EXHIBIT 10.1
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EGAIN COMMUNICATIONS CORPORATION
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as of
March 29, 2001, by and between IMPERIAL BANK ("Bank") and EGAIN COMMUNICATIONS
CORPORATION ("Borrower").
RECITALS
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A. Bank and Borrower are parties to that certain Starter Kit Loan and
Security Agreement dated as of August 7, 1998, as amended (the "Original
Agreement").
B. Borrower and Bank wish to amend and restate the terms of the Original
Agreement. This Agreement sets forth the terms on which Bank will advance
credit to Borrower, and Borrower will repay the amounts owing to Bank.
AGREEMENT
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
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1.1 Definitions. As used in this Agreement, the following terms shall
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have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, and directors.
"Affiliated Entity" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
reasonable Collateral audit fees; and Bank's reasonable attorneys' fees and
expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty percent (80%) of
Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
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"Change in Control" shall mean a transaction in which any "person" or
"group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of a
sufficient number of shares of all classes of stock then outstanding of Borrower
ordinarily entitled to vote in the election of directors, empowering such
"person" or "group" to elect a majority of the Board of Directors of Borrower,
who did not have such power before such transaction.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
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hereto.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Advance, Equipment Advance, Term
Advance, Letter of Credit, the issuance of credit cards under Section 2.1(e), or
any other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at the end of
a given day.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
eligibility may be fixed and revised from time to time by Bank as a consequence
of any Collateral audits done pursuant to Section 6.3 in Bank's reasonable
judgment and upon notification thereof to Borrower in accordance with the
provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following:
(a) Accounts that the account debtor has failed to pay within sixty
(60) days of the payment date set forth in the applicable invoice;
(b) Accounts with respect to an account debtor, twenty-five percent
(25%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
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(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate
of Borrower;
(f) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the United
States or any department, agency, or instrumentality of the United States;
(h) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty-
five percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage (the "Concentration Limit"), except as approved by
Bank in writing (provided that in no event shall the Concentration Limit shall
be greater than 50%); and
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business.
"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank, or
(ii) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1(b).
"Equipment Line" means a credit extension of up to Three Million
Dollars ($3,000,000).
"Equipment Maturity Date" means February 27, 2004.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
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"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, or proceedings seeking reorganization.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule, provided that Indebtedness for the capital leases disclosed on the
Schedule shall be subject to the cap set forth in subsection (c) below;
(c) Indebtedness secured by a lien described in clause (c) of the
defined term "Permitted Liens," provided (i) such Indebtedness does not exceed
the lesser of the cost or fair market value of the
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equipment financed with such Indebtedness and (ii) such Indebtedness does not
exceed $5,000,000 in the aggregate at any given time;
(d) Subordinated Debt; and
(e) Contingent Obligations of any Subsidiary with respect to
obligations of Borrower, and Indebtedness of any Subsidiary to any other
Subsidiary and Contingent Obligations of any Subsidiary with respect to
obligations of any other Subsidiary (provided that the primary obligations are
not prohibited hereby).
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within two (2) years from the date of acquisition thereof, (ii)
commercial paper maturing no more than two (2) years from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, (iii) certificates of deposit
maturing no more than two (2) years from the date of investment therein issued
by Bank and (iv) Bank's money market accounts;
(c) Investments made by the Borrower or any Subsidiary, provided
Borrower may make Investments in its Subsidiaries, provided that (i) the
aggregate amount of such Investments shall not exceed $3,000,000 in any given
quarter and (ii) no Event of Default has occurred which is continuing or would
exist immediately after giving effect to any such Investment; and
(d) Borrower's purchase of Nitman Software Xxx.Xxx for an amount of
not more than $2,000,000, provided that no Event of Default has occurred which
is continuing or would exist immediately after giving effect to such purchase.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank's security
interests;
(c) Liens (i) upon or in any equipment acquired or held by Borrower
or any of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;
(e) Liens arising by operation of law, which are not past due or
which are being contested in good faith by appropriate proceedings and for which
reserves satisfactory to Bank have been established; and
(f) Liens arising in connection with Subordinated Debt.
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"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall
be determined, the unrestricted cash, plus the fair market value of all
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marketable securities, of Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Operating Officer, the Chief Financial Officer, the Controller and the
Vice President of Finance of the Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1(a) hereof.
