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EXHIBIT 10.13
This LOAN AND SECURITY AGREEMENT is entered into as of September 18, 1998,
by and between SILICON VALLEY BANK ("BANK") and QUINTUS CORPORATION
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software an other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit issuance,
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 loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiations, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal or review, or those incurred in any Insolvency Proceeding), whether or
not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including without limitation: 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 (i) 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.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
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"Committed Revolving Line" means Seven Million Five Hundred
Thousand Dollars ($7,500,000).
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith, provided, however, that such amount shall not in any
event exceed the maximum amount of the obligations under the guarantee or other
support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Letter of Credit,
Term Loan, Exchange Contract or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"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 extendable at
the option of Borrower or any Subsidiary to a date more than one year from the
date of determination, but excluding Subordinated Debt.
"Debt Service Coverage" means, as measured quarterly as of
the last day of each fiscal quarter of Borrower, on a consolidated basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the sum
of (i) net income, plus (ii) depreciation and amortization of intangible assets
and other non-cash charges to income plus (iii) quarterly interest expense to
(b) an amount equal to the sum of (x) all scheduled repayments and mandatory
prepayments of principal on account of long-term Debt for such quarter plus (y)
quarterly interest expense.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank in
writing, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay
within ninety (90) days of invoice date, except with respect to Accounts owing
from Lucent Technologies, which will be excluded to the extent such Accounts
have not paid within one hundred twenty (120) days of invoice date;
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(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date, except with respect to Accounts owing from Lucent
Technologies, which shall be excluded if fifty percent (50%) of such Accounts
have not been paid within one hundred twenty (120) days of invoice date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts, except with respect to Lucent Technologies, as to which
the percentage shall be thirty-five percent (35%), to the extent such
obligations exceed the aforementioned percentages, except as approved in
writing by Bank;
(d) 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;
(e) Accounts with respect to which the account debtor is a
federal, state or local governmental entity or any department, agency or
instrumentality thereof;
(f) Accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the account
debtor (sometimes referred to as "contra" accounts, e.g. accounts payable,
customer deposits, credit accounts, etc.);
(g) Accounts generated by demonstration or promotional
equipment, or 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;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that are: (1) covered by credit insurance in form and amount, and by
an insurer satisfactory to Bank less the amount of any deductible(s) which may
be or become owing thereon; or (2) supported by one or more letters of credit
either advised or negotiated through Bank or in favor of Bank as beneficiary
in an amount and of a tenor, and issued by a financial institution, acceptable
to Bank; or (3) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
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"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.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means all of Borrower's
right, title and interest in and to the following:
(a) Copyrights, Trademarks, and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents, or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks, or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"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 present or future agreement entered
into between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to time.
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"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means September 17, 2001.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents" means all patents, patent applications and like
protections, including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Payment Date" means the seventeenth (17th) calendar day of each
month, commencing on the first such date after the Closing Date and ending on
the Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the closing Date and disclosed
in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"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 and as to which adequate reserves are
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maintained on Borrower's Books in accordance with GAAP, provided the same have
no priority over any 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) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any lease or
license, provided that such leases, subleases, licenses and sublicenses do not
prohibit the grant of the security interest granted hereunder, and
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (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.
"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 as of any applicable date, the unrestricted
cash; unrestricted cash-equivalents; and net, billed accounts receivable of
Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the date immediately preceding
the first anniversary of the Closing Date.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity
of which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such Person or one
or more Affiliates of such Person.
"Tangible Net Worth" means, as of any applicable date, the
consolidated total assets of Borrower and its Subsidiaries minus without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) all reserves not already deducted from assets,
and (ii) Total Liabilities.
"Term Loan" means a credit extension of One Million One Hundred
Thousand Dollars ($1,000,000).
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"Total Liabilities" means, as of any applicable date, all
obligations that should, in accordance with GAAP, be classified as liabilities
on the consolidated balance sheet of Borrower, including in any event all
Indebtedness, but specifically excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of Assignor
connected with and symbolized by such trademarks.
1.2. Accounting and Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations and determinations made hereunder shall be made in accordance with
GAAP. When used herein, the term "financial statements" shall include the notes
and schedules thereto. The terms "including"/"includes" shall always be read as
meaning "including (or includes) without limitation," when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1. Credit Extensions. 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.
