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EXHIBIT 10.31
SYNON CORPORATION
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SILICON VALLEY BANK
AGREEMENT & BACKUP
MARCH 1994
Synon Confidential
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SYNON CORPORATION
SYNON, INC.
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
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1. DEFINITIONS AND CONSTRUCTION.......................................................... 1
1.1 Definitions.................................................................. 1
1.2 Accounting Terms............................................................. 8
2. LOAN AND TERMS OF PAYMENT............................................................. 9
2.1 Revolving Advances........................................................... 9
2.2 Overadvances................................................................. 9
2.3 Accounts Collection.......................................................... 9
2.4 Interest Rates, Payments, and Calculations................................... 9
2.7 Additional Costs............................................................. 10
2.8 Term......................................................................... 11
3. CONDITIONS OF LOANS................................................................... 11
3.1 Conditions Precedent to Initial Loan......................................... 11
3.2 Conditions Precedent to all Loans............................................ 11
4. CREATION OF SECURITY INTEREST......................................................... 12
4.1 Grant of Security Interest................................................... 12
4.2 Delivery of Additional Documentation Required................................ 12
4.3 Right to Inspect............................................................. 12
5. REPRESENTATIONS AND WARRANTIES........................................................ 12
5.1 Due Organization and Qualification........................................... 12
5.2 Due Authorization; No Conflict............................................... 12
5.3 No Prior Encumbrances........................................................ 12
5.4 Bona Fide Accounts........................................................... 13
5.5 Merchantable Inventory....................................................... 13
5.6 Name; Location of Chief Executive Office..................................... 13
5.7 Litigation................................................................... 13
5.9 Solvency..................................................................... 13
5.10 Regulatory Compliance........................................................ 13
5.11 Environmental Condition...................................................... 13
5.12 Taxes........................................................................ 14
5.13 Subsidiaries................................................................. 14
5.14 Government Consents.......................................................... 14
5.15 Full Disclosure.............................................................. 14
6. AFFIRMATIVE COVENANTS................................................................. 14
6.1 Good Standing................................................................ 14
6.2 Government Compliance........................................................ 14
6.3 Financial Statements, Reports, Certificates.................................. 14
6.4 Returns...................................................................... 15
6.5 Taxes........................................................................ 15
6.6 Insurance.................................................................... 15
6.7 Principal Depository......................................................... 16
6.8 Quick Ratio.................................................................. 16
6.9 Additional Quick Ratio....................................................... 16
6.10 Debt-Net Worth Ratio......................................................... 16
6.11 Profitability................................................................ 16
6.13 Further Assurances........................................................... 16
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7. NEGATIVE COVENANTS.................................................................... 16
7.2 Change in Business........................................................... 17
7.3 Mergers or Acquisitions...................................................... 17
7.4 Indebtedness................................................................. 17
7.5 Encumbrances................................................................. 17
7.6 Distributions................................................................ 17
7.7 Investments.................................................................. 17
7.8 Transactions with Affiliates................................................. 17
7.9 Subordinated Debt............................................................ 18
7.10 Inventory.................................................................... 18
7.11 Compliance................................................................... 18
8. EVENTS OF DEFAULT..................................................................... 18
8.1 Payment Default.............................................................. 18
8.2 Covenant Default............................................................. 18
8.3 Attachment................................................................... 19
8.4 Insolvency................................................................... 19
8.5 Other Agreements............................................................. 19
8.6 Subordinated Debt............................................................ 19
8.7 Judgments.................................................................... 19
8.8 Misrepresentations........................................................... 19
9. BANK'S RIGHTS AND REMEDIES............................................................ 19
9.1 Rights and Remedies.......................................................... 19
9.2 Power of Attorney............................................................ 20
9.3 Bank Expenses................................................................ 20
9.4 Remedies Cumulative.......................................................... 21
10. WAIVERS; INDEMNIFICATION.............................................................. 21
10.1 Demand; Protest.............................................................. 21
10.2 Bank's Liability for Collateral.............................................. 21
10.3 Indemnification.............................................................. 21
10.4 Subrogation and Similar Rights............................................... 21
10.5 Waivers of Notice............................................................ 21
10.6 Subrogation Defenses......................................................... 22
10.7 Right to Settle, Release..................................................... 22
10.8 Primary Obligation........................................................... 22
10.9 Subordination................................................................ 22
10.10 Enforcement of Rights........................................................ 23
11. NOTICES............................................................................... 23
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................................ 23
13. GENERAL PROVISIONS.................................................................... 23
13.1 Successors and Assigns....................................................... 23
13.2 Time of Essence.............................................................. 24
13.3 Severability of Provisions................................................... 24
13.4 Amendments in Writing, Integration........................................... 24
13.5 Counterparts................................................................. 25
13.6 Survival..................................................................... 25
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This LOAN AND SECURITY AGREEMENT is entered into as of March 17,1994,
by and between SILICON VALLEY BANK ("Bank") and Synon Corporation and Synon,
Inc. (individually, "Borrower" and collectively, "Borrowers").
RECITALS
Borrowers wish to borrow money from time to time from Bank, and Bank
desires to lend money to Borrowers. This Agreement sets forth the terms on
which Bank will lend to Borrowers, and Borrowers will repay the loan to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
a Borrower arising out of the sale or lease of goods or the rendering of
services by such 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 such Borrower and Borrower's Books
relating to any of the foregoing.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person
or any Affiliate of such Person or each of such Person's senior executive
officers, directors, or partners.
"Bank Expenses" means all: reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, administration and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents, whether or not suit is
brought. The term "Bank Expenses" shall not include any items covered by
Sections 2.7 or 10.3.
"Borrowers' Books" means all of books and records of
either Borrower including: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
"Borrowing Base" has the meaning set forth in Section
2.1 hereof.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
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"Committed Line" means $4,000,000.
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend, letter of credit or
other obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable. The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determined amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith; provided, however,
that such amount shall not in any event exceed the maximum amount of the
obligations under the guarantee or other support arrangement.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current assets
on the consolidated balance sheet of Parent and its Subsidiaries as at such
date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Parent and its Subsidiaries as
at such date, plus, to the extent not already included therein, all Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrowers or any
subsidiary to a date more than one year from the date of determination but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations
owed at the end of a given day.
"Eligible Accounts" means those Accounts that arise
in the ordinary course of a Borrower's business from such Borrower's sale or
lease of goods (including, without limitation, the licensing of software and
other technology) or rendering of services that comply with all of such
Borrower's representations and warranties to Bank set forth in Section 5.4 and
that are and at all times shall continue to be acceptable to Bank in all
respects, together with Accounts of a like character acquired by such Borrower
from other entities; provided, that standards of eligibility may be fixed and
revised from time to time by Bank in Bank's reasonable judgment and upon not
less than thirty (30) days' notification thereof to such Borrower in accordance
with the provisions hereof. Unless otherwise agreed to by Bank, Eligible
Accounts shall not include the following:
(a) Accounts that the account debtor has failed
to pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to which the account
debtor is an officer, employee, or agent of Borrower;
(d) Accounts with respect to which services are
provided under fixed contract consulting arrangements or goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
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(e) Accounts with respect to which the account
debtor is an Affiliate (other than by virtue of being directly or indirectly
under common ownership or control with a Borrower) of either Borrower;
(f) Accounts with respect to which the account
debtor is not a resident of the United States or Canada except for Eligible
Foreign Accounts and Accounts arising from products shipped to or services
provided to branches or offices located in the United States of foreign account
debtors as Bank may approve in writing on a case-by-case basis;
(g) Accounts with respect to which the account
debtor is the United States or any department, agency, or instrumentality of
the United States;
(h) Accounts with respect to which Borrower is
liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower, but only to the extent of any amounts owing to the account
debtor against amounts owed to Borrower;
(i) Accounts with respect to an account debtor,
including subsidiaries and affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such
obligations exceed the aforementioned percentage;
(j) Accounts with respect to which the account
debtor disputes liability or makes any claim with respect thereto as to which
Bank believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank
reasonably determines after reasonable inquiry and reasonable consultation with
Borrower to be doubtful by reason of the account debtor's financial condition.
"Eligible Foreign Accounts" means Accounts with
respect to which the account debtor is not a resident of the United States or
Canada and that are: (1) covered by credit insurance in form and amount, and by
an insurer satisfactory to Bank less the amount of any deductible(s) which may
be or become owing thereon; or (2) supported by one or more letters of credit
in favor of Bank as beneficiary, in an amount and of a tenor, and issued by a
financial institution, acceptable to Bank, or (3) that are owed by an account
debtor that Bank may approve in writing on a case-by-case basis.
"Equipment" means machinery, equipment, furniture,
fixtures, vehicles, tools, parts and attachments.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
"Excluded Intellectual Property" shall mean all
intellectual property rights (i) arising under the laws of countries other than
the United States, and (ii) intellectual property rights (A) that must be
registered with, and with respect to which a filing is required by the secured
party with, the United States Patent and Trademark Officer or the United States
Copyright Office, as applicable, to perfect a security interest in such rights,
and (B) are not required to be registered under the terms of Section 6.12
hereof.
"Foreign Subsidiary" means all Subsidiaries of
Borrower other than Subsidiaries that are incorporated under the laws of any
state of the United States.
"GAAP" means generally accepted accounting principles
as in effect from time to time.
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"Indebtedness" means (a) all indebtedness for
borrowed money or the deferred purchase price of property or services,
including without limitation reimbursement and other obligations with respect
to surety bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease obligations,
and (d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including a general assignment for the benefit of substantially all creditors,
compositions, extension generally with substantially all of its creditors, or
proceedings seeking reorganization, arrangement or other relief.
"Inventory" means all present and future inventory in
which either Borrower has any interest, including merchandise, raw materials,
parts, supplies, packing and shipping materials, work in process and finished
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or at any time hereafter owned by or
in the custody or possession, actual or constructive, of such Borrower,
including such inventory as is temporarily out of its custody or possession or
in transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing.
"Investment" means any beneficial interest in
(including stock, partnership interest, or other securities of) any Person, or
any loan, advance, or capital contribution to, any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Lien" means any mortgage, lien, security interest or
other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrowers, and any other agreement entered into
between either Borrower and Bank in connection with this Agreement, all as
amended or extended from time to time.
"Material Adverse Effect" means a material adverse
effect on the business operations or financial condition of Borrower and its
Subsidiaries taken as a whole.
"Maturity Date" means April 30, 1995.
"Modified Cash Flow" means, for any period, net
income for such period minus any net increases in capitalized software for such
period.
"Negotiable Collateral" means a1l of each Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Parent and its
Subsidiaries minus (ii) Total Liabilities.
"Non-Borrower Subsidiary" means a Subsidiary of
Parent other than Synon, Inc.
"Obligations" means all debt, principal, interest,
Bank expenses and other payment obligations (including all amounts charged to a
Borrower's loan account pursuant to any agreement authorizing Bank to charge
such Borrower's loan account), owed by a Borrower to Bank of any kind and
description (whether pursuant to or evidenced by the Loan Documents, or by any
other agreement between Bank and a Borrower).
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"Parent" means Synon Corporation, a Delaware
corporation.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, or agreement
now or hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of a Borrower in favor of Bank
arising under this Agreement or any other Loan Document;
(b) The existing Indebtedness disclosed on the
schedule of exceptions attached hereto (the "Schedule");
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in
the ordinary course of business;
(e) Indebtedness of any Non-Borrower Subsidiary
to a Borrower and Contingent Obligations of any Non-Borrower Subsidiary with
respect to obligations of a Borrower (provided that the primary obligations are
not prohibited hereby); provided that the incurrence of such Indebtedness or
Contingent Obligations, as the case may be, does not result in a violation of
Section 7.6 as a consequence of the provisos set forth in paragraph (d) of the
definition of "Permitted Investments;"
(f) (i) Indebtedness of a Borrower to any
Subsidiary and Contingent Obligations of a Non-Borrower Subsidiary with respect
to obligations of any Borrower (provided that the primary obligations are not
prohibited hereby), (ii) Indebtedness of any Subsidiary to any other Subsidiary
and Contingent Obligations of any Subsidiary with respect to obligations of any
other Subsidiary (provided that the primary obligations are not prohibited
hereby) and (iii) Indebtedness of one Borrower to the other Borrower and
Contingent Obligations of one Borrower to the Other Borrower with respect to
obligations of any other Borrower (provided that the primary obligations are
not prohibited hereby);
(g) Indebtedness secured by Permitted Liens;
(h) Other Indebtedness not otherwise permitted by
Section 7.5 not exceeding $100,000 in the aggregate outstanding at any time;
(i) Indebtedness by a Borrower and its
Subsidiaries consisting of guarantees (and other credit support) of the
obligations of vendors and suppliers of a Borrower or its Subsidiaries in
respect of transactions entered into in the ordinary course of business
provided that such guarantees (and other credit support) shall not at any time
exceed $100,000; and
(j) Extensions, refinancings, modifications,
amendments and restatements of any of items of Permitted Indebtedness (a)
through (i) above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon
Borrower.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from the date
of
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creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank, and (iv) any Investments permitted by
Parent's investment policy, as amended from time to time, provided that such
investment policy (and any such amendment thereto) has been approved by the
Bank, which approval shall not be unreasonably withheld;
(c) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business;
(d) Investments (whether consisting of the
purchase of securities, loans, capital contributions or otherwise, but
excluding Investments permitted under clause (o) of this definition of
Permitted Investments) of a Borrower in or to Non-Borrower Subsidiaries and
Investments by a Borrower in or to companies which simultaneously with such
Investments become Subsidiaries, provided that the sum of (i) all such
Investments by the Borrowers in or to Non-Borrower Subsidiaries, plus (ii)
Contingent Obligations of Borrowers outstanding at any time with respect to the
obligations of Non-Borrower Subsidiaries, minus the sum of (x) Investments by
Non-Borrower Subsidiaries in or to either Borrower, plus (y) payments to either
Borrower on account of Investments by either Borrower in or to Non-Borrower
Subsidiaries, plus (z) distributions or dividends by Non-Borrower Subsidiaries
to either Borrower, in each case, made, incurred or arising on or after the
date hereof, does not at any time exceed $1,000,000; provided, further, that to
the extent that inter-company royalties due to a Borrower constitute
Investments, such inter-company royalties shall not be counted in the foregoing
limitation (but such royalties due shall be Permitted Investments);
(e) Investments (whether consisting of the
purchase of securities, loans, capital contributions, or otherwise) of
Subsidiaries in or to other Subsidiaries or in Borrower;
(f) Investments consisting of receivables owing
to Borrower or its Subsidiaries by Persons and advances to customers or
suppliers, in each case, if created, acquired or made in ordinary course of
business; provided that this paragraph (f) shall not apply to Investments owing
by Subsidiaries to Borrower;
(g) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as
the Board of Directors of Borrower determines that such compensation is in the
best interests of Borrower, (ii) travel advances, employee relocation loans and
other employee loans and advances in the ordinary course of business, (iii)
loans to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries, (iv) other loans to officers and
employees approved by the Board of Directors in an aggregate amount not in
excess of $50,000 outstanding at any time;
(h) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of, and other disputes with, customers or suppliers
arising in the ordinary course of business;
(i) Investments pursuant to or arising under
currency agreements or interest rate agreements;
(j) Investments consisting of notes receivable
of, or prepaid royalties and other credit extensions to, customers and
suppliers who are not Affiliates in the ordinary course of business; provided
that this paragraph (j) shall not apply to Investments by Borrower in any
Subsidiary,
(k) Investments constituting acquisitions
permitted under Section 7.3;
(l) Deposit accounts of Borrower in which Bank
has a Lien prior to any other Lien;
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(m) Deposit accounts of any Subsidiaries
maintained in the ordinary course of business;
(n) Investments accepted in connection with
Transfers permitted by Section 7.1;
(o) Investments of a Borrower in any Subsidiary
consisting of transfers of cash or cash equivalents for marketing, general
administration and other operating activities but not in excess of $750,000 in
any fiscal year (in addition to other Investments otherwise permitted
hereunder); and
(p) Other Investments aggregating not in excess of
$100,000 at any time.
