EXHIBIT 10.1
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LOAN AND SECURITY AGREEMENT
EGAIN COMMUNICATIONS CORP.
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TABLE OF CONTENTS
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Page
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1. ACCOUNTING AND OTHER TERMS ....................................................... 1
2. LOAN AND TERMS OF PAYMENT ........................................................ 1
2.1 Credit Extensions ......................................................... 1
2.2 Overadvances .............................................................. 4
2.3 Interest Rate, Payments ................................................... 4
2.4 Fees ...................................................................... 4
3. CONDITIONS OF LOANS .............................................................. 5
3.1 Conditions Precedent to Initial Credit Extension .......................... 5
3.2 Conditions Precedent to all Credit Extensions ............................. 5
4. CREATION OF SECURITY INTEREST .................................................... 5
4.1 Grant of Security Interest ................................................ 5
4.2 Termination of Bank's Lien in Intellectual Property ....................... 6
5. REPRESENTATIONS AND WARRANTIES ................................................... 6
5.1 Due Organization and Authorization ........................................ 6
5.2 Collateral ................................................................ 6
5.3 Litigation ................................................................ 7
5.4 No Material Adverse Change in Financial Statements ........................ 7
5.5 Solvency .................................................................. 7
5.6 Regulatory Compliance ..................................................... 7
5.7 Subsidiaries .............................................................. 7
5.8 Full Disclosure ........................................................... 7
6. AFFIRMATIVE COVENANTS ............................................................ 8
6.1 Government Compliance ..................................................... 8
6.2 Financial Statements, Reports, Certificates ............................... 8
6.3 Inventory; Returns ........................................................ 8
6.4 Taxes ..................................................................... 9
6.5 Insurance ................................................................. 9
6.6 Primary Accounts .......................................................... 9
6.7 Financial Covenants ....................................................... 9
6.8 Registration of Intellectual Property Rights .............................. 10
6.9 Control Agreements ........................................................ 10
6.10 Further Assurances ........................................................ 10
7. NEGATIVE COVENANTS ............................................................... 10
7.1 Use of Funds .............................................................. 11
7.2 Dispositions .............................................................. 11
7.3 Changes in Business, Ownership, Management or Business Locations .......... 11
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7.4 Mergers or Acquisitions ....................................... 11
7.5 Indebtedness .................................................. 11
7.6 Encumbrance ................................................... 11
7.7 Distributions; Investments .................................... 11
7.8 Transactions with Affiliates. .................................. 12
7.9 Subordinated Debt ............................................. 12
7.10 Compliance .................................................... 12
8. EVENTS OF DEFAULT .................................................... 12
8.1 Payment Default ............................................... 12
8.2 Covenant Default .............................................. 12
8.3 Material Adverse Change ....................................... 13
8.4 Attachment .................................................... 13
8.5 Insolvency .................................................... 13
8.6 Other Agreements .............................................. 13
8.7 Judgments ..................................................... 13
8.8 Misrepresentations ............................................ 13
9. BANK'S RIGHTS AND REMEDIES ........................................... 14
9.1 Rights and Remedies ........................................... 14
9.2 Power of Attorney ............................................. 14
9.3 Accounts Collection ........................................... 15
9.4 Bank Expenses ................................................. 15
9.5 Bank's Liability for Collateral ............................... 15
9.6 Remedies Cumulative ........................................... 15
9.7 Demand Waiver ................................................. 15
10. NOTICES .............................................................. 16
11. CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER .......................... 16
12. GENERAL PROVISIONS ................................................... 16
12.1 Successors and Assigns ........................................ 16
12.2 Indemnification ............................................... 16
12.3 Time of Essence ............................................... 16
12.4 Severability of Provision ..................................... 17
12.5 Amendments in Writing, Integration ............................ 17
12.6 Counterparts .................................................. 17
12.7 Survival ...................................................... 17
12.8 Confidentiality ............................................... 17
12.9 Attorneys' Fees, Costs and Expenses ........................... 17
13. DEFINITIONS .......................................................... 18
13.1 Definitions ................................................... 18
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This LOAN AND SECURITY AGREEMENT dated March 27, 2002, between SILICON VALLEY
BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and EGAIN COMMUNICATIONS CORP., a Delaware corporation ("Borrower"), whose
address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ provides the
terms on which Bank will lend to Borrower and Borrower will repay Bank. The
parties agree as follows:
1. ACCOUNTING AND OTHER TERMS.
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Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2. LOAN AND TERMS OF PAYMENT
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2.1 Credit Extensions.
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Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 Revolving Advances Facility.
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(a) Bank will make Advances not to exceed the lesser of: (i) the
Committed Revolving Line; or (ii) the Borrowing Base, minus (1) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), minus (2) the FX Reserve, and minus (3) the amount reserved by Bank as
of the date of determination for Cash Management Services. Amounts borrowed
under this Section may be repaid and reborrowed during the term of this
Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to that reliance except for losses caused by Bank's gross
negligence or willful misconduct.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.1.2 Letters of Credit.
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Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding the lesser of: (i) the Committed Revolving Line; or (ii) the
Borrowing Base minus (1) the outstanding principal balance of the Advances,
minus (2) the FX Reserve, and minus (3) the amount reserved by Bank as of the
date of determination for Cash Management Services;
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however, the face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed
Committed Revolving Line. Each Letter of Credit will expire no later than 180
days after the Revolving Maturity Date, provided Borrower's Letter of Credit
reimbursement obligation is secured by cash on terms acceptable to Bank at any
time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.
