at no cost to Tenant, shall perform such work or take such other action as may be necessary to place the same in good working order and condition; provided, however, that if Tenant does not give Landlord written notice of any such deficiency in the TS Base Building Systems within ninety (90) days following Landlord’s delivery of possession of the Temporary Lab Space to Tenant, correction of such deficiency shall be governed by the provisions of Article 7 below; and (b) if Landlord fails to deliver the Temporary Lab Space in compliance with all Laws, as evidenced by written notice of violation from any applicable governmental agency(ies) with jurisdiction, Landlord shall, as Tenant’s sole remedy therefor, perform such work in the

-6-

Temporary Lab Space as may be necessary to cure the violation which existed as of the date of delivery; provided, however, that Landlord may contest any alleged violation of Law in good faith, including by seeking a waiver or deferment of compliance, asserting any defense allowed by Law, and exercising any right of appeal (provided that Tenant incurs no liability as a result of such contest and that, after completing such contest, Landlord makes any alteration to the Temporary Lab Space that is necessary to comply with any final order or judgment). Subject to the provisions of this Section 1.3 and Section 25.3 below, the taking of possession of the Temporary Lab Space by Tenant shall conclusively establish that the Temporary Lab Space and the Building were at such time in good and sanitary order, condition and repair.

ARTICLE 2

LEASE TERM

2.1 Lease Term.

2.1.1 The Lease Term shall commence and, unless ended sooner or extended as herein provided, shall expire on the Lease Commencement Date and Lease Expiration Date, respectively, specified in Section 3 of the Summary of Basic Lease Information. Without limiting the foregoing, if the Substantial Completion Date does not occur on or before September 1, 2009, for any reason, then (a) this Lease shall not be void or voidable by either party, and (b) Landlord shall not be liable to Tenant for any loss or damage resulting therefrom; provided, however, that if the Substantial Completion Date does not occur on or before April 1, 2010 (the “Substantial Completion Deadline”), then Tenant, as its sole remedy, shall have the right to terminate this Lease by giving written notice of such termination to Landlord at any time after the Substantial Completion Deadline and prior to the Substantial Completion Date, in which case this Lease shall be terminated effective sixty (60) days after Landlord’s receipt of Tenant’s termination notice, unless the Substantial Completion Date occurs within the first thirty (30) days of such 60-day period; provided, however, that in no event shall Tenant have the right to terminate this Lease pursuant to the foregoing provisions of this Section 2.1.1, unless, prior to the date of Tenant’s termination notice, Landlord has delivered to Tenant a Landlord’s TLS Termination Notice pursuant to Section 1.3.1 above (i.e., so long as Landlord has not terminated Tenant’s occupancy of the Temporary Lab Space as provided in Section 1.3.1 above, Tenant shall have no right to terminate this Lease pursuant to the provisions of this Section 2.1.1).

2.1.2 At any time during the Lease Term, Landlord may deliver to Tenant a notice substantially in the form of Exhibit C attached hereto, as a confirmation of the information set forth therein, which Tenant shall execute and return to Landlord within five (5) days of receipt thereof. If Tenant fails to execute and return (or reasonably object in writing to) such notice within five (5) days after receiving it, Tenant shall be deemed to have executed and returned it without exception. This Lease shall be a binding contractual obligation effective upon execution and delivery hereof by Landlord and Tenant, notwithstanding the later commencement of the Lease Term.

-7-

2.2 Extension Option.

2.2.1 Option Term. Subject to the terms and conditions set forth below, Tenant shall have one (1) option (the “Extension Option”) to extend the Lease Term for an additional period of five (5) years (the “Option Term”). If Tenant properly exercises the Extension Option hereunder, all of the terms, covenants and conditions of this Lease shall continue in full force and effect during the Option Term, including provisions regarding payment of Additional Rent, which shall remain payable on the terms herein set forth, except that (a) the Base Rent payable by Tenant during the Option Term shall be as calculated in accordance with Section 2.3.3 and Section 2.3.4 below, (b) Tenant shall continue to possess and occupy the Premises in their existing condition, “as is” as of the commencement of such Option Term, and Landlord shall have no obligation to repair, remodel, improve or alter the Premises, to perform any other construction or other work of improvement upon the Premises, or to provide Tenant with any construction or refurbishing allowance whatsoever, and (c) Tenant shall have no further rights to extend the Term of this Lease after the expiration of the Option Term.

2.2.2 Exercise. To exercise the Extension Option, Tenant must deliver an unconditional binding notice to Landlord (“Exercise Notice”) via certified mail, FedEx or hand delivery not sooner than twelve (12) months, nor later than nine (9) months, prior to the expiration of the initial Lease Term. If Tenant fails to timely give its notice of exercise with respect to any Extension Option, Tenant will be deemed to have waived such Extension Option.

2.2.3 Market Rate Calculation. The Base Rent payable by Tenant for the Premises during the Option Term shall be the Market Rate (as defined below) for the Premises, valued as of the commencement of the Option Term, determined in the manner hereinafter provided. As used herein, the term “Market Rate” shall mean the annual amount of Base Rent at which tenants, as of the commencement of the Option Term, are leasing non-sublease, non-encumbered, non-equity space under then prevailing ordinary rental market practices (e.g., not pursuant to extraordinary rental, promotional deals or other concessions to tenants which deviate from what is the then prevailing ordinary practice), at arm’s length, that is comparable to the Premises within the Project or other comparable first class office/R&D projects in the submarket in which the Project is located (the “Comparison Projects”), based upon binding lease transactions for tenants in the Comparison Projects that, where possible, commence or are to commence within six (6) months prior to or within six (6) months after the commencement of the Option Term (“Comparison Leases”). Comparison Leases shall include renewal and new non-renewal tenancies, but shall exclude subleases and leases of space subject to another tenant’s expansion rights. Rental rates payable under Comparison Leases shall be adjusted to account for variations between this Lease and the Comparison Leases with respect to: (a) the length of the Option Term compared to the lease term of the Comparison Leases; (b) rental structure, including, without limitation, rental rates per rentable square foot (including type, gross or net, and if gross, adjusting for base year or expense stop), additional rental, escalation provisions, all other payments and escalations; (c) the size of the Premises compared to the size of the premises of the Comparison Leases; (d) free rent, moving expenses and other cash payments, allowances or other monetary concessions affecting the rental rate; (e) the age and quality of construction of the buildings (including compliance with applicable

-8-

codes); and (g) leasehold improvements and/or allowances, including the amounts thereof in renewal leases, and taking into account, in the case of renewal leases (including this Lease), the value of existing leasehold improvements to the renewal tenant.

2.2.4 Base Rent Determination. The Base Rent payable by Tenant for the Premises during the Option Term shall be determined as follows:

(a) If Tenant provides Landlord with its unconditional binding notice of exercise pursuant to Section 2.3.2 above, then, prior to the commencement of the Option Term, Landlord shall deliver to Tenant a good faith written proposal of the Market Rate. Within twenty-one (21) days after receipt of Landlord’s proposal, Tenant shall notify Landlord in writing (1) that Tenant accepts Landlord’s proposal or (2) that Tenant elects to submit the determination of Market Rate to arbitration in accordance with Sections 2.3.4(b) through 2.3.4(d) below. If Tenant does not give Landlord a timely notice in response to Landlord’s proposal, Landlord’s proposal of Market Rate shall be binding upon Tenant.

(b) If Tenant timely elects to submit the determination of Market Rate to arbitration, Landlord and Tenant shall first negotiate in good faith in an attempt to determine the Market Rate. If Landlord and Tenant are able to agree within thirty (30) days following the delivery of Tenant’s notice to Landlord electing arbitration (or if Tenant accepts Landlord’s initial proposal), then such agreement shall constitute a determination of Market Rate for purposes of this Section, and the parties shall immediately execute an amendment to this Lease stating the Base Rent for the Option Term. If Landlord and Tenant are unable to agree on the Market Rate within such 30-day negotiating period, then within fifteen (15) days after the expiration of such negotiating period, the parties shall meet and concurrently deliver to each other in envelopes their respective good faith estimates of the Market Rate (set forth on a net effective rentable square foot per annum basis). If the higher of such estimates is not more than one hundred five percent (105%) of the lower, then the Market Rate shall be the average of the two. Otherwise, the dispute shall be resolved by arbitration in accordance with Sections 2.3.4(c) and 2.3.4(d) below.

(c) Within seven (7) days after the exchange of estimates, the parties shall select as an arbitrator an independent real estate broker with at least five (5) years of experience in leasing commercial office space in the metropolitan area in which the Project is located (a “Qualified Appraiser”). If the parties cannot agree on a Qualified Appraiser, then within a second period of seven (7) days, each shall select a Qualified Appraiser and within ten (10) days thereafter the two appointed Qualified Appraisers shall select an independent Qualified Appraiser and the independent Qualified Appraiser shall be the sole arbitrator. If one party shall fail to select a Qualified Appraiser within the second seven (7) day period, then the Qualified Appraiser chosen by the other party shall be the sole arbitrator.

(d) Within twenty-one (21) days after submission of the matter to the arbitrator, the arbitrator shall determine the Market Rate by choosing whichever of the estimates submitted by Landlord and Tenant the arbitrator judges to be more accurate. The arbitrator shall notify Landlord and Tenant of its decision, which shall be final and binding. If the arbitrator

-9-

believes that expert advice would materially assist him, the arbitrator may retain one or more qualified persons to provide expert advice. The fees of the arbitrator and the expenses of the arbitration proceeding, including the fees of any expert witnesses retained by the arbitrator, shall be paid by the party whose estimate is not selected. Each party shall pay the fees of its respective counsel and the fees of any witness called by that party.

(e) Until the matter is resolved by agreement between the parties or a decision is rendered in any arbitration commenced pursuant to this Section 2.3, Tenant’s monthly payments of Base Rent shall be in an amount equal to Landlord’s determination of the Market Rate. Within ten (10) business days following the resolution of such dispute by the parties or the decision of the arbitrator, as applicable, Tenant shall pay to Landlord, or Landlord shall pay to Tenant, the amount of any deficiency or excess, as the case may be, in the Base Rent theretofore paid.

2.2.5 Rights Personal to Tenant. Tenant’s right to exercise the Extension Option is personal to, and may be exercised only by, BLUEARC CORPORATION, a Delaware corporation (the “Original Tenant”), or any assignee of this Lease permitted without Landlord’s consent pursuant to Section 14.8 below (“Permitted Assignee”), and only if the Original Tenant or a Permitted Transferee continues to occupy the entire Premises at the time of such exercise. No assignee (other than a Permitted Transferee) or subtenant shall have any right to exercise the Extension Option granted herein. In addition, if Tenant is in Default at the time it exercises the Extension Option or at any time thereafter until the commencement of the Option Term or if Tenant has been in Default at any time prior to its exercise of the Extension Option, Landlord shall have, in addition to all of its other rights and remedies under this Lease, the right (but not the obligation) to terminate the Extension Option and to unilaterally revoke Tenant’s exercise of the Extension Option, in which case this Lease shall expire on the Lease Expiration Date, unless earlier terminated pursuant to the terms hereof, and Tenant shall have no further rights under this Lease to renew or extend the Term.

ARTICLE 3

RENT

Tenant shall pay to Landlord or Landlord’s agent, without prior notice or demand or any setoff or deduction, at the place Landlord may from time to time designate in writing, by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, all Base Rent and Additional Rent (defined below) (collectively, “Rent”). As used herein, “Additional Rent” means all amounts, other than Base Rent, that Tenant is required to pay Landlord hereunder. Monthly payments of Base Rent and monthly payments of “Direct Expenses” (defined in Section 4.1 below) shall be paid in advance on or before the first day of each calendar month during the Lease Term; provided, however, that the installment of Base Rent and the installment of Direct Expenses for the first full calendar month of the Lease Term in which such amounts are payable hereunder shall be paid upon Tenant’s execution and delivery of this Lease. Except as otherwise provided herein, all other items of Additional Rent shall be paid within 30 days after Landlord’s written request for payment. Rent for any partial calendar month shall be prorated on the basis of the actual number of days in the month.

-10-

ARTICLE 4

EXPENSES AND TAXES

4.1 General Terms. In addition to paying the Base Rent, Tenant shall pay, in accordance with Section 4.4 below, for each Expense Year (defined in Section 4.2.1 below), an amount equal to the sum of the following (collectively, the “Direct Expenses”): (a) Tenant’s Share of Expenses for such Expense Year, plus (b) Tenant’s Share of Taxes for such Expense Year, plus (c) a management fee (the “Management Fee”) equal to three percent (3%) of the Base Rent payable by Tenant for the applicable Expense Year. The obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration or earlier termination of this Lease. If this Lease commences on a day other than the first day of an Expense Year or expires or terminates on a day other than the last day of an Expense Year, Tenant’s payment of Direct Expenses for the Expense Year in which such commencement, expiration or termination occurs shall be prorated based on the ratio between (x) the number of days in such Expense Year that fall within the Lease Term, and (y) the number of days in such Expense Year.

4.2 Definitions of Key Terms Relating to Additional Rent. As used in this Lease, the following terms shall have the meanings hereinafter set forth:

4.2.1 “Expense Year” shall mean each calendar year in which any portion of the Lease Term falls.

4.2.2 “Expenses” shall mean all expenses, costs and amounts that Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Property. Landlord shall act in a commercially reasonable manner in incurring Expenses, taking into consideration the class and quality of the Building. Without limiting the foregoing, Expenses shall include: (i) the cost of supplying all utilities, the cost of operating, repairing, maintaining and renovating the utility, telephone, mechanical, sanitary, storm-drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections, the cost of contesting any Laws that may affect Expenses, and the costs of complying with any governmentally-mandated transportation-management or similar program; (iii) the cost of all insurance premiums and deductibles; provided, however, that if the deductible payable in connection with any earthquake insurance maintained by Landlord exceeds the amount of the deductible payable in connection with Landlord’s special form property insurance policy covering the Project, such excess shall be amortized over a period of ten (10) years and only that portion of the deductible that is properly allocable to the Term of this Lease (as extended) shall be included in Expenses during the Lease Term (as extended); (iv) the cost of landscaping and re-lamping; (v) the cost of parking-area operation, repair, restoration, and maintenance; (vi) fees and other costs, including management and/or incentive fees, consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Property; (vii) payments under any equipment-rental agreements; (viii) wages, salaries and other compensation, expenses and benefits, including taxes levied thereon, of all persons engaged in

-11-

the operation, maintenance and security of the Property, and costs of training, uniforms, and employee enrichment for such persons; (ix) the costs of operation, repair, maintenance and replacement of all systems and equipment (and components thereof) of the Property; (x) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xi) rental or acquisition costs of supplies, tools, equipment, materials and personal property used in the maintenance, operation and repair of the Property; (xii) the cost of capital improvements or any other items that are (A) intended to effect economies in the operation or maintenance of the Property, or to reduce current or future Expenses or to enhance the safety or security of the Property or its occupants, (B) required to comply with present or anticipated conservation programs, (C) replacements or modifications of the nonstructural portions of the Base Building (as defined in Section 7.2 below) or the Common Areas that are required to keep the Base Building or the Common Areas in good order or condition, or (D) required under any Law; (xiii) except for costs and expenses which are the sole responsibility of Tenant pursuant to Section 7.2 below, all costs paid or incurred by Landlord to perform Landlord’s Repair Obligations (as defined in pursuant to Section 7.2.1 below); and (xiii) payments under any reciprocal easement agreement, transportation management agreement, cost-sharing agreement or other covenant, condition, restriction or similar instrument affecting the Property, whether now or hereafter in effect (collectively, the “Underlying Documents”).

Notwithstanding the foregoing, Expenses shall not include: (a) capital expenditures not described in clauses (xi), (xii) or (xiii) above (in addition, any capital expenditure shall be amortized (including actual or imputed interest on the amortized cost) over the useful life thereof as Landlord shall reasonably determine in accordance with GAAP); (b) depreciation; (c) payments of mortgage and other non-operating debts of Landlord; (d) the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; (e) costs in connection with leasing space in the Building, including brokerage commissions, lease concessions, rental abatements and construction allowances granted to specific tenants; (f) costs incurred in connection with the sale, financing or refinancing of the Building; (g) fines, interest and penalties incurred due to the late payment of Taxes or Expenses, or any failure of Landlord to timely pay any obligation; (h) organizational expenses associated with the creation and operation of the entity that constitutes Landlord; (i) any penalties or damages that Landlord pays to Tenant under this Lease or to other tenants in the Project under their respective leases; (j) fines or penalties resulting from any violations of Law, negligence or willful misconduct of Landlord or its employees, agents or contractors; (k) attorney’s fees and other expenses incurred in connection with negotiations or disputes with tenants or other occupants of the Building; (1) costs related to the presence of Hazardous Substances (as defined in Section 25.2.7 below) or Mold Conditions (as defined in Section 25.2.5 below), except for the costs of (i) routine monitoring of and testing for Hazardous Substances (other than asbestos) in, on, or about the Project and (ii) routine cleanup performed as part of the ordinary operation and maintenance of the Project; (m) expense reserves; (n) costs of structural repairs to the Building; (o) wages, salaries, fees or fringe benefits (“Labor Costs”) paid to executive personnel or officers or partners of Landlord; provided, however, that, if such individuals provide services directly related to the operation, maintenance or ownership of the Project that, if provided directly by a general manager or property manager or his or her general support staff, would normally be chargeable as an

-12-

operating expense of a comparable office building, then the Labor Costs of such individuals may be included in Expenses to the extent of the percentage of their time that is spent providing such services to the Project; or (p) any management fee in excess of the Management Fee specified in Section 4.1.1 above.

4.2.3 “Taxes” shall mean all federal, state, county or local governmental or municipal taxes, fees, charges, assessments, levies, licenses or other impositions, whether general, special, ordinary or extraordinary, that are paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing or operation of the Property. Taxes shall include (a) real estate taxes; (b) general and special assessments; (c) transit taxes; (d) leasehold taxes; (e) personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems, appurtenances, furniture and other personal property used in connection with the Property; (f) any tax on the rent, right to rent or other income from any portion of the Property or as against the business of leasing any portion of the Property; (g) any assessment, tax, fee, levy or charge imposed by any governmental agency, or by any non-governmental entity pursuant to any private cost-sharing agreement, in order to fund the provision or enhancement of any fire-protection, street-, sidewalk- or road-maintenance, refuse-removal or other service that is (or, before the enactment of Proposition 13, was) normally provided by governmental agencies to property owners or occupants without charge (other than through real property taxes); and (h) any assessment, tax, fee, levy or charge allocable or measured by the area of the Premises or by the Rent payable hereunder, including any business, gross income, gross receipts, sales or excise tax with respect to the receipt of such Rent. Any costs and expenses (including reasonable attorneys’ and consultants’ fees) incurred in attempting to protest, reduce or minimize Taxes shall be included in Taxes for the year in which they are incurred. Notwithstanding anything herein to the contrary, Taxes shall exclude (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Property), (ii) any Expenses, (iii) any items required to be paid by Tenant under Section 4.5 below, and (iv) any tax or assessment expense (1) in excess of the amount which would be payable if such tax or assessment expense were paid in installments over the longest permitted term; or (2) imposed on land and improvements other than the Project. During the Term, if Landlord, in its good faith business judgment, deems the real property Taxes levied against the Building for any tax fiscal year to be excessive, then Landlord shall exercise commercially reasonable efforts to seek Proposition 8 property tax relief for such fiscal year.

4.3 Cost Pools; Cost Sharing.

4.3.1 Landlord shall have the right, from time to time, to equitably allocate some or all of the Expenses for the Property among different portions or occupants of the Property (the “Cost Pools”), in Landlord’s reasonable discretion. Such Cost Pools may include the office or retail tenants of a particular building or of the Property. The Expenses allocated to any such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner, in Landlord’s reasonable discretion.

-13-

4.3.2 If Landlord incurs Expenses or Taxes for the Property together with one or more other buildings or properties, whether pursuant to a reciprocal easement agreement, common area agreement or otherwise, such shared amounts shall be equitably prorated and apportioned between the Property and such other buildings or properties, in Landlord’s reasonable discretion.

4.4 Calculation and Payment of Expenses and Taxes.

4.4.1 Statement of Actual Expenses and Taxes and Payment by Tenant. Landlord shall use reasonable efforts to give to Tenant within 180 days after the end of each Expense Year a statement (the “Statement”) setting forth the actual amount of Direct Expenses for such Expense Year, including Tenant’s Share of Expenses and Taxes for such Expense Year. If the amount paid by Tenant for such Expense Year pursuant to Section 4.4.2 below is less or more than the actual sum of Tenant’s Direct Expenses for such Expense Year (as such amounts are set forth in such Statement), Tenant shall pay Landlord the amount of such underpayment, or receive a credit in the amount of such overpayment, with or against the Rent next due hereunder; provided, however, that if this Lease has expired or terminated and Tenant has vacated the Premises, Tenant shall pay Landlord the amount of such underpayment, or Landlord shall pay Tenant the amount of such overpayment (less any Rent due), within 30 days after delivery of such Statement. Any failure of Landlord to timely furnish the Statement for any Expense Year shall not preclude Landlord or Tenant from enforcing its rights under this Article 4; provided, however, that Tenant shall not be required to pay any deficiency in Direct Expenses for the Expense Year that occurs during the last year of the Lease Term if Landlord fails to deliver the Statement for such Expense Year within eighteen (18) months after the expiration of the Lease Term.

4.4.2 Statement of Estimated Expenses and Taxes. In addition, Landlord shall endeavor to give to Tenant, for each Expense Year, a statement (the “Estimate Statement”) setting forth Landlord’s reasonable estimates of the Direct Expenses (the “Estimated Direct Expenses”) for such Expense Year, including Tenant’s Share of Expenses and Taxes for such Expense Year. Upon receiving an Estimate Statement, Tenant shall pay, with its next installment of Base Rent, an amount equal to the excess of (a) the amount obtained by multiplying (i) the sum of the Estimated Direct Expenses (as such amount is set forth in such Estimate Statement), by (ii) a fraction, the numerator of which is the number of months that have elapsed in the applicable Expense Year (including the month of such payment) and the denominator of which is 12, over (b) any amount previously paid by Tenant for such Expense Year pursuant to this Section 4.4.2. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the sum of the Estimated Direct Expenses, as such amount is set forth in the previous Estimate Statement delivered by Landlord to Tenant. Any failure of Landlord to timely furnish any Estimate Statement shall not preclude Landlord from enforcing its rights to receive payments and revise any previous Estimate Statement under this Article 4.

4.4.3 Retroactive Adjustment of Taxes. Notwithstanding anything herein to the contrary, if, after Landlord’s delivery of any Statement, an increase or decrease in Taxes occurs for the applicable Expense Year (whether by reason of reassessment, error, or otherwise), Taxes for

-14-

such Expense Year shall be retroactively adjusted. If, as a result of such adjustment, it is determined that Tenant has under- or overpaid Tenant’s Share of such Taxes, Tenant shall pay Landlord the amount of such underpayment, or receive a credit in the amount of such overpayment, with or against the Rent next due hereunder; provided, however, that if this Lease has expired or terminated and Tenant has vacated the Premises, Tenant shall pay Landlord the amount of such underpayment, or Landlord shall pay Tenant the amount of such overpayment (less any Rent due), within 30 days after such adjustment is made.

4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible.

4.5.1 Tenant shall pay, 10 days before delinquency, any taxes levied against Tenant’s equipment, furniture, fixtures and other personal property located in or about the Premises. If any such taxes are levied against Landlord or its property (or if the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or other personal property of Tenant), and if Landlord pays such taxes (or such increased assessment), which Landlord shall have the right to do regardless of the validity thereof, Tenant shall, upon demand, repay to Landlord the amount so paid.

4.5.2 If the leasehold improvements in the Premises, whether installed and/or paid for by Landlord, Tenant or any prior tenant, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to Landlord’s “building standard” in other space in the Building are assessed, then the Taxes levied against Landlord or the Property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant for purposes of Section 4.5.1 above.

4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay, 10 days before delinquency, (i) any rent tax, sales tax, service tax, transfer tax or value added tax, or any other tax respecting the rent or services described herein or otherwise respecting this Lease; (ii) taxes assessed upon the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of any portion of the Property; and (iii) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest in the Premises.

ARTICLE 5

USE OF PREMISES

Tenant shall not (a) use the Premises for any improper or objectionable purpose, for any purpose not permitted under Article 25 below, or for any purpose other than the Permitted Use; or (b) do anything in or about the Premises that (i) violates any of the Rules and Regulations or any provision of the Underlying Documents, (ii) damages the reputation of the Project or interferes with, injures or annoys other occupants of the Project, or (iii) constitutes a nuisance. Without limiting the foregoing, no portion of the Premises shall be used for any of the following uses: any pornographic or obscene purposes, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling, materials, activities, or sexual conduct or any other use that, as of the

-15-

time of the execution hereof, has or could reasonably be expected to have a material adverse effect on the Property or its use, operation or value. Tenant’s rights and obligations under this Lease and Tenant’s use of the Premises and the Common Areas shall be subject and subordinate to the Underlying Documents.

ARTICLE 6

SERVICES

Tenant shall promptly pay, as the same become due, all charges for water, gas, electricity, telephone, sewer service, waste pick-up and any other utilities, materials and services furnished directly to or used by Tenant on or about the Premises during the Term (collectively, “Utilities”), including, without limitation, (a) meter, use and/or connection fees, hook-up fees, or standby fees, and (b) penalties for discontinued or interrupted service. Tenant shall provide janitorial service to the Premises at its sole cost and expense, provided that any persons employed by Tenant to do janitorial work shall be subject to Landlord’s prior written approval. Landlord shall provide exterior window washing, provided that Tenant shall pay for its share of the cost of such window washing to the extent property included in Expenses pursuant to Section 4.1.2 above. At no time shall use of electricity in the Premises exceed the capacity of existing feeders and risers to or wiring in the Premises. Any interruption or cessation of Utilities resulting from any causes, including any entry for repairs pursuant to this Lease, and any renovation, redecoration or rehabilitation of any area of the Project (each, a “Service Interruption”), shall not render Landlord liable for damages to either person or property or for interruption or loss to Tenant’s business, nor be construed as an eviction of Tenant, nor work an abatement of any portion of Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof; provided, however, that if the Premises, or a material portion thereof, is made untenantable or inaccessible for more than five (5) consecutive business days after written notice from Tenant to Landlord as a result of any Service Interruption that is reasonably within the control of Landlord to correct, then Tenant, as its sole remedy, shall be entitled to receive an abatement of Monthly Rent (defined below) payable hereunder for the period beginning on the sixth (6th) consecutive business day of such Service Interruption and ending on the day the service is restored. If a Service Interruption renders less than the entire Premises untenantable or inaccessible, the amount of Monthly Rent abated shall be prorated in proportion to the percentage of the rentable square footage of the Premises that is rendered untenantable or inaccessible. As used herein, “Monthly Rent” means Base Rent and Tenant’s monthly installment of Direct Expenses.

ARTICLE 7

REPAIRS

7.1 Tenant’s Obligations.

7.1.1 Tenant shall, at its expense, but under the supervision and subject to the prior written approval of Landlord, and within any reasonable period of time specified by Landlord, perform all maintenance and repairs (including replacement) to the Premises that are not Landlord’s

-16-

express responsibility hereunder, and keep the Premises in good condition and repair, reasonable wear and tear excepted (collectively, “Tenant’s Repair Obligations”). As a condition to approving any repair by Tenant, Landlord may, without limitation, require that Tenant comply with the requirements of Sections 8.2, 8.3 and 8.4 below as if such repair were an Alteration (defined in Section 8.1 below). Tenant’s Repair Obligations shall include: (a) floor coverings; (b) interior partitions; (c) doors; (d) the interior side of demising walls; (e) Alterations; and (f) the heating, ventilating and air conditioning (“HVAC”) systems and equipment, the plumbing, sewer, drainage, electrical, fire protection, elevator, escalator, life safety and security systems and equipment and other mechanical, electrical and communications systems and equipment (collectively, the “Building Systems”), or portions of the Building Systems, that exclusively serve the Premises, including, without limitation, (i) any specialty or supplemental Building Systems installed by or for Tenant (“Specialty Systems”) such as any UPS facilities or equipment, and (ii) all electrical facilities and equipment, including lighting fixtures, lamps, fans and any exhaust equipment and systems, electrical motors and all other appliances and equipment of every kind and nature, whether such items are located within or outside of the Premises, and whether they are installed by or for the benefit of Tenant or exist as of the date hereof. Notwithstanding the foregoing, Landlord shall, within thirty (30) days after receipt of an invoice therefor, reimburse Tenant for the cost of any repairs or replacements made by Tenant pursuant to this Section 7.1.1 to the extent such repairs or replacements are necessitated by the negligence or willful misconduct of Landlord or any Landlord Parties (as defined in Section 10.1 below) (unless such repairs or replacements are covered by the insurance Tenant is required to carry hereunder, in which event Landlord shall pay such portion [i.e., the portion of the repairs or replacements attributable to the negligence or willful misconduct of Landlord or any Landlord Parties] of any commercially reasonable deductible in connection therewith).

7.1.2 Tenant shall also be responsible for all pest control within the Premises, and for all trash removal and disposal from the Premises. Notwithstanding the provisions of Section 7.1.1 above, with respect to the HVAC systems and equipment serving the Premises, Landlord shall obtain HVAC systems preventive maintenance contracts with bimonthly or monthly service in accordance with manufacturer recommendations, which shall be paid for by Tenant within thirty (30) days after receipt of an invoice therefor, and which shall provide for and include replacement of filters, oiling and lubricating of machinery, parts replacement, adjustment of drive belts, oil changes and other preventive maintenance, including annual maintenance of duct work, interior unit drains and caulking of sheet metal, and recaulking of jacks and vents on an annual basis. Tenant shall have the benefit of all warranties available to Landlord regarding the HVAC systems and equipment.

7.1.3 Notwithstanding the foregoing provisions of this Section 7.1, Landlord may, at its option, perform any or all of Tenant’s Repair Obligations (including obtaining HVAC systems preventive maintenance contracts) on Tenant’s behalf, in which case Tenant shall pay Landlord, within ten (10) days after receipt of an invoice therefor, the actual out-of-pocket cost of such work (without mark-up by Landlord); provided, however, that if Tenant fails to perform any of Tenant’s Repair Obligations, then Landlord may, but need not, make such repairs and replacements, in which event Tenant shall pay Landlord the cost of such work, plus a reasonable percentage of the cost

-17-

thereof (not to exceed 10%) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements, within ten (10) days after receipt of an invoice therefor.

7.1.4 Notwithstanding the provisions of Section 7.1.1 above to the contrary, if, at any time during the Lease Term, any capital repairs, replacements or improvements (as determined in accordance with generally accepted accounting principles) are required to be made to the Building Systems (excluding any Building Systems installed by Tenant, any Specialty Systems, and any other equipment or facilities relating to the particular use or manner of use of the Premises by Tenant or any Tenant Parties), then, unless such repairs, replacements or improvements are required by the act or omission of Tenant or any Tenant Parties, or any Alterations to the Premises made by or on behalf of Tenant, Landlord shall perform such repairs, replacements or improvements at Landlord’s cost and expense, subject, however, to the following: beginning on the first calendar month following substantial completion of the capital repairs, replacements or improvements, Tenant shall pay to Landlord, as Additional Rent, in equal monthly installments hereunder with Base Rent, the portion of the cost of such repairs, replacements or improvements allocable to the remaining Lease Term (including, if applicable, any Option Term), which portion shall be determined by amortizing the cost of the repairs, replacements or improvements on a straight-line basis over the useful life thereof (as Landlord shall reasonably determine in accordance with GAAP), together with interest on such amortized amount calculated at the lesser of (i) ten percent (10%) per annum or (ii) the maximum legal rate of interest allowed by the State of California.

7.2 Landlord’s Obligations.

7.2.1 Landlord shall maintain, repair and replace the following items (“Landlord’s Repair Obligations”): (a) the non-structural portions of the roof of the Building, including the roof coverings (provided that Tenant installs no additional air conditioning or other equipment on the roof that damages the roof coverings, in which event Tenant shall pay all costs resulting from such damage); (b) any Building Systems serving the Premises and/or the Project, or portions thereof, for which Tenant is not responsible pursuant to Section 7.1 above (i.e., those Building Systems, if any, that do not exclusively serve the Premises) (collectively, “Base Building Systems”); and (c) the Common Areas of the Project, including, without limitation, the Parking Facilities, pavement, landscaping, sprinkler systems, sidewalks, driveways, curbs, lighting systems and other facilities, systems, equipment and improvements in the Common Areas. Landlord’s Repair Obligations also includes the routine repair and maintenance of the load bearing and exterior walls of the Building, including, without limitation, any painting, sealing, patching and waterproofing of such walls.

7.2.2 Landlord, at its own cost and expense, agrees to repair and maintain the structural portions of the roof (specifically excluding the roof coverings), the foundation, the footings, the floor slab, and the load bearing walls and exterior walls of the Building (excluding any glass and any routine maintenance, including, without limitation, any painting, sealing, patching and waterproofing of such walls) (collectively, and together with the Base Building Systems, the “Base Building”). The Base Building shall also include any public restrooms, elevators and exit stairwells in the Building.

-18-

7.2.3 Notwithstanding Section 10.5 below, if any such repair or maintenance is made necessary by the negligence or willful misconduct of Tenant or any Tenant Party, Tenant shall pay the actual out-of-pocket cost of such work, including a percentage of the cost thereof (to be uniformly established for the Project, not to exceed 10%) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements, within ten (10) days after receipt of an invoice therefor; provided, however, that, except in the event of the willful misconduct of Tenant, if such work is covered by Landlord’s insurance (or the insurance required to be carried by Landlord hereunder), Tenant shall only be obligated to pay any commercially reasonable deductible in connection therewith.

7.3 Waiver. Tenant hereby waives any rights under subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar Law.

ARTICLE 8

ADDITIONS AND ALTERATIONS

8.1 Landlord’s Consent to Alterations. Tenant may not make any improvements, alterations, additions or changes to the Premises or to any mechanical, plumbing or HVAC facilities or other systems serving the Premises (collectively, “Alterations”) without Landlord’s prior written consent, which consent shall be requested by Tenant not less than 30 days before commencement of work. Such consent shall not be unreasonably withheld, provided that it shall be deemed reasonable for Landlord to withhold its consent to any Alteration that would adversely affect the structure, systems or equipment of the Building or be visible from outside the Building (collectively, “Significant Alterations”). Notwithstanding the foregoing and any provisions of Section 8.2 to the contrary, Tenant shall be permitted to make interior, cosmetic or decorative, non-structural Alterations without Landlord’s prior consent, provided that such Alterations (a) cost less than Twenty-Five Thousand Dollars ($25,000.00) per project and do not constitute Significant Alterations hereunder, and (b) prior to commencing any such Alterations, Tenant provides Landlord with not less than ten (10) business days’ prior written notice thereof, which shall include a copy of any governmental permits required to complete such Alterations, if any.

8.2 Manner of Construction. Landlord may impose reasonable conditions to its consent to any Alteration. Without limiting the foregoing, before commencing any Alteration, Tenant shall deliver to Landlord, and obtain Landlord’s written approval of, each of the following items (to the extent applicable): plans and specifications (including any changes thereto); names of contractors, subcontractors, mechanics, laborers and materialmen; required building permits; and evidence of the insurance required under Section 8.4 below. Tenant shall perform any Alteration in a good and workmanlike manner, using materials of a quality reasonably approved by Landlord, and in conformance with all applicable Laws and Landlord’s construction rules and regulations. Without limiting the foregoing, if, as a result of Tenant’s performance of any Alteration, Landlord becomes required under applicable Law to perform any inspection or give any notice relating to the Premises or such Alteration, or to ensure that such Alteration is performed in any particular manner, Tenant

-19-

shall comply with such requirement on Landlord’s behalf and promptly thereafter provide Landlord with reasonable documentation of such compliance. Tenant shall ensure that no Alteration impairs any Building System or Landlord’s ability to perform its obligations hereunder. In the event of a Tenant Alteration costing in excess of $100,000, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of the work and naming Landlord as a co-obligee. Before commencing any Alteration, Tenant shall meet with Landlord to discuss Landlord’s design parameters and any code compliance issues. In performing any Alteration, Tenant shall not obstruct access to, or the conduct of business in, any portion of the Project by Landlord or any other occupant of the Project. Tenant shall not use contractors, services, labor, materials or equipment that, in Landlord’s reasonable judgment, would disturb labor harmony with any workforce or trades engaged in performing other work or services in or about the Project. Upon completion of any Alteration, Tenant shall cause a Notice of Completion to be recorded in the office of the recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor Law, and Tenant shall deliver to Landlord reproducible copies of the “as built” drawings of the Alteration, as well as all related governmental permits, approvals and other documents.

8.3 Payment for Alterations. For any Alteration, Tenant shall pay Landlord within twenty (20) days following written demand (a) Landlord’s reasonable out-of-pocket expenses incurred in reviewing such work, and (b) a fee for Landlord’s oversight and coordination of work that costs over $50,000 equal to 3% of its cost. If Tenant pays its contractors directly for any Alteration, Tenant shall (i) to the extent required by Landlord, condition such payment upon receipt of final lien releases and waivers, and (ii) cause its contractors to sign Landlord’s standard contractor’s rules and regulations. Notwithstanding the foregoing, (i) this Section 8.3 shall not apply to any Tenant Improvements constructed pursuant to any Tenant Work Letter, and (ii) the first sentence of this Section 8.3 shall not apply to Tenant’s initial power distribution work, which Tenant intends to perform as an Alteration pursuant to the provisions of this Article 8.

8.4 Construction Insurance. Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of any Alteration, and such other insurance as Landlord may reasonably require. All Alterations shall be insured by Tenant pursuant to Article 10 below immediately upon completion thereof.

8.5 Landlord’s Property. All improvements in and to the Premises, including any Tenant Improvements and Alterations, shall become the property of Landlord upon installation and without compensation to Tenant. Notwithstanding the foregoing, unless otherwise instructed by Landlord in writing, Tenant shall, at Tenant’s expense, before the expiration or earlier termination of this Lease, (a) remove from the Premises any Alterations, (b) repair any damage to the Premises caused by such removal, and (c) restore the affected portion of the Premises to its condition existing before the installation of such Alterations; provided, however, that if Tenant’s request for Landlord’s approval of any proposed Alterations contains a request that Landlord identify any portion of such Alterations that Landlord will require Tenant to remove as provided above, then Landlord will, at the time it approves such Alterations, identify such portion of the Alterations, if any, that Landlord will

-20-

require Tenant to so remove. If Tenant fails to complete the removal, repair or restoration required by this Section 8.5 before the expiration or earlier termination of this Lease, (i) Landlord may do so and may charge the cost thereof to Tenant, and (ii) for purposes of Article 16 below, Tenant shall be deemed to be in holdover in the Premises without Landlord’s consent until such work is completed. Tenant’s trade fixtures, furniture, equipment and other personal property installed in the Premises (“Tenant’s Property”) shall at all times be and remain Tenant’s property. At any time Tenant may remove Tenant’s Property from the Premises, provided that Tenant repairs all damage caused by such removal.

ARTICLE 9

COVENANT AGAINST LIENS

Tenant shall keep the Project and Premises free from any liens or encumbrances arising out of any work performed, materials furnished or obligations incurred by or on behalf of Tenant. Tenant shall give Landlord written notice at least 20 days before commencing any such work on the Premises (or such additional time as may be necessary under applicable Laws) to afford Landlord the opportunity of posting and recording appropriate notices of non-responsibility. Tenant shall remove any such lien or encumbrance by bond or otherwise within 10 business days after notice by Landlord, and if Tenant fails to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without responsibility for investigating the validity thereof. The amount so paid shall be reimbursed by Tenant, as Additional Rent, upon demand, without limiting other remedies available to Landlord under this Lease. Nothing in this Lease shall authorize Tenant to cause or permit any lien or encumbrance to affect Landlord’s interest in the Project, and any lien or encumbrance created by, through or under Tenant shall attach to Tenant’s interest only.

ARTICLE 10

INDEMNIFICATION; INSURANCE.

10.1 Indemnification and Waiver

10.1.1 Tenant agrees that Landlord, its partners, members and Security Holders (defined in Article 18 below), and their respective partners, members, directors, officers, agents, employees and independent contractors (including Landlord, collectively, the “Landlord Parties”) shall not be liable for, and are hereby released from any responsibility for, any damage to person or property (or resulting from the loss of use thereof) that is sustained by Tenant or any party claiming by, through or under Tenant, including any such damage caused by any active or passive act, omission or neglect of any Landlord Party or by any act or omission for which liability without fault or strict liability may be imposed, except only, with respect to Landlord, (a) to the extent such damage is caused by the gross negligence or willful misconduct of any Landlord Party or by any default by Landlord pursuant to this Lease or (b) to the extent such limitation on liability is prohibited by law. Nothing in this Section 10.1 shall limit the provisions of Section 10.5 or Article 21 below.

-21-

10.1.2 Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any obligations, losses, claims, actions, liabilities, penalties, damages, costs and expenses (including reasonable attorneys’ and consultants’ fees and expenses) (“Claims”) suffered or imposed upon or asserted against any Landlord Party in connection with or arising from (a) any cause in, on or about the Premises (including a slip and fall), (b) the occupancy of the Premises by Tenant or any person claiming by, through or under Tenant, (c) any act, omission or negligence of Tenant or of any person claiming by, through or under Tenant, or any of their members, partners, officers, contractors, agents, employees, invitees or licensees (collectively, “Tenant Parties”), or (d) any breach by Tenant of any representation, covenant or other term contained in this Lease, whether occurring before, during, or after the expiration of the Lease Term. The foregoing indemnification shall apply regardless of any active or passive negligence of the Landlord Parties and regardless of whether liability without fault or strict liability may be imposed upon the Landlord Parties; provided, however, that, with respect to any Landlord Party, Tenant’s obligations under this Section shall be inapplicable (i) to the extent such Claims arise from the gross negligence or willful misconduct of such Landlord Party or from any default by Landlord pursuant to this Lease or (ii) to the extent such obligations are prohibited by applicable Laws.

10.1.3 The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any Claim relating to any event or condition occurring or existing before such expiration or termination.

10.2 Tenant’s Compliance With Landlord’s Fire and Casualty Insurance. Tenant, at its expense, shall comply with all insurance company requirements pertaining to the use of the Premises. If Tenant’s conduct or use of the Premises causes any increase in the premium for such insurance policies, Tenant shall reimburse Landlord for such increase. Tenant, at its expense, shall comply with all rules and requirements of the American Insurance Association and any similar body.

10.3 Tenant’s Insurance. Tenant shall maintain the following coverages in the following amounts.

10.3.1 Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) arising out of Tenant’s operations, and contractual liabilities (covering the performance by Tenant of its indemnity agreements), including a Broad Form endorsement covering the insuring provisions of this Lease and Tenant’s indemnity obligations under Section 10.1 above, for limits of liability not less than:

Bodily Injury and Property Damage Liability	$5,000,000 each occurrence $5,000,000 annual aggregate
Personal Injury Liability	$5,000,000 each occurrence $5,000,000 annual aggregate 0% Insured’s participation
Umbrella Liability Coverage	$5,000,000 each occurrence $5,000,000 annual aggregate

-22-

Notwithstanding the foregoing policy requirements, Tenant shall be deemed to have complied therewith if Tenant carries lower occurrence and annual aggregate limits for its bodily injury, property damage liability and personal injury liability policies so long as Tenant’s umbrella liability coverage is increased to account for any such lower limits.

10.3.2 Physical Damage Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant’s property in the Premises installed by, for, or at the expense of Tenant, and (ii) all Alterations made to the Premises by Tenant during the Term. Such insurance shall be written on an “all risks” of physical loss or damage basis, for the full replacement cost value (subject to reasonable deductible amounts) new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance, and shall include coverage for damage or other loss caused by fire or other peril, including vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, and explosion, and providing business interruption coverage for a period of one year.

10.3.3 Worker’s Compensation and Employer’s Liability or other similar insurance to the extent required by applicable Laws.

10.4 Form of Policies. The minimum limits of insurance required to be carried by Tenant under this Lease shall not limit Tenant’s liability under this Lease. Such insurance shall (i) name Landlord, Landlord’s managing agent, and any other party specified by Landlord having an interest in the Premises (“Additional Insured Parties”) as additional insureds (liability insurance only); (ii) specifically cover Tenant’s indemnification obligations under this Lease, including Tenant’s indemnification obligations under Section 10.1 above; (iii) be issued by an insurance company that has an A.M. Best rating of not less than A-X and is licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and non-contributing with Tenant’s insurance; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that it shall not be canceled or coverage adversely and materially changed without 30 days’ prior written notice to Landlord and any Security Holder, except for notices relating to non-payment of premiums, in which case the period shall be 10 days. With respect to the umbrella liability coverage, Tenant, at its expense, shall procure a “per location” endorsement or equivalent reasonably acceptable to Landlord so that the general aggregate and other limits apply separately and specifically to the Premises. Tenant shall deliver to Landlord, on or before the Lease Commencement Date and at least 10 days before the expiration dates thereof, certificates from Tenant’s insurance company on the forms currently designated “ACORD 28” (Evidence of Commercial Property Insurance) and “ACORD 25-S” (Certificate of Liability Insurance) or the equivalent. In addition, attached to the ACORD 25-S there shall be an endorsement naming the Additional Insured Parties as additional insureds which shall be binding on Tenant’s insurance company and shall provide that the insurance company shall endeavor to advise each Additional Insured Party in writing at least 30 days before any termination or material adverse change to the policies that would affect the interest of such Additional Insured Party, except that 10 days’ prior written notice may be given in the case of nonpayment of premiums. Upon Landlord’s request, Tenant shall deliver to Landlord, in lieu of such certificates, copies of the policies of

-23-

insurance required to be carried under Section 10.3 above showing that the Additional Insured Parties are named as additional insureds. If Tenant fails to deliver such policies or certificates, then Landlord may, at its option, procure such policies for the account of Tenant, in which event Tenant shall pay Landlord the cost thereof within thirty (30) days after written demand.