"Permitted Liens" means the following:
(a) Any Liens existing as of the date hereof and
disclosed in the Schedule or arising under this Agreement and the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in
good faith by appropriate proceedings, provided the same have no priority over
any of Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or
held by the Borrower or any of its subsidiaries to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens consisting of leases or subleases and
license and sublicenses granted to others in the ordinary course of a
Borrower's business not interfering in any material respect with the business
of a Borrower and its Subsidiaries taken as a whole, and any interest or title
of a lessor, licensor or under any lease or license;
(e) Liens on assets (including the proceeds
thereof and accessions thereto) that existed at the time such assets were
acquired by a Borrower or any Subsidiary (including Liens on assets of any
corporation that existed at the time it became or becomes a Subsidiary);
(f) Liens on Equipment leased by a Borrower or
any Subsidiary pursuant to an operating lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely
for the purpose of financing the lease of such Equipment (including Liens
pursuant to leases permitted pursuant to Section 7.1 and Liens arising from UCC
financing statements regarding leases permitted by this Agreement);
(g) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
8.7;
(h) Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of the business of a Borrower and its
Subsidiaries, taken as a whole;
(i) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
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(j) Liens that are not prior to the Lien of Bank
which constitute rights of set-off of a customary nature or bankers' Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangements entered into with banks in the
ordinary course of business;
(k) Earn-out and royalty obligations existing on
the date hereof or entered into in connection with an acquisition permitted by
Section 7.3;
(1) Liens, not otherwise permitted by Section
7.5, which Liens do not in the aggregate exceed $100,000 at any time; and
(m) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (a), (c) and (k) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not
such announced rate is the lowest rate available from Bank.
"Quick Assets" means at any date as of which the
amount thereof shall be determined, the consolidated cash, cash equivalents,
accounts receivable and investments with maturities not to exceed 90 days, of
Parent and its Subsidiaries determined in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances or commercial letters of
credit, as specified in Section 2.1 hereof.
"Revolving Note" means a promissory note in
substantially the form of Exhibit B attached hereto.
"Subordinated Debt" means any debt subordinated to the
debt owing by a Borrower to Bank on terms acceptable to Bank (and identified as
being such by such Borrower and Bank).
"Subsidiary" means any corporation or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock
of which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which
any determination is being made, is owned by Borrower, either directly or
indirectly. Unless the context otherwise required, any reference to Subsidiary
shall be a reference to a Subsidiary of Parent and any collective reference to
Subsidiaries shall include Synon, Inc. unless otherwise indicated.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Parent and its Subsidiaries, including in any event all Indebtedness, but
specifically excluding Subordinated Debt.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations made hereunder shall be made in accordance with
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GAAP When used herein, the terms "financial statements" shall include the notes
and schedules thereto to the extent they are audited.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. Subject to the terms and
conditions of this Agreement, Bank agrees to make cash advances ("Advances") to
Borrowers in an aggregate amount not to exceed the lesser of the Committed Line
or the Borrowing Base, provided that Borrowers may not at any time have
outstanding Advances in excess of Two Million Five Hundred Thousand Dollars
($2,500,000) until the first date on which Parent reports in the consolidated
financial statements delivered under Section 6.3 that Parent and its
Subsidiaries have achieved an aggregate Modified Cash Flow of not less than One
Million Dollars ($1,000,000) at any time during Borrowers' fiscal year 1994.
For purposes of this Agreement "Borrowing Base" shall mean an amount equal to
seventy percent (70%) of Eligible Accounts.
To evidence the Advances, Borrowers shall execute and deliver to Bank
on the date hereof the Revolving Note.
Whenever Borrowers desire an Advance, Borrowers will notify Bank by
facsimile transmission or telephone no later than 11:00 a.m. California time,
one Business Day before the day the Advance is to be made. Each such
notification shall be promptly confirmed by a Borrowing Certificate in
substantially the form of Exhibit C hereto. Bank shall be entitled to rely on
any such telephonic notice given by any person who Bank reasonably believes to
be a Responsible Officer of either Borrower, and Borrowers shall indemnify and
hold Bank harmless for any damage or loss suffered by Bank as a result of such
reliance.
Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer of either Borrower, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank will credit the amount
of Advances made under this Section 2.1 to a Borrower's loan account. Amounts
borrowed pursuant to this Section 2.1 may be repaid and reborrowed at any time
during the term of this Agreement so long as no Event of Default has occurred
and is continuing.
The Revolving Facility shall terminate on the Maturity Date, at which
time all amounts advanced under this Section 2.1 shall be immediately due and
payable.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 Accounts Collection. Borrowers shall enter into a
lockbox agreement with Bank, pursuant to which all funds received by each
Borrower from any source shall immediately be deposited. Borrower shall direct
all account debtors to mail or deliver all checks or other forms of payment for
amounts owing to Borrower in the ordinary course of Borrower's business to such
lockbox designated by Bank. Borrower shall hold in trust as collateral for
Bank all amounts that Borrower receives despite the directions to make payments
to such lockbox, and immediately deliver such payments to Bank in their
original form as received from the account debtor, with proper endorsements for
deposit into an account held by Bank. Bank shall have a security interest in
all such proceeds, but will not exercise any rights against such proceeds
except upon the occurrence and during the continuance of an Event of Default.
2.4 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in
Section 2.4(b), any Advances evidenced by the Note shall bear interest, on the
average Daily Balance, at a rate equal to two (2.0)
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percentage points above the Prime Rate; provided that the rate shall be the
Prime Rate plus one and one quarter (1.25) percentage points above the Prime
Rate from and after the first date on which Parent reports in the financial
statements delivered under Section 6.3 that Borrowers have achieved an
aggregate Modified Cash Flow of not less than Two Hundred Fifty Thousand
Dollars ($250,000) at any time during Borrowers' fiscal year 1994.