2.1.3 Foreign Exchange Sublimit.
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If there is availability under the Committed Revolving Line and the
Borrowing Base, then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from or sell to Bank a
set amount of foreign currency more than one business day after the contract
date (the "FX Forward Contract"). Bank will subtract 10% of each outstanding FX
Forward Contract from the foreign exchange sublimit which is a maximum equal to
Committed Revolving Line (the "FX Reserve"). The total FX Forward Contracts at
any one time may not exceed 10 times the amount of the FX Reserve. Bank may
terminate the FX Forward Contracts if an Event of Default occurs.
2.1.4 Cash Management Services Sublimit.
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If there is availability under the Committed Revolving Line and the
Borrowing Base, Borrower may use up to an amount equal to Committed Revolving
Line for Bank's Cash Management Services, which may include merchant services,
direct deposit of payroll, business credit card, check cashing, automated
clearing house services, and controlled disbursement services identified in
various cash management services agreements related to such services (the "Cash
Management Services"). All amounts Bank pays for any Cash Management Services
will be treated as Advances under the Committed Revolving Line.
2.1.5 Equipment Advances.
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(a) Through September 30, 2002 (the "Equipment Availability End Date"),
Bank will make advances ("Equipment Advance" and, collectively, "Equipment
Advances") not exceeding the Committed Equipment Line. Equipment Advances when
repaid may not be reborrowed. The Equipment Advances may only be used to finance
new or used Eligible Equipment purchased on or after 90 days before the date of
each Equipment Advance; provided, however, that the initial Equipment Advance
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may be used to finance Eligible Equipment purchased on or after 180 days before
the date of such Equipment Advance. Each Equipment Advance may not exceed 100%
of the equipment invoice excluding taxes, shipping, warranty charges, freight
discounts and installation expense. Other Equipment may constitute up to 25% of
the aggregate Equipment Advances. Each Equipment Advance shall be considered a
promissory note evidencing the amounts due hereunder for all purposes. The
maximum number of Equipment Advances that will be made is seven (7).
(b) To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 12:00 p.m. Pacific time 1
Business Day before the day on which the Equipment Advance is to be made. The
notice in the form of Exhibit B
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(Payment/Advance Form) must be signed by a Responsible Officer or designee and
include a copy of the invoice for the Equipment being financed.
(c) Borrower will make monthly payments of principal and accrued
interest for each Equipment Advance (collectively, "Scheduled Payments"), on the
last Business Day of the month following the Funding Date (or commencing on the
Funding Date if the Funding Date is the last Business Day of the month) with
respect to such Equipment Advance and continuing thereafter during the Repayment
Period on the last Business Day of each calendar month (each a "Payment Date"),
in an amount equal to the Loan Factor multiplied by the Equipment Loan Amount
for such Equipment Advance as of such Payment Date. All unpaid principal and
accrued interest is due and payable in full on the last Payment Date with
respect to such Equipment Advance. Payments received after 12:00 noon Pacific
time are considered received at the opening of business on the next Business
Day. An Equipment Advance may only be prepaid in accordance with Section 2.1.5
(f) and (g).
(d) Borrower will pay interest on the Payment Dates (as described
above) at the rate in Section 2.3(a)(ii).
(e) On the Equipment Maturity Date with respect to each Equipment
Advance, Borrower will pay, in addition to the unpaid principal and accrued
interest and all other amounts due on such date with respect to such Equipment
Advance, an amount equal to the Equipment Advance Final Payment.
(f) If the Equipment Advances are accelerated following the occurrence
of an Event of Default or otherwise, then Borrower will immediately pay to Bank
(i) all unpaid Scheduled Payments (including principal and interest) with
respect to each Equipment Advance, (ii) all remaining Scheduled Payments
(including principal and interest unpaid) (iii) all accrued unpaid interest,
including the default rate of interest, to the date of the prepayment, (iv) the
Equipment Advance Final Payment and (v) all other sums, if any, that shall have
become due and payable with respect to any Equipment Advance.
(g) Borrower shall have the option to prepay at any time prior to
acceleration, all, but not less than all, of an Equipment Advance advanced by
Bank under this Agreement, provided Borrower (i) provides written notice to Bank
to prepay such Equipment Advance prior to such prepayment, and (ii) pays, on the
date of the prepayment (A) all outstanding principal; (B) all unpaid accrued
interest to the date of the prepayment; and (C) the Equipment Advance Final
Payment.
2.1.6 Term Loan.
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(a) Bank will make a Term Loan available to Borrower.
(b) Borrower will pay 24 equal installments of principal plus interest
of $85,951.03 (the "Term Loan Payment"). Each Term Loan Payment is payable on
the last day of each month during the term of the loan. Borrower's final Term
Loan Payment, due on Term Loan Maturity Date, includes all outstanding Term Loan
principal and accrued interest.
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(c) On the Term Loan Maturity Date, Borrower will pay, in addition to
the unpaid principal and accrued interest and all other amounts due on such date
with respect to the Term Loan, an amount equal to the Term Loan Final Payment.
(d) If the Term Loan is accelerated following the occurrence of an
Event of Default or otherwise, then Borrower will immediately pay to Bank (i)
all outstanding Term Loan principal and accrued interest, (ii) all accrued
unpaid interest, including the default rate of interest, to the date of the
prepayment, (iv) the Term Loan Final Payment and (v) all other sums, if any,
that shall have become due and payable with respect to the Term Loan.
(e) Borrower shall have the option to prepay all or a portion, such
portion not to be less than 25%, of the Term Loan advanced by Bank under this
Agreement, provided Borrower (i) provides written notice to Bank to prepay such
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portion of the Term Loan prior to such prepayment, and (ii) pays, on the date of
the prepayment: (A) that percentage of the outstanding principal; (B) that
percentage of unpaid accrued interest to the date of such prepayment; and (C)
that percentage of the Term Loan Final Payment at the time of such prepayment.
