\n 12.5 Amendments in Writing, Integration…………………………………… 25
\n 12.6 Counterparts………………………………………………………. 25
\n 12.7 Survival………………………………………………………….. 25
\n 12.8 Confidentiality……………………………………………………. 25
\n<\/c><\/c><\/s><\/table>\n iii
\n 5
\n This LOAN AND SECURITY AGREEMENT (the “Agreement”) is entered into as of
\nSeptember 19, 1997, by and between SILICON VALLEY BANK (“Bank”) and ACCRUE
\nSOFTWARE, INC. (“Borrower”).<\/p>\n
RECITALS<\/p>\n
Borrower wishes to obtain credit from time to time from Bank, and Bank
\ndesires to extend credit to Borrower. This Agreement sets forth the terms on
\nwhich Bank will advance credit to Borrower, and Borrower will repay the amounts
\nowing to Bank.<\/p>\n
AGREEMENT<\/p>\n
The parties agree as follows:<\/p>\n
1. DEFINITIONS AND CONSTRUCTION<\/p>\n
1.1 Definitions. As used in this Agreement, the following terms
\nshall have the following definitions:<\/p>\n
“Accounts” means all presently existing and hereafter
\narising accounts, contract rights, and all other forms of obligations owing to
\nBorrower arising out of the sale or lease of goods (including, without
\nlimitation, the licensing of software and other technology) or the rendering of
\nservices by Borrower, whether or not earned by performance, and any and all
\ncredit insurance, guaranties, and other security therefor, as well as all
\nmerchandise returned to or reclaimed by Borrower and Borrower’s Books relating
\nto any of the foregoing.<\/p>\n
“Advance” or “Advances” means a cash advance under the
\nRevolving Facility.<\/p>\n
“Affiliate” means, with respect to any Person, any Person
\nthat owns or controls directly or indirectly such Person, any Person that
\ncontrols or is controlled by or is under common control with such Person, and
\neach of such Person’s senior executive officers, directors, and partners.<\/p>\n
“Bank Expenses” means all: reasonable costs or expenses
\n(including reasonable attorneys’ fees and expenses) incurred in connection with
\nthe preparation, negotiation, administration, and enforcement of the Loan
\nDocuments; and Bank’s reasonable attorneys’ fees and expenses incurred in
\namending, enforcing or defending the Loan Documents (including fees and expenses
\nof appeal), whether or not suit is brought.<\/p>\n
“Borrower’s Books” means all of Borrower’s books and
\nrecords including: ledgers; records concerning Borrower’s assets or liabilities,
\nthe Collateral, business operations or financial condition; and all computer
\nprograms, or tape files, and the equipment, containing such information.<\/p>\n
“Borrowing Base” has the meaning set forth in Section 2.1
\nhereof.<\/p>\n
“Business Day” means any day that is not a Saturday,
\nSunday, or other day on which banks in the State of California are authorized or
\nrequired to close.<\/p>\n
“Cash Management Sublimit” has the meaning set forth in
\nSection 2.1.3 hereof.<\/p>\n
“Closing Date” means the date of this Agreement.<\/p>\n
1
\n 6
\n “Code” means the California Uniform Commercial Code.<\/p>\n
“Collateral” means the property described on Exhibit A
\nattached hereto.<\/p>\n
“Committed Line” means One Million Dollars ($1,000,000).<\/p>\n
“Contingent Obligation” means, as applied to any Person,
\nany direct or indirect liability, contingent or otherwise, of that Person with
\nrespect to (i) any indebtedness, lease, dividend, letter of credit or other
\nobligation of another, including, without limitation, any such obligation
\ndirectly or indirectly guaranteed, endorsed, co-made or discounted or sold with
\nrecourse by that Person, or in respect of which that Person is otherwise
\ndirectly or indirectly liable; (ii) any obligations with respect to undrawn
\nletters of credit issued for the account of that Person; and (iii) all
\nobligations arising under any interest rate, currency or commodity swap
\nagreement, interest rate cap agreement, interest rate collar agreement, or other
\nagreement or arrangement designated to protect a Person against fluctuation in
\ninterest rates, currency exchange rates or commodity prices; provided, however,
\nthat the term “Contingent Obligation” shall not include endorsements for
\ncollection or deposit in the ordinary course of business. The amount of any
\nContingent Obligation shall be deemed to be an amount equal to the stated or
\ndetermined amount of the primary obligation in respect of which such Contingent
\nObligation is made or, if not stated or determinable, the maximum reasonably
\nanticipated liability in respect thereof as determined by such Person in good
\nfaith; provided, however, that such amount shall not in any event exceed the
\nmaximum amount of the obligations under the guarantee or other support
\narrangement.<\/p>\n
“Copyrights” means any and all copyright rights, copyright
\napplications, copyright registrations and like protections in each work or
\nauthorship and derivative work thereof, whether published or unpublished and
\nwhether or not the same also constitutes a trade secret, now or hereafter
\nexisting, created, acquired or held.<\/p>\n
“Current Liabilities” means, as of any applicable date,
\nall amounts that should, in accordance with GAAP, be included as current
\nliabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
\nas at such date, plus, to the extent not already included therein, all
\noutstanding Advances made under this Agreement, including all Indebtedness that
\nis payable upon demand or within one year from the date of determination thereof
\nunless such Indebtedness is renewable or extendable at the option of Borrower or
\nany Subsidiary to a date more than one year from the date of determination, but
\nexcluding Subordinated Debt.<\/p>\n
“Daily Balance” means the amount of the Obligations owed
\nat the end of a given day.<\/p>\n
“Eligible Accounts” means those Accounts that arise in the
\nordinary course of Borrower’s business that comply with all of Borrower’s
\nrepresentations and warranties to Bank set forth in Section 5.4; provided, that
\nstandards of eligibility may be fixed and revised from time to time by Bank in
\nBank’s reasonable judgment and upon notification thereof to Borrower in
\naccordance with the provisions hereof. Unless otherwise agreed to by Bank,
\nEligible Accounts shall not include the following:<\/p>\n
(a) Accounts that the account debtor has failed to pay
\nwithin ninety (90) days of invoice date;<\/p>\n
(b) Accounts with respect to an account debtor, fifty
\npercent (50%) of whose Accounts the account debtor has failed to pay within
\nninety (90) days of invoice date;<\/p>\n
(c) Accounts with respect to which the account debtor is
\nan officer, employee, or agent of Borrower;<\/p>\n
2
\n 7
\n (d) Accounts with respect to which goods are placed on
\nconsignment, guaranteed sale, sale or return, sale on approval, bill and hold,
\nor other terms by reason of which the payment by the account debtor may be
\nconditional;<\/p>\n
(e) Accounts with respect to which the account debtor is
\nan Affiliate of Borrower;<\/p>\n
(f) Accounts with respect to which the account debtor does
\nnot have its principal place of business in the United States, except for
\nEligible Foreign Accounts, and Accounts arising from products shipped to or
\nservices provided to branches or offices located in the United States of any
\naccount debtor that does not have its principal place of business in the United
\nStates;<\/p>\n
(g) Accounts with respect to which the account debtor is
\nthe United States or any department, agency, or instrumentality of the United
\nStates;<\/p>\n
(h) Accounts with respect to which Borrower is liable to
\nthe account debtor for goods sold or services rendered by the account debtor to
\nBorrower, but only to the extent of any amounts owing to the account debtor
\nagainst amounts owed to Borrower;<\/p>\n
(i) Accounts with respect to an account debtor, including
\nSubsidiaries and Affiliates, whose total obligations to Borrower exceed
\ntwenty-five percent (25%) of all Accounts, to the extent such obligations exceed
\nthe aforementioned percentage, except as approved in writing by Bank, except for
\nthe Accounts of Apple Computer and Sun Microsystems, for which the applicable
\npercentage shall be thirty-five percent (35%).<\/p>\n
(j) Accounts with respect to which the account debtor
\ndisputes liability or makes any claim with respect thereto as to which Bank
\nbelieves, in its sole discretion, that there may be a basis for dispute (but
\nonly to the extent of the amount subject to such dispute or claim), or is
\nsubject to any Insolvency Proceeding, or becomes insolvent, or goes out of
\nbusiness; and<\/p>\n
(k) Accounts the collection of which Bank reasonably
\ndetermines to be doubtful.<\/p>\n
“Eligible Foreign Accounts” means Accounts with respect to
\nwhich the account debtor does not have its principal place of business in the
\nUnited States and that are: (1) covered by credit insurance in form and amount,
\nand by an insurer satisfactory to Bank less the amount of any deductible(s)
\nwhich may be or become owing thereon; or (2) supported by one or more letters of
\ncredit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
\nby a financial institution, acceptable to Bank; or (3) that Bank approves on a
\ncase-by-case basis.<\/p>\n
“Equipment” means all present and future machinery,
\nequipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
\nattachments in which Borrower has any interest.<\/p>\n
“ERISA” means the Employment Retirement Income Security
\nAct of 1974, as amended, and the regulations thereunder.<\/p>\n
“Foreign Exchange Reserve” has the meaning set forth in
\nSection 2.1.3 herein.<\/p>\n
“GAAP” means generally accepted accounting principles as
\nin effect from time to time.<\/p>\n
“Indebtedness” means (a) all indebtedness for borrowed
\nmoney or the deferred purchase price of property or services, including without
\nlimitation reimbursement and other obligations with respect to<\/p>\n
3
\n 8
\nsurety bonds and letters of credit, (b) all obligations evidenced by notes,
\nbonds, debentures or similar instruments, (c) all capital lease obligations and
\n(d) all Contingent Obligations.<\/p>\n
“Insolvency Proceeding” means any proceeding commenced by
\nor against any person or entity under any provision of the United States
\nBankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
\nincluding assignments for the benefit of creditors, formal or informal
\nmoratoria, compositions, extension generally with its creditors, or proceedings
\nseeking reorganization, arrangement, or other relief.<\/p>\n
“Intellectual Property Collateral” means<\/p>\n
(a) Copyrights, Trademarks and Patents;<\/p>\n
(b) Any and all trade secrets, and any and all
\nintellectual property rights in computer software and computer software products
\nnow or hereafter existing, created, acquired or held;<\/p>\n
(c) Any and all design rights which may be available to
\nBorrower now or hereafter existing, created, acquired or held;<\/p>\n
(d) Any and all claims for damages by way of past, present
\nand future infringement of any of the rights included above, with the right, but
\nnot the obligation, to sue for and collect such damages for said use or
\ninfringement of the intellectual property rights identified above;<\/p>\n
(e) All licenses or other rights to use any of the
\nCopyrights, Patents or Trademarks, and all license fees and royalties arising
\nfrom such use to the extent permitted by such license or rights;<\/p>\n
(f) All amendments, renewals and extensions of any of the
\nCopyrights, Trademarks or Patents; and<\/p>\n
(g) All proceeds and products of the foregoing, including
\nwithout limitation all payments under insurance or any indemnity or warranty
\npayable in respect of any of the foregoing.<\/p>\n
“Inventory” means all present and future inventory in
\nwhich Borrower has any interest, including merchandise, raw materials, parts,
\nsupplies, packing and shipping materials, work in process and finished products
\nintended for sale or lease or to be furnished under a contract of service, of
\nevery kind and description now or at any time hereafter owned by or in the
\ncustody or possession, actual or constructive, of Borrower, including such
\ninventory as is temporarily out of its custody or possession or in transit and
\nincluding any returns upon any accounts or other proceeds, including insurance
\nproceeds, resulting from the sale or disposition of any of the foregoing and any
\ndocuments of title representing any of the above, and Borrower’s Books relating
\nto any of the foregoing.<\/p>\n
“Investment” means any beneficial ownership of (including
\nstock, partnership interest or other securities) any Person, or any loan,
\nadvance or capital contribution to any Person.<\/p>\n
“IRC” means the Internal Revenue Code of 1986, as amended,
\nand the regulations thereunder.<\/p>\n
“Letter of Credit” or “Letters of Credit” has the meaning
\nset forth in Section 2.1.1 herein.<\/p>\n
“Lien” means any mortgage, lien, deed of trust, charge,
\npledge, security interest or other encumbrance.<\/p>\n
4
\n 9
\n “Loan Documents” means, collectively, this Agreement, any
\nnote or notes executed by Borrower, and any other agreement entered into between
\nBorrower and Bank in connection with this Agreement, all as amended or extended
\nfrom time to time.<\/p>\n
“Material Adverse Effect” means a material adverse effect
\non (i) the business operations or condition (financial or otherwise) of Borrower
\nand its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
\nthe Obligations or otherwise perform its obligations under the Loan Documents.<\/p>\n
“Maturity Date” means June 18, 2001.<\/p>\n
“Negotiable Collateral” means all of Borrower’s present
\nand future letters of credit of which it is a beneficiary, notes, drafts,
\ninstruments, securities, documents of title, and chattel paper, and Borrower’s
\nBooks relating to any of the foregoing.<\/p>\n
“Obligations” means all debt, principal, interest, Bank
\nExpenses and other amounts owed to Bank by Borrower pursuant to this Agreement
\nor any other agreement, whether absolute or contingent, due or to become due,
\nnow existing or hereafter arising, including any interest that accrues after the
\ncommencement of an Insolvency Proceeding and including any debt, liability, or
\nobligation owing from Borrower to others that Bank may have obtained by
\nassignment or otherwise.<\/p>\n
“Patents means all patents, patent applications and like
\nprotections including without limitation improvements, divisions, continuations,
\nrenewals, reissues, extensions and continuations-in-part of the same.<\/p>\n
“Periodic Payments” means all installments or similar
\nrecurring payments that Borrower may now or hereafter become obligated to pay to
\nBank pursuant to the terms and provisions of any instrument, or agreement now or
\nhereafter in existence between Borrower and Bank.<\/p>\n
“Permitted Indebtedness” means:<\/p>\n
(a) Indebtedness of Borrower in favor of Bank arising
\nunder this Agreement or any other Loan Document;<\/p>\n
(b) Indebtedness existing on the Closing Date and
\ndisclosed in the Schedule;<\/p>\n
(c) Indebtedness secured by a Lien described in clause (c)