10.5 Subrogation. Notwithstanding anything in this Lease to the contrary, Landlord and Tenant hereby waive, and shall cause their respective insurance carriers to waive, any rights of recovery against the other for any loss of or damage to property which loss or damage is (or, if the insurance required under this Lease been carried, would have been) covered by insurance. All of Landlord’s and Tenant’s repair and indemnity obligations under this Lease shall be subject to the waiver contained in this paragraph. For the purposes of this Section 10.5, any deductible with respect to a party’s insurance shall be deemed covered by, and recoverable by such party under, valid and collectable policies of insurance.

10.6 Additional Insurance Obligations. Tenant shall carry and maintain during the Lease Term, at its expense, such increased amounts of the insurance required to be carried by Tenant under this Article 10, and such other types and amounts of insurance covering the Premises and Tenant’s operations therein, as may be reasonably requested by Landlord, but not in excess of the amounts and types of insurance then being required by landlords of buildings comparable to and in the vicinity of the Building; provided, however, that, unless necessitated by Tenant’s particular use of the Premises, the particular manner in which Tenant conducts business in the Premises or any Alterations to the Premises made by or on behalf of Tenant, Landlord shall not adjust, modify or increase Tenant’s insurance requirements during the initial Lease Term.

10.7 Landlord’s Insurance. Subject to reimbursement as an Expense in accordance with the provisions of Article 4 hereof, Landlord shall procure and maintain in effect throughout the Lease Term commercial general liability insurance, property insurance and/or such other types of insurance as are normally carried by reasonably prudent owners of commercial properties substantially similar to, and in the vicinity of, the Project. Such coverages shall be in such amounts, from such companies and on such other terms and conditions as Landlord may from time to time reasonably determine, and Landlord shall have the right, but not the obligation, to change, cancel, decrease or increase any insurance coverages in respect of the Building, add additional forms of insurance as Landlord shall deem reasonably necessary, and/or obtain umbrella or other policies covering both the Building and other assets owned by or associated with Landlord or its affiliates, in which event the cost thereof shall be equitably allocated; provided, however, that Landlord shall, at all times during the Lease Term, maintain “all risk” (or similar) property insurance coverage on (i) the Base Building, (ii) all improvements that exist in the Premises as of the Lease Commencement Date (the “Original Improvements”), and (iii) the Tenant Improvements, in the amount of the full replacement value thereof as reasonably estimated by Landlord (without deduction for depreciation), subject to reasonable deductible amounts.

-24-

ARTICLE 11

DAMAGE AND DESTRUCTION

11.1 Completion Estimate; Termination Rights. Tenant shall promptly notify Landlord of any damage to the Premises resulting from any fire or other casualty. With reasonable promptness after discovering the casualty, Landlord shall provide Tenant with written notice (the “Completion Estimate”) stating (a) whether the Landlord Repairs (defined below) will include any Alterations, and (b) Landlord’s reasonable estimate of the amount of time required, using standard working methods (without the payment of overtime or other premiums), to substantially complete the Landlord Repairs and restore the Alterations (the “Restoration”). As used herein, “Landlord Repairs” means the repair and restoration of the Base Building, the Original Improvements, the Tenant Improvements, any Common Areas serving or providing access to the Premises, and, if so elected by Landlord in the Completion Estimate, any Alterations. If the Completion Estimate indicates that the Restoration cannot be substantially completed within 270 days after commencement, then either party may terminate this Lease upon 60 days’ prior written notice to the other party delivered within 10 days after Landlord’s delivery of the Completion Estimate. In addition, Landlord, by notice to Tenant within 90 days after Landlord’s discovery of damage to the Premises or the Project, may, whether or not the Premises are affected, terminate this Lease if: (i) any Security Holder terminates any ground lease or requires that any insurance proceeds be used to pay any mortgage debt; (ii) any damage to Landlord’s property is not fully covered by Landlord’s insurance policies (subject to deductible), unless the cost to repair is less than three percent (3%) of the replacement cost of the Building, in which event Landlord shall not have the option to terminate this Lease; (iii) the damage occurs during the last 12 months of the Lease Term; (iv) Landlord decides to rebuild the Building or Common Areas so that it or they will be substantially different structurally or architecturally such that it does not allow for the Permitted Use. In the event of such termination by Landlord or Tenant pursuant to this Section, neither party shall have any obligations to the other under this Lease, except for obligations arising before such termination or obligations that survive the expiration or earlier termination of this Lease. If Landlord has elected to complete the Landlord Repairs, and to include the Alterations therein, and this Lease is not terminated, then Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s property insurance required under Section 10.3 above with respect to any Alterations.

11.2 Repair and Restoration. If this Lease is not terminated pursuant to Section 11.1 above, Landlord shall promptly and diligently perform the Landlord Repairs, subject to reasonable delays for insurance adjustment or other matters beyond Landlord’s reasonable control. Such repair and restoration shall be to substantially the same condition that existed before the casualty, except for any modifications required by Law or any Security Holder, and except for any modifications to the Common Areas that are deemed desirable by Landlord, are consistent with the character of the Project, and do not materially impair access to the Premises. If this Lease is not terminated pursuant to Section 11.1 above, and the Landlord Repairs shall include any Alterations, (a) Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s insurance required under Section 10.3 above with respect to such Alterations; and

-25-

(b) if the estimated cost of repairing and restoring such Alterations exceeds the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier, Tenant shall pay such excess cost to Landlord within 15 days after Landlord’s demand. If this Lease is not terminated pursuant to Section 11.1 above and the Landlord Repairs exclude any of the Alterations, then Tenant, at its expense and in accordance with Sections 8.2, 8.3 and 8.4 above, shall repair any damage to any such Alterations and restore them to substantially their original condition. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its invitees, or for any injury to Tenant’s business, resulting from any fire or other casualty or from any repair of damage resulting therefrom; provided, however, that if any fire or other casualty damages the Premises or any Common Area necessary for Tenant’s use of or access to the Premises, then, during any time that, as a result of such damage, any portion of the Premises are untenantable or inaccessible and is not occupied by Tenant, the Monthly Rent shall be abated in proportion to the rentable square footage of such portion of the Premises; provided, however, if the Tenant reasonably cannot use undamaged portions of the Premises as a result of damage to other portions of the Premises, then the Monthly Rent shall abate as to such portion of the Premises as aforesaid. If the Landlord Repairs exclude any of the Alterations, Tenant’s right to rent abatement under the preceding sentence shall continue until the earlier to occur of (i) the date that the repair and restoration of such Alterations is completed by Tenant, (ii) the date that is reasonably determined by Landlord to be the date on which Tenant would have completed the repair and restoration of such Alterations if Tenant had used reasonable diligence in connection therewith, or (iii) the date that Tenant recommences business operations in the damaged portion of the Premises, provided that, in no event, in the case of clauses (i) or (ii) above, shall Tenant’s right to rent abatement expire earlier than the date that Landlord has substantially completed the Landlord Repairs so that the Premises is no longer untenantable or inaccessible.

11.3 Waiver of Statutory Provisions. The provisions of this Lease, including this Article 11, constitute an express agreement between Landlord and Tenant with respect to any damage to or destruction of any part of the Premises or the Project, and any Law, including Sections 1932(2) and 1933(4) of the California Civil Code, relating to rights or obligations concerning damage or destruction in the absence of an express agreement between the parties shall not apply.

ARTICLE 12

NONWAIVER

No provision of this Lease shall be deemed waived by either party hereto unless it is expressly waived by such party in writing, and no waiver of any breach of any provision hereof shall be deemed to be a waiver of any subsequent breach of such provision or any other provision hereof. Landlord’s acceptance of Rent shall not be deemed to be a waiver of any preceding breach by Tenant of any provision hereof, other than Tenant’s failure to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of such acceptance. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord’s right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord

-26-

may accept such check or payment without prejudice to Landlord’s right to recover the full amount due. No receipt of monies by Landlord from Tenant after the giving of any notice or after the termination of this Lease shall affect such notice or reinstate or alter the length of the Lease Term or Tenant’s right of possession hereunder. After the service of notice or the commencement of a suit, or after a final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of such Rent shall not waive or affect such notice, suit or judgment.

ARTICLE 13

CONDEMNATION

If any part of the Premises or Project is permanently taken by any competent authority for any public or quasi-public use or purpose, by power of eminent domain or by private purchase in lieu thereof (a “Taking”), which is so substantial that the Premises cannot reasonably be used by Tenant for the operation of its business, then either Landlord or Tenant may terminate this Lease. Any such termination shall be effective as of the date possession is required to be surrendered to the authority, and the terminating party shall provide written notice of termination to the other party within 45 days after it first receives written notice of such surrender date. Except as provided above in this Article 13, neither party may terminate this Lease as a result of a Taking. Tenant shall not assert any claim against Landlord or the authority for any compensation because of any Taking and Landlord shall be entitled to the entire award of compensation; provided, however, that Tenant shall have the right to file any separate claim available to Tenant for any Taking of Tenant’s personal property or any fixtures that Tenant has the right hereunder to remove upon the expiration hereof, and for moving expenses. If this Lease is terminated pursuant to this Article 13, all Rent shall be apportioned as of the date of such termination. If a Taking occurs and this Lease is not so terminated, the Monthly Rent shall be abated, for the period of such Taking, in proportion to the percentage of the rentable square footage of the Premises, if any, that is subject to (or rendered inaccessible by) such Taking. Tenant hereby waives any rights it might have under Section 1265.130 of The California Code of Civil Procedure.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 Transfers. Tenant shall not, without Landlord’s prior written consent, assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to, or otherwise transfer this Lease or any interest hereunder, permit any assignment or other transfer of this Lease or any interest hereunder by operation of law, sublet any part of the Premises, enter into any license or concession agreement, or otherwise permit the occupancy or use of any part of the Premises by any persons other than Tenant and its employees and contractors (each, a “Transfer”). If Tenant desires Landlord’s consent to any Transfer, Tenant shall provide Landlord with written notice (the “Transfer Notice”) of (i) the proposed effective date of the Transfer (the “Contemplated Effective Date”), which shall not be less than 30 days nor more than 180 days after the effective date of the Transfer Notice, and the contemplated length of the term of the proposed Transfer, (ii) a description

-27-

of the portion of the Premises to be transferred (the “Contemplated Transfer Space”), (iii) all of the terms of the proposed Transfer and the consideration therefor, including calculation of the Transfer Premium (defined in Section 14.3 below), the name and address of the proposed transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, and (iv) current financial statements of the proposed transferee (or, in the case of a Transfer described in Section 14.6 below, of the proposed new controlling party(ies)) certified by an officer, partner or owner thereof and any other information reasonably required by Landlord in order to evaluate the proposed Transfer. Within 30 days after receiving the Transfer Notice, Landlord shall notify Tenant in writing of (a) its consent to the proposed Transfer, (b) its refusal to consent to the proposed Transfer, or (c) its exercise of its rights under Section 14.4 below. Any Transfer made without Landlord’s prior written consent shall, at Landlord’s option, be void and shall, at Landlord’s option, constitute a Default (defined in Article 19 below). Tenant shall pay Landlord a fee of $1,500.00 for Landlord’s review of any proposed Transfer, whether or not Landlord consents thereto, plus any reasonable legal fees incurred by Landlord in connection with any proposed Transfer, up to a maximum amount of Two Thousand Five Hundred Dollars ($2,500.00) per proposed Transfer (unless there is a dispute in connection with the proposed Transfer, in which event the provisions of Section 30.19 below shall apply).

14.2 Landlord’s Consent. Subject to Section 14.4 below, Landlord shall not unreasonably withhold its consent to any proposed Transfer. Without limiting other reasonable grounds for withholding consent, it shall be deemed reasonable for Landlord to withhold consent to a proposed Transfer if:

14.2.1 The proposed transferee has a character or reputation or is engaged in a business that is not consistent with the quality of the Building or the Project; or

14.2.2 The proposed transferee intends to use the Contemplated Transfer Space for purposes that are not permitted under this Lease; or

14.2.3 The proposed transferee is a governmental entity or a nonprofit organization; or

14.2.4 In the case of a proposed sublease, license, concession or other occupancy agreement having a term of three (3) years or longer, the rent or occupancy fee charged by Tenant to the transferee during the term of such agreement, calculated using a present value analysis, is less than 85% of the rent being quoted by Landlord or its Affiliates (defined below) at the time of such Transfer for comparable space in the Project for a comparable or longer term, calculated using a present value analysis; provided, however, that if no comparable space in the Project is available for lease for a comparable or longer term at the time of the proposed Transfer, then the foregoing restriction on the proposed effective rent shall be inapplicable; or

14.2.5 The proposed transferee is not a party of reasonable financial strength in light of the responsibilities to be undertaken in connection with the Transfer on the effective date of the Transfer Notice; or

-28-

14.2.6 The proposed Transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease; or

14.2.7 The proposed transferee or any of its Affiliates (defined below) is engaged in active lease negotiations with Landlord (or, at any time during the 4-month period ending on the effective date of the Transfer Notice, has negotiated with Landlord to lease) for space in the Project, unless Landlord does not then have space available for lease in the Project of the size required by the proposed Transferee. As used herein, “Affiliate” means, with respect to any party, a person or entity that controls, is under common control with, or is controlled by such party.

Notwithstanding anything else herein to the contrary, if Landlord consents to any Transfer pursuant to this Section 14.2 but Tenant does not enter into such Transfer within six (6) months thereafter, such consent shall no longer apply and such Transfer shall not be permitted unless Tenant again obtains Landlord’s consent thereto pursuant and subject to the terms of this Article 14 (including Landlord’s right of recapture, if any, under Section 14.4 below). Notwithstanding anything to the contrary in this Lease, if Tenant claims that Landlord has unreasonably withheld its consent under this Section 14.2 or otherwise has breached or acted unreasonably under this Article 14, its sole remedies shall be a suit for contract damages (subject to Article 21 below) or declaratory judgment and an injunction for the relief sought, and Tenant hereby waives all other remedies, including any rights under California Civil Code Section 1995.310 and any other right at law or equity to terminate this Lease. In addition, to the extent permitted under applicable Laws, Tenant hereby waives, on behalf of any proposed transferee, any remedies against Landlord arising out of any unreasonable withholding of consent to a proposed Transfer or any breach of this Article 14, except for any right to obtain a declaratory judgment or injunction for the relief sought.

14.3 Transfer Premium.

14.3.1 If Landlord consents to a Transfer, Tenant shall pay to Landlord seventy-five percent (75%) of any Transfer Premium (defined below). As used herein, “Transfer Premium” means (i) (a) in the case of an assignment, any consideration (including payment for leasehold improvements) paid by the assignee on account of such assignment; and (b) in the case of a sublease, license, concession or other occupancy agreement, the amount by which all rent and other consideration paid by the transferee to Tenant for the Premises pursuant to such agreement exceeds the Monthly Rent payable by Tenant hereunder with respect to the Contemplated Transfer Space for the term of such agreement, minus (ii) any brokerage commissions (not to exceed commissions typically paid in the market at the time of such subletting or assignment) and reasonable attorneys’ fees paid by Transferor in connection with the Transfer (“Recoverable Expenses”). For purposes of calculating the Transfer Premium in connection with a sublease, the Recoverable Expenses shall be deducted, on an amortized basis, without interest, over the term of the sublease. Payment of the portion of the Transfer Premium payable to Landlord hereunder shall be made (x) in the case of an assignment, within 30 days after Tenant or the prior controlling party(ies), as the case may be, receive(s) the consideration described above, and (y) in the case of a sublease, license, concession or other occupancy agreement, on the first day of each month during the term of such agreement, in a sum equal to 75% of the amount by which the rent and other consideration paid by the transferee to

-29-

Tenant under such agreement for such month exceeds (1) the Monthly Rent payable by Tenant under this Lease with respect to the Contemplated Transfer Space for such month, plus (2) the amortized amount of Recoverable Expenses allocated to such month. In the case of an assignment, Tenant and the assignee shall be jointly and severally liable for payment of any Transfer Premium.

14.3.2 Upon Landlord’s request, Tenant shall provide Landlord with reasonable documentation of Tenant’s calculation of the Transfer Premium. Landlord or its authorized representatives shall have the right, at all reasonable times, to audit the books, records and papers of Tenant relating to a Transfer, and shall have the right to make copies thereof. If the Transfer Premium is found to be understated, Tenant shall pay the deficiency within 20 days after demand, and if the Transfer Premium is understated by more than 5%, Tenant shall pay Landlord’s costs of such audit. The provisions of this Section 14.3 shall not apply in the event of a Permitted Transfer.

14.4 Landlord’s Option to Recapture. Notwithstanding anything to the contrary in this Article 14, in the case of a proposed assignment of this Lease or a sublease or other Transfer (except a Permitted Transfer, as defined in Section 14.8 below) of more than seventy-five percent (75%) of the Premises under a sublease or other instrument that is effective at any time during the final six (6) months of the Lease Term, Landlord shall have the option, in lieu of consenting to a proposed Transfer, to recapture the Contemplated Transfer Space by giving written notice to Tenant within 30 days after receiving the Transfer Notice. Such recapture shall automatically terminate this Lease with respect to the Contemplated Transfer Space as of the Contemplated Effective Date. If the Contemplated Transfer Space is less than the entire Premises, the Base Rent and Tenant’s Share shall be adjusted on the basis of the percentage of the rentable square footage of the Premises that is retained by Tenant, and this Lease, as so amended, shall continue in full force and effect. Upon request of either party, the parties shall execute a written agreement prepared by Landlord memorializing such termination or amendment of this Lease. The provisions of this Section 14.4 shall not apply in the event of a Permitted Transfer.

14.5 Effect of Consent. If Landlord consents to a Transfer (or, except with respect to clause (iv) below, in the event of any Permitted Transfer pursuant to Section 14.8 below), (i) the terms and conditions of this Lease shall not be deemed to have been waived or modified, (ii) such consent shall not be deemed a consent to any further Transfer by Tenant or any transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv) Tenant shall furnish, upon Landlord’s request, a complete statement, certified by an independent certified public accountant or Tenant’s chief financial officer, setting forth in detail the computation of any Transfer Premium resulting from such Transfer. In the case of an assignment, the assignee shall assume in writing, for Landlord’s benefit, all obligations of Tenant under this Lease. No Transfer, whether with or without Landlord’s consent, shall relieve Tenant or any guarantor of this Lease from any liability under this Lease. Landlord’s consent to any Transfer shall not be effective unless any guarantor of this Lease also consents to such Transfer in writing.

14.6 Additional Transfers. For purposes of this Lease, the term “Transfer” shall also include (a) if Tenant is a closely held professional service firm, the withdrawal or change (whether

-30-

voluntary, involuntary or by operation of law) of 75% or more of its equity owners within a 12-month period; and (b) in all other cases, any transaction(s) resulting in the acquisition of a Controlling Interest (defined below) by one or more parties none of which, alone or together with other parties, owned a Controlling Interest immediately before such transaction(s) (a “Change of Control”). As used herein, “Controlling Interest” means any direct or indirect equity or beneficial ownership interest in Tenant that confers upon its holder(s) the power to control Tenant. As used in this Article 14, “control” means, with respect to any party, the direct or indirect power to direct the ordinary management and policies of such party, whether through the ownership of voting securities, by contract or otherwise (but not through the ownership of voting securities listed on a recognized securities exchange). Notwithstanding anything to the contrary herein, in no event shall the sale or issuance of Tenant’s stock for the purpose of raising equity financing constitute an assignment or other Transfer of this Lease.

14.7 Occurrence of Default. Any sublease, license, concession or other occupancy agreement entered into by Tenant shall be subordinate and subject to the provisions of this Lease, and if this Lease is terminated during the term of any such agreement, Landlord shall have the right to: (i) treat such agreement as cancelled and repossess the Contemplated Transfer Space by any lawful means, or (ii) require that the transferee attorn to and recognize Landlord as its landlord (or licensor, as applicable) under such agreement. If Tenant is in Default, Landlord is irrevocably authorized to direct any transferee under any such agreement to make all payments under such agreement directly to Landlord (which Landlord shall apply towards Tenant’s obligations under this Lease) until such Default is cured. Such transferee shall rely on any representation by Landlord that Tenant is in Default, without any need for confirmation thereof by Tenant. No collection or acceptance of rent by Landlord from any transferee shall be deemed a waiver of any provision of this Article 14, an approval of any transferee, or a release of Tenant from any obligation under this Lease, whenever accruing. In no event shall Landlord’s enforcement of any provision of this Lease against any transferee be deemed a waiver of Landlord’s right to enforce any term of this Lease against Tenant or any other person.

14.8 Permitted Transfers. Tenant may, without Landlord’s prior written consent pursuant to Section 14.1 above, undergo a Change of Control, or assign this Lease or sublet any portion of the Premises (hereinafter, collectively, referred to as a “Permitted Transfer”) to (a) any corporation or other entity that controls, is controlled by, or is under common control with Tenant, (b) any successor entity to Tenant by way of merger, consolidation or other non-bankruptcy corporate reorganization, or (c) any corporation or other entity that acquires all or substantially all of Tenant’s assets or stock (collectively, “Permitted Transferees”, and, individually, a “Permitted Transferee”); provided that (i) the Original Tenant or any Permitted Transferee shall be the assignor; (ii) no Default shall exist at the time of the Transfer; (iii) at least ten (10) business days prior to the effective date of the Transfer (or, if such prior notice is prohibited by applicable securities laws, then within 10 business days after the effective date of the Transfer), Tenant provides Landlord with a Transfer Notice pursuant to Section 14.1 above, and supplies Landlord with any documents or information reasonably requested by Landlord regarding such Transfer or Permitted Transferee, including, but not limited to, (A) copies of the sublease or instrument of assignment and copies of documents establishing to the reasonable satisfaction of Landlord that the transaction in question is

-31-

one permitted under this Section 14.8, and (B) a written certification from an officer of Tenant certifying the manner in which the proposed Transfer qualifies as a Permitted Transfer hereunder; (iv) in the case of an assignment pursuant to clause (a) or pursuant to the sale of assets under clause (c) above, at least ten (10) business days prior to the Transfer (or, if such prior notice is prohibited by applicable securities laws, then within 10 business days after the effective date of the Transfer), Tenant furnishes Landlord with a written document executed by the proposed Transferee in which such entity assumes all of Tenant’s obligations under this Lease with respect to the Contemplated Transfer Space, in form and substance reasonably satisfactory to Landlord, (v) in the case of an assignment pursuant to clause (b) above or any Change of Control, (A) the successor entity must have a tangible net worth at the time of the Transfer (i.e., not including intangible assets in the calculation, such as goodwill, patents, copyrights, and trademarks) computed in accordance with generally accepted accounting principles (“Net Worth”) that is at least equal to the Net Worth of Tenant immediately prior to such Transfer, and (B) if Tenant is a closely held professional service firm, at least 75% of its equity owners existing 12 months before the Transfer are also equity owners of the successor entity; (vi) the Transferee is qualified to conduct business in the State of California, and (vii) any such proposed Transfer is made for a good faith operating business purpose and not, whether in a single transaction or in a series of transactions, be entered into as a subterfuge to evade the obligations and restrictions relating to Transfers set forth in this Article 14.

ARTICLE 15

SURRENDER OF PREMISES; REMOVAL OF PERSONAL PROPERTY AND TRADE

FIXTURES

15.1 Surrender of Premises. No act or omission by any Landlord Party during the Lease Term, including acceptance of keys to the Premises, shall be deemed an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. Upon the expiration or earlier termination of this Lease, Tenant shall, subject to the provisions of Section 8.5 above, this Article 15 and Section 25.2 below, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, except for reasonable wear and tear, repairs that are specifically made the responsibility of Landlord hereunder and, subject to the provisions of Articles 11 and 13 above, damage from casualty and condemnation. Without limiting the generality of the foregoing, upon surrender of the Premises, Tenant shall, at Tenant’s sole cost and expense, have performed (or caused to be performed) the following to Landlord’s reasonable satisfaction: (a) all interior walls of the Premises shall be repaired if marked or damaged, (b) all carpets shall be shampooed and cleaned, and all floors cleaned and waxed, (c) all broken, marred or nonconforming acoustical ceiling tiles shall be replaced, and (d) except to the extent Landlord’s obligation pursuant to Section 7.1 above, the Building Systems and lighting shall be in good order and repair, including any burned out or broken light bulbs or ballasts replaced, and Tenant shall have caused to be performed, at Tenant’s sole cost and expense, all such Building Systems, including all HVAC equipment, to be audited, serviced and repaired by a reputable and licensed service firm reasonably acceptable to Landlord. If Tenant fails to surrender possession of the Premises to Landlord in accordance with this Section 15.1, then, in addition to all of Landlord’s other rights and remedies,

-32-

Landlord may, but need not, perform the required repairs, replacements and other work in and to the Premises, and Tenant shall pay Landlord the actual out-of-pocket cost thereof, including a fee for Landlord’s oversight and coordination of such work equal to 10% of its cost, within twenty {20) days after receipt of an invoice therefor and reasonably adequate supporting paid invoices from Landlord’s contractors.

15.2 Removal of Property. Not later than the expiration or earlier termination of this Lease, Tenant shall, without expense to Landlord, (i) cause to be removed from the Premises all debris and rubbish and all furniture, equipment, business and trade fixtures, Lines (defined in Section 30.28 below), free-standing cabinet work, movable partitions and other articles of personal property that are owned or placed in the Premises by Tenant or any party claiming by, through or under Tenant (except for any Lines not required to be removed under Section 30.28 below), and (ii) repair all damage to the Premises resulting from such removal. If Tenant fails to timely perform such removal and repair, then (i) Landlord may do so and charge the costs thereof (including storage costs) to Tenant, and (ii) for purposes of Article 16 below, Tenant shall be deemed to be in holdover in the Premises without Landlord’s consent until such removal and repair is complete. If Tenant fails to remove such property from the Premises, or from storage, within 30 days after notice from Landlord, Landlord may deem all or any part of such property to be, at Landlord’s option, either (x) conveyed to Landlord without compensation, or (y) abandoned.

15.3 Survival. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant contained in this Article 15 shall survive the expiration of the Lease Term or any earlier termination of this Lease.

ARTICLE 16

HOLDING OVER

If Tenant fails to surrender any portion of the Premises upon the expiration or earlier termination of this Lease, such tenancy shall be subject to all of the terms and conditions hereof; provided, however, that (a) if such holdover occurs with Landlord’s express written consent, such tenancy shall be from month-to-month only and shall not constitute a renewal hereof or an extension for any further term, and Tenant shall pay Rent at a monthly rate equal to one hundred fifty percent (150%) of the Rent applicable during the last rental period of the Lease Term; and (b) if such holdover occurs without Landlord’s express written consent, such tenancy shall be a tenancy at sufferance only, for the entire Premises, and Tenant shall pay Rent (on a per month basis without reduction for any partial month during the period of holdover) at a monthly rate equal to one hundred fifty percent (150%) of the Rent applicable during the last rental period of the Lease Term. Nothing in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or earlier termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or waive any other rights or remedies of Landlord provided herein or at Law. If Landlord is unable to deliver possession of the Premises to a

-33-

new tenant or to perform improvements for a new tenant as a result of Tenant’s holdover, Tenant shall be liable for all damages, including lost profits, that Landlord incurs as a result of the holdover.

ARTICLE 17

ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS

Within 10 business days after Landlord’s written request, Tenant shall execute and deliver to Landlord a commercially reasonable estoppel certificate in favor of such parties as Landlord may reasonably designate, including current and prospective Security Holders and prospective purchasers. Such estoppel certificate may contain, without limitation, a statement (i) that this Lease, as amended to date, is in full force and effect; (ii) that Tenant is paying Rent on a current basis; (iii) as to the existence, to Tenant’s knowledge, of any defaults by Landlord, rights to offset against Rent, or claims against Landlord; (iv) of the Lease Commencement Date and the Lease Expiration Date; (v) of the amount of Base Rent that is due and payable; (vi) of the amounts of Tenant’s Estimated Direct Expenses; (vii) of the status of any improvements required to be completed by Landlord in the Premises; and (viii) of the amount of any Security Deposit. If Tenant fails to execute and deliver (or reasonably object in writing to) such estoppel certificate within 10 business days after Landlord’s request, Tenant shall be deemed to have executed and delivered such estoppel certificate without exception. Upon delivery (or deemed delivery) of an estoppel certificate, Tenant shall be estopped from asserting a contrary fact or claim against the party(ies) to whom such estoppel certificate is addressed and such party(ies) may rely upon the statements made in such estoppel certificate. Upon Landlord’s request at any time during the Lease Term (which may be made only in connection with a default by Tenant or a bona fide sale, financing or other similar transaction involving the Project), Tenant shall provide to Landlord, for Tenant’s current fiscal year and the two (2) preceding fiscal years, financial statements prepared in accordance with generally accepted accounting principles and, if consistent with Tenant’s normal practice, audited by an independent certified public accountant. Landlord shall exercise commercially reasonable efforts to keep all such financial statements confidential, provided that Landlord may disclose the same to existing or prospective lenders, investors, partners, purchasers or other persons reasonably having a need to review such financial statements.

ARTICLE 18

SUBORDINATION

18.1 Subordination. This Lease shall be subject and subordinate to all ground or underlying leases, mortgages, trust deeds and other encumbrances now or hereafter in force against the Building or Project, any loan document secured by any of the foregoing (a “Loan Document”), all renewals, extensions, modifications, supplements, consolidations and replacements thereof (each, a “Security Agreement”), and all advances made upon the security of such mortgages or trust deeds, unless in each case the holder of such Security Agreement (each, a “Security Holder”) requires in writing that this Lease be superior thereto. In the event of the enforcement by any Security Holder of any remedy under any Security Agreement or Loan Document, Tenant shall, at the option of the

-34-

Security Holder or of any other person or entity succeeding to the interest of the Security Holder as a result of such enforcement, attorn to the Security Holder or to such person or entity and shall recognize the Security Holder or such successor in the interest as Landlord under this Lease without change in the provisions thereof, provided that such party agrees not to disturb Tenant’s occupancy so long as Tenant timely pays the Rent and otherwise performs its obligations hereunder. In no event shall any such Security Holder or successor in interest be liable for or bound by (i) any payment of an installment of Rent or Additional Rent which may have been made more than thirty (30) days before the due date of such installment, (ii) any act or omission of or default by Landlord under the Lease (but the Security Holder, or such successor, shall be subject to the continuing obligations of Landlord to the extent arising from and after such succession to the extent of the Security Holder’s, or such successor’s, interest in the Property), (iii) any credits, claims, setoffs or defenses which Tenant may have against Landlord, or (iv) any obligation under this Lease to maintain a fitness facility at the Property. Landlord’s interest herein may be assigned as security at any time to any Security Holder. Tenant shall, within 10 days of request by Landlord, any Security Holder or other successor in interest, execute such further instruments as such party may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any Security Agreement, and/or any such attornment. Tenant hereby waives any right it may have under Law to terminate or otherwise adversely affect this Lease or Tenant’s obligations hereunder in the event of any foreclosure.

18.2 SNDA. With respect to any Security Agreement to which this Lease is now or shall hereafter become subordinate, Landlord shall use commercially reasonable efforts to obtain from the Security Holder, for the benefit of Tenant, a commercially reasonable non-disturbance agreement reasonably acceptable to Tenant, providing generally that as long as no Default occurs under this Lease, this Lease will not be terminated if such Security Holder acquires title to the Project by reason of foreclosure proceedings, acceptance of a deed in lieu of foreclosure, or termination of the leasehold interest of Landlord, provided that Tenant attorns to such Security Holder in accordance with its commercially reasonable requirements. Except for making such commercially reasonable efforts, Landlord will be under no duty or obligation hereunder with respect to any Security Agreement, nor will the failure or refusal of the Security Holder to grant a non-disturbance agreement render Landlord liable to Tenant, or affect this Lease, in any manner.

ARTICLE 19

DEFAULTS; REMEDIES

19.1 Events of Default. The occurrence of any of the following shall constitute a “Default”:

19.1.1 Any failure by Tenant to pay any Rent when due unless such failure is cured within five (5) business days after written notice from Landlord of delinquency; or

19.1.2 Except as otherwise provided in this Section 19.1, any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease where such failure

-35-

continues for 30 days after written notice from Landlord; provided that if such failure cannot reasonably be cured within such 30-day period, Tenant shall not be deemed to be in Default if it diligently commences such cure within such period, thereafter diligently pursues such cure, and completes such cure within 60 days after Landlord’s written notice; or

19.1.3 Abandonment of the Premises by Tenant; or

19.1.4 Any failure by Tenant to observe or perform the provisions of Articles 5, 14, 17 or 18 above where such failure continues for more than three (3) business days after notice from Landlord; or

19.1.5 Tenant becomes in breach of Section 30.18.2 or 30.18.3 below.

The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by Law, and Landlord shall not be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding.

19.2 Remedies Upon Default. Upon the occurrence of any Default, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (which shall be cumulative and nonexclusive), the option to pursue any one or more of the following remedies (which shall be cumulative and nonexclusive) without any notice or demand.

19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy it may have for possession or arrearages in Rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following:

(a) The worth at the time of award of the unpaid Rent which has been earned at the time of such termination; plus

(b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Lease Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided; plus

(d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including (but only to the extent reasonably attributable to the remaining Lease Term) brokerage commissions, advertising

-36-

expenses, expenses of remodeling any portion of the Premises for a new tenant (whether for the same or a different use), and any special concessions made to obtain a new tenant; and

(e) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable Law.

As used in Sections 19.2.1(a) and (b) above, the “worth at the time of award” shall be computed by allowing interest at a rate per annum equal to the lesser of (i) the annual “Bank Prime Loan” rate cited in the Federal Reserve Statistical Release Publication G.13(415), published on the first Tuesday of each calendar month (or such other comparable index as Landlord shall reasonably designate if such rate ceases to be published) plus two (2) percentage points, or (ii) the highest rate permitted by Law. As used in Section 19.2.1(c) above, the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%.

19.2.2 Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover Rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all Rent as it becomes due.

19.2.3 Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or any Law or other provision of this Lease), without prior demand or notice except as required by applicable Law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof.

19.3 Subleases of Tenant. Whether or not Landlord elects to terminate this Lease on account of any Default as set forth in this Article 19, Landlord shall have the right to (a) terminate any sublease, license, concession or other occupancy agreement entered into by Tenant and affecting the Premises, or, in Landlord’s sole and absolute discretion, (b) succeed to Tenant’s interest in such agreement. If Landlord elects to succeed to Tenant’s interest in any such agreement, Tenant shall, as of the date of Landlord’s notice of such election, have no further right to or interest in the Rent or other consideration receivable thereunder.

19.4 Efforts to Relet. Unless Landlord provides Tenant with express written notice to the contrary, no re-entry, repossession, repair, maintenance, change, alteration, addition, reletting, appointment of a receiver or other action or omission by Landlord shall (a) be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, or to accept a surrender of the Premises, or (b) operate to release Tenant from any of its obligations hereunder. Tenant hereby waives, for Tenant and for all those claiming by, through or under Tenant, the provisions of Section 3275 of the California Civil Code and Sections 1174(c) and 1179 of the California Code of

-37-

Civil Procedure and any rights, now or hereafter existing, to redeem or reinstate, by order or judgment of any court or by any legal process or writ, this Lease or Tenant’s right of occupancy of the Premises after any termination of this Lease.

19.5 Landlord Defaults. Landlord shall not be in default hereunder unless it fails to begin within 30 days after written notice from Tenant, or fails to pursue with reasonable diligence thereafter, the cure of any failure of Landlord to meet its obligations hereunder. Tenant hereby waives any right to terminate or rescind this Lease as a result of any default by Landlord hereunder or any breach by Landlord of any promise or inducement relating hereto, and Tenant agrees that its remedies for any such matter shall be limited to a suit for damages and/or injunction. In addition, before exercising any such remedies for a default or breach by Landlord, Tenant shall give notice and a reasonable time to cure to any Security Holder of which Tenant has been given notice.

ARTICLE 20

RIGHTS RESERVED TO LANDLORD

In addition to any and all other rights reserved by Landlord hereunder, Landlord may exercise at any time any of the following rights respecting the operation of the Project without liability to Tenant of any kind:

20.1 Window Treatments. To approve, at Landlord’s discretion, prior to installation, any shades, blinds, ventilators or window treatments of any kind, as well as any lighting within the Premises that may be visible from the exterior of the Premises.

20.2 Preparation for Reoccupancy. Intentionally deleted.

20.3 Use of Lockbox. To designate a lockbox collection agent for collections of amounts due Landlord. In that case, the date of payment of Rent or other sums shall be the date of the agent’s receipt of such payment or the date of actual collection if payment is made in the form of a negotiable instrument thereafter dishonored upon presentment. However, Landlord may reject any payment for all purposes as of the date of receipt or actual collection by mailing to Tenant within a reasonable time after such receipt or collection a check equal to the amount sent by Tenant.

20.4 Repairs and Alterations. To make repairs or alterations to the Project and in doing so transport any required material through the Premises, to close entrances, doors, corridors, elevators and other facilities in the Project, to open any ceiling in the Premises, or to temporarily suspend services or use of Common Areas. Landlord may perform any such repairs or alterations during ordinary business hours, except that Tenant may require any work in the Premises to be done after business hours if Tenant pays Landlord for overtime and any other expenses incurred. Landlord may do or permit any work on any nearby building, land, street, alley or way.

20.5 Building Services. To install, use and maintain through the Premises, pipes, conduits, wires and ducts serving the Premises and/or Project, provided that such installation, use and maintenance does not unreasonably interfere with Tenant’s use of the Premises.

-38-

20.6 Use of Roof. To install, operate, maintain and repair any satellite dish, antennae, equipment, or other facility on the roof of the Building or to use the roof of the Building in any other manner, or to allow any entity selected by Landlord to undertake the foregoing, provided that such installation, operation, maintenance, repair or use does not unreasonably interfere with Tenant’s use of the Premises.

20.7 Other Actions. To take any other action which Landlord deems reasonable in connection with the operation, maintenance or preservation of the Building and the Project.

ARTICLE 21

LANDLORD EXCULPATION

The liability of the Landlord Parties to Tenant under or relating to this Lease, the Project, the Premises or Landlord’s operation, management, leasing, repair, renovation or alteration of the Project or the Premises shall be limited to an amount equal to the lesser of (a) Landlord’s interest in the Building, or (b) the equity interest Landlord would have in the Building if the Building were encumbered by third-party debt in an amount equal to 80% of the value of the Building (as such value is determined by Landlord). Tenant shall look solely to Landlord’s interest in the Building for the recovery of any judgment or award against any Landlord Party. No Landlord Party shall have any personal liability for any judgment or deficiency, and Tenant hereby waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in this Article 21 shall inure to the benefit of the Landlord Parties’ present and future partners, members, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner or member of Landlord (if Landlord is a partnership or limited liability company) or any trustee or beneficiary of Landlord (if Landlord or any partner or member of Landlord is a trust) have any liability for the performance of Landlord’s obligations under this Lease. Notwithstanding any contrary provision herein, no Landlord Party shall be liable for any injury or damage to, or interference with, Tenant’s business, including loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, or for any form of special or consequential damage, in each case however occurring. For purposes of this Article 21, “Landlord’s interest in the Building” shall include rents paid by tenants, insurance proceeds, condemnation proceeds, and proceeds from the sale of the Building (collectively, “Owner Proceeds”); provided, however, that Tenant shall not be entitled to recover Owner Proceeds from any Landlord Party (other than Landlord) or any other third party after they have been distributed or paid to such party; provided further, however, that nothing in this sentence shall diminish any right Tenant may have under Law, as a creditor of Landlord, to initiate or participate in an action to recover from a third party an asset of Landlord on the grounds that such third party obtained such asset when Landlord was, or could reasonably be expected to become, insolvent or in a transfer that was preferential or fraudulent as to Landlord’s creditors.

-39-

ARTICLE 22

SECURITY DEPOSIT

22.1 Security Deposit. Concurrently with its execution and delivery of this Lease, Tenant shall deposit with Landlord the Security Deposit, if any, as security for Tenant’s performance of its obligations under this Lease. If Tenant Defaults under any provision of this Lease, Landlord may, at its option, without notice to Tenant, apply all or part of the Security Deposit to pay any past-due Rent, cure any default by Tenant, or compensate Landlord for any other loss or damage caused by such default (including all Rent or other damages due upon termination of this Lease pursuant to Section 19.2.1 above). If Landlord so applies any portion of the Security Deposit, Tenant shall, within five (5) days after demand therefor, restore the Security Deposit to its original amount, and Tenant’s failure to do so shall, at Landlord’s option, be an incurable Default. The Security Deposit is not an advance payment of Rent or measure of damages. Any unapplied portion of the Security Deposit shall be returned to Tenant within 30 days after the latest to occur of (a) the expiration of the Lease Term, or (b) Tenant’s vacation and surrender of the Premises in accordance with the requirements of this Lease. Landlord may assign the Security Deposit to a successor and thereafter shall have no further liability to Tenant for the return of the Security Deposit. Tenant shall not be entitled to any interest on the Security Deposit and Landlord shall not be required to keep the Security Deposit separate from its other accounts. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code and any other Law governing the manner of application or timing of the return of a security deposit.

22.2 Reduction in Security Deposit. Notwithstanding any provision of this Section 22 to the contrary, the amount of the Security Deposit shall be reduced, as of January 31, 2012, January 31, 2013, and January 31, 2014 (each, a “Reduction Date”), by Sixty-Two Thousand Five Hundred Dollars ($62,500.00) (each a “Security Reduction”) on each Reduction Date; provided, however, that in no event shall any such reduction be permitted hereunder if (a) there has occurred any default by Tenant under the Lease (after any applicable notice and cure period) within the 24-month period prior to the applicable Reduction Date, (b) Tenant is in default of any of its obligations under this Lease as of such Reduction Date (unless Tenant cures such default before the expiration of any applicable notice and cure period), or (c) if Tenant’s net income for the 12-month period prior to the Reduction Date is a negative number (which condition must be met, to Landlord’s reasonable satisfaction, by Tenant’s financial statements prepared in accordance with generally accepted accounting principles and, if consistent with Tenant’s normal practice, audited by an independent certified public accountant). If the Security Deposit Amount is reduced pursuant to the foregoing, then Landlord shall, subject to the conditions above, refund to Tenant the sum of Sixty-Two Thousand Five Hundred Dollars ($62,500.00) on or before the later to occur of (1) thirty (30) days after each Reduction Date (or, in the case of the cure of Tenant’s failure to perform described in clause (b) above, within thirty (30) days after such cure); or (2) thirty (30) days after Landlord’s receipt of the required financial statements described in clause (c) above. If Landlord fails to refund to Tenant such sum within the applicable 30-day period described in the preceding sentence, then, in the absence of any good faith dispute regarding whether such refund is owing to Tenant, Tenant shall have the right to credit such amount against Rent next coming due.

-40-

ARTICLE 23

INTENTIONALLY OMITTED

ARTICLE 24

SIGNS

24.1 Signage Rights. Tenant shall not place on any portion of the Premises any sign, placard, lettering, banner, displays, graphic, decor or other advertising or communicative material which is visible from the exterior of the Building without Landlord’s prior written approval; provided, however, that Tenant shall be entitled to install monument Tenant-identification signage (“Tenant’s Signage Rights”) in accordance with Landlord’s signage standards in effect at the time and all applicable Laws and Underlying Documents. The material, typeface, graphic format and proportions of Tenant’s sign, as well as the precise location of such sign, on such monument shall be subject to Landlord’s approval, which shall not be unreasonably withheld; provided, however, that, without limiting Tenant’s obligations pursuant to this Article 24, Landlord hereby approves Tenant’s existing signage on the Premises. Tenant, at its expense, shall be responsible for obtaining all approvals for such sign and for obtaining and installing such sign. The failure of Tenant to obtain such approvals shall not release Tenant from any of its obligations under this Lease. Any approved sign shall be installed and removed at Tenant’s expense. Tenant, at its sole expense, shall maintain such sign in good condition and repair during the Term. Prior to the expiration or earlier termination of this Lease, Tenant at its sole cost shall remove all of its exterior signage, including Tenant’s existing exterior signage, and repair any and all damage caused to the Building and/or Project (including any fading or discoloration) by such sign and/or the removal of such sign from the Building and/or Project.

24.2 Rights Personal to Tenant. Tenant’s Signage Rights are personal to, and may be exercised only by, the BLUEARC CORPORATION, a Delaware corporation (“Original Tenant”) (and not by any other assignee, sublessee or Transferee of Tenant’s interest in this Lease, except for a Permitted Transferee), and only so long as the Original Tenant or Permitted Transferee continues to occupy all or substantially all of the Premises.

ARTICLE 25

COMPLIANCE WITH LAW; HAZARDOUS SUBSTANCES

25.1 Compliance with Laws. Tenant, at its expense, shall comply with all applicable Laws relating to (a) the operation of its business at the Project, or (b) the use, condition, configuration or occupancy of the Premises; provided, however, that unless such compliance is not necessitated by reason of the installation of any of Tenant’s furniture, fixtures, equipment or property in the Premises, or by Tenant’s particular use of the Premises or the particular manner in which it conducts (or proposes to conduct) its business therein, Tenant shall not be required to correct any non-compliance with applicable Laws that exists in the Premises as of the Lease Commencement

-41-

Date (as such applicable Laws are applied and interpreted by the applicable governmental authorities as of the Lease Commencement Date), which shall be corrected by Landlord at no cost to Tenant. If, in order to comply with any such Law, Tenant must obtain or deliver any permit, certificate or other document evidencing such compliance, Tenant shall provide a copy of such document to Landlord promptly after obtaining or delivering it. In addition, if a change to the Building or Common Areas becomes required under any applicable Law as a result of any Alteration or use of the Premises other than general office use, Tenant, upon demand, shall (x) at Landlord’s option, either make such change at Tenant’s cost or pay Landlord the actual out-of-pocket cost of making such change, and (y) pay Landlord a fee for Landlord’s oversight and coordination of work that costs over $50,000 equal to 3% of its cost. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated (or that, because of an Alteration or use of the Premises other than general office use, a change to the Building or Common Areas has become required under) any of such applicable Laws shall be conclusive of that fact as between Landlord and Tenant. As used herein, “Laws” means the laws, ordinances, regulations and requirements, whether now or hereafter in effect, of the United States of America, the State of California, the local municipal or county governing body, and any other lawful authority having jurisdiction over the Project or the parties. Notwithstanding anything in this Lease to the contrary, unless necessitated by Tenant’s particular use of the Premises, the particular manner in which Tenant conducts business in the Premises or any Alterations to the Premises made by or on behalf of Tenant, Tenant shall have no obligation to make structural alterations or improvements to the Premises to comply with any Laws or Underlying Documents.

