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ACCRUE SOFTWARE, INC.
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION....................................................... 1
1.1 Definitions................................................................. 1
1.2 Accounting Terms............................................................ 7
2. LOAN AND TERMS OF PAYMENT.......................................................... 7
2.1 Advances.................................................................... 7
2.2 Overadvances................................................................ 11
2.3 Interest Rates, Payments, and Calculations.................................. 11
2.4 Crediting Payments.......................................................... 11
2.5 Fees........................................................................ 11
2.6 Additional Costs............................................................ 12
3. CONDITIONS OF LOANS................................................................ 12
3.1 Conditions Precedent to Initial Advance..................................... 12
3.2 Conditions Precedent to all Advances........................................ 13
4. CREATION OF SECURITY INTEREST...................................................... 13
4.1 Grant of Security Interest.................................................. 13
4.2 Delivery of Additional Documentation Required............................... 13
4.3 Right to Inspect............................................................ 13
5. REPRESENTATIONS AND WARRANTIES..................................................... 14
5.1 Due Organization and Qualification.......................................... 14
5.2 Due Authorization; No Conflict.............................................. 14
5.3 No Prior Encumbrances....................................................... 14
5.4 Bona Fide Eligible Accounts................................................. 14
5.5 Merchantable Inventory...................................................... 14
5.6 Intellectual Property....................................................... 14
5.7 Name; Location of Chief Executive Office.................................... 14
5.8 Litigation.................................................................. 14
5.9 No Material Adverse Change in Financial Statements.......................... 15
5.10 Solvency.................................................................... 15
5.11 Regulatory Compliance....................................................... 15
5.12 Environmental Condition..................................................... 15
5.13 Taxes....................................................................... 15
5.14 Subsidiaries................................................................ 15
5.15 Government Consents......................................................... 15
5.16 Full Disclosure............................................................. 15
6. AFFIRMATIVE COVENANTS.............................................................. 16
6.1 Good Standing............................................................... 16
6.2 Government Compliance....................................................... 16
6.3 Financial Statements, Reports, Certificates................................. 16
6.4 Inventory; Returns.......................................................... 17
6.5 Taxes....................................................................... 17
6.6 Insurance................................................................... 17
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6.7 Principal Depository........................................................ 17
6.8 Quick Ratio................................................................. 17
6.9 Tangible Net Worth.......................................................... 17
6.10 Minimum Liquidity/Debt Service Coverage..................................... 17
6.11 Registration of Intellectual Property Rights................................ 18
6.12 Further Assurances.......................................................... 18
7. NEGATIVE COVENANTS................................................................. 18
7.1 Dispositions................................................................ 19
7.2 Change in Business.......................................................... 19
7.3 Mergers or Acquisitions..................................................... 19
7.4 Indebtedness................................................................ 19
7.5 Incumbrances................................................................ 19
7.6 Distributions............................................................... 19
7.7 Investments................................................................. 19
7.8 Transactions with Affiliates................................................ 19
7.9 Intellectual Property Agreements............................................ 19
7.10 Subordinated Debt........................................................... 20
7.11 Inventory................................................................... 20
7.12 Compliance.................................................................. 20
8. EVENTS OF DEFAULT.................................................................. 20
8.1 Payment Default............................................................. 20
8.2 Covenant Default............................................................ 20
8.3 Material Adverse Change..................................................... 20
8.4 Attachment.................................................................. 20
8.5 Insolvency.................................................................. 21
8.6 Other Agreements............................................................ 21
8.7 Subordinated Debt........................................................... 21
8.8 Judgments................................................................... 21
8.9 Misrepresentations.......................................................... 21
9. BANK'S RIGHTS AND REMEDIES......................................................... 21
9.1 Rights and Remedies......................................................... 21
9.2 Power of Attorney........................................................... 22
9.3 Accounts Collection......................................................... 23
9.4 Bank Expenses............................................................... 23
9.5 Bank's Liability for Collateral............................................. 23
9.6 Remedies Cumulative......................................................... 23
9.7 Demand; Protest............................................................. 23
10. NOTICES............................................................................ 24
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................................... 24
12. GENERAL PROVISIONS................................................................. 24
12.1 Successors and Assigns...................................................... 25
12.2 Indemnification............................................................. 25
12.3 Time of Essence............................................................. 25
12.4 Severability of Provisions.................................................. 25
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12.5 Amendments in Writing, Integration.......................................... 25
12.6 Counterparts................................................................ 25
12.7 Survival.................................................................... 25
12.8 Confidentiality............................................................. 25
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This LOAN AND SECURITY AGREEMENT (the "Agreement") is entered into as of
September 19, 1997, by and between SILICON VALLEY BANK ("Bank") and ACCRUE
SOFTWARE, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a cash advance under the
Revolving Facility.
"Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Cash Management Sublimit" has the meaning set forth in
Section 2.1.3 hereof.
"Closing Date" means the date of this Agreement.
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"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Line" means One Million Dollars ($1,000,000).
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Current Liabilities" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of Borrower or
any Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed
at the end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay
within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty
percent (50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is
an officer, employee, or agent of Borrower;
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(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is
an Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does
not have its principal place of business in the United States, except for
Eligible Foreign Accounts, and Accounts arising from products shipped to or
services provided to branches or offices located in the United States of any
account debtor that does not have its principal place of business in the United
States;
(g) Accounts with respect to which the account debtor is
the United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to
the account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank, except for
the Accounts of Apple Computer and Sun Microsystems, for which the applicable
percentage shall be thirty-five percent (35%).
(j) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductible(s)
which may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"Foreign Exchange Reserve" has the meaning set forth in
Section 2.1.3 herein.
"GAAP" means generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed
money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to
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surety bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease obligations and
(d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by
or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Letter of Credit" or "Letters of Credit" has the meaning
set forth in Section 2.1.1 herein.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
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"Loan Documents" means, collectively, this Agreement, any
note or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect
on (i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means June 18, 2001.
"Negotiable Collateral" means all of Borrower's present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Indebtedness secured by a Lien described in clause (c)
of Permitted Liens, provided the principal amount of such Indebtedness does not
exceed the lesser of the cost or fair market value of the Equipment financed
with the proceeds of such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(f) Other Indebtedness in an aggregate outstanding amount
not exceeding $100,000.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
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(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank and other investments in the aggregate amount
not exceeding $100,000.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Bank's security interests, unless required by law;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Leases or subleases and licenses or sublicenses
granted to others in the ordinary course of Borrower's business not interfering
in any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any lease
or license provided that such leases, subleases, licenses and sublicenses do not
prohibit the grant of the security interest granted hereunder; and
(e) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (d) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the date immediately
preceding the first anniversary of the date of this Agreement.
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"Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances, as specified in Section 2.1
hereof.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower
that is subordinated to the debt owing by Borrower to Bank on terms acceptable
to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which
(i) any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the consolidated total assets of Borrower
and its Subsidiaries minus, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, and (c) all reserves
not already deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"Trademarks" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of Assignor
connected with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
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2. LOAN AND TERMS OF PAYMENT
2.1 Advances
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of (i) the Committed Line less amounts specified in the
Cash Management Services Agreement or (ii) the Borrowing Base, minus in each
case the face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) and the Foreign Exchange Reserve. For purposes
of this Agreement, "Borrowing Base" shall mean an amount equal to One Hundred
Fifty Thousand Dollars ($150,000), plus eighty percent (80%) of Eligible
Accounts. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1 may be repaid and reborrowed at any time
without penalty, in whole or in part, prior to the Revolving Maturity Date.
(b) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
California time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer, or without instructions if in Bank's discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer, and Borrower shall indemnify
and hold Bank harmless for any damages or loss suffered by Bank as a result of
such reliance. Bank will credit the amount of Advances made under this Section
2.1 to Borrower's deposit account.
(c) The Revolving Facility shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 shall
be immediately due and payable.
2.1.1 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued letters of credit (each a
"Letter of Credit," collectively, the "Letters of Credit") for the account of
Borrower in an aggregate face amount not to exceed the lesser of (i) the
Committed Line minus the amount specified in the Cash Management Services
Agreement or (ii) the Borrowing Base minus in each case the sum of the then
outstanding principal balance of the Advances, the face amount outstanding
Letters of Credit and the Foreign Exchange Reserve; provided that the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) shall not in any case exceed Two Hundred Fifty Thousand
Dollars ($250,000). Each such Letter of Credit shall have an expiry date no
later than the Revolving Maturity Date. All such Letters of Credit shall be, in
form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of application and letter of
credit agreement. All amounts actually paid by Bank in respect of a letter of
credit shall, when paid, constitute an Advance under this Agreement.