\nof Permitted Liens, provided the principal amount of such Indebtedness does not
\nexceed the lesser of the cost or fair market value of the Equipment financed
\nwith the proceeds of such Indebtedness;<\/p>\n
(d) Subordinated Debt;<\/p>\n
(e) Indebtedness to trade creditors incurred in the
\nordinary course of business; and<\/p>\n
(f) Other Indebtedness in an aggregate outstanding amount
\nnot exceeding $100,000.<\/p>\n
“Permitted Investment” means:<\/p>\n
(a) Investments existing on the Closing Date disclosed in
\nthe Schedule; and<\/p>\n
5
\n 10
\n (b) (i) marketable direct obligations issued or
\nunconditionally guaranteed by the United States of America or any agency or any
\nState thereof maturing within one (1) year from the date of acquisition thereof,
\n(ii) commercial paper maturing no more than one (1) year from the date of
\ncreation thereof and currently having the highest rating obtainable from either
\nStandard & Poor’s Corporation or Moody’s Investors Service, Inc., and (iii)
\ncertificates of deposit maturing no more than one (1) year from the date of
\ninvestment therein issued by Bank and other investments in the aggregate amount
\nnot exceeding $100,000.<\/p>\n
“Permitted Liens” means the following:<\/p>\n
(a) Any Liens existing on the Closing Date and disclosed
\nin the Schedule or arising under this Agreement or the other Loan Documents;<\/p>\n
(b) Liens for taxes, fees, assessments or other
\ngovernmental charges or levies, either not delinquent or being contested in good
\nfaith by appropriate proceedings, provided the same have no priority over any of
\nBank’s security interests, unless required by law;<\/p>\n
(c) Liens (i) upon or in any equipment acquired or held by
\nBorrower or any of its Subsidiaries to secure the purchase price of such
\nequipment or indebtedness incurred solely for the purpose of financing the
\nacquisition of such equipment, or (ii) existing on such equipment at the time of
\nits acquisition, provided that the Lien is confined solely to the property so
\nacquired and improvements thereon, and the proceeds of such equipment;<\/p>\n
(d) Leases or subleases and licenses or sublicenses
\ngranted to others in the ordinary course of Borrower’s business not interfering
\nin any material respect with the business of Borrower and its Subsidiaries taken
\nas a whole, and any interest or title of a lessor, licensor or under any lease
\nor license provided that such leases, subleases, licenses and sublicenses do not
\nprohibit the grant of the security interest granted hereunder; and<\/p>\n
(e) Liens incurred in connection with the extension,
\nrenewal or refinancing of the indebtedness secured by Liens of the type
\ndescribed in clauses (a) through (d) above, provided that any extension, renewal
\nor replacement Lien shall be limited to the property encumbered by the existing
\nLien and the principal amount of the indebtedness being extended, renewed or
\nrefinanced does not increase.<\/p>\n
“Person” means any individual, sole proprietorship,
\npartnership, limited liability company, joint venture, trust, unincorporated
\norganization, association, corporation, institution, public benefit corporation,
\nfirm, joint stock company, estate, entity or governmental agency.<\/p>\n
“Prime Rate” means the variable rate of interest, per
\nannum, most recently announced by Bank, as its “prime rate,” whether or not such
\nannounced rate is the lowest rate available from Bank.<\/p>\n
“Quick Assets” means, at any date as of which the amount
\nthereof shall be determined, the consolidated cash, cash-equivalents, accounts
\nreceivable and investments, with maturities not to exceed 90 days, of Borrower
\ndetermined in accordance with GAAP.<\/p>\n
“Responsible Officer” means each of the Chief Executive
\nOfficer, the Chief Financial Officer and the Controller of Borrower.<\/p>\n
“Revolving Maturity Date” means the date immediately
\npreceding the first anniversary of the date of this Agreement.<\/p>\n
6
\n 11
\n “Revolving Facility” means the facility under which
\nBorrower may request Bank to issue cash advances, as specified in Section 2.1
\nhereof.<\/p>\n
“Schedule” means the schedule of exceptions attached
\nhereto, if any.<\/p>\n
“Subordinated Debt” means any debt incurred by Borrower
\nthat is subordinated to the debt owing by Borrower to Bank on terms acceptable
\nto Bank (and identified as being such by Borrower and Bank).<\/p>\n
“Subsidiary” means any corporation or partnership in which
\n(i) any general partnership interest or (ii) more than 50% of the stock of which
\nby the terms thereof ordinary voting power to elect the Board of Directors,
\nmanagers or trustees of the entity shall, at the time as of which any
\ndetermination is being made, be owned by Borrower, either directly or through an
\nAffiliate.<\/p>\n
“Tangible Net Worth” means at any date as of which the
\namount thereof shall be determined, the consolidated total assets of Borrower
\nand its Subsidiaries minus, without duplication, (i) the sum of any amounts
\nattributable to (a) goodwill, (b) intangible items such as unamortized debt
\ndiscount and expense, patents, trade and service marks and names, copyrights and
\nresearch and development expenses except prepaid expenses, and (c) all reserves
\nnot already deducted from assets, and (ii) Total Liabilities.<\/p>\n
“Total Liabilities” means at any date as of which the
\namount thereof shall be determined, all obligations that should, in accordance
\nwith GAAP be classified as liabilities on the consolidated balance sheet of
\nBorrower, including in any event all Indebtedness, but specifically excluding
\nSubordinated Debt.<\/p>\n
“Trademarks” means any trademark and servicemark rights,
\nwhether registered or not, applications to register and registrations of the
\nsame and like protections, and the entire goodwill of the business of Assignor
\nconnected with and symbolized by such trademarks.<\/p>\n
1.2 Accounting Terms. All accounting terms not specifically
\ndefined herein shall be construed in accordance with GAAP and all calculations
\nmade hereunder shall be made in accordance with GAAP. When used herein, the
\nterms “financial statements” shall include the notes and schedules thereto.<\/p>\n
7
\n 12<\/p>\n
2. LOAN AND TERMS OF PAYMENT<\/p>\n
2.1 Advances<\/p>\n
(a) Subject to and upon the terms and conditions of this
\nAgreement, Bank agrees to make Advances to Borrower in an aggregate amount not
\nto exceed the lesser of (i) the Committed Line less amounts specified in the
\nCash Management Services Agreement or (ii) the Borrowing Base, minus in each
\ncase the face amount of all outstanding Letters of Credit (including drawn but
\nunreimbursed Letters of Credit) and the Foreign Exchange Reserve. For purposes
\nof this Agreement, “Borrowing Base” shall mean an amount equal to One Hundred
\nFifty Thousand Dollars ($150,000), plus eighty percent (80%) of Eligible
\nAccounts. Subject to the terms and conditions of this Agreement, amounts
\nborrowed pursuant to this Section 2.1 may be repaid and reborrowed at any time
\nwithout penalty, in whole or in part, prior to the Revolving Maturity Date.<\/p>\n
(b) Whenever Borrower desires an Advance, Borrower will
\nnotify Bank by facsimile transmission or telephone no later than 3:00 p.m.
\nCalifornia time, on the Business Day that the Advance is to be made. Each such
\nnotification shall be promptly confirmed by a Payment\/Advance Form in
\nsubstantially the form of Exhibit B hereto. Bank is authorized to make Advances
\nunder this Agreement, based upon instructions received from a Responsible
\nOfficer, or without instructions if in Bank’s discretion such Advances are
\nnecessary to meet Obligations which have become due and remain unpaid. Bank
\nshall be entitled to rely on any telephonic notice given by a person who Bank
\nreasonably believes to be a Responsible Officer, and Borrower shall indemnify
\nand hold Bank harmless for any damages or loss suffered by Bank as a result of
\nsuch reliance. Bank will credit the amount of Advances made under this Section
\n2.1 to Borrower’s deposit account.<\/p>\n
(c) The Revolving Facility shall terminate on the
\nRevolving Maturity Date, at which time all Advances under this Section 2.1 shall
\nbe immediately due and payable.<\/p>\n
2.1.1 Letters of Credit.<\/p>\n
(a) Subject to the terms and conditions of this
\nAgreement, Bank agrees to issue or cause to be issued letters of credit (each a
\n“Letter of Credit,” collectively, the “Letters of Credit”) for the account of
\nBorrower in an aggregate face amount not to exceed the lesser of (i) the
\nCommitted Line minus the amount specified in the Cash Management Services
\nAgreement or (ii) the Borrowing Base minus in each case the sum of the then
\noutstanding principal balance of the Advances, the face amount outstanding
\nLetters of Credit and the Foreign Exchange Reserve; provided that the face
\namount of outstanding Letters of Credit (including drawn but unreimbursed
\nLetters of Credit) shall not in any case exceed Two Hundred Fifty Thousand
\nDollars ($250,000). Each such Letter of Credit shall have an expiry date no
\nlater than the Revolving Maturity Date. All such Letters of Credit shall be, in
\nform and substance, acceptable to Bank in its sole discretion and shall be
\nsubject to the terms and conditions of Bank’s form of application and letter of
\ncredit agreement. All amounts actually paid by Bank in respect of a letter of
\ncredit shall, when paid, constitute an Advance under this Agreement.<\/p>\n
(b) The obligation of Borrower to immediately
\nreimburse Bank for drawings made under Letters of Credit shall be absolute,
\nunconditional and irrevocable, and shall be performed strictly in accordance
\nwith the terms of this Agreement and such Letters of Credit, under all
\ncircumstances whatsoever. Borrower shall indemnify, defend and hold Bank
\nharmless from any loss, cost, expense or liability, including, without
\nlimitation, reasonable attorneys’ fees, arising out of or in connection with any
\nLetters of Credit.<\/p>\n
(c) Borrower may request that Bank issue a Letter
\nof Credit payable in a currency other than United States Dollars. If a demand
\nfor payment is made under any such Letter of Credit, Bank shall treat such
\ndemand as an advance to Borrower of the equivalent of the amount thereof (plus
\ncable charges) in<\/p>\n
8
\n 13
\nUnited States currency at the then prevailing rate of exchange in San Francisco,
\nCalifornia, for sales of that other currency for cable transfer to the country
\nof which it is the currency.<\/p>\n
(d) Upon the issuance of any Letter of Credit
\npayable in a currency other than United States Dollars, Bank shall create a
\nreserve under the Committed Line for Letters of Credit against fluctuations in
\ncurrency exchange rates, in an amount equal to ten percent (10%) of the face
\namount of such Letter of Credit. The amount of such reserve may be amended by
\nBank from time to time to account for fluctuations in the exchange rate. The
\navailability of funds under the Committed Line shall be reduced by the amount of
\nsuch reserve for so long as such Letter of Credit remains outstanding.<\/p>\n
2.1.2 Foreign Exchange Contract; Foreign Exchange
\nSettlements.<\/p>\n
(a) Subject to the terms of this Agreement,
\nBorrower may enter into foreign exchange contracts (the “Exchange Contracts”)
\nnot to exceed an aggregate amount of $250,000 (the “Contract Limit”), pursuant
\nto which Bank shall sell to or purchase from Borrower foreign currency on a spot
\nor future basis. Borrower shall not request any Exchange Contracts at any time
\nit is out of compliance with any of the provisions of this Agreement. All
\nExchange Contracts must provide for delivery of settlement on or before the
\nRevolving Maturity Date. The amount available under the Committed Line at any
\ntime shall be reduced by the following amounts (the “Foreign Exchange Reserve”)
\non any given day (the “Determination Date”): (i) on all outstanding Exchange
\nContracts on which delivery is to be effected or settlement allowed more than
\ntwo business days after the Determination Date, ten percent (10%) of the gross
\namount of the Exchange Contracts; plus (ii) on all outstanding Exchange
\nContracts on which delivery is to be effected or settlement allowed within two
\nbusiness days after the Determination Date, one hundred percent (100%) of the
\ngross amount of the Exchange Contracts.<\/p>\n
(b) Bank may, in its discretion, terminate the
\nExchange Contracts at any time (a) that an Event of Default occurs or (b) that
\nthere is no sufficient availability under the Committed Line and Borrower does
\nnot have available funds in its bank account to satisfy the Foreign Exchange
\nReserve. If Bank terminates the Exchange Contracts, and without limitation of
\nany applicable indemnities, Borrower agrees to reimburse Bank for any and all
\nfees, costs and expenses relating thereto or arising in connection therewith.<\/p>\n
(c) Borrower shall not permit the total gross
\namount of all Exchange Contracts on which delivery is to be effected and
\nsettlement allowed in any two business day period to be more than $250,000 (the
\n“Settlement Limit”), nor shall Borrower permit the total gross amount of all
\nExchange Contracts to which Borrower is a party, outstanding at any one time, to
\nexceed the Contract Limit. Notwithstanding the above, however, the amount which
\nmay be settled in any two (2) business day period may be increased above the
\nSettlement Limit up to, but in no event to exceed, the amount of the Contract
\nLimit under either of the following circumstances:<\/p>\n
(i) if there is sufficient availability
\nunder the Committed Line in the amount of the Foreign Exchange Reserve as of
\neach Determination Date, provided that Bank in advance shall reserve the full
\namount of the Foreign Exchange Reserve against the Committed Line; or<\/p>\n
(ii) if there is insufficient availability
\nunder the Committed Line, as to settlements within any two (2) business day
\nperiod, provided that Bank, in its sole discretion, may: (A) verify good funds
\noverseas prior to crediting Borrower’s deposit account with Bank (in the case of
\nBorrower’s sale of foreign currency); or (B) debit Borrower’s deposit account
\nwith Bank prior to delivering foreign currency overseas (in the case of
\nBorrower’s purchase of foreign currency).<\/p>\n
(d) In the case of Borrower’s purchase of foreign
\ncurrency, Borrower in advance shall instruct Bank upon settlement either to
\ntreat the settlement amount as an advance under the<\/p>\n
9
\n 14
\nCommitted Line, or to debit Borrower’s account for the amount settled.<\/p>\n
(e) Borrower shall execute all standard form
\napplications and agreements of Bank in connection with the Exchange Contracts
\nand, without limiting any of the terms of such applications and agreements,
\nBorrower will pay all standard fees and charges of Bank in connection with the
\nExchange Contracts.<\/p>\n
(f) Without limiting any of the other terms of this
\nAgreement or any such standard form applications and agreements of Bank,
\nBorrower agrees to indemnify Bank and hold it harmless from and against any and