25.1.1 Notwithstanding the provisions of Section 25.1.1 above to the contrary, if, at any time during the Lease Term, any capital alterations or improvements (as determined in accordance with generally accepted accounting principles) are required to be made to the Premises to comply with any Laws or Underlying Documents, then, unless such alterations or improvements are necessitated by the particular use of the Premises by Tenant or any Tenant Party, the particular manner in which Tenant or any Tenant Party conducts business in the Premises or any Alterations to the Premises made by or on behalf of Tenant or any Tenant Party, Landlord shall perform such alterations or improvements at Landlord’s cost and expense, subject, however, to the following: beginning on the first calendar month following substantial completion of the capital alterations or improvements, Tenant shall pay to Landlord, as Additional Rent, in equal monthly installments hereunder with Base Rent, the portion of the cost of such alterations or improvements allocable to the remaining Lease Term (including, if applicable, any Option Term), which portion shall be determined by amortizing the cost of the alterations or improvements on a straight-line basis over the useful life thereof (as Landlord shall reasonably determine in accordance with GAAP), together with interest on such amortized amount calculated at the lesser of (i) ten percent (10%) per annum or (ii) the maximum legal rate of interest allowed by the State of California.

-42-

25.2 Hazardous Substances; Mold Conditions.

25.2.1 Prohibition Against Hazardous Substances.

Tenant shall not cause or permit its agents, employees or contractors to cause any Hazardous Substances (as defined below) to be brought upon, produced, treated, stored, used, discharged or disposed of in the Project without Landlord’s prior written consent, which Landlord may give or withhold in its reasonable discretion. Landlord hereby approves of Tenant’s use of the Hazardous Substances described in Exhibit E attached hereto. Any handling, transportation, storage, treatment, disposal or use of any Hazardous Substances in or about the Project by Tenant, its agents, employees, contractors or invitees shall strictly comply with all applicable Laws. Tenant shall be solely responsible for obtaining and complying with all permits necessary for the maintenance and operation of its business, including, without limitation, all permits governing the use, handling, storage, treatment, transport, discharge and disposal of Hazardous Substances. Tenant shall indemnify, defend and hold Landlord and the Landlord Parties harmless from and against any Claims (including, without limitation, diminution in value of the Premises or the Project, damages for the loss or restriction on use of leasable space or of any amenity of the Premises or the Project, damages arising from any adverse impact on marketing of space in the Project, Remedial Work (as defined below), and sums paid in settlement of claims) which result from or arise out of the use, storage, treatment, transportation, release, or disposal of any Hazardous Substances on or about the Premises during the Term and on or about the Project outside of the Premises by Tenant or any Tenant Parties.

(a) Landlord shall have the right, at any time, but not more than one (1) time in any calendar year (unless (x) Landlord has reasonable cause to believe that Tenant has failed to fully comply with the provisions of this Section 25.2, or (y) required by any lender or governmental agency [such circumstances under (x) or (y) above shall constitute “Reasonable Cause”]), to inspect the Premises and conduct tests and investigations to determine whether Tenant is in compliance with the provisions of this Section 25.2. The costs of all such inspections, tests and investigations shall be borne solely by Tenant, unless (1) Landlord undertakes same without Reasonable Cause and (2) the Initial or Updated Disclosure Certificate (as such terms are defined in Section 25.2.4 below) provided by Tenant indicates that Tenant’s current and proposed future uses of Hazardous Substances on or about the Premises are limited to de minimis amounts of Hazardous Substances customarily used in office buildings. The foregoing rights granted to Landlord shall not, however, create (i) a duty on Landlord’s part to inspect, test, investigate, monitor or otherwise observe the Premises or the activities of Tenant or any Tenant Party with respect to Hazardous Substances, including, but not limited to, Tenant’s operation, use or remediation thereof, or (ii) liability on the part of Landlord or any Landlord Party for Tenant’s use, storage, treatment, transportation, release, or disposal of any Hazardous Substances, it being understood that Tenant shall be solely responsible for all liability in connection therewith.

25.2.2 Landlord Notification. Tenant shall promptly provide Landlord with complete copies of all documents, correspondence and other written materials directed to or from, or relating to, Tenant concerning environmental issues at the Premises or the Project, including, without

-43-

limitation, documents relating to the release, potential release, investigation, compliance, cleanup and abatement of Hazardous Substances, and any claims, causes of action or other legal documents related to same. Within twenty-four (24) hours following Tenant’s knowledge of any unauthorized release, spill or discharge of Hazardous Substances, in, on, or about the Premises or Project, Tenant shall endeavor to provide written notice to Landlord fully describing the event. Tenant shall also provide Landlord with a copy of any document or correspondence submitted by or on behalf of Tenant to any regulatory agency as a result of or in connection with any such unauthorized release, spill or discharge. Within twenty-four (24) hours of receipt by Tenant of any warning, notice of violation, permit suspension or similar disciplinary measure relating to Tenant’s actual or alleged failure to comply with any environmental law, rule, regulation, ordinance or permit, Tenant shall provide written notice to Landlord.

25.2.3 Remedial Work. If any investigation or monitoring of site conditions or any clean-up, containment, restoration, removal or remediation of Hazardous Substances (collectively, “Remedial Work”) is required under any applicable Laws as a result of the handling, use, storage, treatment, transportation or disposal of any Hazardous Substances by Tenant or any Tenant Party, then Tenant shall perform or cause to be performed the Remedial Work in compliance with applicable Laws or, at Landlord’s option, Landlord may cause such Remedial Work to be performed and Tenant shall reimburse Landlord for the reasonable costs thereof within thirty (30) days after written demand therefor. All Remedial Work performed by Tenant shall be performed by one or more contractors, selected by Tenant and approved in advance in writing by Landlord, and under the supervision of a consulting engineer selected by Tenant and approved in advance in writing by Landlord. All costs and expenses of such Remedial Work shall be paid by Tenant, including, without limitation, the charges of such contractor(s), the consulting engineer and Landlord’s reasonable attorneys’ and experts’ fees and costs incurred in connection with monitoring or review of such Remedial Work.

25.2.4 Hazardous Substances Disclosure Certificate. Prior to executing this Lease, Tenant has completed, executed and delivered to Landlord a Hazardous Materials Disclosure Certificate (“Initial Disclosure Certificate”), a fully completed copy of which is attached hereto as Exhibit E and incorporated herein by this reference. The completed Hazardous Substances Disclosure Certificate shall be deemed incorporated into this Lease for all purposes, and Landlord shall be entitled to rely fully on the information contained therein. Tenant shall, at such times as Tenant desires to handle, produce, treat, store, use, discharge or dispose of new or additional Hazardous Substances on or about the Premises that were not listed on the Initial Disclosure Certificate, complete, execute and deliver to Landlord an updated Disclosure Certificate (each, an “Updated Disclosure Certificate”) describing Tenant’s then current and proposed future uses of Hazardous Substances on or about the Premises, which Updated Disclosure Certificates shall be in the same format as that which is set forth in Exhibit E or in such updated format as Landlord may reasonably require from time to time. Tenant shall deliver an Updated Disclosure Certificate to Landlord not less than ten (10) days prior to the date Tenant intends to commence the manufacture, treatment, use, storage, handle, discharge or disposal of new or additional Hazardous Substances on or about the Premises, and Landlord shall have the right to approve or disapprove such new or additional Hazardous Substances reasonable discretion. Tenant shall make no use of Hazardous

-44-

Substances on or about the Premises except as described in the Initial Disclosure Certificate or as otherwise approved by Landlord in writing in accordance with this Section 25.2.

25.2.5 Mold.

(a) Because mold spores are present essentially everywhere and mold can grow in almost any moist location, Tenant acknowledges the necessity of adopting and enforcing good housekeeping practices, ventilation and vigilant moisture control within the Premises (particularly in kitchen areas, janitorial closets, bathrooms, in and around water fountains and other plumbing facilities and fixtures, break rooms, in and around outside walls, and in and around HVAC systems and associated drains) for the prevention of mold (such measures, “Mold Prevention Practices”). Tenant will, at its sole cost and expense, use reasonable efforts to keep and maintain the Premises in good order and condition in accordance with the Mold Prevention Practices and acknowledges that the control of moisture, and prevention of mold within the Premises, are integral to its obligations under this Lease.

(b) Tenant, at its sole cost and expense, shall use reasonable efforts to:

(1) Regularly monitor the Premises for the presence of mold and any conditions that reasonably can be expected to give rise or be attributed to mold or fungus including, but not limited to, observed or suspected instances of water damage, condensation, seepage, leaks or any other water penetration (from any source, internal or external), mold growth, mildew, repeated complaints of respiratory ailments or eye irritation by Tenant’s employees or any other occupants of the Premises, or any notice from a governmental agency of complaints regarding the indoor air quality at the Premises (the “Mold Conditions”); and

(2) Immediately notify Landlord in writing if it observes, suspects, has reason to believe Mold Conditions exist at the Premises.

(c) In the event of suspected mold or Mold Conditions at the Premises, Landlord may cause an inspection of the Premises to be conducted, during such time as Landlord may designate, to determine if mold or Mold Conditions are present at the Premises.

25.2.6 Surrender. Tenant shall surrender the Premises to Landlord upon the expiration or earlier termination of this Lease free of (a) mold or Mold Conditions caused or exacerbated by the negligent or intentional acts or omissions of Tenant or any Tenant Parties, and free of debris and waste and (b) Hazardous Substances placed on, about or near the Premises by Tenant or any Tenant Parties, and in a condition which complies with all Environmental Laws. Tenant’s obligations and liabilities pursuant to the provisions of this Section 25.2 shall be in addition to any other surrender requirement in this Lease and shall survive the expiration of the Lease Term or any earlier termination of this Lease.

25.2.7 Definitions. As used in this Lease, the following terms shall be defined as follows:

-45-

(a) “Hazardous Substances” means (1) any substance or material that is included within the definitions of “hazardous substances,” “hazardous materials,” “toxic substances,” “pollutant,” “contaminant,” “hazardous waste,” or “solid waste” in any Environmental Law (as hereinafter defined); (2) petroleum or petroleum derivatives, including crude oil or any fraction thereof, all forms of natural gas, and petroleum products or by-products or waste; (3) polychlorinated biphenyls (PCB’s); (4) asbestos and asbestos containing materials (whether friable or non-friable); (5) lead and lead based paint or other lead containing materials (whether friable or non-friable); (6) urea formaldehyde; (7) microbiological pollutants; (8) batteries or liquid solvents or similar chemicals; (9) radon gas; (10) mildew, fungus, mold, bacteria and/or other organic spore material, whether or not airborne, colonizing, amplifying or otherwise; and (11) any additional substance, material or waste (A) the presence of which on or about the Premises (i) requires reporting, investigation or remediation under any Environmental Laws, (ii) causes or threatens to cause a nuisance on the Premises or any adjacent area or property or poses or threatens to pose a hazard to the health or safety of persons on the Premises or any adjacent area or property, or (iii) which, if it emanated or migrated from the Premises, could constitute a trespass, or (B) which is now or is hereafter classified or considered to be hazardous or toxic under any Environmental Laws.

(b) “Environmental Laws” means all statutes, terms, conditions, limitations, restrictions, standards, prohibitions, obligations, schedules, plans and timetables that are contained in or promulgated pursuant to any federal, state or local laws (including rules, regulations, ordinances, codes, judgments, orders, decrees, contracts, permits, stipulations, injunctions, the common law, court opinions, and demand or notice letters issued, entered, promulgated or approved thereunder), relating to pollution or the protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of Hazardous Substances into ambient air, surface water, ground water or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances including but not limited to the: Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and Reauthorization Act of 1986 (SARA), 42 U.S.C. 9601 et seq.; Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 (RCRA), 42 U.S.C. 6901 et seq.; Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq.; Toxic Substances Control Act, 15 U.S.C. 2601 et seq.; Clean Air Act, 42 U.S.C. 7401 et seq.; and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. “Environmental Laws” shall include any statutory or common law that has developed or develops in the future regarding mold, fungus, microbiological pollutants, mildew, bacteria and/or other organic spore material. “Environmental Laws” shall not include laws relating to industrial hygiene or worker safety, except to the extent that such laws address asbestos and asbestos containing materials (whether friable or non-friable) or lead and lead based paint or other lead containing materials.

25.3 Landlord Representation and Indemnification. Landlord shall indemnify, defend and hold Tenant harmless from and against any claims brought by third parties requiring Remedial Work in the Project, except to the extent such Remedial Work results from or arises out of the use, storage, treatment, transportation, release, or disposal of any Hazardous Substances on or about the Project by Tenant or any Tenant Parties.

-46-

25.4 Survival. Landlord’s and Tenant’s obligations under this Article 25 shall survive the expiration or of the Lease Term or any earlier termination of this Lease until all Claims within the scope of this Article 25 are fully, finally, and absolutely barred by the applicable statutes of limitations.

ARTICLE 26

LATE CHARGES

If any installment of Rent is not received by Landlord or Landlord’s designee within five (5) business days after its due date, Tenant shall pay to Landlord a late charge equal to the greater of 5% of the overdue amount or $250. In addition, any Rent that is not paid within 10 days after its due date shall bear interest, from its due date until paid, at a rate equal to the lesser of 12% per annum or the highest rate permitted by applicable Law. Such late charges and interest shall be deemed Additional Rent, not liquidated damages, and Landlord’s right to collect such amounts shall not limit any of Landlord’s other rights and remedies hereunder or at Law. Notwithstanding the provisions of this Article 26 to the contrary, no late charge shall be assessed the first time during any calendar year during the Lease Term that Rent is not paid within five (5) business days after said amount is due, so long as Tenant shall pay any such delinquent amount within three (3) business days after notice of such delinquency from Landlord.

ARTICLE 27

LANDLORD’S RIGHT TO CURE DEFAULT

Landlord shall have the right, at its option, to cure any Default, without waiving its rights and remedies based upon such Default and without releasing Tenant from any obligations hereunder, in which event Tenant shall pay to Landlord, upon demand, all costs incurred by Landlord in performing such cure (including reasonable attorneys’ fees). Tenant’s obligations under this Article 27 shall survive the expiration or sooner termination of this Lease.

ARTICLE 28

ENTRY BY LANDLORD

Landlord reserves the right, at all reasonable times and upon reasonable notice to Tenant (except in the case of an emergency), to enter the Premises to (i) inspect the Premises; (ii) show the Premises to prospective purchasers, to current or prospective Security Holders or insurers, or, during the last 9 months of the Lease Term (or while an uncured Default exists), to prospective tenants; (iii) post notices of non-responsibility; or (iv) perform maintenance, repairs or alterations. Notwithstanding anything to the contrary in this Article 28, Landlord may enter the Premises, at any time and without prior notice to Tenant, to (A) perform required services; (B) take possession of the Premises in accordance with Section 19.2 above; or (C) exercise its rights under Article 27 above. Upon entry, Landlord may take such steps, including temporary closure of the Premises, as are

-47-

reasonably required to accomplish the foregoing purposes; provided, however, that, subject to the next succeeding sentence, Landlord shall, in connection with the foregoing access, use commercially reasonable efforts to minimize interference with Tenant’s business in the Premises. Landlord may perform any required repairs, alterations or other services in or to the Premises during ordinary business hours, except that, other than in the case of an emergency, Tenant may require any work in the Premises to be done after business hours if Tenant pays Landlord for overtime and any other expenses incurred. Landlord shall at all times have a key with which to unlock all the doors in the Premises. In an emergency, Landlord shall have the right to use any means Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises by Landlord as provided herein shall not be deemed to be a forcible or unlawful entry into or detainer of, or a constructive eviction of Tenant from, any portion of the Premises, and Tenant shall not be entitled to any damages or abatement of Rent in connection with such entry. Notwithstanding the foregoing, except in the event of an emergency, Landlord and any person entering the Premises with, at the direction of or under the authority of, Landlord shall follow Tenant’s commercially reasonable security requirements, which include the requirement that all persons entering the Premises be attended by a representative of Tenant; provided, however, that Tenant shall make a representative available upon 24-hours prior telephone notice by Landlord.

ARTICLE 29

TENANT PARKING

Tenant shall have the right to park in the Project’s parking facilities (the “Parking Facilities”), in common with other tenants of the Project, upon the terms and conditions contained in this Article 29. Tenant shall not use more than the number of unreserved parking spaces set forth in Section 8 of the Summary. In addition, Tenant shall pay to Landlord any fees, taxes or other charges imposed by the Regional Air Quality Control Board or any other governmental or quasi-governmental agency in connection with the Parking Facilities, to the extent such amounts are allocated to Tenant by Landlord. Landlord shall not be liable to Tenant, nor shall this Lease be affected, if any parking is impaired by (or any parking charges are imposed as a result of) any Law. Tenant’s rights under this Article 29 are conditioned upon Tenant’s reasonably abiding by, and causing its employees and invitees to abide by, all rules and regulations established by Landlord from time to time for the orderly operation and use of the Parking Facilities (including any sticker or other identification system and the prohibition of vehicle repair and maintenance activities in the Parking Facilities). Landlord may, in its discretion, allocate and assign parking passes among Tenant and the other tenants in the Project, provided Tenant’s parking rights are not materially impaired. Tenant’s use of the Parking Facilities shall be at Tenant’s sole risk, and Landlord shall have no liability for any personal injury or damage to or theft of any vehicles or other property occurring in the Parking Facilities or otherwise in connection with any use of the Parking Facilities by Tenant, its employees or invitees. Landlord may alter the size, configuration, design, layout or any other aspect of the Parking Facilities at any time (provided Tenant’s parking rights are not materially impaired) and may, without incurring any liability to Tenant and without any abatement of Rent, from time to time temporarily close off or restrict access to the Parking Facilities for purposes of facilitating any such alteration (provided Landlord uses commercially reasonable efforts

-48-

to minimize the impact on Tenant’s business operations). Landlord may delegate its responsibilities hereunder to a parking operator, in which case (i) such parking operator shall have all the rights of control reserved herein by Landlord, (ii) Tenant shall not be required to pay such parking operator any charge for the parking spaces, and (iii) Landlord shall have no liability for claims arising through acts or omissions of such parking operator except to the extent caused by Landlord’s gross negligence or willful misconduct. Tenant’s parking rights under this Article 29 are solely for the benefit of Tenant’s employees and such rights may not be transferred without Landlord’s prior written approval, except pursuant to a Transfer permitted under Article 14 above.

ARTICLE 30

MISCELLANEOUS PROVISIONS

30.1 Terms; Captions. The words “Landlord” and “Tenant” as used herein shall include the plural as well as the singular. The captions of Articles and Sections are for convenience only and shall not affect the interpretation of such Articles and Sections. Wherever the words “include,” “includes” or “including” are used in this Lease, they shall be deemed, as the context indicates, to be followed by the words “but (is/are) not limited to”. Any reference herein to “any part” or “any portion” of the Premises, the Property, the Project or any other property shall be construed to refer to all or any part of such property. Wherever this Lease requires Tenant to comply with any Law, rule, regulation, program, procedure or other requirement or prohibits Tenant from engaging in any particular conduct, this Lease shall be deemed also to require Tenant to cause each of its employees, licensees, invitees and subtenants, and any other person claiming by, through or under Tenant, to comply with such requirement or refrain from engaging in such conduct, as the case may be. Tenant hereby waives the benefit of any rule that a written agreement shall be construed against the drafting party.

30.2 Binding Effect. The provisions of this Lease shall, as the case may require, bind or inure to the benefit of the respective successors and assigns of Landlord and Tenant, provided that this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 above.

30.3 No Air Rights. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction of Tenant’s obligations under this Lease.

30.4 Modification of Lease. If any current or prospective Security Holder requires a written amendment of this Lease that will not cause an increased cost to Tenant or otherwise materially and adversely change the rights and obligations of Tenant hereunder, Tenant shall execute such an amendment, subject to Tenant’s reasonable review and comment, and deliver it to Landlord within 10 business days after Landlord’s request therefor. At the request of Landlord or any Security Holder, Tenant shall execute a memorandum of Lease and deliver it to Landlord within 10 business days after such request.

-49-

30.5 Transfer of Landlord’s Interest. Landlord shall have the right to transfer all or any portion of its interest in the Project or Building and in this Lease, and, in the event of any such transfer (which transfer shall include the Security Deposit), Landlord shall automatically be released from, Tenant shall look solely to the transferee for the performance of, and the transferee shall be deemed to have assumed, all of Landlord’s obligations arising hereunder after the date of such transfer (including the return of any Security Deposit), and Tenant shall attorn to the transferee as provided in Article 18 above.

30.6 Prohibition Against Recording. Except as provided in Section 30.4 above, neither this Lease nor any memorandum, affidavit or other writing with respect thereto shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant.

30.7 Landlord’s Title. Landlord’s title is and always shall be paramount to the title of Tenant. Nothing contained herein shall empower Tenant to do any act that can encumber the title of Landlord.

30.8 Relationship of Parties. Nothing in this Lease shall be construed to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant.

30.9 Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant’s designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord may elect in its sole and absolute discretion.

30.10 Time of Essence. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor.

30.11 Partial Invalidity. If any provision of this Lease is to any extent invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and every other provision of this Lease shall be valid and enforceable to the fullest extent permitted by Law.

30.12 Covenant of Quiet Enjoyment. Landlord covenants that so long as Tenant performs all of its obligations hereunder, Tenant shall have peaceful and quiet possession of the Premises against any party lawfully claiming by, through or under Landlord, subject to the terms hereof. The foregoing covenant is in lieu of any other covenant express or implied.

30.13 Entire Agreement. This Lease and the attached exhibits, which are incorporated into and made a part of this Lease, set forth the entire agreement between the parties with respect to the leasing of the Premises and supersede and cancel all previous negotiations, arrangements, communications, agreements and understandings, if any, between the parties hereto (none of which shall be used to interpret this Lease). Tenant acknowledges that in entering into this Lease it has not

-50-

relied on any representation, warranty or statement, whether oral or written, not expressly set forth herein. This Lease can be modified only by a written agreement signed by the parties hereto.

30.14 Reserved Rights. Landlord reserves to itself all rights not expressly granted to Tenant hereunder, including the right, in Landlord’s sole and absolute discretion, to lease, renovate, improve, alter, subdivide, demolish, construct or develop the Project, or enter into new Underlying Documents with owners of other property, and no such act, or failure to so act, shall constitute a breach of any obligation to Tenant or give rise to any remedy, including any remedy of constructive eviction, damages or abatement of Rent.

30.15 Force Majeure. If either party is prevented from performing any of its obligations hereunder as a result of any strike; lockout; labor dispute; act of God, war or terrorism; inability to obtain services, labor or materials (or reasonable substitutes therefor); governmental action; civil commotion; fire or other casualty; or other cause beyond the reasonable control of such party, other than financial inability (collectively, a “Force Majeure”), then, notwithstanding anything to the contrary in this Lease, such obligation shall be excused during the period of such prevention, and if this Lease specifies a time period for the performance of such obligation, such time period shall be extended by the period of such prevention; provided, however, that nothing in this Section 30.15 shall (a) permit Tenant to holdover in the Premises after the expiration or earlier termination of this Lease, or (b) excuse any obligation to pay Rent, any of Tenant’s obligations under Article 5, 21 or 24 above or Section 30.18.2 or 30.18.3 below, or any of Tenant’s obligations whose nonperformance would interfere with any other occupant’s use, occupancy or enjoyment of its respective premises or the Project.

30.16 Notices. All notices, demands, statements, designations, approvals or other communications (collectively, “Notices”) given or required to be given by either party to the other hereunder or by Law shall be in writing, shall be (A) sent by United States certified or registered mail, postage prepaid, return receipt requested, (B) delivered by a nationally recognized courier service, or (C) delivered personally. Any Notice shall be sent or delivered to the address set forth in Section 9 (if Tenant is the recipient) or Section 10 (if Landlord is the recipient) of the Summary, or to such other place (other than a P.O. box) as the recipient may from time to time designate in a Notice to the other party. Any Notice shall be deemed to be received on the earlier to occur of the date of actual delivery or the date on which delivery is refused, or, if Tenant is the recipient and has vacated its notice address without providing a new notice address, three (3) business days after the date the Notice is deposited in the U.S. mail or with a courier service in the manner described above.

30.17 Joint and Several. If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several.

30.18 Representations and Warranties. Tenant represents, warrants and covenants as follows:

-51-

30.18.1 If Tenant is not a natural person, then (a) Tenant has full power and authority to execute, deliver and perform its obligations under this Lease, and each person signing on behalf of Tenant is authorized to do so; (b) Tenant is, and at all times during the Lease Term will remain, duly organized, validly existing and in good standing under the laws of the state of its formation and qualified to do business in the state of California; and (c) Tenant shall, within 10 days after execution of this Lease, deliver to Landlord satisfactory evidence of such authority.

30.18.2 Tenant has not, and at no time during the Lease Term will have, (a) made a general assignment for the benefit of creditors, (b) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by any creditors, (c) suffered the appointment of a receiver to take possession of all or substantially all of its assets, (d) suffered the attachment or other judicial seizure of all or substantially all of its assets, (e) admitted in writing its inability to pay its debts as they come due, or (f) made an offer of settlement, extension or composition to its creditors generally, in each case unless the same is dismissed in sixty (60) days.

30.18.3 Tenant is not, and at no time during the Lease Term will be, (a) in violation of any Anti-Terrorism Law (defined below); (b) conducting any business or engaging in any transaction or dealing with any Prohibited Person (defined below), including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Prohibited Person; (c) dealing in, or otherwise engaging in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 (defined below); or (d) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in, any Anti-Terrorism Law. Neither Tenant nor any of its Affiliates, officers, directors, shareholders, partners, members or lease guarantors is, or at any time during the Lease Term will be, a Prohibited Person. As used herein, “Anti-Terrorism Law” means any Law relating to terrorism, anti-terrorism, money-laundering or anti-money laundering activities, including the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986, Executive Order No. 13224, and Title 3 of the USA Patriot Act (defined below), and any regulations promulgated under any of them, each as may be amended from time to time. As used herein, “Executive Order No. 13224” means Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, and relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism,” as may be amended from time to time. As used herein, “Prohibited Person” means (1) a person or entity that is listed in, or owned or controlled by a person or entity that is listed in, the Annex to Executive Order No. 13224; (2) a person or entity with whom Landlord is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; or (3) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/t11sdn.pdf, or at any replacement website or other official publication of such list. As used herein, “USA Patriot Act” means the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (Public. Law 107-56).

-52-

30.19 Attorneys’ Fees. In any lawsuit, action, arbitration, quasi-judicial proceeding, administrative proceeding or other proceeding brought by either party to enforce such party’s rights or remedies under this Lease, the prevailing party shall be entitled to reasonable attorneys’ fees and all costs, expenses and disbursements in connection with such action or proceeding, including all costs of expert consultation and other reasonable investigation, which sums may be included in any judgment or decree entered in such action or proceeding in favor of the prevailing party. In addition, Tenant shall pay all reasonable attorneys’ fees and other fees and costs, including costs of expert consultation and other reasonable investigation, that Landlord incurs in interpreting or enforcing this Lease or otherwise protecting its rights hereunder, (a) where an action or proceeding is not brought, or (b) in any voluntary or involuntary bankruptcy case, assignment for the benefit of creditors, or other insolvency, liquidation or reorganization proceeding involving Tenant or this Lease, including all motions and proceedings regarding relief from automatic stay, lease assumption or rejection and/or extensions of time related thereto, lease designation, use of cash collateral, claim objections, and disclosure statements and plans of reorganization.

30.20 Governing Law; WAIVER OF TRIAL BY JURY.

30.20.1 This Lease shall be construed and enforced in accordance with the Laws of the State of California.

30.20.2 THE PARTIES HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE OR ANY EMERGENCY OR STATUTORY REMEDY. IF THE JURY WAIVER PROVISIONS OF THIS SECTION 30.20.2 ARE NOT ENFORCEABLE UNDER CALIFORNIA LAW, THEN THE FOLLOWING PROVISIONS SHALL APPLY. It is the desire and intention of the parties to agree upon a mechanism and procedure under which controversies and disputes arising out of this Lease or related to the Premises will be resolved in a prompt and expeditious manner. Accordingly, except with respect to actions for unlawful or forcible detainer or with respect to the prejudgment remedy of attachment, any action, proceeding or counterclaim brought by either party hereto against the other (and/or against its officers, directors, employees, agents or subsidiaries or affiliated entities) on any matters arising out of or in any way connected with this Lease, Tenant’s use or occupancy of the Premises and/or any claim of injury or damage, whether sounding in contract, tort, or otherwise, shall be heard and resolved by a referee under the provisions of the California Code of Civil Procedure, Sections 638 – 645.1, inclusive (as same may be amended, or any successor statute(s) thereto) (the “Referee Sections”). Any fee to initiate the judicial reference proceedings and all fees charged and costs incurred by the referee shall be paid by the party initiating such procedure (except that if a reporter is requested by either party, then a reporter shall be present at all proceedings where requested and the fees of such reporter – except for copies ordered by the other parties – shall be borne by the party requesting the reporter); provided however, that allocation of the costs and fees, including any initiation fee, of such proceeding shall be ultimately determined in accordance with Section 30.20 above. The venue of the proceedings shall be in the county in which the Premises are located. Within 10 days of receipt by any party of a

-53-

written request to resolve any dispute or controversy pursuant to this Section 30.20.2, the parties shall agree upon a single referee who shall try all issues, whether of fact or law, and report a finding and judgment on such issues as required by the Referee Sections. If the parties are unable to agree upon a referee within such 10-day period, then any party may thereafter file a lawsuit in the county in which the Premises are located for the purpose of appointment of a referee under the Referee Sections. If the referee is appointed by the court, the referee shall be a neutral and impartial retired judge with substantial experience in the relevant matters to be determined, from Jams/Endispute, Inc., the American Arbitration Association or similar mediation/arbitration entity. The proposed referee may be challenged by any party for any of the grounds listed in the Referee Sections. The referee shall have the power to decide all issues of fact and law and report his or her decision on such issues, and to issue all recognized remedies available at law or in equity for any cause of action that is before the referee, including an award of attorneys’ fees and costs in accordance with this Lease. The referee shall not, however, have the power to award punitive damages, nor any other damages that are not permitted by the express provisions of this Lease, and the parties hereby waive any right to recover any such damages. The parties shall be entitled to conduct all discovery as provided in the California Code of Civil Procedure, and the referee shall oversee discovery and may enforce all discovery orders in the same manner as any trial court judge, with rights to regulate discovery and to issue and enforce subpoenas, protective orders and other limitations on discovery available under California Law. The reference proceeding shall be conducted in accordance with California Law (including the rules of evidence), and in all regards, the referee shall follow California Law applicable at the time of the reference proceeding. The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain a prompt and expeditious resolution of the dispute or controversy in accordance with the terms of this Section 30.20.2. In this regard, the parties agree that the parties and the referee shall use best efforts to ensure that (a) discovery be conducted for a period no longer than 6 months from the date the referee is appointed, excluding motions regarding discovery, and (b) a trial date be set within 9 months of the date the referee is appointed. In accordance with Section 644 of the California Code of Civil Procedure, the decision of the referee upon the whole issue must stand as the decision of the court, and upon the filing of the statement of decision with the clerk of the court, or with the judge if there is no clerk, judgment may be entered thereon in the same manner as if the action had been tried by the court. Any decision of the referee and/or judgment or other order entered thereon shall be appealable to the same extent and in the same manner that such decision, judgment, or order would be appealable if rendered by a judge of the superior court in which venue is proper hereunder. The referee shall in his/her statement of decision set forth his/her findings of fact and conclusions of law. The parties intend this general reference agreement to be specifically enforceable in accordance with the Code of Civil Procedure. Nothing in this Section 30.20.2 shall prejudice the right of any party to obtain provisional relief or other equitable remedies from a court of competent jurisdiction as shall otherwise be available under the Code of Civil Procedure and/or applicable court rules.

30.20.3 IF LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH

-54-

PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW. IN ADDITION, IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, AND (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW.

30.20.4 THE PROVISIONS OF THIS SECTION 30.20 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.

30.21 Submission of Lease. Submission of this instrument for examination or signature by Tenant does not constitute an option or offer to lease, and this instrument is not effective, as a lease or otherwise, until execution and delivery by both Landlord and Tenant.

30.22 Brokers. Tenant represents to Landlord that it has dealt only with Tenant’s Broker as its broker in connection with this Lease. Tenant shall indemnify, defend, and hold Landlord harmless from all claims of any brokers, other than Tenant’s Broker, claiming to have represented Tenant in connection with this Lease. Landlord shall indemnify, defend and hold Tenant harmless from all claims of any brokers claiming to have represented Landlord in connection with this Lease. Tenant acknowledges that any Affiliate of Landlord that is involved in the negotiation of this Lease is representing only Landlord, and that any assistance rendered by any agent or employee of such Affiliate in connection with this Lease or any subsequent amendment or other document related hereto has been or will be rendered as an accommodation to Tenant solely in furtherance of consummating the transaction on behalf of Landlord, and not as agent for Tenant. Landlord shall pay (or cause to be paid) all fees owed to Tenant’s Broker and Landlord’s Broker pursuant to separate written agreements.

30.23 Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent, and Tenant hereby waives the benefit of any Law to the contrary and agrees that if Landlord fails to perform its obligations hereunder, Tenant shall not be entitled to make any repairs or perform any other acts hereunder at Landlord’s expense or to set off any Rent against Landlord.

30.24 Project or Building Name and Signage. Landlord shall have the right at any time to change the name or address of the Project or Building, and to install and maintain any signs on the exterior or the interior of the Project or Building that Landlord may desire in its sole and absolute discretion. Without Landlord’s prior written consent, Tenant shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises.

30.25 Counterparts. This Lease may be executed in counterparts with the same effect as if both parties had executed the same document. Both counterparts shall be construed together and shall constitute a single lease.

-55-

30.26 Confidentiality. Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant’s financial, legal and space-planning consultants, attorneys, brokers, employees, directors. investors, subtenants, assignees, potential or actual Permitted Transferees and other as may be required by law or useful in connection with any legal proceedings in connection with this Lease.

30.27 No Violation. Tenant represents and warrants that neither its execution of nor its performance under this Lease will cause Tenant to be in violation of any agreement or Law.

30.28 Communications and Computer Lines. Tenant may install, maintain, replace, remove or use any communications or computer wires and cables serving the Premises (collectively, the “Lines”), provided that (i) Tenant shall obtain Landlord’s prior written consent, use an experienced and qualified contractor approved in writing by Landlord, and comply with all provisions of Articles 7 and 8 above; (ii) space for additional Lines shall be maintained for existing and future occupants of the Project, as determined in Landlord’s reasonable opinion; (iii) the Lines (including riser cables) shall be appropriately insulated to prevent excessive electromagnetic fields or radiation and shall be surrounded by a protective conduit reasonably acceptable to Landlord; (iv) the Lines shall be clearly marked with adhesive plastic labels (or plastic tags attached to such Lines with wire) to show Tenant’s name, suite number, telephone number and the name of the person to contact in the case of an emergency (A) every four feet (4’) outside the Premises (including the electrical room risers and other Common Areas), and (B) at the Lines’ termination point(s); (v) any new or existing Lines serving the Premises shall comply with all applicable Laws; (vi) as a condition to permitting the installation of new Lines, Landlord may require that Tenant remove existing unused Lines located in or serving the Premises and repair any damage in connection with such removal; and (vii) Tenant shall pay all costs in connection therewith. Unless otherwise instructed by Landlord (by written notice to Tenant), Tenant shall, at its expense, before the expiration or earlier termination of this Lease, remove any Lines located in or serving the Premises and repair any resulting damage.

30.29 Transportation Management. Tenant shall comply with all present or future programs intended to manage parking, transportation or traffic in and around the Project and/or the Building, and, in connection therewith, Tenant shall take responsible action for planning and managing the transportation of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities. Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Project-, Building- or area-wide ridesharing program manager; (v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees.

30.30 Access. Except when and where Tenant’s right of access is specifically excluded as the result of (a) an emergency, (b) a requirement by Law, or (c) a specific provision set forth in this

-56-

Lease, Tenant shall have the right of access to the Premises twenty-four (24) hours per day, seven (7) days per week during the Lease Term.

[The remainder of this page has been intentionally left blank]

-57-

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.

LANDLORD:

CARR NP PROPERTIES, L.L.C.,

a Delaware limited liability company

By: /s/ John Moe

Name: John Moe

Title: Market Managing Director

TENANT:

BLUEARC CORPORATION,

a Delaware corporation

By: /s/ Mike Gustafson

Name: Mike Gustafson

Title: CEO

[chairman, president or vice-president]
By:	/s/ Rick Martig

Name: Rick Martig

Title: CFO

[secretary, assistant secretary, chief

financial officer or assistant treasurer]

EXHIBIT A

RIO ROBLES TECHNOLOGY CENTRE

OUTLINE OF PREMISES

Exhibit A

1

EXHIBIT B

RIO ROBLES TECHNOLOGY CENTRE

TENANT WORK LETTER

This Tenant Improvement Agreement (“Agreement”) is an integral part of the Lease dated as of July 16, 2009 (“Lease”), by and between CARR NP PROPERTIES, L.L.C., a Delaware limited liability company (“Landlord”), and BLUEARC CORPORATION, a Delaware corporation (“Tenant”), relating to certain Premises described therein, and except where clearly inconsistent or inapplicable, the provisions of the Lease are incorporated into this Agreement. Capitalized terms used in this Agreement not otherwise defined herein shall have the meaning given such terms in the Lease. Landlord and Tenant agree as follows with respect to the initial alterations, additions and improvements to be installed in the Premises (the “Tenant Improvements”).

1. INITIAL TENANT IMPROVEMENTS.

(a) On or before the Commencement Date, Landlord shall cause to be substantially completed the Tenant Improvements identified on Exhibit B-1 attached hereto (the “Approved TI Description”), subject to and in accordance with Landlord’s standard specifications for the Project (“Project Standard Specifications”) including, but not limited to, the standard building materials which are then being used by Landlord for the Project and/or similar projects owned by Landlord in the vicinity of the Project. Landlord will provide Tenant with a copy of the Project Standard Specifications upon Tenant’s request. The work of constructing the Tenant Improvements, which the parties acknowledge shall include certain upgrades to the electrical systems serving the Building (“PG&E Power Upgrades”), is referred to as “Landlord’s Work”.

(b) Following execution of the Lease, Landlord shall cause to be prepared, at its sole cost and expense, and delivered to Tenant final working drawings for Landlord’s Work (the “Final Plans”). The Tenant Improvements shown on the Final Plans shall be substantially consistent with the work initially identified on Exhibit B-1 attached hereto, and Landlord shall cause Landlord’s Work to be performed (i) substantially as shown on the Final Plans, excepting only minor variations (i.e., variations which are not inconsistent with the intent of the Final Plans) as Landlord may deem advisable, and any Change Orders approved by Landlord; and (ii) in compliance with all applicable Laws; provided, however, that the issuance of a temporary or permanent certificate of occupancy or final sign off on the job card upon Substantial Completion (as defined below) of Landlord’s Work shall be deemed conclusive evidence of the compliance of the Tenant Improvements with applicable Laws.

2. CHANGE ORDERS. If, prior to the Substantial Completion Date, Tenant shall request improvements or changes to the Premises in addition to, revision of or substitution for the Tenant Improvements identified in the Approved TI Description, including, without limitation, any request for above-Building standard finishes or other detailed specifications (individually or collectively, “Change Orders”), Tenant shall deliver to Landlord for its approval plans and specifications for such Change Orders. If Landlord does not approve of the plans for such Change Orders, Landlord shall advise Tenant of the revisions required. Tenant shall revise and redeliver the plans and specifications to Landlord within five (5) days of Landlord’s advice or Tenant shall be deemed to have abandoned its request for such Change Orders. Tenant shall pay for all preparations and revisions of plans and specifications, and the increase in the cost of construction, resulting from all Change Orders.

Exhibit B

1

3. TENANT IMPROVEMENT COSTS. Landlord shall bear the cost of the design and construction of the Tenant Improvements, except for the following, which shall be Tenant’s responsibility:

(a) The increase in the cost of construction resulting from Change Orders;

(b) The cost of trade fixtures, workstations, telecommunications or computer cabling, electrical distribution, or built-in furniture or equipment to be installed by Tenant; and

(c) Any increase in the cost of construction resulting from Tenant Delays (as defined in Section 4 below).

If Landlord and Tenant agree on any Change Orders as provided in Section 2 above, then Landlord shall furnish Tenant with an invoice specifying Tenant’s estimated share of the cost of the Change Order, and Tenant shall pay such estimated amount to Landlord within thirty (30) days thereafter. Tenant acknowledges and agrees that any such invoice shall be based solely on an estimate of Landlord’s contractor, and shall not be binding on Landlord or Landlord’s contractor, nor shall Tenant’s payment on account of such estimate limit Tenant’s obligation hereunder to pay the increase in the cost of construction resulting from Change Orders.

4. SUBSTANTIAL COMPLETION. As used in the Lease, the “Substantial Completion Date” means the date that Landlord, its architect, engineer or construction manager determines that Landlord’s Work has been completed, except for the following (“Substantial Completion”): (a) finishing details, minor omissions, mechanical adjustments, and similar items of the type customarily found on an architectural punch-list (the “Punch-List Items”), the correction or completion of which will not substantially interfere with Tenant’s occupancy and use of the Premises; and (b) trade fixtures, workstations, telecommunications or computer cabling or built-in furniture or equipment to be installed by Tenant; provided, however, that if Landlord is delayed in completing Landlord’s Work as a result of any Tenant Delay (as defined below), the Substantial Completion Date shall be deemed to be the date that Substantial Completion of Landlord’s Work would have occurred in the absence of such Tenant Delay, as reasonably determined by Landlord or Landlord’s architect. Tenant shall be responsible for and shall pay any costs and expenses incurred by Landlord in connection with, or as a consequence of, any Tenant Delay. As used in this Lease, the term “Tenant Delay” means a delay in the completion of Landlord’s Work, to the extent caused by the act, omission, neglect or failure of Tenant or any of Tenant’s agents, employees, contractors or subcontractors, including, without limitation, to the extent caused by Change Orders or by Tenant’s failure to pay the estimated amounts required pursuant to Section 3 above.

5. MISCELLANEOUS.

(a) Notwithstanding any provision to the contrary contained in this Lease, if a Default as described in the Lease, or a Default by Tenant under this Agreement, has occurred at any time on or before the Substantial Completion of Landlord’s Work, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to cease performance of Landlord’s Work until such Default is cured (in which case, such delay shall be a Tenant Delay), and (ii) all other obligations of Landlord under the terms of this Agreement shall be forgiven until such time as such default is cured pursuant to the terms of the Lease.

(b) Tenant acknowledges that the timing of the completion of the Final Plans and the Tenant Improvements is of the utmost importance to Landlord. Accordingly, Tenant hereby agrees to fully

Exhibit B

2

and diligently cooperate with all reasonable requests by Landlord in connection with or related to the design and construction of the Tenant Improvements, and in connection therewith, shall respond to Landlord’s requests for information and/or approvals, except as specifically set forth herein to the contrary, within five (5) business days following request by Landlord.

(c) Without limiting the provisions of Section 2 above or Tenant’s obligations set forth in Section 8.5 of the Lease, Tenant agrees that Landlord may condition its approval of any Change Order on Tenant’s agreement to (i) remove the same upon the expiration or termination of the Lease, (ii) repair any damage to the Premises caused by such removal, and (iii) restore the affected portion of the Premises to its condition existing before the installation thereof. If Tenant’s request for Landlord’s approval of any proposed Change Order contains a request that Landlord identify any portion of such Change Order that Landlord will require Tenant to remove as provided above, then Landlord will, at the time it approves such Change Order, identify such portion of the Change Order, if any, that Landlord will require Tenant to so remove. If Tenant fails to complete the removal, repair or restoration required by this subparagraph (c) before the expiration or earlier termination of the Lease, then, consistent with the provisions of Section 8.5 of the Lease, (1) Landlord may do so and may charge the cost thereof to Tenant, and (2) for purposes of Article 16 of the Lease, Tenant shall be deemed to be in holdover in the Premises without Landlord’s consent until such work is completed.

Exhibit B

3

EXHIBIT B-1

RIO ROBLES TECHNOLOGY CENTRE

APPROVED BLUEARC TENANT IMPROVEMENTS

Exhibit B-1

1

Exhibit B-1

2

EXHIBIT C

RIO ROBLES TECHNOLOGY CENTRE

NOTICE OF LEASE TERM DATES

            , 20    

To:        

Re: Office Lease (the “Lease”) dated July 16, 2009, between CARR NP PROPERTIES, L.L.C., a Delaware limited liability company (“Landlord”), and BLUEARC CORPORATION, a Delaware corporation (“Tenant”), concerning 40-50 Rio Robles Drive, Santa Clara, California.

