Exhibit 10.34
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (this "Loan Modification
Agreement') is entered into as of November 28, 2001, by and between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and MERCATOR SOFTWARE, INC., a Delaware corporation with its principal
place of business at 45 Danbury Road, Wilton, Connecticut 06897("Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
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indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of June 22, 2001,
evidenced by, among other documents, a certain Accounts Receivable Financing
Agreement dated as of June 22, 2001, as amended by a certain Accounts Receivable
Financing Modification Agreement dated as of September 18, 2001 (the "Loan
Agreement"). Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the "Obligations".
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
-------------------------
the Collateral as described in the Loan Agreement and in a certain Intellectual
Property Security Agreement dated June 22, 2001 (the "IP Security Agreement")
(together with any other collateral security granted to Bank, the "Security
Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
Modifications to Loan Agreement.
-------------------------------
1. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1 thereof:
""Applicable Rate" is a per annum rate equal
to the "Prime Rate" plus one (1.0)
percentage point."
and inserting in lieu thereof the following:
""Applicable Rate" is a per annum rate equal
to the Prime Rate plus one (1.0) percentage
point; provided, however, the Applicable
Rate shall be reduced to a per annum rate
equal to the Prime Rate after the occurrence
of the Funding Event."
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1 thereof:
""Capitalization Event" is the issuance by
Borrower of equity, or Subordinated Debt
with a lender and subject to terms
reasonably acceptable to Bank, resulting in
the net proceeds to Borrower of at least
Five Million Dollars ($5,000,000.00) in
cash."
and inserting in lieu thereof the following:
""Capitalization Event" INTENTIONALLY
OMITTED."
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1 thereof:
""Facility Amount" is Ten Million Dollars ($10,000,000.00);
provided, however, the Facility Amount shall be increased to
Fifteen Million Dollars ($15,000,000.00) for any period after
the occurrence of a Funding Event."
and inserting in lieu thereof the following:
""Facility Amount" is Ten Million Dollars ($10,000,000.00);
provided, however, the Facility Amount shall be increased to
Fifteen Million Dollars ($15,000,000.00) after the occurrence
of the Funding Event."
4. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1 thereof:
""Facility Period" is the period beginning on this date and
continuing until one year from the date of this Agreement,
unless the period is terminated sooner by Bank with notice to
Borrower or by Borrower pursuant to Section 4.3."
and inserting in lieu thereof the following:
""Facility Period" is the period beginning on this date and
continuing until November 27, 2002, unless the period is
terminated sooner by Bank with notice to Borrower or by
Borrower pursuant to Section 4.3."
5. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1 thereof:
""Minimum Finance Charge" is a minimum monthly Finance Charge
of $20,000.00 payable to the Bank."
and inserting in lieu thereof the following:
""Minimum Finance Charge" is a minimum monthly Finance Charge
payable to the Bank equal to: (i) from the date hereof through
November 30, 2001, $20,000.00 and (ii) from December 1, 2001
to the last day of the Facility Period, $12,000.00.
Notwithstanding the foregoing, upon the occurrence of and
Event of Default and until such time as such Event of Default
has been cured, the minimum monthly Finance Charge shall be
$20,000.00. Upon curing of an Event of Default, the minimum
monthly Finance Charge shall revert to $12,000.00."