\nall claims, debts, liabilities, demands, obligations, actions, costs and
\nexpenses (including, without limitation, reasonable attorneys’ fees of counsel
\nof Bank’s choice), of every nature and description which it may sustain or
\nincur, based upon, arising out of, or in any way relating to any of the Exchange
\nContracts or any transactions relating thereto or contemplated thereby.<\/p>\n
2.1.3 Cash Management Sublimit. Subject to the terms and
\nconditions of this Agreement, Borrower may utilize up to an aggregate amount not
\nto exceed Two Hundred Fifty Thousand Dollars ($250,000) (the “Cash Management
\nSublimit”) for cash management services provided by Bank, which services may
\ninclude merchant services, PC-ACH, direct deposit of payroll, business credit
\ncard, Firstax, and other related check cashing services as defined in that
\ncertain Cash Management Services Agreement entered into by Bank and Borrower
\nfrom time to time (a “Cash Management Service”, or the “Cash Management
\nServices”). Any amounts actually paid by Bank in respect of a Cash Management
\nService or Cash Management Services shall, when paid, constitute an Advance
\nunder the Committed Line.<\/p>\n
2.1.4 Equipment Advances.<\/p>\n
(a) At any time from the date hereof through June
\n18, 1998 (the “Equipment Availability Date”), Borrower may from time to time
\nrequest advances (each an “Equipment Advance” and, collectively, the “Equipment
\nAdvances”) from Bank in an aggregate principal amount of up to One Million
\nDollars ($1,000,000). The Equipment Advances shall be used to purchase Equipment
\napproved from time to time by Bank (which shall in any case have been purchased
\nsince June 30, 1996) and shall not exceed one hundred percent (100%) of the cost
\nof such Equipment, excluding installation expense, freight discounts, warranty
\ncharges and taxes. Up to twenty percent (20%) of the Equipment Advances may be
\nused for software and leasehold improvements or other soft costs approved by
\nBank. Each Equipment Advance shall be in a minimum amount of Fifty Thousand
\nDollars ($50,000).<\/p>\n
(b) Interest shall accrue from the date of each
\nEquipment Advance at the rate specified in Section 2.3(a), and shall be payable
\nmonthly on the last Business Day of each month for each month through June,
\n1998. The Equipment Advance or Equipment Advances that are outstanding on the
\nEquipment Availability Date will be payable in thirty-six (36) equal monthly
\ninstallments of principal, plus accrued interest, beginning on July 18, 1998 and
\ncontinuing through the Maturity Date, on which date the entire principal amount
\nand all accrued but unpaid interest shall be due and payable. The principal and
\nall accrued but unpaid interest under the Equipment Advance or Equipment
\nadvances may be repaid at any time without penalty, in whole or in part, prior
\nto the Maturity Date.<\/p>\n
(c) When Borrower desires to obtain an Equipment
\nAdvance, Borrower shall notify Bank (which notice shall be irrevocable) by
\nfacsimile transmission received no later than 3:00 p.m. California time one (1)
\nBusiness Day before the day on which the Equipment Advance is to be made. Such
\nnotice shall be in substantially the form of Exhibit B. The notice shall be
\nsigned by a Responsible Officer and include a copy of the invoice for the
\nEquipment to be financed.<\/p>\n
2.2 Overadvances. If, at any time or for any reason, the<\/p>\n
10
\n 15
\namount of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
\nAgreement is greater than the lesser of (i) the Committed Line or (ii) the
\nBorrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
\nsuch excess.<\/p>\n
2.3 Interest Rates, Payments, and Calculations<\/p>\n
(a) Interest Rate. Except as set forth in Section 2.3(b),
\nany Advances shall bear interest, on the average Daily Balance, at a rate equal
\nto one-half (0.5) percentage point above the Prime Rate, and all Equipment
\nAdvances shall bear interest at a rate equal to one (1.0) percentage point above
\nthe Prime Rate.<\/p>\n
(b) Default Rate. All Obligations shall bear interest,
\nfrom and after the date Borrower receives written notice of the occurrence of an
\nEvent of Default, at a rate equal to five (5) percentage points above the
\ninterest rate applicable immediately prior to the occurrence of the Event of
\nDefault.<\/p>\n
(c) Payments. Except as specified in Section 2.1.4(b),
\ninterest hereunder shall be due and payable on the eighteenth calendar day of
\neach month during the term hereof. Bank shall, at its option, charge such
\ninterest, all Bank Expenses, and all Periodic Payments against any of Borrower’s
\ndeposit accounts or against the Committed Line, in which case those amounts
\nshall thereafter accrue interest at the rate then applicable hereunder. Bank
\nwill notify Borrower of all debits and charges that Bank makes against
\nBorrower’s accounts in the ordinary course of Bank’s operations. Any interest
\nnot paid when due shall be compounded by becoming a part of the Obligations, and
\nsuch interest shall thereafter accrue interest at the rate then applicable
\nhereunder.<\/p>\n
(d) Computation. In the event the Prime Rate is changed
\nfrom time to time hereafter, the applicable rate of interest hereunder shall be
\nincreased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
\nchanged, by an amount equal to such change in the Prime Rate. Bank shall notify
\nBorrower of the change in the ordinary course of Borrower’s business. All
\ninterest chargeable under the Loan Documents shall be computed on the basis of a
\nthree hundred sixty (360) day year for the actual number of days elapsed.<\/p>\n
2.4 Crediting Payments. Prior to the occurrence of an Event of
\nDefault, Bank shall credit a wire transfer of funds, check or other item of
\npayment to such deposit account or Obligation as Borrower specifies. After the
\noccurrence of an Event of Default, the receipt by Bank of any wire transfer of
\nfunds, check, or other item of payment shall be immediately applied to
\nconditionally reduce Obligations, but shall not be considered a payment on
\naccount unless such payment is of immediately available federal funds or unless
\nand until such check or other item of payment is honored when presented for
\npayment. Notwithstanding anything to the contrary contained herein, any wire
\ntransfer or payment received by Bank after 12:00 noon California time shall be
\ndeemed to have been received by Bank as of the opening of business on the
\nimmediately following Business Day. Whenever any payment to Bank under the Loan
\nDocuments would otherwise be due (except by reason of acceleration) on a date
\nthat is not a Business Day, such payment shall instead be due on the next
\nBusiness Day, and additional fees or interest, as the case may be, shall accrue
\nand be payable for the period of such extension, provided however, that no late
\nfee shall accrue because the relevant date is not a Business Day.<\/p>\n
2.5 Fees. Borrower shall pay to Bank the following:<\/p>\n
(a) Facility Fee. A Facility Fee equal to Five Thousand
\nDollars ($5,000), which fee shall be due on the Closing Date and shall be fully
\nearned and nonrefundable;<\/p>\n
(b) Financial Examination and Appraisal Fees. Bank’s
\ncustomary fees and out-of-pocket expenses for Bank’s audits of Borrower’s
\nAccounts, and for each appraisal of Collateral and financial <\/p>\n
11
\n 16
\nanalysis and examination of Borrower performed from time to time by Bank or its
\nagents each such examination not be exceed $500 per day; and<\/p>\n
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
\nincurred through the Closing Date, including reasonable attorneys’ fees and
\nexpenses not to exceed $7,500, and, after the date hereof, all Bank Expenses,
\nincluding reasonable attorneys’ fees and expenses, as and when they become due.<\/p>\n
2.6 Additional Costs. In case any change in any law, regulation,
\ntreaty or official directive or the interpretation or application thereof by any
\ncourt or any governmental authority charged with the administration thereof or
\nthe compliance with any guideline or request of any central bank or other
\ngovernmental authority (whether or not having the force of law), in each case
\nafter the date of this Agreement:<\/p>\n
(a) subjects Bank to any tax with respect to payments of
\nprincipal or interest or any other amounts payable hereunder by Borrower or
\notherwise with respect to the transactions contemplated hereby (except for taxes
\non the overall net income of Bank imposed by the United States of America or any
\npolitical subdivision thereof);<\/p>\n
(b) imposes, modifies or deems applicable any deposit
\ninsurance, reserve, special deposit or similar requirement against assets held
\nby, or deposits in or for the account of, or loans by, Bank; or<\/p>\n
(c) imposes upon Bank any other condition with respect to
\nits performance under this Agreement,<\/p>\n
and the result of any of the foregoing is to increase the cost to Bank, reduce
\nthe income receivable by Bank or impose any expense upon Bank with respect to
\nany loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
\nthe amount of such increase in cost, reduction in income or additional expense
\nas and when such cost, reduction or expense is incurred or determined, upon
\npresentation by Bank of a statement of the amount and setting forth Bank’s
\ncalculation thereof, all in reasonable detail, which statement shall be deemed
\ntrue and correct absent manifest error. Bank agrees that it will allocate all
\nsuch increased costs among its customers similarly affected in good faith and in
\na manner consistent with Bank’s customary practice.<\/p>\n
2.7 Term. This Agreement shall become effective on the Closing
\nDate, and subject to Section 12.7, shall continue in full force and effect for a
\nterm ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have
\nthe right to terminate its obligation to make Advances under this Agreement
\nduring the continuance of an Event of Default. Notwithstanding termination,
\nBank’s Lien on the Collateral shall remain in effect for so long as any
\nObligations are outstanding. Provided no Obligations are outstanding, Borrower
\nshall have the right to terminate this Agreement upon written notice to Bank.
\nUpon any termination, Bank’s Lien on the Collateral shall terminate provided no
\nObligations are outstanding and Bank shall cooperate with Borrower to make such
\nfilings (e.g., financing statements and termination of the Intellectual Property
\nSecurity Agreement) as Borrower may reasonably request to evidence such
\ntermination.<\/p>\n
3. CONDITIONS OF LOANS<\/p>\n
3.1 Conditions Precedent to Initial Advance. The obligation of
\nBank to make the initial Advance is subject to the condition precedent that Bank
\nshall have received, in form and substance satisfactory to Bank, the following:<\/p>\n
(a) this Agreement;<\/p>\n
(b) a certificate of the Secretary of Borrower with
\nrespect to incumbency and<\/p>\n
12
\n 17
\nresolutions authorizing the execution and delivery of this Agreement;<\/p>\n
(c) an intellectual property security agreement;<\/p>\n
(d) an audit of Borrower’s Accounts (prior to any
\nAdvances);<\/p>\n
(e) financing statement (Form UCC-1);<\/p>\n
(f) insurance certificate;<\/p>\n
(g) payment of the fees and Bank Expenses then due
\nspecified in Section 2.5 hereof; and<\/p>\n
(h) such other documents, and completion of such other
\nmatters, as Bank may reasonably deem necessary or appropriate.<\/p>\n
3.2 Conditions Precedent to all Advances. The obligation
\nof Bank to make each Advance, including the initial Advance, is further subject
\nto the following conditions:<\/p>\n
(a) timely receipt by Bank of the Payment\/Advance Form as
\nprovided in Section 2.1; and<\/p>\n
(b) the representations and warranties contained in
\nSection 5 shall be true and correct in all material respects on and as of the
\ndate of such Payment\/Advance Form and on the effective date of each Advance as
\nthough made at and as of each such date, and no Event of Default shall have
\noccurred and be continuing, or would result from such Advance. The making of
\neach Advance shall be deemed to be a representation and warranty by Borrower on
\nthe date of such Advance as to the accuracy of the facts referred to in this
\nSection 3.2(b).<\/p>\n
4. CREATION OF SECURITY INTEREST<\/p>\n
4.1 Grant of Security Interest. Borrower grants and pledges to
\nBank a continuing security interest in all presently existing and hereafter
\nacquired or arising Collateral in order to secure prompt repayment of any and
\nall Obligations and in order to secure prompt performance by Borrower of each of
\nits covenants and duties under the Loan Documents. Except as set forth in the
\nSchedule, such security interest constitutes a valid, first priority security
\ninterest in the presently existing Collateral, and will constitute a valid,
\nfirst priority security interest in Collateral acquired after the date hereof
\nassuming Bank has timely and properly filed and taken all other actions
\nnecessary or desirable to perfect and protect such security interest.<\/p>\n
4.2 Delivery of Additional Documentation Required. Borrower shall
\nfrom time to time execute and deliver to Bank, at the request of Bank, all
\nNegotiable Collateral, all financing statements and other documents that Bank
\nmay reasonably request, in form satisfactory to Bank, to perfect and continue
\nperfected Bank’s security interests in the Collateral and in order to fully
\nconsummate all of the transactions contemplated under the Loan Documents.<\/p>\n
4.3 Right to Inspect Bank (through any of its officers,
\nemployees, or agents) shall have the right, upon reasonable prior notice, from
\ntime to time during Borrower’s usual business hours, to inspect Borrower’s Books
\nand to make copies thereof and to check, test, and<\/p>\n
13
\n 18
\nappraise the Collateral in order to verify Borrower’s financial condition or the
\namount, condition of, or any other matter relating to, the Collateral.<\/p>\n
5. REPRESENTATIONS AND WARRANTIES<\/p>\n
Borrower represents and warrants as follows:<\/p>\n
5.1 Due Organization and Qualification. Borrower and each
\nSubsidiary is a corporation duly existing and in good standing under the laws of
\nits state of incorporation and qualified and licensed to do business in, and is
\nin good standing in, any state in which the conduct of its business or its
\nownership of property requires that it be so qualified.<\/p>\n
5.2 Due Authorization; No Conflict. The execution, delivery, and
\nperformance of the Loan Documents are within Borrower’s powers, have been duly
\nauthorized, and are not in conflict with nor constitute a breach of any
\nprovision contained in Borrower’s Articles of Incorporation or Bylaws, nor will
\nthey constitute an event of default under any material agreement to which
\nBorrower is a party or by which Borrower is bound except to the extent that
\ncertain intellectual property agreements prohibit the assignment of the rights
\nthereunder to a third party without the Borrower’s or other party’s consent.