Lease ID:

Business Unit Number:                                   

Dear                     :

In accordance with the Lease, Tenant accepts possession of the Premises and confirms the following:

1. The Lease Commencement Date is and the Lease Expiration Date is August 31, 2014.

2. The approximate number of rentable square feet within the Premises are 41,772 rentable square feet, subject to Article 1 of the Lease.

3. Tenant’s Share, based upon the approximate number of rentable square feet within the Premises, is 100%, subject to Article 1 of the Lease.

Please acknowledge the foregoing by signing all three (3) counterparts of this letter in the space provided below and returning two (2) fully executed counterparts to my attention. Please note that, pursuant to Article 2 of the Lease, if Tenant fails to execute and return (or reasonably object in writing to) this letter within five (5) days after receiving it, Tenant shall be deemed to have executed and returned it without exception.

“Landlord”:

CARR NP PROPERTIES, L.L.C.,

a Delaware limited liability company

By:                                                                                                  

Name:                                                                                            

Title:                                                                                              

Exhibit C

1

Agreed and Accepted as

of             , 200  .

“Tenant”:

BLUEARC CORPORATION,

a Delaware corporation

By:                                                                                            

Name:                                                                                       

Title:                                                                                         

Exhibit C

2

EXHIBIT D

RIO ROBLES TECHNOLOGY CENTRE

RULES AND REGULATIONS

Tenant shall comply with the following rules and regulations (as reasonably modified or supplemented from time to time, the “Rules and Regulations”). Landlord shall not be responsible to Tenant for the nonperformance of any of the Rules and Regulations by any other tenants or occupants of the Project. In the event of any conflict between the Rules and Regulations and the other provisions of this Lease, the latter shall control. Tenant shall not be required to comply with any new rule or regulation unless the same applies non-discriminatorily to all occupants of the Building, does not unreasonably interfere with Tenant’s use of the Premises or Tenant’s parking rights and does not materially increase the obligations or decrease the rights of Tenant under this Lease.

1. Upon the expiration or earlier termination of the Lease, Tenant shall deliver to Landlord all keys and passes for offices, rooms, parking lot and toilet rooms which shall have been furnished Tenant. If the keys so furnished are lost, Tenant shall pay Landlord therefor.

2. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building and also the times and manner of moving the same in and out of the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property. Any damage to the Building, its contents, occupants or invitees resulting from Tenant’s moving or maintaining any such safe or other heavy property shall be the sole responsibility and expense of Tenant (notwithstanding anything to the contrary in Article 7 or Section 10.5 of the Lease).

3. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord.

4. No sign, advertisement, notice or handbill shall be exhibited, distributed, painted or affixed by Tenant on any part of the Building without Landlord’s prior written consent. Tenant shall not disturb, solicit, peddle or canvass any occupant of the Project.

5. Tenant shall not overload the floor of the Premises, or, except as provided in Article 8 of the Lease, mark, drive nails or screws or drill into the partitions, woodwork or drywall of the Premises, or otherwise deface the Premises, without Landlord’s prior written consent. Tenant shall not purchase bottled water, ice, towel, linen, maintenance or other like services from any person not approved by Landlord.

6. Except for vending machines intended for the sole use of Tenant’s employees and invitees, no vending machine or machines other than fractional horsepower office machines shall be installed, maintained or operated in the Premises without Landlord’s prior written consent.

7. Tenant shall not use or keep any foul or noxious gas or substance in or on the Premises, or occupy or use the Premises in a manner offensive or objectionable to Landlord or other occupants of the Project by reason of noise, odors or vibrations, or interfere with other occupants or those having business

Exhibit D

1

therein, whether by the use of any musical instrument, radio, CD player or otherwise. Tenant shall not throw anything out of doors, windows or skylights or down passageways.

8. Tenant shall not bring into or keep within the Project or the Building any animals (other than service animals), birds, aquariums, or, except in areas designated by Landlord, bicycles or other vehicles.

9. No cooking shall be done in the Premises, nor shall the Premises be used for lodging, for living quarters or sleeping apartments, or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, Underwriters’ laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages for employees and invitees, provided that such use complies with all applicable Laws.

10. The Premises shall not be used for manufacturing or for the storage of merchandise except to the extent such storage may be incidental to the Permitted Use. Tenant shall not occupy the Premises as an office for a messenger-type operation or dispatch office, public stenographer or typist, or for the manufacture or sale of liquor, narcotics or tobacco, or as a medical office, a barber or manicure shop, or an employment bureau, without Landlord’s prior written consent. Tenant shall not engage or pay any employees in the Premises except those actually working for Tenant in the Premises, nor advertise for laborers giving an address at the Premises.

11. Landlord reserves the right to exclude from the Project any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs, or who violates any of these Rules and Regulations.

12. Tenant shall not loiter in or on the Common Areas for the purpose of smoking tobacco products or for any other purpose, nor in any way obstruct such areas, and shall use them only as a means of ingress and egress for the Premises.

13. Tenant shall store all its trash and garbage inside the Premises. No material shall be placed in the trash or garbage receptacles if, under applicable Law, it may not be disposed of in the ordinary and customary manner of disposing of trash and garbage in the vicinity of the Building. All trash, garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes at such times as Landlord shall designate.

14. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

15. Any persons employed by Tenant to do janitorial work shall be subject to Landlord’s prior written approval, and Tenant shall be responsible for all acts of such persons.

16. No awning or other projection shall be attached to the outside walls of the Building without Landlord’s prior written consent. Other than Landlord’s Building-standard window coverings, no curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises. All electrical ceiling fixtures hung in the Premises or spaces along the perimeter of the Building must be fluorescent and/or of a quality, type, design and a warm white bulb color approved in advance in writing by Landlord. Neither the interior nor exterior of any windows shall be coated or otherwise

Exhibit D

2

sunscreened without Landlord’s prior written consent. Tenant shall abide by Landlord’s regulations concerning the opening and closing of window coverings.

17. Tenant shall not obstruct any sashes, sash doors, skylights, windows or doors that reflect or admit light or air into the halls, passageways or other public places in the Building, nor shall Tenant place any bottles, parcels or other articles on the windowsills.

18. Tenant must comply with requests by Landlord concerning the informing of their employees of items of importance to the Landlord.

19. Tenant must comply with the State of California “No-Smoking” law set forth in California Labor Code Section 6404.5 and with any local “No-Smoking” ordinance that may be in effect from time to time and is not superseded by such law.

20. Landlord shall have no obligation to provide guard service or other security measures for the benefit of the Premises or the Project. Tenant assumes all responsibility for the protection of Tenant and its agents, employees, contractors and invitees, and the property thereof, from acts of third parties, including responsibility for keeping doors locked and other means of entry to the Premises closed, whether or not Landlord, at its option, elects to provide security protection for any portion of the Project. Tenant further assumes the risk that any safety or security device, service or program that Landlord elects, in its sole and absolute discretion, to provide may not be effective, or may malfunction or be circumvented by an unauthorized third party, and Tenant shall, in addition to its other insurance obligations under this Lease, obtain its own insurance coverage to the extent Tenant desires protection against losses resulting from such occurrences. Tenant shall cooperate in any reasonable safety or security program developed by Landlord or required by Law.

21. All office equipment of an electrical or mechanical nature shall be placed by Tenant in the Premises in settings approved by Landlord, to absorb or prevent any vibration, noise or annoyance.

22. Tenant shall not use any hand trucks except those equipped with rubber tires and rubber side guards.

23. No auction, liquidation, fire sale, going-out-of-business or bankruptcy sale shall be conducted in the Premises without Landlord’s prior written consent.

Landlord may, from time to time, modify or supplement these Rules and Regulations in a manner that, in Landlord’s reasonable judgment, is appropriate for the management, safety, care and cleanliness of the Premises, the Common Areas and the Project, for the preservation of good order therein, and for the convenience of other occupants and tenants thereof. Landlord may equitably waive any of these Rules and Regulations for the benefit of any particular tenant, but no such waiver shall be construed as a waiver of such Rule and Regulation in favor of any other tenant, nor prevent Landlord from thereafter enforcing such Rule and Regulation against any or all tenants.

Exhibit D

3

EXHIBIT E

RIO ROBLES TECHNOLOGY CENTRE

HAZARDOUS SUBSTANCES DISCLOSURE CERTIFICATE

Your cooperation in this matter is appreciated. Initially, the information provided by you in this Hazardous Substances Disclosure Certificate is necessary for the Landlord to evaluate your proposed uses of the premises (the “Premises”) and to determine whether to enter into a lease agreement with you as tenant. If a lease agreement is signed by you and the Landlord (the “Lease Agreement”), on an annual basis in accordance with the provisions of Section 25.2 of the Lease Agreement, you are to provide an update to the information initially provided by you in this certificate. Any questions regarding this certificate should be directed to, and when completed, the certificate should be delivered to:

Landlord: c/o Equity Office 2655 Campus Drive, Suite 100 San Mateo, CA 94403 Attn: Market Officer Phone: (650) 372-3500

Name of (Prospective) Tenant: Blue Arc

Mailing Address:	50 Rio Robles
	San Jose, CA 95134

Contact Person, Title and Telephone Number(s): Bill Kichan Controller 576-6611

Contact Person for Hazardous Waste Materials Management and Manifests and Telephone Number(s):

Address of (Prospective) Premises:

Length of (Prospective) initial Term:

1. GENERAL INFORMATION:

Describe the proposed operations to take place in, on, or about the Premises, including, without limitation, principal products processed, manufactured or assembled, and services and activities to be provided or otherwise conducted. Existing tenants should describe any proposed changes to on-going operations.

General office and electronic testing

Exhibit E

1

2. USE, STORAGE AND DISPOSAL OF HAZARDOUS SUBSTANCES

2.1 Will any Hazardous Substances (as hereinafter defined) be used, generated, treated, stored or disposed of in, on or about the Premises? Existing tenants should describe any Hazardous Substances which continue to be used, generated, treated, stored or disposed of in, on or about the Premises.

Wastes	Yes ¨	No x
Chemical Products	Yes ¨	No x
Other	Yes ¨	No x
If Yes is marked, please explain:_____________________________________________________

2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous Substances to be used, generated, treated, stored or disposed of in, on or about the Premises, including the applicable hazard class and an estimate of the quantities of such Hazardous Substances to be present on or about the Premises at any given time; estimated annual throughput; the proposed location(s) and method of storage (excluding nominal amounts of ordinary household cleaners and janitorial supplies which are not regulated by any Environmental Laws, as hereinafter defined); and the proposed location(s) and method(s) of treatment or disposal for each Hazardous Substance, including, the estimated frequency, and the proposed contractors or subcontractors. Existing tenants should attach a list setting forth the information requested above and such list should include actual data from on-going operations and the identification of any variations in such information from the prior year’s certificate.

3. STORAGE TANKS AND SUMPS

Is any above or below ground storage or treatment of gasoline, diesel, petroleum, or other Hazardous Substances in tanks or sumps proposed in, on or about the Premises? Existing tenants should describe any such actual or proposed activities.

        Yes  ¨    No  x

If yes, please explain: ________________________________________________________________________________

4. WASTE MANAGEMENT

4.1 Has your company been issued an EPA Hazardous Waste Generator I.D. Number? Existing tenants should describe any additional identification numbers issued since the previous certificate.

Exhibit E

2

Yes  ¨    No   x

4.2 Has your company filed a biennial or quarterly reports as a hazardous waste generator? Existing tenants should describe any new reports filed.

Yes  ¨    No   x

If yes, attach a copy of the most recent report filed.

5. WASTEWATER TREATMENT AND DISCHARGE

5.1 Will your company discharge wastewater or other wastes to:

storm drain?	sewer?
surface water?	X no wastewater or other wastes discharged.
Existing tenants should indicate any actual discharges. If so, describe the nature of any proposed or actual discharge(s).

5.2 Will any such wastewater or waste be treated before discharge?

Yes  ¨    No  x

If yes, describe the type of treatment proposed to be conducted. Existing tenants should describe the actual treatment conducted.

6. AIR DISCHARGES

6.1 Do you plan for any air filtration systems or stacks to be used in your company’s operations in, on or about the Premises that will discharge into the air; and will such air emissions be monitored? Existing tenants should indicate whether or not there are any such air filtration systems or stacks in use in, on or about the Premises which discharge into the air and whether such air emissions are being monitored.

Yes  ¨    No   x

If yes, please describe:

Exhibit E

3

6.2 Do you propose to operate any of the following types of equipment, or any other equipment requiring an air emissions permit? Existing tenants should specify any such equipment being operated in, on or about the Premises.

Spray booth(s)	Incinerator(s)
Dip tank(s)	Other (Please describe)
Drying oven(s)	X No Equipment Requiring Air Permits

If yes, please describe:

6.3 Please describe (and submit copies of with this Hazardous Substances Disclosure Certificate) any reports you have filed in the past thirty-six months with any governmental or quasi-governmental agencies or authorities related to air discharges or clean air requirements and any such reports which have been issued during such period by any such agencies or authorities with respect to you or your business operations.

7. HAZARDOUS SUBSTANCES DISCLOSURES

7.1 Has your company prepared or will it be required to prepare a Hazardous Substances management plan (“Management Plan”) or Hazardous Substances Business Plan and Inventory (“Business Plan”) pursuant to Fire Department or other governmental or regulatory agencies’ requirements? Existing tenants should indicate whether or not a Management Plan is required and has been prepared.

Yes ¨ No x

If yes, attach a copy of the Management Plan or Business Plan. Existing tenants should attach a copy of any required updates to the Management Plan or Business Plan.

7.2 Are any of the Hazardous Substances, and in particular chemicals, proposed to be used in your operations in, on or about the Premises listed or regulated under Proposition 65? Existing tenants should indicate whether or not there are any new Hazardous Substances being so used which are listed or regulated under Proposition 65.

Yes ¨ No x

If yes, please explain:

Exhibit E

4

8. ENFORCEMENT ACTIONS AND COMPLAINTS

8.1 With respect to Hazardous Substances or Environmental Laws, has your company ever been subject to any agency enforcement actions, administrative orders, or consent decrees or has your company received requests for information, notice or demand letters, or any other inquiries regarding its operations? Existing tenants should indicate whether or not any such actions, orders or decrees have been, or are in the process of being, undertaken or if any such requests have been received.

Yes ¨ No x

If yes, describe the actions, orders or decrees and any continuing compliance obligations imposed as a result of these actions, orders or decrees and also describe any requests, notices or demands, and attach a copy of all such documents. Existing tenants should describe and attach a copy of any new actions, orders, decrees, requests, notices or demands not already delivered to Landlord pursuant to the provisions of Section 25.2 of the Lease Agreement.

8.2 Have there ever been, or are there now pending, any lawsuits against your company regarding any environmental or health and safety concerns?

Yes ¨ No x

If yes, describe any such lawsuits and attach copies of the complaint(s), cross-complaint(s), pleadings and other documents related thereto as requested by Landlord. Existing tenants should describe and attach a copy of any new complaint(s), cross-complaint(s), pleadings and other related documents not already delivered to Landlord pursuant to the provisions of Section 30.16 of the Lease Agreement.

8.3 Have there been any problems or complaints from adjacent tenants, owners or other neighbors at your company’s current facility with regard to environmental or health and safety concerns? Existing tenants should indicate whether or not there have been any such problems or complaints from adjacent tenants, owners or other neighbors at, about or near the Premises and the current status of any such problems or complaints.

Yes ¨ No x

If yes, please describe. Existing tenants should describe any such problems or complaints not already disclosed to Landlord under the provisions of the signed Lease Agreement and the current status of any such problems or complaints.

Exhibit E

5

9. PERMITS AND LICENSES

Attach copies of all permits and licenses issued to your company with respect to its proposed operations in, on or about the Premises, including, without limitation, any Hazardous Substances permits, wastewater discharge permits, air emissions permits, and use permits or approvals. Existing tenants should attach copies of any new permits and licenses as well as any renewals of permits or licenses previously issued.

As used herein, “Hazardous Substances” and “Environmental Laws” shall have the meanings given to such terms in the Lease Agreement.

The undersigned hereby acknowledges and agrees that this Hazardous Substances Disclosure Certificate is being delivered to Landlord in connection with the evaluation of a Lease Agreement and, if such Lease Agreement is executed, will be attached thereto as an exhibit. The undersigned further acknowledges and agrees that if such Lease Agreement is executed, this Hazardous Substances Disclosure Certificate will be updated from time to time in accordance with Section 25.2 of the Lease Agreement. The undersigned further acknowledges and agrees that the Landlord and its partners, lenders and representatives may rely upon the statements, representations, warranties, and certifications made herein and the truthfulness thereof in entering into the Lease Agreement and the continuance thereof throughout the term, and any renewals thereof, of the Lease Agreement.

Tenant hereby certifies, represents and warrants that the information contained in this certificate is true and correct.

(PROSPECTIVE) TENANT:
By:	/s/ Rick Martig

Title: CFO

Exhibit E

6

EX-10.12

Exhibit 10.12

18 October 2000

THE SCOTTISH PROVIDENT INSTITUTION

SYNAXIA NETWORKS LIMITED

LEASE

of premises at

Queensgate House Waterside Park

Bracknell Berkshire

We hereby certify this to be a true copy of the original.

FRESHFIELDS BRUCKHAUS DERINGER

Contents

Clause	Page
INTERPRETATION		1
Definitions		1
Construction		4
DEMISE AND RENTS		5
RENT REVIEW		6
TENANT’S COVENANTS		6
LANDLORD’S COVENANTS		6
PROVISOS		6
RECORD OF WHETHER A NEW TENANCY		7
THE FIRST SCHEDULE		7
Part I The Estate		7
Part II The Demised Premises		7
Part III Rights granted		7
Services		7
THE THIRD SCHEDULE		10
Tenant’s Covenants		10
Pay rents		10
Insurance		10
Pay outgoings		10
Repair		11
Decoration maintenance and cleaning		12
Yield up		12
Permit entry for Landlord and others		13
Remedy wants of repair and entry for Landlord on default		14
Letting and dealing boards		14
Notices		14
Statutory requirements		15
Alterations		16
Signs		18
Dangerous and deleterious substances		18
Fire precautions		18
Securing unoccupied premises		19
Loading		19
Use		19

Insurers’ requirements	19
Notify damage by Insured Risks	20
Prevent encroachments	20
Alienation	20
Underletting	22
Register devolutions	25
Compensation	25
Defective premises	26
Indemnify Landlord	26
Costs	26
Value Added Tax	27
Comply with title matters	27
Notify matters affecting Guarantor’s covenants	27
Use of common areas	28
Refuse regulation	28
Regulations	28
THE FOURTH SCHEDULE	28
Landlord’s Covenants	28
Quiet enjoyment	28
Insurance	28
Repair of Services	29
Repair of Estate Road	29
Repair of Landscaped Areas and Car Parks	30
THE FIFTH SCHEDULE	30
Provisos Agreements and Declarations	30
Forfeiture	30
Notices	31
Determination on destruction	32
Landlord to have insurance moneys on frustration	32
Double insurances	32
Interest on unpaid rents and other moneys	32
Non-acquisition of easements	33
Refusal of rent when breach exists	33
Tenant’s covenants fully enforceable	33
Warranty disclaimer	33
Exclusion of liability	33
Enforcement of Landlord’s covenants	34
Compensation exclusion	34
Common areas	34
Modification of Regulations	34
Disputes with Adjoining Owners	35
Requirement for Notice of Want of Repair	35
Severability	35
Governing Law and Jurisdiction	35

-2-

Contracts (Rights of Third Parties) Act 1999	35
THE SIXTH SCHEDULE	36
Regulations	36

-3-

THIS LEASE is made on 18^th October 2000

BETWEEN

THE SCOTTISH PROVIDENT INSTITUTION whose head office is at P.O. Box 58 6 St. Andrew Square Edinburgh EH2 2YA (the Landlord);

SYNAXIA NETWORKS LIMITED (registered number 3516646) whose registered office is at 6 Saint Andrew Street London EC4A 3LX (the Tenant).

NOW THIS DEED WITNESSES as follows:

INTERPRETATION

Definitions

1.1 In this Lease unless the context otherwise requires the following expressions shall have the following meanings:

Authorised Guarantee Agreement means an authorised guarantee agreement with respect to the performance by an assignee of the tenant’s covenants in this Lease to be entered into by the Tenant pursuant to paragraph 22.6 of the Third Schedule such agreement to be in accordance with the provisions of section 16 of the Landlord and Tenant (Covenants) Act 1995 and subject thereto to be in such terms as the Landlord may reasonably require;

Base Rate means the base rate of Bank of Scotland from time to time ruling or if the same shall become incapable of determination such reasonable rate of interest as the Landlord may from time to time specify in substitution therefor;

Basic Rent means the clear yearly rent of Three hundred and thirty two thousand and five hundred pounds (£332,500) as increased from time to time pursuant to the Second Schedule;

COM Regulations means the Construction (Design and Management) Regulations 1994;

Car Parks means the areas shown coloured pink on the Plan;

Conducting Media means sewers drains gutters rain water pipes watercourses telecommunications water gas electric mains and other pipes wires cables ducts and any other conducting media of whatsoever nature;

Demised Premises means the land and premises more particularly described in Part I of the First Schedule and any part thereof together with all buildings now or hereafter erected thereon all Conducting Media and Plant in through over under or upon the said premises all additions alterations and improvements thereto and all fixtures and fittings therein (other than tenant’s and trade fixtures and fittings);

Estate means the land and buildings more particularly described in Part I of the First Schedule of which the Demised Premises form part or such premises of greater or lesser extent as the Landlord may from time to time notify to the Tenant;

Estate Road means the road and pavements shown coloured yellow on the Plan;

Insured Risks means the risks of fire storm tempest flood lightning explosion and in peacetime aircraft and articles dropped therefrom riot civil commotion malicious damage terrorism impact plant and machinery cover overflowing of tanks and bursting of pipes (except always such risks as cannot reasonably be insured on satisfactory terms or at a reasonable premium or as the insurers or underwriters have refused to insure) and such other risks as the Landlord shall from time to time insure (subject in all cases to any excesses exclusions and limitations imposed by the insurers or underwriters);

Landlord includes the estate owner for the time being of the reversion immediately expectant on the Termination of the Term;

Landlord’s Surveyor means any firm or person (including a chartered surveyor employed by the Landlord but not the Surveyor) appointed by or acting for the Landlord to perform the function of a surveyor for any purpose under this Lease;

Landscaped Areas means the areas shown coloured green on the Plan;

this Lease means this Lease any licence or consent granted pursuant hereto and any variation hereof and any deed or instrument made supplemental hereto;

Open Market Rent means the dear yearly rent at which the Demised Premises might reasonably be expected to be let at the Relevant Review Date as a whole or (if the Demised Premises are then sub-let in part or parts for a period of five years after such Relevant Review Date and the aggregate rental value of such parts (together with any parts which are not sub-let) is greater than the rental value of the Demised Premises as a whole) in the several parts in which the Demised Premises are then divided by a willing landlord to a willing tenant in the open market with vacant possession and without fine or premium for a term equal to the contractual term granted by this Lease but commencing on the Relevant Review Date at the rate applicable after the expiry of any rent free or reduced rent period and/or after the giving of any other inducement of such length or of such amount or nature as would be negotiated in the open market between the willing landlord and the willing tenant to enable the willing tenant to fit out assuming (if not a fact) that:

(a) the Demised Premises and all rights appurtenant thereto and all buildings comprised therein are then in existence and if damaged or destroyed are fully restored and reinstated and any rent cesser or rent abatement in accordance with this Lease does not apply;

(b) the willing tenant has received the benefit of such rent free or reduced rent period or other inducement to enable the willing tenant to fit out;

(c) the Demised Premises enjoy all rights and services necessary for the beneficial use thereof;

-2-

(d) all the covenants stipulations and conditions contained in this Lease on the part of the Tenant have been duly and fully performed observed and complied with;

(e) no work has been carried out to the Demised Premises during the Term or during any period of occupation by the Tenant or any undertenant or their respective predecessors in title prior to the date of this Lease which would diminish the letting value thereof;

(f) the willing tenant is with others in the open market for the Demised Premises;

(g) (notwithstanding any act omission or default of the Tenant or other circumstance) the Demised Premises are fit and ready for immediate occupation and use and can lawfully be used for any use permitted by this Lease;

and on a lease which shall otherwise contain the same terms and provisions in all respects as this Lease (other than the amount of the Basic Rent but including the provisions for review of the Basic Rent herein contained on the basis that such review will take place at five yearly intervals) there being disregarded any effect on rent of:

(A) the fact that the Tenant or any lawful sub-tenant or occupier or their respective predecessors in title has been in occupation of the Demised Premises;

(B) any goodwill attached to the Demised Premises by reason of the carrying on thereat of the business of the Tenant or any lawful sub-tenant or occupier or their respective predecessors in such business;

(C) any improvement lawfully carried out by the Tenant or any lawful sub-tenant or occupier at its own expense with the Landlord’s written consent (where required) otherwise than in pursuance of an obligation to the Landlord or its predecessors in title;

(D) all Statutory Rent Restrictions;

Perpetuity Period means the period beginning on the date hereof and expiring on the sooner of eighty years from the date hereof and the Termination of the Term;

Plan means the plan or plans annexed hereto;

Planning Acts means the Town and Country Planning Act 1990 the Planning (Listed Buildings and Conservation Areas) Act 1990 the Planning (Hazardous Substances) Act 1990 the Planning (Consequential Provisions) Act 1990 the Plan and Compensation Act 1991 the Local Government Planning and Land Act 1980 the Local Government (Miscellaneous Provisions) Act 1982 the Housing and Planning Act 1986 and any act for the time being in force of a similar nature or any laws and regulations intended to control or regulate the construction demolition alteration or change of use of land or buildings or to preserve or protect the environment or the national heritage;

Plant means plant equipment machinery apparatus and installations;

-3-

Prescribed Rate means four per centum per annum above Base Rate compounded with rests on the Rent Days such rate to apply as well after as before any judgment;

Regulations means the regulations set out in the Sixth Schedule and any variations or additions thereto from time to time notified in writing to the Tenant and made by or on behalf of the Landlord for the proper management care or security of the Estate or the comfort safety or convenience of occupants thereof or persons resorting thereto;

Rent Days mean 25 March 24 June 29 September and 25 December in each year and Relevant Rent Day shall be construed accordingly;

Review Date means 19 October 2005 and each successive fifth anniversary of such date during the Term and Relevant Review Date shall be construed accordingly;

Review Period means the period between a Review Date and the next succeeding Review Date or the Termination of the Term (as the case may be) and Relevant Review Period shall be construed accordingly;

Statutory Rent Restrictions means restrictions imposed by any Act of Parliament which operate to impose any limitation whether in time or amount on the review of the Basic Rent and/or the collection of an increase in the Basic Rent;

Surveyor means an independent chartered surveyor of recognised standing experienced in the valuation and letting of premises so far as practicable of similar character or comparable to the Demised Premises in the locality thereof or if there are no such premises locally then in the same region as the Demised Premises or nationally (as the case may require);

Tenant includes its successors in title and assigns and in the case of an individual his personal representatives;

Term means the term hereby granted and shall include any extension holding over or continuation thereof whether by statute agreement or otherwise;

Termination of the Term means the determination of the Term whether by effluxion of time re-entry surrender or otherwise;

Value Added Tax means Value Added Tax and any other tax replacing or supplementing the same from time to time.

Construction

1.2 This Lease shall unless the context otherwise requires be construed on the basis that:

(a) where the Tenant for the time being or any guarantor of this Lease comprises more than one person covenants and obligations assumed by the Tenant or any such guarantor (as the case may be) shall be construed as made by all such persons jointly and severally;

-4-

(b) the Term shall be deemed to commence for all purposes on the date of commencement specified in clause 2;

(c) references (whether specific or general) to any Act of Parliament order instrument regulation directive direction or plan shall be deemed also to refer to any statutory or other modification or re-enactment thereof from time to time in force and to include any requirement having the force of law in the United Kingdom and any subordinate legislation order instrument regulation direction or plan from time to time in force made or issued thereunder or deriving validity therefrom or from any enactment repealed thereby or under any such modification or re-enactment;

(d) any rights easements and privileges reserved to the Landlord under this Lease and the benefit of all other provisions which may be exercised under this Lease by the Landlord shall also be for the benefit of and be exercisable by any superior landlord for the time being and any mortgagee of the Landlord and any provision requiring the consent or approval of the Landlord shall be construed as being deemed to require also the consent or approval of any superior landlord or mortgagee where necessary and any indemnity given to the Landlord shall be deemed to extend to any superior landlord or mortgagee;

(e) any covenant on the part of the Tenant not to do any act or thing shall include an obligation on the part of the Tenant not to permit or suffer such act or thing;

(f) words denoting one gender include the other genders and words denoting persons include firms and corporations and vice versa;

(g) clause and paragraph headings shall not affect the interpretation of this Lease;

(h) the words including and include shall be deemed to be followed by the words without limitation.

DEMISE AND RENTS

2. In consideration of the rents hereby reserved and the covenants on the part of the Tenant and the conditions hereinafter contained the Landlord HEREBY DEMISES unto the Tenant the Demised Premises TOGETHER WITH (but to the exclusion of all others) so far as the Landlord is able to grant the same the rights set out in Part III of the First Schedule EXCEPTING AND RESERVING unto the Landlord and to all other persons from time to time entitled thereto the rights set out in Part IV of the First Schedule TO HOLD the same unto the Tenant SUBJECT to all rights of light and air and all covenants easements rights and privileges (if any) affecting the Demised Premises including the rights covenants and other matters more particularly contained or referred to in the Property and Charges Registers of title BK219351 and in the documents short particulars whereof are set out in Part V of the First Schedule for a term of fifteen years commencing on 19 October 2000 YIELDING AND PAYING therefor unto the Landlord without deduction set-off or counterclaim (except such as the Tenant may be required by law to deduct notwithstanding any stipulation to the contrary):

2.1 Basic Rent: yearly during the Term and so in proportion for any period less than a year the Basic Rent which shall be paid whether or not demanded in advance by equal

-5-

quarterly payments on each of the Rent Days except the first payment which shall be made on the 25 March 2001 in respect of the period from and including 1 June 2001 to (but excluding) the next following Rent Day;

2.2 Road Rent: by way of further rent within 14 days of demand a due and fair proportion (to be conclusively determined by the Landlord’s Surveyor) of (i) all sums incurred by the Landlord (whether by way of payment or incurred as a contribution) including any Value Added Tax or other similar tax thereon so far as the same is irrecoverable by the Landlord or the person to whom the contribution is payable in the repair maintenance cleansing and when necessary resurfacing rebuilding and renewal (but not improvement) of the Estate Road and (ii) all administrative charges and managing agents’ fees reasonably and properly incurred by the Landlord as aforesaid in connection therewith;

2.3 Landscape Areas and Car Parks Rent: By way of further rent within 14 days of demand an amount equal to all sums incurred by the Landlord including Value Added Tax or other similar tax thereon so far as the same is irrecoverable by the Landlord in the repair maintenance cleansing marking out and (when necessary) resurfacing rebuilding renewal and replacing of the Landscaped Areas and Car Parks together with all administrative charges and managing agents’ fees incurred by the Landlord in connection therewith;

2.4 Insurance Rent: by way of further rent within 14 days of demand an amount equal to the cost of insurance incurred from time to time in respect of the Demised Premises and the other items referred to in paragraph 1.2 of the Third Schedule;

2.5 Further Rent: by way of further rent all interest and other amounts payable under and at the times set out in this Lease;

2.6 Value Added Tax: the Value Added Tax which is or may be chargeable (by reason of an election of the Landlord or otherwise) in respect of the rents reserved by this Lease.

RENT REVIEW

3. The Basic Rent shall be reviewed and (if appropriate) increased at the times and in the manner set out in the Second Schedule.

TENANT’S COVENANTS

4. The Tenant covenants with the Landlord in the manner set out in the Third Schedule.

LANDLORD’S COVENANTS

5. The Landlord covenants with the Tenant in the manner set out in the Fourth Schedule.

PROVISOS

6. It is agreed and declared in the manner set out in the Fifth Schedule.

-6-

RECORD OF WHETHER A NEW TENANCY

7. It is hereby recorded that the tenancy created by this Lease is a new tenancy within the meaning of section 1(3) of the Landlord and Tenant (Covenants) Act 1995.

DULY DELIVERED AS A DEED on the date inserted on page 1

THE FIRST SCHEDULE

Part I

The Estate

ALL THAT piece or parcel of land at the north west side of Longshot Lane Bracknell in the County of Berkshire known as Waterside Park as the same is registered at H.M. Land Registry with absolute title under title number BK 219351 and is shown for identification edged in blue on the Plan.

Part II

The Demised Premises

The land situated at Waterside Park Bracknell Berkshire forming part of the Estate and known as Queensgate House for the purpose of identification only shown edged red on the Plan.

Part III

Rights granted

The following rights (in common with the Landlord and all others now or hereafter entitled to the like rights) and subject to compliance with the Regulations:

Access Ways

1. Ingress to and egress from the Demised Premises and the Car Parks at all times with or without vehicles over and along the Estate Road and over and along the Car Parks for ingress to and egress from the parking spaces within the Car Parks and to make deliveries to the Demised Premises.

Part IV Documents referred to in clause 2 [remainder illegible].

Services

2. To use all drains sewers channels and watercourses and water gas and electric conduits mains pipes wires and cables or other conducting media and all or any other services now or hereafter during the Perpetuity Period provided for the Demised Premises and laid in under or over the Estate or in under or over any other property across which the Landlord shall have rights to carry the same for the passage of surface water and sewage from and water gas electricity and other services to and from the Demised Premises.

-7-

(a) the Surveyor shall be appointed by the Landlord and the Tenant or in default of agreement on such appointment by the President (or other the acting Chief Officer) for the time being of the Royal Institution of Chartered Surveyors on the written application of the Landlord or the Tenant;

(b) the Surveyor shall invite the Landlord and the Tenant to submit to him within such time limits as he shall consider appropriate such written representations and cross representations as to the amount of the Open Market Rent with such supporting evidence as they may respectively wish;

(c) the Surveyor will within two months after his appointment or within such extended period as the parties shall agree (acting reasonably) give to the Landlord and the Tenant written notice of the amount of the Open Market Rent as determined by him and his determination shall be final and binding on the parties to this Lease;

(d) if the Surveyor shall not have given notice of his determination within the period and in manner aforesaid or if for any reason it becomes apparent that he will be unable to do so within such period the Landlord and the Tenant may agree upon or either of them (having first informed the other in writing) may apply for a new Surveyor to be appointed in his place (which procedure may be repeated as many times as may be necessary) provided always that any such determination given by the Surveyor outside such time limit but prior to the appointment of a new Surveyor shall be valid and effective but if given thereafter shall be null and void;

(e) the Surveyor’s fees or charges (including the costs of his appointment) shall be borne between the Landlord and the Tenant in such proportions as the Surveyor shall determine or in the event that no determination is made equally between the Landlord and the Tenant.

3. In the case of determination by the Surveyor acting as an arbitrator the following provisions shall have effect:

(a) the Surveyor shall be appointed by the Landlord and the Tenant or in default of agreement on such appointment by the President (or other the acting Chief Officer) for the time being of the Royal Institution of Chartered Surveyors on the written application of the Landlord or the Tenant;

(b) the arbitration shall be conducted in accordance with the Arbitration Act 1996.

4. If the Open Market Rent has not been ascertained (by agreement or determination) by any Relevant Review Date the Tenant shall pay to the Landlord until the date when the Open Market Rent has been ascertained as aforesaid the Basic Rent at the yearly rate payable for the period immediately preceding the Relevant Review Date and upon the amount of the Basic Rent actually payable from the Relevant Review Date being ascertained the Tenant shall forthwith pay to the Landlord in respect of the period commencing on the Relevant Review Date and ending on the Relevant Rent Day immediately following such ascertainment the amount by which the Open

-8-

Market Rent for such period exceeds the Basic Rent at the rate previously payable together with interest thereon at the Base Rate for the period commencing on the Relevant Review Date (or the Relevant Rent Day upon which the relevant proportion of the same would have become due had the Open Market Rent been ascertained before the Relevant Review Date) and ending on the date of payment.

5. Throughout any period during the Term that Statutory Rent Restrictions shall apply to prevent or prohibit either wholly or partially:

(a) the operation of the above provisions for review of the Basic Rent then the Relevant Review Date or Dates shall be postponed to take effect on the earliest date or dates thereafter upon which such review may occur and if there shall be a partial relaxation of the Statutory Rent Restrictions there shall be a further review of the Basic Rent on the earliest date thereafter as aforesaid notwithstanding that the Basic Rent may have been increased partially on or since the original Relevant Review Date;

(b) the collection of any increase in the Basic Rent or any instalment or part thereof by the Landlord or the retention thereof at any time after collection then the collection of any increase or increases in the Basic Rent shall be postponed to take effect on the earliest date or dates thereafter that such increase or increases may be collected and/or retained in whole or in part and on as many occasions as shall be required to ensure the collection of the whole increase;

and until the Statutory Rent Restrictions shall be removed the Basic Rent shall be the maximum sum from time to time permitted by the Statutory Rent Restrictions.

6. On each occasion that the Open Market Rent is ascertained pursuant to this Schedule the Landlord and the Tenant shall complete a memorandum of the yearly amount of the Basic Rent payable under this Lease for the Relevant Review Period (the form of which memorandum is endorsed on this Lease and the counterpart) and such memorandum shall be signed by or on behalf of the Landlord and Tenant respectively.

7. For the avoidance of doubt it is declared that:

(a) the Basic Rent payable for any Review Period shall not be less than the amount of the Basic Rent payable (or which but for Statutory Rent Restrictions or any rent cesser or rent abatement in accordance with this Lease would have been payable) for the period immediately preceding the commencement of such Review Period;

(b) any agreement between or other memorandum in writing signed by or on behalf of the Landlord and the Tenant as to the amount of the Open Market Rent as at any Review Date or the amount of the Basic Rent payable during any Review Period shall be valid and binding on the parties to this Lease notwithstanding the appointment of the Surveyor or any application for his appointment or the failure in any manner to adhere to the foregoing procedures methods or timetables for review of the Basic Rent or determination of the Open Market Rent.

-9-

THE THIRD SCHEDULE

Tenant’s Covenants

Pay rents

1.1 To pay to the Landlord the Basic Rent and other rents payable under this Lease at the times and in the manner as provided in this Lease without any deduction set-off or counterclaim except as aforesaid the Basic Rent and any Value Added Tax to be paid by means of a banker’s standing order or by such other method as the Landlord may reasonably require.

Insurance

1.2 To pay to the Landlord within 14 days of demand an amount equal to:

(a) the cost incurred by the Landlord from time to time (without deduction of any agency or other commission paid or allowed to the Landlord which the Landlord shall be entitled to retain) of insuring:

(i) the Demised Premises in accordance with the provisions of paragraph 2.1 of the Fourth Schedule;

(ii) loss of any rent reserved by this Lease; and

(iii) against property owner’s third party and public liabilities of the Landlord or relating to the Demised Premises including those arising under the Defective Premises Act 1972;

(b) the cost incurred by the Landlord of obtaining from time to time a professional valuation of the Demised Premises for insurance purposes and of settling any insurance claims provided that such valuations are carried out no more than once in any period of three years;

(c) any applicable excess under any insurance policy effected by the Landlord for the purpose of this Lease in the event of any damage to or destruction of the Demised Premises by any of the Insured Risks;

(d) the cost of insuring any fixtures or fittings installed by the Tenant which have become part of the Demised Premises or any alterations to the Demised Premises of which the Tenant has given the Landlord written notice and which the Landlord has agreed to insure.

Pay outgoings

2.1 To pay and discharge all existing and future rates taxes duties charges assessments impositions and outgoings whatsoever (whether parliamentary parochial local or of any other description) which are now or may at any time hereafter be assessed charged levied or imposed or payable (a) in respect of the Demised Premises or (b) on or by any estate owner landlord tenant or occupier in aspect thereof (except (subject to paragraphs 27.4 and 28.1 of this Schedule) any tax payable by the Landlord as a direct result of the ownership of or a dealing by the Landlord with its reversionary interest in the Demised Premises or the receipt by the Landlord of the Basic Rent).

-10-

2.2 To pay for all gas electricity and water consumed or used on or for the Demised Premises and all standing charges and charges for meters and installation hire and maintenance in respect thereof and to observe all regulations and requirements of the relevant supply authorities and to pay for all telephone and other communication systems serving the Demised Premises.

2.3 If the Demised Premises shall at any time during the Term be unoccupied for any period during which the Tenant or any other person shall be entitled to claim or take the benefit of any relief from the payment of general rates or other outgoings and in consequence the amount of any claim to or benefit of similar relief which would otherwise be available to the Landlord in respect of any period following the Termination of the Term if the Demised Premises were vacant shall or may be reduced or lost to pay to the Landlord on demand in respect of such period an amount equal to the whole amount of the value to the Landlord of the claim or benefit which is not available to the Landlord and which would otherwise have been available to the Landlord in respect of the Demised Premises had the same been fully occupied throughout the Term and left unoccupied thereafter (no account being taken of any period of actual occupation by any person after the Termination of the Term).

2.4 To pay on demand a fair proportion of the costs and expenses of making repairing maintaining rebuilding renewing replacing lighting insuring connecting and cleansing all Conducting Media boundary walls fences party walls structures roads pavements open areas and other conveniences which shall at any time belong to or be used for the Demised Premises in common with other premises near or adjoining thereto the amount due in case of dispute to be assessed by the Landlord’s Surveyor whose decision shall be final and binding on all parties except in the case of manifest error.

2.5 Not to agree or by default allow to be fixed the rateable value of the Demised Premises or any part thereof without the prior written consent of the Landlord such consent not to be unreasonably withheld and to co-operate with the Landlord in any negotiations with the District Valuer or any appeal to the Court or to the Lands Tribunal in respect of the rateable value of the Demised Premises.

Repair

3. To keep in good and substantial repair and condition and as necessary in whole or in part rebuild replace and renew and keep clean and properly maintained the Demised Premises (including the exterior and structure) and to replace from time to time all landlord’s fixtures fittings and appurtenances in the Demised Premises which may be or become beyond repair at any time during the Term or at the Termination of the Term provided that there shall be excepted damage by any of the Insured Risks to the extent that the insurance of the Demised Premises effected by the Landlord has not been vitiated or prejudiced or payment of the insurance moneys refused in whole or in part as a consequence of any act or default of the Tenant or any undertenant or their respective servants agents licensees or invitees.

-11-

Decoration maintenance and cleaning

4.1 As and whenever necessary and in any event as to the exterior of the Demised Premises in every third year of the Term and as to the interior at intervals of not more than five years but not so as to require redecoration in the penultimate year of the Term and also as to both interior and exterior during the last year prior to or at the Termination of the Term to have prepared and painted those parts of the Demised Premises usually painted with two coats at least of good quality paint and otherwise to have professionally treated or decorated all other parts of the Demised Premises requiring treatment for preservation and protection.

4.2 To carry out such painting decoration or other treatment in a proper and workmanlike manner to the reasonable satisfaction of the Landlord and in accordance with such reasonable directions in regard thereto as may from time to time be communicated to the Tenant by or on behalf of the Landlord and during the last year prior to or at the Termination of the Term in colours tints and materials previously approved in writing by the Landlord.

4.3 Forthwith to replace all broken or damaged glass in the Demised Premises with glass of the same colour tint and specification.

4.4 To clean all windows (externally and internally) and window frames and other glass comprised in the Demised Premises as often as necessary but at least once in every month.

4.5 To procure that all electrical and mechanical Plant is properly and regularly serviced and maintained by qualified persons approved in writing by the Landlord such approval not to be unreasonably withheld.

4.6 To repair maintain and renew when necessary all Car Park lights.

Yield up

5. To yield up the Demised Premises unto the Landlord at the Termination of the Term so painted treated repaired rebuilt cleansed maintained amended and kept as aforesaid and otherwise as shall be in accordance with the covenants and conditions contained in or imposed by virtue of this Lease and the keys and all fixtures (other than tenant’s and trade fixtures) of every kind in or upon the Demised Premises or which during the Term may be affixed or fastened to or upon the same and prior to the Termination of the Term to the reasonable satisfaction of the Landlord:

5.1 in case any of the said fixtures shall be missing damaged destroyed or beyond repair forthwith to replace them with others of a similar or more modern character and of no less value; and

5.2 unless released from compliance by written notice given by the Landlord prior to the Termination of the Term to remove from the Demised Premises all tenant’s and trade fixtures and fittings and furniture and effects and signage and if any alterations have been made to the Demised Premises (whether during the Term or during any period of occupation by the Tenant or any undertenant or their respective predecessors in title prior to the date of this Lease) to reinstate the Demised Premises to the condition in which the same were prior to the making of such alterations;

-12-

5.3 to make good any damage caused to the Demised Premises by any such reinstatement or removal or the removal of any fixtures fittings furniture or effects; and

5.4 unless the same shall have been replaced in the preceding two years and shall be in a reasonable condition at the Termination of the Term to replace the floor coverings laid in the office accommodation forming part of the Demised Premises with new floor coverings of the design style material and quality as are fitted at the date hereof or as maybe otherwise approved in writing by the Landlord;

provided that if the Tenant shall fail to leave the Demised Premises in all respects in the state and condition in which the same should be left the Tenant shall in addition to the proper costs of remedying the same pay to the Landlord by way of liquidated damages a sum equal to the proportion of the rents reserved by this Lease at the rates applicable immediately prior to the Termination of the Term payable for the period from the Termination of the Term to the date on which the same shall or should have been remedied the Landlord acting reasonably and expeditiously.