2.2 Overadvances.
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If Borrower's Obligations under Section 2.1.1, 2.1.2, 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.
2.3 Interest Rate, Payments.
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(a) Interest Rate. (i) Advances accrue interest on the outstanding
principal balance at a per annum rate of 0.25 percentage points above the Basic
Rate; (ii) Equipment Advances accrue interest on the outstanding principal
balance at a per annum rate of 0.50 percentage points above the Basic Rate; and
(iii) the Term Loan accrues interest at a per annum rate of 0.50 percentage
points above the Basic Rate. After an Event of Default, Obligations accrue
interest at 5 percent above the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Basic Rate changes.
Interest is computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Interest is payable on the last day of each month. Bank
may debit any of Borrower's deposit accounts including Account Number 3300362112
for principal and interest payments owing or any amounts Borrower owes Bank.
Bank will notify Borrower when it debits Borrower's accounts. These debits are
not a set-off. Payments received after 12:00 noon Pacific time are considered
received at the opening of business on the next Business Day. When a payment is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional fees or interest accrue.
2.4 Fees.
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Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable facility fee of
$56,250 due on the Closing Date, provided, however, that if for the period
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commencing in June 30, 2002 through
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and including the Revolving Maturity Date, Borrower maintains at least 85% of
all of Borrower's account balances at the Bank, then the Facility Fee shall be
reduced to $37,500 and the difference plus accrued interest (at the rate equal
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to Bank's cost of funds) shall be refunded to the Borrower; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and expenses) incurred through and after the Closing Date when due.
3. CONDITIONS OF LOANS
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3.1 Conditions Precedent to Initial Credit Extension.
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Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees it
requires, including but not limited to control agreements with respect to all
deposit accounts and investment accounts maintained by Borrower, in form and
substance satisfactory to Bank, in order for Bank to perfect its security
interest in such deposit accounts and investments accounts, provided, however,
that if Borrower deposits not less than $4,000,000 in Bank on or before the
Closing Date, Borrower may deliver the herein referenced control agreements on
or before April 15, 2002 (the "Deadline Date"), provided, further, that if
Borrower fails to deliver the herein referenced control agreements on or before
the Deadline Date, notwithstanding anything to the contrary in Section 6.6 of
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this Agreement, Borrower shall deposit (promptly but in no event later than 2
days from the Deadline Date) not less than 50% of its cash and cash equivalents
in Bank.
3.2 Conditions Precedent to all Credit Extensions.
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Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form;
(b) receipt of an fully executed Intellectual Property Security
Agreement in form and substance satisfactory to Bank; and
(c) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4. CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest.
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Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
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Collateral if: (i) an Event of Default has occurred and is continuing, or (ii)
Borrower has agreed to the placing of such hold in writing. If this Agreement is
terminated, Bank's lien and security interest in the Collateral will continue
until Borrower fully satisfies its Obligations.
4.2 Termination of Bank's Lien in Intellectual Property.
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If Borrower achieves two consecutive fiscal quarters of positive EBDA,
Bank shall release and terminate its lien and security interest in the
Intellectual Property. Upon the release and termination of Bank's lien and
security interest in the Intellectual Property, Borrower shall execute and
deliver to Bank a Negative Pledge Agreement in favor of Bank, in form and
substance satisfactory to Bank. Notwithstanding the foregoing, if Borrower
experiences two consecutive fiscal quarters of negative EBDA, Borrower agrees to
grant Bank a continuing security interest in the Intellectual Property and to
execute all necessary documents in connection with the granting of such security
interest and Borrower authorizes Bank to execute and file all necessary
documents (including but not limited to UCC-1 financing statement) to perfect
its security interest in the Intellectual Property.
5. REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
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Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified.
The execution, delivery and performance of the Loan Documents have
been duly authorized, and do not conflict with Borrower's formations documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could cause a Material Adverse Change.
5.2 Collateral.
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Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Eligible Accounts are bona fide, existing obligations, and
the service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects. Borrower is the sole owner of
the Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party.
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5.3 Litigation.
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Except as shown in the Schedule, there are no actions or proceedings
pending or, to Borrower's knowledge, threatened by or against Borrower or any
Subsidiary in which an adverse decision could cause a Material Adverse Change.
5.4 No Material Adverse Change in Financial Statements.
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All consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 Solvency.
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The fair salable 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 in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 Regulatory Compliance.
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Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors). Borrower
has complied with the Federal Fair Labor Standards Act. Borrower has not
violated any laws, ordinances or rules, the violation of which could cause a
Material Adverse Change. None of Borrower's or any Subsidiary's properties or
assets has been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and each
Subsidiary has timely filed all required tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted.
5.7 Subsidiaries.
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Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 Full Disclosure.
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No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained in the certificates or statements not misleading.
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6. AFFIRMATIVE COVENANTS
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Borrower will do all of the following:
6.1 Government Compliance.
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Borrower will maintain its and all 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 on Borrower's business or operations. Borrower will
comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or cause a Material
Adverse Change.
6.2 Financial Statements, Reports, Certificates.
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(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period, in a form acceptable to Bank and certified by a
Responsible Officer; (ii) within 10 days of filing, copies of all statements,
reports and notices made available to Borrower's 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; (iii) a prompt 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 $250,000 or more;
(iv) prompt notice of any material change in the composition of the Intellectual
Property, including any subsequent ownership right of Borrower in or to any
Copyright, Patent or Trademark not shown 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 taken as a whole; and
(v) budgets, sales projections, operating plans or other financial information
Bank reasonably requests.