(b) Past-Due Rate. If all or a portion of the
principal amount of any of the Advances made hereunder or any interest accrued
thereon or any Bank Expenses shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), then any such overdue amounts shall
bear interest at a rate per annum which is four (4) percentage points above the
rate otherwise then applicable.
(c) Payments. Interest hereunder shall be due
and payable on the last Business Day of each calendar month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses,
and all Periodic Payments against either Borrower's loan account or against the
Committed Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. Each Borrower authorizes Bank
automatically to deduct from such Borrower's account or accounts with Bank the
amount of any payment due hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days elapsed.
2.5 Crediting Payments. The receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds and is
made to the appropriate deposit account of Bank or unless and until such check
or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any payment (other
than a wire transfer of immediately available funds) received by Bank after
11:00 a.m. California time shall be deemed to have been received by Bank as of
the opening of business on the immediately following Business Day.
2.6 Fees. Borrowers shall pay to Bank the following:
(a) Facility Fee. Upon the date hereof, a
nonrefundable Commitment Fee equal to Fifteen Thousand Dollars ($15,000)
(Borrower having previously paid to Bank $15,000 constituting a partial payment
of the Commitment Fee), which shall be due upon the date of this Agreement and
shall be fully earned and nonrefundable;
(b) Financial Examination and Appraisal Fees.
Bank's customary fees and out-of-pocket expenses for Bank's audits of either
Borrower's Accounts and Inventory, and for each appraisal of Collateral and
financial analysis and examination of such Borrower performed from time to time
by Bank or its agents (not to exceed $1,000 per audit); and
(c) Bank Expenses. Upon the date hereof, all
Bank Expenses incurred through the date hereof, including reasonable attorneys'
fees (not to exceed $5,000) and expenses.
2.7 Additional Costs. In case any law, regulation,
treaty or official directive or the interpretation or application thereof by
any court of any governmental authority charged with the administration thereof
or the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
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(a) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United
States of America or any political subdivision thereof); or
(b) imposes, modifies or deems applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to their performance under this Agreement, and the result of any of the
foregoing is to increase the cost to Bank, reduce the income receivable by Bank
or impose any expense upon Bank with respect to any loans, Bank shall notify
Borrowers thereof. Borrowers agree to pay to Bank the amount of such increase
in cost, reduction in income or additional expense as and when such cost,
reduction or expense is incurred or determined, upon presentation by Bank of a
statement in the amount and setting forth Bank's calculation thereof, all in
reasonable detail, which statement shall be deemed true and correct absent
manifest error; provided, however, that the Borrowers shall not be liable for
any such amount attributable to any period prior to the date one hundred eighty
(180) days prior to the date of such certificate.
2.8 Term. This Agreement shall become effective upon the
date hereof and shall continue in full force and effect for a term ending on
the Maturity Date. Notwithstanding the foregoing, Bank shall have the right to
terminate its obligation to make Advances under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Loan. The obligation
of Bank to make the initial Advance is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement and the Note, each duly
executed by Borrowers;
(b) a certificate of the secretary of each
Borrower with respect to incumbency and resolutions authorizing the execution
and delivery of this Agreement;
(c) an opinion of Borrowers' counsel;
(d) an accounts receivable audit;
(e) an intellectual property security agreement;
(f) a guaranty of Synon Europe;
(g) payment of the fees and Bank Expenses then due
specified in Section 2.5 herof; and
(h) such other documents, and completion of such
other matters, as Bank may deem necessary or appropriate.
3.2 Conditions Precedent to all Loans. The obligation of
Bank to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Bank of the Borrowing
Certificate as provided in Section 2.1; and
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(b) the representations and warranties contained
in Section 5 shall be true and correct in all material respects on and as of
the date of such Borrowing Certificate and on the effective date of each
Advance as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Advance.
The making of each Advance shall be deemed to be a representation and
warranty by Borrowers on the date of such Advance as to the accuracy of the
facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrowers grant to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrowers of each of
their respective covenants and duties under the Loan Documents. Except as set
forth in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral (other than
Excluded Intellectual Property), and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof (other than
Excluded Intellectual Property).
4.2 Delivery of Additional Documentation Required.
Borrowers shall from time to time execute and deliver to Bank, at the request
of Bank, all financing statements, all Negotiable Collateral and other
documents that Bank may reasonably request, in form satisfactory to Bank, to
perfect and continue perfected Bank's security interests in the Collateral and
in order to fully consummate all of the transactions contemplated under the
Loan Documents.
4.3 Right to Inspect. Subject to Section 13.7, Bank
(through any of its officers, employees, or agents) shall have the right, upon
reasonable prior notice, from time to time during each Borrower's usual
business hours, to inspect Borrower's Books and to make copies thereof and to
check, test, and appraise the Collateral in order to verify such Borrower's
financial condition or the amount, condition of, or any other matter relating
to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Such Borrower is
a corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified, except for such states as to which
any failure so to qualify is not reasonably likely to have a Material Adverse
Effect on such Borrower.
5.2 Due Authorization: No Conflict. The execution,
delivery, and performance of the Loan Documents are within such Borrower's
powers, have been duly authorized, and are not in conflict with nor constitute
a breach of any provision contained in such Borrower's Articles or Certificate
of Incorporation as appropriate, or Bylaws, nor will they constitute an event
of default under any material agreement to which such Borrower is a party or by
which such Borrower is bound. Such Borrower is not in default under any
agreement to which it is a party or by which it is bound, which default is
reasonably likely to have a Material Adverse Effect on such Borrower.