Permit entry for Landlord and others

6. To permit the Landlord and others authorised by it with all necessary equipment at all times in case of emergency and otherwise at any reasonable times or reasonable prior notice without interruption or interference to enter upon the Demised Premises for such period as shall be necessary:

6.1 to examine the Demised Premises to ensure that nothing has been done or omitted which constitutes or may be a breach or non-performance of any of the covenants contained in this Lease;

6.2 to take schedules or inventories of the items to be yielded up at the Termination of the Term;

6.3 to exercise any rights excepted and reserved to the Landlord and for any other purpose connected with the interest of the Landlord in the Demised Premises or the disposal or charge thereof;

6.4 to enable the Landlord to comply with any of its covenants;

6.5 to inspect and measure the Demised Premises and for all purposes connected with any intended or pending step under the provisions of Part II of the Landlord and Tenant Act 1954 or the review of the Basic Rent hereunder;

6.6 to inspect and execute repairs additions or alterations to or upon or maintain the Estate and any adjoining or neighbouring premises;

-13-

6.7 to inspect maintain cleanse repair alter test renew replace lay and make connections to the Conducting Media;

the person exercising such rights making good to the Tenant all physical damage to the Demised Premises thereby occasioned.

Remedy wants of repair and entry for Landlord on default

7.1 Forthwith to commence and diligently proceed to remedy repair and make good all breaches of covenant wants of repair and of decoration and defects of which notice shall be given by the Landlord to the Tenant and which the Tenant shall be liable to remedy repair or make good and if the Tenant shall so fail to remedy repair and make good the matters prescribed in such notice within a reasonable period to permit the Landlord and all persons authorised by the Landlord with or without equipment to enter into and stay upon the Demised Premises and remedy repair and make good the same at the expense of the Tenant (but so that any other right or remedy of the Landlord under this Lease shall not thereby be prejudiced) and to pay on demand the costs and expenses thereof together with interest thereon at the Prescribed Rate from the respective dates of demand by the Landlord to the date of reimbursement which amounts shall be a debt due from the Tenant to the Landlord and recoverable at the option of the Landlord by action or as rent in arrear.

7.2 To pay to the Landlord on demand all costs and expenses incurred by the Landlord after the Termination of the Term in repairing restoring painting or otherwise treating the Demised Premises so as to put them into the state and condition required by the Tenant’s covenants together with interest thereon at the Prescribed Rate from the respective dates of demand by the Landlord to the date of reimbursement.

Letting and dealing boards

8. To permit the Landlord and its servants and agents to enter upon the Demised Premises and affix and retain without interference in a conspicuous position (but not so as adversely to interfere with the access of light and air to or the use and enjoyment of the Demised Premises in any material respect) notices for re-letting the same (if there is a possibility of the Term being determined) at any time during the last six months of the Term or selling the Landlord’s interest in the Demised Premises at any time during the Term and to permit all persons with written authority from the Landlord or the Landlord’s agents at reasonable times of the day and following reasonable notice to enter and view the Demised Premises without interruption.

Notices

9.1 Immediately on becoming aware of the same by the Tenant of any notice or communication from a competent authority affecting the Demised Premises or their to give to the Landlord a copy thereof and in any event when the Tenant first becomes aware of the service of such notice or of any circumstances likely to lead to service of such a notice to give to the Landlord full particulars of such notice or circumstances and to make or join in making such objection or representation against in respect of the same as the Landlord may reasonably require.

-14-

Statutory requirements

10.1 At the expense of the Tenant to comply with all present and future Acts of Parliament relating to the Demised Premises or their use or the employment of persons therein and to obtain the Landlord’s approval (such approval not to be unreasonably withheld) for and execute at the Tenant’s own expense any work required to be carried out in or to the Demised Premises whether such work is required to be carried out by the owner or the occupier or any other person.

10.2 Not at any time to do or omit on or about the Demised Premises any act or thing by reason of which the Landlord may under any such Acts incur or have imposed upon it or become liable to pay any levy penalty damages compensation costs charges or expenses.

10.3 To obtain all licences permissions and consents and to execute and do all works and things and to bear and pay all expenses required or imposed by any such Acts in respect of any works carried out by the Tenant on the Demised Premises or of any user thereof or of the employment of any persons therein.

Planning

11.1 At the expense of the Tenant to comply with the provisions and requirements of the Planning Acts and all licences consents permissions and conditions now or hereafter existing granted or imposed thereunder or under any enactment repealed thereby so far as the same are implemented and relate to or affect the Demised Premises or any operations works acts or things now or hereafter carried out executed done or omitted thereon or the use thereof for any purpose.

11.2 So often as necessary at the expense of the Tenant to obtain from the Local Planning Authority or other competent authority all licences consents and permissions required under the Planning Acts for any works to or operations on the Demised Premises or the institution or continuance of any use thereof but so that the Tenant shall not make any application for planning permission without the previous written consent of the Landlord such consent not to be unreasonably withheld or delayed in the case of alterations or a change of use permitted by this Lease or in respect of which the Landlord’s consent is not to be unreasonably withheld.

11.3 Notwithstanding any consent which may be granted by the Landlord not to carry out any works or any alteration or addition to the Demised Premises or any change of use thereof (for which a planning permission needs to be obtained) before a planning permission therefor has been produced to and approved by the Landlord (such approval not to be unreasonably withheld or delayed in the case of alterations or a change of use permitted by this Lease or in respect of which the Landlord’s consent is not to be unreasonably withheld) provided that the Landlord may refuse to express its approval on the grounds that the period thereof or anything contained therein or omitted therefrom in the reasonable opinion of the Landlord would be or be likely to be (whether during the Term or following the Termination of the Term prejudicial to the Landlord’s interest in the Demised Premises or any adjoining or neighbouring land and property belonging to the Landlord.

11.4 Unless the Landlord shall otherwise direct to carry out before the Termination of the Term any works stipulated to be carried out to the Demised Premises by a date subsequent to

-15-

the Termination of the Term as a condition of any planning permission which may have been granted during the Term to or implemented by the Tenant, or any person deriving title under or through the Tenant before or during the Term.

11.5 In any case where permission for any development has been granted subject to conditions the Landlord shall be entitled as a condition of giving its consent to the permitted development to require the Tenant to provide security to the Landlord satisfactory to the Landlord for the compliance with such conditions and the development shall not be commenced or the use instituted until such security shall have been provided to the satisfaction of the Landlord.

11.6 Not to do any thing on or with reference to the Demised Premises which may be grounds for or cause or lead to the compulsory acquisition thereof.

11.7 Not to serve any purchase notice under the Planning Acts requiring any authority to purchase the interest of the Tenant in the Demised Premises.

11.8 To produce on demand to the Landlord or as directed by it to any third party all such plans documents and other evidence as the Landlord may reasonably require in order to satisfy itself that the provisions of the covenants contained in paragraphs 10 and 11 of this Schedule have been complied with.

Alterations

12.1 Not to make any alterations or additions in or to the Demised Premises except (with the prior written consent of the Landlord which shall not be unreasonably withheld):

(a) internal non-structural alterations or additions not involving any cutting maiming altering or injuring the Demised Premises; and

(b) alterations required to comply with the provisions of paragraphs 10 and 11 of this Schedule;

provided that it may be a condition of any such consent that the Tenant shall enter into such covenants with the Landlord with regard to the execution and reinstatement of the works in such form as the Landlord may reasonably require.

12.2 Not to remove any fixtures (of whatever kind) and fittings comprised in the Demised Premises except the Tenant’s trade fittings which do not on installation become Landlord’s fixtures or fittings unless the Tenant shall on such removal replace the same with fixtures and/or fittings (as the case may be) of equal value and utility.

12.3 Not to make any alterations or additions to the electrical gas water or telecommunications installations of the Demised Premises without the prior written consent of the Landlord (such consent not to be unreasonably withheld) and to procure that all such alterations or additions are carried out by suitably qualified and skilled persons in accordance with regulations and standards of the relevant supply authority.

-16-

12.4 To carry out and complete the work involved in all alterations to the Demised Premises in accordance with the terms of all consents with materials of suitable good quality in a proper and workmanlike manner and to the reasonable satisfaction of the Landlord.

12.5 On completion of the installation of anything which shall become part of the Demised Premises forthwith to give to the Landlord written notice of the same stating the full cost of reinstatement thereof.

12.6 Not to erect or affix to the exterior of the Demised Premises any aerials posts wires fittings or works for telegraphic communication or other Plant nor to make any aperture in any wall nor to affix any machinery to the Demised Premises without the written consent of the Landlord such consent not to be unreasonably withheld or delayed.

12.7 Not to interfere with any Conducting Media which now are or may hereafter be in or through the Demised Premises nor cause access thereto to be or become more difficult than the same now is nor to cause the Conducting Media serving the Demised Premises to be overloaded or subjected to use in excess of that for which the same were designed or restrict the level of supply of water air gas electricity or other services to other premises.

12.8 Where the CDM Regulations apply to any alterations additions or other works to the Demised Premises:

(a) prior to commencement of any such works to make and serve a declaration to the Health and Safety Executive to the effect that the Tenant shall act as the sole client in respect of such works for the purpose of the CDM Regulations (and supply a copy of the same to the Landlord);

(b) to act as the sole client in respect of such works for the purposes of the CDM Regulations and to comply with all the obligations imposed upon the client by the CDM Regulations;

(c) to procure that the Tenant’s planning supervisor (appointed from time to time under the CDM Regulations) and the Tenant’s contractors and designers shall comply in all respects with the CDM Regulations;

(d) on completion of such works to supply to the Landlord’s Surveyor for retention by the Landlord a full and complete copy of the Health and Safety File for the works prepared in accordance with the CDM Regulations and any code of practice or other guidance issued by any competent authority (the Health and Safety File) together with a royalty free irrevocable and non-exclusive copyright licence or licences to use and reproduce the same for any purposes relating to the Demised Premises or any part thereof (which licences shall carry the right to grant sub-licences and shall be transferable to third parties).

12.9 To produce and keep all Health and Safety Files relating to the Demised Premises in accordance with the CDM Regulations and up-to-date and in good order and to supply on demand to the Landlord copies of the same together with a royalty free irrevocable and non-exclusive copyright licence or licences to use and reproduce the same for any purposes relating to

-17-

the Demised Premises or any part thereof (which licences shall carry the right to grant sub-licences and shall be transferable to third parties) and at the Termination of the Term to forthwith deliver to the Landlord all such Health and Safely Files.

12.10 If the Tenant or any other occupier of the Demised Premises shall carry out any building work alteration change of use or any other development on or to the Demised Premises to indemnify the landlord against all liability whether immediate or consequential for any tax levy imposition or charge of whatsoever nature for which the Landlord may be or become liable as a result of the same and also against any further liability to tax flowing from this indemnity or any payment pursuant to it and to repay to the Landlord on demand the amount thereof together with interest at the Prescribed Rate from the date of payment by the Landlord to the date of such repayment all which sums in default of payment shall be recoverable at the option of the Landlord by action or as rent in arrear.

Signs

13.1 Not to affix to or display on the Demised Premises any sign boarding poster placard blind or advertisement which shall be visible from the outside of the Demised Premises except with the prior written consent of the Landlord (such consent not to be unreasonably withheld or delayed) such means of identification and other signs bearing the corporate or trading name of the Tenant and its corporate logo or any other permitted occupier of the Demised Premises and the nature of its business as shall be reasonably necessary in connection with the use and occupation of the Demised Premises for the time being the number position size lettering design and materials of which shall first have been approved in writing by the Landlord such approval not to be unreasonably withheld.

Dangerous and deleterious substances

14. Not to keep on the Demised Premises any substance of a dangerous corrosive combustible explosive radio-active volatile unstable or offensive nature or which might in any way damage the Demised Premises or the Conducting Media serving the same (except with the prior written consent of the Landlord and after giving due notice to any insurers of the Demised Premises and subject to any requirements imposed by them (with which the Tenant shall comply) small quantities of inflammable materials used in connection with the business carried on in the Demised Premises) or the keeping or use of which may contravene any Acts of Parliament nor to stop up or obstruct in any way or permit oil or grease or other deleterious or other substances that might cause damage to health or the environment to enter by any means the Conducting Media serving the Demised Premises or any adjoining or neighbouring premises and in the event of such damage or obstruction forthwith to remedy the same and make good all damage to the entire satisfaction of the Landlord.

Fire precautions

15. At the expense of the Tenant to comply with all requirements and recommendations (whether legally enforceable or not) from time to time of the appropriate authority in relation to fire precautions affecting the Demised Premises and to keep and maintain sufficient fire fighting and

-18-

extinguishing apparatus in and about the Demised Premises installed in compliance with such requirements and recommendations and with any legal requirements and open to inspection and maintained to the reasonable satisfaction of the Landlord and not to obstruct the access to or means of working of the same.

Securing unoccupied premises

16. Throughout any period during which the Demised Premises are closed for business or are unoccupied (whether or not furnished) to keep the Demised Premises fully secured and to provide such caretaking and other arrangements as may be necessary to give the Demised Premises reasonable protection from vandalism theft or unlawful occupation and to pay any additional insurance premiums arising therefrom.

Loading

17. Not to impose on any part of the floors roof roof trusses ceilings or the structure of the Demised Premises any load or weight greater than that which the same are designed or constructed to bear with due margin for safety nor by machinery or otherwise to cause or permit any undue vibration to or nuisance by noise or otherwise in the Demised Premises.

Use

18.1 Not to use the Demised Premises or any part thereof:

(a) for residential purposes or as sleeping accommodation;

(b) for any noisy noxious offensive dangerous illegal or immoral purpose or for any auction political or public meeting entertainment or exhibition or for gambling;

(c) in a manner which would cause noxious polluting or contaminative substances to be spilled leaked emitted or deposited on in under or from the Demised Premises and to clean up and carry out any other necessary remediation works arising from any such matter;

(d) in any way or for any purpose which may be an annoyance nuisance damage disturbance or inconvenience to or prejudice the Landlord or the Estate or the owners or occupiers of any premises adjoining or near to the Demised Premises or the neighbourhood.

18.2 Without prejudice to the generality of the foregoing not to use the Demised Premises otherwise than for a use or uses falling within Class B1 of the Schedule to the Town and Country Planning (Use Classes) Order 1987 (but not including in this pretext any Order amending or replacing the same).

Insurers’ requirements

19.1 To carry out at the Tenant’s expense such works and other precautions as may be required or recommended by any insurers of the Demised Premises in accordance with their directions and not to carry on upon the Demised Premises or any adjoining property controlled by

-19-

the Tenant any trade business or activity or do or omit any act or thing on or in relation to the Demised Premises which may make void or voidable the policy of insurance of the Demised Premises or of any adjoining or neighbouring premises belonging to the Landlord or render any increased or extra premium payable in such insurance.

19.2 To pay forthwith within 14 days of demand to the Landlord the whole of the amount (including professional and other fees and costs) which should have been recoverable under any insurance of the Demised Premises or any adjoining or neighbouring premises of the Landlord rendered irrecoverable as a consequence of any act or default of the Tenant or any undertenant or their respective servants agents licensees or visitors.

Notify damage by Insured Risks

20.1 To give immediate written notice to the Landlord on the Tenant becoming aware of any destruction of or damage to the Demised Premises stating whether and to what extent the same was brought about directly or indirectly by any of the Insured Risks.

Prevent encroachments

21.1 Not knowingly to permit any owner of any property adjoining or near the Demised Premises to acquire any rights of way light or air or other privilege or easement or make any encroachment over against out of or upon the Demised Premises nor to give any acknowledgement that the Demised Premises enjoy any such rights by the consent of any third party and as soon as the Tenant shall become aware thereof or of any act or thing which might result in the acquisition or making of any of the same to give immediate written notice thereof to the Landlord and to take such stops or action as may be reasonably required by the Landlord for preventing any of the same from being acquired or made.

21.2 Not without obtaining the prior written consent of the Landlord to stop up darken or obscure any windows or lights belonging to the Demised Premises.

Alienation

Charges

22.1 Not to charge the Demised Premises as a whole or in part.

Declarations of Trust

22.2 Not to hold the whole or any part of the Demised Premises or this Lease on trust for another.

Assignments

22.3 Not to assign the Demised Premises or this Lease in any part less than the whole.

-20-

22.4 Not to assign the whole of the Demised Premises:

(a) (if the Landlord shall reasonably so require) without obtaining from a guarantor or guarantors reasonably acceptable to the Landlord a full guarantee of the covenants of the proposed assignee by deed in such form as shall be reasonably required by the Landlord; nor

(b) if the proposed assignee is a company which is in the same group of companies (within the meaning of section 42 of the Landlord and Tenant Act 1954) as the Tenant; nor

(c) unless the Tenant has paid or provided security reasonably acceptable to the Landlord for all rents and other sums for which the Tenant is or will remain under this Lease prior to the date of the assignment; nor

(d) if in the reasonable opinion of the Landlord the proposed assignee is not of sufficient financial standing to enable it to pay the rents reserved from time to time by this Lease and otherwise perform the covenants on the part of the contained in this Lease; nor

(e) unless (where the assignee or its guarantor (other than the guarantor required to provide an Authorised Guarantee Agreement) is a company registered in England and Wales or in Scotland) the Tenant has produced to the Landlord audited accounts for either the assignee or its guarantor showing that for each of the three financial years immediately preceding the Tenant’s application for consent to the proposed assignment:

(i) the net profits on ordinary activities after taxation of the assignee or such guarantor (as the case may be) exceed an amount equal to three times the sum of the Basic Rent for those years; and

(ii) the assignee’s or such guarantor’s (as the case may be) net current assets as revealed by the balance sheets in those audited accounts are not less than three times the sum of the Basic Rent for those years;

Provided that if the Basic Rent is in the course of review under this Lease then for the purposes of this paragraph the Basic Rent shall be deemed to be the amount stated in writing by the Landlord to the Tenant as being the Landlord’s reasonable opinion of the Open Market Rent of the Demised Premises as at the Relevant Review Date;

And the assignee (or such guarantor (as the case may be)) shall have produced to the Landlord a certificate signed by a director of the assignee (or of the guarantor (as the case may be)) that there has been no material adverse change in the financial performance and status of the assignee (or guarantor) since the date of the most recent such audited accounts;

And in this paragraph audited accounts means accounts prepared on a consistent basis and the historical convention and complying in all respects with the requirements of all relevant laws then in force and with all applicable accounting standards and generally accepted accounting principles of the United Kingdom then in force and certified by the auditors of the assignee or guarantor (as the case may be) as giving a true and fair view of the state of affairs of the assignee or guarantor (as the case may be) and its profits for the period under review; nor

-21-

(f) where the proposed assignee is not resident in the United Kingdom of Great Britain and Northern Ireland.

22.5 Not to assign or transfer the whole of the Demised Premises otherwise than in accordance with nor without in each and every such case first complying with the foregoing provisions and subject to having complied with them and subject to paragraph 22.6 of this Schedule not without obtaining the prior written consent of the Landlord which consent shall not be unreasonably withheld.

22.6 The Landlord and the Tenant agree that for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 the Landlord may give its consent to an assignment subject to conditions that:

(a) the Tenant by deed enters into an Authorised Guarantee Agreement;

(b) any guarantor whose guarantee is subsisting immediately before the assignment enters into a guarantee with the Landlord in such form as the Landlord may reasonably require of the Tenant’s obligations under the Authorised Guarantee Agreement;

(c) the assignment shall not take place until any requisite consent of any superior landlord or mortgagee has been obtained and any lawfully imposed conditions of such consent satisfied;

(d) the Tenant obtains from the assignee a covenant by deed with the Landlord to pay the Basic Rent and all other rents reserved by this Lease and to observe and perform all the covenants on the part of the Tenant and the conditions contained in this Lease from the date of the deed of transfer or deed of assignment of the Demised Premises until such time as the assignee shall be released pursuant to section 5 of the Landlord and Tenant (Covenants) Act 1995.

Underletting

22.7 Not to underlet any part or parts of the Demised Premises so as to permit more than four underlettings or five occupancies of the Demised Premises at any one time (the Tenant counting as one occupancy).

22.8 Not to underlet the Demised Premises or any part thereof:

(a) at a rent payable more than two quarters in advance;

(b) other than on terms which shall contain provisions for review of the rent thereby reserved at such intervals no less frequent than shall be normal in the market for similar property at the time of the grant thereof having regard to the terms of the proposed underlease;

-22-

(c) at a rent less than the open market rental reasonably obtainable in the open market without fine premium or other consideration for the whole or part of the Demised Premises so underlet;

(d) unless the underlessee shall be prohibited from sub-underletting the whole or any part of the premises so underlet;

(e) other than on terms which shall incorporate such provisions as are necessary to ensure that any such underlease is consistent with and in all respects no less than the provisions of this Lease;

(f) unless the form of underlease is first approved by the Landlord (such approval not to be unreasonably withheld or delayed);

(g) unless the property to be underlet falls wholly within the Demised Premises as comprised within this Lease and does not include any property or any right over any property which is not demised by this Lease.

22.9 (a) Not to underlet the whole of the Demised Premises at a rent less than the Basic Rent for the time being payable under this Lease unless the Landlord shall otherwise agree (such agreement not to be unreasonably withheld if the proposed rent is the open market rental reasonably available in the open market without fine premium or other consideration);

(b) Not to underlet part only of the Demised Premises at u rent less than such proportion of the Basic Rent for the time being payable under this Lease as the net lettable floor area of the part of the Demised Premises to be underlet bears to the net lettable floor area of the whole of the Demised Premises (such proportion in case of dispute to be conclusively determined at the expense of the Tenant by the Landlord’s Surveyor) unless the Landlord shall otherwise agree (such agreement not to be unreasonably withheld if the proposed rent is the best rack rental reasonably available in the open market without fine premium or other consideration).

22.10 Not to underlet the Demised Premises without obtaining from the underlessee:

(a) a covenant by deed with the Landlord that the underlessee will throughout the term granted by the underlease:

(i) (in the case of an underletting of the whole of the Demised Premises) observe and perform all the covenants and conditions on the part of the tenant contained in this Lease (other than the covenant to pay the Basic Rent) and the underlease;

(ii) (in the case of an underletting of part only of the Demised Premises) observe and perform all the covenants and conditions on the part of the tenant contained in this Lease (other than the covenant to pay the Basic Rent) so far as the same relate to the underlet premises and in the underlease;

(iii) not assign part only of the premises demised by the underlease;

-23-

(iv) not sub-let or part with possession or occupation of the whole or any part of the premises demised by the underlease;

(v) not assign the whole of the premises demised by the underlease except in a manner and on terms permitted or required by this paragraph 22 and by the terms of the underlease being terms in accordance with the provisions of this paragraph 22 nor without first obtaining the written consent of the Landlord under this Lease which consent shall (subject to compliance with such requirements) not be unreasonably withheld;

(b) a covenant from the underlessee in the underlease (which covenant the Tenant shall enforce) in the terms of paragraphs 22.10(a)(iii) (iv) and (v) of this Schedule;

(c) an agreement in the underlease between the underlessor and the underlessee in the same terms as paragraphs 22.3 22.4 22.5 and 22.6 of this Schedule but with respect to the premises demised by and the basic and other rents reserved by the underlease.

22.11 Not to underlet the whole or any part of the Demised Premises without ensuring that the underlease shall contain an agreement authorised by an Order of a court of competent jurisdiction excluding in relation to the tenancy to be created by such underlease the provisions of sections 24 to 28 inclusive of the Landlord and Tenant Act 1954.

22.12 Not to underlet the whole or any part of the Demised Premises otherwise than in accordance with nor without in each and every such case first complying with the foregoing provisions and subject thereto not without obtaining the prior written consent of the Landlord which consent shall not be unreasonably withheld.

22.13 Not at any time during the Term to be a party or privy to an agreement or arrangement for commutation in whole or in part of the rent reserved by any underlease in consideration of the payment of a lump sum or any other consideration.

22.14 Not upon a review of the rent reserved by any underlease (which the Tenant shall procure is reviewed in accordance with its terms):

(a) to agree the amount of any such reviewed rent; or

(b) to make any representations to any third party appointed to determine such reviewed rent;

without (in each case) the prior written consent of the Landlord (such consent not to be unreasonably withheld or delayed).

22.15 Not at any time expressly or by implication to waive any breach of covenant or obligation by any underlessee or any assignee of any underlease nor vary the terms of any permitted underlease nor accept a surrender of nor forfeit any underlease in any such case without the prior written consent of the Landlord (such consent not to be unreasonably withheld or delayed).

-24-

22.16 Not to take any step (whether before or after the granting of any underlease) which would prevent the Landlord exercising any statutory right which the Landlord may at any time have in respect of any underlease whether in relation to the power to collect underlease rents or otherwise.

Sharing Occupation

22.17 Not to part with or share possession or occupation of the Demised Premises or any part thereof other than in a manner permitted by this paragraph 22.

22.18 Subject to the Tenant giving not less than 14 days’ prior written notice to the Landlord of the identity of the company and of the part of the Demised Premises affected (if less than the whole) the Tenant may share occupation of the Demised Premises or the relevant part thereof with a company within the same group of companies (within the meaning of section 42 of the Landlord and Tenant Act 1954) as the Tenant:

(a) for so long only as such company shall remain within such group;

(b) on terms whereby such company is not given exclusive occupation of the Demised Premises or any part thereof and no relationship of landlord and tenant is created; and

(c) provided that any rent or other payment received by the Landlord from any such company shall be deemed to have been paid by such company as agent for the Tenant.

Disclosure of Information

22.19 Upon every application for consent required by this paragraph 22 to disclose to the Landlord such information including as to the terms proposed as the Landlord may reasonably require.

Register devolutions

23. Within one month of every assignment transfer underlease or charge affecting the Demised Premises or any devolution of the estate of the Tenant therein or this Lease or of any derivative interest and every surrender thereof or the commencement or termination of any sharing of the Demised Premises or part thereof to give notice in writing to the Landlord and to provide the Landlord with a certified copy of such assignment transfer underlease or charge or the Probate of the Will or Letters of Administration or other instrument document or evidence of such devolution or surrender or sharing and to pay to the Landlord a reasonable registration fee of not less than twenty-five pounds plus Value Added Tax thereon.

Compensation

24. To pay or procure the payment to the Landlord of the due and proper proportion of any compensation paid to the Tenant or payable as a consequence of any notice served on or application refused by any governmental or local authority in respect of the Demised Premises or the use thereof.

-25-

Defective premises

25. Forthwith upon becoming aware of the same to give notice in writing to the Landlord of any defect in the Demised Premises which would or might give rise to an obligation on the Landlord to do or refrain from doing any act or thing in order to comply with the duty of care imposed on the Landlord pursuant to the Defective Premises Act 1972 and at all times to display and maintain all notices (including the wording thereof) which the Landlord may from time to time require to be displayed at the Demised Premises.

Indemnify Landlord

26. To pay and make good to the Landlord and to keep the Landlord fully and effectually indemnified against all loss costs claims demands liability damage actions and expenses whatsoever incurred or sustained by the Landlord directly or indirectly as a consequence of or in connection with any breach non-performance or non-observance of any of the covenants and conditions on the part of the Tenant contained or implied in this Lease or the use of the Demised Premises by the Tenant or any permitted occupier or their respective servants agents licensees or visitors or the exercise of any rights granted by this Lease and such indemnity shall be without prejudice to any rights or remedies of the Landlord under this Lease in respect of any breach non-performance or non-observance of any covenant or condition.

Costs

27. To pay within 14 days of demand:

27.1 all reasonable and proper legal costs and other costs and professional fees and disbursements incurred by the Landlord in connection with or incidental to:

(a) any application made by the Tenant for a consent licence or approval (whether the same be granted withdrawn or lawfully refused or proffered subject to any lawful qualification or condition); and

(b) the negotiation and preparation of any Authorised Guarantee Agreement; and

(c) the consideration of any proposal (including plans and specifications) for and the inspection supervision and approval or otherwise of any works on the Demised Premises or any change in the use thereof;

27.2 all expenses including solicitors’ costs and surveyors’ fees incurred by the Landlord in contemplation of or incidental to or arising from the preparation and service of:

(a) a notice under section 146 of the Law of Property Act 1925 or of proceedings under sections 146 and 147 of that Act notwithstanding that in any such case forfeiture is avoided otherwise than by relief granted by the court; and

-26-

(b) any notice whether served on the Tenant or any other person required to be served by virtue of the Landlord and Tenant (Covenants) Act 1995 in connection with any breach of the covenants or conditions on the part of the Tenant contained in this Lease or otherwise pursuant to the Landlord and Tenant (Covenants) Act 1995;

27.3 all proper expenses including solicitors’ costs surveyors’ fees and bailiffs’ costs and commission incurred by the Landlord in connection with or incidental to any breach non-performance or non-observance of any of the covenants or conditions on the part of the Tenant contained in this Lease or in contemplation of the enforcement thereof including the service of all notices relating to and schedules of dilapidations and wants of repair or decoration to the Demised Premises and any negotiations in respect thereof and whether served during the Term or after the Termination of the Term (but relating in all cases to such wants of repair or decoration that accrued not later than the Termination of the Term) or the levy of distress;

27.4 all Value Added Tax incurred by the Landlord on or included in any amount reimbursable by the Tenant to the Landlord under this Lease to the extent not recoverable by the Landlord as an input.

Value Added Tax

28.1 Where any payment due under or by virtue of this Lease is a payment on which Value Added Tax is or may be chargeable (by reason of an election of the Landlord or otherwise) to pay the amount of such tax in respect of the payment at the rate applicable to that payment.

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

Comply with title matters

29. Not to breach any of the covenants conditions and provisions affecting the Demised Premises including insofar as the same are still subsisting and capable of being enforced those contained or referred to in the Property and Charges Register of title BK219351 and in the documents referred to in Part V of the First Schedule and to keep the Landlord fully and effectually indemnified from and against all costs claims demands and liabilities arising from any future breach non-performance or non-observance thereof.

Notify matters affecting Guarantor’s covenants

30. To give to the Landlord such advance written notice as may be reasonably practicable of any circumstances or occurrence which may tend materially to diminish the value to the Landlord of the covenants on the part of any guarantor contained in this Lease in order to enable suitable further arrangements satisfactory to the Landlord to be agreed and made for reviewing without delay or immediately restoring the status quo or its equivalent and to make or cause such arrangements including without prejudice to the generality of the foregoing the provision of further or substituted guarantors acceptable to the Landlord to be made in such manner as may reasonably be required by the Landlord.

-27-

Use of common areas

31.1 Not at any time during the Term to cause or permit any damage to or obstruction to the Estate Road or Car Parks and not to park vehicles on the Estate Road.

31.2 Not by any act or default to cause or permit the drains pipes conduits ducts cables wires and other conducting media conveying services to the Demised Premises or those within the Demised Premises to be overloaded or subjected to use in excess of that for which the same were designed or which may restrict the level of supply of water gas or electricity to other parts of the Estate.

31.3 Not except in any emergency to carry out or permit to be carried out in the Car Parks or on the Estate Roads any repairs to or replacement of parts in or overhauls to or test of any vehicle.

Refuse regulation

32. To retain all trade and other refuse upon the Demised Premises in a neat and tidy condition and in proper receptacles and to make adequate arrangements for the frequent removal of such refuse from the Demised Premises.

Regulations

33. To observe and conform to the Regulations and use all reasonable endeavours to procure that all persons resorting to the Demised Premises observe and conform to the same.

THE FOURTH SCHEDULE

Landlord’s Covenants

Quiet enjoyment

1.1 The Tenant paying the Basic Rent and other rents and charges payable under this Lease and performing and observing the several covenants and stipulations on the part of the Tenant contained in this Lease may peaceably and quietly hold and enjoy the Demised Premises during the Term without any lawful interruption or disturbance from or by the Landlord or any person rightfully claiming under or in trust for it.

Insurance

2.1 At all times during the Term to insure (unless such insurance shall be prevented or vitiated by the act or default of the Tenant or any undertenant or their respective servants agents licensees or visitors):

-28-

(a) the Demised Premises other than plate and other fixed glass for such amount as the Landlord shall from time to time be advised by the Landlord’s Surveyor as being equal to the full cost of reinstatement thereof (or such greater amount as the Tenant may reasonably request in writing from time to time) together with architects’ and other professional fees costs of demolition and site clearance (due allowance being made for possible increases in building costs) and any work which may be required by virtue of any Act of Parliament against loss or damage by the Insured Risks appropriate thereto; and

loss of Basic Rent for five years or such longer period as the Landlord shall reasonably determine at the yearly rate payable under this Lease and for such additional amounts in respect of rent prospectively payable on review as the Landlord shall reasonably require;

[Illegible] insurance office or underwriters of repute upon the usual terms and conditions [illegible] by them for such insurance and through such agency as the Landlord shall [illegible] Provided Always that the Landlord shall not be under any obligation to insure fixtures or fittings installed by the Tenant which have become part of the Demised Premises or any alterations to the Demised Premises unless the Tenant shall have [illegible] to the Landlord written notice of the same and of the full cost of reinstatement thereof and the Landlord has agreed with the Tenant to effect the insurance thereof.

In case of damage to or destruction of the Demised Premises by any of the [illegible] Risks and save to the extent that the policy of insurance shall have been [illegible] or payment of the policy moneys refused as a consequence of any act or fault of the Tenant or of any undertenant or their respective servants agents licensees or visitors and subject to receipt of all insurance moneys to make application [illegible] necessary consents and approvals and forthwith to expend all moneys received [illegible] of such insurance (other than in respect of loss of any rent reserved by this [illegible]) in rebuilding reinstating and making good (as the case may be) the Demised Premises with all reasonable speed when it is lawful so to do (except fixtures and [illegible] therein in respect of which the Tenant has not given written notice of the installation thereof as herein provided or which the Landlord has not agreed to insure) [illegible] up any deficiency from the Landlord’s own funds and in case of rebuilding or substantial reinstatement this covenant by the Landlord shall be satisfied if the Landlord provides in the premises so rebuilt or reinstated accommodation as convenient and commodious as is reasonably practicable but not necessarily identical to the Demised Premises as the same existed prior to such damage or destruction.

Repair of Services

Subject to compliance by the Tenant with paragraph 2.4 of the Third Schedule to repair replace renew and clean in a good and workmanlike manner the Conducting [illegible] in and under the Estate until they are taken over by the Local Authority or appropriate statutory undertaking.

Repair of Estate Road

Subject to the payment by the Tenant of the Road Rent to keep repaired maintained cleansed and when necessary resurfaced rebuilt and renewed the Estate Road.

-29-

Repair of Landscaped Areas and Car Parks

Subject to the payment by the Tenant of the Landscaped Areas and Car Parks Tenant to keep the Landscaped Areas and the Car Parks well cultivated and tended (as appropriate) and clean and tidy and as and when necessary to repair maintain resurface [illegible] out replant rebuild renew and repair the same.

THE FIFTH SCHEDULE

Provisos Agreements and Declarations

Forfeiture

1. This Lease is made on the express condition that if and whenever:

(a) the Basic Rent or any other rents and charges reserved or made payable under this Lease or any part thereof respectively shall be unpaid for twenty-one days after becoming due (whether formally or legally demanded or not);

(b) there shall be a breach or non-performance or non-observance of any of the covenants or agreements on the part of the Tenant or stipulations or conditions contained in this Lease imposed on the Tenant;

(c) the Tenant or any person who shall from time to time have guaranteed to the Landlord the performance of the covenants on the part of the Tenant and conditions imposed on it under this Lease being a company shall go into liquidation (other than a voluntary liquidation of a solvent company for the purpose of amalgamation or reconstruction) or have a winding-up petition or petition for an administration order made against it or have a winding-up or administration order made against it or be unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986 or shall enter into a composition with its creditors or a scheme of arrangement of its affairs or have an administrator or an administrative receiver or a receiver or manager appointed over all or any part of its undertaking or assets or being an individual shall have a bankruptcy order or an interim order made against him or enter into a composition with his creditors or scheme of arrangement of his affairs or have an interim receiver appointed in respect of his property;

(d) the Tenant in any case shall suffer any distress or execution to be levied on the Demised Premises or their contents;

(e) any proceedings or events are instituted or occur outside the jurisdiction of the courts of England which have an analogous effect to any referred to in this paragraph;

then and in any such case the Landlord or its agents may at any time thereafter and notwithstanding the waiver or implied waiver of any previous right of re-entry arising under this Lease re-enter upon the Demised Premises or any part of them in the name of the whole whereupon the Term shall absolutely cease and determine but without prejudice to any rights or remedies which may then have

-30-

accrued to the Landlord in respect of arrears of rent or other breach or non-performance or non-observance of any condition covenant or agreement on the part of the Tenant contained in this Lease or otherwise.

Notices

2.1 All notices (other than any notice to be served pursuant to sections 8 10 or 17 of the Landlord and Tenant (Covenants) Act 1995) to be given under this Lease shall be in writing and section 196 of the Law of Properly Act 1925 as amended by the Recorded Delivery Service Act 1962 shall apply to the service of all such notices and in case of any notice to be served on the Tenant such notice shall also be duly served if left at the Demised Premises or sent to the last known address of the Tenant.

2.2 Notices in connection with this Lease to be served pursuant to sections 8 10 or 17 of the Landlord and Tenant (Covenants) Act 1995 shall be served in accordance with that Act and consequently section 23 of the Landlord and Tenant Act 1927 shall apply to such notices.

Suspension of rent

3.1 If during the Term the Demised Premises shall be destroyed or so damaged by any of the Insured Risks as to be unfit for occupation and use then (provided the Tenant shall have duly carried out its obligations under clause 2.2 of this Lease and the insurance of the Demised Premises or for loss of any rent reserved by this Lease shall not have been vitiated or payment of the policy moneys refused in whole or in part as a consequence of any act or default of the Tenant or any undertenant or their respective servants agents licensees or visitors and subject to the payment by the Tenant to the Landlord of an amount equal to any applicable excess under the relevant policy of insurance) the Basic Rent or a fair and just proportion thereof according to the nature and extent of the damage shall be suspended as from the date of such destruction or damage until the period for which the Landlord has insured loss of Basic Rent for the Demised Premises has expired or until the Demised Premises have been rebuilt or reinstated (whichever is the shorter period) and any dispute as to the extent proportion or period of such suspension shall be determined by a single arbitrator to be appointed by the Landlord and the Tenant or (if they cannot agree on such appointment) by the President or other the acting chief officer for the time being of the Royal Institution of Chartered Surveyors in accordance with the Arbitration Act 1996.

3.2 The Landlord shall have the right at any time within the three months following the destruction of the Demised Premises (or such longer period as shall be agreed in writing between the Landlord and Tenant before the expiry of such period) and suspension of rent or a proportion thereof determined under the above provision by notice in writing served on the Tenant to determine the Term and upon service of such notice this Lease shall absolutely determine but such determination will take place without prejudice to any rights then subsisting under this Lease between the parties which shall include but without prejudice to the generality of the foregoing any rights of the Landlord to unpaid rent or under the covenant to pay to the Landlord as required by paragraph 6 of this Schedule the proceeds of any insurance effected by the Tenant or the other covenants by the Tenant and the conditions herein contained and any rights of the Tenant to the return of a proportionate part of the rental payment outstanding at the time of the suspension of rent as above.

-31-

Determination on destruction

4. If at the expiration of three years calculated from the date upon which the Demised Premises shall have been destroyed or so damaged by any of the Insured Risks as to render them unfit for occupation and use (or such longer period as shall be agreed in writing between the Landlord and the Tenant before the expiry of such period) the Landlord shall have been unable to obtain all necessary consents and approvals for the rebuilding replacement and/or reinstatement of the Demised Premises then (unless otherwise agreed in writing between the Landlord and the Tenant prior to the expiration of such period) this Lease shall determine on written notice by either party to the other except (in the case of determination by the Tenant) if the insurance of the Demised Premises has been vitiated or prejudiced by or payment of the policy moneys refused in whole or in part as a consequence of any act or default of the Tenant or any undertenant or their respective servants agents licensees or visitors Provided always that such determination will take place without prejudice to any and all rights then subsisting between the parties to this Lease.

Landlord to have insurance moneys on frustration

5. If this Lease shall determine under the provisions of paragraph 3.2 or 4 of this Schedule or the Landlord shall not have completed the rebuilding replacement or reinstatement of the Demised Premises following destruction or damage by any of the Insured Risks at the Termination of the Term then and in either such case all moneys payable or to become payable under any insurance effected pursuant to the Landlord’s covenant in this Lease in that respect shall be paid to the Landlord for its own use and benefit.

Double insurances

6. If at any time the Tenant is entitled to the benefit of any insurance of the Demised Premises which shall cause the Landlord’s insurers to refuse to make payment in full then the Tenant shall pay or procure that there be paid to the Landlord for its own use and benefit all moneys received or to be received by virtue of such insurance.

Interest on unpaid rents and other moneys

7. If the Basic Rent and any Value Added Tax payable thereon shall not be paid to the Landlord within seven days of the Relevant Rent Day (whether or not demanded) or any other rents or amounts payable by the Tenant to the Landlord under this Lease shall not be paid within seven days of the date of demand or other due date the Tenant shall pay to the Landlord with any such sums (but without prejudice to any other rights or remedies of the Landlord) interest thereon at the Prescribed Rate calculated on a day-to-day basis from the date on which the same became due and payable down to the date of payment by the Tenant.

-32-

Non-acquisition of easements

8. The Tenant shall not by implication of law or otherwise be entitled to any estate or any right privilege or easement (except as expressly granted by this Lease) nor shall the Tenant by virtue or in respect of the Demised Premises or this Lease be deemed to have acquired or to be entitled nor shall it during the Term acquire or become entitled by length of enjoyment prescription or any other means to any such estate right privilege or easement.

Refusal of rent when breach exists

9. If the Landlord shall refuse to accept the Basic Rent or any other rents or amounts payable by the Tenant to the Landlord under this Lease in order to avoid a waiver of any right which the Landlord may have to forfeit this Lease or re-enter the Demised Premises by reason of any breach of covenant by the Tenant or otherwise then notwithstanding any tender of the same by the Tenant such sums shall bear interest to be paid by the Tenant at the Prescribed Rate calculated on a day-to-day basis from the date on which the same became due and payable down to the date upon which payment shall be accepted by the Landlord or earlier forfeiture or re-entry.

Tenant’s covenants fully enforceable

10. Each of the Tenant’s covenants contained in this Lease shall remain in full force both at law and in equity notwithstanding that the Landlord may have waived or released temporarily or permanently revocably or irrevocably or otherwise any similar covenant affecting other premises adjoining or near to the Demised Premises or have waived any prior breach of any covenant on the part of the Tenant.

Warranty disclaimer

11. The Tenant acknowledges that no representation or warranty has been given prior to the date hereof or is given or implied by this Lease that the use now or hereafter proposed by the Tenant for the Demised Premises is or will be or will remain a use which does not constitute a breach of the Planning Acts or will not require planning permission and that no consent which the Landlord may give to any change of use shall be taken as including any such representation or warranty and the Term and the Basic Rent and other rents or amounts payable to the Landlord under this Lease shall not (save to the extent provided in paragraph 3 of this Schedule) determine by reason of any changes modifications or restrictions of the use of or access to the Demised Premises or by the same being or becoming impracticable or prohibited for any reason.

Exclusion of liability

12. Save to the extent to which the Landlord shall be covered by insurance the Landlord shall not be liable to the Tenant (except as expressly provided in this Lease) or any other person in respect of:

(a) any damage suffered by the Tenant or any undertenant or occupier or their respective servants agents or visitors by reason of any defect in the Demised Premises;

-33-

(b) any injury death damage destruction whether to person property or goods or financial or consequential loss due directly or indirectly to or caused by any act neglect omission or default of any other occupier for the time being of the Demised Premises (or their respective; servants agents or visitors) or any person authorised by the Landlord to enter the Demised Premises;

(c) any loss damage nuisance interference or annoyance suffered during the carrying out of inspections repairs decorations additions alterations or other works whether structural or otherwise which may appear to the Landlord to be necessary or desirable to the Demised Premises.

Enforcement of Landlord’s covenants

13. The covenants on the part of the Landlord contained in or obligations on its part implied by this Lease shall be binding in full on the owner of the reversion expectant on the Termination of the Term but shall not be enforceable against any person who has owned such reversion after he shall have parted with all interest therein.

Compensation exclusion

14. Subject to section 38(2) of the Landlord and Tenant Act 1954 neither the Tenant nor any assignee or underlessee (whether immediate or derivative) of the Term or of the Demised Premises shall be entitled on quitting the Demised Premises to any compensation under section 37 of such Act.

Common areas

15. Notwithstanding anything contained in these Presents the Landlord shall not be liable to the Tenant nor shall the Tenant have any claim against the Landlord in respect of any temporary disruption to the Estate Road Landscaped Areas or Car Parks by reason of necessary repair or maintenance or by reason of damage thereto or destruction thereof by fire water Act of God or other cause beyond the Landlord’s control or by reason of the exercise of rights granted by a Deed dated 13th June 1986 and made between the Landlord (1) Wyndham Investments Limited (2) Bracknell Wine Company Limited (3) Gordon Lester Bollingbroke Foulger and Peter Foulger (4) and Waterside Park Limited (5) PROVIDED ALWAYS that the Landlord shall use its best endeavours to keep such disruption to a minimum and to ensure that reasonable access to the Demised Premises is available at all times.

Modification of Regulations

16. The Landlord shall be at liberty to facilitate the better regulation management care and security of the Estate and the buildings thereon and the comfort safety and convenience of the occupants thereof and all other persons resorting thereto to alter and modify the Regulations from time to time at its discretion and by notice in writing to the Tenant but shall not be under any obligation to institute proceedings to enforce compliance therewith unless it thinks fit so to do.

-34-

Disputes with Adjoining Owners

17. Any dispute arising between the Tenant and tenants or occupiers of adjoining or neighbouring premises belonging to the Landlord about any easement right or privilege in favour of or affecting the Demised Premises or the premises adjoining or near the Demised Premises shall be decided by the Landlord’s Surveyor (whose decision including as to costs shall be binding upon the Tenant who shall submit to and abide by such decision).

Requirement for Notice of Want of Repair

18. Notwithstanding anything contained or implied in this Lease the Landlord shall not be under any liability in respect of any want of maintenance or repair unless the Landlord shall have received actual notice of the want of maintenance or repair and shall thereafter have failed to remedy the same as soon as reasonably practicable.