(b) Within 30 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged listings of accounts receivable, accounts
payable and schedule of deferred revenues.
(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Accounts at Borrower's
expense, but the audits will be conducted no less often than once every 6 months
unless an Event of Default has occurred and is continuing; provided, however,
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that the cost of any one audit shall not exceed $2,000.
6.3 Inventory; Returns.
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Borrower will keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
account debtors will follow
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Borrower's customary practices as they exist the Closing Date. Borrower must
promptly notify Bank of all returns, recoveries, disputes and claims, that
involve more than $100,000.
6.4 Taxes.
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Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments and will deliver
to Bank, on demand, appropriate certificates attesting to the payment.
6.5 Insurance.
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Borrower will keep its business and the Collateral insured for risks
and in amounts, as Bank requests. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
will have a lender's loss payable endorsement showing Bank as a loss payee and
all liability policies will show the Bank as an additional insured and provide
that the insurer must give Bank at least 30 days notice before canceling its
policy. At Bank's request, Borrower will deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy will, at
Bank's option, be payable to Bank on account of the Obligations.
6.6 Primary Accounts.
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(i) Borrower will maintain its primary depository and
operating accounts with Bank;
(ii) Within 30 days of the Closing Date, Borrower will
transfer not less than 25% of its cash and cash equivalents to Bank;
(iii) On or before June 30, 2002, Borrower will transfer not
less than 50% of its cash and cash equivalents to Bank; and
(iv) On and after July 1, 2002, Borrower will maintain not
less than 50% of its unrestricted cash and cash equivalents in any accounts at
or through Bank at all times, provided, however, that in the event Borrower
raises capital in future rounds of equity financing (the "Raised Capital"),
Borrower and Bank agree, prior to the closing of any such equity financing
round, to reasonably negotiate in good faith to determine what percentage of the
Raised Capital will be required to be maintained at or through Bank.
6.7 Financial Covenants.
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Borrower will maintain as of the last day of each month:
(i) Quick Ratio (Adjusted). A ratio of Quick Assets to
Current Liabilities plus non-cash secured Letters of Credit of at least 1.25 to
1.0.
(ii) Profitability. Borrower will have a net profit no more
negative than the following amounts for the corresponding fiscal quarters (Net
Loss, as defined by GAAP, minus dividends payable to common and preferred
shareholders:
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Fiscal Quarter Ending Net Profit (Net Loss)
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March 31, 2002 ($16,300,000)
June 30, 2002 ($14,500,000)
September 30, 2002 ($12,100,000)
December 31, 2002 ($11,100,000)
6.8 Registration of Intellectual Property Rights.
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Borrower will consistent with its business practices and objectives,
register with the United States Patent and Trademark Office Patents within 30
days of the date of this Agreement and additional Patents developed or acquired
including revisions or additions with any product before the sale or licensing
of the product to any third party. In addition, Borrower will register with the
United States Copyright Office its Copyrights within 30 days of this Agreement
and additional Copyrights on an ongoing basis, provided, however, Borrower will
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only be required to register Copyrights developed or acquired that relate to
Borrower's generally available products (including prior, current and future
material version releases thereof) before the sale or licensing of the product
to any third party, provided, further, Borrower will not be required to register
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any Copyrights until the Ninth Circuit Court Appeals rules on the matter of
Aerocon Engineering v. Silicon Valley Bank, provided, further, that if the Ninth
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Circuit Court of Appeals rules in Bank's favor (allowing perfection in
unregistered Copyrights by means of UCC-1 financing statement filing), Borrower
will not be required to register any Copyrights.
Borrower will (consistent with past practices): (i) protect, defend
consistent with past practice and maintain the validity and enforceability of
the Intellectual Property and promptly advise Bank in writing of material
infringements and (ii) not allow any Intellectual Property to be abandoned,
forfeited or dedicated to the public without Bank's written consent, which
consent shall not be unreasonably withheld.
6.9 Control Agreements.
------------------
With respect to deposit accounts or investment accounts maintained at
financial institutions other than Bank, within fifteen (15) days of the opening
of any such deposit account or investment account, Borrower will execute and
deliver to Bank control agreements in form satisfactory to Bank in order for
Bank to perfect its security interest in such deposit accounts or investment
accounts.
6.10 Further Assurances.
------------------
Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld:
10
7.1 Use of Funds.
------------
7.1.1 Use any proceeds of the Term Loans for any purpose other than
to pay amounts owing to Old Lender in full in accordance with the Payoff Letter.
7.2 Dispositions.
------------
Convey, sell, lease, transfer or otherwise dispose of (collectively
"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.
7.3 Changes in Business, Ownership, Management or Business Locations.
----------------------------------------------------------------
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or have a change in
its ownership (other than the sale of Borrower's equity securities in a public
or private offering) of greater than 51%. Borrower will not, without at least 30
days prior written notice, relocate its chief executive office or add any new
offices or business locations.
7.4 Mergers or Acquisitions.
-----------------------
Without the consent of the Bank, such consent not to be unreasonably
withheld or delayed, merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.5 Indebtedness.
------------
Create, incur, assume, or be liable for any Indebtedness, or permit
any Subsidiary to do so, other than Permitted Indebtedness.
7.6 Encumbrance.
-----------
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
Bank's first priority security interest in the Collateral to change, subject to
Permitted Liens.
7.7 Distributions; Investments.
--------------------------
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock, except that
11
Borrower may repurchase the stock of former employees pursuant to stock
repurchase agreements as long as an Event of Default does not exist prior to
such repurchase or would not exist after giving effect to such repurchase.