"Revolving Line" means a credit extension of up to Three Million
Five Hundred Thousand Dollars ($3,500,000).
"Revolving Maturity Date" means March 28, 2002.
"Schedule" means the schedule of exceptions attached hereto and
approved by Bank, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation, company or partnership in which
(i) any general partnership interest or (ii) more than 50% of the stock or other
units of ownership which by the terms thereof has the ordinary voting power to
elect the Board of Directors, managers or trustees of the entity, at the time as
of which any determination is being made, is owned by Borrower, either directly
or through an Affiliated Entity.
"Tangible Net Worth" means at any date as of which the amount thereof
shall be determined, the sum of the capital stock and additional paid-in capital
plus retained earnings (or minus accumulated deficit) of Borrower and its
Subsidiaries minus intangible assets, plus Subordinated Debt, on a consolidated
basis determined in accordance with GAAP.
1.2 Accounting Terms. All accounting terms not specifically defined
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herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT.
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2.1 Credit Extensions.
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Borrower promises to pay to the order of Bank, in lawful money of the
United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower hereunder. Borrower shall also pay interest
on the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.
(a) Revolving Advances.
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(i) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Revolving Line or (ii) the Borrowing Base,
minus, in each case, the aggregate face amount of all outstanding Letters of
Credit. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1(a) may be repaid and reborrowed at any time prior
to the Revolving Maturity Date, at which time all Advances under this Section
2.1(a) shall be immediately due and payable. Borrower may prepay any Advances
without penalty or premium.
(ii) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
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based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1(a) to Borrower's deposit account.
(b) Equipment Advances.
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(i) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through September 28, 2001, Bank
agrees to make advances (each an "Equipment Advance" and, collectively, the
"Equipment Advances") to Borrower in an aggregate outstanding amount not to
exceed the Equipment Line. Each Equipment Advance shall not exceed one hundred
percent (100%) of the invoice amount of equipment, software and furniture
approved by Bank from time to time (which Borrower shall, in any case, have
purchased within 120 days of the date of the corresponding Equipment Advance),
excluding taxes, shipping, warranty charges, freight discounts and installation
expense. Notwithstanding the foregoing, all Equipment Advances for software and
other soft costs shall not exceed $600,000 in the aggregate.
(ii) Interest shall accrue from the date of each Equipment
Advance at the rate specified in Section 2.3(a), and shall be payable monthly on
the last day of each month through August 31, 2001. Any Equipment Advances that
are outstanding on September 29, 2001 shall be payable in equal monthly
installments of principal, plus all accrued interest, beginning on September 30,
2001, and continuing on the last day of each month thereafter through the
Repayment Period, provided that all amounts due under this Section 2.1(b) and
any other amounts due under this Agreement shall be immediately due and payable
on the Equipment Maturity Date. Equipment Advances, once repaid, may not be
reborrowed. Borrower may prepay any Equipment Advances without penalty or
premium. As used herein, "Repayment Period" means (i) for Equipment Advances for
software and other soft costs, 24 months, and (ii) for all other Equipment
Advances, 30 months.
(iii) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
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signed by a Responsible Officer or its designee and include a copy of the
invoice for any Equipment to be financed.
(c) Letters of Credit.
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(i) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued letters of credit for the account of
Borrower (each, a "Letter of Credit" and collectively, the "Letters of Credit")
in an aggregate outstanding face amount not to exceed the Revolving Line minus
the aggregate amount of the outstanding Advances at any time, provided that the
aggregate face amount of all outstanding Letters of Credit shall not exceed
$1,000,000. All Letters of Credit shall be, in form and substance, acceptable to
Bank in its sole discretion and shall be subject to the terms and conditions of
Bank's form of standard application and letter of credit agreement, which
Borrower hereby agrees to execute. On any drawn but unreimbursed Letter of
Credit, the unreimbursed amount shall be deemed an Advance under Section 2.1(a).
No
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Letter of Credit shall have an expiration date which is later than the Revolving
Maturity Date unless Borrower secures in cash the obligations under such Letter
of Credit on terms acceptable to Bank.