2.1.1 Advances.
(a) Subject to and upon the terms and conditions
of this Agreement, Bank agrees to make Advances to Borrower in an aggregate
outstanding amount not to exceed (i) the Committed Revolving Line or the
Borrowing Base, whichever is less. Subject to the terms and conditions of this
Agreement, amounts borrowed pursuant to this Section 2.1.1 may be repaid and
reborrowed at any time prior to the Revolving Maturity Date.
(b) Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. 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, 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 2.1.1 to
Borrower's deposit account.
(c) The Committed Revolving Line shall terminate
on the Revolving Maturity Date, at which time all Advances under this Section
2.1.1 shall be immediately due and payable.
2.1.2 Term Loan.
(a) Subject to and upon the terms and conditions
of this Agreement, Bank agrees to make a Term Loan available to Borrower.
Amounts borrowed pursuant to this Section 2.1.2 may not be reborrowed once
repaid.
(b) Interest shall accrue on the Term Loan at
the rate specified in Section 2.3(a), and shall be payable monthly during the
term thereof. The Term Loan will be payable in thirty-six (36) equal monthly
installments of principal, plus all accrued interest, beginning on the Payment
Date of the month following the Closing Date, and ending on the Maturity Date,
at which time all amounts owing under this Agreement shall be due and payable.
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2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or
(ii) the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate.
(i) Except as set forth in Section 2.3(b), any Advances shall
bear interest on the average daily balance thereof, at a per annum rate equal
to the Prime Rate.
(ii) Except as set forth in Section 2.3(b), the Term Loan shall
bear interest on the average daily balance thereof, at a per annum rate equal
to the Prime Rate plus 0.5%.
(b) Default Rate. All Obligations shall bear interest, from and
after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on each
Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number _______ for payments of principal
and interest due on the Obligations and any other amounts owing by Borrower to
Bank. Bank will notify Borrower of all debits which Bank has made against
Borrower's accounts. Any such debits against Borrower's accounts in no way
shall be deemed a set-off. Any interest not paid when due shall be compounded
by becoming a part of the Obligations, and such interest shall thereafter
accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by
an amount equal to such change in the Prime Rate. All interest chargeable under
the Loan Document shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4. Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations 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:
(a) Facility Fee. A Facility Fee equal to Two Thousand Dollars
($2,000) which fee shall be due on the Closing Date and shall be fully earned
and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents;
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(c) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses,
as and when they become due.
2.6. Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of America
or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction 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.
2.7. Term. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, 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
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) an intellectual property security agreement;
(d) financing statements (Forms UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
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(g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2. 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 result from such Credit Extension. 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 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1. Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt performance by Borrower of each
of its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Borrower acknowledges that Bank may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations. Notwithstanding termination of
this Agreement, Bank's Lien on the Collateral shall remain in effect for so
long as any Obligations are outstanding.
4.2. Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3. Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to
time during Borrower's usual business hours, to inspect Borrower's Books and to
make copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1. Due Organization and Qualification. Borrower and each Subsidiary
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2. Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles/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.
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5.3. No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4. Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are 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.
5.6. Intellectual Property. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and
no claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party. Except for and upon filing with the
United States Patent and Trademark Office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights
necessary to perfect the security interests created hereunder, and except as has
been already made or obtained, no authorization, approval or other action by,
and no notice to or filing with, any United States governmental authority or
United States regulatory body is required either (i) for the grant by Borrower
of the security interest granted hereby or for the execution, delivery or
performance of Loan Documents by Borrower in the United States or (ii) for the
perfection in the United States or the exercise by Bank of its rights and
remedies hereunder.
5.7. Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business and will not, without at least
thirty (30) days prior written notice to Bank, do 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 or, to Borrower's knowledge, threatened 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
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.10. Solvency. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11. Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards
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Act. Borrower has not violated any statutes, laws, ordinances or rules
applicable to it, violation of which could have a Material Adverse Effect.
5.12. Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release or other disposition of hazardous waste or
hazardous substances into the environment.
5.13. Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid, or
has made adequate provision for the payment of, all taxes reflected therein,
except those being contested in good faith by proper proceedings with adequate
reserves under GAAP.
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 has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for the continued operation of Borrower's business as currently
conducted.
5.16. Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to
make 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 and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2. Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and
shall cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3. Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, in a form and certified by an Officer of Borrower reasonably acceptable
to Bank; (b) as soon as available, but in any event within
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one hundred twenty (120) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) within five (5) days of filing, copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (d)
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 One Hundred Thousand Dollars
($100,000) or more; (e) prompt notice of any material change in the composition
of the Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement between
Borrower and Bank or knowledge of an event that materially adversely affects
the value of the Intellectual Property Collateral; and (f) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time.