7.8 Transactions with Affiliates.
----------------------------
Directly or indirectly enter into or permit any material transaction
with any Affiliate except transactions that are in the ordinary course of
Borrower's business, on terms less favorable to Borrower than would be obtained
in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt.
-----------------
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent, such consent not
to be unreasonably withheld.
7.10 Compliance.
----------
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that 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, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT
-----------------
Any one of the following is an Event of Default:
8.1 Payment Default.
---------------
If Borrower fails to pay any of the Obligations within 3 days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 Covenant Default.
----------------
If Borrower does not perform any obligation in Section 6 or violates
any covenant in Section 7 or does not perform or observe any other material
term, condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or cannot
be cured after Borrower's attempts in the 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional time (of not
more than 30 days) to attempt to cure the
12
default. During the additional period, the failure to cure the default is not an
Event of Default (but no Credit Extensions will be made during the 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 the 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 priority of Bank's
security interests in the Collateral.
8.4 Attachment.
----------
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 Insolvency.
----------
If Borrower becomes Insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
----------------
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $250,000 or that could cause a Material Adverse Change, provided,
however that Borrower's failure to pay disputed trade payables of up to $250,000
in the aggregate shall not be an Event of Default under this Section 8.6 unless
such nonpayment could constitute a Material Adverse Change;
8.7 Judgments.
---------
If a money judgment(s) in the aggregate of at least $250,000 is
rendered against Borrower and is unsatisfied and unstayed for 10 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied); or
8.8 Misrepresentations.
------------------
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
13
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies.
-------------------
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or
the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, rights of use of any name, trade
secrets, trade names, Trademarks, service marks, and advertising matter, or any
similar property 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, Borrower's rights under all licenses
and all franchise agreements inure to Bank's benefit; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
-----------------
When an Event of Default occurs and continues, Borrower irrevocably
appoints Bank as its lawful attorney to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or ▇▇▇▇ of lading for any Account or drafts against account debtors,
(iii) make, settle, and adjust all claims under Borrower's insurance policies;
(iv) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the
14
perfection of any security interest regardless of whether an Event of Default
has occurred. Bank's appointment as Borrower's attorney in fact, and all of
Bank's rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank's obligation to
provide Credit Extensions terminates.
9.3 Accounts Collection.
-------------------
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
-------------
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 Bank's Liability for Collateral.
-------------------------------
If Bank complies with reasonable banking practices and Section 9-207
of the Code, it is not liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other person. Borrower bears all risk of loss, damage or destruction
of the Collateral.
9.6 Remedies Cumulative.
-------------------
Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right or
remedy is not an election, and Bank's waiver of any Event of Default is not a
continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 Demand Waiver.
-------------
Borrower waives demand, 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 guaranties held by Bank on which Borrower is
liable.
15
10. NOTICES
-------
All notices or demands by any party to this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile at the addresses listed at the beginning of this
Agreement. A Party may change its notice address by giving the other Party
written notice.
11. CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER
-------------------------------------------
California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa ▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns.
----------------------
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights or Obligations under it without Bank's prior written consent which may be
granted or withheld in Bank's discretion. Bank has 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 under this Agreement, the Loan Documents or any related
agreement.
12.2 Indemnification.
---------------
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including 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 in this
Agreement.
16
12.4 Severability of Provision.
-------------------------
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 Amendments in Writing, Integration.
----------------------------------
All amendments to this Agreement must be in writing and signed by both
Borrower and Bank. This Agreement and the Loan Documents represent the entire
agreement about this subject matter, and supersedes prior or contemporaneous
negotiations or agreements. All prior or contemporaneous agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
12.6 Counterparts.
------------
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, are one Agreement.
12.7 Survival.
--------
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 Confidentiality.
---------------
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their present or prospective business with Borrower, (ii) to
prospective transferees or purchasers of any interest in the loans, (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank's examination or audit and (v) as Bank considers
appropriate exercising remedies under this Agreement. Confidential information
does not include information that either: (a) is in the public domain or in
Bank's possession when disclosed to Bank, or becomes part of the public domain
after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank
does not know that the third party is prohibited from disclosing the
information.
12.9 Attorneys' Fees, Costs and Expenses.
-----------------------------------
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other costs and expenses incurred, in addition to
any other relief to which it may be entitled, whether or not a lawsuit is filed.
17
13. DEFINITIONS
-----------
13.1 Definitions.
-----------
In this Agreement:
"Accounts" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the
Committed Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Basic Rate" is, as of the Closing Date, the per annum rate of
interest (based on a year of 360 days) equal to the greater of: (a) the Prime
Rate, or (b) 4.75%.
"Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"Borrowing Base" is (i) 65% of Eligible Accounts, as determined by
Bank from Borrower's most recent Borrowing Base Certificate; provided, however,
-------- -------
that in Bank's Permitted Discretion, Bank may lower the percentage of the
Borrowing Base after performing an audit of Borrower's Collateral pursuant to
Section 6.2(d); provided further, that no such adjustment shall become effective
until the tenth (10th) Business Day following delivery to Borrower of a report
by the Bank setting forth in reasonable detail the rationale for the adjustment
of the percentage. The Bank agrees that during such ten (10) day period, the
Bank will negotiate in good faith with the Borrower to settle any differences of
opinion with respect to such audit and adjustment.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"Cash Management Services" are defined in Section 2.1.4.
"Closing Date" is the date of this Agreement.
"Code" is the California Uniform Commercial Code.
18
"Collateral" is the property described on Exhibit A.
---------
"Committed Equipment Line" is a Credit Extension of up to $537,282.51.
"Committed Revolving Line" is an Advance of up to $5,000,000.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or registrations
and like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Advance, Equipment Advance, Letter of
Credit, Term Loan, Exchange Contract, or any other extension of credit by Bank
for Borrower's benefit.