(b) The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrower may request that Bank issue a Letter
of Credit payable in a currency other than United States Dollars. If a demand
for payment is made under any such Letter of Credit, Bank shall treat such
demand as an advance to Borrower of the equivalent of the amount thereof (plus
cable charges) in
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United States currency at the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for cable transfer to the country
of which it is the currency.
(d) Upon the issuance of any Letter of Credit
payable in a currency other than United States Dollars, Bank shall create a
reserve under the Committed Line for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Line shall be reduced by the amount of
such reserve for so long as such Letter of Credit remains outstanding.
2.1.2 Foreign Exchange Contract; Foreign Exchange
Settlements.
(a) Subject to the terms of this Agreement,
Borrower may enter into foreign exchange contracts (the "Exchange Contracts")
not to exceed an aggregate amount of $250,000 (the "Contract Limit"), pursuant
to which Bank shall sell to or purchase from Borrower foreign currency on a spot
or future basis. Borrower shall not request any Exchange Contracts at any time
it is out of compliance with any of the provisions of this Agreement. All
Exchange Contracts must provide for delivery of settlement on or before the
Revolving Maturity Date. The amount available under the Committed Line at any
time shall be reduced by the following amounts (the "Foreign Exchange Reserve")
on any given day (the "Determination Date"): (i) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed more than
two business days after the Determination Date, ten percent (10%) of the gross
amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
business days after the Determination Date, one hundred percent (100%) of the
gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the
Exchange Contracts at any time (a) that an Event of Default occurs or (b) that
there is no sufficient availability under the Committed Line and Borrower does
not have available funds in its bank account to satisfy the Foreign Exchange
Reserve. If Bank terminates the Exchange Contracts, and without limitation of
any applicable indemnities, Borrower agrees to reimburse Bank for any and all
fees, costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross
amount of all Exchange Contracts on which delivery is to be effected and
settlement allowed in any two business day period to be more than $250,000 (the
"Settlement Limit"), nor shall Borrower permit the total gross amount of all
Exchange Contracts to which Borrower is a party, outstanding at any one time, to
exceed the Contract Limit. Notwithstanding the above, however, the amount which
may be settled in any two (2) business day period may be increased above the
Settlement Limit up to, but in no event to exceed, the amount of the Contract
Limit under either of the following circumstances:
(i) if there is sufficient availability
under the Committed Line in the amount of the Foreign Exchange Reserve as of
each Determination Date, provided that Bank in advance shall reserve the full
amount of the Foreign Exchange Reserve against the Committed Line; or
(ii) if there is insufficient availability
under the Committed Line, as to settlements within any two (2) business day
period, provided that Bank, in its sole discretion, may: (A) verify good funds
overseas prior to crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's deposit account
with Bank prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as an advance under the
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Committed Line, or to debit Borrower's account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank and hold it harmless from and against any and
all claims, debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, reasonable attorneys' fees of counsel
of Bank's choice), of every nature and description which it may sustain or
incur, based upon, arising out of, or in any way relating to any of the Exchange
Contracts or any transactions relating thereto or contemplated thereby.
2.1.3 Cash Management Sublimit. Subject to the terms and
conditions of this Agreement, Borrower may utilize up to an aggregate amount not
to exceed Two Hundred Fifty Thousand Dollars ($250,000) (the "Cash Management
Sublimit") for cash management services provided by Bank, which services may
include merchant services, PC-ACH, direct deposit of payroll, business credit
card, Firstax, and other related check cashing services as defined in that
certain Cash Management Services Agreement entered into by Bank and Borrower
from time to time (a "Cash Management Service", or the "Cash Management
Services"). Any amounts actually paid by Bank in respect of a Cash Management
Service or Cash Management Services shall, when paid, constitute an Advance
under the Committed Line.
2.1.4 Equipment Advances.
(a) At any time from the date hereof through June
18, 1998 (the "Equipment Availability Date"), Borrower may from time to time
request advances (each an "Equipment Advance" and, collectively, the "Equipment
Advances") from Bank in an aggregate principal amount of up to One Million
Dollars ($1,000,000). The Equipment Advances shall be used to purchase Equipment
approved from time to time by Bank (which shall in any case have been purchased
since June 30, 1996) and shall not exceed one hundred percent (100%) of the cost
of such Equipment, excluding installation expense, freight discounts, warranty
charges and taxes. Up to twenty percent (20%) of the Equipment Advances may be
used for software and leasehold improvements or other soft costs approved by
Bank. Each Equipment Advance shall be in a minimum amount of Fifty Thousand
Dollars ($50,000).