5.3 No Prior Encumbrances. Such Borrower has good and
indefeasible title to the Collateral, free and clear of Liens, except for
Permitted Liens. Except as disclosed in the Schedule, such Borrower has not
acquired any part of the Collateral from an assignor outside the ordinary
course of such assignor's business.
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5.4 Bona Fide Accounts. The Eligible Accounts are bona
fide existing obligations created by the sale and delivery of Inventory or the
rendition of services to account debtors in the ordinary course of such
Borrower's business, unconditionally owed to such Borrower without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. The
property giving rise to such Eligible Accounts has been delivered to the
account debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Such Borrower has not received
notice of actual or imminent Insolvency Proceedings of any account debtor at
the time an account due from such account debtor is included in any Borrowing
Base Certificate as an Eligible Account
5.5 Merchantable Inventory. All Inventory is in all
material respects of good and marketable quality.
5.6 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, such Borrower has not done business under any name
other than that specified on the signature page hereof. The chief executive
office of such Borrower is located at the address indicated in Section 11
hereof.
5.7 Litigation. Except as set forth in the Schedule,
there are no actions or proceedings pending by or against such Borrower before
any court or administrative agency in which an adverse decision can be
reasonably expected to have a Material Adverse Effect on such Borrower or the
Collateral. Except as set forth in the Schedule, such Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change. All financial statements
relating to such Borrower (consolidated, in the case of Parent) that have been
delivered by such Borrower to Bank fairly present in all material respects such
Borrower's financial condition as of the date thereof and Borrower's results of
operations for the period then ended. There has not been a material adverse
change in the financial condition of such Borrower since the date of the most
recent of such financial statements submitted to Bank. Since such date, there
has not occurred a material adverse change in Borrower's business, a material
impairment of the prospect of repayment of any portion of the Obligations owing
to Bank or a material impairment of the value of priority of Bank's security
interest in the Collateral.
5.9 Solvency. Such Borrower is solvent and able to pay
its debts (including trade debts) as they mature.
5.10 Regulatory Compliance. Such Borrower has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in such Borrower's
incurring any liability that is reasonably likely to have a Material Adverse
Effect on such Borrower. Such Borrower is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940. Such Borrower is not engaged principally, or as
one of the important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations G, T and U of the Board of Governors of the Federal Reserve System).
Such Borrower has complied with all the provisions of the Federal Fair Labor
Standards Act.
5.11 Environmental Condition. None of such Borrower's
properties or assets has ever been used by such Borrower or, to the best of
such Borrower's knowledge, by previous owners or operators, in the disposal of,
or to produce, store, handle, treat, release, or transport, any hazardous waste
or hazardous substance other than in accordance with applicable law; to the
best of such Borrower's knowledge, none of such Borrower's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute; no lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by such
Borrower, and such Borrower has not received a summons, citation, notice, or
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directive from the Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by Borrower
resulting in the releasing, or otherwise disposing of hazardous waste or
hazardous substances into the environment.
5.12 Taxes. Such Borrower has filed or caused to be filed
all material tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Such Borrower does not own any stock,
partnership interest or other equity securities of any entity, except for
Permitted Investments,
5.14 Government Consents. Such Borrower has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of such Borrower's business as currently conducted
except where the failure to do so is not likely to have a Material Adverse
Effect.
5.15 Full Disclosure. The representations, warranties and
other statements included in the documents, certificates and written statements
furnished by each Borrower to Bank prior to or as of the date of this Agreement
for use in connection with the transactions contemplated by this Agreement,
taken as a whole, do not contain any untrue statement of a material fact or
omit to state a material fact (known to such Borrower, in the case of any
document not furnished by it) necessary in order to make the statements
contained herein or therein not misleading (it being recognized by Bank that
the projections and forecasts provided by each Borrower are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections and forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, until payment in full
of the Obligations, such Borrower shall do or cause to be done all of the
following:
6.1 Good Standing. Such Borrower shall maintain its
corporate existence and its good standing in its jurisdiction of incorporation
and maintain qualification in each jurisdiction in which the failure to so
qualify is reasonably likely to have a Material Adverse Effect on such Borrower.
Such Borrower shall maintain in force all licenses, approvals and agreements,
the loss of which is reasonably likely to have a Material Adverse Effect on such
Borrower.
6.2 Government Compliance. Such Borrower shall comply
with all statutes, laws, ordinances and government rules and regulations to
which it is subject, noncompliance with which is reasonably likely to have a
Material Adverse Effect on such Borrower.
6.3 Financial Statements, Reports, Certificates. Such
Borrower shall deliver to Bank: (a) as soon as available, but in any event
within thirty (30) days after the end of each month, a company prepared balance
sheet, income statement and cash flow statement covering such Borrower's
consolidated operations during such period, certified by an officer of such
Borrower reasonably acceptable to Bank; (b) as soon as available, but in any
event within thirty (30) days after the end of each month, company prepared
consolidating financial statements including a schedule of intercompany charges
for each of such Borrower's foreign subsidiary; (c) as soon as available, but
in any event within ninety (90) days after the end of such Borrower's fiscal
year, audited financial statements of Borrower on a consolidated basis prepared
in accordance with GAAP, consistently applied, together with an unqualified
opinion on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank (which audits for the years 1992
and 1993 shall contain no material changes from preliminary draft financial
statements or company prepared financial statements delivered to Bank), and (at
the time of filing with the appropriate tax authorities) the federal tax
returns of Borrower, (d) promptly upon
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becoming available, copies of all statements, reports and notices sent or made
available generally by such Borrower to its security holders or to any holders
of Subordinated Debt; (e) promptly upon receipt of notice thereof, a report of
any legal actions pending or threatened against such Borrower which may result
in damages to such Borrower in excess of $250,000; and (f) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time.