Within ten (10) days after the fifteenth (15th) calendar day and 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.
Within thirty (30) days after the last day of each month, Borrower shall
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred
and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is (i) contested in good
faith by appropriate proceedings, (ii) is reserved against (to the extent
required by GAAP) by Borrower and (iii) no lien other than a Permitted Lien
results.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a
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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. At 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, as of the last day of
each fiscal quarter, a ratio of Quick Assets to Current Liabilities, less
deferred maintenance revenue, of at least 1.0 to 1.0.
6.9. Profitability. Borrower may incur losses not to exceed: (i)
$1,500,000 for the fiscal quarter ending September 30, 1998; (ii) $1,000,000 for
the fiscal quarter ending December 31, 1998; (iii) $1,000,000 for the fiscal
quarter ending March 31, 1999; or (iv) $500,000 for the fiscal quarter ending
June 30, 1999. Borrower shall have a net profit of at least $1 for each fiscal
quarter thereafter.
6.10. Liquidity, Debt Service Coverage. Subject to the remainder of
this section, Borrower shall maintain (i) as of the last day of each calendar
month, a Liquidity Ratio of at least 1.5 to 1.0 and (ii) as of the last day of
each fiscal quarter, a Liquidity Ratio of at least 2.0 to 1.0. Notwithstanding
the foregoing, if Borrower attains two consecutive quarters of Debt Service
Coverage of not less than 1.5 to 1.0, then Liquidity Ratio will no longer be
tested and instead Borrower shall maintain, as of the last day of each of
Borrower's fiscal quarters, a Debt Service Coverage of at least 1.5 to 1.0. For
purposes of this Section, "Liquidity Ratio" means as of any date for which it is
tested, the ratio of (a) an amount equal to (i) cash and cash equivalents plus
(ii) the amount available to be drawn but not drawn under Section 2.1.1 to (b)
the aggregate outstanding amount of the Term Loan.
6.11. Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those intellectual
property rights listed on Exhibits A, B and C to the Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this
Agreement within thirty (30) days of the date of this Agreement. Borrower shall
register or cause to be registered with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those additional
intellectual property rights developed or acquired by Borrower from time to time
in connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or additions to the
intellectual property rights listed on such Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents, Copyrights, (ii) use its
best efforts to detect infringements of the Trademarks, Patents, and Copyrights
and promptly advise Bank in writing of material infringements detected and (iii)
not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited or
dedicated to the public without the written consent of Bank, which shall not be
unreasonably withheld, unless Bank determines that reasonable business practices
suggest that abandonment is appropriate.
(d) Bank shall have the right, but not the obligation, to take,
at Borrower's sole expense, any actions that Borrower is required under this
Section 6.11 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.
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6.12. Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1. Dispositions. Convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than Transfers (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business, or (iii) of
worn-out or obsolete Equipment.
7.2. Changes in Business, Ownership, Management or Business
Locations. Engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower and
any business substantially similar or related thereto (or incidental thereto),
or suffer a material change in Borrower's ownership or management. Borrower will
not, without at least thirty (30) days prior written notification to Bank,
relocate its chief executive office or add any new offices or business
locations.
7.3. Mergers or Acquisitions. Merge or consolidate, or
permit any of its Subsidiaries to merger or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person.
7.4. Indebtedness. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness.
7.5. Encumbrances. Create, incur, assume or suffer to exist
any Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6. Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
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.
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. Intellectual Property Agreements. Borrower shall not
permit the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts, except to the extent that such provisions are necessary in Borrower's
exercise of its reasonable business judgment.
7.10. Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
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7.11. Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of any
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest.
7.12. Compliance. Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for such
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1. Payment Default. If Borrower fails to pay, when due, any
of the Obligations;
8.2. Covenant Default.
(a) If Borrower fails to perform any obligation
under Sections 6.3, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12, or violates any of
the covenants contained in Article 7 of this Agreement, or
(b) If Borrower 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 the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional 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 (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of
Borrower or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;
8.4. Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within 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
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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 One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7. Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8. Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of 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 or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice
of its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable (provided that upon the occurrence of an Event of Default described
in Section 8.5 all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Liquidate any Exchange Contracts not yet settled and demand
that Borrower immediately deposit cash with Bank in an amount sufficient to
cover any losses incurred by Bank due to liquidation of the Exchange Contracts
at the then prevailing market price;
(e) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(f) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to
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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 possessions 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 premises, Borrower
hereby grants Bank a license to enter 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;
(g) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(h) 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 non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower's labels, patents, copyrights, mask works,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any 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;
(i) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to the
Obligations in whatever manner or order Bank deems appropriate;
(j) Bank may credit bid and purchase at any public sale, or at
any private sale as permitted by law; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
(l) Bank shall have a non-exclusive, royalty-free license to
use the Intellectual Property Collateral to the extent reasonably necessary to
permit Bank to exercise its rights and remedies upon the occurrence of an Event
of Default.