(b) Interest shall accrue from the date of each
Equipment Advance at the rate specified in Section 2.3(a), and shall be payable
monthly on the last Business Day of each month for each month through June,
1998. The Equipment Advance or Equipment Advances that are outstanding on the
Equipment Availability Date will be payable in thirty-six (36) equal monthly
installments of principal, plus accrued interest, beginning on July 18, 1998 and
continuing through the Maturity Date, on which date the entire principal amount
and all accrued but unpaid interest shall be due and payable. The principal and
all accrued but unpaid interest under the Equipment Advance or Equipment
advances may be repaid at any time without penalty, in whole or in part, prior
to the Maturity Date.
(c) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission received no later than 3:00 p.m. California time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be in substantially the form of Exhibit B. The notice shall be
signed by a Responsible Officer and include a copy of the invoice for the
Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the
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amount of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 Interest Rates, Payments, and Calculations
(a) Interest Rate. Except as set forth in Section 2.3(b),
any Advances shall bear interest, on the average Daily Balance, at a rate equal
to one-half (0.5) percentage point above the Prime Rate, and all Equipment
Advances shall bear interest at a rate equal to one (1.0) percentage point above
the Prime Rate.
(b) Default Rate. All Obligations shall bear interest,
from and after the date Borrower receives written notice of the occurrence of an
Event of Default, at a rate equal to five (5) percentage points above the
interest rate applicable immediately prior to the occurrence of the Event of
Default.
(c) Payments. Except as specified in Section 2.1.4(b),
interest hereunder shall be due and payable on the eighteenth calendar day of
each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower's
deposit accounts or against the Committed Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable hereunder. Bank
will notify Borrower of all debits and charges that Bank makes against
Borrower's accounts in the ordinary course of Bank's operations. Any interest
not paid when due shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder.
(d) Computation. In the event the Prime Rate is changed
from time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. Bank shall notify
Borrower of the change in the ordinary course of Borrower's business. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension, provided however, that no late
fee shall accrue because the relevant date is not a Business Day.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Five Thousand
Dollars ($5,000), which fee shall be due on the Closing Date and shall be fully
earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial
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analysis and examination of Borrower performed from time to time by Bank or its
agents each such examination not be exceed $500 per day; and
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses not to exceed $7,500, and, after the date hereof, all Bank Expenses,
including reasonable attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to
its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error. Bank agrees that it will allocate all
such increased costs among its customers similarly affected in good faith and in
a manner consistent with Bank's customary practice.
2.7 Term. This Agreement shall become effective on the Closing
Date, and subject to Section 12.7, shall continue in full force and effect for a
term ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Advances under this Agreement
during the continuance of an Event of Default. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding. Provided no Obligations are outstanding, Borrower
shall have the right to terminate this Agreement upon written notice to Bank.
Upon any termination, Bank's Lien on the Collateral shall terminate provided no
Obligations are outstanding and Bank shall cooperate with Borrower to make such
filings (e.g., financing statements and termination of the Intellectual Property
Security Agreement) as Borrower may reasonably request to evidence such
termination.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and
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resolutions authorizing the execution and delivery of this Agreement;
(c) an intellectual property security agreement;
(d) an audit of Borrower's Accounts (prior to any
Advances);
(e) financing statement (Form UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(h) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation
of Bank to make each Advance, including the initial Advance, is further subject
to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Advance as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof
assuming Bank has timely and properly filed and taken all other actions
necessary or desirable to perfect and protect such security interest.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and
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appraise the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent.
Borrower is not in default under any agreement to which it is a party or by
which it is bound, which default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The property giving rise to such Eligible Accounts
has been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects, normal
wear and tear excepted; provided, however, that the Inventory is the product of
rapidly changing technology and therefore is subject to technological
obsolescence.
5.6 Intellectual Property. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business or except as
permitted under this Agreement. To Borrower's best knowledge, each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and as
of the date hereof, Borrower has no knowledge that nor has it received any
communication that a claim has been made that any part of the Intellectual
Property Collateral violates the rights of any third party.