Within thirty (30) days of the last day of each month, Borrowers shall
deliver to Bank a borrowing base certificate signed by an officer of Parent on
behalf of Borrowers in substantially the form of Exhibit D hereto, together
with aged listings of accounts receivable and accounts payable; provided that,
for any period in which any Advances are outstanding under this Agreement,
Borrowers shall deliver such borrowing base certificate semi-monthly, within
(ten) 10 days of the end of each two-week period.
Borrowers shall deliver to Bank with the monthly financial statements
a compliance certificate signed by a Responsible Officer of Parent in
substantially the form of Exhibit
Exhibit E hereto.
Bank shall have a right from time to time thereafter to audit either
Borrower's Accounts at such Borrower's expense, provided that such audits will
be conducted no more often than three (3) times per year unless an Event of
Default has occurred and is continuing.
6.4 Returns. Returns and allowances, if any, as between
such Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of such Borrower, as they exist
at the time of the execution and delivery of this Agreement. Such Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes
and claims, where the return, recovery, dispute or claim involves more than Two
Hundred Thousand Dollars ($200,000).
6.5 Taxes. Such Borrower shall make due and timely
payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment
or deposit thereof; and such Borrower will make timely payment or deposit of
all material tax payments and withholding taxes required of it by applicable
laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and will,
upon request, furnish Bank with proof satisfactory to Bank indicating that such
Borrower has made such payments or deposits; provided that Borrower need not
make any payment if the amount or validity of such payment is contested in good
faith by appropriate proceedings and is adequately reserved against (to the
extent required by GAAP) by such Borrower.
6.6 Insurance.
(a) Such Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as ordinarily
insured against by other owners in similar businesses conducted in the
locations where Borrower's business is conducted on the date hereof. Each
Borrower shall also maintain insurance relating to Borrower's ownership and use
of the Collateral in amounts and of a type that are customary to businesses
similar to Borrower's.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as reasonably satisfactory
to Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof, and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
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6.7 Principal Depository. Each Borrower shall maintain
its depository and operating accounts with Bank, except for a single deposit
account No. 4539-036939 of Synon, Inc. which will be maintained at Wells Fargo
Bank with an account balance not to exceed $250,000.
6.8 Quick Ratio. Parent shall maintain, on a
consolidated basis with its Subsidiaries, as of the last day of each calendar
month, a ratio of Quick Assets to Current Liabilities (excluding deferred
revenue relating to maintenance income) of at least 1.05 to 1.00 for the period
from the Closing Date until August 31, 1994; 1.10 to 1.0 thereafter until
September 30, 1994, and 1.25 to 1.0 thereafter.
6.9 Additional Quick Ratio. Borrowers shall maintain,
for Borrowers only and not on a consolidated basis with any other entity, as of
the last day of each calendar month, a ratio of Quick Assets (of Borrowers
only) to Current Liabilities (of Borrowers only) (excluding deferred revenue
relating to maintenance income) of at least 1.05 to 1.00 for the period from
the Closing Date until August 31, 1994; 1.10 to 1.0 thereafter until September
30, 1994, and 1.25 to 1.0 thereafter.
6.10 Debt-Net Worth Ratio. Parent shall maintain, on a
consolidated basis with its Subsidiaries, as of the last day of each calendar
month, a ratio of Total Liabilities less Subordinated Debt (and excluding
deferred revenue relating to maintenance income) to Net Worth plus Subordinated
Debt of not more than (i) for the period from the Closing Date to November 30,
1994, 3.00 to 1.00 and (ii) thereafter, 2.25 to 1.00.
6.11 Profitability. Parent shall, on a consolidated basis
with its Subsidiaries, not suffer a loss in excess of Seven Hundred Fifty
Thousand Dollars ($750,000) for the first fiscal quarter of 1994, shall be
profitable for the second fiscal quarter of 1994, shall not suffer a loss in
excess of Three Hundred Thousand Dollars ($300,000) for the third fiscal
quarter of 1994 and, thereafter, shall be profitable before taxes and after
taxes for each fiscal quarter.
6.12 Registration of Intellectual Property Rights.
Borrowers shall register or cause to be registered (to the extent not already
registered) with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, those intellectual property rights
listed on Exhibits A, B and C to the Intellectual Property Security Agreement,
dated the date hereof, delivered to Bank by Borrower, as soon as is practicable.
Borrowers shall register or cause to be registered with the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, those
additional United States material registrable intellectual property rights
developed or acquired by Borrower from time to time; provided, however, that
Borrower shall only be required to register (i) copyrights for source (codes and
user manuals for new products that are expected to eventually constitute a
material portion of Borrower's revenue, which copyrights shall be registered
within 90 days of the commercial availability of such product, (ii) copyrights
for source codes and user manuals for major revisions to existing registered
products, (iii) patent rights to the extent that Borrower in consultation with
patent counsel determines in good faith that patent protection is desirable, and
(iv) trademark rights to the extent a trademark is utilized in connection with a
product which is expected to constitute or constitutes a material portion of
Borrower's revenue. Borrower shall notify Bank annually of each intellectual
property right registration and shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in such additional intellectual property
rights.