Severability

19. If any provision of this Lease is held to be invalid or unenforceable then such provision shall (so far as invalid or unenforceable) be given no effect and shall be deemed not to be included in this Lease but without invalidating any of the remaining provisions of this Lease.

Governing Law and Jurisdiction

20.1 This Lease shall be governed by and interpreted in accordance with English law.

20.2 The parties give the courts of England exclusive jurisdiction to settle any dispute (including claims for set-off and counterclaims) which may arise in connection with the validity effect interpretation or performance of or the legal relationships established by this Lease or otherwise arising in connection with this Lease.

20.3 The agreement contained in paragraph 20.2 of this Schedule is included for the benefit of the Landlord and accordingly notwithstanding the exclusive agreement in paragraph 16.2 the Landlord shall retain the right to bring proceedings in any other court which has jurisdiction by virtue of the Convention on Jurisdiction and the Enforcement of Judgments signed on 27 September 1968 (as from time to time amended and extended).

Contracts (Rights of Third Parties) Act 1999

21. A person who is not a party to this Lease shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

-35-

THE SIXTH SCHEDULE

Regulations

1. Once monthly to wipe down and clean all external signs including directional and light fittings.

2. Every six months to clean out any petrol interceptors traps and gullies exclusively serving the Demised Premises and annually rod through and clean all drains exclusively serving the Demised Premises.

3. To wash down and disinfect all external rubbish areas once a month.

4. Not to park vehicles on the Estate Road.

(EXECUTED as a DEED under (THE COMMON SEAL of THE (SCOTTISH PROVIDENT (INSTITUTION attested by:

[Illegible]

Authorised Signatory

[Illegible]

Authorised Signatory

-36-

MEMORANDUM

Subject to the provisions of the Second Schedule to the within written Lease it has [illegible] between the Landlord and the Tenant that the Basic Rent of £332,500 (three hundred and thirty two pounds and five hundred pounds) per annum first [illegible] by clause 2 of the within written Lease shall be increased to £             (                     pounds) per annum as from the      day of              Two Hundred and                                         .

[            ] by                                                                                  )

[            ] behalf of the                                                                  )

Landlord/Tenant                                                                          )

MEMORANDUM

Subject to the provisions of the Second Schedule to the within written Lease it has [illegible] agreed between the Landlord and the Tenant that the Basic Rent of              (                     pounds) per annum first reserved by [illegible] of the within written Lease shall be increased to £             (                     pounds) per annum as from the      day of              Two Hundred and                                         .

[Illegible] by                                                                              )

[Illegible] behalf of the                                                              )

Landlord/Tenant                                                                        )

-37-

EX-10.13

Exhibit 10.13

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date between GOLD HILL CAPITAL 2008, LP (“Lender”), and BLUEARC CORPORATION, a Delaware corporation (“Borrower”), provides the terms on which Lender shall lend to Borrower and Borrower shall repay Lender. The parties agree as follows:

1            ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.

2            LOAN AND TERMS OF PAYMENT

2.1        Promise to Pay. Borrower hereby unconditionally promises to pay Lender the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon and any applicable fees as and when due in accordance with this Agreement.

2.1.1    Growth Capital Advances.

    (a)        Availability. Subject to the terms and conditions of this Agreement, Lender agrees to lend to Borrower from time to time prior to the Growth Capital Commitment Termination Date, one advance (the “Growth Capital Advance”) in an aggregate amount not to exceed the Growth Capital Loan Commitment. When repaid, the Growth Capital Advance may not be re-borrowed. Lender’s obligation to lend hereunder shall terminate on the Growth Capital Commitment Termination Date. For purposes of this Section, Borrower shall request the Growth Capital Advance be made on or before ten (10) Business Days after the Effective Date.

    (b)        Repayment. For the Growth Capital Advance, Borrower shall make monthly payments of interest only commencing on the first day of the month following the month in which the Funding Date occurs with respect to such Growth Capital Advance and continuing thereafter on the first day of each successive calendar month during the Growth Capital Interest Only Period. Commencing on the Growth Capital Amortization Date and continuing thereafter on the first day of each successive calendar month during the Growth Capital Repayment Period (each a “Growth Capital Scheduled Payment Date”), Borrower shall make thirty (30) equal monthly payments of principal and interest which would fully amortize the outstanding Growth Capital Advance as of the Growth Capital Amortization Date over the Growth Capital Repayment Period (each a “Growth Capital Scheduled Payment Date”). All unpaid principal and accrued interest is due and payable in full on the Growth Capital Maturity Date with respect to such Growth Capital Advance. A Growth Capital Advance may only be prepaid in accordance with Section 2.1.1(e).

    (c)        Final Payment. On the Growth Capital Maturity Date with respect to the Growth Capital Advance, Borrower shall pay, in addition to the outstanding principal, accrued and unpaid interest, and all other amounts due on such date with respect to such Growth Capital Advance, an amount equal to the Final Payment.

    (d)        Mandatory Prepayment Upon an Acceleration. If the Growth Capital Advance is accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lender an amount equal to the sum of: (i) all unpaid Growth Capital Scheduled Payments (with respect to the Growth Capital Advance due prior to the next such Growth Capital Scheduled Payment Date), (ii) all remaining Growth Capital Scheduled Payments (including principal and interest) to become due, (iii) the Final Payment, and (iv) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts.

    (e)        Permitted Prepayment of Loans. Borrower shall have the option to prepay all, but not less than all, of the Growth Capital Advance advanced by Lender under this Agreement, provided Borrower (i) delivers

written notice to Lender of its election to prepay the Growth Capital Advance at least five (5) Business Days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all unpaid Growth Capital Scheduled Payments (with respect to the Growth Capital Advance due prior to the next such Growth Capital Scheduled Payment Date), (B) all remaining Growth Capital Scheduled Payments (including principal and interest) to become due, (C) the Final Payment, and (D) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. Notwithstanding the foregoing, Borrower acknowledges and agrees that prior to prepaying the Growth Capital Advance pursuant to this Section, Borrower shall need to first obtain the written consent of Silicon Valley Bank to such prepayment.

2.2         Payment of Interest on the Credit Extensions.

    (a)         Interest Rate. Subject to Section 2.2(b), the principal amount outstanding under the Growth Capital Advance shall accrue interest, which interest shall be payable monthly, at a fixed per annum rate equal to twelve percent (12%).

    (b)         Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points above the rate that is otherwise applicable thereto (the “Default Rate”). Payment or acceptance of the increased interest rate provided in this Section 2.2(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Lender.

    (c)         Intentionally omitted.

    (d)         360-Day Year. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed.

    (e)         ACH Payments. Borrower shall separately set up an ACH payment structure in favor of Lender, satisfactory to Lender.

    (f)         Payments. Unless otherwise provided, interest is payable monthly on the first (1st) calendar day of each month. Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue.

2.3         Fees. Borrower shall pay to Lender:

    (a)         Loan Fee. A fully earned, non-refundable loan fee of Thirty Seven Thousand Five Hundred Dollars ($37,500) has been paid to Lender; and

    (b)         Lender Expenses. All Lender Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.

3             CONDITIONS OF LOANS

3.1         Conditions Precedent to Initial Credit Extension. Lender’s obligation to make the initial Credit Extension is subject to the condition precedent that Borrower shall consent to or shall have delivered, in form and substance satisfactory to Lender, such documents, and completion of such other matters, as Lender may reasonably deem necessary or appropriate, including, without limitation:

    (a)         duly executed original signatures to the Loan Documents to which it is a party;

    (b)         a duly executed original signature to the Warrant;

    (c)         duly executed original signatures to the Control Agreements required by Section 6.6(b);

-2-

    (d)         its Operating Documents and good standing certificates of Borrower certified by the Secretary of State of the States of Delaware and California as of a date no earlier than thirty (30) days prior to the Effective Date;

    (e)         duly executed original signatures to the completed Borrowing Resolutions for Borrower;

    (f)         certified copies, dated as of a recent date, of financing statement searches, as Lender shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

    (g)         the Perfection Certificate executed by Borrower;

    (h)         a copy of its Amended and Restated Investors’ Rights Agreement and any amendments thereto;

    (i)         evidence satisfactory to Lender that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Lender; and

    (j)         payment of the fees and Lender Expenses then due as specified in Section 2.3 hereof.

3.2        Conditions Precedent to all Credit Extensions. Lender’s obligation to make each Credit Extension, including the initial Credit Extension, is subject to the following:

    (a)        except as otherwise provided in Section 3.4(a), timely receipt of an executed Payment/Advance Form;

    (b)        the representations and warranties in Section 5 shall be true in all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 remain true in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and

    (c)        in Lender’s sole discretion, there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or there has not been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Lender.

3.3        Covenant to Deliver.

Borrower agrees to deliver to Lender each item required to be delivered to Lender under this Agreement as a condition to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Lender of any such item shall not constitute a waiver by Lender of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in Lender’s sole discretion.

-3-

3.4         Procedures for Borrowing.

    (a)         Growth Capital Advance. To obtain the Growth Capital Advance, Borrower must notify Lender by facsimile or telephone by 12:00 p.m. Pacific Time at least ten (10) Business Days prior to the date the Growth Capital Advance is to be made. If such notification is by telephone, Borrower must promptly confirm the notification by delivering to Lender a completed Payment/Advance Form in the form attached as Exhibit B. On the Funding Date, Lender shall transfer to Borrower’s deposit account, as designated on the Payment/Advance Form, an amount equal to the amount of the Growth Capital Advance. Lender may make the Growth Capital Advance under this Agreement based on instructions from a Responsible Officer or his or her designee. Lender may rely on any telephone notice given by a person whom such Lender believes is a Responsible Officer or designee. Borrower shall indemnify Lender for any loss Lender suffers due to such reliance.

4             CREATION OF SECURITY INTEREST

4.1         Grant of Security Interest. Borrower hereby grants Lender, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Lender, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to the Lien of SVB and other Permitted Liens). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Lender in a writing signed by Borrower of the general details thereof and grant to Lender in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Lender.

If this Agreement is terminated, Lender’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as Lender’s obligation to make Credit Extensions has terminated, Lender shall, at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Borrower.

Lender agrees that the Liens granted to it hereunder in Third Party Equipment shall be subordinate (or released upon request of the applicable equipment lender or lessor) to the Liens in Third Party Equipment of future lenders providing equipment financing and equipment lessors for Third Party Equipment; provided that such Liens are confined solely to the equipment so financed and the proceeds thereof and are permitted under paragraph (c) of the definition of Permitted Liens. “Third Party Equipment” means the Equipment financed or acquired falling within the definition of paragraph (c) of the definition of Permitted Liens. Notwithstanding the foregoing, the Obligations hereunder shall not be subordinate in right of payment to any obligations to other equipment lenders or equipment lessors and Lender’s rights and remedies hereunder shall not in any way be subordinate to the rights and remedies of any such lenders or equipment lessors (except with respect to the Third Party Equipment only). So long as no Event of Default has occurred, Lender agrees to execute and deliver such agreements and documents as may be reasonably requested by Borrower from time to time which set forth the lien subordination (or, if applicable, lien release) described in this Section 4.1 and are reasonably acceptable to Lender. Lender shall have no obligation to execute any agreement or document which would impose obligations, restrictions or lien priority on Lender which are less favorable to Lender than those described in this Section 4.1.

4.2         Authorization to File Financing Statements. Borrower hereby authorizes Lender to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Lender’s interest or rights hereunder, including a notice of the negative pledge on intellectual property substantially in the form of Exhibit A.

5             REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1         Due Organization, Authorization; Power and Authority. Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be

-4-

qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Lender a completed certificate signed by Borrower, entitled “Perfection Certificate.” Borrower represents and warrants to Lender that, unless changed pursuant to a notification to Lender pursuant to Section 7.2: (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Lender of such occurrence and provide Lender with Borrower’s organizational identification number.

The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect and UCC-1 financing statement filings) or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.

5.2         Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts described in the Perfection Certificate delivered to Lender in connection herewith, or of which Borrower has given Lender notice and taken such actions as are necessary to give Lender a perfected security interest therein.

The Collateral (excluding Collateral with an aggregate book value not in excess of Two Hundred Fifty Thousand Dollars ($250,000)) is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate or as permitted pursuant to Section 7.2 and as otherwise permitted by the last sentence of this paragraph. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral (excluding Collateral with an aggregate book value not in excess of Two Hundred Fifty Thousand Dollars ($250,000)) to a bailee, then Borrower will first receive the written consent of Lender and such bailee must execute and deliver a bailee agreement in form and substance satisfactory to Lender in its sole discretion.

5.3         Intentionally omitted.

5.4         Litigation. There are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than Five Hundred Thousand Dollars ($500,000).

5.5         No Material Deviation in Financial Statements. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Lender fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Lender.

-5-

5.6         Solvency. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

5.7         Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted, except where the failure to do so would not reasonably be expected to cause a material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations of Borrower.

5.8         Subsidiaries; Investments. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.

5.9         Tax Returns and Payments; Pension Contributions. Borrower has timely filed all material required tax returns and reports, and Borrower has timely paid all material foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Lender in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.” Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

5.10         Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes.

5.11         Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Lender that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

6             AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

-6-

6.1         Government Compliance.

      (a)         Maintain its and all its Subsidiaries’ legal existence (except as permitted by Section 7.3) and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business.

      (b)         Use commercially reasonably efforts to obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Lender in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Lender.

6.2         Financial Statements, Reports, Certificates.

      (a)         Deliver to Lender: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations for such month certified by a Responsible Officer and in a form acceptable to Lender; (ii) as soon as available, but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Lender in its reasonable discretion; (iii) annual financial projections approved by Borrower’s Board of Directors consistent in form and detail with those provided to Borrower’s venture capital investors as soon as available, but no later than thirty (30) days after the approval thereof by Borrower’s Board of Directors and no less frequently than annually; (iv) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt; (v) in the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission or a link thereto on Borrower’s or another website on the Internet; (vi) a prompt report of any legal actions pending or threatened against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of Five Hundred Thousand Dollars ($500,000) or more; and (vii) other financial information reasonably requested by Lender.

    (b)         Within thirty (30) days after the last day of each month, deliver to Lender with the monthly financial statements, a duly completed Compliance Certificate signed by a Responsible Officer.

    (c)         Allow Lender to audit or inspect Borrower’s Collateral at Borrower’s expense. Such audits or inspections shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing.

    (d)         Deliver to Lender a copy of every 409 evaluation report as to Borrower’s capital stock Borrower’s receives after the Effective Date within thirty (30) days after Borrower’s receipt thereof.

    (e)         So long as Borrower is not subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within thirty (30) days after Borrower completes any private equity financing/sale of its capital stock, deliver to Lender a copy of Borrower’s certificate of incorporation, as amended by such equity financing/sale, and a list of the venture capital investors and strategic investors participating in such equity financing/sale.

6.3         Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify Lender of all returns, recoveries, disputes and claims that involve more than Two Hundred Fifty Thousand Dollars ($250,000).

-7-

6.4         Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all material required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all material foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Lender, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

6.5         Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Lender may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Lender. All property policies shall have a lender’s loss payable endorsement showing Lender as lender loss payee and waive subrogation against Lender, and all liability policies shall show, or have endorsements showing, Lender as an additional insured. All policies (or the loss payable and additional insured endorsements) shall provide that the insurer shall endeavor to give Lender at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At Lender’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Lender has been granted a first priority security interest (subject to the Lien of SVB and other Permitted Liens). After the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Lender, be payable to Lender on account of the Obligations or to SVB as to the obligations under the SVB Loan Facility and Lender has agreed by a separate agreement with SVB how to share any such insurance proceeds. If Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Lender, Lender may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Lender deems prudent.

6.6         Operating Accounts.

      (a)         Maintain an ACH payment structure in favor of Lender, satisfactory to Lender.

      (b)         Provide Lender five (5) days prior written notice before establishing any Collateral Account. For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Lender’s Lien in such Collateral Account in accordance with the terms hereunder. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Lender by Borrower as such.

6.7         Protection of Intellectual Property Rights. Borrower shall: (a) protect, defend and maintain the validity and enforceability of its material intellectual property; (b) promptly advise Lender in writing of material infringements of its material intellectual property; and (c) not allow any intellectual property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Lender’s written consent.

6.8         Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Lender, without expense to Lender, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Lender may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Lender with respect to any Collateral or relating to Borrower.

6.9         Right to Invest. Grant to Lender or its Affiliates a right (but not an obligation) to purchase up to Two Hundred Fifty Thousand Dollars ($250,000) in Borrower’s next round of private equity financing on the same terms, conditions and pricing offered to its lead investors (and Lender or its Affiliates shall enter into and be subject to the same documentation as such lead investors). Borrower shall give Lender written notice of the private equity financing, as early as practicable, which notice shall (a) identify the investors participating in such private equity financing and contain the terms, conditions and pricing of the private equity financing, and (b) be delivered to Lender’s address set

-8-

forth in Section 10 hereof. If Borrower does not give Lender at least fifteen (15) Business Days written notice prior to the initial closing of such financing and Lender does not participate in the initial closing, then this right to invest in such financing may be exercised by Lender (or its Affiliates) in a subsequent closing no later than thirty (30) days after the initial closing of such financing and Borrower shall give Lender at least fifteen (15) Business Days written notice prior to this subsequent closing. The right granted hereunder shall survive the termination of this Agreement.

6.10         Further Assurances. Execute any further instruments and take further action as Lender reasonably requests to perfect or continue Lender’s Lien in the Collateral or to effect the purposes of this Agreement.

7              NEGATIVE COVENANTS

Borrower shall not do any of the following without Lender’s prior written consent:

7.1         Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens and Permitted Investments; (d) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (e) exclusive licenses of intellectual property that could not result in a legal transfer of title of the licensed property but that may be exclusive as to a geographic area, field of use or a limited period of time; and (f) Transfers of other property having an aggregate book value not to exceed Five Hundred Thousand Dollars ($500,000) in any fiscal year so long as no Event of Default has occurred and is continuing or would exist after giving effect to any such Transfer.

7.2         Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related or incidental thereto; (b) liquidate or dissolve; or (c) (i) have a change in Borrower’s Chief Executive Officer unless a new Chief Executive Officer or an interim Chief Executive Officer is approved by the Borrower’s Board of Directors, including the Directors who are not employees of Borrower at the time of such approval, within one hundred twenty (120) days of the date of termination of the Chief Executive Officer, or (ii) prior to a Positive M&A Event, have a change in the director on Borrower’s Board of Directors designated by Crosslink Venture Partners, L.P. (“Crosslink”) unless the replacement director is a partner, principal or member of Crosslink, or (iii) prior to a Positive M&A Event, have a change in the director on Borrower’s Board of Directors designated by Morgenthaler Venture Partners, L.P. (“Morgenthaler”) unless the replacement director is a partner, principal or member of Morgenthaler, or (iv) prior to a Positive M&A Event, have a change in the director on Borrower’s Board of Directors designated by Meritech Venture Partners, L.P. (“Meritech”) unless the replacement director is a partner, principal or member of Meritech, or (v) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than 49% of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital investors or strategic investors). A “Positive M&A Event” means either (i) an initial public offering of Borrower’s common stock, or (ii) a merger or acquisition of Borrower consented to by Lender in writing for the purposes of Section 7.3. Borrower shall not, without contemporaneous written notice to Lender: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Two Hundred Fifty Thousand Dollars ($250,000) in Borrower’s assets or property), (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization.

7.3         Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except: (i) a Subsidiary may merge or consolidate into another Subsidiary or into Borrower; (ii) Borrower or a Subsidiary may acquire the assets of a Subsidiary that has dissolved; and (iii) acquisitions of a Person so long as (1) the total consideration including cash and the value of any non-cash consideration (other than capital stock of Borrower) for all such transactions does not in the aggregate exceed One Million Dollars ($1,000,000) in any fiscal year, (2) such transactions are not otherwise prohibited by Section 7 of this

-9-

Agreement, (c) no Event of Default has occurred and is continuing or would exist after giving effect to such transactions, and (d) Borrower is the surviving legal entity or Borrower is the parent of the surviving legal entity.

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

7.5         Encumbrance. (a) Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens; (b) permit any Collateral not to be subject to the first priority security interest granted herein (other than the Lien of SVB and other Permitted Liens); or (c) enter into any agreement, document, instrument or other arrangement (except with or in favor of Lender or SVB) with any Person which prohibits or has the effect of prohibiting Borrower from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s intellectual property, except: (i) as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Lien” herein, and (ii) with respect to intellectual property licenses where Borrower is the licensee, the underlying intellectual property under such license is not owned by Borrower and such license prohibits or conditions the assignment of, or the granting of a security interest in, the license or the underlying intellectual property.

7.6         Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.

7.7         Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock and make payments in cash for any fractional shares upon such conversion or in connection with the exercise or conversion of warrants or other securities in an aggregate amount not to exceed Twenty Five Thousand Dollars ($25,000); and (iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided such repurchase does not exceed in the aggregate of Two Hundred Fifty Thousand Dollars ($250,000) per fiscal year; or (b) make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.

7.8         Transactions with Affiliates. Enter into or permit to exist any material transaction with any Affiliate of Borrower, except for: (i) transactions with Subsidiaries that are not otherwise prohibited under this Agreement, (ii) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person, (iii) customary indemnification, fees, expenses and compensation arrangements including employee benefits not otherwise prohibited by Section 7 of this Agreement paid or reimbursed to directors, officers or employees who are Affiliates, and (iv) transactions permitted under Section 7.7.

7.9         Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Lender.

7.10         Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation

-10-

plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

8            EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

8.1        Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) day grace period shall not apply to payments due on the Growth Capital Maturity Date). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);

8.2        Covenant Default.

    (a)        Borrower fails or neglects to perform any obligation in Sections 6.2 or 6.6 or violates any covenant in Section 7; or

    (b)        Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace periods provided under this section shall not apply, among other things, to any other covenants set forth in subsection (a) above;

8.3        Intentionally omitted.

8.4        Attachment; Levy; Restraint on Business.

    (a)        (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under control of Borrower (including a Subsidiary) on deposit with Lender or any Lender Affiliate, or (ii) a notice of lien, levy, or assessment is filed against any of Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and

    (b)        (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;

8.5         Insolvency. (a) Borrower shall fail to pay its debts (including trade debts) as they become due; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding, is dismissed);

8.6         Other Agreements. There is a default in any agreement to which Borrower or any Guarantor is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000) or that could have a material adverse effect on Borrower’s or any Guarantor’s business;

-11-

8.7        SVB Loan Agreement. There is an event of default (beyond any applicable cure period) in the SVB Loan Agreement;

8.8        Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order, or decree);

8.9        Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Lender or to induce Lender to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

8.10      Subordinated Debt. A default or breach occurs under any agreement between Borrower and any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement with Lender, or any creditor that has signed such an agreement with Lender breaches any terms of such agreement; or

8.11      Lien Priority. There is a material impairment in the priority of Lender’s security interest in the Collateral.

9           LENDER’S RIGHTS AND REMEDIES

9.1        Rights and Remedies. While an Event of Default occurs and continues Lender may, without notice or demand, do any or all of the following:

    (a)        declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Lender);

    (b)        stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Lender;

    (c)        settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Lender considers advisable, notify any Person owing Borrower money of Lender’s security interest in such funds, and verify the amount of such account;

    (d)        make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Lender requests and make it available as Lender designates. Lender may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any .Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Lender a license to enter and occupy any of its premises, without charge, to exercise any of Lender’s rights or remedies;

    (e)        apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Lender owing to or for the credit or the account of Borrower;

    (f)        ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Lender is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of advertising for sale, and selling any Collateral and, in connection with Lender’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Lender’s benefit;

-12-

(g)        place a “hold” on any account maintained with Lender and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

(h)        demand and receive possession of Borrower’s Books; and

(i)        exercise all rights and remedies available to Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

9.2        Power of Attorney. Borrower hereby irrevocably appoints Lender as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Lender determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Lender or a third party as the Code permits, Borrower hereby appoints Lender as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Lender’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Lender is under no further obligation to make Credit Extensions hereunder. Lender’s foregoing appointment as Borrower’s attorney in fact, and all of Lender’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Lender’s obligation to provide Credit Extensions terminates.

9.3        Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Lender may obtain such insurance or make such payment, and all amounts so paid by Lender are Lender Expenses and immediately due and payable, bearing interest at the then highest applicable rate, and secured by the Collateral. Lender will make reasonable efforts to provide Borrower with notice of Lender obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Lender are deemed an agreement to make similar payments in the future or Lender’s waiver of any Event of Default.

9.4        Application of Payments and Proceeds. Borrower shall have no right to specify the order or the accounts to which Lender shall allocate or apply any payments required to be made by Borrower to Lender or otherwise received by Lender under this Agreement when any such allocation or application is not specified elsewhere in this Agreement. If an Event of Default has occurred and is continuing, Lender may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Lender shall determine in its sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Lender for any deficiency. If Lender, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Lender shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Lender of cash therefor.

9.5        Lender’s Liability for Collateral. So long as Lender complies with the Code regarding the safekeeping of the Collateral in the possession or under the control of Lender, Lender shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.

9.6        No Waiver; Remedies Cumulative. Lender’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Lender thereafter to demand strict performance and compliance herewith or therewith. No waiver

-13-

hereunder shall be effective unless signed by Lender and then is only effective for the specific instance and purpose for which it is given. Lender’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Lender has all rights and remedies provided under the Code, by law, or in equity. Lender’s exercise of one right or remedy is not an election, and Lender’s waiver of any Event of Default is not a continuing waiver. Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.

9.7        Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Lender on which Borrower is liable.

10         NOTICES

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Lender or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

If to Borrower:     BlueArc Corporation
	50 Rio Robles Drive
	San Jose, CA 95134
	Attn: Rick Martig, CFO
	Fax: (408) 576-5741
	Email: rmartig@bluearc.com
If to Lender:	Gold Hill Capital 2008, LP
	One Almaden Blvd., Suite 630
	San Jose, CA 95113
	Attn: Glenn Marasigan
	Fax: (408) 200-7841
	Email: gmarasigan@goldhillcapital.com

11        CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Lender each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Lender from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Lender. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED

-14-

TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

12          GENERAL PROVISIONS

12.1        Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Lender’s prior written consent (which may be granted or withheld in Lender’s discretion). Lender has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Lender’s obligations, rights, and benefits under this Agreement and the other Loan Documents.

12.2        Indemnification. Borrower agrees to indemnify, defend and hold Lender and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Lender (each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Lender Expenses incurred, or paid by such Indemnified Person from, following, or arising from transactions between Lender and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

12.3        Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.

12.4        Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.5        Correction of Loan Documents. Lender may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

12.6        Amendments in Writing; Integration. All amendments to this Agreement must be in writing and signed by both Lender and Borrower. This Agreement and the Loan Documents represent the entire agreement about

-15-

this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

12.7        Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement.

12.8        Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to indemnify Lender shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

12.9        Confidentiality. All financial information (other than any such information contained periodic reports filed by Borrower with the Securities and Exchange Commission) disclosed by the Borrower to Lender in writing and together with all other written information disclosed by Borrower to Lender that is marked “Confidential” shall be considered confidential for purposes hereof. In handling any confidential information, Lender shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Lender’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Lender shall use commercially reasonable efforts to obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Lender’s regulators or as otherwise required in connection with Lender’s examination or audit; (e) as Lender considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Lender so long as such service providers have executed a confidentiality agreement with Lender with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in Lender’s possession when disclosed to Lender, or becomes part of the public domain after disclosure to Lender; or (ii) is disclosed to Lender by a third party, if Lender does not know that the third party is prohibited from disclosing the information.

Lender may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis, so long as Lender does not disclose Borrower’s identity or the identity of any person associated with Borrower unless otherwise expressly permitted by this Agreement. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.

12.10      Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and Lender arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.

13           DEFINITIONS

13.1        Definitions. As used in this Agreement, the following terms have the following meanings:

“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

“Agreement” is defined in the preamble hereof.

-16-

“Borrower” is defined in the preamble hereof.

“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

“Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit C.

“Business Day” is any day that is not a Saturday, Sunday or a day on which Lender is closed.

“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of or remedies with respect to, Lender’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes on the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.

“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.

“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit D.

“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Lender pursuant to which Lender obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.

-17-

“Credit Extension” is any Growth Capital Advance or any other extension of credit by Lender for Borrower’s benefit.

“Default Rate” is defined in Section 2.2(b).

“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

“Effective Date” is the date Lender executes and delivers this Agreement as indicated on the signature page hereof.

“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

“Event of Default” is defined in Section 8.

“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earlier of (a) the Growth Capital Maturity Date or (b) the acceleration of such Growth Capital Advance, equal to the Loan Amount for such Growth Capital Advance multiplied by the Final Payment Percentage.

“Final Payment Percentage” is, for each Growth Capital Advance, two percent (2.0%).

“Foreign Subsidiary” means a Subsidiary not organized under the laws of the United States or any state or territory thereof or the District of Columbia.

“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.

“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.

“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

-18-

“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central Lender or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

“Growth Capital Advance” is defined in Section 2.1.1.

“Growth Capital Amortization Date” means, for the Growth Capital Advance, February 1, 2010; provided, however, if Borrower has presented evidence satisfactory to Lender that Borrower has achieved at least Seventy Four Million Seven Hundred Thousand Dollars ($74,700,000) in revenue for Borrower’s fiscal year-end 2010, then the “Growth Capital Amortization Date” shall be, for each Growth Capital Advance, August 1, 2010.

“Growth Capital Commitment Termination Date” is the earlier to occur of (a) ten (10) Business Days after the Effective Date, or (b) an Event of Default.

“Growth Capital Interest Only Period” means, for the Growth Capital Advance, the period of time commencing on its Funding Date through the day before the Growth Capital Amortization Date.

“Growth Capital Loan Commitment” is Seven Million Five Hundred Thousand Dollars ($7,500,000).

“Growth Capital Maturity Date” is, for the Growth Capital Advance, its 30th Growth Capital Scheduled Payment Date.

“Growth Capital Repayment Period” is, for the Growth Capital Advance, a period of time equal to thirty (30) consecutive months.

“Growth Capital Scheduled Payment” is defined in Section 2.1.1.

“Growth Capital Scheduled Payment Date” is defined in Section 2.1.1.

“Guarantor” is any present or future guarantor of the Obligations.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

“Indemnified Person” is defined in Section 12.2.

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

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

“Lender” is defined in the preamble hereof.

-19-

“Lender Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

“Loan Amount” in respect of each Growth Capital Advance is the original principal amount of such Growth Capital Advance.

“Loan Documents” are, collectively, this Agreement, the Warrant, the Perfection Certificate, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement between Borrower any Guarantor and/or for the benefit of Lender in connection with this Agreement, all as amended, restated, or otherwise modified.

“Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, Lender Expenses and other amounts Borrower owes Lender now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Lender, and the performance of Borrower’s duties under the Loan Documents.

“Operating Documents” are, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

“Payment/Advance Form” is that certain form attached hereto as Exhibit B.

“Perfection Certificate” is defined in Section 5.1.

“Permitted Indebtedness” is:

(a)        Borrower’s Indebtedness to Lender under this Agreement and the other Loan Documents;

(b)        Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

(c)        Subordinated Debt;

(d)        unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

(e)        Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

(f)        Indebtedness in an aggregate principal amount not to exceed Thirteen Million Five Hundred Thousand Dollars ($13,500,000) secured by Permitted Liens consisting of (i) Indebtedness in an aggregate principal amount not to exceed Twelve Million Five Hundred Thousand Dollars ($12,500,000) to Silicon Valley Bank, and (ii) Indebtedness in an aggregate principal amount not to exceed One Million Five Hundred Thousand Dollars ($1,500,000) secured by the Liens described in clause (c) of the definition of Permitted Liens;

(g)        other Indebtedness not exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate outstanding at any time:

-20-

(h)        inter-company Indebtedness that otherwise constitutes an Investment allowed under clauses (a), (f) or (j) of the definition of Permitted Investments; and

(i)        extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

“Permitted Investments” are:

(a)        Investments shown on the Perfection Certificate and existing on the Effective Date;

(b)        (i) Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved by Lender;

(c)        Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

(d)        Investments consisting of deposit accounts in which Lender has a perfected security interest;

(e)        Investments accepted in connection with Transfers permitted by Section 7.1;

(f)        Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed One Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate in any calendar month;

(g)        Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;

(h)        Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

(i)        Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary; and

(j)        Other Investments in an amount not exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate.

“Permitted Liens” are:

(a)        Liens existing on the Effective Date and shown on the Perfection Certificate, Liens in favor of Silicon Valley Bank or Liens arising under this Agreement and the other Loan Documents;

(b)        Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

(c)        purchase money Liens (including capital leases) (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than One Million Five Hundred Thousand

-21-

Dollars ($1,500,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

(d)        Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

(e)        Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

(f)        Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

(g)        leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or intellectual property) granted in the ordinary course of Borrower’s business, if the leases, subleases, licenses and sublicenses do not prohibit granting Lender a security interest in the underlying property unless such security interest has been released pursuant to the terms of Section 4.1;

(h)        licenses of intellectual property permitted under Section 7.1(d) and (e);

(i)        Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and

(j)        Liens in favor of other financial institutions securing the customary fees and expenses of such institutions arising in connection with Borrower’s deposit accounts or investment accounts held at such institutions, provided that Lender has a perfected security interest in the amounts held in such deposit and/or securities accounts in to the extent required by Section 6.6(b).

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

“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.

“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Lender (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Lender entered into between Lender and the other creditor), on terms acceptable to Lender.

-22-

“Subsidiary” means, with respect to any Person, any Person of which more than 50.0% of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled directly or indirectly by such Person or one or more of Affiliates of such Person.

“SVB Loan Facility” means the Second Amended and Restated Loan and Security Agreement between Silicon Valley Bank and Borrower dated as of on or about March 30, 2009, as it may be amended from time to time.

“Transfer” is defined in Section 7.1.

“Warrant” is that certain Warrant to Purchase Stock dated the Effective Date executed by Borrower in favor of Lender.

[Signature page follows.]

-23-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.

BORROWER:

BLUEARC CORPORATION

By	/s/ Rick Martig
Name:	Rick Martig
Title:	CFO

LENDER:

GOLD HILL CAPITAL 2008, LP

By: Gold Hill Capital 2008, LLC, General Partner

By	/s/ Rob Helm
Name:	Rob Helm
Title:	Managing Director

Effective Date: March 30                                              , 2009

[Signature page to Loan and Security Agreement]

EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include any of the following, whether now owned or hereafter acquired: (a) more than 65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter, or (b) any intellectual property, including without limitation, any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing; provided, however, the Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing.

Pursuant to the terms of a certain negative pledge arrangement with Lender, Borrower has agreed: (a) not to encumber any of its copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, without Lender’s prior written consent, and (b) not to enter into any agreement, document, instrument or other arrangement (except with or in favor of Lender) with any Person or entity which directly or indirectly prohibits or has the effect of prohibiting Borrower from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s intellectual property, without Lender’s prior written consent.

  EXHIBIT B

  Loan Payment/Advance Request Form

  Fax To: Date:                     

  LOAN ADVANCE:                                                         BLUEARC CORPORATION

  Also Complete Outgoing Wire Request section below for the funds from this loan advance to go through an outgoing wire.

  To Account #                                                                         

                            (Deposit Account # and Bank name)

  Amount of Growth Capital Advance $                                                         

All Borrower’s representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date. Borrower agrees to repay this Growth Capital Advance pursuant to the terms of the Loan and Security Agreement.

Authorized Signature:	Phone Number:
Print Name/Title:

  OUTGOING WIRE REQUEST:

  Complete only if all or a portion of funds from the loan advance above is to be wired.

Beneficiary Name:	Amount of Wire: $
Beneficiary Lender:	Account Number:
City and State:
Beneficiary Lender Transit (ABA) #:	Beneficiary Lender Code (Swift, Sort, Chip. etc.):
	(For International Wire Only)

Intermediary Lender:      Transit (ABA) #:

For Further Credit to:

Special Instruction:

Authorized Signature:     Phone Number:

Print Name/Title:

EXHIBIT C

BORROWING RESOLUTIONS

CORPORATE BORROWING CERTIFICATE

BORROWER: BlueArc Corporation                 DATE:

LENDER: Gold Hill Capital 2008, LP

I hereby certify as follows, as of the date set forth above:

1. I am the Secretary, Assistant Secretary or other officer of the Borrower. My title is as set forth below.

2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.

3. Attached hereto are true, correct and complete copies of Borrower’s Articles/Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above. Such Articles/Certificate of Incorporation have not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof.

4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Lender may rely on them until Lender receives written notice of revocation from Borrower. In addition, these resolutions were approved by the requisite number of holders of Borrower’s preferred stock, as set forth in Borrower’s Articles/Certificate of Incorporation.

RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:

Name Title Signature Authorized to Add or Remove Signatories

RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money. Borrow money from Gold Hill Capital 2008, LP (“Lender”).

Execute Loan Documents. Execute any loan documents Lender requires.

Grant Security. Grant Lender a security interest in any of Borrower’s assets.

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

Issue Warrants. Issue warrants for Borrower’s capital stock.

Further Acts. Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrowers right to a jury trial) they believe to be necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.

5. The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.

By:

Name:

Title:

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

I, the                                                   of Borrower, hereby certify as to paragraphs 1 through 5

                                             [print title]

above, as of the date set forth above.

By:

Name:

Title:

-2-

EXHIBIT D

COMPLIANCE CERTIFICATE

TO: GOLD HILL CAPITAL 2008, LP FROM: BLUEARC CORPORATION Date:                     

The undersigned authorized officer of BLUEARC CORPORATION (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Lender (the “Agreement”), (1) Borrower is in complete compliance for the period ending                      with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Lender. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

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

Reporting Covenant	Required	Complies
Monthly financial statements with Compliance Certificate	Monthly within 30 days	Yes No
Annual financial statement (CPA Audited) + CC	FYE within 180 days	Yes No
Annual projections	Within 30 days after Board approval but no less frequently than annually	Yes No
409 evaluation	Within 30 days of receipt by Borrower	Yes No
Most recent certificate of incorporation, as amended, and list of venture capital and strategic investors in round	Within 30 days after private equity financing
10-Q, 10-K and 8-K	Within 5 days after filing with SEC	Yes No

Since the last Compliance Certificate Borrower has delivered, has Borrower changed: (i) the address of its chief executive office, (ii) its legal name, or (iii) its state of incorporation? If so, please give details is:

                                                                                                                                           .

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

BLUEARC CORPORATION	LENDER USE ONLY
By:	Received by:
Name:		AUTHORIZED SIGNER
Title:	Date:

Verified:
	AUTHORIZED SIGNER
Date:
Compliance Status: Yes     No

-2-

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this      day of April, 2010, by and between Gold Hill Capital 2008, LP (“Lender”) and BlueArc Corporation, a Delaware corporation (“Borrower”) whose address is 50 Rio Robles Drive, San Jose, California 95134.

RECITALS

A.        Lender and Borrower have entered into that certain Loan and Security Agreement dated as of March 30, 2009 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

B.        Lender has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C.        Borrower has requested that Lender amend the Loan Agreement to (i) restructure the payments due on the Growth Capital Advances, and (iii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D.        Lender has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.        Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.        Amendments to Loan Agreement.

  2.1        Section 2.1.1 (b) (Repayment). Section 2.1.1(b) is amended in its entirety and replaced with the following:

(b) Repayment. Commencing January 1, 2010 and on the first day of each successive month during the Growth Capital Interest Only Period, Borrower shall make monthly payments of accrued interest only on the Growth Capital Advance. Promptly after the First Amendment Effective Date, Lender shall refund to Borrower the principal portion of the February 1, 2010 and March 1, 2010 payments that Borrower had made to Lender before the First Amendment Effective Date.

Commencing on the Growth Capital Amortization Date and continuing thereafter on the first day of each successive month thereafter through the Growth Capital Maturity Date (each, a “Growth Capital Scheduled Payment Date”), Borrower shall make thirty (30) equal monthly payments of principal and interest (each, a “Growth Capital Scheduled Payment”) which would fully amortize the outstanding Growth Capital Advance.

All unpaid principal and unpaid accrued interest is due and payable in full on the Growth Capital Maturity Date. The Growth Capital Advance may only be prepaid in accordance with Sections 2.1.1(d) and 2.1.1(e).

1

If Borrower fails to meet a Performance Trigger, the Growth Capital Advance shall immediately amortize which is reflected in the definition of “Growth Capital Amortization Date.” Borrower shall advise Lender of Borrower’s compliance or noncompliance with the Performance Triggers on or before the end of each relevant quarter and certify such results with the next then-due Compliance Certificate.

  2.2        Section 13 (Definitions). The following terms and their respective definitions are added in Section 13.1 in proper alphabetical order:

“EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense.

“First Amendment” means the First Amendment to Loan and Security Agreement dated as of the First Amendment Effective Date between Borrower and Lender.

“First Amendment Effective Date” means the date the First Amendment becomes effective.

“First Amendment Warrant” means the Warrant to Purchase Stock issued by Borrower to Lender dated the First Amendment Effective Date.

“First Performance Trigger” Borrower has not recorded losses of EBITDA in excess of Three Million Dollars ($3,000,000) for the first quarter ending April 30, 2010.

“Fourth Performance Trigger” Borrower has recorded EBITDA in excess of $0 for the fourth quarter ending January 31, 2011.

“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower, including, without limitation or duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including leases of all types).

“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.

“Performance Trigger” means any of the First Performance Trigger, Second Performance Trigger, Third Performance Trigger and the Fourth Performance Trigger.

“Second Performance Trigger” Borrower has not recorded losses of EBITDA in excess of Two Million Five Hundred Thousand Dollars ($2,500,000) for the second quarter ending July 31, 2010.

“Third Performance Trigger” Borrower has not recorded losses of EBITDA in excess of One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) for the third quarter ending October 31, 2010.

  2.3        Section 13 (Definitions). The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the following:

“Growth Capital Advance Maturity Date” is the earlier of: (i) September 1, 2013, or (ii) the thirtieth (30^th) Growth Capital Scheduled Payment Date.

“Growth Capital Amortization Date” means, for the Growth Capital Advance, April 1, 2011; provided, however, (i) if Borrower does not meet the First Performance Trigger, the “Growth

2

Capital Amortization Date” shall be May 1, 2010; (ii) if Borrower meets the First Performance Trigger but does not meet the Second Performance Trigger, the “Growth Capital Amortization Date” shall be August 1, 2010; (iii) if Borrower meets the First Performance Trigger and the Second Performance Trigger but does not meet the Third Performance Trigger, the “Growth Capital Amortization Date” shall be November 1, 2010; and (iv) if Borrower meets the First Performance Trigger, the Second Performance Trigger and the Third Performance Trigger but does not meet the Fourth Performance Trigger, the “Growth Capital Amortization Date” shall be February 1, 2011.

  2.4        Exhibit D (Compliance Certificate). Exhibit D, the Compliance Certificate, is amended in its entirety and replaced with Exhibit A to the First Amendment.

3.   Limitation of Amendments.

3.1        The amendments set forth in Section 2 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Lender may now have or may have in the future under or in connection with any Loan Document.

3.2        This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4.   Representations and Warranties. To induce Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender as follows:

4.1        Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2        Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3        The organizational documents of Borrower delivered to Lender on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or

3

registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7        This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.        Fees. Borrower shall pay to Lender:

5.1        Restructuring Fee. Borrower shall pay Lender a fully earned, non-refundable restructuring fee of Thirty Seven Thousand Five Hundred Dollars ($37,500) (the “Restructuring Fee”) which shall be due and payable on the First Amendment Effective Date.

5.2        Lender Expenses. All Lender Expenses (including reasonable attorneys’ fees and reasonable expenses for documentation and negotiation of this Amendment) incurred through and after the date of this Amendment, when due.

6.        No Defenses; General Release. Borrower by its execution of this Amendment, hereby declares that it has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the Credit Extensions, the modification of the Credit Extensions, any documents mentioned herein or otherwise; and, to the extent any such setoffs, counterclaims, defenses or other causes of action may exist, whether known or unknown, such items are hereby waived by Borrower. As of the date hereof, for valuable consideration, the receipt of which is hereby acknowledged, Borrower hereby, for itself, its officers, its employees, affiliates, partners, agents, successors, administrators and assigns, releases, acquits and forever discharges Lender, its past or present directors, managers, officers, employees, agents, affiliates, attorneys, shareholders, successors and assigns (“Released Parties”), and each of them, separately and collectively, of and from any and all claims, actions, causes of action, counterclaims, liabilities, suits, debts, offsets, setoffs, losses, liens, demands, rights, obligations, damages, costs, attorneys’ fees, interest, loss of service, expenses and compensation, known or unknown, fixed or contingent, and defenses of every nature and kind whatsoever (“Claims”), which Borrower might have had in the past, or now has, including, without limitation, any Claims relating to and in any way connected with: the Loan Agreement or the other Loan Documents as in effect prior to the date of this Amendment, all related agreements thereto, and the lending relationship between Borrower and the Released Parties as of the date hereof, except for claims arising under this Amendment, the transactions contemplated hereby, and/or arising from the Loan Agreement and/or the other Loan Documents from and after the date of this Amendment.

Furthermore, Borrower further agrees never to commence, aid or participate in, either directly or indirectly (except to the extent required by order or legal process issued by a court or governmental agency of competent jurisdiction) any legal action, defense or other proceeding based in whole or in part hereof on the foregoing released claims.

Borrower expressly understands and acknowledges that it is possible that unknown losses or Claims exist or that present losses or Claims may have been understated in amount or severity, and it explicitly took that into account in determining the consideration to be given for this release, and a portion of said consideration and the mutual covenants contained herein, having been bargained for between the parties with the knowledge of the possibility of such unknown Claims, were given in exchange for a full accord, satisfaction and discharge of all such Claims. Consequently, in furtherance of this general release, Borrower acknowledges and waives the benefits of California Civil Code section 1542 (and all similar ordinances and statutory, regulatory, or judicially created laws or rules of any jurisdiction) which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

4

Borrower agrees that the agreements contained herein are intended to be in full satisfaction of any alleged injuries or damages of Borrower. Borrower has consulted with legal counsel prior to signing this release or has had an opportunity to obtain such counsel and knowingly chose not to do so, and executes such release voluntarily with the intention of fully and finally extinguishing all disputes between the parties hereto. Borrower acknowledges that it is relying on no written or oral agreement, representation or understanding of any kind made by Lender or any employee, attorney or agent of Lender.

7.        Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

8.        Effectiveness. This Amendment shall be deemed effective upon the occurrence of all of the following (the “First Amendment Effective Date”):

(a)        the due execution and delivery to Lender of this Amendment by each party hereto;

(b)        Borrower shall have delivered its duly executed original signature to the First Amendment Warrant in the form provided by Lender;

(c)        Borrower shall have paid the Restructuring Fee and Lender Expenses then due;

(d)        Lender shall have received certified copies, dated as of a recent date, of financing statement searches, as Lender shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been terminated or released; and

(e)        Lender shall have received good standing certificates of Borrower certified by the Secretary of State of the States of California and Delaware as of a date no earlier than thirty (30) days prior to the date of this Amendment.

9.        Amendments in Writing; Integration. This Amendment is a Loan Document. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

10.        Governing Law; Venue. The provisions of Section 11 of the Loan Agreement apply to this Amendment.

[SIGNATURE PAGE FOLLOWS]

5

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Loan and Security Agreement to be duly executed and delivered as of the date first written above.

LENDER		BORROWER
Gold Hill Capital 2008, LP		BlueArc Corporation
By:	Gold Hill Capital 2008, LLC, General Partner

		By:
		Name:	/s/ Rick Martig
By:		Title:	CFO
Name:	/s/ Rob Helm
Title:	Managing Director

6

EXHIBIT D

COMPLIANCE CERTIFICATE

TO:      GOLD HILL CAPITAL 2008, LP	Date:
FROM:    BLUEARC CORPORATION

The undersigned authorized officer of BLUEARC CORPORATION (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Lender (the “Agreement”), (1) Borrower is in complete compliance for the period ending                      with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Lender. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

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

Reporting Covenant	Required	Complies
Monthly financial statements with Compliance Certificate	Monthly within 30 days	Yes    No
Annual financial statement (CPA Audited) + CC	FYE within 180 days	Yes     No
Annual projections	Within 30 days after Board approval but no less frequently than annually	Yes    No
409 evaluation	Within 30 days of receipt by Borrower	Yes     No
Most recent certificate of incorporation, as amended, and list of venture capital and strategic investors in round	Within 30 days after private equity financing
10-Q, 10-K and 8-K	Within 5 days after filing with SEC	Yes    No

Since the last Compliance Certificate Borrower has delivered, has Borrower changed: (i) the address of its chief executive office, (ii) its legal name, or (iii) its state of incorporation? If so, please give details is:

                                                                                                                                               .

Performance Triggers		Complies
First Performance Trigger	EBITDA > ($3,000,000) for quarter ending April 30, 2010	Yes     No
Second Performance Trigger	EBITDA > ($2,500,000) for quarter ending July 31, 2010	Yes    No
Third Performance Trigger	EBITDA > ($1,750,000) for quarter ending October 31, 2010	Yes     No
Fourth Performance Trigger	EBITDA > $0 for quarter ending January 31, 2011	Yes    No

The following Performance Trigger analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

7

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

BLUEARC CORPORATION	LENDER USE ONLY
By:	Received by:
Name:		AUTHORIZED SIGNER
Title:	Date:
	Verified:
		AUTHORIZED SIGNER
	Date:
	Compliance Status:	Yes    No

8

Schedule 1 to Compliance Certificate

Performance Triggers of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.

Dated:                     

I. EBITDA

Required:             See chart below

	Performance Triggers
First Performance Trigger	EBITDA > ($3,000,000) for quarter ending April 30, 2010
Second Performance Trigger	EBITDA > ($2,500,000) for quarter ending July 31, 2010
Third Performance Trigger	EBITDA > ($1,750,000) for quarter ending October 31, 2010
Fourth Performance Trigger	EBITDA > $0 for quarter ending January 31, 2011

Actual:

A.	Net Income of Borrower for quarter	$
B.	To the extent included in the determination of Net Income
	1.      The provision for income taxes for quarter	$
	2.      Depreciation expense for quarter	$
	3.      Amortization expense for quarter	$
	4.      Net Interest Expense for quarter	$
	5.      All other charges which are both non-cash and non-recurring for quarter	$
	6.      All non-cash income for quarter	$
	7.      The sum of lines 1 through 5 minus line 6	$
C.	EBITDA (line A plus line B.7)

Is line C equal to or greater than corresponding Performance Trigger?

                 No, not in compliance                                                                   Yes, in compliance

9

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this 26th day of January, 2011 (the “Second Amendment Effective Date”) by and between Gold Hill Capital 2008, LP (“Lender”) and BlueArc Corporation, a Delaware corporation (“Borrower”) whose address is 50 Rio Robles Drive, San Jose, California 95134.

RECITALS

A.        Lender and Borrower have entered into that certain Loan and Security Agreement dated as of March 30, 2009, as amended by that certain First Amendment to Loan and Security Agreement dated as of April     , 2010 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

B.        Lender has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C.        Borrower has requested that Lender amend the Loan Agreement to (i) restructure the payments due on the Growth Capital Advances, and (iii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D.        Lender has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

Now, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.      Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.      Amendments to Loan Agreement.

2.1        Section 2.1.1 (b) (Repayment). Section 2.1.1(b) is amended in its entirety and replaced with the following:

(b)        Repayment. Commencing January 1, 2011 and on the first day of each successive month during the Growth Capital Interest Only Period, Borrower shall make monthly payments of accrued interest only on the Growth Capital Advance.

Commencing on the Growth Capital Amortization Date and continuing thereafter on the first day of each successive month thereafter through the Growth Capital Maturity Date (each, a “Growth Capital Scheduled Payment Date”), Borrower shall make thirty (30) equal

monthly payments of principal and interest (each, a “Growth Capital Scheduled Payment”) which would fully amortize the outstanding Growth Capital Advance.

All unpaid principal and unpaid accrued interest is due and payable in full on the Growth Capital Maturity Date. The Growth Capital Advance may only be prepaid in accordance with Sections 2.1.1(d) and 2.1.1(e).

If Borrower fails to meet a Performance Trigger, the Growth Capital Advance shall amortize in accordance with the definition of “Growth Capital Amortization Date.” Borrower shall advise Lender of Borrower’s compliance or noncompliance with the relevant Performance Trigger on or before the end of the third week after the end of each relevant quarter and certify such results with the next then-due Compliance Certificate. To the extent that Borrower fails to meet a Performance Trigger and Borrower made an interest-only payment on the Growth Amortization Date rather than the first Growth Capital Scheduled Payment, Borrower, on the then next Growth Capital Scheduled Payment Date, shall pay the incremental principal and interest portion of the first Growth Capital Scheduled Payment in addition to making the second Growth Capital Scheduled Payment on the second Growth Capital Scheduled Payment Date.

2.2        Section 2.2(a) (Interest Rate). Section 2.2(a) is amended in its entirety and replaced with the following:

(a)        Interest Rate. Subject to Section 2.2(b), the principal amount outstanding under the Growth Capital Advance shall accrue interest, which interest shall be payable monthly, at a fixed per annum rate equal to:

(i)        from the Funding Date through December 31, 2010, twelve percent (12%);

(ii)       from January 1, 2011 through December 31, 2011, eleven percent (11%); and

(iii)      from January 1, 2012 and thereafter:

  (1)        if Borrower has not fully satisfied each Performance Trigger, eleven percent (11%); or

  (2)        if Borrower has fully satisfied each Performance Trigger, nine and one-half percent (9.5%).

  2.3       Section 13 (Definitions). The following terms and their respective definitions are added in Section 13.1 in proper alphabetical order:

“Second Amendment” means the Second Amendment to Loan and Security Agreement dated as of the Second Amendment Effective Date between Borrower and Lender.

“Second Amendment Effective Date” is defined in the Second Amendment.

-2-

“Second Amendment Warrant” means the Warrant to Purchase Stock issued by Borrower to Lender dated the Second Amendment Effective Date.

2.4         Section 13 (Definitions). The following terms and their respective definitions set forth in Section 13.1 are amended in their entirety and replaced with the following:

“First Performance Trigger” Borrower’s EBITDA shall be greater than negative Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) for the fiscal quarter ending April 30, 2011.

“Growth Capital Advance Maturity Date” is the earlier of: (i) June 1, 2014, or (ii) the thirtieth (30^th) Growth Capital Scheduled Payment Date.

“Growth Capital Amortization Date” means, for the Growth Capital Advance, January 1, 2012; provided, however, (i) if Borrower does not meet the First Performance Trigger, the “Growth Capital Amortization Date” shall be May 1, 2011; (ii) if Borrower meets the First Performance Trigger but does not meet the Second Performance Trigger, the “Growth Capital Amortization Date” shall be August 1, 2011; and (iii) if Borrower meets the First Performance Trigger and the Second Performance Trigger but does not meet the Third Performance Trigger, the “Growth Capital Amortization Date” shall be November 1, 2011.

“Performance Trigger” means any of the First Performance Trigger, Second Performance Trigger and the Third Performance Trigger.

“Second Performance Trigger” Borrower’s EBITDA shall be greater than negative Two Million Dollars ($2,000,000) for the fiscal quarter ending July 31, 2011.

“Third Performance Trigger” Borrower’s EBITDA shall be greater than negative One Million Dollars ($1,000,000) for the fiscal quarter ending October 31, 2011.

2.5         Exhibit D (Compliance Certificate). Exhibit D, the Compliance Certificate, is amended in its entirety and replaced with Exhibit A to the Second Amendment.

3.      Limitation of Amendments.

3.1        The amendments set forth in Section 2 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Lender may now have or may have in the future under or in connection with any Loan Document.

3.2        This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

-3-

4.      Representations and Warranties. To induce Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender as follows:

4.1        Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2        Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3        The organizational documents of Borrower previously delivered to Lender remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any material contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6        The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7        This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.      Fees. Borrower shall pay to Lender:

5.1        Second Amendment Restructuring Fee. Borrower shall pay Lender a fully earned, non-refundable restructuring fee of Thirty Seven Thousand Five Hundred Dollars ($37,500) (the “Second Amendment Restructuring Fee”) which shall be due and payable on the Second Amendment Effective Date.

-4-

5.2        Lender Expenses. All Lender Expenses (including reasonable attorneys’ fees and reasonable expenses for documentation and negotiation of this Amendment) incurred through and after the date of this Amendment, when due.

6.      First Amendment Warrant. The parties agree that Borrower met the several performance triggers defined in the First Amendment Warrant and, accordingly, the “Number of Shares” under the First Amendment Warrant is 174,371.

7.      Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

8.      Effectiveness. This Amendment shall be deemed effective as of the Second Amendment Effective Date upon the occurrence of all of the following:

(a)        the due execution and delivery to Lender of this Amendment by each party hereto;

(b)        Borrower shall have delivered its duly executed original signature to the Second Amendment Warrant in the form provided by Lender; and

(c)        Borrower shall have paid the Second Amendment Restructuring Fee and Lender Expenses then due.

9.      Amendments in Writing; Integration. This Amendment is a Loan Document. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

10.    Governing Law; Venue. The provisions of Section 11 of the Loan Agreement apply to this Amendment.

[SIGNATURE PAGE FOLLOWS]

-5-

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Loan and Security Agreement to be duly executed and delivered as of the date first written above.

LENDER		BORROWER
Gold Hill Capital 2008, LP		BlueArc Corporation
By:  Gold Hill Capital 2008, LLC,
General Partner
By:  /s/ Rob Helm		By:  /s/ Rick Martig
Name:	Rob Helm	Name:	Rick Martig
Title:	Partner	Title:	CFO

EXHIBIT D

COMPLIANCE CERTIFICATE

TO:        GOLD HILL CAPITAL 2008, LP FROM:  BLUEARC CORPORATION Date:                                     

The undersigned authorized officer of BLUEARC CORPORATION (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Lender (the “Agreement”), (1) Borrower is in complete compliance for the period ending                      with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Lender. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

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

Reporting Covenant	Required	Complies
Monthly financial statements with Compliance Certificate	Monthly within 30 days	Yes No
Annual financial statement (CPA Audited) + CC	FYE within 180 days	Yes No
Annual projections	Within 30 days after Board approval but no less frequently than annually	Yes No
409 evaluation	Within 30 days of receipt by Borrower	Yes No
Most recent certificate of incorporation, as amended, and list of venture capital and strategic investors in round	Within 30 days after private equity financing
10-Q, 10-K and 8-K	Within 5 days after filing with SEC	Yes No

Since the last Compliance Certificate Borrower has delivered, has Borrower changed: (i) the address of its chief executive office, (ii) its legal name, or (iii) its state of incorporation? If so, please give details is:

                                                                                                                                                .

	Performance Triggers	Complies
First Performance Trigger	EBITDA > ($2,750,000) for quarter ending April 30, 2011	Yes No
Second Performance Trigger	EBITDA > ($2,000,000) for quarter ending July 31, 2011	Yes No
Third Performance Trigger	EBITDA > ($1,000,000) for quarter ending October 31, 2011	Yes No

The following Performance Trigger analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

BLUEARC CORPORATION	LENDER USE ONLY
By:	Received by:
Name:		AUTHORIZED SIGNER
Title:	Date:
	Verified:
		AUTHORIZED SIGNER
	Date:
	Compliance Status:	Yes    No

-2-

Schedule I to Compliance Certificate

Performance Triggers of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.

Dated:                                     

I.                EBITDA

Required:                 See chart below

	Performance Triggers
First Performance Trigger	EBITDA > ($2,750,000) for quarter ending April 30, 2011
Second Performance Trigger	EBITDA > ($2,000,000) for quarter ending July 31, 2011
Third Performance Trigger	EBITDA > ($1,000,000) for quarter ending October 31, 2011

Actual:

A.	Net Income of Borrower for quarter	$
B.	To the extent included in the determination of Net Income
	1.      The provision for income taxes for quarter	$
	2.      Depreciation expense for quarter	$
	3.      Amortization expense for quarter	$
	4.      Net Interest Expense for quarter	$
	5.      R&D tax credits for quarter	$
	6.      Stock based compensation for quarter	$
	7.      Mark to market of warrants for quarter	$
	8.      All other charges which are non-cash for quarter	$
	9.      All non-cash income for quarter	$
10.	The sum of lines 1 through 8 minus line 9	$

C. EBITDA (line A plus line B.10)

Is line C equal to or greater than corresponding Performance Trigger?

                 No, not in compliance                                                                   Yes, in compliance

EX-10.14

Exhibit 10.14

Silicon Valley Bank

SILICON VALLEY BANK

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of March 30, 2009, between SILICON VALLEY BANK, a California chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 (FAX (408) 748-9478) (“Bank”) and BLUEARC CORPORATION, a Delaware corporation, with offices at 50 Rio Robles, San Jose, California 95134 (FAX (408) 576-6600) (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:

Recitals.

A. Bank and Borrower have entered into that certain Amended and Restated Loan and Security Agreement, dated as of November 30, 2005 (as amended from time to time, the “Prior Loan Agreement”). Pursuant to the Prior Loan Agreement, Bank has agreed to make certain loans and other financial accommodations, as described therein, to Borrower.

B. Borrower has requested, and Bank has agreed to amend and restate the Prior Loan Agreement in its entirety. The parties hereby agree that the Prior Loan Agreement is hereby amended and restated in its entirety as follows:

1. ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. The term “financial statements” includes the notes and schedules. The terms “including” and “includes” always mean “including (or includes) without limitation,” in this or any Loan Document. Capitalized terms in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein.

2. LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the unpaid principal amount of all Advances hereunder with all interest, fees and finance charges due thereon as and when due in accordance with this Agreement.

2.1.1 Financing of Accounts and Purchase Orders.

(a) Account Availability. Subject to the terms of this Agreement, Borrower may request that Bank finance specific Eligible Accounts. Bank may, in its good faith business discretion, finance such Eligible Accounts by extending credit to Borrower in an amount equal to the result of the Advance Rate multiplied by the face amount of the Eligible Account. In addition, at all times that Borrower is Streamline Facility Eligible, Bank may, as part of the Financed

Receivables, finance Eligible Accounts on an aggregate basis. Any credit extended by Bank hereunder with respect to any Eligible Account, whether such credit is extended with respect to a specific Eligible Account or with respect to Eligible Accounts on an aggregate basis, is an “Account Advance.” Bank may, in its sole discretion, change the percentage of the Advance Rate for a particular Eligible Account on a case by case basis. When Bank makes an Account Advance with respect to a specific Eligible Account, such Eligible Account becomes a “Financed Receivable” and when Bank makes an Account Advance with respect to Eligible Accounts on an aggregate basis, each Eligible Account become a “Financed Receivable.”

(b) Purchase Order Availability. Subject to the terms of this Agreement, Borrower may request that Bank finance specific Eligible Purchase Orders. Bank may, in its good faith business discretion, finance such Eligible Purchase Orders by extending credit to Borrower in an amount equal to the result of the Advance Rate multiplied by the face amount of the Eligible Purchase Orders (the “Purchase Orders Advance”). Bank may, in its sole discretion, change the percentage of the Advance Rate for a particular Eligible Purchase Orders on a case by case basis. When Bank makes either an Account Advance or a Purchase Order Advance, the Eligible Account or Eligible Purchase Order becomes a “Financed Receivable.”

(c) Overadvance Availability. Subject to the terms of this Agreement, provided that Borrower has already financed all its Eligible Receivables and Eligible Purchase Orders pursuant to Section 2.1.1(a) or (b) above, Borrower may request that Bank make additional advances (each such Advance being hereinafter referred to as an “Overadvance”) and Bank, may, in its good faith business discretion, elect to make such Overadvance. Without limiting Bank’s discretion to decide whether to make Overadvances, Bank does not intend to make, and Borrower shall not request, more than one Overadvance during each calendar quarter.

(d) Maximum Advances. The aggregate face amount of Advances outstanding at any time (whether an Overadvance, a Purchase Order Advance, an Account Advances made on an individual Eligible Account basis or Account Advances on an aggregate Eligible Account basis), may not exceed the Facility Amount. In addition, the aggregate amount of all Purchase Order Advances outstanding at any time may not exceed the Purchase Order Sublimit and the aggregate amount of all Overadvances outstanding at any time may not exceed the Overadvance Sublimit.

(e) Borrowing Procedure. Borrower will deliver an Advance Request and Invoice Transmittal in the form attached hereto as Exhibit C-1 signed by a Responsible Officer for each Account Advance it requests, along with a detailed cash receipts journal, and accompanied by an accounts receivable aging, if Borrower is then Streamline Facility Eligible, or by invoices, if Borrower is not Streamline Facility Eligible. Borrower shall deliver a Purchase Order Transmittal for each Eligible Purchase Order it offers. Bank may rely on information set forth in or provided with the Advance Request and Invoice Transmittal or Purchase Order Transmittal. Borrower will deliver an Advance Request in the form attached hereto as Exhibit C-2 signed by a Responsible Officer for each Overadvance it requests.

(f) Deemed Borrowing. Upon the delivery of a Borrowing Base Certificate, the Borrower shall be deemed to have requested an Account Advance and/or a Purchase

-2-

Order Advance in a principal amount equal to the lesser of (i) the aggregate outstanding principal amount of the Overadvances and (ii) an amount equal to the excess, if any, of (A) the sum of (1) the aggregate Eligible Accounts multiplied by the applicable Advance Rate plus (2) the aggregate Eligible Purchase Orders multiplied by the applicable Advance Rate over (B) the aggregate principal amount of the Account Advances and the Purchase Order Advances. The proceeds of such Advance shall be applied to the outstanding Overadvances in the order of their maturity.

(g) Credit Quality; Confirmations. Bank may, at its option, conduct a credit check of the Account Debtor for each Account or Purchase Order requested by Borrower for financing hereunder in order to approve any such Account Debtor’s credit before agreeing to finance such Account or Purchase Order. Bank may also verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts or Purchase Orders (including confirmations of Borrower’s representations in Section 5.3) by means of mail, telephone or otherwise, either in the name of Borrower or Bank from time to time in its sole discretion.

(h) Accounts Notification /Collection. Bank may notify any Person owing Borrower money of Bank’s security interest in the funds and verify and/or collect the amount of the Account or may invoice, verify and/or collect any amount payable in respect of any Purchase Order.

(i) Maturity. This Agreement shall terminate and all Obligations outstanding hereunder shall be immediately due and payable on the Maturity Date; provided, however, to the extent not repaid pursuant to Section 2.1.1(f) hereof, each Overadvance shall be due and payable on that date which is forty-five (45) days after the date such Overadvance is made. No Overadvance may be repaid out of the proceeds of another Overadvance.

(j) Suspension of Advances. Borrower’s ability to request that Bank finance Eligible Accounts or Eligible Purchase Orders hereunder or that Bank make Overadvances hereunder will terminate if, in Bank’s sole discretion, there has been a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement.

(k) End of Streamline Facility Eligible Status. On any day that Borrower ceases to be Streamline Facility Eligible, Borrower shall deliver to Bank an Advance Request and Invoice Transmittal in the form attached hereto as Exhibit C, and containing detailed invoice reporting, signed by a Responsible Officer and accompanied by a current accounts receivable aging and a copy of each invoice, all in accordance with Section 6.2(g) hereof, along with a detailed cash receipts journal, and Bank, in its good faith, business discretion, will decide which of Borrower’s Accounts shall thereafter be deemed to be Financed Receivables for purposes of this Agreement. If following such determination, the outstanding principal amount of the Obligations exceeds the amount of the Financed Receivables multiplied by the Advance Rate, such excess shall constitute Overadvances hereunder and, to the extent such Overadvances exceed the Overadvance Sublimit, Borrower irrevocably authorizes Bank to debit any account of Borrower maintained by

-3-

Borrower with Bank or any of Bank’s Affiliates for the amount of such excess over the Overadvance Sublimit.

(l) Early Termination. This Agreement may be terminated prior to the Maturity Date as follows: (i) by Borrower, effective three Business Days after written notice of termination is given to Bank; or (ii) by Bank at any time after the occurrence of an Event of Default, without notice, effective immediately. If this Agreement is terminated (A) by Bank in accordance with clause (ii) in the foregoing sentence, or (B) by Borrower for any reason, Borrower shall pay to Bank a termination fee in an amount equal to three eights of one percent (0.375%) of the average unused portion of the Facility Amount, calculated on a per annum basis for the two month period following such termination (the “Early Termination Fee”). The Early Termination Fee shall be due and payable on the effective date of such termination (the “Early Termination Fee”). The Early Termination Fee shall be due and payable on the effective date of such termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations. Notwithstanding the foregoing, Bank agrees to waive the Early Termination Fee if Bank agrees to refinance and redocument this Agreement under another division of Bank (in its sole and exclusive discretion) prior to the Maturity Date.

2.2 Collections, Finance Charges, Remittances and Fees. The Obligations shall be subject to the following fees and Finance Charges. Unpaid fees and Finance Charges may, in Bank’s discretion, accrue interest and fees as described in Section 9.2 hereof.

2.2.1 Collections. Subject to Section 2.2.8, Collections will be credited to the Financed Receivable Balance for such Financed Receivable. If Bank receives a payment for both a Financed Receivable and a non-Financed Receivable, the funds will be applied as set forth in Section 2.2.8.

2.2.2 Facility Fee. A fully earned, non-refundable facility fee of Twenty Thousand Dollars ($20,000) is due upon execution of this Agreement (the “Facility Fee”).

2.2.3 Unused Fee. A fee (the “Unused Fee”), payable monthly, in arrears, on a calendar year basis, in an amount equal to three eights on one percent (0.375%) per annum of the average unused portion of the Facility Amount, as determined by Bank. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Fee previously earned by Bank pursuant to this Section notwithstanding any termination of the Agreement.

2.2.4 Finance Charges. In computing Finance Charges on the Obligations under this Agreement, all Collections received by Bank shall be deemed applied by Bank on account of the Obligations one (1) Business Day after receipt of the Collections. Borrower will pay a finance charge (the “Finance Charge”) on each Financed Receivable (or, when the Borrower is Streamline Facility Eligible, on the Streamline Financed Receivables Balance) which is equal to the Applicable Rate divided by 360 multiplied by the number of days each such Financed Receivable is outstanding (or, when the Borrower is Streamline Facility Eligible, for the actual days elapsed) multiplied by the outstanding Financed Receivable Balance for such Financed Receivable (or, when the Borrower is Streamline Facility Eligible, on the Streamline Financed Receivables Balance). Borrower shall pay a Finance Charge on the Overadvances which is equal to the Overadvance Applicable Rate divided

-4-

by 360 multiplied by the number of days each such Overadvance is outstanding. The Finance Charge is payable in accordance with Section 2.3 hereof.

2.2.5 Collateral Handling Fee. So long as the Unrestricted Cash is less than Four Million Five Hundred Thousand Dollars ($4,500,000), Borrower will pay to Bank a collateral handling fee equal to three quarters of one percent (0.75%) per month of the Financed Receivable Balance for each Financed Receivable outstanding based upon a 360-day year (the “Collateral Handling Fee”). The Collateral Handling Fee is payable when the Advance made based on such Financed Receivable is payable in accordance with Section 2.3 hereof. In Computing Collateral Handling Fees under this agreement, all Collections received by Bank shall be deemed applied by Bank on account of Obligations one (1) Business Day after receipt of the Collections. After an Event of Default, the Collateral Handling Fee will increase an additional one-half of one percent (0.50%) effective immediately upon such Event of Default.

2.2.6 Accounting. After each Reconciliation Period, Bank will provide an accounting of the transactions for that Reconciliation Period, including the amount of all Financed Receivables, all Overadvances, all Collections, Adjustments, Finance Charges, Collateral Handling Fee and the Facility Fee. If Borrower does not object to the accounting in writing within thirty (30) days it shall be considered accurate. All Finance Charges and other interest and fees are calculated on the basis of a 360-day year and actual days elapsed.

2.2.7 Deductions. Bank may deduct fees, Finance Charges, Advances which become due pursuant to Section 2.3, and other amounts due pursuant to this Agreement from any Advances made or Collections received by Bank.

2.2.8 Lockbox; Account Collection Services.

(a) Borrower shall direct each Account Debtor (and each depository institution where proceeds of Accounts are on deposit) to remit payments with respect to the Accounts and Purchase Orders to a lockbox account established with Bank or to wire transfer payments to an account in Bank’s name and under Bank’s dominion and control (collectively, the “Lockbox”). In the event the Borrower receives any proceeds of the Accounts and Purchase Orders at its offices, the Borrower shall immediately transfer and deliver same to Bank, along with a detailed cash receipts journal.

(b) Within one (1) day of receipt by Bank of proceeds of Accounts in the Lockbox, Bank will turn over to Borrower the proceeds of the Accounts; provided, however, the Bank, at its sole and exclusive discretion (regardless of whether an Event of Default has occurred), may elect to apply such proceeds to the Obligations. In the event Bank elects to apply the proceeds of Accounts to the Obligations, Bank shall apply such proceeds as follows: (i) the proceeds of each Financed Receivable shall be applied to the Advance made by Bank on such Financed Receivable and to the Finance Charge relating thereto, (ii) any excess proceeds from such Financed Receivable, and the proceeds of any Accounts which are not Financed Receivables, shall be applied first to the Overadvances, second to any amounts due to Bank, such as the Finance Charge, the Facility Fee, payments due to Bank, other fees and expenses, or otherwise, and (iii) any remaining proceeds shall be turned over to Borrower; provided, however, that Bank may hold such remaining

-5-

proceeds as a reserve until the end of the applicable Reconciliation Period if Bank, in its discretion, determines that other Financed Receivable(s) may no longer qualify as an Eligible Account or an Eligible Purchase Order at any time prior to the end of the subject Reconciliation Period. This Section does not impose any affirmative duty on Bank to perform any act other than as specifically set forth herein. All Accounts, Purchase Orders and the proceeds thereof are Collateral and if an Event of Default occurs, Bank may apply the proceeds of such Accounts and Purchase Order to the Obligations, in any order that Bank chooses.

2.3 Repayment of Obligations; Adjustments.

2.3.1 Repayment.

(a) Except as provided in subsection (b) below, Borrower will repay each Advance on the earliest of : (i) the date on which payment is received of the Financed Receivable with respect to which the Advance was made, (ii) the date on which the Financed Receivable is no longer an Eligible Account or Eligible Purchase Order, (iii) the date on which any Adjustment is asserted to the Financed Receivable (but only to the extent of the Adjustment if the Financed Receivable remains otherwise an Eligible Account or Eligible Purchase Order), (iv) the date on which there is a breach of any warranty or representation set forth in Section 5.3 or a breach of any covenant in this Agreement, or (v) the Maturity Date (including any early termination). Each payment under this Section 2.3.1(a) will also include all accrued Finance Charges and Collateral Handling Fee with respect to such Advance and all other amounts then due and payable hereunder.

(b) If Borrower is Streamline Facility Eligible, Borrower will repay each Advance on the earliest of: (i) in the case of a Purchase Order Advance, the date on which payment is received of the Financed Receivable with respect to which the Advance was made, (ii) the date on which the aggregate Advances outstanding exceeds the product of the Financed Receivables Balance multiplied by the applicable Advance Rate, to the extent of such excess, (iii) the date on which there is a breach of any warranty or representation set forth in Section 5.3 or a breach of any covenant in this Agreement, or (v) the Maturity Date (including any early termination). So long as Borrower is Streamline Facility Eligible, accrued Finance Charges shall be payable on the first day of each month for the immediately preceding month.

2.3.2 Repayment on Event of Default. When there is an Event of Default, Borrower will, if Bank demands (or, upon the occurrence of an Event of Default under Section 8.5, immediately without notice or demand from Bank) repay all of the Advances. The demand may, at Bank’s option, include the Advance for each Financed Receivable then outstanding, each Overadvance then outstanding and all accrued Finance Charges, Early Termination Fee, Collateral Handling Fee, the Unused Fee, attorneys and professional fees, court costs and expenses, and any other Obligations.

2.3.3 Debit of Accounts. Bank may debit any of Borrower’s deposit accounts for payments or any amounts Borrower owes Bank hereunder. These debits shall not constitute a set-off.

-6-

2.3.4 Adjustments. If at any time during the term of this Agreement any Account Debtor asserts an Adjustment or if Borrower issues a credit memorandum or if any of the representations, warranties or covenants set forth in Section 5.3 are not longer true in all material respects, Borrower will promptly advise Bank.

2.4 Power of Attorney. Borrower irrevocably appoints Bank and its successors and assigns as attorney-in-fact and authorizes Bank, to (i) following the occurrence of an Event of Default, sell, assign, transfer, pledge, compromise, or discharge all or any part of the Financed Receivables; (ii) following the occurrence of an Event of Default, demand collect, sue, and give releases to any Account Debtor for monies due and compromise, prosecute, or defend any action, claim, case or proceeding about the Financed Receivables, including filing a claim or voting a claim in any bankruptcy case in Bank’s or Borrower’s name, as Bank chooses; (iii) following the occurrence of an Event of Default, prepare, file and sign Borrower’s name on any notice, claim, assignment, demand, draft, or notice of or satisfaction of lien or mechanics’ lien or similar document; (iv) following the occurrence of an Event of Default, notify all Account Debtors to pay Bank directly; (v) regardless of whether there has been an Event of Default, receive, open, and dispose of mail addressed to Borrower; (vi) regardless of whether there has been an Event of Default, endorse Borrower’s name on checks or other instruments (to the extent necessary to pay amounts owed pursuant to this Agreement); and (vii) regardless of whether there has been an Event of Default, execute on Borrower’s behalf any instruments, documents, financing statements to perfect Bank’s interests in the Financed Receivables and Collateral and do all acts and things necessary or expedient, as determined solely and exclusively by Bank, to protect or preserve, Bank’s rights and remedies under this Agreement, as directed by Bank.

3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Advance. Bank’s agreement to make the initial Advance is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation, subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following:

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

(b) Perfection Certificate(s) by Borrower;

(c) Account Control Agreement/ Investment Account Control Agreement;

(d) insurance certificates;

(e) payment of the fees and Bank Expenses then due and payable;

-7-

(f) the Intercreditor Agreement duly executed by the Term Loan Lender in favor of Bank;

(g) Certificate of Foreign Qualification (if applicable);

(h) Certificate of Good Standing/Legal Existence; and

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

3.2 Conditions Precedent to all Advances. Bank’s agreement to make each Advance, including the initial Advance, is subject to the following:

(a) receipt of the Advance Request & Invoice Transmittal or Purchase Order Transmittal;

(b) if Borrower is above the Threshold Amount, receipt of the Advance Request & Invoice Transmittal or Purchase Order Transmittal, a detailed cash receipts journal, a duly completed Borrowing Base Certificate signed by a Responsible Officer, an aged listing of accounts receivable and accounts payable by invoice date, in form acceptable to Bank, and a Deferred Revenue report, in form acceptable to Bank;

(c) Bank shall have (at its option) conducted the confirmations and verifications as described in Section 2.1.1(g); and

(d) each of the representations and warranties in Section 5 shall be true on the date of the Advance Request and Invoice Transmittal, Purchase Order Transmittal or Overadvance Request and on the effective date of each Advance and no Event of Default shall have occurred and be continuing, or result from the Advance. Each Advance is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 remain true.

4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations and the performance of each of Borrower’s duties under the Loan Documents, a continuing security interest in, and pledges and assigns to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower warrants and represents that the security interest granted herein shall be a first priority security interest in the Collateral (subject only to the Lien of the Term Loan Lender and other Permitted Liens).

Except as noted on the Perfection Certificate, Borrower is not a party to, nor is bound by, any material license or other agreement with respect to which Borrower is the licensee that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property. Without prior consent from Bank, Borrower shall not enter into, or become bound by, any such license or agreement which is reasonably likely to have a material impact on Borrower’s business or financial condition. Borrower shall take such steps as Bank

-8-

requests to obtain the consent of or waiver by, any person whose consent or waiver is necessary for all such licenses or contract rights to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future.

If the Agreement is terminated, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the brief details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Bank.

Bank agrees that the Liens granted to it hereunder in Third Party Equipment shall be subordinate (or released upon request of the applicable equipment lender or lessor) to the Liens in Third Party Equipment of future lenders providing equipment financing and equipment lessors for Third Party Equipment; provided that such Liens are confined solely to the equipment so financed and the proceeds thereof and are permitted under paragraph (c) of the definition of Permitted Liens. “Third Party Equipment” means the Equipment financed or acquired falling within the definition of paragraph (c) of the definition of Permitted Liens. Notwithstanding the foregoing, the Obligations hereunder shall not be subordinate in right of payment to any obligations to other equipment lenders or equipment lessors and Bank’s rights and remedies hereunder shall not in any way be subordinate to the rights and remedies of any such lenders or equipment lessors (except with respect to the Third Party Equipment only). So long as no Event of Default has occurred, Bank agrees to execute and deliver such agreements and documents as may be reasonably requested by Borrower from time to time which set forth the lien subordination (or, if applicable, lien release) described in this Section 4.1 and are reasonably acceptable to Bank. Bank shall have no obligation to execute any agreement or document which would impose obligations, restrictions or lien priority on Bank which are less favorable to Bank than those described in this Section 4.1.

4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions in order to perfect or protect Bank’s interest or rights hereunder, which financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.

5. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization and Authorization. Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. Borrower represents and warrants to Bank that unless changed pursuant to a notification to Bank pursuant to Section 7.2: (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; and (b) Borrower is

-9-

an organization of the type, and is organized in the jurisdiction, set forth in the Perfection Certificate; and (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; and (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or if more than one, its chief executive office as well as Borrower’s mailing address if different, and (e) all other information set forth on the Perfection Certificate pertaining to Borrower is accurate and complete. If Borrower does not now have an organizational identification number, but later obtains one, Borrower shall forthwith notify Bank of such organizational identification number.

The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s organizational documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change.

5.2 Collateral. Borrower has good title to the Collateral, free of Liens except Permitted Liens. All inventory is in all material respects of good and marketable quality, free from material defects. The Accounts are bona fide, existing obligations of the Account Debtors. Borrower has no deposit account, other than the deposit accounts with Bank and deposit accounts described in the Perfection Certificate delivered to Bank in connection herewith. The Collateral is not in the possession of any third party bailee (such as a warehouse) except for (i) Collateral having a value not in excess of Five Hundred Thousand Dollars ($500,000) at any time (ii) as otherwise provided in the Perfection Certificate or (iii) a permitted pursuant to Section 7.2 or the last sentence of this paragraph. Except as hereafter disclosed to Bank in writing by Borrower, none of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral (excluding Collateral with an aggregate book value not in excess of Five Hundred Thousand Dollars ($500,000) to a bailee, then Borrower will first receive the written consent of Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of Bank.

5.3 Financed Receivables. Borrower represents and warrants for each Financed Receivable:

(a) Each Financed Receivable is an Eligible Account or an Eligible Purchase Order.

(b) Borrower is the owner with legal right to sell, transfer, assign and encumber such Financed Receivable;

(c) The correct amount is on the Advance Request and Invoice Transmittal or Purchase Order Transmittal and is not disputed;

(d) Payment is not contingent on any obligation or contract pertaining to any Eligible Account and Borrower has fulfilled all its obligations as of the Advance Request and Invoice Transmittal date or Purchase Order Transmittal date;

-10-

(e) Each Financed Receivable that is an Eligible Account is based on an actual sale and delivery of goods and/or services rendered and is due to Borrower;

(f) Each Financed Receivable is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;

(g) There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;

(h) Borrower reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings;

(i) Borrower has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;

(j) Bank has the right to endorse and/or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral; and

(k) No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement contained in the certificates or statement not misleading.

5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of Borrower’s Responsible Officers or legal counsel, threatened by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change.

5.5 No Material Deviation in Financial Statements. All consolidated financial statements for Borrower and any Subsidiary delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank.

5.6 Solvency. Borrower is able to pay its debts (including trade debts) as they mature.

5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally.

-11-

Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to obtain or make such consents, declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change.

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

5.9 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

5.10 Advance Formula. The aggregate principal amount of the Obligations does not exceed the sum of (a) the product of the face amount of the Financed Receivables multiplied by the applicable Advance Rate plus (b) the Overadvance Sublimit.

6. AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance. Borrower shall maintain its and all Subsidiaries’ legal existence (except as permitted by Section 7.3) and good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business or operations or would reasonably be expected to cause a Material Adverse Change.

6.2 Financial Statements, Reports, Certificates.

(a) Borrower shall deliver to Bank: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared unaudited consolidated balance sheet and income statement covering Borrower’s consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than two hundred (200) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iii) in the event that Borrower’s stock becomes publicly held, (A) within five (5) days of filing, copies of all statements, reports and notices made available to

-12-

Borrower’s security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission, (B) as soon as available, but no later than fifty (50) days after the last day of Borrower’s fiscal quarter, copies of Borrowers report on Form 10-Q filed with the Securities and Exchange Commission, and (C) as soon as available, but no later than ninety-five (95) days after the last day of Borrower’s fiscal year, copies of Borrowers report on Form 10-K filed with the Securities and Exchange Commission; (iv) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of Five Hundred Thousand Dollars ($500,000.00) or more; and (v) budgets, sales projections, operating plans or other financial information reasonably requested by Bank.

(b) Within thirty (30) days after the last day of each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of Exhibit B.

(c) Borrower will allow Bank to audit Borrower’s Collateral, including, but not limited to, Borrower’s Accounts and accounts receivable, at Borrower’s expense, upon reasonable notice to Borrower; provided, however, prior to the occurrence of an Event of Default, Borrower shall be obligated to pay for not more than one (1) audit per year. After the occurrence of an Event of Default, Bank may audit Borrower’s Collateral, including, but not limited to, Borrower’s Purchase Orders, Accounts and accounts receivable at Borrower’s expense and at Bank’s sole and exclusive discretion and without notification and authorization from Borrower.

(d) Upon Bank’s request, provide a written report respecting any Financed Receivable, if payment of any Financed Receivable does not occur by its due date and include the reasons for the delay.

(e) Within thirty (30) days after last day of each month, Borrower shall deliver to Bank a duly completed Borrowing Base Certificate signed by a Responsible Officer, a purchase order report, an aged listing of accounts receivable and accounts payable by invoice date, in form acceptable to Bank.

(f) Provide Bank with, as soon as available, but no later than thirty (30) days following each Reconciliation Period, a Deferred Revenue report, in form acceptable to Bank.

(g) Immediately upon Borrower ceasing to be Streamline Facility Eligible, provide Bank with a current aging of Accounts and, to the extent not previously delivered to Bank, a copy of the invoice for each Eligible Account and an Advance Request and Invoice Transmittal with respect to each such Account, along with a detailed cash receipts journal.

6.3 Taxes. Borrower shall make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to such payments.

-13-

6.4 Insurance. Borrower shall keep its business and the Collateral insured for risks and in amounts, and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as an additional loss payee and all liability policies shall show Bank as an additional insured and all policies shall provide that the insurer must give Bank at least thirty (30) days notice before canceling its policy. At Bank’s request., Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on account of the Obligations, If Borrower fails to obtain insurance as required under this Section or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section and take any action under the policies Bank deems prudent.

6.5 Accounts.

(a) In order to permit Bank to monitor Borrower’s financial performance and condition, Borrower, and all Borrower’s Domestic Subsidiaries, shall maintain Borrower’s, and such Domestic Subsidiaries, primary depository and operating accounts and securities accounts with Bank and not less than eighty-five percent (85%) of Borrower’s and such Domestic Subsidiaries domestic cash or securities in excess of that amount used for Borrower’s or such Domestic Subsidiaries operations shall be maintained or administered through Bank. Any Guarantor shall maintain all depository, operating and securities accounts with Bank.

(b) Borrower shall identify to Bank, in writing, any bank or securities account opened by Borrower with any institution other than Bank. In addition, for each such account that Borrower or Guarantor at any time opens or maintains, Borrower shall, at Bank’s request and option, pursuant to an agreement in form and substance acceptable to Bank, cause the depository bank or securities intermediary to agree that such account is the collateral of Bank pursuant to the terms hereunder. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees.

6.6 Further Assurances. Borrower shall execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s security interest in the Collateral or to effect the purposes of this Agreement.

7. NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent.

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively a “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (i) of inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) of worn-out or obsolete Equipment; (iv) in connection with Permitted Liens and Permitted Investments; (v) exclusive licenses of intellectual

-14-

property that could not result in a legal transfer of title of the licensed property but that may be exclusive as to a geographic area, field of use or a limited period of time; and (vi) Transfers of other property having an aggregate book value not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year so long as no Event of Default has occurred and is continuing or would exist after giving effect to any such Transfer.

7.2 Changes in Business. Ownership, Management or Business Locations. (i) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related or incidental thereto, (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty-nine (49.0%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital investors or strategic investors) or (iii) if its Chief Executive Officer (the “CEO”) ceases to hold such office with Borrower and Borrower has not replaced such CEO within ninety (90) days after such CEO ceases to hold such office with Borrower. Borrower shall not, without at least thirty (30) days prior written notice to Bank: (i) relocate its chief executive office, or add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Fifty Thousand Dollars ($50,000) in Borrower’s assets or property), or (ii) change its jurisdiction of organization, or (iii) change its organizational structure or type, or (iv) change its legal name, or (v) change any organizational number (if any) assigned by its jurisdiction of organization.

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

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

7.5 Encumbrance. Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, or permit any Collateral not to be subject to the first priority security interest granted herein, except for Permitted Liens. The Collateral may also be subject to Permitted Liens. In addition, Borrower shall not sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber, or enter into any agreement, document, instrument or other arrangement (except with or in favor of the Bank or the Term Loan Lender) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower from selling, transferring, assigning, mortgaging, pledging, leasing, granting a security interest in or upon, or encumbering any of Borrower’s Intellectual Property, other than Permitted Liens and in connection with Transfers permitted under Section 7.1.

7.6 Distributions; Investments. (i) Directly or indirectly acquire or own any Person, or make any Investment in any Person or permit any of its Subsidiaries to do so, other than Permitted Investments, or (ii) pay any dividends or make any distribution or payment or redeem,

-15-

retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends solely in common stock and make payments in cash for any fractional shares upon such conversion or in connection with the exercise or conversion of warrants or other securities in an aggregate amount not to exceed Twenty Five Thousand Dollars ($25,000), and (iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided such repurchase does not exceed in the aggregate of Two Hundred Thousand Dollars ($200,000) per fiscal year.

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

7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt, without Bank’s prior written consent.