5.7 Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there
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are no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.9 No Material Adverse Change in Financial Statements. All
consolidated historical financial statements related to Borrower and any
Subsidiary that have been delivered by Borrower to Bank fairly present in all
material respects Borrower's consolidated financial condition as of the date
thereof and Borrower's consolidated results of operations for the period then
ended. There has not been a material adverse change in the consolidated
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank.
5.10 Solvency. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments and has no Subsidiaries.
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5.15 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted, except to the extent that any failure to do so would not have a
Material Adverse Effect.
5.16 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within ninety (90) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank (provided the audited statements for the fiscal year ending
December 31, 1996 shall be due not later than October 31, 1997); (c) within five
(5) days upon becoming available, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders or to any
holders of Subordinated Debt and all reports on Form 10-K and 10-Q filed with
the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of One Hundred Thousand Dollars ($100,000) or more; (e) prompt notice of any
material change in the composition of the Intellectual Property Collateral,
including, but not limited to, any subsequent ownership right of the Borrower in
or to any Copyright, Patent or Trademark not specified in any intellectual
property security agreement between Borrower and Bank or knowledge of an event
that materially adversely effects the value of the Intellectual Property
Collateral; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
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Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing, and no audit will be conducted if no Advances have been requested
during the three-month period prior to the scheduled date of an audit.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects, subject to normal wear
and tear and normal obsolescence due to the technological basis of such
Inventory. Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than Fifty Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower
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shall maintain its principal depository and operating accounts with Bank.
6.8 Quick Ratio. For the periods ending September 30, 1997 and
January 31, 1998 and quarterly thereafter beginning March 31, 1998, Borrower
shall maintain, as of the last day of each period, a ratio of Quick Assets to
Current Liabilities of at least 2.0 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of January
31, 1998 and the last day of each fiscal quarter, thereafter a Tangible Net
Worth of not less than Three Million Dollars ($3,000,000).
6.10 Minimum Liquidity/Debt Service Coverage. Subject to the
remainder of this Section, Borrower shall maintain, as of the last day of each
calendar month the sum of (i) cash and cash equivalents plus (ii) short term
investments plus (iii) amounts available to be drawn but not drawn on the
Committed Line minus (iv) restricted cash of at least one and one-half (1.5)
times the outstanding amount of Equipment Advances. Notwithstanding the
foregoing, from and after the time Borrower achieves for two consecutive fiscal
quarters a Debt Service Coverage of at least 2.0 to 1.0, Borrower shall not be
subject to the minimum liquidity requirement set forth above, but instead shall
maintain, as of the last day of each fiscal quarter, a Debt Service Coverage of
at least 2.0 to 1.0. "Debt Service Coverage" means, as of any date of
determination, with respect to Borrower and its Subsidiaries on a consolidated
basis, a ratio of (a) the sum of (i) earnings after tax plus (ii) interest and
non-cash (i.e. depreciation and amortization) expense to (b) the sum of (i)
current portion of long term debt plus (ii) interest expense.
6.11 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered (to
the extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those intellectual
property rights listed on Exhibits A, B and C to the Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this
Agreement within thirty (30) days of the date of this Agreement and in form and
substance reasonably acceptable to Borrower's legal counsel. Borrower shall
register or cause to be registered with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those additional
intellectual property rights developed or acquired by Borrower from time to time
in connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or additions to the
intellectual property rights listed on such Exhibits A, B and C and in form and
substance reasonably acceptable to Borrower's legal counsel, unless Borrower, in
the exercise of its prudent business judgment, deems such registration not to
have any significant commercial value, provided that Borrower shall in all cases
register in accordance with this Section 6.11 the copyright of the source code
of any software, the licensing of which generates 5 percent or more of
Borrower's gross revenue in any calendar month.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights to be
abandoned, forfeited or dedicated to the public without the written consent of
Bank, which shall not be unreasonably withheld, unless Borrower determines that
reasonable business practices suggest that abandonment is appropriate.
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(d) Bank shall have the right, but not the obligation, to
take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.11 to take but which Borrower fails to take, after fifteen (15)
days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.
6.12 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership
provided that nothing in this Section 7.2 shall prohibit Borrower from
completing a public offering of its Common Stock pursuant to a Registration
Statement filed with the Securities and Exchange Commission. Borrower will not,
without thirty (30) days prior written notification to Bank, relocate its chief
executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except Borrower may at any time when an Event of Default
is not continuing, repurchase from an officer, director or employee shares of
equity securities of Borrower held by them upon such person's termination of
employment or rendering of service to Borrower.
