Exhibit 10.6
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LOAN AND SECURITY AGREEMENT
SILICON VALLEY BANK
and
PLUMTREE SOFTWARE, INC.
$7,500,000
March 14, 2001
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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
2.1.1 Revolving Advances.......................................... 1
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2.1.2 Letters of Credit Sublimit.................................. 1
2.1.3 Intentionally Omitted....................................... 2
2.1.4 Cash Management Services Sublimit........................... 2
2.2 Overadvances....................................................... 2
2.3 Interest Rate, Payments............................................ 2
2.4 Fees............................................................... 3
223. CONDITIONS OF LOANS................................................... 3
3.1 Conditions Precedent to Initial Credit Extension................... 3
3.2 Conditions Precedent to all Credit Extensions...................... 3
4. CREATION OF SECURITY INTEREST......................................... 3
4.1 Grant of Security Interest......................................... 3
5. REPRESENTATIONS AND WARRANTIES........................................ 4
5.1 Due Organization and Authorization................................. 4
5.2 Collateral......................................................... 4
5.3 Litigation......................................................... 4
5.4 No Material Adverse Change in Financial Statements................. 4
5.5 Solvency........................................................... 5
5.6 Regulatory Compliance.............................................. 5
5.7 Subsidiaries....................................................... 5
5.8 Full Disclosure.................................................... 5
6. AFFIRMATIVE COVENANTS................................................. 6
6.1 Government Compliance.............................................. 6
6.2 Financial Statements, Reports, Certificates........................ 6
6.3 Inventory; Returns................................................. 6
6.4 Taxes.............................................................. 7
6.5 Insurance.......................................................... 7
6.6 Primary Accounts................................................... 7
6.7 Financial Covenants................................................ 7
6.8 Further Assurances................................................. 8
7. NEGATIVE COVENANTS.................................................... 8
7.1 Dispositions....................................................... 8
7.2 Changes in Business, Ownership, Management or Business Locations... 8
7.3 Mergers or Acquisitions............................................ 8
7.4 Indebtedness....................................................... 8
7.5 Encumbrance........................................................ 9
7.6 Distributions; Investments......................................... 9
7.7 Transactions with Affiliates....................................... 9
7.8 Subordinated Debt.................................................. 9
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7.9 Compliance......................................................... 9
8. EVENTS OF DEFAULT..................................................... 9
8.1 Payment Default.................................................... 10
8.2 Covenant Default................................................... 10
8.3 Material Adverse Change............................................ 10
8.4 Attachment......................................................... 10
8.5 Insolvency......................................................... 10
8.6 Other Agreements................................................... 10
8.7 Judgments.......................................................... 11
8.8 Misrepresentations................................................. 11
8.9 Guaranty........................................................... 11
9. BANK'S RIGHTS AND REMEDIES............................................ 11
9.1 Rights and Remedies................................................ 11
9.2 Power of Attorney.................................................. 12
9.3 Accounts Collection................................................ 12
9.4 Bank Expenses...................................................... 12
9.5 Bank's Liability for Collateral.................................... 13
9.6 Remedies Cumulative................................................ 13
9.7 Demand Waiver...................................................... 13
10. NOTICES............................................................... 13
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER............................ 13
12. GENERAL PROVISIONS.................................................... 14
12.1 Successors and Assigns............................................. 14
12.2 Indemnification.................................................... 14
12.3 Time of Essence.................................................... 14
12.4 Severability of Provision.......................................... 14
12.5 Amendments in Writing, Integration................................. 14
12.6 Counterparts....................................................... 14
12.7 Survival........................................................... 14
12.8 Confidentiality.................................................... 15
12.9 Attorneys' Fees, Costs and Expenses................................ 15
13. DEFINITIONS........................................................... 15
13.1 Definitions........................................................ 15
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This LOAN AND SECURITY AGREEMENT dated as of March 14, 2001, between SILICON
VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and PLUMTREE SOFTWARE, INC., a California 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,
as set forth herein.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), minus (iii) the amount of the Cash Management Services Sublimit
designated by Bank at the time of determination as utilized. 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 3:00 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 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 reasonably believes is a
Responsible Officer. Borrower will indemnify Bank for any direct loss Bank
suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.1.2 Letters of Credit Sublimit.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus the
amount of the Cash Management Sublimit designated by Bank at the time of
determination as utilized; provided, however, that the face
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amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) may not exceed $5,000,000. Each Letter of Credit will have an
expiry date of no later than 30 days after the Revolving Maturity Date, but
Borrower's reimbursement obligation will be 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 Intentionally Omitted.
2.1.4 Cash Management Services Sublimit.
(a) Borrower may use up to $5,000,000 for Bank's Cash Management
Services, which may include merchant services, direct deposit of payroll,
business credit card, and check cashing services identified in various cash
management services agreements related to such services (the "Cash Management
Services"). The amount of such aggregate credit limit designated by Bank at the
time of determination as utilized shall reduce by a factor of 1.25 the amount
otherwise available to be borrowed under the Committed Revolving Line.
2.2 Overadvances.
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If Borrower's Obligations under Section 2.1.1 and 2.1.2 exceed the lesser
of either (i) the Committed Revolving Line minus the Cash Management Services
Sublimit or (ii) the Borrowing Base, Borrower must immediately pay Bank the
excess, upon demand.
2.3 Interest Rate, Payments.
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(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate of 1.0 percentage point above the Prime Rate;
provided that during any period that Borrower maintains a balance of at least
$2,500,000 (calculated net of the DDA Peg Balance) in a Sweep Account, such
interest rate shall be reduced to 0.75 percentage point above the Prime Rate;
provided, further, that in the event Borrower's Quick Ratio (Adjusted) is less
than 2.00: 1.00 under Section 6.7(i) hereof as of a Date of Determination (as
defined in such section), the rate of interest otherwise applicable to the
Advances shall be increased by one-half (1/2) percentage point (50 basis points)
until the next Date of Determination when such ratio is greater than or equal to
2.00 to 1.00. After an Event of Default, Obligations accrue interest at 5.0
percentage points above the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Prime Rate changes.
Interest is computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the first day of each month. Bank may debit any of Borrower's deposit accounts
including Account Number ____________________________ for principal and interest
payments owing or any amounts Borrower owes Bank. Bank will promptly 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.
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2.4 Fees.
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Borrower will pay:
(a) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
(b) Loan Fee. A loan fee equal to 1% of the Committed Revolving Line,
payable on the Closing Date; provided that Borrower may elect to pay a reduced
fee equal to 0.5% on the Closing Date and maintain a minimum balance of at least
$1,000,000 in a demand deposit account maintained at Bank (the "DDA Peg
Balance"); provided further that in the event the reduced fee is paid and at any
time thereafter during the term of this Agreement, Borrower fails to maintain
such minimum balance, then Borrower shall immediately pay to Bank the additional
0.5% fee.
(c) Letter of Credit Fees. A fee equal to 1.5% of the face amount of
each Letter of Credit, together with an origination and courier fee of $270 at
issuance.
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 set forth
herein.
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; and
(b) 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 this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
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 any 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, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation 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 reasonably be expected to 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 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, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
5.3 Litigation.
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Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a likely
adverse decision could reasonably be expected to 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
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Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank. There has been no material adverse
deviation from the business plan of Borrower which was presented to Bank prior
to the date of this Agreement.
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.
----------------------
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 in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to 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, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 Subsidiaries.
-------------
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 Full Disclosure.
----------------
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements 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. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ, in some instances materially, from the projected and
forecasted results.
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6. AFFIRMATIVE COVENANTS
---------------------
Borrower will do all of the following:
6.1 Government Compliance.
----------------------
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause 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 would reasonably
be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
--------------------------------------------
(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 and certified by a Responsible Officer
acceptable to Bank; (ii) as soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) within 5 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; (iv) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could reasonably be expected to result
in damages or costs to Borrower or any Subsidiary of $200,000 or more; and (v)
budgets, sales projections, operating plans or other financial information Bank
reasonably requests which shall be treated as Borrower Confidential Information.
(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 and accounts
payable.
(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 Collateral at Borrower's
expense, but the audits will be conducted no more often than every year at a
cost not to exceed $3000 per audit unless an Event of Default has occurred and
is continuing.
6.3 Inventory; Returns.
-------------------
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 at execution of this Agreement.
Borrower must promptly notify Bank of all returns, recoveries, disputes and
claims, that would be likely to involve a loss or return of more than $200,000.
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.
----------
Borrower will keep its business and the Collateral insured for risks and
in amounts, as Bank may reasonably request that are customary in Borrower's
industry. Insurance policies will be in a form, with companies, and in amounts
that are satisfactory to Bank in Bank's reasonable discretion. All property
policies will have a lender's loss payable endorsement showing Bank as an
additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 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.