(ii) The obligation of Borrower to immediately reimburse Bank
for drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit, except for
expenses caused by Bank's gross negligence or willful misconduct.
(d) Term Advances. There are currently, as of the Closing Date,
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outstanding advances (the "Term Advances") in an aggregate principal amount
equal to $1,000,000 under the Original Agreement. Borrower shall not request or
receive any further Term Advances. Interest shall accrue on the Term Advances at
the rate specified in Section 2.3(a). The Term Advances shall be payable in
twenty-four (24) equal monthly installments of principal, plus all accrued
interest, beginning on April 30, 2001, and continuing on the last day of each
month thereafter through March 31, 2003, at which time all amounts due under
this Section 2.1(d) shall be immediately due and payable. Term Advances, once
repaid, may not be reborrowed. Borrower may prepay all Term Advances without
penalty or premium.
(e) Corporate Credit Cards. Subject to the terms and conditions of
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this Agreement, provided that there is availability under the Revolving Line,
Borrower may request corporate credit cards with an aggregate limit not in
excess of $250,000, provided that availability under the Revolving Line shall be
reduced by the aggregate limit of the corporate credit cards issued to Borrower
plus any other amounts which become due or owing to Bank in connection with this
Section 2.1(e). The terms and conditions (including repayment and fees) of such
credit cards shall be subject to the terms and conditions of the Bank's standard
forms of credit card application and agreement, which Borrower hereby agrees to
execute. Any corporate credits cards which remain outstanding after the
Revolving Maturity Date shall previously be cash secured to the satisfaction of
Bank.
2.2 Overadvances. If the aggregate amount of the outstanding Advances
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plus the aggregate face amount of all outstanding Letters of Credit exceeds the
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lesser of the Revolving Line or the Borrowing Base at any time, Borrower shall
immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
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(a) Interest Rates.
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(i) Advances. Except as set forth in Section 2.3(b), the
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Advances shall bear interest, on the outstanding Daily Balance thereof, at a
rate equal to one-half percent (0.50 %) above the Prime Rate.
(ii) Equipment Advances. Except as set forth in Section 2.3(b),
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the Equipment Advances shall bear interest, on the outstanding Daily Balance
thereof, at a rate equal to one-half percent (0.50 %) above the Prime Rate.
(iii) Term Advances. Except as set forth in Section 2.3(b), the
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Term Advances shall bear interest, on the outstanding Daily Balance thereof, at
a rate equal to one-half percent (0.50 %) above the Prime Rate.
(b) Late Fee; Default Rate. If any payment is not made within ten
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(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
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(c) Payments. Interest hereunder shall be due and payable on the
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last calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Revolving
Line, in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
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time hereafter, the applicable rate of interest hereunder shall be increased or
decreased, effective as of the day the Prime Rate is changed, by an amount equal
to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
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Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
2.5 Fees. Borrower shall pay to Bank the following:
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(a) Facility Fee. On the Closing Date, a Facility Fee equal to
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$65,000, which shall be nonrefundable; and
(b) Bank Expenses. On the Closing Date, all Bank Expenses incurred
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through the Closing Date, including reasonable attorneys' fees and expenses and,
after the Closing Date, all Bank Expenses, including reasonable attorneys' fees
and expenses, as and when they become due.
2.6 Additional Costs. In case any law, regulation, treaty or official
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directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement, and the result of any of the foregoing is to
increase the cost to Bank, reduce the income receivable by Bank or impose any
expense upon Bank with respect to the Obligations, Bank shall notify Borrower
thereof. Borrower agrees to pay to Bank the amount of such increase in cost,
reduction in income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon presentation by Bank of a statement of
the amount and setting forth Bank's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest error.
9
2.7 Term. This Agreement shall become effective on the Closing Date and,
----
subject to Section 12.7, shall continue in full force and effect for so long as
any Obligations remain outstanding or Bank has any obligation to make Credit
Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS.
-------------------
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
------------------------------------------------
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) financing statements (Form UCC-1);
(d) agreement to provide insurance; and
(e) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(f) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to Initial Advance. The obligation of Bank to
---------------------------------------
make an Advance, to issue a Letter of Credit, or to issue corporate credit cards
under Section 2.1(e) is subject to the condition precedent that Bank shall have
received an audit of the Collateral, the results of which shall be satisfactory
to Bank, which audit shall be completed within 30 days of the Closing Date.