7.7 Investments. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted
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Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Intellectual Property Agreements. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts, except to the extent that such provisions are necessary in Borrower's
exercise of its reasonable business judgement.
7.10 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 Inventory. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply in a
material respect with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event
of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of,
or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such
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25
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there occurs a Material Adverse
Change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within thirty (30)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
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 One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account
of Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of twenty (20) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
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9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
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(i) Bank may credit bid and purchase at any public sale;
and
(j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) to modify, in its
sole discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibit A, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims any
right, title or interest; (g) to file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of Borrower where permitted by law; and (h)
dispose of the Intellectual Property Collateral in accordance with, but only to
the extent permitted under, Section 9504 of the California Uniform Commercial
Code (and to register such disposition with appropriate government authorities);
provided Bank may exercise such power of attorney to sign the name of Borrower
on any of the documents described in Section 4.2 regardless of whether an Event
of Default has occurred. The appointment of Bank as Borrower's attorney in fact,
and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or
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arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person whomsoever. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: Accrue Software, Inc.
1275 Orleans Drive
Sunnyvale, CA 94089
Attn: Mr. Mike Hayashida
FAX: (408) 541-1874
With a Copy to: Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: John V. Bautista
FAX: (415) 854-1121
If to Bank: Silicon Valley Bank
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Mr. Jim Marshall
FAX: (415) 812-0864
Any notice delivered or sent to Borrower shall be effective
notwithstanding a failure to deliver or send a copy of such notice to Borrower's
counsel or any other person. The parties hereto may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other.
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11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The Loan Documents shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance
of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain
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outstanding. The obligations of Borrower to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information
Bank and all employees and agents of Bank, including but not limited to
accountants, shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ACCRUE SOFTWARE, INC.
By: /s/ Simon Roy
-----------------------------------
Title: President and CEO
-----------------------------------
SILICON VALLEY BANK
By: /s/ James R. Marshall
-----------------------------------
Title: Vice President
-----------------------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
----------------
FAX#: (408) 496-2426 TIME:
----------------
FROM:
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
----------------------------- -----------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $
----------------------------
PRINCIPAL PAYMENT (ONLY) $
----------------------------
INTEREST PAYMENT (ONLY) $
----------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
----------------------------
OTHER INSTRUCTIONS:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
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BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
-------------------------------------------- -------------------------
Authorized Requester Phone #
-------------------------------------------- -------------------------
Received By (Bank) Phone #
---------------------------
Authorized Signature (Bank)
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EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: Accrue Software, Inc. Lender: Silicon Valley Bank
Commitment Amount: $1,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
-------- --------
2. Additions (please explain on reverse) $
--------
3. TOTAL ACCOUNTS RECEIVABLE $
--------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
--------
5. Balance of 50% over 90 day accounts $
--------
6. Concentration Limits* $
--------
7. Foreign Accounts $
--------
8. Governmental Accounts $
--------
9. Contra Accounts $
--------
10. Promotion or Demo Accounts $
--------
11. Intercompany/Employee Accounts $
--------
12. Other (please explain on reverse) $
--------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
-------
14. Eligible Accounts (#3 minus #13) $
-------
15. LOAN VALUE OF ACCOUNTS (80% of #14) $
--------
NONFORMULA SUBLIMIT
16. Nonformula Sublimit $150,000
BALANCES
17. Maximum Loan Amount $
-------
18. Total Funds Available [Lesser of #17 or (#15 plus #16)] $
--------
19. Present balance owing on Line of Credit $
--------
20. Outstanding under Sublimits ( ) $
-------
21. RESERVE POSITION (#18 minus #19 and #20) $
--------
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
*35% maximum concentration limit allowed for Apple Computer and Sun
Microsystems.
-------------------------
BANK USE ONLY
Rec'd By:
----------------
Auth. Signer
Date:
----------------
Verified:
----------------
Auth. Signer
-------------------------
Date:
----------------
-------------------------
COMMENTS:
Accrue Software, Inc.
/s/ Richard Kreysar
----------------------------
30
35
By:
-------------------------
Authorized Signer
31
36
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: ACCRUE SOFTWARE, INC.
The undersigned authorized officer of Accrue Software, Inc. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending with all required covenants except
as noted below and (ii) all representations and warranties of Borrower stated in
the Agreement are true and correct in all material respects as of the date
hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days* Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual** Yes No
* 12/31/96 FYE, Financial Statement due before 10/31/97.