-----------------
Borrower will maintain its primary depository and operating accounts with
Bank. In addition, Borrower shall maintain at least 51% of its cash and cash
equivalents in demand deposit accounts, money market savings accounts and/or
investment accounts at Bank.
6.7 Financial Covenants.
--------------------
Borrower will maintain:
(i) Quick Ratio (Adjusted). As of the last day of each month ("Date
of Determination"), a ratio of Quick Assets to Current Liabilities minus
Deferred Revenue of at least 1.75 to 1.00; provided that in the event such ratio
as of a Date of Determination is below 2.00 to 1.00, the rate of interest
otherwise applicable to the Advances pursuant to Section 2.3 shall be increased
by one-half (1/2) percentage point (50 basis points) until the next Date of
Determination when such ratio is greater than or equal to 2.00 to 1.00.
(ii) Maximum Operating Loss; Minimum Profitability. As of the last day
of each quarter, a maximum operating loss (calculated as earnings before
interest, taxes, depreciation and amortization, calculated in accordance with
GAAP but excluding expenses incurred and paid prior to February 28, 2001, in
connection with the issuance of Borrower's S-1 Registration Statement) of
<$5,000,000> for the quarter ending 3/31/01; <$3,000,000> for the quarter ending
6/30/01; <$2,000,000> for the quarter ending 9/30/01; and thereafter, minimum
quarterly net profit after tax (calculated in accordance with GAAP) of $1.00.
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6.8 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:
7.1 Dispositions.
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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.
7.2 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 reasonably related
thereto or have a material change in its ownership or management (other than the
sale of Borrower's equity securities in a public offering or to venture capital
investors approved by Bank) of greater than 33% (calculated on a fully diluted
basis after giving effect to the subject transaction). Borrower will not,
without at least 30 days prior written notice, relocate its chief executive
office, or add any new offices or business locations at which Borrower maintains
$200,000 or more in assets.
7.3 Mergers or Acquisitions.
------------------------
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 be reasonably likely to 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 (inclusive of goodwill). A
Subsidiary may merge or consolidate into another Subsidiary or into Borrower and
Borrower may merge or consolidate into a Subsidiary.
7.4 Indebtedness.
-------------
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
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7.5 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
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens. As more fully provided in the Negative Pledge
Agreement executed in connection herewith, in no event shall Borrower grant or
suffer to exist any Lien upon the Intellectual Property other than license
rights otherwise permitted hereunder, and Borrower shall not enter into any
agreement with any third party preventing Borrower from granting to Bank a Lien
upon the Intellectual Property.
7.6 Distributions; Investments.
---------------------------
Except as otherwise permitted hereunder, 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.
7.7 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 no less favorable to Borrower than would be obtained in an
arm's length transaction with a non-affiliated Person.
7.8 Subordinated Debt.
------------------
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any material provision in any document
relating to the Subordinated Debt that would affect either Bank's first priority
status with respect to the Collateral or Bank's senior right to payment, without
Bank's prior written consent.
7.9 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:
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8.1 Payment Default.
----------------
If Borrower fails to pay any of the Obligations within 5 Business Days
after their due date. During such 5 Business Day 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 within such10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During the additional time, 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.
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
$200,000 or that could reasonably be expected to cause a Material Adverse
Change;
10
8.7 Judgments.
---------
If a money judgment(s) in the aggregate of at least $200,000 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);
8.8 Misrepresentations.
------------------
If Borrower or any authorized 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; or
8.9 Guaranty.
--------
Any guaranty of any Obligations ceases for any reason to be in full force
or any Guarantor does not perform any obligation under any guaranty of the
Obligations, or any material misrepresentation or material misstatement exists
now or later in any warranty or representation in any guaranty of the
Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to
any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies.
-------------------
During the time 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 in its
reasonable discretion;
(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;
11
(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, Mask Works, 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.
------------------
Effective only 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. If Borrower refuses after Bank's request, Bank may exercise the power
of attorney to sign Borrower's name on any documents necessary to perfect or
continue the 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 Events of Default have been cured, or Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Collection.
-------------------
During the time 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.
12
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 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.
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 guarantees held by Bank on which Borrower is
liable.
10. NOTICES
-------
All notices or demands by any party about 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 to the addresses set forth 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 ANY OF 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.
13
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
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.
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 direct losses or Bank Expenses
directly incurred, or paid by Bank from, following, or resulting from
transactions hereunder 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.