3.3 Conditions Precedent to all Credit Extensions. The obligation of
---------------------------------------------
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.3.
4. CREATION OF SECURITY INTEREST.
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest
10
in Collateral acquired after the date hereof. Borrower also hereby agrees not to
sell, transfer, assign, mortgage, pledge, lease, grant a security interest in,
or encumber any of its intellectual property.
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral (except for such Negotiable Collateral as is necessary for the
Borrower to conduct its business in the ordinary course, but only so long as no
Event of Default exists), all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
4.4 Pledge of Collateral. Borrower hereby pledges, assigns and grants to
--------------------
Bank a security interest in all shares of stock which are part of the Collateral
(the "Shares"), together with all proceeds and substitutions thereof, all cash,
stock and other moneys and property paid thereon, all rights to subscribe for
securities declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance of the
Obligations. Upon the occurrence of an Event of Default, the certificate or
certificates for the Shares will be delivered to Bank, accompanied by an
instrument of assignment duly executed in blank by Borrower, and Borrower shall
cause the books of each entity whose shares are part of the Collateral and any
transfer agent to reflect the pledge of the Shares. Upon the occurrence of an
Event of Default, Bank may effect the transfer of any securities included in the
Collateral into the name of Bank and cause new certificates representing such
securities to be issued in the name of Bank or its transferee. Borrower will
execute and deliver such documents, and take or cause to be taken such actions,
as Bank may reasonably request to perfect or continue the perfection of Bank's
security interest in the Collateral. Unless an Event of Default shall have
occurred and be continuing, Borrower shall be entitled to exercise any rights
with respect to the Collateral and to give consents, waivers and ratifications
in respect thereof, provided that no vote shall be cast or consent, waiver or
ratification given or action taken which would be inconsistent with any of the
terms of this Agreement or which would constitute or create any violation of any
of such terms. All such rights to vote and give consents, waivers and
ratifications shall terminate upon the occurrence and continuance of an Event of
Default.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is
----------------------------------
a corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and marketable title to the
---------------------
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The property and services giving rise to such Eligible
Accounts has been delivered or rendered to the account debtor or to the account
debtor's agent for immediate and unconditional acceptance by the account debtor.
Borrower has
11
not received notice of actual or imminent Insolvency Proceeding of any account
debtor that is included in any Borrowing Base Certificate as an Eligible
Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
----------------------
of good and marketable quality, free from all material defects, except for
Inventory for which adequate reserves have been made.
5.6 Intellectual Property. Except for Intellectual Property licensed by
---------------------
Borrower and set forth in the Schedule, Borrower is the sole owner of all
trademarks, patents, trademarks, design rights, tradenames, copyrights,
technology, know-how, and processes necessary for the conduct of its business as
currently conducted (the "Intellectual Property") its Intellectual Property
except for those the failure to own could not have a Material Adverse Effect.
Each of Borrower's patents is valid and enforceable, and no part of its
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of its Intellectual Property
violates the rights of any third party.
5.7 Name; Location of Chief Executive Office. Except as disclosed in
----------------------------------------
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are no
----------
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect, or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral.
5.9 No Material Adverse Change in Financial Statements. All
--------------------------------------------------
consolidated financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay its
--------------------------
debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary have met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal Reserve
System). Borrower has complied with all the provisions of the Federal Fair Labor
Standards Act. Borrower has not violated any statutes, laws, ordinances or rules
applicable to it, violation of which could have a Material Adverse Effect.
5.12 Environmental Condition. Except as disclosed in the Schedule, none
-----------------------
of Borrower's or any Subsidiary's properties or assets has ever been used by
Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
12
5.13 Taxes. Borrower and each Subsidiary have filed or caused to be
-----
filed all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 Government Consents. Borrower and each Subsidiary have obtained
-------------------
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could have a Material Adverse Effect.
5.16 Investment Accounts. Except as disclosed in Schedule 5.16, none
-------------------
of Borrower's property is maintained or invested with a Person other than Bank.