\nBorrower is not in default under any agreement to which it is a party or by
\nwhich it is bound, which default could have a Material Adverse Effect.<\/p>\n
5.3 No Prior Encumbrances. Borrower has good and indefeasible
\ntitle to the Collateral, free and clear of Liens, except for Permitted Liens.<\/p>\n
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona
\nfide existing obligations. The property giving rise to such Eligible Accounts
\nhas been delivered to the account debtor or to the account debtor’s agent for
\nimmediate shipment to and unconditional acceptance by the account debtor.
\nBorrower has not received notice of actual or imminent Insolvency Proceeding of
\nany account debtor that is included in any Borrowing Base Certificate as an
\nEligible Account.<\/p>\n
5.5 Merchantable Inventory. All Inventory is in all material
\nrespects of good and marketable quality, free from all material defects, normal
\nwear and tear excepted; provided, however, that the Inventory is the product of
\nrapidly changing technology and therefore is subject to technological
\nobsolescence.<\/p>\n
5.6 Intellectual Property. Borrower is the sole owner of the
\nIntellectual Property Collateral, except for non-exclusive licenses granted by
\nBorrower to its customers in the ordinary course of business or except as
\npermitted under this Agreement. To Borrower’s best knowledge, each of the
\nPatents is valid and enforceable, and no part of the Intellectual Property
\nCollateral has been judged invalid or unenforceable, in whole or in part, and as
\nof the date hereof, Borrower has no knowledge that nor has it received any
\ncommunication that a claim has been made that any part of the Intellectual
\nProperty Collateral violates the rights of any third party.<\/p>\n
5.7 Name; Location of Chief Executive Office. Except as disclosed
\nin the Schedule, Borrower has not done business under any name other than that
\nspecified on the signature page hereof. The chief executive office of Borrower
\nis located at the address indicated in Section 10 hereof.<\/p>\n
5.8 Litigation. Except as set forth in the Schedule, there<\/p>\n
14
\n 19
\nare no actions or proceedings pending by or against Borrower or any Subsidiary
\nbefore any court or administrative agency in which an adverse decision could
\nhave a Material Adverse Effect or a material adverse effect on Borrower’s
\ninterest or Bank’s security interest in the Collateral. Borrower does not have
\nknowledge of any such pending or threatened actions or proceedings.<\/p>\n
5.9 No Material Adverse Change in Financial Statements. All
\nconsolidated historical financial statements related to Borrower and any
\nSubsidiary that have been delivered by Borrower to Bank fairly present in all
\nmaterial respects Borrower’s consolidated financial condition as of the date
\nthereof and Borrower’s consolidated results of operations for the period then
\nended. There has not been a material adverse change in the consolidated
\nfinancial condition of Borrower since the date of the most recent of such
\nfinancial statements submitted to Bank.<\/p>\n
5.10 Solvency. The fair saleable value of Borrower’s assets
\n(including goodwill minus disposition costs) exceeds the fair value of its
\nliabilities; the Borrower is not left with unreasonably small capital after the
\ntransactions contemplated by this Agreement; and Borrower is able to pay its
\ndebts (including trade debts) as they mature.<\/p>\n
5.11 Regulatory Compliance. Borrower and each Subsidiary has met
\nthe minimum funding requirements of ERISA with respect to any employee benefit
\nplans subject to ERISA. No event has occurred resulting from Borrower’s failure
\nto comply with ERISA that is reasonably likely to result in Borrower’s incurring
\nany liability that could have a Material Adverse Effect. Borrower is not an
\n“investment company” or a company “controlled” by an “investment company” within
\nthe meaning of the Investment Company Act of 1940. Borrower is not engaged
\nprincipally, or as one of the important activities, in the business of extending
\ncredit for the purpose of purchasing or carrying margin stock (within the
\nmeaning of Regulations G, T and U of the Board of Governors of the Federal
\nReserve System). Borrower has complied with all the provisions of the Federal
\nFair Labor Standards Act. Borrower has not violated any statutes, laws,
\nordinances or rules applicable to it, violation of which could have a Material
\nAdverse Effect.<\/p>\n
5.12 Environmental Condition. None of Borrower’s or any
\nSubsidiary’s properties or assets has ever been used by Borrower or any
\nSubsidiary or, to the best of Borrower’s knowledge, by previous owners or
\noperators, in the disposal of, or to produce, store, handle, treat, release, or
\ntransport, any hazardous waste or hazardous substance other than in accordance
\nwith applicable law; to the best of Borrower’s knowledge, none of Borrower’s
\nproperties or assets has ever been designated or identified in any manner
\npursuant to any environmental protection statute as a hazardous waste or
\nhazardous substance disposal site, or a candidate for closure pursuant to any
\nenvironmental protection statute; no lien arising under any environmental
\nprotection statute has attached to any revenues or to any real or personal
\nproperty owned by Borrower or any Subsidiary; and neither Borrower nor any
\nSubsidiary has received a summons, citation, notice, or directive from the
\nEnvironmental Protection Agency or any other federal, state or other
\ngovernmental agency concerning any action or omission by Borrower or any
\nSubsidiary resulting in the releasing, or otherwise disposing of hazardous waste
\nor hazardous substances into the environment.<\/p>\n
5.13 Taxes. Borrower and each Subsidiary has filed or caused to
\nbe filed all tax returns required to be filed, and has paid, or has made
\nadequate provision for the payment of, all taxes reflected therein.<\/p>\n
5.14 Subsidiaries. Borrower does not own any stock, partnership
\ninterest or other equity securities of any Person, except for Permitted
\nInvestments and has no Subsidiaries.<\/p>\n
15
\n 20<\/p>\n
5.15 Government Consents. Borrower and each Subsidiary has
\nobtained all consents, approvals and authorizations of, made all declarations or
\nfilings with, and given all notices to, all governmental authorities that are
\nnecessary for the continued operation of Borrower’s business as currently
\nconducted, except to the extent that any failure to do so would not have a
\nMaterial Adverse Effect.<\/p>\n
5.16 Full Disclosure. No representation, warranty or other
\nstatement made by Borrower in any certificate or written statement furnished to
\nBank contains any untrue statement of a material fact or omits to state a
\nmaterial fact necessary in order to make the statements contained in such
\ncertificates or statements not misleading.<\/p>\n
6. AFFIRMATIVE COVENANTS<\/p>\n
Borrower covenants and agrees that, until payment in full of all
\noutstanding Obligations, and for so long as Bank may have any commitment to make
\nan Advance hereunder, Borrower shall do all of the following:<\/p>\n
6.1 Good Standing. Borrower shall maintain its and each of its
\nSubsidiaries’ corporate existence and good standing in its jurisdiction of
\nincorporation and maintain qualification in each jurisdiction in which the
\nfailure to so qualify could have a Material Adverse Effect. Borrower shall
\nmaintain, and shall cause each of its Subsidiaries to maintain, to the extent
\nconsistent with prudent management of Borrower’s business, in force all
\nlicenses, approvals and agreements, the loss of which could have a Material
\nAdverse Effect.<\/p>\n
6.2 Government Compliance. Borrower shall meet, and shall cause
\neach Subsidiary to meet, the minimum funding requirements of ERISA with respect
\nto any employee benefit plans subject to ERISA. Borrower shall comply, and shall
\ncause each Subsidiary to comply, with all statutes, laws, ordinances and
\ngovernment rules and regulations to which it is subject, noncompliance with
\nwhich could have a Material Adverse Effect or a material adverse effect on the
\nCollateral or the priority of Bank’s Lien on the Collateral.<\/p>\n
6.3 Financial Statements, Reports, Certificates. Borrower shall
\ndeliver to Bank: (a) as soon as available, but in any event within thirty (30)
\ndays after the end of each month, a company prepared consolidated balance sheet
\nand income statement covering Borrower’s consolidated operations during such
\nperiod, certified by a Responsible Officer; (b) as soon as available, but in any
\nevent within ninety (90) days after the end of Borrower’s fiscal year, audited
\nconsolidated financial statements of Borrower prepared in accordance with GAAP,
\nconsistently applied, together with an unqualified opinion on such financial
\nstatements of an independent certified public accounting firm reasonably
\nacceptable to Bank (provided the audited statements for the fiscal year ending
\nDecember 31, 1996 shall be due not later than October 31, 1997); (c) within five
\n(5) days upon becoming available, copies of all statements, reports and notices
\nsent or made available generally by Borrower to its security holders or to any
\nholders of Subordinated Debt and all reports on Form 10-K and 10-Q filed with
\nthe Securities and Exchange Commission; (d) promptly upon receipt of notice
\nthereof, a report of any legal actions pending against Borrower or any
\nSubsidiary that could result in damages or costs to Borrower or any Subsidiary
\nof One Hundred Thousand Dollars ($100,000) or more; (e) prompt notice of any
\nmaterial change in the composition of the Intellectual Property Collateral,
\nincluding, but not limited to, any subsequent ownership right of the Borrower in
\nor to any Copyright, Patent or Trademark not specified in any intellectual
\nproperty security agreement between Borrower and Bank or knowledge of an event
\nthat materially adversely effects the value of the Intellectual Property
\nCollateral; and (f) such budgets, sales projections, operating plans or other
\nfinancial information as Bank may reasonably request from time to time.<\/p>\n
16
\n 21<\/p>\n
Within twenty (20) days after the last day of each month, Borrower shall
\ndeliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
\nsubstantially the form of Exhibit C hereto, together with aged listings of
\naccounts receivable and accounts payable.<\/p>\n
Borrower shall deliver to Bank with the monthly financial statements a
\nCompliance Certificate signed by a Responsible Officer in substantially the form
\nof Exhibit D hereto.<\/p>\n
Bank shall have a right from time to time hereafter to audit Borrower’s
\nAccounts at Borrower’s expense, provided that such audits will be conducted no
\nmore often than every six (6) months unless an Event of Default has occurred and
\nis continuing, and no audit will be conducted if no Advances have been requested
\nduring the three-month period prior to the scheduled date of an audit.<\/p>\n
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
\nand marketable condition, free from all material defects, subject to normal wear
\nand tear and normal obsolescence due to the technological basis of such
\nInventory. Returns and allowances, if any, as between Borrower and its account
\ndebtors shall be on the same basis and in accordance with the usual customary
\npractices of Borrower, as they exist at the time of the execution and delivery
\nof this Agreement. Borrower shall promptly notify Bank of all returns and
\nrecoveries and of all disputes and claims, where the return, recovery, dispute
\nor claim involves more than Fifty Thousand Dollars ($50,000).<\/p>\n
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary
\nto make, due and timely payment or deposit of all material federal, state, and
\nlocal taxes, assessments, or contributions required of it by law, and will
\nexecute and deliver to Bank, on demand, appropriate certificates attesting to
\nthe payment or deposit thereof; and Borrower will make, and will cause each
\nSubsidiary to make, timely payment or deposit of all material tax payments and
\nwithholding taxes required of it by applicable laws, including, but not limited
\nto, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
\nstate, and federal income taxes, and will, upon request, furnish Bank with proof
\nsatisfactory to Bank indicating that Borrower or a Subsidiary has made such
\npayments or deposits; provided that Borrower or a Subsidiary need not make any
\npayment if the amount or validity of such payment is contested in good faith by
\nappropriate proceedings and is reserved against (to the extent required by GAAP)
\nby Borrower.<\/p>\n
6.6 Insurance<\/p>\n
(a) Borrower, at its expense, shall keep the Collateral
\ninsured against loss or damage by fire, theft, explosion, sprinklers, and all
\nother hazards and risks, and in such amounts, as ordinarily insured against by
\nother owners in similar businesses conducted in the locations where Borrower’s
\nbusiness is conducted on the date hereof. Borrower shall also maintain insurance
\nrelating to Borrower’s ownership and use of the Collateral in amounts and of a
\ntype that are customary to businesses similar to Borrower’s.<\/p>\n
(b) All such policies of insurance shall be in such form,
\nwith such companies, and in such amounts as reasonably satisfactory to Bank. All
\nsuch policies of property insurance shall contain a lender’s loss payable
\nendorsement, in a form satisfactory to Bank, showing Bank as an additional loss
\npayee thereof and all liability insurance policies shall show the Bank as an
\nadditional insured, and shall specify that the insurer must give at least twenty
\n(20) days notice to Bank before canceling its policy for any reason. Upon Bank’s
\nrequest, Borrower shall deliver to Bank certified copies of such policies of
\ninsurance and evidence of the payments of all premiums therefor. All proceeds
\npayable under any such policy shall, at the option of Bank, be payable to Bank
\nto be applied on account of the Obligations.<\/p>\n
6.7 Principal Depository. Borrower<\/p>\n
17
\n 22
\nshall maintain its principal depository and operating accounts with Bank.<\/p>\n
6.8 Quick Ratio. For the periods ending September 30, 1997 and
\nJanuary 31, 1998 and quarterly thereafter beginning March 31, 1998, Borrower
\nshall maintain, as of the last day of each period, a ratio of Quick Assets to
\nCurrent Liabilities of at least 2.0 to 1.0.<\/p>\n
6.9 Tangible Net Worth. Borrower shall maintain, as of January
\n31, 1998 and the last day of each fiscal quarter, thereafter a Tangible Net
\nWorth of not less than Three Million Dollars ($3,000,000).<\/p>\n
6.10 Minimum Liquidity\/Debt Service Coverage. Subject to the
\nremainder of this Section, Borrower shall maintain, as of the last day of each
\ncalendar month the sum of (i) cash and cash equivalents plus (ii) short term
\ninvestments plus (iii) amounts available to be drawn but not drawn on the
\nCommitted Line minus (iv) restricted cash of at least one and one-half (1.5)
\ntimes the outstanding amount of Equipment Advances. Notwithstanding the
\nforegoing, from and after the time Borrower achieves for two consecutive fiscal
\nquarters a Debt Service Coverage of at least 2.0 to 1.0, Borrower shall not be
\nsubject to the minimum liquidity requirement set forth above, but instead shall
\nmaintain, as of the last day of each fiscal quarter, a Debt Service Coverage of
\nat least 2.0 to 1.0. “Debt Service Coverage” means, as of any date of
\ndetermination, with respect to Borrower and its Subsidiaries on a consolidated