** Unless no borrowings have occurred for three (3) months prior to scheduled
audit date.
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $3,000,000 $_____ Yes No
Liquidity 1.5:1.0* _____:1.0 Yes No
Debt Service Coverage 2.0:1.0* _____:1.0 Yes No
* Debt Service replaces Liquidity after 2 quarters of DSC > 2.0.
32
37
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See Attached
Sincerely,
Received by:
------------------------------ ---------------------------
SIGNATURE AUTHORIZED SIGNER
Date:
------------------------------ ---------------------------
TITLE
Verified:
------------------------------ ---------------------------
DATE AUTHORIZED SIGNER
Date:
---------------------------
Compliance Status: Yes No
33
38
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Accrue Software, Inc. Bank: Silicon Valley Bank
================================================================================
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $1,000,000 and an Equipment Line of Credit up to $1,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital and Equipment Acquisition.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line Equipment Line
-------------- --------------
Amount paid to Borrower directly: $ $
---------- -----------
Undisbursed Funds $ $
---------- -----------
Principal $1,000,000 $1,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$5,000 Loan Fee
$ Accounts Receivables Audit
------
$ 100 UCC Search Fees
$ 100 UCC Filing Fees
$ Patent Filing Fees
------
$ Trademark Filing Fees
------
$ Copyright Filing Fees
------
$7,500 Outside Counsel Fees and Expenses (Maximum)
------
Total Charges Paid in Cash $
--------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered ______ the amount of any loan payment. If the funds
in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF ____________, 19___.
BORROWER:
Accrue Software, Inc.
/s/ Richard Kreysar
---------------------------------
Authorized Officer
39
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Accrue Software, Inc. BANK: Silicon Valley Bank
--------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. Accrue Software, Inc. ("Grantor") understands
that insurance coverage is required in connection with the extending of a loan
or the providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be canceled or diminished without
a minimum of twenty (20) days' prior written notice
to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 19, 1997, or earlier. Grantor acknowledges and
agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Bank may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at the
option of Bank, shall be payable on demand or shall be added to the indebtedness
as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO
PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN;
HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE
INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 19,
1997.
GRANTOR:
Accrue Software, Inc.
x
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS: _______________
================================================================================
40
CORPORATE RESOLUTIONS TO BORROW
BORROWER: ACCRUE SOFTWARE, INC.
I, the undersigned Secretary or Assistant Secretary of Accrue Software,
Inc. (the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
--------------------- ----------------------- -------------------------
--------------------- ----------------------- -------------------------
--------------------- ----------------------- -------------------------
--------------------- ----------------------- -------------------------
--------------------- ----------------------- -------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of September 19, 1997 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to
1
41
receive cash for the same or to cause such proceeds to be credited to the
account of the Corporation with Bank, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on _______________,
19___ and attest that the signatures set opposite the names listed above are
their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X
-----------------------------------
2
42
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of April 9, 1999, by
and between Accrue Software, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated September 19, 1997, as may be
amended from time to time, (the "Loan Agreement"). The Loan Agreement provided
for, among other things, an Equipment facility in the original principal amount
of One Million Dollars ($1,000,000). Defined terms used but not otherwise
defined herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement and in that certain
Intellectual Property Security Agreement, dated September 19, 1997, by and
between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents." Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement
1. The following terms are hereby incorporated into Section 1.1
entitled "Definitions":
"Committed Equipment 2 Line" is a Credit Extension in an amount
of $750,000.
"Credit Extension" is each Equipment Advance, Equipment 2 Advance
or any other extension of credit by Bank for Borrower's benefit.
"Equipment 2 Advance(s)" is defined in Section 2.1.5.
"Equipment 2 Availability End Date" is defined in Section 2.1.5.
"Equipment 2 Maturity Loan Maturity Date" is defined in Section
2.1.5.
2. The following Section is hereby incorporated into the Loan
Agreement:
2.1.5 Equipment 2 Advances.
(a) Through April 9, 2000 (the "Equipment 2
Availability End Date"), Bank will make advances ("Equipment 2
Advance" and, collectively, "Equipment 2 Advances") not exceeding
the Committed Equipment 2 Line. The Equipment 2 Advances may only
be used to purchase Equipment, including computer equipment,
office equipment and other machinery and may not exceed 100% of
the equipment invoice, excluding taxes, shipping, warranty
charges, freight discounts and installation expense. Software
licenses, leasehold improvements and other soft costs may
constitute up to 20% of the aggregate Equipment 2 Advances. Each
Equipment 2 Advance must be for minimum of $75,000.