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 Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements, including without
limitation, that certain Loan and Security Agreement, dated April 10, 1998. All
prior agreements (including, such Loan and Security Agreement), understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement 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, constitute 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
14
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 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) reasonably necessary in connection with Bank's
appropriate exercise of its 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 reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
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).
15
"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) 70% of Eligible Accounts plus (ii) 70% of Eligible
Foreign Accounts as determined by Bank from Borrower's most recent Borrowing
Base Certificate; provided, however, that Bank may lower the percentage of the
-------- -------
Borrowing Base after performing an audit of Borrower's Collateral, based upon
the results of such audit.
"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.
"Collateral" is the property described on Exhibit A.
---------
"Committed Revolving Line" is an Advance of up to $7,500,000.
"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, Letter of Credit, or any other
extension of credit by Bank for Borrower's benefit.
"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"DDA Peg Balance" has the meaning set forth in Section 2.4(b).
16
"Deferred Revenue" is all amounts received in advance of performance under
maintenance contracts or other contracts and not yet recognized as revenue.
"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards in the exercise of Bank's commercially
---
reasonable judgment by giving Borrower 60 days prior notice. 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;
(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);
(h) 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;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank 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;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"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.
17
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is United States generally accepted accounting principles.
"Guarantor" is any present or future guarantor of the Obligations.
"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.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents, and Mask Works 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;
(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.
18
"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.
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change" is defined in Section 8.3.
"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.
"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"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; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc., (iii) Bank's certificates of deposit issued
maturing no more than 1 year after issue; and (iv) foreign exchange
19
contracts entered into by Borrower in the ordinary course of business to hedge
currency exchange risks.
"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;
(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,
---
ren ewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"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, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is March 14, 2002.
"Schedule" is any attached schedule of exceptions.
20
"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 reasonably 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.
"Sweep Account" is an account maintained by Borrower at Bank, designated as
the Borrower's sweep account.
"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.
---
"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.
"Trademarks" are trademark and service ▇▇▇▇ 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:
PLUMTREE SOFTWARE, INC., a California corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
Title: Chief Financial Officer
----------------------------------
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Title: Vice President
--------------------------------
21
EXHIBIT A
---------
Subject to the exclusion below regarding Intellectual Property, 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 temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and 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 mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Borrower and Bank are parties to that certain Negative Pledge Agreement,
dated on or about the date of this Agreement, whereby Borrower, in connection
with Bank's loan or loans to Borrower, has agreed, among other things, not to
sell, transfer, assign, mortgage, pledge, lease, grant a security interest in,
or encumber any of its Intellectual Property without Bank's prior written
consent.
22
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any Intellectual Property consisting of copyrights, copyright
applications, copyright registration and like protection in each work of
authorship and derivative work thereof, whether published or unpublished, now
owned or hereafter acquired; any patents, patent applications and like
protections, including without limitation, improvements, divisions,
continuation, renewals, reissues, extension and continuations-in-part of the
same; any trademarks, service marks and applications therefor, whether
registered or not; any of the goodwill of the business of Borrower connected
with and symbolized by such trademarks; any trade secret rights, including any
rights to unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owner or hereafter acquired; or any
claims for damages by way of any past, present and future infringement of any of
the foregoing, except the Collateral shall include the proceeds of all the
Intellectual Property that are accounts (i.e. accounts receivable) of Borrower,
or general intangibles consisting of rights to payment, and, in addition, if a
judicial authority, (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security
interest in such accounts and general intangibles of Borrower that are proceeds
of the Intellectual Property, then the Collateral shall automatically, and
effective as of the Closing Date, include the Intellectual Property described
in this paragraph to the extent necessary to permit perfection of Bank's
security interest in such accounts and general intangibles of Borrower that are
proceeds of the Intellectual Property.
23
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:_________________________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:_________________________
--------------------------------------------------------------------------------
FROM: PLUMTREE SOFTWARE, INC.