\nbasis, a ratio of (a) the sum of (i) earnings after tax plus (ii) interest and
\nnon-cash (i.e. depreciation and amortization) expense to (b) the sum of (i)
\ncurrent portion of long term debt plus (ii) interest expense.<\/p>\n
6.11 Registration of Intellectual Property Rights.<\/p>\n
(a) Borrower shall register or cause to be registered (to
\nthe extent not already registered) with the United States Patent and Trademark
\nOffice or the United States Copyright Office, as applicable, those intellectual
\nproperty rights listed on Exhibits A, B and C to the Intellectual Property
\nSecurity Agreement delivered to Bank by Borrower in connection with this
\nAgreement within thirty (30) days of the date of this Agreement and in form and
\nsubstance reasonably acceptable to Borrower’s legal counsel. Borrower shall
\nregister or cause to be registered with the United States Patent and Trademark
\nOffice or the United States Copyright Office, as applicable, those additional
\nintellectual property rights developed or acquired by Borrower from time to time
\nin connection with any product prior to the sale or licensing of such product to
\nany third party, including without limitation revisions or additions to the
\nintellectual property rights listed on such Exhibits A, B and C and in form and
\nsubstance reasonably acceptable to Borrower’s legal counsel, unless Borrower, in
\nthe exercise of its prudent business judgment, deems such registration not to
\nhave any significant commercial value, provided that Borrower shall in all cases
\nregister in accordance with this Section 6.11 the copyright of the source code
\nof any software, the licensing of which generates 5 percent or more of
\nBorrower’s gross revenue in any calendar month.<\/p>\n
(b) Borrower shall execute and deliver such additional
\ninstruments and documents from time to time as Bank shall reasonably request to
\nperfect Bank’s security interest in the Intellectual Property Collateral.<\/p>\n
(c) Borrower shall (i) protect, defend and maintain the
\nvalidity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
\nits best efforts to detect infringements of the Trademarks, Patents and
\nCopyrights and promptly advise Bank in writing of material infringements
\ndetected and (iii) not allow any Trademarks, Patents or Copyrights to be
\nabandoned, forfeited or dedicated to the public without the written consent of
\nBank, which shall not be unreasonably withheld, unless Borrower determines that
\nreasonable business practices suggest that abandonment is appropriate.<\/p>\n
18
\n 23
\n (d) Bank shall have the right, but not the obligation, to
\ntake, at Borrower’s sole expense, any actions that Borrower is required under
\nthis Section 6.11 to take but which Borrower fails to take, after fifteen (15)
\ndays’ notice to Borrower. Borrower shall reimburse and indemnify Bank for all
\nreasonable costs and reasonable expenses incurred in the reasonable exercise of
\nits rights under this Section 6.11.<\/p>\n
6.12 Further Assurances. At any time and from time to time
\nBorrower shall execute and deliver such further instruments and take such
\nfurther action as may reasonably be requested by Bank to effect the purposes of
\nthis Agreement.<\/p>\n
7. NEGATIVE COVENANTS<\/p>\n
Borrower covenants and agrees that, so long as any credit
\nhereunder shall be available and until payment in full of the outstanding
\nObligations or for so long as Bank may have any commitment to make any Advances,
\nBorrower will not do any of the following:<\/p>\n
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
\ndispose of (collectively, a “Transfer”), or permit any of its Subsidiaries to
\nTransfer, all or any part of its business or property, other than: (i) Transfers
\nof Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
\nlicenses and similar arrangements for the use of the property of Borrower or its
\nSubsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.<\/p>\n
7.2 Change in Business. Engage in any business, or permit any of
\nits Subsidiaries to engage in any business, other than the businesses currently
\nengaged in by Borrower and any business substantially similar or related thereto
\n(or incidental thereto), or suffer a material change in Borrower’s ownership
\nprovided that nothing in this Section 7.2 shall prohibit Borrower from
\ncompleting a public offering of its Common Stock pursuant to a Registration
\nStatement filed with the Securities and Exchange Commission. Borrower will not,
\nwithout thirty (30) days prior written notification to Bank, relocate its chief
\nexecutive office.<\/p>\n
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
\nof its Subsidiaries to merge or consolidate, with or into any other business
\norganization, or acquire, or permit any of its Subsidiaries to acquire, all or
\nsubstantially all of the capital stock or property of another Person.<\/p>\n
7.4 Indebtedness. Create, incur, assume or be or remain liable
\nwith respect to any Indebtedness, or permit any Subsidiary so to do, other than
\nPermitted Indebtedness.<\/p>\n
7.5 Encumbrances. Create, incur, assume or suffer to exist any
\nLien with respect to any of its property, or assign or otherwise convey any
\nright to receive income, including the sale of any Accounts, or permit any of
\nits Subsidiaries so to do, except for Permitted Liens.<\/p>\n
7.6 Distributions. Pay any dividends or make any other
\ndistribution or payment on account of or in redemption, retirement or purchase
\nof any capital stock, except Borrower may at any time when an Event of Default
\nis not continuing, repurchase from an officer, director or employee shares of
\nequity securities of Borrower held by them upon such person’s termination of
\nemployment or rendering of service to Borrower.<\/p>\n
7.7 Investments. Directly or indirectly acquire or own, or make
\nany Investment in or to any Person, or permit any of its Subsidiaries so to do,
\nother than Permitted<\/p>\n
19
\n 24
\nInvestments.<\/p>\n
7.8 Transactions with Affiliates. Directly or indirectly enter
\ninto or permit to exist any material transaction with any Affiliate of Borrower
\nexcept for transactions that are in the ordinary course of Borrower’s business,
\nupon fair and reasonable terms that are no less favorable to Borrower than would
\nbe obtained in an arm’s length transaction with a nonaffiliated Person.<\/p>\n
7.9 Intellectual Property Agreements. Borrower shall not permit
\nthe inclusion in any material contract to which it becomes a party of any
\nprovisions that could or might in any way prevent the creation of a security
\ninterest in Borrower’s rights and interests in any property included within the
\ndefinition of the Intellectual Property Collateral acquired under such
\ncontracts, except to the extent that such provisions are necessary in Borrower’s
\nexercise of its reasonable business judgement.<\/p>\n
7.10 Subordinated Debt. Make any payment in respect of any
\nSubordinated Debt, or permit any of its Subsidiaries to make any such payment,
\nexcept in compliance with the terms of such Subordinated Debt, or amend any
\nprovision contained in any documentation relating to the Subordinated Debt
\nwithout Bank’s prior written consent.<\/p>\n
7.11 Inventory. Store the Inventory with a bailee, warehouseman,
\nor similar party unless Bank has received a pledge of the warehouse receipt
\ncovering such Inventory. Except for Inventory sold in the ordinary course of
\nbusiness and except for such other locations as Bank may approve in writing,
\nBorrower shall keep the Inventory only at the location set forth in Section 10
\nhereof and such other locations of which Borrower gives Bank prior written
\nnotice and as to which Borrower signs and files a financing statement where
\nneeded to perfect Bank’s security interest.<\/p>\n
7.12 Compliance. Become an “investment company” controlled by an
\n“investment company,” within the meaning of the Investment Company Act of 1940,
\nor become principally engaged in, or undertake as one of its important
\nactivities, the business of extending credit for the purpose of purchasing or
\ncarrying margin stock, or use the proceeds of any Advance for such purpose. Fail
\nto meet the minimum funding requirements of ERISA, permit a Reportable Event or
\nProhibited Transaction, as defined in ERISA, to occur, fail to comply in a
\nmaterial respect with the Federal Fair Labor Standards Act or violate any law or
\nregulation, which violation could have a Material Adverse Effect or a material
\nadverse effect on the Collateral or the priority of Bank’s Lien on the
\nCollateral, or permit any of its Subsidiaries to do any of the foregoing.<\/p>\n
8. EVENTS OF DEFAULT<\/p>\n
Any one or more of the following events shall constitute an Event
\nof Default by Borrower under this Agreement:<\/p>\n
8.1 Payment Default. If Borrower fails to pay the principal of,
\nor any interest on, any Advances when due and payable; or fails to pay any
\nportion of any other Obligations not constituting such principal or interest,
\nincluding without limitation Bank Expenses, within thirty (30) days of receipt
\nby Borrower of an invoice for such other Obligations;<\/p>\n
8.2 Covenant Default. If Borrower fails to perform any obligation
\nunder Article 6 or violates any of the covenants contained in Article 7 of this
\nAgreement, or fails or neglects to perform, keep, or observe any other material
\nterm, provision, condition, covenant, or agreement contained in this Agreement,
\nin any of the Loan Documents, or in any other present or future agreement
\nbetween Borrower and Bank and as to any default under such other term,
\nprovision, condition, covenant or agreement that can be cured, has failed to
\ncure such default within ten (10) days after Borrower receives notice thereof or
\nany officer of Borrower becomes aware thereof; provided, however, that if the
\ndefault cannot by its nature be cured within the ten (10) day period or cannot
\nafter diligent attempts by Borrower be cured within such<\/p>\n
20
\n 25
\nten (10) day period, and such default is likely to be cured within a reasonable
\ntime, then Borrower shall have an additional reasonable period (which shall not
\nin any case exceed thirty (30) days) to attempt to cure such default, and within
\nsuch reasonable time period the failure to have cured such default shall not be
\ndeemed an Event of Default (provided that no Advances will be required to be
\nmade during such cure period);<\/p>\n
8.3 Material Adverse Change. If there occurs a Material Adverse
\nChange in Borrower’s business or financial condition, or if there is a material
\nimpairment of the prospect of repayment of any portion of the Obligations or a
\nmaterial impairment of the value or priority of Bank’s security interests in the
\nCollateral;<\/p>\n
8.4 Attachment. If any material portion of Borrower’s assets is
\nattached, seized, subjected to a writ or distress warrant, or is levied upon, or
\ncomes into the possession of any trustee, receiver or person acting in a similar
\ncapacity and such attachment, seizure, writ or distress warrant or levy has not
\nbeen removed, discharged or rescinded within twenty (20) days, or if Borrower is
\nenjoined, restrained, or in any way prevented by court order from continuing to
\nconduct all or any material part of its business affairs, or if a judgment or
\nother claim becomes a lien or encumbrance upon any material portion of
\nBorrower’s assets, or if a notice of lien, levy, or assessment is filed of
\nrecord with respect to any of Borrower’s assets by the United States Government,
\nor any department, agency, or instrumentality thereof, or by any state, county,
\nmunicipal, or governmental agency, and the same is not paid within ten (10) days
\nafter Borrower receives notice thereof, provided that none of the foregoing
\nshall constitute an Event of Default where such action or event is stayed or an
\nadequate bond has been posted pending a good faith contest by Borrower (provided
\nthat no Advances will be required to be made during such cure period);<\/p>\n
8.5 Insolvency. If Borrower becomes insolvent, or if an
\nInsolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
\nis commenced against Borrower and is not dismissed or stayed within thirty (30)
\ndays (provided that no Advances will be made prior to the dismissal of such
\nInsolvency Proceeding);<\/p>\n
8.6 Other Agreements. If there is a default in any agreement to
\nwhich Borrower is a party with a third party or parties resulting in a right by
\nsuch third party or parties, whether or not exercised, to accelerate the
\nmaturity of any Indebtedness in an amount in excess of One Hundred Thousand
\nDollars ($100,000) or that could have a Material Adverse Effect;<\/p>\n
8.7 Subordinated Debt. If Borrower makes any payment on account
\nof Subordinated Debt, except to the extent such payment is allowed under any
\nsubordination agreement entered into with Bank;<\/p>\n
8.8 Judgments. If a judgment or judgments for the payment of
\nmoney in an amount, individually or in the aggregate, of at least Fifty Thousand
\nDollars ($50,000) shall be rendered against Borrower and shall remain
\nunsatisfied and unstayed for a period of twenty (20) days (provided that no
\nAdvances will be made prior to the satisfaction or stay of such judgment); or<\/p>\n
8.9 Misrepresentations. If any material misrepresentation or
\nmaterial misstatement exists now or hereafter in any warranty or representation
\nset forth herein or in any certificate delivered to Bank by any Responsible
\nOfficer pursuant to this Agreement or to induce Bank to enter into this
\nAgreement or any other Loan Document.<\/p>\n
21
\n 26<\/p>\n
9. BANK’S RIGHTS AND REMEDIES<\/p>\n
9.1 Rights and Remedies. Upon the occurrence and during the
\ncontinuance of an Event of Default, Bank may, at its election, without notice of
\nits election and without demand, do any one or more of the following, all of
\nwhich are authorized by Borrower:<\/p>\n
(a) Declare all Obligations, whether evidenced by this
\nAgreement, by any of the other Loan Documents, or otherwise, immediately due and
\npayable (provided that upon the occurrence of an Event of Default described in
\nSection 8.5 all Obligations shall become immediately due and payable without any
\naction by Bank);<\/p>\n
(b) Cease advancing money or extending credit to or for
\nthe benefit of Borrower under this Agreement or under any other agreement
\nbetween Borrower and Bank;<\/p>\n
(c) Demand that Borrower (i) deposit cash with Bank in an
\namount equal to the amount of any Letters of Credit remaining undrawn, as
\ncollateral security for the repayment of any future drawings under such Letters
\nof Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
\npay in advance all Letters of Credit fees scheduled to be paid or payable over
\nthe remaining term of the Letters of Credit;<\/p>\n
(d) Settle or adjust disputes and claims directly with
\naccount debtors for amounts, upon terms and in whatever order that Bank
\nreasonably considers advisable;<\/p>\n
(e) Without notice to or demand upon Borrower, make such
\npayments and do such acts as Bank considers necessary or reasonable to protect
\nits security interest in the Collateral. Borrower agrees to assemble the
\nCollateral if Bank so requires, and to make the Collateral available to Bank as
\nBank may designate. Borrower authorizes Bank to enter the premises where the
\nCollateral is located, to take and maintain possession of the Collateral, or any
\npart of it, and to pay, purchase, contest, or compromise any encumbrance,
\ncharge, or lien which in Bank’s determination appears to be prior or superior to
\nits security interest and to pay all expenses incurred in connection therewith.