(b) Interest accrues from the date of each Equipment 2
Advance at the rate in Section 2.3(a) and is payable monthly.
43
(c) Equipment 2 Advances outstanding on October 9, 1999 are
payable in 36 equal monthly installments of principal, plus
accrued interest, beginning on November 9, 1999 and ending on
October 9, 2002.
(d) Equipment 2 Advances made after October 9, 1999 and
outstanding on the Equipment 2 Availability End Date are payable
in 36 equal monthly installments of principal, plus accrued
interest, beginning on the 9th of each month following the
Equipment 2 Availability End Date and ending on April 9, 2003
(the "Equipment 2 Loan Maturity Date"). Equipment 2 Advances when
repaid may not be reborrowed.
(e) To obtain an Equipment 2 Advance, Borrower must notify
Bank (the notice is irrevocable) by facsimile no later than 3:00
p.m. Pacific time 1 Business Day before the day on which the
Equipment 2 Advance is to be made. The notice must be signed by a
Responsible Officer or designee and include a copy of the invoice
for the Equipment being financed.
3. Section 2.3(a) entitled "Interest Rate" is herby amended to read
as follows:
Except as set forth in Section 2.3(b), any Equipment Advances
and Equipment 2 Advances shall bear interest, on the average
Daily Balance, at a rate equal to one (1.000) percentage point
above the Prime Rate.
4. Section 6.8 entitled "quick Ratio" is hereby amended to read as
follows:
Borrower shall maintain, as of the last day of each month, a
ratio of Quick Assets to Current Liabilities, less deferred
revenue, of 2.00 to 1.00.
5. Section 6.9 entitled "Tangible Net Worth" is hereby replaced with
the following Section:
6.9. Net Income. Borrower shall achieve as of the last day of
each fiscal quarter a minimum net profit of $1., provided,
however, Borrower is allowed losses, provided such losses do not
exceed $1,040,000 for the fiscal quarter ending June 30, 1999 and
$670,000 for the fiscal quarter ending September 30, 1999.
6. Section 6.10 entitled "Minimum Liquidity/Debt Service Coverage"
is hereby amended to read as follows:
Borrower shall maintain, as of the last day of each fiscal
quarter, the sum of (i) cash and cash equivalents plus (ii) short
term investments plus (iii) 60% of Borrower's net Accounts
divided by (iii) all outstanding Credit Extensions of not less
than 1.20 to 1.00 (the "Liquidity Covenant"). Beginning the
fiscal quarter ending March 31, 2000 and each fiscal quarter
ending thereafter, the Liquidity Covenant shall be replaced by a
Debt Service Coverage Covenant of (a) quarterly adjusted net
income plus (b) quarterly depreciation/amortization plus (c)
quarterly interest expense, divided by (d) current portion of
long term debt divided by 4 plus (e) quarterly interest expense
of 1.50 to 1.00 (the "Debt Service Coverage Covenant").
7. The term "Advances" as stated in the last sentence under Section
8.2, 8.4, 8.5 and 8.8 is hereby replaced with the term "Credit
Extensions."
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
-2-
44
5. PAYMENT OF LOAN FEE. Borrower shall pay to bank a fee in the amount of
Three Thousand Seven Hundred Fifty Dollars ($3.750) (the "Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties,and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
ACCRUE SOFTWARE, INC. SILICON VALLEY BANK
By: /s/ Rick Kreysar By: /s/ R. Bryan Jadot
------------------------------ ----------------------------
Name: Rick Kreysar Name: R. Bryan Jadot
---------------------------- --------------------------
Title: CEO Title: A/O
--------------------------- -------------------------
Date: 4/19/99
---------------------------
-3-
45
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: Accrue Software, Inc.
LOAN OFFICER: R. Bryan Jadot
DATE: April 9, 1999
Loan Fee $3,750.00
Documentation Fee 250.00
TOTAL FEE DUE $4,000.00
=========
( ) A check for the total amount is attached.
( ) Debit DDA #___________ for the total amount.
Borrower:
--------------------------------
(Authorized Signer)
Bank:
--------------------------------
Silicon Valley Bank (Date)
Account Officer's Signature
-4-