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, verification of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (e) settle and adjust disputes and
claims respecting the accounts directly with account debtors, for amounts and
upon terms which Bank determines to be reasonable; (f) to modify, in its sole
discretion, any intellectual property security agreement entered into between
Borrower and Bank without first obtaining Borrower's approval of or signature
to such modification by amending Exhibit A, Exhibit B, Exhibit C and Exhibit D,
thereof, as appropriate, to include reference to any right, title or interest
in any Copyrights, Patents, or Trademarks acquired by Borrower after the
execution hereof or to delete any reference to any right, title or interest in
any Copyrights, Patents, or Trademarks in which Borrower no longer has or
claims any right, title or interest; (g) to file in its sole discretion, one
ore more financing or continuation statements and amendments thereto, relative
to any of the Collateral without the signature of Borrower where permitted by
law; and (h) to transfer the Intellectual Property Collateral into the name of
Bank or third party to the extent permitted under the California Uniform
Commercial Code, provided Bank may exercise such power of attorney to sign the
name of Borrower on
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any of the documents described in Section 4.2 regardless of whether an Event of
Default has occurred. The appointment of Bank as Borrower's attorney in fact,
and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid
and performed and Bank's obligation to provide advances hereunder is terminated.
9.3. Accounts Collection. At any time from the date 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. Borrower
shall collect all amounts owing to Borrower for Bank, receive in trust all
payments as Bank's trustee, and, if requested or required by Bank, immediately
deliver such payments to Bank in their original form as received from the
account debtor, with proper endorsement for deposit.
9.4. Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line 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 expressly set forth herein as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.
9.7. Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, portage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, as
its addresses set forth below:
If to Borrower: Quintus Corporation
00000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
FAX: (000) 000-0000
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If to Bank: Silicon Valley Bank
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
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
The Loan Documents shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law. Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa 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 indemnify,
defend, protect and hold harmless Bank and its officers, employees, and agents
against: (a) all obligations, demands, claims, and liabilities claimed or
asserted by any other party in connection with the transactions contemplated by
the Loan Documents; and (b) all losses or Bank Expenses in any way suffered,
incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under the Loan Documents, or otherwise (including without limitation reasonable
attorneys fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3. Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4. Severability of Provisions. Each provision of
this Agreement shall be severable from every other provision of this Agreement
for the purpose of determining the legal enforceability of any specific
provision.
12.5. Amendments in Writing, Integration. This
Agreement cannot be amended or terminated except by a writing signed by
Borrower and Bank. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Agreement, if any, are merged into this Agreement and
the Loan Documents.
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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,
provided that so long as the obligations referred to in the first sentence of
this Section 12.7 have been satisfied, and Bank has no commitment to make any
Credit Extensions or to make any other loans to Borrower, Bank shall release all
security interest granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8. Confidentiality. In handling any confidential information,
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement, except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may deem appropriate in connection with the exercise of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain after disclosure to Bank through no fault of
Bank; or (b) is disclosed to Bank by a third party, provided Bank does not have
actual knowledge that such third party is prohibited from disclosing such
information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QUINTUS CORPORATION
By: /s/ Xxxxx Salvesin
-------------------------
Title: CFO
----------------------
SILICON VALLEY BANK
By: /s/ [Signature Illegible]
-------------------------
Title: Vice President
----------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any
of the foregoing;
(g) All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
A-1
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LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 15, 1998,
by and between Quintus Corporation ("Borrower") and Silicon Valley Bank
("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated September 18, 1998, as may
be amended from time to time, (the "Loan Agreement"). The Loan Agreement
provided for, among other things, a Committed Revolving Line in the original
principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000) and
a Term Loan in the original principal amount of One Million One Hundred Thousand
Dollars ($1,100,000). Defined terms used but not otherwise defined herein shall
have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTEES. Repayment of the Indebtedness
is secured by the Collateral as described in the Loan Agreement and an
Intellectual Property Security Agreement dated September 18, 1998.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the indebtedness shall
be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement
1. Section 1.1 entitled "Definitions" is hereby amended to
incorporate the following defined terms:
"Exchange Contract" has the meaning set forth in Section
2.1.4.
"Letter of Credit" means a letter of credit or similar
undertaking issued by Bank pursuant to Section 2.1.3.
"Letter of Credit Reserve" has the meaning set forth in
Section 2.1.3.
2. The following Sections are hereby incorporated into the
Loan Agreement to read as follows:
2.1.3 Letters of Credit
Bank agrees to issue or cause to be issued Letters of
Credit for the account of Borrower not exceeding (i) the
lesser of the Committed Revolving Line or the Borrowing
Base, whichever is less, minus (ii) the then outstanding
principal balance of the Advances minus the Foreign
Exchange Reserve, however the face amount of outstanding
Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may
not in any case exceed One Million Five Hundred Dollars
($1,500,000). Each Letter of Credit shall have an expiry
date no later than one hundred eighty (180) days after
the Revolving Maturity Date provided that Borrower's
Letter of Credit reimbursement obligation shall be
secured by cash
24
on terms acceptable to bank at any time the Revolving Maturity
Date if the term of this agreement is not extended by Bank.
2.1.4 Foreign Exchange Contract, Foreign exchange Settlements.
Borrower may enter foreign exchange contracts (the "Exchange
Contracts") not exceeding an aggregate amount of $500,000 (the
"Contract Limit"), under which Bank will sell to or purchase
from Borrower foreign currency on a spot or a future basis.
Borrower may not request any Exchange Contracts if it is out of
compliance with any provision of this Agreement. Exchange
Contracts must provide for delivery of settlement on or before
the Revolving Maturity Date. The amount available under the
Committed Revolving Line is reduced by the following (the
"Exchange Reserve") on any given day (the "Determination Date"):
(i) on all outstanding Exchange contracts on which delivery is
to be effected or settlement allowed more than two business days
after the Determination Date, 10% of the gross amount of
Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement
allowed within two business days after the Determination Date,
100% of the gross amount of the Exchange Contracts.
Banks may terminate the Exchange Contracts if (a) an Event of
Default occurs or (b) there is not sufficient availability under
the Committed Revolving Line and Borrower does not have
available funds in its deposit account for the Foreign Exchange
Reserve. If Bank terminates the Exchange Contracts, Borrower
will reimburse Bank for all fees, costs and expenses in
connection with the Exchange Contracts.
Borrower may not permit the total of all Exchange Contracts on
which delivery is to be effected and settlement allowed in any
two business day period to be more than $500,000 (the
"Settlement Limit") nor may Borrower permit the total of all
Exchange Contracts outstanding at any one time, to exceed the
Contract Limit. However, the amount which may be settled in any
2 business day period may be increased above the Settlement
Limit if:
(i) there is sufficient availability under the Committed
Revolving Line in the amount of the Foreign Exchange Reserve
for each Determination Date, provided that Bank in advance
shall reserve the full amount of the Foreign Exchange
Reserve against the Committed Revolving Line; or
(ii) there is sufficient availability under the Committed
Revolving Line for settlements within any 2 business day
period, but Bank: (A) verifies good funds overseas before
crediting Borrower's deposit account (in the case of
Borrower's sale of foreign currency); or (B) debits
Borrower's deposit account before delivering foreign
currency overseas (in the case of Borrower's purchase of
foreign currency.
If Borrower purchases foreign currency, Borrower must in advance
instruct Bank either to treat the settlement as an advance under
the Committed Revolving Line, or to debit Borrower's account for
the amount settled.
Borrower will execute all bank's standard applications and
agreements in connection with the Exchange Contracts and pay all
Bank's standard fees and charges.
2
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Borrower will indemnify Bank and hold it harmless from all
claims, liabilities, demands, obligations, actions, costs
and expenses (including reasonable attorneys' fees) which
it incurs arising out of or in any way relating to any of
the Exchange Contracts or any contemplated transactions.
3. Sub-section (a) of Section 2.1.1 entitled "Advances" is
hereby amended in its entirety to read as follows:
Subject to and upon the terms and conditions of this
Agreement Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) the
Committed Revolving Line or the Borrowing Base, whichever
is less, minus (ii) the amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of
Credit) and minus (iii) the Foreign Exchange Reserve.
subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1.1 may be
repaid and reborrowed at any time prior to the Revolving
Maturity Date.
Section 2.2 entitled "Overadvances" is hereby amended in
its entirety to read as follows:
If Borrower's Obligations under Section 2.1.1, 2.1.3 and
2.1.4 exceed the lesser of either (i) the Committed
Revolving Line or (ii) the Borrowing Base, Borrower must
immediately pay in cash to Bank the excess.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.
3
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This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
QUINTUS CORPORATION SILICON VALLEY BANK
By: /s/ XXXX X. XXXXXXXX By: /s/ XXXXX X. XXXXX
--------------------------------- ---------------------------------
Name: Xxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxx
------------------------------- -------------------------------
Title: VP, Corporate Controller Title: Assistant Vice President
------------------------------ ------------------------------
4
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LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 30, 1999, by
and between Quintus Corporation ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated September 18, 1998, as may
be amended from time to time (the "Loan Agreement"). The Loan Agreement
provided for, among other things, a Committed Revolving Line in the original
principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000)
and a Term Loan in the original principal amount of One Million One Hundred
Thousand Dollars ($1,100,000). Defined terms used but not otherwise defined
herein shall have the same meanings as in the Loan Agreement.
Hereafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement and an
Intellectual Property Security Agreement dated September 18, 1998.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement
1. Section 1.1 entitled "Definitions" is hereby amended to
incorporate the following defined terms:
"Borrowing Base" means an amount equal to (i) eighty percent
(80%) of Eligible Accounts plus the applicable Overadvance
Amount (as set forth below under "Overadvance Schedule")
"Purchase Agreement" means that certain Accounts Receivable
Purchase Agreement, between Borrower and Silicon Valley
Financial Services, of even date herewith.
"Purchase Sublimit" has the meaning set forth in Section
2.1.5.
"Overadvance Amount" means an amount not to exceed the
amounts set forth for each applicable period set forth in
the Overadvance Schedule, the Overadvance shall be cured by
Borrower by paying down the indebtedness from the
Collections under the Purchase Agreement, as more
particularly described therein.
"Overadvance Schedule" means:
$1,100,000 for the period of March 16, 1999 through March
18, 1999;
$700,000 for the period of March 19, 1999 through March 24,
1999;
$350,000 for the period of March 26, 1999 through March 30,
1999;
$0 thereafter.
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2. Sub-section (a) of Section 2.1.1 entitled "Advances" is
hereby amended in its entirety to read as follows:
Subject to and upon the terms and conditions of this
Agreement Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) the Committed
Revolving Line or the Borrowing Base, whichever is less,
minus (ii) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit); minus
(iii) the Foreign Exchange Reserve and minus (iv) the
Purchasing Sublimit. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section
2.1.1 may be repaid and reborrowed at any time prior to the
Revolving Maturity Date. Notwithstanding the foregoing,
until such time as Borrower has fully repaid the
Overadvance Amount in full in accordance with the
Overadvance Schedule and is in full compliance with the
Loan Agreement, Borrower shall no longer be entitled to
further Advances.
3. The following Sections are hereby incorporated into the
Loan Agreement to read as follows:
2.1.5 Purchasing Sublimit.
Borrower may use up to $7,500,000 (gross $9,375,000) for
selling receivables to Silicon Valley Financial Services
under the terms and conditions of the Purchase Agreement.
The amount available under the Committed Revolving Line
shall be reduced by the aggregate amount of the Purchased
Receivables as such term is defined in the Purchase
Agreement.
4. Section 2.2 entitled "Overadvances" is hereby amended in
its entirety to read as follows:
If Borrower's Obligations under Section 2.1.1, 2.1.3, 2.14
and 2.1.5 exceed the lesser of either (i) the Committed
Revolving Line or (ii) the Borrowing Base, Borrower must
immediately pay in cash to Bank the excess.
5. Section 6.3 entitled "Financial Statements, Reports,
Certificates" is hereby amended in part to provide that
within three (3) days after the end of each week, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by
a Responsible Officer, together with aged listings of
accounts receivable and accounts payable, as well as weekly
cash flow projections.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
2
29
Indebtedness. Noting in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK;
QUINTUS CORPORATION SILICON VALLEY BANK
By: /s/ XXXXX XXXXXXXX By:
--------------------------------- ---------------------------------
Name: Xxxxx Xxxxxxxx Name:
------------------------------- -------------------------------
Title: CFO Title:
------------------------------ ------------------------------