6. The Loan Agreement shall be amended by deleting the following section
appearing as Section 3.2 thereof:
"3.2 Finance Charges. In computing Finance Charges on the
Obligations, all Collections received by Bank shall be deemed
applied by Bank on account of the Obligations three (3)
Business Days after receipt of the Collections. Borrower will
pay a finance charge (the "Finance Charge"), which is equal to
the greater of (i) the Applicable Rate multiplied by the
number of days in the Reconciliation Period multiplied by the
outstanding average daily Financed Receivable Balance for that
Reconciliation Period, or (ii) the Minimum Finance Charge, as
and when same may be applicable. After an Event of Default,
Obligations accrue interest at two percent (2.0%) above the
Applicable Rate effective immediately before the Event of
Default. "
2
and inserting in lieu thereof the following:
"3.2 Finance Charges. In computing Finance Charges on the
Obligations, all Collections received by Bank shall be deemed
applied by Bank on account of the Obligations one (1) Business
Day after receipt of the Collections. Borrower will pay a
finance charge (the "Finance Charge"), which is equal to the
greater of (i) the Applicable Rate multiplied by the number of
days in the Reconciliation Period multiplied by the
outstanding average daily Financed Receivable Balance for that
Reconciliation Period, or (ii) the Minimum Finance Charge, as
and when same may be applicable. After an Event of Default,
Obligations accrue interest at two percent (2.0%) above the
Applicable Rate effective immediately before the Event of
Default. "
7. The Loan Agreement shall be amended by deleting the following section
appearing as Section 3.4 thereof:
"3.4 Collateral Handling Fee. On each Reconciliation Day,
Borrower will pay to Bank a collateral handling fee, equal to
0.375% per month of the average daily Financed Receivable
Balance outstanding during the applicable Reconciliation
Period."
and inserting in lieu thereof the following:
"3.4 Collateral Handling Fee. On each Reconciliation Day,
Borrower will pay to Bank a collateral handling fee, equal to
0.375% per month of the average daily Financed Receivable
Balance outstanding during the applicable Reconciliation
Period; provided, however, such collateral handling fee shall
be reduced to 0.25% per month of the average daily Financed
Receivable Balance outstanding during the applicable
Reconciliation Period after the occurrence of the Funding
Event."
8. The Loan Agreement shall be amended by deleting the following section
appearing as Section 4.3 thereof:
"4.3 Early Termination of Agreement. This Agreement may be
terminated prior to the last day of the Facility Period as
follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Bank; or (ii) by
Bank at any time after the occurrence of an Event of Default,
without notice, effective immediately. If this Agreement is so
terminated by Borrower or by Bank, Borrower shall pay to Bank
a termination fee in an amount equal to Three Hundred Thousand
Dollars ($300,000.00) (the "Early Termination Fee"). The
termination fee shall be due and payable on the effective date
of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the
Obligations. Notwithstanding the foregoing, Bank agrees to
waive the Early Termination Fee if Bank agrees to refinance
the Obligations (in its sole and exclusive discretion) prior
to the last day of the Facility Period."
and inserting in lieu thereof the following:
"4.3 Early Termination of Agreement. This Agreement may be
terminated prior to the last day of the Facility Period as
follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Bank; or (ii) by
Bank at any time after the occurrence of an Event of Default,
without notice, effective immediately. If this Agreement is so
terminated by Borrower or by Bank,
3
Borrower shall pay to Bank a termination fee
in an amount equal to Two Hundred
Twenty-Five Thousand Dollars ($225,000.00)
(the "Early Termination Fee"). The
termination fee shall be due and payable on
the effective date of termination and
thereafter shall bear interest at a rate
equal to the highest rate applicable to any
of the Obligations. Notwithstanding the
foregoing, Bank agrees to waive the Early
Termination Fee if Bank agrees to refinance
the Obligations (in its sole and exclusive
discretion) or if a different credit
facility with Bank replaces this credit
facility or if this credit facility is
transferred to another division of Bank
prior to the last day of the Facility
Period."
9. The Loan Agreement shall be amended by deleting the
following section appearing as Section 6.3 (L)
thereof:
"(L) Maintain at all times an Adjusted Quick
Ratio of at least: 1.25 to 1.0 for May,
2001, 1.50 to 1.0 for June, 2001, 1.30 to
1.0 for July, 2001, 1.20 to 1.0 for August,
2001, 1.50 to 1.0 for September, 2001 and
thereafter, which Adjusted Quick Ratio will
be tested by Bank on a monthly basis."
and inserting in lieu thereof the following:
"(L) Maintain at all times an Adjusted Quick
Ratio of at least: 1.1 to 1.0 for October,
2001, 1.1 to 1.0 for November, 2001, 1.5 to
1.0 for December, 2001 and thereafter, which
Adjusted Quick Ratio will be tested by Bank
on a monthly basis."