\nWith respect to any of Borrower’s owned premises, Borrower hereby grants Bank a
\nlicense to enter into possession of such premises and to occupy the same,
\nwithout charge, for up to one hundred twenty (120) days in order to exercise any
\nof Bank’s rights or remedies provided herein, at law, in equity, or otherwise;<\/p>\n
(f) Without notice to Borrower set off and apply to the
\nObligations any and all (i) balances and deposits of Borrower held by Bank, or
\n(ii) indebtedness at any time owing to or for the credit or the account of
\nBorrower held by Bank;<\/p>\n
(g) Ship, reclaim, recover, store, finish, maintain,
\nrepair, prepare for sale, advertise for sale, and sell (in the manner provided
\nfor herein) the Collateral. Bank is hereby granted a license or other right,
\nsolely pursuant to the provisions of this Section 9.1, to use, without charge,
\nBorrower’s labels, patents, copyrights, rights of use of any name, trade
\nsecrets, trade names, trademarks, service marks, and advertising matter, or any
\nproperty of a similar nature, as it pertains to the Collateral, in completing
\nproduction of, advertising for sale, and selling any Collateral and, in
\nconnection with Bank’s exercise of its rights under this Section 9.1, Borrower’s
\nrights under all licenses and all franchise agreements shall inure to Bank’s
\nbenefit;<\/p>\n
(h) Sell the Collateral at either a public or private
\nsale, or both, by way of one or more contracts or transactions, for cash or on
\nterms, in such manner and at such places (including Borrower’s premises) as Bank
\ndetermines is commercially reasonable, and apply any proceeds to the Obligations
\nin whatever manner or order Bank deems appropriate;<\/p>\n
22
\n 27
\n (i) Bank may credit bid and purchase at any public sale;
\nand<\/p>\n
(j) Any deficiency that exists after disposition of the
\nCollateral as provided above will be paid immediately by Borrower.<\/p>\n
9.2 Power of Attorney. Effective only upon the occurrence and
\nduring the continuance of an Event of Default, Borrower hereby irrevocably
\nappoints Bank (and any of Bank’s designated officers, or employees) as
\nBorrower’s true and lawful attorney to: (a) send requests for verification of
\nAccounts or notify account debtors of Bank’s security interest in the Accounts;
\n(b) endorse Borrower’s name on any checks or other forms of payment or security
\nthat may come into Bank’s possession; (c) sign Borrower’s name on any invoice or
\nbill of lading relating to any Account, drafts against account debtors,
\nschedules and assignments of Accounts, verifications of Accounts, and notices to
\naccount debtors; (d) make, settle, and adjust all claims under and decisions
\nwith respect to Borrower’s policies of insurance; (e) settle and adjust disputes
\nand claims respecting the accounts directly with account debtors, for amounts
\nand upon terms which Bank determines to be reasonable; (f) to modify, in its
\nsole discretion, any intellectual property security agreement entered into
\nbetween Borrower and Bank without first obtaining Borrower’s approval of or
\nsignature to such modification by amending Exhibit A, Exhibit B and Exhibit C,
\nthereof, as appropriate, to include reference to any right, title or interest in
\nany Copyrights, Patents or Trademarks acquired by Borrower after the execution
\nhereof or to delete any reference to any right, title or interest in any
\nCopyrights, Patents or Trademarks in which Borrower no longer has or claims any
\nright, title or interest; (g) to file, in its sole discretion, one or more
\nfinancing or continuation statements and amendments thereto, relative to any of
\nthe Collateral without the signature of Borrower where permitted by law; and (h)
\ndispose of the Intellectual Property Collateral in accordance with, but only to
\nthe extent permitted under, Section 9504 of the California Uniform Commercial
\nCode (and to register such disposition with appropriate government authorities);
\nprovided Bank may exercise such power of attorney to sign the name of Borrower
\non any of the documents described in Section 4.2 regardless of whether an Event
\nof Default has occurred. The appointment of Bank as Borrower’s attorney in fact,
\nand each and every one of Bank’s rights and powers, being coupled with an
\ninterest, is irrevocable until all of the Obligations have been fully repaid and
\nperformed and Bank’s obligation to provide advances hereunder is terminated.<\/p>\n
9.3 Accounts Collection. Upon the occurrence and during the
\ncontinuance of an Event of Default, Bank may notify any Person owing funds to
\nBorrower of Bank’s security interest in such funds and verify the amount of such
\nAccount. Borrower shall collect all amounts owing to Borrower for Bank, receive
\nin trust all payments as Bank’s trustee, and immediately deliver such payments
\nto Bank in their original form as received from the account debtor, with proper
\nendorsements for deposit.<\/p>\n
9.4 Bank Expenses. If Borrower fails to pay any amounts or
\nfurnish any required proof of payment due to third persons or entities, as
\nrequired under the terms of this Agreement, then Bank may do any or all of the
\nfollowing: (a) make payment of the same or any part thereof; (b) set up such
\nreserves under the Revolving Facility as Bank deems necessary to protect Bank
\nfrom the exposure created by such failure; or (c) obtain and maintain insurance
\npolicies of the type discussed in Section 6.6 of this Agreement, and take any
\naction with respect to such policies as Bank deems prudent. Any amounts so paid
\nor deposited by Bank shall constitute Bank Expenses, shall be immediately due
\nand payable, and shall bear interest at the then applicable rate hereinabove
\nprovided, and shall be secured by the Collateral. Any payments made by Bank
\nshall not constitute an agreement by Bank to make similar payments in the future
\nor a waiver by Bank of any Event of Default under this Agreement.<\/p>\n
9.5 Bank’s Liability for Collateral. So long as Bank complies
\nwith reasonable banking practices, Bank shall not in any way or manner be liable
\nor responsible for: (a) the safekeeping of the Collateral; (b) any loss or
\ndamage thereto occurring or<\/p>\n
23
\n 28
\narising in any manner or fashion from any cause; (c) any diminution in the value
\nthereof; or (d) any act or default of any carrier, warehouseman, bailee,
\nforwarding agency, or other person whomsoever. All risk of loss, damage or
\ndestruction of the Collateral shall be borne by Borrower.<\/p>\n
9.6 Remedies Cumulative. Bank’s rights and remedies under this
\nAgreement, the Loan Documents, and all other agreements shall be cumulative.
\nBank shall have all other rights and remedies not inconsistent herewith as
\nprovided under the Code, by law, or in equity. No exercise by Bank of one right
\nor remedy shall be deemed an election, and no waiver by Bank of any Event of
\nDefault on Borrower’s part shall be deemed a continuing waiver. No delay by Bank
\nshall constitute a waiver, election, or acquiescence by it. No waiver by Bank
\nshall be effective unless made in a written document signed on behalf of Bank
\nand then shall be effective only in the specific instance and for the specific
\npurpose for which it was given.<\/p>\n
9.7 Demand; Protest. Borrower waives demand, protest, notice of
\nprotest, notice of default or dishonor, notice of payment and nonpayment, notice
\nof any default, nonpayment at maturity, release, compromise, settlement,
\nextension, or renewal of accounts, documents, instruments, chattel paper, and
\nguarantees at any time held by Bank on which Borrower may in any way be liable.<\/p>\n
10. NOTICES<\/p>\n
Unless otherwise provided in this Agreement, all notices or
\ndemands by any party relating to this Agreement or any other agreement entered
\ninto in connection herewith shall be in writing and (except for financial
\nstatements and other informational documents which may be sent by first-class
\nmail, postage prepaid) shall be personally delivered or sent by a recognized
\novernight delivery service, certified mail, postage prepaid, return receipt
\nrequested, or by telefacsimile to Borrower or to Bank, as the case may be, at
\nits addresses set forth below:<\/p>\n
If to Borrower: Accrue Software, Inc.
\n 1275 Orleans Drive
\n Sunnyvale, CA 94089
\n Attn: Mr. Mike Hayashida
\n FAX: (408) 541-1874<\/p>\n
With a Copy to: Venture Law Group
\n 2800 Sand Hill Road
\n Menlo Park, CA 94025
\n Attn: John V. Bautista
\n FAX: (415) 854-1121<\/p>\n
If to Bank: Silicon Valley Bank
\n 1731 Embarcadero Road, Suite 220
\n Palo Alto, CA 94303
\n Attn: Mr. Jim Marshall
\n FAX: (415) 812-0864<\/p>\n
Any notice delivered or sent to Borrower shall be effective
\nnotwithstanding a failure to deliver or send a copy of such notice to Borrower’s
\ncounsel or any other person. The parties hereto may change the address at which
\nthey are to receive notices hereunder, by notice in writing in the foregoing
\nmanner given to the other.<\/p>\n
24
\n 29<\/p>\n
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER<\/p>\n
The Loan Documents shall be governed by, and construed in
\naccordance with, the internal laws of the State of California, without regard to
\nprinciples of conflicts of law. Each of Borrower and Bank hereby submits to the
\nexclusive jurisdiction of the state and Federal courts located in the County of
\nSanta Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
\nRESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
\nARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
\nTHEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
\nOTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
\nFOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
\nAGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
\nWITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
\nTRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.<\/p>\n
12. GENERAL PROVISIONS<\/p>\n
12.1 Successors and Assigns. This Agreement shall bind and inure
\nto the benefit of the respective successors and permitted assigns of each of the
\nparties; provided, however, that neither this Agreement nor any rights hereunder
\nmay be assigned by Borrower without Bank’s prior written consent, which consent
\nmay be granted or withheld in Bank’s sole discretion. Bank shall have the right
\nwithout the consent of or notice to Borrower to sell, transfer, negotiate, or
\ngrant participation in all or any part of, or any interest in, Bank’s
\nobligations, rights and benefits hereunder.<\/p>\n
12.2 Indemnification. Borrower shall defend, indemnify and hold
\nharmless Bank and its officers, employees, and agents against: (a) all
\nobligations, demands, claims, and liabilities claimed or asserted by any other
\nparty in connection with the transactions contemplated by the Loan Documents;
\nand (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
\nBank as a result of or in any way arising out of, following, or consequential to
\ntransactions between Bank and Borrower whether under the Loan Documents, or
\notherwise (including without limitation reasonable attorneys fees and expenses),
\nexcept for losses caused by Bank’s gross negligence or willful misconduct.<\/p>\n
12.3 Time of Essence. Time is of the essence for the performance
\nof all obligations set forth in this Agreement.<\/p>\n
12.4 Severability of Provisions. Each provision of this Agreement
\nshall be severable from every other provision of this Agreement for the purpose
\nof determining the legal enforceability of any specific provision.<\/p>\n
12.5 Amendments in Writing, Integration. This Agreement cannot be
\namended or terminated orally. All prior agreements, understandings,
\nrepresentations, warranties, and negotiations between the parties hereto with
\nrespect to the subject matter of this Agreement, if any, are merged into this
\nAgreement and the Loan Documents.<\/p>\n
12.6 Counterparts. This Agreement may be executed in any number
\nof counterparts and by different parties on separate counterparts, each of
\nwhich, when executed and delivered, shall be deemed to be an original, and all
\nof which, when taken together, shall constitute but one and the same Agreement.<\/p>\n
12.7 Survival. All covenants, representations and warranties made
\nin this Agreement shall continue in full force and effect so long as any
\nObligations remain<\/p>\n
25
\n 30
\noutstanding. The obligations of Borrower to indemnify Bank with respect to the
\nexpenses, damages, losses, costs and liabilities described in Section 12.2 shall
\nsurvive until all applicable statute of limitations periods with respect to
\nactions that may be brought against Bank have run.<\/p>\n
12.8 Confidentiality. In handling any confidential information
\nBank and all employees and agents of Bank, including but not limited to
\naccountants, shall exercise the same degree of care that it exercises with
\nrespect to its own proprietary information of the same types to maintain the
\nconfidentiality of any non-public information thereby received or received
\npursuant to this Agreement except that disclosure of such information may be
\nmade (i) to the subsidiaries or affiliates of Bank in connection with their
\npresent or prospective business relations with Borrower, (ii) to prospective
\ntransferees or purchasers of any interest in the Loans, provided that they have
\nentered into a comparable confidentiality agreement in favor of Borrower and
\nhave delivered a copy to Borrower, (iii) as required by law, regulations, rule
\nor order, subpoena, judicial order or similar order, (iv) as may be required in
\nconnection with the examination, audit or similar investigation of Bank and (v)
\nas Bank may determine in connection with the enforcement of any remedies
\nhereunder. Confidential information hereunder shall not include information that
\neither: (a) is in the public domain or in the knowledge or possession of Bank
\nwhen disclosed to Bank, or becomes part of the public domain after disclosure to
\nBank through no fault of Bank; or (b) is disclosed to Bank by a third party,
\nprovided Bank does not have actual knowledge that such third party is prohibited
\nfrom disclosing such information.<\/p>\n
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
\nexecuted as of the date first above written.<\/p>\n
ACCRUE SOFTWARE, INC.<\/p>\n