5.17 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
5.18 Shares. Borrower has full power and authority to create a first
------
lien on the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. There are
no subscriptions, warrants, rights of first refusal or other restrictions on, or
options exercisable with respect to the Shares. The Shares have been and will be
duly authorized and validly issued, and are fully paid and non-assessable. The
Shares is not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.
6. AFFIRMATIVE COVENANTS.
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have a Material Adverse Effect. Borrower shall maintain, and shall cause
each of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect, or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, prepared in accordance with GAAP, consistently applied, in a
form acceptable to Bank and certified by a Responsible Officer; (b) copies of
all statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and, within 10
days of the Securities and Exchange Commission standard filing date, all reports
on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (c)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of Two Hundred Fifty Thousand Dollars
($250,000) or more; and (d) such budgets, sales projections, operating plans or
other
13
financial information as Bank may reasonably request from time to time generally
prepared by Borrower in the ordinary course of business.
Within twenty-five (25) days after the last day of each month, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together with aged
---------
listings of accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts and appraise Collateral at Borrower's expense, provided that such
audits will be conducted no more often than every six (6) months unless an Event
of Default has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Borrower shall promptly notify Bank of
all returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than One Hundred Thousand Dollars
($100,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
-----
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's business, ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof, and all liability insurance policies shall show the Bank as an
additional insured and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, at all times a ratio of (i)
-----------
Quick Assets to (ii) Current Liabilities less deferred revenue plus the
---- ---
aggregate face amount of all outstanding Letters of Credit, of at least 1.25 to
1.00.
14
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each fiscal quarter, a Tangible Net Worth of not less than: (i) $42,000,000
for the fiscal quarter ending Xxxxx 00, 0000, (xx) $27,000,000 for the fiscal
quarter ending June 30, 2001, (iii) $15,000,000 for the fiscal quarter ending
September 30, 2001, and (iv) $12,000,000 for the fiscal quarter ending December
31, 2001. Thereafter, Borrower shall maintain, at all times a Tangible Net Worth
of not less than $12,000,000.
6.10 Profitability. Borrower shall show a profit (before non cash
-------------
charges for goodwill, deferred compensation, accreted dividends or other non
cash charges related to Borrower's cumulative preferred stock) of at least $1.00
for each fiscal quarter, beginning with the fiscal quarter ending on March 31,
2002.
6.11 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, including its intellectual
property, other than: (i) Transfers of Inventory in the ordinary course of
business; (ii) Transfers of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) Transfers of surplus, worn-out or obsolete Equipment, or (iv)
Transfers to Borrower made in connection with the liquidation, dissolution or
reorganization of any Subsidiary required pursuant to the exercise of the
Borrower's reasonable business judgment.
7.2 Change in Business; Change in Control or Executive Office. Engage
---------------------------------------------------------
in any business, or permit any of its Subsidiaries to engage in any business,
other than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto). Borrower will
not suffer or permit a Change in Control (other than the sale of Borrower's
equity securities in a public offering or to venture capital investors approved
by Bank, which approval will not be unreasonably withheld or delayed and will be
considered in good faith) or without thirty (30) days prior written notification
to Bank, relocate its chief executive office outside the State of California.
Borrower will not change the date on which its fiscal year ends without Bank's
prior written consent.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
Notwithstanding the foregoing, this Section 7.3 shall not apply to transactions
in which the sole consideration is Borrower's stock, Borrower is the surviving
entity, and, after giving effect to such transaction, there is no Change in
Control, provided that at the time of any such transaction an Event of Default
has not occurred which is continuing and no Event of Default would exist after
giving effect to any such transaction.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, including its intellectual property, or
assign or otherwise convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens. Agree with any Person other than Bank not to grant a security interest
in, or otherwise encumber, any of its property, or permit any Subsidiary to do
so.
15
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock, or permit any of its Subsidiaries to do so, except that Borrower may
repurchase the stock of former employees pursuant to stock repurchase agreements
as long as an Event of Default does not exist prior to such repurchase or would
not exist after giving effect to such repurchase.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments. Maintain or invest any of its property with a
Person other than Bank unless such Person has entered into a control agreement
with Bank, in form and substance satisfactory to Bank.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment
-----------------------
with a bailee, warehouseman, or similar party unless Bank has received a pledge
of the warehouse receipt covering such Inventory. Except for Inventory sold in
the ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment only at the
location set forth in Section 10 hereof, at those locations set forth in
Schedule 7.10 hereto, and at such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest. Notwithstanding the
foregoing, Borrower shall promptly inform Bank if Borrower's assets in
Pennsylvania and/or Illinois exceed $50,000 in the aggregate at any time.