7.9 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Advance for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

8. EVENTS OF DEFAULT

Any one of the following is an Event of Default:

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

8.2 Covenant Default. Borrower fails or neglects to perform any obligation in Section 6 or violates any covenant in Section 7 or fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant or agreement contained in this Agreement, any Loan Documents and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) Business Days after the occurrence thereof; provided, however, grace and cure periods provided under this section shall not

-16-

apply to financial covenants or any other covenants that are required to be satisfied, completed or tested by a date certain;

8.3 [Intentionally Omitted];

8.4 Attachment. (i) Any portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in ten (10) days; (ii) the service of process upon Borrower seeking to attach, by trustee or similar process, any funds of Borrower on deposit with Bank, or any entity under the control of Bank (including a subsidiary); (iii) Borrower is enjoined, restrained, or prevented by court order from conducting any part of its business; (iv) a judgment or other claim becomes a Lien on a portion of Borrower’s assets; or (v) a notice of lien, levy, or assessment is filed against any of Borrower’s assets by any government agency and not paid within ten (10) days after Borrower receives notice;

8.5 Insolvency. (i) Borrower shall fail to pay its debts (including trade debts) as they become due; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Advances shall be made before any Insolvency Proceeding is dismissed);

8.6 Other Agreements. If there is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000) or that could result in a Material Adverse Change;

8.7 Judgments. If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000) shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of ten (10) Business Days (provided that no Advances will be made prior to the satisfaction or stay of such judgment);

8.8 Misrepresentations. If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document;

8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and any creditor of Borrower that signed a subordination agreement, intercreditor, or other similar agreement with Bank, or any creditor that has signed a subordination agreement with Bank breaches any terms of the subordination agreement; or

8.10 Term Loan Agreement. There is a default (beyond any applicable cure period) in the Term Loan Agreement.

9. BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:

-17-

(a) Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

(b) Stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;

(c) Settle or adjust disputes and claims directly with Account Debtors for amounts, on terms and in any order that Bank considers advisable and notify any Person owing Borrower money of Bank’s security interest in such funds and verify the amount of such account. Borrower shall collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with proper endorsements for deposit;

(d) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;

(e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;

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

(g) Place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any control agreement or similar agreements providing control of any Collateral; and

(h) Exercise all rights and remedies and dispose of the Collateral according to the Code.

9.2 Bank Expenses; Unpaid Fees. Any amounts paid by Bank as provided herein shall constitute Bank Expenses and are immediately due and payable, and shall bear interest at the Default Rate and be secured by the Collateral. No payments by Bank shall be deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default. In

-18-

addition, any amounts advanced hereunder which are not based on Financed Receivables (including, without limitation, unpaid fees and Finance Charges as described in Section 2.2) shall accrue interest at the Default Rate and be secured by the Collateral.

9.3 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of Collateral in possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.

9.4 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay is not a waiver, election, or acquiescence. No waiver hereunder shall be effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given.

9.5 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.

9.6 Default Rate. After the occurrence of an Event of Default, all Obligations shall accrue interest at the Applicable Rate (or, in the case of Overadvances, at the Overadvance Applicable Rate) plus five percent (5.0%) per annum (the “Default Rate”).

10. NOTICES

Notices or demands by either party about this Agreement must be in writing and personally delivered or sent by an overnight delivery service, by certified mail postage prepaid return receipt requested, or by fax to the addresses listed at the beginning of this Agreement. A party may change notice address by written notice to the other party.

11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints,

-19-

and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

-20-

12. GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or Obligations under it without Bank’s prior written consent which may be granted or withheld in Bank’s discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits under this Agreement, the Loan Documents or any related agreement.

12.2 Indemnification. Borrower hereby indemnifies, defends and holds Bank and its officers, employees, directors and agents harmless against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.

12.3 Right of Set-Off. Borrower hereby grants to Bank, a lien, security interest and right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.

12.5 Severability of Provision. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.6 Amendments in Writing; Integration. All amendments to this Agreement must be in writing signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire agreement about this subject matter, and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

12.7 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement.

-21-

12.8 Survival. All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

12.9 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (i) to Bank’s subsidiaries or affiliates in connection with their business with Borrower; (ii) to prospective transferees or purchasers of any interest in the Advances (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee’s or purchaser’s agreement to the terms of this provision); (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank’s examination or audit; and (v) as Bank considers appropriate in exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.

13. DEFINITIONS

13.1 Definitions. In this Agreement;

“Account Advance” is defined in Section 2.1.1(a).

“Accounts” are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

“Account Debtor” is as defined in the Code and shall include, without limitation, any person liable on any Financed Receivable, including a guarantor of the Financed Receivable and any issuer of a letter of credit or banker’s acceptance.

“Adjustments” are all discounts, allowances, returns, disputes, counterclaims, offsets, defenses, rights of recoupment, rights of return, warranty claims, or short payments, asserted by or on behalf of any Account Debtor for any Financed Receivable.

“Advance” is either an Account Advance, a Purchase Order Advance or an Overadvance, as applicable.

“Advance Rate” is (a) with respect to Eligible Accounts, eighty percent (80.0%), net of any offsets related to each specific Account Debtor other than Deferred Revenue, or such other percentage as Bank establishes under Section 2.1.1 and (b) with respect to Eligible Purchase Orders; seventy percent (70.0%), net of any offsets related to each specific Account Debtor, or such other percentage as Bank establishes under Section 2.1.1.

-22-

“Advance Request and Invoice Transmittal” shows Eligible Accounts which Bank may finance and, for each such Account, includes the Account Debtor’s, name, address, invoice amount, invoice date and invoice number.

“Affiliate” is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

“Applicable Rate” is a per annum rate equal to:

(a) if Borrower has Ten Million Dollars ($10,000,000) or more of Unrestricted Cash, the Prime Rate plus one-half of one percent (0.50%);

(b) if Borrower has Four Million Five Hundred Thousand Dollars ($4,500,000) or more but less than Ten Million Dollars ($10,000,000) of Unrestricted Cash, the Prime Rate plus two percent (2.00%); and

(c) if Borrower has less than Four Million Five Hundred Thousand Dollars ($4,500,000) of Unrestricted Cash, the Prime Rate plus two and one-half percent (2.50%).

Adjustments in the Applicable Rate shall take place on the day following a change in the Unrestricted Cash (as stated above) and shall remain in effect until a subsequent change in the Unrestricted Cash. If there is an adjustment to the Applicable Rate due to a decrease in of Unrestricted Cash (a “Downward Adjustment”), Borrower shall not be entitled to an adjustment in the Applicable Rate due to an increase in Unrestricted Cash prior to the first day of the month following the date of such Downward Adjustment.

“Bank Expenses” are all audit fees and expenses and reasonable costs or expenses (including reasonable attorneys’ fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings).

“Borrowing Base Certificate” is that certain certificate in the form attached hereto as Exhibit D.

“Borrower’s Books” are all Borrower’s books and records including ledgers, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information,

“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed. “Closing Date” is the date of this Agreement.

“Code” is the Uniform Commercial Code as adopted in California, as amended and as may be amended and in effect from time to time.

-23-

“Collateral” is any and all properties, rights and assets of Borrower granted by Borrower to Bank or arising under the Code, now, or in the future, in which Borrower obtains an interest, or the power to transfer rights, as described on Exhibit A.

“Collateral Handling Fee” is defined in Section 2.2.5.

“Collections” are all funds received by Bank from or on behalf of an Account Debtor for Financed Receivables.

“Compliance Certificate” is attached as Exhibit B.

“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement.

“Default Rate” is defined in Section 9.6.

“Deferred Revenue” is all amounts received or invoiced, as appropriate, in advance of performance under contracts and not yet recognized as revenue.

“Domestic Subsidiary” is any Subsidiary organized or formed under the laws of any state in the United States of America.

“Eligible Accounts” are billed Accounts in the ordinary course of Borrower’s business that meet all Borrower’s representations and warranties in Section 5.3, have been, at the option of Bank, confirmed in accordance with Section 2.1.1(g), and are due and owing from Account Debtors deemed creditworthy by Bank in its sole discretion. Without limiting the fact that the determination of which Accounts are eligible hereunder is a matter of Bank discretion in each instance. Eligible Accounts shall not include the following Accounts (which listing may be amended or changed in Bank’s discretion with notice to Borrower):

(a) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date;

(b) Accounts for an Account Debtor, fifty percent (50%) or more of whose Accounts have not been paid within ninety (90) days of invoice date;

-24-

(c) Accounts for which the Account Debtor does not have its principal place of business in the United States or the European Union, unless agreed to by Bank in writing, in its sole discretion, on a case-by-case basis;

(d) Accounts for which the Account Debtor is a federal, state or local government entity or any department, agency, or instrumentality thereof except for Accounts of the United States if the payee has assigned its payment rights to Bank and the assignment has been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);

(e) Accounts for which Borrower owes the Account Debtor, but only up to the amount owed (sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts);

(f) Accounts for demonstration or promotional equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or other terms if Account Debtor’s payment may be conditional;

(g) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent;

(h) Accounts in which the Account Debtor disputes liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;

(i) Accounts for which Bank reasonably determines collection to be doubtful or any Accounts which are unacceptable to Bank for any reason.

“Eligible Purchase Orders” are Purchase Orders received in the ordinary course of Borrower’s business that meet all Borrower’s representations and warranties in Section 5.3, have been, at the option of Bank, confirmed in accordance with Section 2.1.1(g), and will result in the creation of an Account due and owing from Account Debtors deemed creditworthy by Bank in its sole discretion. Without limiting the fact that the determination of which Purchase Orders are eligible hereunder is a matter of Bank discretion in each instance, Eligible Purchase Order shall not include the following Purchase Order (which listing may be amended or changed in Bank’s discretion with notice to Borrower):

(a) Purchase Orders not due for shipment and invoicing within thirty (30) days;

(b) Purchase Orders which, when shipped and invoiced, would not be an Eligible Account;

(c) Purchase Orders for which Borrower owes the Account Debtor, but only up to the amount owed (sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts);

-25-

(d) Purchase Orders which are unacceptable to Bank for any reason.

“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

“ERISA” is the Employment Retirement Income Security Act of 1974, and its regulations.

“Events of Default” are set forth in Article 8.

“Facility Amount” is Twelve Million Five Hundred Thousand Dollars ($12,500,000).

“Facility Fee” is defined in Section 2.2.2.

“Finance Charges” is defined in Section 2.2.4.

“Financed Receivables” are all those Eligible Accounts and Eligible Purchase Orders, including their proceeds which Bank finances and makes an Advance, as set forth in Section 2.1.1. A Financed Receivable stops being a Financed Receivable (but remains Collateral) when the Advance made for the Financed Receivable has been fully paid.

“Financed Receivable Balance” is the total outstanding gross face amount, at any time, of any Financed Receivable.

“Foreign Subsidiary” means a Subsidiary not organized under the laws of the United States or any state or territory thereof or the District of Columbia.

“GAAP” is generally accepted accounting principles.

“Guarantor” is any present or future guarantor of the Obligations.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations.

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

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

“Lockbox” is defined in Section 2.2.8.

-26-

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

“Loan Documents” are, collectively, this Agreement, the Term Loan Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated.

“Material Adverse Change” is: (i) A material impairment in the perfection or priority of Bank’s security interest in the Collateral or in the value of such Collateral; (ii) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (iii) a material impairment of the prospect of repayment of any portion of the Obligations. A material adverse change in the business, operations, or condition (financial or otherwise) of Bluearc UK Ltd. shall not be deemed a Material Adverse Change hereunder unless it results in a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower on an unconsolidated basis.

“Maturity Date” is April 30, 2010.

“Obligations” are all advances, liabilities, obligations, covenants and duties owing, arising, due or payable by Borrower to Bank now or later under this Agreement or any other document, instrument or agreement, account (including those acquired by assignment) primary or secondary, such as all Advances. Finance Charges, Facility Fee, Collateral Handling Fee, Early Termination Fee, Unused Fee, interest, fees, expenses, professional fees and attorneys’ fees, or other amounts now or hereafter owing by Borrower to Bank.

“Overadvance” is defined in Section 2.1.1(c).

“Overadvance Applicable Rate” means the rate per annum equal to the Applicable Rate divided by the Advance Rate for Eligible Purchase Orders.

“Overadvance Sublimit” is Five Hundred Thousand Dollars ($500,000).

“Perfection Certificate” is a certain Perfection Certificate completed and delivered by Borrower to Bank in connection with this Agreement.

“Permitted Indebtedness” is:

(a) Borrower’s indebtedness to Bank under this Agreement or the Loan Documents and Borrower’s Indebtedness to the Term Loan Lender under the Term Loan Agreement or the Term Loan Documents as they exist on the date hereof and as they may be amended from time to time; provided such amendments have received the prior written consent of Bank;

(b) Indebtedness existing on the date hereof and set forth on the Perfection Certificatel;

(c) Subordinated Debt;

-27-

(d) Indebtedness to trade creditors incurred in the ordinary course of business;

(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

(f) Indebtedness secured by Permitted Liens;

(g) other Indebtedness not otherwise permitted by Section 7.4 not exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate outstanding at any time;

(h) inter-company Indebtedness that otherwise constitutes an Investment allowed under clauses (a), (f) or (j) of the definition of “Permitted Investments”; and

(i) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

“Permitted Investments” are:

(a) Investments shown on the Perfection Certificate and existing on the date hereof;

(b)(i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any state maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor’s Corporation or Moody’s Investors Service, Inc., (iii) Bank’s certificates of deposit issued maturing no more than 1 year after issue, (iv) investments made in compliance with the Borrower’s investment objective and policy guidelines in the form of Exhibit E hereto, (v) any other investments administered through Bank and (vi) Borrower’s investment, as in effect on the date hereof in Bluearc UK Ltd.;

(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

(d) Investments consisting of deposit accounts in which Bank has a perfected security interest;

(e) Investments accepted in connection with Transfers permitted by Section 7.1;

(f) Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries consisting of advances in the ordinary course of business not to exceed Three Million Dollars ($3,000,000) in the aggregate per fiscal quarter;

-28-

(g) Investments not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;

(h) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

(i) Investments consisting of notes receivable of or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary; and

(j) other Investments not otherwise permitted by Section 7.7 not exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate outstanding at any time.

“Permitted Liens” are:

(a) Liens existing on the date hereof and shown on the Perfection Certificate, Liens arising under this Agreement or other Loan Documents or under the Term Loan Agreement and the other Term Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

(c) purchase money Liens (including capital leases) securing no more than One Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate amount outstanding (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

(d) leases or subleases and licenses or sublicenses permitted under Section 7.1(ii) and (v), if the leases, subleases, licenses and sublicenses permit granting Bank a security interest;

(e) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (d), but any extension, renewal or

-29-

replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

(f) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

(g) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

(h) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and

(i) Liens in favor of other financial institutions securing the customary fees and expenses of such institutions arising in connection with Borrower’s deposit accounts or investment accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts in to the extent required by Section 6.5.

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

“Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate. “Prior Loan Agreement” is defined in Recital A.

“Purchase Order” shall mean a purchase order received by Borrower from a customer. “Purchase Order Advance” is defined in Section 2.1.1(b).

“Purchase Order Sublimit” is One Million Five Hundred Thousand Dollars ($1,500,000).

“Purchase Order Transmittal” is a writing signed by an authorized representative of Borrower which accurately identifies the Purchase Order which Bank, at its election, may purchase and make Purchase Order Advances against, and includes for each such receivable the correct amount to be owed by the Account Debtor, the name and address of the Account Debtor, the Purchase Order number, the Purchase Order date, the sales order number, the sales order date and the account code.

“Reconciliation Day” is the last calendar day of each month. “Reconciliation Period” is each calendar month.

“Responsible Officer” is each of the Chief Executive Officer, President and Chief Financial Officer of Borrower.

-30-

“Streamline Facility Eligible” means, as of any day, (a) Bank, in its sole and exclusive discretion, has not elected to apply proceeds of the Accounts to the Obligations and (b) Borrower (i) meets the Threshold Amount and (ii) has continuously met the Threshold Amount on each day of the preceding three whole months or, if less, each day since the date of this Agreement; provided that the requirement set forth in this clause (ii) shall not apply if (A) Bank otherwise approves in writing or (B) Borrower meets the Threshold Amount as a result of Borrower’s receipt of at least Four Million Dollars ($4,000,000) of proceeds from the issuance of its equity or subordinated debt, provided that such issuance is on terms and conditions reasonably satisfactory to Bank.

“Streamline Financed Receivable Balance” is, for any period, the sum of (a) an amount equal to the average daily outstanding principal amount of Account Advances during such period, divided by the Advance Rate applicable to Eligible Accounts plus (b) an amount equal to the average daily outstanding principal amount of Purchase Order Advances during such period, divided by, the Advance Rate applicable to Eligible Purchase Orders.

“Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s debt to Bank (pursuant to a subordination agreement entered into between Bank, Borrower and the subordinated creditor), on terms acceptable to Bank.

“Subsidiary” is any Person, corporation, partnership, limited liability company, joint venture, or any other business entity of which more than fifty percent (50%) of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person.

“Term Loan Agreement” means that certain Loan and Security Agreement dated March , 2009 by and between Borrower and Term Loan Lender.

“Term Loan Documents” are, collectively, the Term Loan Agreement, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Term Loan Lender in connection with the Term Loan Agreement, all as amended, extended or restated.

“Term Loan Lender” means Gold Hill Capital 2008, LP and its successors and assigns under the Term Loan Agreement.

“Third Party Equipment” is defined in Section 4.1.

“Threshold Amount” means, on any day, Unrestricted Cash in an amount equal to the greater of (a) Three Million Dollars ($3,000,000) or (b) the outstanding principal amount of the Obligations (giving effect to any Advances requested to be made on such day).

“Unrestricted Cash” is unrestricted cash of Borrower on deposit with Bank or its Affiliates in which Bank has a first priority perfected security interest.

“Unused Fee” is defined in Section 2.2.2.

[Signature Page Follows.]

-31-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the State of California as of the date first above written.

BORROWER:

BLUEARC CORPORATION
By	/s/ Rick Martig
Name:	Rick Martig
Title:	CFO
BANK:
SILICON VALLEY BANK
By	/s/ Ray Aguilar
Name:	Ray Aguilar
Title:	RM

-32-

EXHIBIT A

The Collateral consists of all of Borrower’s right, title and interest in and to the following:

All goods, equipment, inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, general intangibles (including payment intangibles) accounts (including health-care receivables), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, now owned or later acquired; any patents, trademarks, service marks and applications therefor; trade styles, trade names, any trade secret rights, including any rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; or any claims for damages by way of any past, present and future infringement of any of the foregoing; and

All Borrower’s books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral shall not be deemed to include (a) more than 65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter, or (b) any copyrights (including computer programs, blueprints and drawings), copyright applications, copyright registration and like protection in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; any design rights; any patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, trademarks, servicemarks and applications therefor, whether registered or not, except that the Collateral shall include all accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing,

Pursuant to the Second Amended and Restated Loan and Security Agreement between the Borrower and Bank, Borrower has agreed not to sell, transfer, assign, mortgage, pledge, lease grant a security interest in, or encumber any of its intellectual property without Bank’s prior written consent.

EXHIBIT B

SILICON VALLEY BANK

SPECIALTY FINANCE DIVISION

Compliance Certificate

I, as authorized officer of Bluearc Corporation (“Borrower”) certify under the Second Amended and Restated Loan and Security Agreement (the “Agreement”) between Borrower and Silicon Valley Bank (“Bank”) as follows (all capitalized terms used herein shall have the meaning set forth in the Agreement):

Borrower represents and warrants for each Financed Receivable:

Each Financed Receivable is an Eligible Account or Eligible Purchase Order.

Borrower is the owner with legal right to sell, transfer, assign and encumber such Financed Receivable;

The correct amount is on the Advance Request and Invoice Transmittal or Purchase Order Transmittal and is not disputed;

Payment is not contingent on any obligation or contract pertaining to an Eligible Account and Borrower has fulfilled all its obligations as of the date of the Advance Request and Invoice Transmittal or Purchase Order Transmittal;

Each Financed Receivable which is an Eligible Account is based on an actual sale and delivery of goods and/or services rendered and is due to Borrower;

Each Financed Receivable is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;

There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;

It reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings; It has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;

Bank has the right to endorse and/ or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral.

No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement contained in the certificates or statement not misleading,

Additionally, Borrower represents and warrants as follows:

Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s organizational documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change.

Borrower has good title to the Collateral, free of Liens except Permitted Liens. All inventory is in all material respects of good and marketable quality, free from material defects.

Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP, Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to obtain or make such consents, declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change.

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

Reporting Covenant	Required	Complies
Monthly financial statements with Compliance Certificate	Monthly within 30 days	Yes No
Annual financial statement (CPA Audited) + CC	FYE within 200 days	Yes No
10-K, 10-Q and 8-K	All within 5 days of filing, 10-Qs FQE within 95 days and 10-Ks FYE within 95 days	Yes No
Borrowing Base Certificate, A/R & A/P Agings and Purchase Order Reports	Monthly within 30 days	Yes No
Deferred Revenue Report	Monthly within 30 days	Yes No
Unrestricted Cash	Applicable Rate	Applies
Greater than or equal to $10,000,000	Prime + 0.50%	Yes No
Greater than or equal to $4,500,000 but less than $10,000,000	Prime + 2.00%	Yes No

-2-

Less than $4,500,000	Prime + 2.50%	Yes No
Unrestricted Cash	Collateral Handling Fee	Applies
Greater than or equal to $4,500,000	None	Yes No
Less than $4,500,000	0.75%	Yes No

All representations and warranties in the Agreement are true and correct in all material respects on this date, and the Borrower represents that there is no existing Event of Default.

Sincerely,

Signature

Title

Date

-3-

EXHIBIT C-1

Silicon Valley Bank

Advance Request & Invoice Transmittal

Client Name:
Date Submitted:	Transmittal #:

Streamline Reporting

Accounts Receivable Aging Date Total of Accounts ($) Advance Request ($)

Detail Reporting

Invoice #	Customer Name	Customer Address	Invoice Date	Invoice Amount
			Gross Total	$	0.00
			Advance Rate		80	%
			Net Cash Advance	$	0.00

Comments:

The Borrower (“Borrower”) named an this Advance Request & Invoice Transmittal (“Transmittal”), hereby delivers this Transmittal to Silicon Valley Bank (“Bank”) pursuant to a Second Amended and Restated Loan and Security Agreement between Borrower and Bank (“Agreement”). By forwarding this Transmittal along with the Accounts Receivable Aging or copies of the invoices listed herein, Borrower is requesting Bank to make advances (“Advances”) based on such receivables in accordance with the terms of the Agreement and hereby represents and warrants that the request has been made by an authorized representative of Borrower with full right, power and authority to deliver this Transmittal to

Bank. Borrower acknowledges that such Advances (together with all fees, interest and other charges associated with such Advances) shall be repaid in accordance with the terms of the Agreement. Borrower hereby ratifies and reaffirms all of its representations and warranties in the Agreement, including, without limitation, Borrower’s representations set forth in Section 5.3 thereof.

For SVB Use Only	Disbursement Instructions
Date	SVB DDA #
AM Approval	Wire To
PM/TL Approval	ADA #
SCO Approval	Account #

-2-

EXHIBIT C-2

Loan Payment/Overadvance Request Form

DEADLINE FOR SAME DAY PROCESSING IS NOON P.S.T.*

Fax To: Date:                     

LOAN PAYMENT	[Insert Borrower Name]
From Account #                                                                                                                                           (Deposit Account #)	To Account #:                                                                                                                                              (Loan Account #)
Principal $	and/or Interest $
Authorized Signature:	Phone Number:
Print Name/Title:

  Loan Advance

  Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

From Account #	To Account #
(Loan Account #)	(Deposit Account # )

All Borrower’s representations and warranties in the Second Amended and Restated Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance, provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof, and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

Authorized Signature:	Phone Number:
Print Name/Title:

  OUTGOING WIRE REQUEST:

  Complete only if all or a portion of funds from the loan advance above is to be wired.

  Deadline for same day processing is noon, P.S.T.

Beneficiary Name:	Amount of Wire: $
Beneficiary Bank:	Account Number:
City and State:
Beneficiary Bank Transit (ABA) #:	Beneficiary Bank Code (Swift, Sort, Chip, etc.)                                                   (For International Wire Only)

Intermediary Bank:	Transit (ABA) #:
For Further Credit to:
Special Instruction:

* Unless otherwise provided for an Advance bearing interest at LIBOR.

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreement(s) covering funds transfer service(s), which agreement(s) were previously received and executed by me (us)
Authorized Signature:	2nd Signature (if required):
Print Name/Title:	Print Name/Title:
Telephone #:	Telephone #:

-2-

EXHIBIT D

BORROWING BASE CERTIFICATE

Borrower:	BlueArc Corporation
Lender:	Silicon Valley Bank
Facility Amount:	$12,500,000

ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of	$
2. Additions (please explain on reverse)	$
3. TOTAL ACCOUNTS RECEIVABLE	$
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due	$
5. Balance of 50% over 90 day accounts	$
6. Credit balances over 90 days	$
7. Foreign Accounts	$
8. Governmental Accounts	$
9. Contra Accounts	$
10. Promotion or Demo Accounts	$
11. Intercompany/Employee Accounts	$
12. Disputed Accounts	$
13. Deferred Revenue	$
14. Other (please explain on reverse)	$
15. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS	$
16. Eligible Accounts (#3 minus #15)	$
17. ELIGIBLE AMOUNT OF ACCOUNTS (80% of #16)	$
PURCHASE ORDERS
18. Purchase Order Sublimit	$	1,500,000
19. Eligible Purchase Orders as of	$
20. Eligible Amount of Purchase Orders (70% of #19)	$
21. Eligible Purchase Order Availability [less of #18 and #20]
OVERADVANCES
22. Overadvance Sublimit	$	500,000
BALANCES
23. Maximum Loan Amount	$	12,500,000
24. Total Funds Available [Lesser of #23 or (#17 plus #21 plus #22)]	$
25. Present outstanding Advances	$
26. RESERVE POSITION (#24 minus #25)	$

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Second Amended and Restated Loan and Security Agreement between the undersigned and Silicon Valley Bank.

COMMENTS:		BANK USE ONLY
By:		Received by:
	Authorized Signer		AUTHORIZED SIGNER
Date:		Date:
		Verified:
			AUTHORIZED SIGNER
		Date:
		Compliance Status:             Yes     No

COMMENTS

-2-

EXHIBIT E

BLUEARC CORPORATION

INVESTMENT OBJECTIVE AND POLICY GUIDELINES

I. Guidelines

The purpose of this policy and guidelines is to establish a clear understanding between BlueArc Corp (the “Company”) and its investment advisors (the “Advisor”), of the management of the Company’s cash assets. The Company is presently utilizing two such advisors. This policy provides an overall philosophy that is specific for Advisor to know what is expected, but sufficiently flexible to allow for changing economic conditions and securities markets. The policy establishes the investment restrictions for the Advisor, and the procedures for policy and performance review.

II. Fund Objective

The cash investment balances represent working capital funds of Company. It is essential that these assets be invested in a highly quality portfolio which: 1) preserves principal; 2) meets liquidity needs; 3) delivers good yields in relationship to these guidelines and market conditions; 4) avoids inappropriate concentrations of investments; and 5) provides direct fiduciary control of all investments and cash.

III. Maximum Maturity

The portfolio will be invested in short-term instruments that have remaining maturities no longer that 13 months. However, the average maturity of the portfolio will be maintained at 9 months or less, unless specifically instructed in writing by the Company.

IV. Liquidity Needs

BlueArc’s availability of surplus funds for investment will vary seasonably during the year. The Company will provide periodic updates on forecasted cash needs to guide Advisor in managing the liquidity. Further, the portfolio will be invested such that $2,000,000 is available every 30 days for each advisor (currently $4,000,000).

V. Types And Characteristics Of Assets Approved For Investment

All assets selected by Advisor must have a readily ascertainable market value and must be readily marketable. The type of assets approved for investment are listed below. Any other type of asset may not be invested in without prior written consent.

a. Securities and/or obligations issued or guaranteed by the U.S. Government and its Federal Agencies.

b. Time Deposits, Certificates of Deposit and Bankers Acceptances including Eurodollar denominated and Yankee issues. Investments must be rates Al /P1 or higher by either Standard & Poor’s or Moody’s.

c. Corporate securities issued by foreign or domestic corporations which pay in U.S. dollars. Commercial paper must be rated Al/P1 or higher and Corporate Notes, Auction Floating Rate Notes and Medium Term Notes must have a long-term rating of A or better by either Standard & Poor’s or Moody’s.

d. Auction-Rate Preferred Stocks — Industrial auction-rate preferred must be rated A or better by either Standard & Poor’s or Moody’s.

e. Repurchase agreements with member banks of the Federal Reserve System and primary dealers limited to United State Government securities. The market value of the securities used as collateral must exceed the principal and interest due under the agreement by at least 102%.

f. Cash management funds that strictly invest in the above, and maintain a $1 Net Asset Value, are AAA rated, and have an average maturity of 90 days or less.

VI. Concentration Limits

Diversification of the portfolio will be a tool for minimizing risk while maintaining liquidity. The following parameters will be adhered to in managing the portfolio:

a. Obligations of the U.S. Government and U.S. Federal Agencies have no concentration limits.

b. A maximum at the time of purchase of 10% or $1,000,000, whichever is greater, will be invested in any one issuer except for the U.S. Government,

VII. Responsibilities Of Advisor

a. Adherence to the statement of Investment Objectives and Policy Guidelines.

i. Advisor is expected to respect and observe the specific limitations, guidelines, attitudes, and philosophies stated herein or as expressed in any written amendments or instructions.

ii. Advisor’s acceptance of the responsibility of managing these funds will constitute a ratification of this Statement, affirming its belief that it is realistically capable of achieving the investment guidelines and limitations stated herein.

-2-

b. Discretionary Authority

i. Advisor will be responsible for making all investment decisions on a discretionary basis regarding all assets placed under its jurisdiction. Such “discretion” includes decisions to buy, hold and sell securities (including cash equivalents) in amounts and proportions that are reflective of Advisors current investment strategy and compatible with investment guidelines.

c. Communication

i. Advisor will be expected to keep the Company informed on a timely basis of major changes in its investment outlook, investment strategy, asset allocation, and other matters affecting its investment policies or philosophy.

ii. Whenever Advisor believes that any particular guideline should be altered or deleted, it will be Advisor’s responsibility to initiate written communications with the Company expressing its views and recommendations.

d. Reporting

i. The Company will receive timely notices of transaction activity as well as monthly performance reports.

ii. Any information needs to assist the Company in conducting an evaluation of portfolio management will be expected on a timely basis.

e. Compliance with Appropriate Legislation.

i. Advisor is responsible for strict compliance with federal and state law as it pertains to its duties and responsibilities as a fiduciary.

ii. Advisor must be registered under the Investment Advisory Act of 1940.

VIII. Trading

All purchases and sales will be executed at the best net price with the principals dealers and banks in the particular securities. U.S. Government, U.S. Federal Agency and repurchase agreement securities brokers will be limited to the list of Primary Government Securities Dealers published by the Federal Reserve Bank. All securities purchased will be in the name of the account or the nominee name of the custodian bank.

IX. Evaluation And Review

-3-

a. Advisor will be evaluated against its investment objectives. The Company believes that ongoing qualitative evaluation of the portfolio management is important in the protection of assets and in the achievement of our objectives in the future years. Therefore evaluation of Advisor’s performance may include measurements based on both quantitative and qualitative standards.

b. The Company will hold discussions at least quarterly to review the following with the Advisor:

i. Current portfolio structure and asset allocation policy.

ii. Investment results in context with the goals, objectives and policies.

c. The company reserves the right to change Advisors at any time. Evaluation criteria the Company wishes to focus on are the following:

i. Consistency of approach - having a visible philosophy and adhering to a stated investment strategy.

ii. Adherence to risk tolerance and investment guidelines.

iii. Performance relative to the appropriate benchmarks.

d. Any large deviation from expected results or performance guidelines may require the consideration to alter and amend the investment policies. The Company will encourage Advisor to present recommendations in writing as to changes they believe will be prudently beneficial.

Approved By:

BlueArc Corporation

Date:

-4-

INVOICE FOR FEES AND/OR EXPENSES

(Invoice Number 118096)

BORROWER:	BLUEARC CORPORATION
FED. TAX ID #	77-0526726
LOAN OFFICER:	TOM SMITH
DATE:	MARCH 27, 2009

LOAN FEES:	Loan Fee	$	20,000
	Legal Fees	$	4,400
	Legal Expenses*	$	700
	TOTAL	$	25,100

* Out of pocket expenses covering the fees for good standing certificates, UCC, federal/state tar and judgment lien searches and UCC financing statement.

Please indicate the method of payment:

¨ A check for the total is attached

x Debit DDA#              for the total amount

¨ Loan Proceeds

Borrower:

BlueArc Corporation
By:		Date:
	Authorized Signer
Lender:
Silicon Valley Bank
By:		Date:

EX-10.14A

Exhibit 10.14A

FIRST AMENDMENT TO

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into this 26 day of April, 2010, by and between SILICON VALLEY BANK (“Bank”) BLUEARC CORPORATION, a Delaware corporation (“Borrower”) whose address is 50 Rio Robles, San Jose, California 95134.

RECITALS

A. Bank and Borrower have entered into that certain Second Amended and Restated Loan and Security Agreement dated as of March 30, 2009 (as the same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) extend the Maturity Date, and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Section 13 (Definitions). The following term and its definition set forth in Section 13.1 is amended in its entirety and replaced with the following:

“Maturity Date” is April 30, 2011.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or

(b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document,

3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment; Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3 The organizational documents of Borrower delivered to Bank on the Closing Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

-2-

5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of a non-refundable amendment fee in an amount equal to Ten Thousand Dollars ($10,000), (c) Bank’s receipt of the Acknowledgment of Amendment and Reaffirmation of Intercreditor Agreement substantially in the form attached hereto as Schedule 1, duly executed and delivered by Gold Hill Capital 2008, LP, and (d) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment.

[Signature page follows.]

-3-

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

BANK
SILICON VALLEY BANK
By:	/s/ Ray Aguilar

Name: Ray Aguilar

Title: RM

BORROWER
BLUEARC CORPORATION
By:	/s/ Rick Martig

Name: Rick Martig

Title: CFO

[Signature Page to First Amendment to Second Amended and Restated Loan and Security Agreement]

Schedule 1

ACKNOWLEDGMENT OF AMENDMENT

AND REAFFIRMATION OF INTERCREDITOR AGREEMENT

Section 1. Gold Hill Capital 2008, LP (“Gold Hill”) hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of the First Amendment to Second Amended and Restated Loan and Security Agreement dated as of even date herewith (the “Amendment”).

Section 2. Gold Hill hereby (a) consents to the Amendment, and (b) agrees that the Intercreditor Agreement dated March 30, 2009 by and between Gold Hill and Bank (the “Intercreditor Agreement”) shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of the Amendment or any other document or instrument delivered in connection herewith.

Section 3. Gold Hill represents and warrants that, after giving effect to the Amendment, all representations and warranties given by Gold Hill contained in the Intercreditor Agreement are true, accurate and complete as if made the date hereof.

Dated as of April     , 2010

GOLD HILL:

GOLD HILL CAPITAL 2008, LP
By: Gold Hill Capital 2008, LLC, General Partner
By:	/s/ Rob Helm
	Name:	Rob Helm
	Title:	Managing Director
		Gold Hill Capital

Schedule 1

EX-10.14B

Exhibit 10.14B

SECOND AMENDMENT TO

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into this      day of November, 2010, but is effective as of November 1, 2010, by and between SILICON VALLEY BANK (“Bank”) and BLUEARC CORPORATION, a Delaware corporation (“Borrower”) whose address is 50 Rio Robles, San Jose, California 95134.

RECITALS

A. Bank and Borrower have entered into that certain Second Amended and Restated Loan and Security Agreement dated as of March 30, 2009, as amended by that certain First Amendment to Second Amended and Restated Loan and Security Agreement by and between Bank and Borrower dated as of April 26, 2010 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) extend the Maturity Date, and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Section 2.2.3 (Unused Fee). Section 2.2.3 of the Loan Agreement is amended in its entirety and replaced with the following:

2.1.1 Unused Fee. A fee (the “Unused Fee”), payable monthly, in arrears, on a calendar year basis, in an amount equal to:

(a) if Borrower has Nine Million Dollars ($9,000,000) or more of Unrestricted Cash, then no Unused Fee will apply;

(b) if Borrower has Four Million Five Hundred Thousand Dollars ($4,500,000) or more but less than Nine Million Dollars ($9,000,000) of Unrestricted Cash, one-quarter of one percent (0.25%) per annum of the average unused portion of the Facility Amount, as determined by Bank; and

(c) if Borrower has less than Four Million Five Hundred Thousand Dollars ($4,500,000) of Unrestricted Cash, three eights of one percent (0.375%) per annum of the average unused portion of the Facility Amount, as determined by Bank.

2.2 Section 13 (Definitions). The following term and its definition set forth in Section 13.1 is amended in its entirety and replaced with the following:

“Applicable Rate” is a per annum rate equal to:

(a) if Borrower has Nine Million Dollars ($9,000,000) or more of Unrestricted Cash, the Prime Rate plus one-half of one percent (0.50%);

(b) if Borrower has Four Million Five Hundred Thousand Dollars ($4,500,000) or more but less than Nine Million Dollars ($9,000,000) of Unrestricted Cash, the Prime Rate plus two percent (2.00%); and

(c) if Borrower has less than Four Million Five Hundred Thousand Dollars ($4,500,000) of Unrestricted Cash, the Prime Rate plus two and one-half percent (2.50%).

Adjustments in the Applicable Rate shall take place on the day following a change in the Unrestricted Cash (as stated above) and shall remain in effect until a subsequent change in the Unrestricted Cash. If there is an adjustment to the Applicable Rate due to a decrease in of Unrestricted Cash (a “Downward Adjustment”), Borrower shall not be entitled to an adjustment in the Applicable Rate due to an increase in Unrestricted Cash prior to the first day of the month following the date of such Downward Adjustment.

“Maturity Date” is October 31, 2011.

“Unused Fee” is defined in Section 2.2.3.

2.3 Compliance Certificate. Exhibit B of the Loan Agreement is replaced in its entirety with Exhibit B attached hereto. From and after the date of this Amendment, all references in the Loan Agreement to the Compliance Certificate shall be deemed to refer to Exhibit B attached hereto.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent

-2-

to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3 The organizational documents of Borrower delivered to Bank on the Closing Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

-3-

5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective as of November 1, 2010, upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of a non-refundable amendment fee in an amount equal to Five Thousand Dollars ($5,000), (c) Bank’s receipt of the Acknowledgment of Amendment and Reaffirmation of Intercreditor Agreement substantially in the form attached hereto as Schedule 1, duly executed and delivered by Gold Hill Capital 2008, LP, and (d) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment.

[Signature page follows.]

-4-

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

BANK

SILICON VALLEY BANK

By:

Name:

Title:

BORROWER

BLUEARC CORPORATION

By: /s/ Rick Martig

Name: Rick Martig

Title: CFO

Schedule 1

ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF INTERCREDITOR AGREEMENT

Section 1. Subject to Section 4 hereof, Gold Hill Capital 2008, LP (“Gold Hill”) hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of the Second Amendment to Second Amended and Restated Loan and Security Agreement dated as of even date herewith (the “Amendment”).

Section 2. Subject to Section 4 hereof, Gold Hill hereby (a) consents to the Amendment, and (b) agrees that the Intercreditor Agreement dated March 30, 2009 by and between Gold Hill and Bank (the “Intercreditor Agreement”) shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of the Amendment or any other document or instrument delivered in connection herewith.

Section 3. Gold Hill represents and warrants that, after giving effect to the Amendment, all representations and warranties given by Gold Hill contained in the Intercreditor Agreement are true, accurate and complete as if made the date hereof.

Section 4. Gold Hill’s acknowledgments, confirmations, consents and agreements herein are subject to the maximum principal amount of the Bank Loan Agreement (as defined in the Intercreditor Agreement) and SVB Services (as defined in the Intercreditor Agreement) having not been increased since the execution and delivery of the Intercreditor Agreement.

Dated as of November     , 2010, but effective as of November 1, 2010.

GOLD HILL:

GOLD HILL CAPITAL 2008, LP

By: Gold Hill Capital 2008, LLC, General Partner

By:	/s/ Tim Waterson
	Name:	Tim Waterson
	Title:	Partner
		Gold Hill Capital

EXHIBIT B

SILICON VALLEY BANK

SPECIALTY FINANCE DIVISION

Compliance Certificate

I, as authorized officer of Bluearc Corporation (“Borrower”) certify under the Second Amended and Restated Loan and Security Agreement (the “Agreement”) between Borrower and Silicon Valley Bank (“Bank”) as follows (all capitalized terms used herein shall have the meaning set forth in the Agreement):

Borrower represents and warrants for each Financed Receivable:

Each Financed Receivable is an Eligible Account or Eligible Purchase Order.

Borrower is the owner with legal right to sell, transfer, assign and encumber such Financed Receivable;

The correct amount is on the Advance Request and Invoice Transmittal or Purchase Order Transmittal and is not disputed;

Payment is not contingent on any obligation or contract pertaining to an Eligible Account and Borrower has fulfilled all its obligations as of the date of the Advance Request and Invoice Transmittal or Purchase Order Transmittal;

Each Financed Receivable which is an Eligible Account is based on an actual sale and delivery of goods and/or services rendered and is due to Borrower;

Each Financed Receivable is not past due or in default, has not been previously sold, assigned, transferred, or pledged and is free of any liens, security interests and encumbrances other than Permitted Liens;

There are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount;

It reasonably believes no Account Debtor is insolvent or subject to any Insolvency Proceedings;

It has not filed or had filed against it Insolvency Proceedings and does not anticipate any filing;

Bank has the right to endorse and/ or require Borrower to endorse all payments received on Financed Receivables and all proceeds of Collateral.

No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement contained in the certificates or statement not misleading.

Exhibit B - Page 1

Additionally, Borrower represents and warrants as follows:

Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s organizational documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change.

Borrower has good title to the Collateral, free of Liens except Permitted Liens. All inventory is in all material respects of good and marketable quality, free from material defects.

Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to obtain or make such consents, declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change.

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

Reporting Covenant	Required	Complies
Monthly financial statements with Compliance Certificate	Monthly within 30 days	Yes No
Annual financial statement (CPA Audited) + CC	FYE within 200 days	Yes No
10-K, 10-Q and 8-K	All within 5 days of filing, 10-Qs FQE within 95 days and 10-Ks FYE within 95 days	Yes No
Borrowing Base Certificate, A/R & A/P Agings and Purchase Order Reports	Monthly within 30 days	Yes No
Deferred Revenue Report	Monthly within 30 days	Yes No
Unrestricted Cash	Applicable Rate	Applies
Greater than or equal to $9,000,000	Prime + 0.50%	Yes No

Exhibit B - Page 2

Greater than or equal to $4,500,000 but less than $9,000,000	Prime + 2.00%	Yes No
Less than $4,500,000	Prime + 2.50%	Yes No
Unrestricted Cash	Collateral Handling Fee	Applies
Greater than or equal to $4,500,000	None	Yes No
Less than $4,500,000	0.75%	Yes No
Unrestricted Cash	Unused Fee	Applies
Greater than or equal to $9,000,000	No Unused Fee	Yes No
Greater than or equal to $4,500,000 but less than $9,000,000	0.25% per annum of the average unused portion of the Facility Amount	Yes No
Less than $4,500,000	0.375% per annum of the average unused portion of the Facility Amount	Yes No

[Signature Appears on the Following Page]

Exhibit B - Page 3

All representations and warranties in the Agreement are true and correct in all material respects on this date, and the Borrower represents that there is no existing Event of Default.

Sincerely,

Signature  /s/ Rick Martig

Title  CFO

Date  11/14/10

Exhibit B - Page 4

EX-10.14C

Exhibit 10.14C

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into this 2^nd day of June, 2011 (the “Amendment Closing Date”), by and between SILICON VALLEY BANK (“Bank”) and BLUEARC CORPORATION, a Delaware corporation (“Borrower”) whose address is 50 Rio Robles, San Jose, California 95134.

RECITALS

A. Bank and Borrower have entered into that certain Second Amended and Restated Loan and Security Agreement dated as of March 30, 2009, as amended by that certain First Amendment to Second Amended and Restated Loan and Security Agreement by and between Bank and Borrower dated as of April 26, 2010, and as amended by that certain Second Amendment to Second Amended and Restated Loan and Security Agreement by and between Bank and Borrower dated as of November 19, 2010, but effective as of November 1, 2010 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) extend the Maturity Date, and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Section 2.2.3 (Unused Fee). Section 2.2.3 of the Loan Agreement is amended in its entirety and replaced with the following:

2.2.3 Unused Fee. A fee (the “Unused Fee”), payable monthly, in arrears, on a calendar year basis, in an amount equal to one-quarter of one percent (0.25%) per annum of

the average unused portion of the Facility Amount, as determined by Bank. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Fee previously earned by Bank pursuant to this Section notwithstanding any termination of the Agreement.

2.2 Section 13 (Definitions). The following term and its definition set forth in Section 13.1 is amended in its entirety and replaced with the following:

“Prime Rate” is the “ prime rate” of interest, as published from time to time by The Wall Street Journal in the “Money Rates” section of its Western Edition newspaper. In the event The Wall Street Journal or such rate is no longer published or available, Bank shall select a comparable rate.

“Maturity Date” is December 31, 2012.

2.3 Amendment Fee. Borrower shall pay to Bank a fully-earned, non-refundable amendment fee as follows:

(a) Twelve Thousand Five Hundred Dollars ($12,500) paid on the Amendment Closing Date; and

(b) Twelve Thousand Five Hundred Dollars ($12,500) paid on the first anniversary of the Amendment Closing Date.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

-2-

4.3 The organizational documents of Borrower delivered to Bank on the Closing Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of a non-refundable amendment fee due on the Amendment Closing Date pursuant to Section 2.3 of this Amendment, (c) Bank’s receipt of the Acknowledgment of Amendment and Reaffirmation of Intercreditor Agreement substantially in the form attached hereto as Schedule 1, duly executed and delivered by Gold Hill Capital 2008, LP, and (d) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment.

[Signature page follows.]

-3-

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

BANK
SILICON VALLEY BANK
By:	/s/ Ray Aguilar

Name: Ray Aguilar

Title:	RM
BORROWER

BLUEARC C ORATION
By:	/s/ Rick Martig

Name: Rick Martig

Title: CFO

-4-

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF BLUEARC CORPORATION

BlueArc Germany GmbH (Germany)

BlueArc UK Limited (U.K.)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-1 of BlueArc Corporation of our report dated June 23, 2011 relating to the financial statements of BlueArc Corporation, which appears in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

San Jose, California

June 23, 2011