By: \/s\/ Simon Roy
\n ———————————–
\n Title: President and CEO
\n ———————————–<\/p>\n
SILICON VALLEY BANK<\/p>\n
By: \/s\/ James R. Marshall
\n ———————————–
\n Title: Vice President
\n ———————————–<\/p>\n
26
\n 31
\n EXHIBIT A<\/p>\n
The Collateral shall consist of all right, title and interest of
\nBorrower in and to the following:<\/p>\n
(a) All goods and equipment now owned or hereafter acquired, including,
\nwithout limitation, all machinery, fixtures, vehicles (including motor vehicles
\nand trailers), and any interest in any of the foregoing, and all attachments,
\naccessories, accessions, replacements, substitutions, additions, and
\nimprovements to any of the foregoing, wherever located;<\/p>\n
(b) All inventory, now owned or hereafter acquired, including, without
\nlimitation, all merchandise, raw materials, parts, supplies, packing and
\nshipping materials, work in process and finished products including such
\ninventory as is temporarily out of Borrower’s custody or possession or in
\ntransit and including any returns upon any accounts or other proceeds, including
\ninsurance proceeds, resulting from the sale or disposition of any of the
\nforegoing and any documents of title representing any of the above, and
\nBorrower’s Books relating to any of the foregoing;<\/p>\n
(c) All contract rights and general intangibles now owned or hereafter
\nacquired, including, without limitation, goodwill, trademarks, servicemarks,
\ntrade styles, trade names, patents, patent applications, leases, license
\nagreements, franchise agreements, blueprints, drawings, purchase orders,
\ncustomer lists, route lists, infringements, claims, computer programs, computer
\ndiscs, computer tapes, literature, reports, catalogs, design rights, income tax
\nrefunds, payments of insurance and rights to payment of any kind;<\/p>\n
(d) All now existing and hereafter arising accounts, contract rights,
\nroyalties, license rights and all other forms of obligations owing to Borrower
\narising out of the sale or lease of goods, the licensing of technology or the
\nrendering of services by Borrower, whether or not earned by performance, and any
\nand all credit insurance, guaranties, and other security therefor, as well as
\nall merchandise returned to or reclaimed by Borrower and Borrower’s Books
\nrelating to any of the foregoing;<\/p>\n
(e) All documents, cash, deposit accounts, securities, letters of
\ncredit, certificates of deposit, instruments and chattel paper now owned or
\nhereafter acquired and Borrower’s Books relating to the foregoing;<\/p>\n
(f) All copyright rights, copyright applications, copyright
\nregistrations and like protections in each work of authorship and derivative
\nwork thereof, whether published or unpublished, now owned or hereafter acquired;
\nall trade secret rights, including all rights to unpatented inventions,
\nknow-how, operating manuals, license rights and agreements and confidential
\ninformation, now owned or hereafter acquired; all mask work or similar rights
\navailable for the protection of semiconductor chips, now owned or hereafter
\nacquired; all claims for damages by way of any past, present and future
\ninfringement of any of the foregoing; and<\/p>\n
(g) Any and all claims, rights and interests in any of the above and all
\nsubstitutions for, additions and accessions to and proceeds thereof.<\/p>\n
27
\n 32
\n EXHIBIT B<\/p>\n
LOAN PAYMENT\/ADVANCE TELEPHONE REQUEST FORM<\/p>\n
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.<\/p>\n
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
\n —————-
\nFAX#: (408) 496-2426 TIME:
\n —————-<\/p>\n
FROM:
\n —————————————————————————
\n CLIENT NAME (BORROWER)<\/p>\n
REQUESTED BY:
\n ——————————————————————-
\n AUTHORIZED SIGNER’S NAME<\/p>\n
AUTHORIZED SIGNATURE:
\n ———————————————————–<\/p>\n
PHONE NUMBER:
\n ——————————————————————-<\/p>\n
FROM ACCOUNT # TO ACCOUNT #
\n —————————– ———————–<\/p>\n
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
\n————————– ———————<\/p>\n
PRINCIPAL INCREASE (ADVANCE) $
\n —————————-
\nPRINCIPAL PAYMENT (ONLY) $
\n —————————-
\nINTEREST PAYMENT (ONLY) $
\n —————————-
\nPRINCIPAL AND INTEREST (PAYMENT) $
\n —————————-<\/p>\n
OTHER INSTRUCTIONS:
\n——————————————————————————–<\/p>\n
——————————————————————————–<\/p>\n
All representations and warranties of Borrower stated in the Loan and
\nSecurity Agreement are true, correct and complete in all material respects as of
\nthe date of the telephone request for and Advance confirmed by this Borrowing
\nCertificate; provided, however, that those representations and warranties
\nexpressly referring to another date shall be true, correct and complete in all
\nmaterial respects as of such date.<\/p>\n
28
\n 33
\n BANK USE ONLY<\/p>\n
TELEPHONE REQUEST:<\/p>\n
The following person is authorized to request the loan payment transfer\/loan
\nadvance on the advance designated account and is known to me.<\/p>\n
——————————————– ————————-
\n Authorized Requester Phone #<\/p>\n
——————————————– ————————-
\n Received By (Bank) Phone #<\/p>\n
—————————
\n Authorized Signature (Bank)<\/p>\n
29
\n 34
\n EXHIBIT C
\n BORROWING BASE CERTIFICATE<\/p>\n
——————————————————————————–
\nBorrower: Accrue Software, Inc. Lender: Silicon Valley Bank<\/p>\n
Commitment Amount: $1,000,000
\n——————————————————————————–<\/p>\n
\n
\nACCOUNTS RECEIVABLE
\n 1. Accounts Receivable Book Value as of $
\n ——– ——–
\n 2. Additions (please explain on reverse) $
\n ——–
\n 3. TOTAL ACCOUNTS RECEIVABLE $
\n ——–<\/p>\nACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
\n 4. Amounts over 90 days due $
\n ——–
\n 5. Balance of 50% over 90 day accounts $
\n ——–
\n 6. Concentration Limits* $
\n ——–
\n 7. Foreign Accounts $
\n ——–
\n 8. Governmental Accounts $
\n ——–
\n 9. Contra Accounts $
\n ——–
\n 10. Promotion or Demo Accounts $
\n ——–
\n 11. Intercompany\/Employee Accounts $
\n ——–
\n 12. Other (please explain on reverse) $
\n ——–
\n 13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
\n ——-
\n 14. Eligible Accounts (#3 minus #13) $
\n ——-
\n 15. LOAN VALUE OF ACCOUNTS (80% of #14) $
\n ——–<\/p>\n
NONFORMULA SUBLIMIT
\n 16. Nonformula Sublimit $150,000<\/p>\n
BALANCES
\n 17. Maximum Loan Amount $
\n ——-
\n 18. Total Funds Available [Lesser of #17 or (#15 plus #16)] $
\n ——–
\n 19. Present balance owing on Line of Credit $
\n ——–
\n 20. Outstanding under Sublimits ( ) $
\n ——-
\n 21. RESERVE POSITION (#18 minus #19 and #20) $
\n ——–
\n<\/c><\/c><\/c><\/s><\/table>\n
The undersigned represents and warrants that the foregoing is true, complete and
\ncorrect, and that the information reflected in this Borrowing Base Certificate
\ncomplies with the representations and warranties set forth in the Loan and
\nSecurity Agreement between the undersigned and Silicon Valley Bank. <\/p>\n
*35% maximum concentration limit allowed for Apple Computer and Sun
\nMicrosystems.<\/p>\n
————————-
\n BANK USE ONLY<\/p>\n
Rec’d By:
\n —————-
\n Auth. Signer
\n Date:
\n —————-
\n Verified:
\n —————-
\n Auth. Signer
\n ————————-<\/p>\n
Date:
\n —————-<\/p>\n
————————-
\nCOMMENTS:<\/p>\n
Accrue Software, Inc.<\/p>\n
\/s\/ Richard Kreysar
\n—————————-<\/p>\n
30
\n 35<\/p>\n
By:
\n ————————-
\n Authorized Signer<\/p>\n
31
\n 36
\n EXHIBIT D
\n COMPLIANCE CERTIFICATE<\/p>\n
TO: SILICON VALLEY BANK<\/p>\n
FROM: ACCRUE SOFTWARE, INC.<\/p>\n
The undersigned authorized officer of Accrue Software, Inc. hereby
\ncertifies that in accordance with the terms and conditions of the Loan and
\nSecurity Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is
\nin complete compliance for the period ending with all required covenants except
\nas noted below and (ii) all representations and warranties of Borrower stated in
\nthe Agreement are true and correct in all material respects as of the date
\nhereof. Attached herewith are the required documents supporting the above
\ncertification. The Officer further certifies that these are prepared in
\naccordance with Generally Accepted Accounting Principles (GAAP) and are
\nconsistently applied from one period to the next except as explained in an
\naccompanying letter or footnotes.<\/p>\n
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES\/NO UNDER “COMPLIES”
\nCOLUMN.<\/p>\n
\n\n REPORTING COVENANT REQUIRED COMPLIES
\n —————— ——– ——–
\n
\n Monthly financial statements Monthly within 30 days Yes No
\n Annual (CPA Audited) FYE within 90 days* Yes No
\n A\/R & A\/P Agings Monthly within 15 days Yes No
\n A\/R Audit Initial and Semi-Annual** Yes No
\n<\/c><\/c><\/c><\/s><\/caption>\n<\/table>\n* 12\/31\/96 FYE, Financial Statement due before 10\/31\/97.<\/p>\n
** Unless no borrowings have occurred for three (3) months prior to scheduled
\n audit date.<\/p>\n
\n\n FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
\n —————— ——– —— ——–
\n
\n Maintain on a Quarterly Basis:
\n Minimum Quick Ratio 2.0:1.0 _____:1.0 Yes No
\n Minimum Tangible Net Worth $3,000,000 $_____ Yes No
\n Liquidity 1.5:1.0* _____:1.0 Yes No
\n Debt Service Coverage 2.0:1.0* _____:1.0 Yes No
\n<\/c><\/c><\/c><\/s><\/caption>\n<\/table>\n* Debt Service replaces Liquidity after 2 quarters of DSC > 2.0.<\/p>\n
32
\n 37<\/p>\n
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
\n See Attached<\/p>\n
Sincerely,<\/p>\n
Received by:
\n—————————— —————————
\nSIGNATURE AUTHORIZED SIGNER
\n Date:
\n—————————— —————————
\nTITLE
\n Verified:
\n—————————— —————————
\nDATE AUTHORIZED SIGNER<\/p>\n
Date:
\n —————————<\/p>\n
Compliance Status: Yes No<\/p>\n
33
\n 38
\n DISBURSEMENT REQUEST AND AUTHORIZATION<\/p>\n
Borrower: Accrue Software, Inc. Bank: Silicon Valley Bank<\/p>\n
================================================================================<\/p>\n
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
\namount up to $1,000,000 and an Equipment Line of Credit up to $1,000,000.<\/p>\n
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.<\/p>\n
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
\nCapital and Equipment Acquisition.<\/p>\n
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
\ndisbursed until all of Bank’s conditions for making the loan have been
\nsatisfied. Please disburse the loan proceeds as follows:<\/p>\n
\n\n Revolving Line Equipment Line
\n ————– ————–
\n
\n Amount paid to Borrower directly: $ $
\n ———- ———–
\n Undisbursed Funds $ $
\n ———- ———–
\n Principal $1,000,000 $1,000,000
\n<\/c><\/c><\/s><\/caption>\n<\/table>\nCHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
\nfollowing charges:<\/p>\n
\n\n Charges Paid in Cash:<\/p>\n
\n $5,000 Loan Fee
\n $ Accounts Receivables Audit
\n ——
\n $ 100 UCC Search Fees
\n $ 100 UCC Filing Fees
\n $ Patent Filing Fees
\n ——
\n $ Trademark Filing Fees
\n ——
\n $ Copyright Filing Fees
\n ——
\n $7,500 Outside Counsel Fees and Expenses (Maximum)
\n ——
\n Total Charges Paid in Cash $
\n ——–
\n<\/c><\/s><\/caption>\n<\/table>\nAUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
\nBorrower’s account numbered ______ the amount of any loan payment. If the funds
\nin the account are insufficient to cover any payment, Bank shall not be
\nobligated to advance funds to cover the payment.<\/p>\n
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
\nWARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
\nTHAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER’S FINANCIAL CONDITION AS
\nDISCLOSED IN BORROWER’S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
\nAUTHORIZATION IS DATED AS OF ____________, 19___.<\/p>\n
BORROWER:<\/p>\n
Accrue Software, Inc.<\/p>\n
\/s\/ Richard Kreysar
\n———————————
\nAuthorized Officer<\/p>\n
39
\n AGREEMENT TO PROVIDE INSURANCE<\/p>\n
GRANTOR: Accrue Software, Inc. BANK: Silicon Valley Bank<\/p>\n
——————————————————————————–<\/p>\n
INSURANCE REQUIREMENTS. Accrue Software, Inc. (“Grantor”) understands
\nthat insurance coverage is required in connection with the extending of a loan
\nor the providing of other financial accommodations to Grantor by Bank. These
\nrequirements are set forth in the Loan Documents. The following minimum
\ninsurance coverages must be provided on the following described collateral (the
\n“Collateral”):<\/p>\n
Collateral: All Inventory, Equipment and Fixtures.<\/p>\n
Type: All risks, including fire, theft and liability.<\/p>\n
Amount: Full insurable value.<\/p>\n
Basis: Replacement value.<\/p>\n
Endorsements: Loss payable clause to Bank with stipulation that
\n coverage will not be canceled or diminished without
\n a minimum of twenty (20) days’ prior written notice
\n to Bank.<\/p>\n
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
\ncompany Grantor may choose that is reasonably acceptable to Bank. Grantor
\nunderstands that credit may not be denied solely because insurance was not
\npurchased through Bank.<\/p>\n
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
\nbefore closing, evidence of the required insurance as provided above, with an
\neffective date of September 19, 1997, or earlier. Grantor acknowledges and
\nagrees that if Grantor fails to provide any required insurance or fails to
\ncontinue such insurance in force, Bank may do so at Grantor’s expense as
\nprovided in the Loan and Security Agreement. The cost of such insurance, at the
\noption of Bank, shall be payable on demand or shall be added to the indebtedness
\nas provided in the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO
\nPURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION
\nAGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN;
\nHOWEVER, GRANTOR’S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE
\nINSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
\nINDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
\nRESPONSIBILITY LAWS.<\/p>\n
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
\nGrantor authorizes Bank to provide to any person (including any insurance agent
\nor company) all information Bank deems appropriate, whether regarding the
\nCollateral, the loan or other financial accommodations, or both.<\/p>\n
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
\nPROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 19,
\n1997.<\/p>\n
GRANTOR:<\/p>\n
Accrue Software, Inc.<\/p>\n
x
\nAuthorized Officer<\/p>\n
================================================================================
\n FOR BANK USE ONLY
\n INSURANCE VERIFICATION<\/p>\n
DATE: PHONE:
\nAGENT’S NAME:
\nINSURANCE COMPANY:
\nPOLICY NUMBER:
\nEFFECTIVE DATES:
\nCOMMENTS: _______________