7.11 Compliance. Become an "investment company" or be controlled by
----------
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
7.12 Negative Pledge Agreements. Permit the inclusion in any
--------------------------
contract to which it becomes a party of any provisions that could restrict or
invalidate the creation of a security interest in Borrower's rights and
interests in any Collateral.
8. EVENTS OF DEFAULT.
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
---------------
Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided,
16
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Credit Extensions will be required
to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse change
-----------------------
in Borrower's business or financial condition or prospects, or if there is a
material impairment of the priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could have a Material Adverse Effect, provided that
Borrower's failure to pay disputed trade payables of up to $1,000,000 in the
aggregate shall not be an Event of Default under this Section 8.6 unless such
nonpayment could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
---------
amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand
Dollars ($250,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
--------------------------
8.1 Rights and Remedies. Upon the occurrence and during the continuance
-------------------
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
17
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5, all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement or under any other agreement between Borrower
and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers necessary
or reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely pursuant to
the provisions of this Section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this Section 9.1, Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit;
(g) Dispose of the Collateral by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Bank determines is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
-----------------
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; provided Bank may exercise such
power of attorney to sign the name of Borrower on any of the documents described
in Section 4.2 regardless of whether an
18
Event of Default has occurred. The appointment of Bank as Borrower's attorney in
fact, and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions hereunder is
terminated.
9.3 Accounts Collection. At any time during the term of this
-------------------
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Upon the
occurrence and during the continuance of an Event of Default, Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under a facility in Section 2.1 as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.6 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
9.8 Shares. Borrower recognizes that Bank may be unable to effect a
------
public sale of any or all the Shares, by reason of certain prohibitions
contained in federal securities laws and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Borrower acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. Bank shall be under no obligation to
delay a sale of any of the Shares for the period of time necessary to permit the
issuer thereof to register such securities for public sale under federal
securities laws or under applicable state securities laws, even if such issuer
would agree to do so.
10. NOTICES.
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be
19
personally delivered or sent by a recognized overnight delivery service,
certified mail, postage prepaid, return receipt requested, or by telefacsimile
to Borrower or to Bank, as the case may be, at its addresses set forth below:
If to Borrower: EGAIN COMMUNICATIONS CORPORATION
000 X. Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Vice President of Finance
FAX: (000) 000-0000
If to Bank: Imperial Bank
000 Xxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Corporate Banking Center
FAX: (000) 000-0000
with a copy to: Imperial Bank
Five Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxx Xxxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
------------------------------------------
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
20
12.3 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. Neither this Agreement nor
----------------------------------
the Loan Documents cannot be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Effect of Amendment and Restatement. This Agreement is intended
-----------------------------------
to and does completely amend and restate, without novation, the Original
Agreement. All security interests granted under the Original Agreement are
hereby confirmed and ratified and shall continue to secure all Obligations under
this Agreement.
13. JUDICIAL REFERENCE.
------------------
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this document, which controversy, dispute or claim is not settled in
writing within thirty (30) days after the "Claim Date" (defined as the date on
----------
which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 et seq. of the California Code of Civil Procedure, or their successor
------
section ("CCP"), which shall constitute the exclusive remedy for the settlement
---
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than Santa Xxxxx County (the "Court"). The referee shall be a retired
-----
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of the Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP (S) 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP (S) 644 in any court in the State of California having jurisdiction. Any
party may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute or
claim, by filing a petition for a hearing and/or trial. All discovery permitted
by this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents which cannot be resolved by the
21
parties shall be submitted to the referee as provided herein, the Superior Court
is empowered to issue temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S) 1280 through (S) 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
EGAIN COMMUNICATIONS CORPORATION
By: /s/ Xxxxxxxx Xxxxxx
-----------------------------
Title: CFO
--------------------------
IMPERIAL BANK
By: /s/ Xxx Xxxxxxx
----------------------------
Title: V.P.