10. The Loan Agreement shall be amended by deleting the
following section appearing as Section 6.3 (M)
thereof:
"(M) Cause the occurrence of a
Capitalization Event on or before September
30, 2001."
and inserting in lieu thereof the following:
"(M) INTENTIONALLY OMITTED."
11. The Loan Agreement shall be amended by adding the
following section as new Section 6.3 (O):
"(O) Deliver to the Bank a copy of its
balance sheet projections for fiscal year
2002 by no later than December 31, 2001."
4. WAIVERS. Bank hereby waives Borrower's existing defaults under the Loan
-------
Agreement by virtue of Borrower's failure to comply with the financial
performance covenant set forth is Section 6.3(L) thereof as of the months ending
September 30, 2001 and October 31, 2001. Bank's waiver of Borrower's compliance
of said affirmative covenant shall apply only to the foregoing specific periods.
In addition, Bank hereby waives Borrower's existing defaults under the Loan
Agreement by virtue of Borrower's failure to comply with the financial
performance covenant set forth is Section 6.3(M).
5. FEES. Borrower shall pay to Bank a modification fee equal to Fifty Thousand
----
Dollars ($50,000.00), which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof. The Borrower shall also reimburse
Bank for all reasonable legal fees and expenses incurred in connection with this
amendment to the Existing Loan Documents; provided, however, Bank shall not
incur any such fees in excess of Twenty Thousand Dollars ($20,000.00) without
prior notice to and consent of Borrower regarding such fees.
4
6. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Borrower hereby
--------------------------------------------------------
ratifies, confirms and reaffirms, all and singular, the terms and conditions of
the IP Security Agreement and acknowledges, confirms and agrees that the IP
Security Agreement contains an accurate and complete listing of all Intellectual
-------- --------
Property Collateral as defined in said Intellectual Property Security Agreement,
except that Schedules A and C of the IP Security Agreement are amended as set
forth in Exhibit A hereto.
7. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
--------------------------------------
and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of June 22, 2001 between Borrower and
Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed,
as of the date hereof, except that Attachments 1 and 2 of the Perfection
Certificate are amended as set forth in Exhibit B hereto.
8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
------------------
necessary to reflect the changes described above.
9. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
------------------------------
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.
10. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Obligations.
11. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents, except
that Schedules 6.3(A) and 6.3(C) of the Loan Agreement are amended as set forth
in Exhibits C-1 and C-2 hereto. Except as expressly modified pursuant to this
Loan Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank's agreement to modify the existing
Obligations pursuant to this Loan Modification Agreement in no way shall
obligate Bank to make any future modifications to the Obligations. Nothing in
this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan
Modification Agreement.
12. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank.
[signature page follows]
5
This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.
MERCATOR SOFTWARE, INC.
By ____________________________________
Title _________________________________
SILICON VALLEY BANK
By_____________________________________
Title _________________________________
6
Exhibit A
Mercator Software, Inc.
Copyright Report
Run Date: 11/28/2001 3:47pm
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Matter Report
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OPEN Matters; CLIENTS: Inclusive -- 00992; MATTERS: Inclusive -- c*;
- ------------------------------------------------------------------------------------------------------------------------------------
FILING ISSUE EXPIRE
- ------------------------------------------------------------------------------------------------------------------------------------
CLIENT MATTER COUNTRY ATTY CLASS STATUS NAME DATE SERIAL NO DATE REG NO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
00992 C0033B United States GSW CPY Registered KEY/MASTER DATA 1992/09/04 TX3 378-405 1992/09/04 TX3 378-405 2067/09/04
INPUT SOFTWARE
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00992 C0033C United States GSW CPY Registered KEY/MASTER 1992/09/08 TX3 377-402 1992/09/08 TX3 377-402 2067/09/08
RELEASE 5.0
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00992 C0033D United States GSW CPY Registered KEY/MASTER 1992/09/04 TX3 376-852 1992/09/04 TX3 376-852 2067/09/04
RELEASE 5.1
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00992 C0033E United States GSW CPY Registered KEY/MASTER DATA 1979 TX3-382-262 1992/09/16 TX3-382-262 2067/09/16
INPUT SOFTWARE
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00992 C0065A United States GSW CPY Registered Trading Partner 1995/01/26 TX3 996-760 1995/01/26 TX3 996-760 2070/01/26
Mainframe -
Original Version
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00992 C0065B United States GSW CPY Registered Trading Partner 1995/01/26 TX3 996-761 1995/01/26 TX3 996-761 2070/01/26
Mainframe -
Version 2.4
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00992 C0066A United States GSW CPY Registered Trading Partner P.C. 1995/01/26 TX3 994-254 1995/01/26 TX3 994-254 2070/01/26
- Original Version
- ------------------------------------------------------------------------------------------------------------------------------------
00992 C0066B United States GSW CPY Registered Trading Partner P.C. 1995/01/26 TX3 980-888 1995/01/26 TX3 980-888 2070/01/26
- Version 4.3
- ------------------------------------------------------------------------------------------------------------------------------------
00992 C0068A United States GSW CPY Registered ONCALL * EDI 1995/01/03 TX3 984-430 1995/01/03 TX3 984-430 2070/01/03
- ------------------------------------------------------------------------------------------------------------------------------------
00992 C0206A United States GSW CPY Registered HUB BROKERAGE SYSTEM 2000 TXu-912-660 2000/03/13 TXu-912-660 2075/03/13
Version 1.0
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00992 C0207A United States GSW CPY Registered FL KIT Version 1.0 2000 TXu-912-661 2000/03/13 TXu-912-661 2075/03/13
- ------------------------------------------------------------------------------------------------------------------------------------
00992 C0208A United States GSW CPY Registered HUB ENCRYPTION 1999/ TXu-912-662 2000/03/13 TXu-912-662 2075/03/13
SOFTWARE Version 1.0
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St. Onge Steward Johnston Reens LLC
Mercator Software, Inc,
Trademark Report
Run Date: 11/28/2001 3:47pm
- ------------------------------------------------------------------------------------------------------------------------------------
Matter Report
- ------------------------------------------------------------------------------------------------------------------------------------
OPEN Matters; CLIENTS: Inclusive -- 00992; MATTERS: Inclusive -- t*;
- ------------------------------------------------------------------------------------------------------------------------------------
BILL FILING ISSUE EXPIRE
- ------------------------------------------------------------------------------------------------------------------------------------
CLIENT MATTER COUNTRY ATTY CLASS STATUS NAME DATE SERIAL NO DATE REG NO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0001A United States GSW TMK Registered TSI (BLOCK LETTERS) 1986/04/02 73/591,175 1990/11/13 1,622,107 2010/11/13
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0015A United States GSW TMK Registered KEY/MASTER 1975/09/11 73/062,738 1976/12/14 1,054,242 2006/12/14
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0020A United States GSW TMK Registered TASK/MASTER 1971/01/20 72/381,499 1972/10/24 946,062 2002/10/24
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0029A United States GSW TMK Registered TRADING PARTNER 1989/12/18 74/011,828 1991/10/15 1,660,560 2011/10/15
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0030B United States GSW TMK Registered EASYPATH 1993/03/19 74/369,220 1994/08/02 1,847,603 2004/08/02
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0031A United States GSW TMK Registered EASYLOGIC 1990/05/18 74/060,535 1991/05/14 1,644,296 2011/05/14
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0032A United States GSW TMK Registered TRANSLATE 1986/11/14 73/630,402 1988/02/09 1,475,704 2008/02/09
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0055A United States GSW TMK Registered TRADING PARTNER 1989/12/11 74/009,319 1990/10/02 1,615,543 2010/10/02
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0060A United States GSW TMK Registered MERCATOR (Class 9) 1991/12/13 74/229,939 1994/04/05 1,829,798 2004/04/05
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0060B United States GSW TMK Registered MERCATOR (Class 9) 1998/06/04 75/496,348 1999/09/28 2,281,097
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00992 T0060C United States GSW TSM Registered MERCATOR (Class 42) 1998/07/06 75/513,974 1999/08/31 2,274,277 2009/08/31
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0060D United States GSW TSM Registered MERCATOR (Class 41) 1998/07/08 75/515,072 1999/08/31 2,274,290 2009/08/31
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00992 T0079A United States GSW TMK Registered TSI SOFT and Design 1996/08/19 75/152,032 1999/02/02 2,221,935 2009/02/02
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0079C United States GSW TSM Suspended TSI SOFT and Design 1997/10/27 75/379,849
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00992 T0086A United States GSW TSM Registered BUSINESSLINK 1997/07/28 75/332,021 1998/10/06 2,193,582 2008/10/06
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0135A United States GSW TMK Suspended M-SHAPED PAPER 2000/01/13 75/896,267
AIRPLANE DESIGN
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00992 T0135B United States GSW TSM Registered M-SHAPED PAPER 2000/01/13 75/896,266 2001/10/30 2,503,016 2011/10/30
AIRPLANE DESIGN
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00992 T0135C United States GSW TSM Registered M-SHAPED PAPER 2000/01/13 75/896,265 2001/10/16 2,499,048 2011/10/16
AIRPLANE DESIGN
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00992 T0136A United States GSW TMK Suspended THE E-BUSINESS 2000/02/15 75/919,983
TRANSFORMATION
COMPANY
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00992 T0136B United States GSW TSM Suspended THE E-BUSINESS 2000/02/15 75/919,982
TRANSFORMATION
COMPANY
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00992 T0136C United States GSW TSM Suspended THE E-BUSINESS 2000/02/15 75/919,981
TRANSFORMATION
COMPANY
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00992 T0156A United States GSW TMK Allowed MYMERCATOR 2000/06/07 76/064,783
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00992 T0156B United States GSW TSM Allowed MYMERCATOR 2000/06/07 76/064,784
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00992 T0156C United States GSW TSM Allowed MYMERCATOR 2000/06/07 76/064,782
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00992 T0162A United States GSW TMK Allowed MYMERCATOR.COM 2000/06/07 76/064,781
- ------------------------------------------------------------------------------------------------------------------------------------
00992 T0162B United States GSW TSM Allowed MYMERCATOR.COM 2000/06/07 76/064,780
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00992 T0162C United States GSW TSM Allowed MYMERCATOR.COM 2000/06/07 76/064,779
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00992 T0163A United States GSW TMK Pending JBUSINESS 1998/02/25 75/439,911
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00992 T0164A United States GSW TMK Registered NOVERA EPIC 1996/11/14 75/197,621 1998/06/23 2,168,474 2008/06/23
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00992 T0209A United States GSW TMK Pending INTEGRATION BROKER 2001/09/10 76/310,869
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00992 T0209B United States GSW TSM Pending INTEGRATION BROKER 2001/09/10 76/310,870
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00992 T0209C United States GSW TSM Pending INTEGRATION BROKER 2001/09/10 76/310,871
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St. Onge Steward Johnston Reens LLC
Exhibit B
As of November 29, 2001
ATTACHMENT 1
Company Identity and Corporate Structure:
TSI International Software, Ltd. - 9/1/93
Mercator Software SARL (France) - 5/98
SCP Solutions Europe (Holland) - 1/99
TSI Software GmbH - 3/5/99
Braid Group Ltd. (Bermuda) -3/18/99
NOTE: HAS SINCE BEEN DISSOLVED
Novera - Acquired 9/30/99 - Inactive
TSI International Software (UK)
NOTE: MERGED INTO MERCATOR UK [LISTED BELOW AS TSI
SOFTWARE LTD. (UK)]
TSI Software Ltd. (UK)
Braid, Inc. (US) - Inactive
TSI Software Ltd. (Hong Kong)
Braid Systems PTY (Australia)
TSI Software PTE (Singapore)
Mercator Software, Inc. - 4/3/00
Mercator Software AB (Sweden) - 2000
Mercator Japan K. K. - 2001
Mercator Software GmbH (Switzerland) - 2001
Mercator Software SA (Spain) - 2001
As of November 29, 2001
ATTACHMENT 2
List of Subsidiaries:
Novera Software, Inc. (US) - Inactive
Mercator International GmbH (Germany)
Mercator Software SARL (France)
SCP Solutions Europe (Holland)
Mercator Software Ltd. (UK)
- Braid, Inc. (US) - Inactive
MCTR Software AB (Sweden)
Mercator Software HK
- Mercator Software Australia Pty Ltd
- Mercator Software Pte Ltd (Singapore)
Mercator Japan K. K.
Mercator Software GmbH (Switzerland)
Mercator Software SA (Spain)
Exhibit C-1
Schedule 6.2(A)
Borrower is qualified to do business in the following states:
Arizona
California
Connecticut
Delaware
Florida
Georgia
Illinois
Maryland
Massachusetts
Missouri
North Carolina
South Carolina
Texas
Virginia
Washington
Wisconsin
Borrower has made application to be qualified to do business in the
following state:
New York
Exhibit C-2
Schedule 6.2(C)
Those proceedings set forth in Item 3 of Borrower's Annual Report, on Form 10-K,
for the fiscal year ended December 31, 2000 and in Item 1 of Borrower's
Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2001,
June 30, 2001, September 30, 2001 and the following, as of November 28, 2001:
1. Caption: James Lees v. Mercator Software, Inc.
Cause No. 4:01CV00092 RWS
Court: United States District Court
Eastern District of Missouri
Eastern Division
Issue: Alleged age discrimination
2. Caption: Tina R. Dube v. Mercator Software, Inc.
Court: U.S. District Court, D. Conn.
Issue: Wrongful termination based on gender
3. Captions: Opposition #121,006 before the Trademark Trial and
Appeal Board of the US Patent and Trademark Office
Mercator Software v. Mercata, Inc.
Opposition #120,739 before the Trademark Trial and
Appeal Board of the US Patent and Trademark Office
Mercator Software v. Mercata, Inc. and Design.
*Opposition to CTM (European) Application 1193515 for MERCATA before
the Office of Harmonization in the Internal Market ("OHIM"), which is a
European Community body which Registers Community trademarks and design
rights within the European Union. *Mercator is currently in
negotiations for a worldwide settlement agreement and wishes to keep
the opposition in place until the matter can be resolved on a worldwide
basis.
Issue: All of the above deal with Mercator's opposition to
the use by Mercata, Inc. of the mark MERCATA for
goods and/or services that are similar to those of
Mercator Software, Inc.
There are, in addition, cross-oppositions in the European Community
involving the use of "Mercator" and the mark "Mercatus" by NSB Retail
Solutions Limited; settlement negotiations ongoing.
4. Caption: Lombardo v. Mercator Software, Inc.
Court: U.S. District Court, District of Connecticut
Issue: alleged violations of Family and Medical Leave Act,
Fair Labor Standards Act
5. Caption: U.S. v. Novera Software, Inc.
Administrative
Proceeding: California Tax Board
Issue: tax lien expected to be lifted shortly; payment has
been made
6. Caption: Aoud v. Mercator Software, Inc.
Court: Superior Court of Justice of Province of
Ontario, Canada
Issue: Alleging termination from employment without cause
and, in the alternative, wrongful hiring
7. Caption: Neubert v. Mercator Software Inc.
Court: U.S. District Court, E.D. PA.
Issue: The plaintiff alleges Borrower's failure to transfer
common stock and the loss of severance compensation
stemming from the sale of plaintiff's business to
Borrower in 1998
8. Administrative
Proceeding: U.S. Dept. of Labor Office of Federal Contract
Compliance has selected the Company for a compliance
audit.
9. Threatened
Proceeding: Two former employees have threatened legal action
against the Company as a result of a recent RIF. No
legal process has been served.
Several collection matters (by way of collection agencies, non-litigation)
whereby Borrower is seeking payment from customers.
Other: Any future action or proceeding, or threatened action or proceeding,
which, if held adversely to Borrower would not (i) have an effect on,
or relate to, any Financed Receivable or (ii) result in estimated
damages in excess of $100,000.00; however, Borrower shall give prompt
notice to Bank of any such action or proceeding.