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 #
___________________________________
Authorized Signature (Bank)
--------------------------------------------------------------------------------
24
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: PLUMTREE SOFTWARE, INC. Bank: Silicon Valley Bank
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▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $7,500,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____________ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________
5. Balance of 50% over 90 day accounts $__________
6. Credit balances over 90 days $__________
7. Concentration Limits $__________
8. Foreign Accounts $__________
9. Governmental Accounts $__________
10. Contra Accounts $__________
11. Promotion or Demo Accounts $__________
12. Intercompany/Employee Accounts $__________
13. Other (please explain on reverse) $__________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
15. Eligible Accounts (#3 minus #14) $__________
16. LOAN VALUE OF ACCOUNTS (70% of #15) $__________
FOREIGN ACCOUNTS RECEIVABLE DEDUCTIONS
17. Accounts Receivable Book Value as of ______________ $__________
18. Additions (please explain on reverse) $__________
19. TOTAL FOREIGN ACCOUNTS RECEIVABLE $__________
a. Amounts over 90 days due
b. Balance of 50% over 90 day accounts $__________
c. Concentration Limits $__________
d. Governmental Accounts $__________
e. Contra Accounts $__________
f. Promotion or Demo Accounts $__________
g. Intercompany/Employee Accounts $__________
h. Other (please explain on reverse) $__________
20. TOTAL FOREIGN ACCOUNTS RECEIVABLE
DEDUCTIONS $__________
21. Eligible Accounts (#19 minus #20) $__________
22. LOAN VALUE OF FOREIGN ACCOUNTS (__[50%] of #21) $__________
BALANCES
23. Maximum Loan Amount $__________
24. Total Funds Available [Lesser of #23 or (#16 plus #22)] $__________
25. Present balance owing on Line of Credit $__________
Outstanding under Sublimits (LC and Cash Management) $__________
RESERVE POSITION (#24 minus #25 and #26) $__________
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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
---- --- ----
PLUMTREE SOFTWARE, INC., a California corporation Rec'd by _____________
Auth. Signer
Date:_________________
By:_______________________________________ Verified:_____________
Authorized Signer Auth. Signer
Date:_________________
----------------------
26
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: PLUMTREE SOFTWARE, INC.
The undersigned authorized officer of PLUMTREE SOFTWARE, INC., a California
corporation ("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
------------------------------------------------------------------------------------------------------------------------------
Annual (Audited) FYE within 120 days Yes No
------------------------------------------------------------------------------------------------------------------------------
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
------------------------------------------------------------------------------------------------------------------------------
A/R & A/P Agings Monthly within 30 days Yes No
------------------------------------------------------------------------------------------------------------------------------
A/R Audit Initial and Annual Yes No
------------------------------------------------------------------------------------------------------------------------------
Borrowing Base Certificate Monthly within 30 days Yes No
------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Maintain:
-------------------------------------------------------------------------------------------------------------------------------
Minimum Monthly Quick Ratio (Adjusted) 2.00:1.00 _____:1.00 Yes No
-------------------------------------------------------------------------------------------------------------------------------
Maximum Quarterly Operating Loss/ Minimum Maximum operating loss (EBITDA) $__________ Yes No
Quarterly Profitability ($5,000,000) for Quarter ending
3/31/01; ($3,000,000) for Quarter
ending 6/30/01; ($1,000,000) for
Quarter ending 9/30/01; Minimum
Quarterly Net Profit After Tax of
$1.00 thereafter
-------------------------------------------------------------------------------------------------------------------------------
Have there been updates to Borrower's intellectual property, if appropriate? Yes No
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-----------------------------------
Comments Regarding Exceptions: See Attached. BANK USE ONLY
Sincerely, Received by:_______________________
AUTHORIZED SIGNER
PLUMTREE SOFTWARE, INC., a California corporation Date:______________________________
____________________________________ Verified:__________________________
Signature AUTHORIZED SIGNER
____________________________________ Date:______________________________
Title
Compliance Status: Yes No
Date________________________________
-----------------------------------
28
CORPORATE BORROWING RESOLUTION
Borrower: PLUMTREE SOFTWARE, INC., Bank: Silicon Valley Bank
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
I, the Secretary or Assistant Secretary of PLUMTREE SOFTWARE, INC., a California
corporation ("Borrower"), CERTIFY that Borrower is a corporation existing under
the laws of the State of California.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
_____________________ _____________________ ______________________
_____________________ _____________________ ______________________
_____________________ _____________________ ______________________
_____________________ _____________________ ______________________
may act for Borrower and:
Borrow Money. Borrow money from Silicon Valley Bank ("Bank").
Execute Loan Documents. Execute any loan documents Bank requires.
Grant Security. Grant Bank a security interest in any of Borrower's assets.
Negotiate Items. Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.
Letters of Credit. Apply for letters of credit from Bank.
Further Acts. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.
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Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
X ______________________________________
*Secretary or Assistant Secretary
X ______________________________________
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
30