\n================================================================================<\/p>\n
40
\n CORPORATE RESOLUTIONS TO BORROW<\/p>\n
BORROWER: ACCRUE SOFTWARE, INC.<\/p>\n
I, the undersigned Secretary or Assistant Secretary of Accrue Software,
\nInc. (the “Corporation”), HEREBY CERTIFY that the Corporation is organized and
\nexisting under and by virtue of the laws of the State of Delaware.<\/p>\n
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
\nand complete copies of the Certificate of Incorporation and Bylaws of the
\nCorporation, each of which is in full force and effect on the date hereof.<\/p>\n
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
\nduly called and held, at which a quorum was present and voting (or by other duly
\nauthorized corporate action in lieu of a meeting), the following resolutions
\nwere adopted.<\/p>\n
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
\nemployees, or agents of this Corporation, whose actual signatures are shown
\nbelow:<\/p>\n
\n\n NAMES POSITIONS ACTUAL SIGNATURES
\n —– ——— —————–
\n <\/p>\n——————— ———————– ————————-<\/p>\n
——————— ———————– ————————-<\/p>\n
——————— ———————– ————————-<\/p>\n
——————— ———————– ————————-<\/p>\n
——————— ———————– ————————-
\n<\/c><\/c><\/s><\/caption>\n<\/table>\n
acting for an on behalf of this Corporation and as its act and deed be, and they
\nhereby are, authorized and empowered:<\/p>\n
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
\n(“Bank”), on such terms as may be agreed upon between the officers, employees,
\nor agents and Bank, such sum or sums of money as in their judgment should be
\nborrowed, without limitation, including such sums as are specified in that
\ncertain Loan and Security Agreement dated as of September 19, 1997 (the “Loan
\nAgreement”).<\/p>\n
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
\nnotes of the Corporation, on Lender’s forms, at such rates of interest and on
\nsuch terms as may be agreed upon, evidencing the sums of money so borrowed or
\nany indebtedness of the Corporation to Bank, and also to execute and deliver to
\nLender one or more renewals, extensions, modifications, refinancings,
\nconsolidations, or substitutions for one or more of the notes, or any portion of
\nthe notes.<\/p>\n
GRANT SECURITY. To grant a security interest to Bank in the Collateral
\ndescribed in the Loan Agreement, which security interest shall secure all of the
\nCorporation’s Obligations, as described in the Loan Agreement.<\/p>\n
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
\ntrade acceptances, promissory notes, or other evidences of indebtedness payable
\nto or belonging to the Corporation or in which the Corporation may have an
\ninterest, and either to <\/p>\n
1
\n 41
\nreceive cash for the same or to cause such proceeds to be credited to the
\naccount of the Corporation with Bank, or to cause such other disposition of the
\nproceeds derived therefrom as they may deem advisable.<\/p>\n
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
\napplications, foreign exchange agreements and other related documents pertaining
\nto Bank’s issuance of letters of credit and foreign exchange contracts.<\/p>\n
FURTHER ACTS. In the case of lines of credit, to designate additional or
\nalternate individuals as being authorized to request advances thereunder, and in
\nall cases, to do and perform such other acts and things, to pay any and all fees
\nand costs, and to execute and deliver such other documents and agreements as
\nthey may in their discretion deem reasonably necessary or proper in order to
\ncarry into effect the provisions of these Resolutions.<\/p>\n
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
\nthese resolutions and performed prior to the passage of these resolutions are
\nhereby ratified and approved, that these Resolutions shall remain in full force
\nand effect and Bank may rely on these Resolutions until written notice of their
\nrevocation shall have been delivered to and received by Bank. Any such notice
\nshall not affect any of the Corporation’s agreements or commitments in effect at
\nthe time notice is given.<\/p>\n
I FURTHER CERTIFY that the officers, employees, and agents named above
\nare duly elected, appointed, or employed by or for the Corporation, as the case
\nmay be, and occupy the positions set forth opposite their respective names; that
\nthe foregoing Resolutions now stand of record on the books of the Corporation;
\nand that the Resolutions are in full force and effect and have not been modified
\nor revoked in any manner whatsoever.<\/p>\n
IN WITNESS WHEREOF, I have hereunto set my hand on _______________,
\n19___ and attest that the signatures set opposite the names listed above are
\ntheir genuine signatures.<\/p>\n
CERTIFIED TO AND ATTESTED BY:<\/p>\n
X
\n ———————————–<\/p>\n
2
\n 42
\n LOAN MODIFICATION AGREEMENT<\/p>\n
This Loan Modification Agreement is entered into as of April 9, 1999, by
\nand between Accrue Software, Inc. (“Borrower”) and Silicon Valley Bank (“Bank”).<\/p>\n
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
\nowing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
\ndocuments, a Loan and Security Agreement, dated September 19, 1997, as may be
\namended from time to time, (the “Loan Agreement”). The Loan Agreement provided
\nfor, among other things, an Equipment facility in the original principal amount
\nof One Million Dollars ($1,000,000). Defined terms used but not otherwise
\ndefined herein shall have the same meanings as in the Loan Agreement.<\/p>\n
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
\nthe “Indebtedness.”<\/p>\n
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
\nsecured by the Collateral as described in the Loan Agreement and in that certain
\nIntellectual Property Security Agreement, dated September 19, 1997, by and
\nbetween Borrower and Bank.<\/p>\n
Hereinafter, the above-described security documents and guaranties, together
\nwith all other documents securing repayment of the Indebtedness shall be
\nreferred to as the “Security Documents.” Hereinafter, the Security Documents,
\ntogether with all other documents evidencing or securing the Indebtedness shall
\nbe referred to as the “Existing Loan Documents.”<\/p>\n
3. DESCRIPTION OF CHANGE IN TERMS.<\/p>\n
A. Modification(s) to Loan Agreement<\/p>\n
1. The following terms are hereby incorporated into Section 1.1
\n entitled “Definitions”:<\/p>\n
“Committed Equipment 2 Line” is a Credit Extension in an amount
\n of $750,000.<\/p>\n
“Credit Extension” is each Equipment Advance, Equipment 2 Advance
\n or any other extension of credit by Bank for Borrower’s benefit.<\/p>\n
“Equipment 2 Advance(s)” is defined in Section 2.1.5.<\/p>\n
“Equipment 2 Availability End Date” is defined in Section 2.1.5.<\/p>\n
“Equipment 2 Maturity Loan Maturity Date” is defined in Section
\n 2.1.5.<\/p>\n
2. The following Section is hereby incorporated into the Loan
\n Agreement:<\/p>\n
2.1.5 Equipment 2 Advances.<\/p>\n
(a) Through April 9, 2000 (the “Equipment 2
\n Availability End Date”), Bank will make advances (“Equipment 2
\n Advance” and, collectively, “Equipment 2 Advances”) not exceeding
\n the Committed Equipment 2 Line. The Equipment 2 Advances may only
\n be used to purchase Equipment, including computer equipment,
\n office equipment and other machinery and may not exceed 100% of
\n the equipment invoice, excluding taxes, shipping, warranty
\n charges, freight discounts and installation expense. Software
\n licenses, leasehold improvements and other soft costs may
\n constitute up to 20% of the aggregate Equipment 2 Advances. Each
\n Equipment 2 Advance must be for minimum of $75,000.<\/p>\n
(b) Interest accrues from the date of each Equipment 2
\n Advance at the rate in Section 2.3(a) and is payable monthly.
\n 43
\n (c) Equipment 2 Advances outstanding on October 9, 1999 are
\n payable in 36 equal monthly installments of principal, plus
\n accrued interest, beginning on November 9, 1999 and ending on
\n October 9, 2002.<\/p>\n
(d) Equipment 2 Advances made after October 9, 1999 and
\n outstanding on the Equipment 2 Availability End Date are payable
\n in 36 equal monthly installments of principal, plus accrued
\n interest, beginning on the 9th of each month following the
\n Equipment 2 Availability End Date and ending on April 9, 2003
\n (the “Equipment 2 Loan Maturity Date”). Equipment 2 Advances when
\n repaid may not be reborrowed.<\/p>\n
(e) To obtain an Equipment 2 Advance, Borrower must notify
\n Bank (the notice is irrevocable) by facsimile no later than 3:00
\n p.m. Pacific time 1 Business Day before the day on which the
\n Equipment 2 Advance is to be made. The notice must be signed by a
\n Responsible Officer or designee and include a copy of the invoice
\n for the Equipment being financed.<\/p>\n
3. Section 2.3(a) entitled “Interest Rate” is herby amended to read
\n as follows:<\/p>\n
Except as set forth in Section 2.3(b), any Equipment Advances
\n and Equipment 2 Advances shall bear interest, on the average
\n Daily Balance, at a rate equal to one (1.000) percentage point
\n above the Prime Rate.<\/p>\n
4. Section 6.8 entitled “quick Ratio” is hereby amended to read as
\n follows:<\/p>\n
Borrower shall maintain, as of the last day of each month, a
\n ratio of Quick Assets to Current Liabilities, less deferred
\n revenue, of 2.00 to 1.00.<\/p>\n
5. Section 6.9 entitled “Tangible Net Worth” is hereby replaced with
\n the following Section:<\/p>\n
6.9. Net Income. Borrower shall achieve as of the last day of
\n each fiscal quarter a minimum net profit of $1., provided,
\n however, Borrower is allowed losses, provided such losses do not
\n exceed $1,040,000 for the fiscal quarter ending June 30, 1999 and
\n $670,000 for the fiscal quarter ending September 30, 1999.<\/p>\n
6. Section 6.10 entitled “Minimum Liquidity\/Debt Service Coverage”
\n is hereby amended to read as follows:<\/p>\n
Borrower shall maintain, as of the last day of each fiscal
\n quarter, the sum of (i) cash and cash equivalents plus (ii) short
\n term investments plus (iii) 60% of Borrower’s net Accounts
\n divided by (iii) all outstanding Credit Extensions of not less
\n than 1.20 to 1.00 (the “Liquidity Covenant”). Beginning the
\n fiscal quarter ending March 31, 2000 and each fiscal quarter
\n ending thereafter, the Liquidity Covenant shall be replaced by a
\n Debt Service Coverage Covenant of (a) quarterly adjusted net
\n income plus (b) quarterly depreciation\/amortization plus (c)
\n quarterly interest expense, divided by (d) current portion of
\n long term debt divided by 4 plus (e) quarterly interest expense
\n of 1.50 to 1.00 (the “Debt Service Coverage Covenant”).<\/p>\n
7. The term “Advances” as stated in the last sentence under Section
\n 8.2, 8.4, 8.5 and 8.8 is hereby replaced with the term “Credit
\n Extensions.”<\/p>\n
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
\nwherever necessary to reflect the changes described above.<\/p>\n
-2-<\/p>\n
44
\n5. PAYMENT OF LOAN FEE. Borrower shall pay to bank a fee in the amount of
\nThree Thousand Seven Hundred Fifty Dollars ($3.750) (the “Loan Fee”) plus all
\nout-of-pocket expenses.<\/p>\n
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
\nbelow) agrees that, as of the date hereof, it has no defenses against the
\nobligations to pay any amounts under the Indebtedness.<\/p>\n
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
\nbelow) understands and agrees that in modifying the existing Indebtedness, Bank
\nis relying upon Borrower’s representations, warranties,and agreements, as set
\nforth in the Existing Loan Documents. Except as expressly modified pursuant to
\nthis Loan Modification Agreement, the terms of the Existing Loan Documents
\nremain unchanged and in full force and effect. Bank’s agreement to
\nmodifications to the existing Indebtedness pursuant to this Loan Modification
\nAgreement in no way shall obligate Bank to make any future modifications to the
\nindebtedness. Nothing in this Loan Modification Agreement shall constitute a
\nsatisfaction of the Indebtedness. It is the intention of Bank and Borrower to
\nretain as liable parties all makers and endorsers of Existing Loan Documents,
\nunless the party is expressly released by Bank in writing. No maker, endorser,
\nor guarantor will be released by virtue of this Loan Modification Agreement.
\nThe terms of this paragraph apply not only to this Loan Modification
\nAgreement, but also to all subsequent loan modification agreements.<\/p>\n
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
\nconditioned upon Borrower’s payment of the Loan Fee.<\/p>\n
This Loan Modification Agreement is executed as of the date first written
\nabove.<\/p>\n
BORROWER: BANK:<\/p>\n
ACCRUE SOFTWARE, INC. SILICON VALLEY BANK<\/p>\n
By: \/s\/ Rick Kreysar By: \/s\/ R. Bryan Jadot
\n —————————— —————————-
\nName: Rick Kreysar Name: R. Bryan Jadot
\n —————————- ————————–
\nTitle: CEO Title: A\/O
\n ————————— ————————-
\nDate: 4\/19\/99
\n ————————— <\/p>\n
-3-
\n 45
\n SILICON VALLEY BANK
\n PRO FORMA INVOICE FOR LOAN CHARGES<\/p>\n
\n <\/p>\nBORROWER: Accrue Software, Inc.<\/p>\n
LOAN OFFICER: R. Bryan Jadot<\/p>\n
DATE: April 9, 1999<\/p>\n
Loan Fee $3,750.00
\n Documentation Fee 250.00<\/p>\n
TOTAL FEE DUE $4,000.00
\n =========<\/p>\n
( ) A check for the total amount is attached.
\n ( ) Debit DDA #___________ for the total amount.<\/p>\n
<\/c><\/c><\/s><\/table>\n
Borrower:<\/p>\n
——————————–
\n (Authorized Signer)<\/p>\n
Bank:<\/p>\n
——————————–
\nSilicon Valley Bank (Date)
\nAccount Officer’s Signature<\/p>\n
-4-<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6556,8832],"corporate_contracts_industries":[9415,9513],"corporate_contracts_types":[9560,9567],"class_list":["post-41132","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-accrue-software-inc","corporate_contracts_companies-silicon-valley-bancshares","corporate_contracts_industries-financial__banks","corporate_contracts_industries-technology__software","corporate_contracts_types-finance","corporate_contracts_types-finance__loan"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41132","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41132"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41132"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41132"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41132"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}