"Current Assets" are amounts that under GAAP should be included on
that date as current assets on Borrower's consolidated balance sheet.
"Current Liabilities" are the aggregate amount of Borrower's Current
Liabilities (as defined pursuant to GAAP), plus the aggregate outstanding amount
of Equipment Advances and Term Loan, minus current portion of Deferred Revenue.
"Deferred Revenue" is all amounts received in advance of performance
under maintenance or other service contracts and not yet recognized as revenue.
"EBDA" is net earnings or losses to common stock shareholders, plus
----
depreciation, plus amortization of goodwill, intangible assets, deferred
----
compensation, plus dividends on preferred stock, plus restructuring charges not
---- ----
to exceed the following amounts for the corresponding fiscal quarters: (i)
$400,000 for the fiscal quarter ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) $75,000 for the
fiscal quarter ending June 30, 2002, (iii) $75,000 for the fiscal quarter ending
September 30, 2002, and (iv) $75,000 for the fiscal quarter ending December 31,
2002.
"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5,
provided, however, that Bank may in its Permitted Discretion change eligibility
standards by giving Borrower notice, provided, further, that no such changes in
eligibility shall become effective until the tenth (10/th/) Business
19
Day following the delivery to Borrower of a written explanation setting forth in
reasonable detail the rationale for any such changes (except for changes in
eligibility relating to cases where account debtors have declared bankruptcy or
where a receiver has been appointed to operate the business of any such account
debtor, in which situation changes to the eligibility requirements, with respect
to any such account debtors, shall be effective immediately). The Bank agrees
that during such ten (10) Business Day period: (i) Bank will negotiate in good
faith with the Borrower to settle any differences of opinion with respect to any
change in eligibility standards and (ii) Borrower will not be required to repay
such amounts advanced on accounts that were deemed to be ineligible. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date, other than non-standard Accounts agreed to by the Bank;
(b) Accounts for an account debtor, 50% or more of whose Accounts
have not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose
total obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage, unless the Bank approves in writing;
(e) Accounts for which the account debtor does not have its
principal place of business in the United States except for Eligible Foreign
Accounts;
(f) Accounts for which the account debtor is a federal, state or
local government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts), provided, however, that if Borrower
achieves a: (i) ratio of Quick Assets to Current Liabilities plus non-cash
secured Letters of Credit of at least 1.35 to 1.0 during fiscal quarter ending
▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) ratio of Quick Assets to Current Liabilities plus non-cash
secured Letters of Credit of at least 1.40 to 1.0 during fiscal quarter ending
June 30, 2002, and (iii) ratio of Quick Assets to Current Liabilities plus
non-cash secured Letters of Credit of at least 1.50 to 1.0 during fiscal
quarters ending September 30, 2002 and December 31, 2002, then that up to an
aggregate of $75,000 of contra accounts, accounts payable, and customer deposits
or credit accounts may be included as Eligible Accounts;
(h) Accounts for which the account debtor does not owe Borrower, but
which Borrower has recognized or can recognize Deferred Revenue, unless and in
which case the portion of such Account that is equal to such Deferred Revenue
amount shall be ineligible under this clause, provided, however, that if
Borrower achieves a: (i) ratio of Quick Assets to Current Liabilities plus
non-cash secured Letters of Credit of at least 1.35 to 1.0 during fiscal quarter
ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) ratio of Quick Assets to Current Liabilities plus
non-cash secured Letters of Credit of at least 1.40 to 1.0 during fiscal quarter
ending June 30, 2002, and (iii) ratio of Quick Assets to Current Liabilities
plus non-cash secured Letters of Credit of at least 1.50 to
20
1.0 during fiscal quarters ending September 30, 2002 and December 31, 2002, then
such Deferred Revenue Accounts may be included as Eligible Accounts.
(i) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval, ▇▇▇▇
and hold, or other terms if account debtor's payment may be conditional;
(j) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent, provided, however, that this exclusion shall not
extend to non-affiliated business partners that sell Borrower's products in the
ordinary course of their business;
(k) Accounts in which the account debtor disputes liability or makes
any claim and Bank reasonably believes there may be a basis for dispute (but
only up to the disputed or claimed amount), or if the Account Debtor is subject
to an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(l) Accounts being factored by or sold to Bank or other financial
institutions under an Accounts Receivable Purchase Facility or similar
agreement; and
(m) Accounts for which Bank reasonably determines collection to be
doubtful, provided, however, that upon Borrower's requests Bank agrees to
-------- -------
provide Borrower with a list of any such excluded Accounts.
"Eligible Equipment" is, to the extent reasonably acceptable to Bank,
new or used general purpose computer equipment, office equipment, test and
laboratory equipment, furnishings, and, subject to the limitations set forth
below. Other Equipment, not to exceed $134,320.63 in the aggregate, that
complies with all of Borrower's representations and warranties to Bank and which
is acceptable to Bank in all respects.
"Eligible Foreign Accounts" are Accounts for which the account debtor
does not have its principal place of business in the United States but are: (1)
covered by credit insurance satisfactory to Bank, less any deductible; or (2)
supported by letter(s) of credit advised and negotiated by Bank or (3) that Bank
approves in writing.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" is defined in Section 2.1.5.
"Equipment Availability End Date" is defined in Section 2.1.5.
"Equipment Loan Amount" is the aggregate amount of the Equipment
Advance.
"Equipment Maturity Date" is, with respect to each Equipment Advance,
the last day of the Repayment Period for such Equipment Advance, or if earlier,
the date of acceleration of such Equipment Advance by Bank following an Event of
Default.
