LOAN MODIFICATION AGREEMENT
Exhibit 10.19
This Loan Modification Agreement is entered into as of November 21, 2003, by and between Kana Software, Inc. (the "Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be owing by
Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, a Loan and Security
Agreement, dated July 10, 2000, as amended or modified from time to time, (the "Loan Agreement"). The
Loan Agreement provides for, among other things, a Committed Revolving Line in the original principal
amount of Ten Million Dollars ($10,000,000). The Loan Agreement has been modified pursuant to, among
other documents, a Loan Modification Agreement dated December 28, 2001, pursuant to which, among
other things, the Committed Revolving Line was decreased to Three Million Dollars ($3,000,000). The Loan
Agreement has been recently modified pursuant to a Loan Modification Agreement dated November 22,
2002, pursuant to which, among other things, the original principal amount of the Committed Revolving Line
increased to Five Million Dollars ($5,000,000). Defined terms used but not otherwise defined herein shall
have the same meanings as set forth in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as
described in the Loan Agreement and in an Intellectual Property Security Agreement.
Hereinafter, the above-described security documents and guaranties, together with all other documents
securing repayment of the Obligations shall be referred to as the "Security Documents". Hereinafter, the
Security Documents, together with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. Sub section (a) of Section 2.3 entitled "Interest Rate, Payments" is hereby
amended in part to provide that, effective as of this date, Advances accrue interest
on the outstanding principal balance at a per annum rate equal to the greater of (i)
the Prime Rate or (ii) 4.00%.
2. Section 6.6 entitled "Primary Accounts" is hereby deleted in its entirety and
replaced with the words "Intentionally Omitted".
3. Section 6.8 entitled "Registration of Intellectual Property Rights" is hereby
amended in its entirety to read as follows:
Borrower shall not register any Copyrights or Mask Works with the United States
Copyright Office unless it: (i) has given at least fifteen (15) days' prior notice to
Bank of its intent to register such Copyrights or Mask Works and has provided
Bank with a copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (ii) executes a security agreement
or such other documents as Bank may reasonably request in order to maintain
the perfection and priority of Bank's security interest in the Copyrights proposed
to be registered with the United States Copyright Office; and (iii) records such
security documents with the United States Copyright Office contemporaneously
with filing the Copyright application(s) with the United States Copyright Office.
Borrower shall promptly provide to Bank a copy of the Copyright application(s)
filed with the United States Copyright Office, together with evidence of the
recording of the security documents necessary for Bank to maintain the
perfection and priority of its security interest in such Copyrights or Mask Works.
Borrower shall provide written notice to Bank of any application filed by Borrower
in the United States Patent Trademark Office for a patent or to register a
trademark or service xxxx within 30 days of any such filing.
Borrower will (i) protect, defend and maintain the validity and enforceability of the
Intellectual Property and promptly advise Bank in writing of material
infringements and (ii) not allow any Intellectual Property material to Borrower's
business to be abandoned, forfeited or dedicated to the public without Bank's
written consent.
4. Section 6.10 entitled "Minimum Unrestricted Cash" is hereby deleted in its entirety and
replaced with "Compensating Balances" and to read as follows:
Borrower shall maintain at least $6,000,000 in unrestricted cash and cash
equivalents with or through Bank at all times. If Borrower fails to comply with the
Compensating Balance for ten (10) consecutive Business Days, it shall not be
deemed as an Event of Default, provided that Borrower pays Bank a one time fee
of Ten Thousand Dollars ($10,000). However, it shall not be construed in any way
as to cure Borrower's violation of any other Event of Default under the Loan
Agreement or Bank's agreement to (i) waive any other Event of Default under the
Loan Agreement; or (ii) forbear from exercising its right and remedies if an Event of
Default occurs, exists or continues under the Loan Agreement.
5. Section 7.3 entitled "Mergers and Acquisitions" is hereby amended in its entirety to read
as follows:
Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except where (i)
such transactions does not exceed (a) $1,000,000 in cash and (b) $4,000,000 in
stocks; (ii) no Event of Default has occurred and is continuing or would result from
such action during the term of this Agreement or result in a decrease of more than
25% of Tangible Net Worth; and or (iii) merge or consolidate a Subsidiary into
another Subsidiary or into Borrower.
6. The following defined term under Section 13.1 entitled "Definitions" is hereby
amended to read as follows:
"Revolving Maturity Date" is November 20, 2004.
B. Waiver of Covenant Default(s)
1. Bank hereby waives Borrower's existing default under the Loan Agreement by virtue
of Borrower's failure to maintain its primary depository and operating accounts with
Bank as described under Section 6.6, as amended herein.
Bank's agreement to waive the above-described default (1) in no way shall be
deemed an agreement by the Bank to waive Borrower's compliance with the abovedescribed
covenant as of all other dates and (2) shall not limit or impair the Bank's
right to demand strict performance of this covenant as of all other dates and (3) shall
not limit or impair the Bank's right to demand strict performance of all other
covenants as of any date.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below)
agrees that, as of the date hereof, it has no defenses against paying any of the Obligations.
6. PAYMENT OF LOAN FEE. Borrower shall pay Bank a fee in the amount of Thirty Seven Thousand
Five Hundred Dollars ($37,500), provided, that Borrower does not move its operating accounts to Bank on
or prior to February 21, 2004 ("Loan Fee") plus all out-of-pocket expenses.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands
and agrees that in modifying the existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified
pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged
and in full force and effect. Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It
is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Loan
Documents, unless the party is expressly released by Bank in writing. Unless expressly released herein, no
maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of
this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is conditioned upon
payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: BANK:
KANA SOFTWARE, INC. SILICON VALLEY BANK
By: By:
Name: Name:
Title: Title:
