Exhibit 10.31
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FORBEARANCE AGREEMENT
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SILICON VALLEY BANK
THE "LENDER"
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CAYENNE SOFTWARE, INC.
THE "BORROWER"
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AUGUST 27, 1998
FORBEARANCE AGREEMENT
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THIS FORBEARANCE AGREEMENT (hereinafter, this "AGREEMENT") made this 27th
day of August, 1998 by and among:
SILICON VALLEY BANK (hereinafter, the "LENDER"), a bank organized under the
laws of the State of California with its principal place of business at
3003 Tasman Drive, Santa Clara, California and with a loan production
office located at Wellesley Office Park, 40 William Street, Suite 350,
Wellesley, Massachusetts doing business under the name "Silicon Valley
East";
CAYENNE SOFTWARE, INC. (hereinafter, the "BORROWER"), a Massachusetts
corporation with its principal offices located at 14 Crosby Drive, Bedford,
Massachusetts;
CAYENNE SOFTWARE LIMITED (hereinafter, "LIMITED"), a company incorporated
in England;
CAYENNE SOFTWARE GMBH (hereinafter, "BACHMAN"), a German limited liability
company;
and
CADRE TECHNOLOGIES, INC. (hereinafter, "CADRE"), a Delaware corporation.
BACKGROUND
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Reference is made to the loan arrangement (hereinafter, the "LOAN
ARRANGEMENT") maintained by and between the Lender and the Borrower, evidenced
by, among other things, the documents, instruments, and agreements (hereinafter
collectively, the "LOAN DOCUMENTS") listed on the Closing Index annexed hereto
marked SCHEDULE 1. (Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings as defined in the Loan Documents).
The Borrower has defaulted under the Loan Agreement and has (i) requested
that the Lender forbear from exercising its rights and remedies upon default
under the Loan Documents and continue to make loans and advances under the Loan
Agreement, including an overadvance in an amount up to $3,000,000.00, and (ii)
advised the Lender that the Borrower has entered into an agreement to merge
(hereinafter, the "MERGER AGREEMENT") with Sterling Software, Inc. (hereinafter,
"STERLING") pursuant to which the Borrower will merge (hereinafter, the
"MERGER") into
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a subsidiary of Sterling, upon consummation of which, among other things, all
amounts owed to the Lender will be satisfied in full. The Lender has agreed to
forbear from enforcing its rights and remedies upon default, and is willing to
continue to make loans and advances to the Borrower, but only upon the terms and
conditions set forth herein.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and among
the Lender, the Borrower, Limited, Bachman, and Cadre, as follows:
ACKNOWLEDGMENT OF INDEBTEDNESS
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1. The Borrower, Limited, Bachman, and Cadre (hereinafter jointly,
severally, and collectively, the "OBLIGORS") hereby acknowledge and
agree that they are jointly, severally, and unconditionally liable to
the Lender for the following amounts (hereinafter all amounts due as
set forth in this Paragraph 1, together with the amounts outstanding
under the Overadvance Facility, as defined in Paragraph 7, below,
shall be referred to collectively as the "OBLIGATIONS"):
(a) Which are outstanding under the Revolving Credit Note as of
August 26, 1998:
Principal $1,994,110.59
Interest 14,177.50
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Total $2,008,288.09
(b) All interest hereafter accruing under the Revolving Credit Note,
and all late fees, costs, expenses, and costs of collection
(including attorneys' fees) heretofore or hereafter incurred by
the Lender in connection therewith.
WAIVER OF CLAIMS
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2. The Obligors hereby acknowledge and agree that they have no offsets,
defenses, claims, or counterclaims against the Lender, or its
officers, directors, employees, attorneys, representatives, parent,
affiliates, predecessors, successors, or assigns with respect to the
Obligations, or otherwise, and that if the Obligors now have, or ever
did have, any offsets, defenses, claims, or counterclaims against the
Lender, or its officers, directors, employees, attorneys,
representatives, parent,
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affiliates, predecessors, successors, or assigns, whether known or
unknown, at law or in equity, from the beginning of the world through
this date and through the time of execution of this Agreement, all of
them are hereby expressly WAIVED, and the Obligors, and each of them,
hereby RELEASE the Lender, and its officers, directors, employees,
attorneys, representatives, parent, affiliates, predecessors,
successors, and assigns from any liability therefor.
RATIFICATION OF LOAN DOCUMENTS; FURTHER ASSURANCES
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3. The Obligors:
(a) Hereby ratify, confirm, and reaffirm all and singular the terms
and conditions of the Loan Documents. The Obligors further
acknowledge and agree that, except as specifically modified in
this Agreement, all terms and conditions of the Loan Documents
shall remain in full force and effect; and
(b) Shall, from and after the execution of this Agreement, execute
and deliver to the Lender whatever additional documents,
instruments, and agreements that the Lender reasonably may
require in order to vest or perfect the Loan Documents and the
collateral granted therein more securely in the Lender and to
otherwise give effect to the terms and conditions of this
Agreement.
CONDITIONS PRECEDENT
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4. The Lender's agreements to forbear, continue to make advances under
the Loan Agreement, and make extensions of credit under the
Overadvance Facility (as defined in Paragraph 7, below), all as more
particularly set forth in this Agreement, are expressly conditioned
upon the prior execution and delivery to the Lender of a (i) Limited
Guaranty and Side Letter in the forms annexed hereto marked EXHIBITS
"A" and "B", respectively, and (ii) ancillary documents between the
Lender and Sterling in form and substance satisfactory to the Lender,
in its sole and exclusive discretion.
AMENDMENT OF THE LOAN DOCUMENTS
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5. From and after the execution of this Agreement, the Loan Documents are
and shall be amended, as follows:
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(a) MAXIMUM REVOLVING CREDIT AMOUNT. The Maximum Revolving Credit
Amount is hereby amended to $2,000,000.00. Except as provided
herein with respect to the Overadvance Facility. the Borrower
shall not request, and the Lender shall not make, extensions of
credit in excess of $2,000,000.00.
(b) MONTHLY PAYMENTS. Monthly payments of interest shall continue to
be made on the Revolving Credit Note as and when due in
accordance with its terms.
(c) APPLICATION OF PROCEEDS. All cash, collections, and other
proceeds of the Lender's Collateral shall continue to be
delivered to the Lender directly to the "Lock Box" established
with the Lender. The Borrower shall take whatever additional
steps as may be necessary in order to insure that all such
proceeds are delivered directly to the Lock Box. The Lender will
turn over to the Borrower all such proceeds received by the
Lender, and the Borrower may use those proceeds for working
capital in the ordinary course of its business.
(d) TERMINATION DATE. The entire outstanding balance of the
Obligations, including all principal and interest (accrued and
hereafter accruing), on the Revolving Credit Note and the
Overadvance Note, and all costs and costs of collection
(including attorneys' fees) incurred by the Lender, shall be paid
in full, if not sooner accelerated upon the occurrence of an
Event of Default, as defined in Paragraph 12, below, on or before
5:00 P.M. Boston time in accordance with (i) or (ii) below
(hereinafter, the "TERMINATION DATE"):
(i) Friday, October 30, 1998, unless, in connection with
the proposed Merger with Sterling, the Borrower has
both (X) mailed the proxy statement, and (Y) obtained
clearance for the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, 15 U.S.C. (S)18(a),
in which case;
(ii) Monday, November 30, 1998.
PAYMENT OF OVERADVANCE
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6. The Borrower has advised the Lender that, as of August 31, 1998, the
aggregate amount of all Revolving Credit Loans under the Loan
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Agreement will be greater than or equal to the Maximum Available Funds
(hereinafter, an "OVERADVANCE"). In addition, the Borrower has advised
the Lender that from and after this date, an additional Overadvance
may exist.
(a) Upon receipt of the Borrowing Base Certificate from the Borrower
effective as of the end of August, 1998, the Lender shall
liquidate the Borrower's Certificates of Deposit Nos. 8800022778
and 8800031164 held by the Lender and pay the proceeds thereof:
(i) First, to the Lender, in satisfaction of any breakage
fees, penalties, costs, or other expenses incurred or
charged in connection with the liquidation of the
Certificates of Deposit;
(ii) Second, to the Lender, in satisfaction of the then
existing Overadvance, projected to be in the
approximate amount of $400,000.00;
(iii) Third, to the Lender as reimbursement for all
attorneys' fees and expenses incurred by the Lender
through that date in connection with the Obligations,
including all attorneys' fees incurred in connection
with the negotiation and preparation of this Agreement
and all documents, instruments, and agreements
incidental hereto; and
(iv) Fourth, to the Borrower, for use as working capital in
the ordinary course of business.
(b) Upon receipt of a Borrowing Base Certificate from the Borrower,
if the Lender determines that an Overadvance then exists under
the Loan Agreement, then:
(i) The Lender shall make telephonic demand upon the
Borrower (confirmed by telecopier) for payment of the
Overadvance; and
(ii) Either:
(1) The Borrower shall pay the Overadvance in full
within Twenty-four (24) hours of the telephonic
demand by the Lender, or
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(2) The Lender shall, if sufficient availability
exists under the Overadvance Facility (described
in Paragraph 7, below), make an advance under the
Overadvance Facility to pay the Overadvance in
full./1/
ESTABLISHMENT OF OVERADVANCE FACILITY
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7. The Lender hereby establishes, as of the date of this Agreement, an
overadvance facility (hereinafter, the "OVERADVANCE FACILITY") in an
amount up to $3,000,000.00. The Borrower may request advances under
the Overadvance Facility using the same notice procedures as are
contemplated in connection with requests for advances under the Loan
Documents. Upon the execution of this Agreement, the Borrower shall
execute and deliver to the Lender a Time Note (hereinafter, the
"OVERADVANCE NOTE") in the amount of $3,000,000.00 made payable to the
Lender to evidence the amounts outstanding under the Overadvance
Facility. All amounts outstanding under the Overadvance Facility shall
constitute a portion of the "Obligations", as defined in Paragraph 1,
above.
(i) No advances shall be made under the Overadvance
Facility unless, at the time of any requested advance,
the aggregate amount of all Revolving Credit Loans
under the Loan Agreement is greater than or equal to
the Maximum Available Funds.
(ii) Interest shall accrue on the outstanding balance of
the Overadvance Facility as it may exist from time-to-
time at a floating rate equal to the aggregate of the
Prime Rate plus One (1%) percent per annum. Accrued
and unpaid interest shall be paid monthly, in arrears,
on the same date that interest is paid on the
Revolving Credit Note.
(iii) All amounts outstanding under the Overadvance
Facility, and the Overadvance Note, shall be secured
/1/ If the Borrower fails to pay the Overadvance in full, as required,
and if sufficient availability under the Overadvance Facility does not
exist to satisfy the Overadvance in full, then (i) the Lender may
nevertheless partially satisfy the Overadvance through an advance up to the
maximum availability under the Overadvance Facility, and (ii) an Event Of
Default shall have occurred under Paragraph 12(b), below.
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fully in all respects by all Collateral granted to
the Lender by the Obligors, which each of the
Obligors hereby ratifies and confirms.
(iv) All borrowings under the Overadvance Facility shall
be used by the Borrower for its general working
capital purposes and for satisfaction of any
Overadvance which may hereafter exist, as provided in
this Agreement.
(v) Amounts repaid under the Overadvance Facility may not
be reborrowed.
(vi) If not sooner paid or accelerated upon the occurrence
of an Event of Default, as defined in Paragraph 12,
below, all amounts outstanding under the Overadvance
Facility, including principal and accrued and unpaid
interest, shall be paid in full on or before the
Termination Date.
MERGER OF BUSINESS
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8. The Borrower has advised the Lender that the Borrower intends to
consummate the Merger with Sterling in order to, among other things,
satisfy all Obligations owed to the Lender in full.
(a) In connection with the proposed Merger, the Borrower shall:
(i) Keep the Lender apprised of all material developments
in connection with the Borrower's efforts to consummate
the Merger, and provide the Lender with copies of any
notices, agreements, or other material communication
with Sterling or others relating to the Merger.
(ii) Provide the Lender with written notice within 24 hours
of the occurrence of any event or development from
which it is apparent, or should be apparent, to the
Borrower that the Merger will not occur as theretofore
contemplated.
(b) Upon consummation of the Merger and satisfaction of the
Obligations owed to the Lender in full:
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(i) The Lender shall promptly release all Collateral and
discharge all security interests, liens, and
encumbrances granted to the Lender by the Obligors, and
execute and deliver to the Obligors all documents,
instruments, and agreements that the Obligors may
reasonably require in connection therewith; and
(ii) Each of the Obligors and Sterling shall execute and
deliver to the Lender a Release in the form annexed
hereto marked EXHIBIT "C".
FINANCIAL REPORTING REQUIREMENTS
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9. The Borrower shall:
(a) Continue to submit all financial information and reports to the
Lender as presently required under the Loan Documents;
(b) Submit to the Lender, (i) within five (5) days of the 15th day of
each month, an estimated Borrowing Base Certificate reflecting
the Borrower's operations as of the 15th day of the month, and
(ii) within ten (10) days of the last day of each month, a
Borrowing Base Certificate reflecting the Borrower's operations
as of the last day of the month;
(c) As and when requested by the Lender, such other and further
information that the Lender may require from time to time.
(d) Confirm in writing with the submission of each financial report
that all of the information contained therein is true, accurate,
and complete.
(e) Permit the Lender to conduct, at the Borrower's expense, field
audits and examinations of the Borrower's business operations and
assets, as and when deemed necessary or appropriate by the
Lender.
FORBEARANCE FEE
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10. In consideration of the Lender's agreement to forbear, as set forth in
this Agreement, upon the execution of this Agreement, the Borrower
shall pay to the Lender a forbearance fee in the amount of $12,500.00
(the "FORBEARANCE FEE"). The Forbearance Fee shall be fully earned by
the
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Lender as of the execution of this Agreement. The Forbearance Fee
shall be retained by the Lender under all circumstances and shall not
be applied in reduction of the Obligations.
FORBEARANCE BY LENDER
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11. In consideration of the Obligors' performance in accordance with this
Agreement, the Lender shall forbear from enforcing its rights and
remedies under the Loan Documents and applicable law as a result of
the Borrower's defaults, until the occurrence of an Event of Default,
as defined in Paragraph 12, below. Notwithstanding the foregoing,
nothing contained in this Agreement shall constitute a waiver by the
Lender of any Event of Default under the Loan Documents, whether now
existing or hereafter arising. This Agreement shall only constitute an
agreement by the Lender to forbear from enforcing its rights and
remedies upon the terms and conditions set forth herein.
EVENTS OF DEFAULT
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12. The occurrence of any one or more of the following events shall
constitute an event of default (hereinafter, an "EVENT OF DEFAULT")
under this Agreement:
(a) The failure of the Obligors to promptly, punctually, or
faithfully perform any term or condition of this Agreement as and
when due, it being expressly acknowledged and agreed that TIME IS
OF THE ESSENCE;
(b) The failure of the Obligors to pay any amount required to be paid
to the Lender under this Agreement as and when due, including
without limitation, the failure to pay any Overadvance within
Twenty-four (24) hours of demand by the Lender, either through
money available to the Borrower or through an advance to be made
by the Lender under the Overadvance Facility, it being expressly
acknowledged and agreed that TIME IS OF THE ESSENCE;
(c) The failure of the Obligors to pay all Obligations in full on or
before 5:00 p.m. Boston time on the Termination Date, it being
expressly acknowledged and agreed that TIME IS OF THE ESSENCE;
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(d) The commencement of any case under the United States Bankruptcy
Code by or against the Borrower;
(e) The termination of the Merger Agreement by either the Borrower or
Sterling for any reason, or withdrawal by either the Borrower or
Sterling of their respective recommendations of the Merger to
their respective shareholders;
(f) The Termination by Sterling of its Limited Guaranty of Collection
dated August 27, 1998.
RIGHTS UPON DEFAULT
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13. Upon the occurrence of any Event of Default:
(a) The agreement of the Lender to forbear as set forth in this
Agreement shall automatically terminate and the Lender may
immediately commence enforcing its rights and remedies pursuant
to the Loan Documents and otherwise;
(b) All Obligations shall be immediately due and payable in full,
without demand, notice, or protest, all of which are hereby
expressly WAIVED;
(c) Interest shall thereafter accrue on the outstanding principal
balance of the Obligations at a rate equal to Three (3%) percent
in excess of the existing rates.
COSTS OF COLLECTION
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14. The Obligors shall reimburse the Lender on demand for any and all
costs, expenses, and costs of collection (including attorneys' fees)
hereafter incurred by the Lender in connection with the protection,
preservation, and enforcement by the Lender of its rights and
remedies.
NOTICES
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15. Any communication between the Lender and/or the Lender and the
Borrower shall be forwarded via (i) telecopier or (ii) recognized
overnight courier, addressed as follows:
If to the Bank: Silicon Valley East
11
40 William Street, Suite 350
Wellesley, Massachusetts 02181
Attention: Pamela J. Aldsworth, Vice President
Telecopier No. (781) 431-9906
With a copy via telecopier to:
Donald E. Rothman, Esquire
Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Telecopier No. (617) 723-6831
If to the Borrower or any of the Obligors:
Cayenne Software, Inc.
14 Crosby Drive
Bedford, Massachusetts 01730
Attn: Fred Phillips, Chief Financial Officer
Telecopier No. (781) 280-6005
With a copy via telecopier to:
William F. McCarthy, Esquire
Ropes & Gray
1 International Place
Boston, Massachusetts 02110
Telecopier No. (617) 951-7050
WAIVERS
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16. NON-INTERFERENCE. From and after the occurrence of any Event of
Default, the Obligors agree not to interfere with the exercise by the
Lender of any of its rights and remedies. The Obligors further agree
that they shall not seek to distrain or otherwise hinder, delay, or
impair the Lender's efforts to realize upon the Collateral, or
otherwise to enforce its rights and remedies pursuant to the Loan
Documents. The provisions of this Paragraph 17 shall be specifically
enforceable by the Lender.
17. JURY TRIAL. The Obligors each hereby make the following waiver
knowingly, voluntarily, and intentionally, and understand that the
Lender, in entering into this Agreement or making any financial
accommodations to the Obligors, whether now or in the future, are
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relying on such a waiver: THE OBLIGORS HEREBY IRREVOCABLY WAIVE ANY
PRESENT OR FUTURE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE LENDER BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE
LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN THE
OBLIGORS, OR ANY OTHER PERSON, AND THE LENDER.
ENTIRE AGREEMENT
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18. This Agreement shall be binding upon the Obligors and the Obligors'
respective employees, representatives, successors, and assigns, and
shall inure to the benefit of the Lender and its successors and
assigns. This Agreement and all documents, instruments, and agreements
executed in connection herewith incorporate all of the discussions and
negotiations between the Obligors and the Lender, either expressed or
implied, concerning the matters included herein and in such other
documents, instruments and agreements, any statute, custom, or usage
to the contrary notwithstanding. No such discussions or negotiations
shall limit, modify, or otherwise affect the provisions hereof. No
modification, amendment, or waiver of any provision of this Agreement,
or any provision of any other document, instrument, or agreement
between the Obligors and the Lender shall be effective unless executed
in writing by the party to be charged with such modification,
amendment, or waiver, and if such party be the Lender, then by a duly
authorized officer thereof.
CONSTRUCTION OF AGREEMENT
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19. In connection with the interpretation of this Agreement and all other
documents, instruments, and agreements incidental hereto:
(a) All rights and obligations hereunder and thereunder, including
matters of construction, validity, and performance, shall be
governed by and construed in accordance with the law of the
Commonwealth of Massachusetts and are intended to take effect as
sealed instruments.
(b) The captions of this Agreement are for convenience purposes only,
and shall not be used in construing the intent of the Lender and
the Obligors under this Agreement.
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(c) In the event of any inconsistency between the provisions of this
Agreement and any other document, instrument, or agreement
entered into by and between the Lender and the Obligors, the
provisions of this Agreement shall govern and control.
(d) The Lender and the Obligors have prepared this Agreement and all
documents, instruments, and agreements incidental hereto with the
aid and assistance of their respective counsel. Accordingly, all
of them shall be deemed to have been drafted by the Lender and
the Obligors and shall not be construed against either (i) the
Lender, or (ii) the Obligors.
ILLEGALITY OR UNENFORCEABILITY
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20. Any determination that any provision or application of this Agreement
is invalid, illegal, or unenforceable in any respect, or in any
instance, shall not affect the validity, legality, or enforceability
of any such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
JURISDICTION
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21. The Obligors and the Lender agree that any legal action, proceeding,
case, or controversy with respect to this Agreement and the
Obligations or any Loan Document shall be brought in the Superior
Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts and
that such Courts shall have exclusive jurisdiction with respect to
such action. By execution and delivery of this Agreement, the Obligors
and the Lender, for themselves and in respect of their property,
accept, submit, and consent generally and unconditionally, to the
jurisdiction of the aforesaid courts.
(a) The Obligors and the Lender WAIVE personal service of any and all
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process upon either of them, and irrevocably consent to the
service of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by
certified mail, postage prepaid, to them at their address set
forth above, such service to become effective five (5) business
days after such mailing.
(b) The Obligors and the Lender WAIVE any objection based on forum
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non conveniens and any objection to venue of any action
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or proceeding instituted under this Agreement or any of the Loan
Documents and consent to the granting of such legal or equitable
remedy as is deemed appropriate by the Court.
INFORMED EXECUTION
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22. The Obligors warrant and represent to the Lender that the Obligors:
(a) Have read and understand all of the terms and conditions of this
Agreement;
(b) Intend to be bound by the terms and conditions of this Agreement;
and
(c) Are executing this Agreement freely and voluntarily, without
duress, after consultation with independent counsel of their own
selection.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been executed this 27th day of
August, 1998.
SILICON VALLEY BANK CAYENNE SOFTWARE, INC.
By: /s/ David Jones By: /s/ F.H. Phillips
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Title: EVP and CCO Title: Vice President
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SILICON VALLEY EAST CAYENNE SOFTWARE LIMITED
By: /s/ Pamela Aldsworth By: /s/ J.J. Alexander
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Title: Vice President Title: Managing Director
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CAYENNE SOFTWARE GMBH
By: /s/ F.H. Phillips
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Title: Managing Director
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CADRE TECHNOLOGIES, INC.
By: /s/ F.H. Phillips
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Title: President
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