21
"Equipment Advance Final Payment" is a payment (in addition to and not
a substitution for the regular monthly payments of principal plus accrued
interest) due on the Equipment Maturity Date for such Equipment Advance equal to
the Equipment Loan Amount for such Equipment Advance multiplied by the Final
Payment Percentage.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"Final Payment Percentage" is, for the Term Loan and each Equipment
Advance, as applicable, 6%.
"Funding Date" is any date on which an Equipment Advance is made to or
on account of Borrower.
"FX Forward Contract" is defined in Section 2.1.3.
"FX Reserve " is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"Guarantor" is any present or future guarantor of the Obligations,
including Egain Communications Corp
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Insolvent" means that the fair value of Borrower's or any other
person's liabilities exceeds the fair salable value of its assets (including
goodwill minus disposition costs) or Borrower or any other person is not able to
pay its debts (including trade debts) as they mature.
"Intellectual Property" is:
(a) Copyrights, Trademarks, and Patents including amendments,
renewals, extensions, and all licenses or other rights to use and all license
fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in
computer software and computer software products now or later existing, created,
acquired or held;
(c) All design rights which may be available to Borrower now or
later created, acquired or held;
22
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to ▇▇▇ and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"Inventory" is 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 later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"Letter of Credit" is defined in Section 2.1.2.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"Loan Factor" is the percentage which results from amortizing the
Equipment Advance over the Repayment Period, using the Basic Rate as the
interest rate.
"Material Adverse Change" is defined in Section 8.3.
"Negative Pledge Agreement" means an agreement reasonably satisfactory
to Lender substantially in the form of Exhibit E attached hereto.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Old Lender" Comerica Bank - California.
"Other Equipment" is leasehold improvements, intangible property such
as computer software and software licenses, and other soft costs, including
taxes, shipping, warranty charges, freight discounts and installation expense.
Unless otherwise agreed to by Bank: not more than
23
$134,320.63 of the Equipment financed with the proceeds of the Committed
Equipment Line shall consist of Other Equipment.
"Patents" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
"Pay-Off Letter" means that certain letter, in form and substance
reasonably satisfactory to Bank, from Old Lender respecting the amount necessary
to repay in full all of the obligations of Borrower or any Subsidiary owing to
Old Lender and obtain a termination or release of all of the Liens existing in
favor of Old Lender in and to the assets of Borrower and such Subsidiaries.
"Permitted Discretion" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured lender) business
judgment.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any
other Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course
of business;
(e) Indebtedness secured by a Lien described in clause (c) of the
defined term "Permitted Liens", provided, however, that (i) such Indebtedness
does not exceed the lesser of the cost or fair market value of the Equipment
financed with such Indebtedness and (ii) such Indebtedness does not exceed
$5,000,000 in the aggregate at any given time;
(f) Capital leases; and
(g) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing
Date;
(b) Investments made by the Borrower or any Subsidiary, provided,
however, that Borrower may make Investments in its Subsidiaries, provided,
however, that (ii) the aggregate amount of such Investments shall not exceed
$3,000,000 in any given quarter and (ii) no Event of Default has occurred which
is continuing or would exist immediately after giving effect to any such
Investment; and
(c) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 2
years from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and currently having a rating of at least A-1 or P-1 from
either Standard & Poor's Corporation or Moody's Investors
24
Service, Inc., and (iii) Bank's certificates of deposit issued maturing no more
than 2 years after issue.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges
or levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
--
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by
Borrower or its Subsidiaries incurred for financing the acquisition of the
Equipment, or (ii) existing on equipment when acquired, if the Lien is confined
--
to the property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
--
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
---
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
(g) Capital leases; and
(h) Purchase money liens.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if
it is not Bank's lowest rate.
"Quick Assets" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, and Eligible Accounts.
"Repayment Period" as to each Equipment Advance, is 36 months;
provided, however that the initial Equipment Advance shall have a repayment
period of 24 months.
25
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer, and the Vice President of Finance of
Borrower.
"Revolving Maturity Date" is March 25, 2003.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"Subsidiary" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) 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) reserves not already
deducted from assets, and (ii) Total Liabilities.
"Term Loan" a loan of $1,962,717.49.
"Term Loan Final Payment" is a payment (in addition to and not a
substitution for the regular monthly payments of principal plus accrued
interest) due on the Term Loan Maturity Date equal to the amount of the Term
Loan multiplied by the Final Payment Percentage.
"Term Loan Maturity Date" is March 25, 2004.
"Total Liabilities" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
26
"Trademarks" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
EGAIN COMMUNICATIONS CORP.
By:________________________________________
Title:_____________________________________
BANK:
SILICON VALLEY BANK
By:________________________________________
Title:_____________________________________
27
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
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;
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 held for sale or lease, or to be furnished under a contract of
service or is temporarily out of Borrower's custody or possession or in transit
and including any returns or repossession 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;
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, payment intangibles, and rights to payment of
any kind;
All now existing and hereafter arising accounts (including health-care
insurance receivables), 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;
All documents (including negotiable documents), cash, deposit accounts,
securities, securities entitlements, securities accounts, investment property,
financial assets, letters of credit, letter of credit rights, money,
certificates of deposit, instruments (including promissory notes) and chattel
paper (including tangible and electronic chattel paper) now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
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 claims for damages by way of any past,
present and future infringement of any of the foregoing; and
All Borrower's Books relating to the foregoing, and the computers and
equipment containing said books and records, and any and all claims, rights and
interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.
28
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:______________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:______________
--------------------------------------------------------------------------------
FROM: EGAIN COMMUNICATIONS CORP.