-------------------------
22
DEBTOR EGAIN COMMUNICATIONS CORPORATION
SECURED PARTY: IMPERIAL BANK
EXHIBIT A
---------
COLLATERAL DESCRIPTION ATTACHMENT
TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:
(i) all accounts receivable, accounts, chattel paper, contract rights
(including, without limitation, royalty agreements, license agreements and
distribution agreements), documents, instruments, money, deposit accounts and
general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all financial assets, all investment property, including securities and
securities entitlements;
(ii) all goods, including, without limitation, equipment and
inventory (including, without limitation, all export inventory);
(iii) all guarantees and other security therefor; and
(iv) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.
23
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME
TO: EMERGING GROWTH DIVISION DATE: _______________
FAX #: 000-000-0000 TIME: _______________
--------------------------------------------------------------------------------
FROM: EGAIN COMMUNICATIONS CORPORATION
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT #_______________________ TO ACCOUNT #________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
$___________________________________________
PRINCIPAL INCREASE (ADVANCE) $___________________________________________
PRINCIPAL PAYMENT (ONLY) $___________________________________________
INTEREST PAYMENT (ONLY) $___________________________________________
PRINCIPAL AND INTEREST (PAYMENT) $___________________________________________
OTHER INSTRUCTIONS:_____________________________________________________________
--------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Amended and
Restated Loan and Security Agreement are true, correct and complete in all
material respects as of the date of the telephone request for an Advance
confirmed by this Borrowing Certificate; provided, however, that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such date.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------------------ -----------------------------
Authorized Requester Phone #
------------------------------------------ -----------------------------
Received By (Bank) Phone #
_____________________________________________
Authorized Signature (Bank)
--------------------------------------------------------------------------------
24
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: EGAIN COMMUNICATIONS CORPORATION Lender: Imperial Bank
Commitment Amount: $3,500,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $___________
5. Balance of 25% over 90 day accounts $___________
6. Concentration Limits
7. Foreign Accounts $___________
8. Governmental Accounts $___________
9. Contra Accounts $___________
10. Demo Accounts $___________
11. Intercompany/Employee Accounts $___________
12. Other (please explain on reverse) $___________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
14. Eligible Accounts (#3 minus #13) $___________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $___________
BALANCES
16. Maximum Loan Amount $3,500,000
17. Total Funds Available [Lesser of #16 or #15] $___________
18. Present balance owing on Line of Credit $___________
19. Outstanding under Sublimits (Letters of Credit and Credit Cards) $___________
20. RESERVE POSITION (#17 minus #18 and #19) $___________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Imperial Bank.
EGAIN COMMUNICATIONS CORPORATION
By:________________________
Authorized Signer
25
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
TO: IMPERIAL BANK
FROM: EGAIN COMMUNICATIONS CORPORATION
The undersigned authorized officer of EGAIN COMMUNICATIONS CORPORATION
hereby certifies that in accordance with the terms and conditions of the Amended
and Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct as of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies that these
are prepared in accordance with Generally Accepted Accounting Principles (GAAP)
and are consistently applied from one period to the next except as explained in
an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
10K and 10Q 10 days of SEC filing date Yes No
A/R & A/P Agings, Borrowing Base Cert. Monthly within 25 days Yes No
A/R Audit Initial and Semi-Annual Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Minimum Quick Ratio 1.25:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth * $________ Yes No
* Borrower shall maintain, as of the last day of each fiscal quarter, a
Tangible Net Worth of not less than: (i) $42,000,000 for the fiscal quarter
ending Xxxxx 00, 0000, (xx) $27,000,000 for the fiscal quarter ending June
30, 2001, (iii) $15,000,000 for the fiscal quarter ending September 30,
2001, and (iv) $12,000,000 for the fiscal quarter ending December 31, 2001.
Thereafter, Borrower shall maintain, as of the last day of each fiscal
quarter, a Tangible Net Worth of not less than $12,000,000.
Comments Regarding Exceptions: See Attached.
No
Received by:____________________
Sincerely, AUTHORIZED SIGNER
Date:___________________________
_______________________________________ Verified:_______________________
SIGNATURE AUTHORIZED SIGNER
_______________________________________ Date:___________________________
TITLE
Compliance Status Yes
_______________________________________
DATE
26