-------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________
PHONE NUMBER:___________________________________________________
FROM ACCOUNT # ______________ TO ACCOUNT # ____________________
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
-------------------------- -----------------------
PRINCIPAL INCREASE (ADVANCE) $___________________________
PRINCIPAL PAYMENT (ONLY) $___________________________
INTEREST PAYMENT (ONLY) $___________________________
PRINCIPAL AND INTEREST (PAYMENT) $___________________________
OTHER INSTRUCTIONS:_____________________________________________
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
________________________________ _____________________________________
Authorized Requester Phone #
________________________________ _____________________________________
Received By (Bank) Phone #
--------------------------------------------------------------------------------
29
--------------------------------------------------------------------------------
_________________________________________
Authorized Signature (Bank)
--------------------------------------------------------------------------------
30
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: EGAIN COMMUNICATIONS CORP. Bank: SILICON VALLEY BANK
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $5,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____________ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_______
5. Balance of 50% over 90 day accounts $_______
6. Credit balances over 90 days $_______
7. Concentration Limits $_______
8. Foreign Accounts $_______
9. Governmental Accounts $_______
10. Contra Accounts $_______
11. Deferred Revenue $_______
12. Promotion or Demo Accounts $_______
13. Intercompany/Employee Accounts $_______
14. Other (please explain on reverse) $_______
15. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
16. Eligible Accounts (#3 minus #15) $_______
17. LOAN VALUE OF ACCOUNTS (65% of #16) $__________
BALANCES
18. Maximum Loan Amount $_______
19. Total Funds Available [Lesser of #17 or #16] $__________
20. Present balance owing on Line of Credit $_______
21. Outstanding under Sublimits (LC or FX or CMS) $_______
RESERVE POSITION (#18 minus #19 and #20) $__________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
-----------------------------
BANK USE ONLY
---- --- ----
Rec'd By_______________
Auth. Signer
EGAIN COMMUNICATIONS CORP. Date:__________________
Verified:______________
Auth. Signer
Date:__________________
-----------------------------
31
By:__________________________
Authorized Signer
32
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: EGAIN COMMUNICATIONS CORP.
The undersigned authorized officer of Egain Communications Corp.
("Borrower") certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date.
Attached are the required documents supporting the certification. The Officer
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
--------------------------------------------------- ------------------------------------------- -------------------------------
Reporting Covenant Required Complies
------------------ -------- --------
--------------------------------------------------- ------------------------------------------- -------------------------------
--------------------------------------------------- ------------------------------------------- ----------------- -------------
Monthly financial statements + CC Monthly within 30 days Yes No
--------------------------------------------------- ------------------------------------------- ----------------- -------------
10-Q, 10-K and 8-K Within 10 days after filing with SEC Yes No
--------------------------------------------------- ------------------------------------------- ----------------- -------------
A/R A/P Agings & Schedule of Deferred Revenues Monthly within 30 days Yes No
--------------------------------------------------- ------------------------------------------- ----------------- -------------
A/R Audit Initial and Semi-Annual Yes No
--------------------------------------------------- ------------------------------------------- ----------------- -------------
Borrowing Base Certificate Monthly within 30 days Yes No
--------------------------------------------------- ------------------------------------------- ----------------- -------------
--------------------------------------------------- ------------------------------------------- ----------------- -------------
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
--------------------------------------------------- ------------------------------------------- ----------------- -------------
--------------------------------------------------- ------------------------------------------- ----------------- -------------
Maintain on a Monthly Basis:
--------------------------------------------------- ------------------------------------------- ----------------- ------ ------
Minimum Quick Ratio (Adjusted) 1.25 : 1.00 _____:1.00 Yes No
--------------------------------------------------- ------------------------------------------- ----------------- ------ ------
Profitability: quarterly $_____________ Yes No
Fiscal Quarter Ending Losses not to exceed:
March 31, 2002 ($16,300,000) Yes No
June 30, 2002 ($14,500,000) Yes No
September 30, 2002 ($12,100,000) Yes No
December 31, 2002 ($11,100,000) Yes No
Have there been updates to Borrower's intellectual property, if appropriate?
Yes No
33
----------------------------------
Comments Regarding Exceptions: See Attached. BANK USE ONLY
Received by:______________________
Sincerely, AUTHORIZED SIGNER
EGAIN COMMUNICATIONS CORP. Date:_____________________________
Verified:_________________________
___________________________________ AUTHORIZED SIGNER
SIGNATURE
Date:_____________________________
___________________________________
TITLE Compliance Status: Yes No
----------------------------------
___________________________________
Date
34
EXHIBIT E
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of _____________, by and
between _________________________ ("Borrower") and Silicon Valley Bank ("Bank").
In connection with, among other documents, the Loan and Security Agreement (the
"Loan Documents") being concurrently executed herewith between Borrower and
Bank, Borrower agrees as follows:
1. Borrower shall not, without the consent of the Bank, such consent not
to be unreasonably withheld, sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's intellectual
property (except for licensing of its proprietary software in the ordinary
course of business), including, without limitation, the following:
(a) 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;
(b) All mask works or similar rights available for the protection of
semiconductor chips, now owned or hereafter acquired;
(c) 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;
(d) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(e) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications;
(f) 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 Borrower connected with and symbolized by
such trademarks, including without limitation;
(g) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to ▇▇▇ for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(h) 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; and
(i) All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks, or Patents; and
35
(j) 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;
2. It shall be an event of default under the Loan Documents between Borrower
and Bank if there is a breach of any term of this Negative Pledge Agreement.
3. Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Documents.
BORROWER:
EGAIN COMMUNICATIONS CORP.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK:
SILICON VALLEY BANK
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
36