6.13 Further Assurances. At any time and from time to time
each Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations, neither Borrower will do, or permit to be done, any of the
following without the prior written consent of Bank:
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7.1 Dispositions. Convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit any Subsidiary to
Transfer, all or any part of its business or property, other than: (i)
Transfers in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Parent or its
Subsidiaries; (iii) Transfers of worn-out or obsolete property; (iv) Transfers
which constitute liquidation of Investments permitted under Section ;(v)
Transfers from any Subsidiary to another Subsidiary or Parent and any Transfers
from either Borrower to a Non-Borrower Subsidiary that are Permitted
Investments; and (vi) other Transfers not otherwise permitted by this Section
7.1 not exceeding $100,000 in any fiscal year.
7.2 Change in Business. Neither Parent nor any of its
Subsidiaries shall engage in any business other than the businesses currently
engaged in by Parent and its Subsidiaries and any business substantially
similar or related thereto (or incidental thereto). Borrowers will not,
without thirty (30) days prior written notification to Bank, relocate their
chief executive offices.
7.3 Mergers or Acquisitions. Merge or consolidate, or
permit any of the Subsidiaries to merger or consolidate, with or into any other
business organization, or acquire, or permit any of the Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person in any transaction valued in excess of Five Hundred Thousand Dollars
($500,000); provided that this Section 7.3 shall not apply to transactions
among Borrowers and the Non-Borrower Subsidiaries in which a Borrower is the
surviving entity or among the Non-Borrower Subsidiaries or to purchases of
inventory, equipment or intellectual property rights in any transaction valued
at less than Five Hundred Thousand Dollars ($500,000) in the ordinary course of
business.
7.4 Indebtedness. Create, incur, assume or be or remain
liable with respect to any Indebtedness other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to
exist any Lien with respect to any of its property, or assign or otherwise
convey any right to receive income, including the sale of any Accounts, or
permit any of the Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, provided that (1) a Borrower may declare and make any
dividend payment or other distribution payable in its equity securities, (2) a
Borrower may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
therefor, (3) Parent may repurchase shares of its Series E Preferred Stock
pursuant to Section 8.01(b) of that certain Stock Purchase Agreement, dated as
of August 28, 1992, between Parent and International Business Machines
Corporation; provided Parent is in compliance with Sections 6.8 and 6.10 hereof
before and after such repurchase and Parent has given Bank copies of all
notices issued in connection with such repurchase at the same time as Parent
has given the notices to International Business Machines Corporation, and (4) a
Borrower may redeem or repurchase its securities in an amount in any fiscal
year not exceeding $150,000 in connection with any agreement between Parent or
the Subsidiaries and any officer, director, employee or consultant of Parent or
its Subsidiaries entered into in the ordinary course of business wherein Parent
(or its Subsidiaries) is obligated or entitled to repurchase from such officer,
director, employee or consultant shares of equity securities of a Borrower (or
its Subsidiaries) upon such Person's termination of employment or services or
other event.
7.7 Investments. Directly or indirectly acquire or own or
make any Investments in or to any Person, or permit any of the Subsidiaries so
to do, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of a
Borrower except for transactions that are in the ordinary course of such
Borrower's business, upon fair and reasonable terms that are no less favorable
to such Borrower than would be obtained in an arm's length transaction with a
nonaffiliated Person and except for
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transactions with the Non-Borrower Subsidiaries that are upon fair and
reasonable terms and transactions constituting Permitted Investments.
7.9 Subordinated Debt. Make any payment in respect of
any Subordinated Debt, or permit any of the Subsidiaries to make any such
payment, except in compliance with the terms of such Subordinated Debt.
7.10 Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrowers shall keep the Inventory only at the location set
forth in Section 11 hereof and such other locations of which the Borrowers give
Bank prior written notice and as to which a Borrower signs and files a
financing statement where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or be
controlled by an "investment company",' within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for
such purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation is reasonably likely to have a Material Adverse
Effect or a material adverse effect on the Collateral or the priority of Bank's
lien on the Collateral, or permit any of its Subsidiaries to do any of the
foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrowers under this Agreement
8.1 Payment Default. If Borrowers fail to pay the
principal of, or any interest on, any Advances when due and payable, or any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice therefor.
8.2 Covenant Default. If either Borrower or Borrowers,
as applicable, fail to perform any obligation under Sections 6.6, 6.7, 6.8,
6.9, 6.10 or 6.11, or violate any of the covenants contained in Article 7
(other than 7.5, 7.7, and 7.10) of this Agreement or fail or neglect to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and
Bank and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, have failed to cure such default
within ten (10) days after the Borrower receives notice thereof or any
Responsible Officer of Borrower become aware thereof (provided that no Advances
will be required to be made during such cure period); provided, however, that
if the default cannot by its nature be cured within the ten (10) day period or
cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time (which
shall not in any case exceed thirty (30) days), then Borrower shall have an
additional reasonable period to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default; provided further that no such additional reasonable
time shall be available (i) to care a failure to provide the statements,
reports and other documents and information to be delivered under Section 6.3
or (ii) to cure a default if a default of a similar nature or under the same
provision hereof occurred within six (6) months of such later default;
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8.3 Attachment. If any material portion of either
Borrower's assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any trustee, receiver or
person acting in a similar capacity and such attachment, seizure, writ or
distress warrant or levy has not been removed, discharged or rescinded within
thirty (30) consecutive days, or if either Borrower is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs, or if a judgment or other claim becomes
a lien or encumbrance upon any material portion of either Borrower's assets, or
if a notice of lien, levy, or assessment is filed of record with respect to any
of either Borrower's assets by the United States Government, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, and the same is not paid within thirty (30) days after
such Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contesting by such Borrower
(provided that no Advances will be made during such cure period);
8.4 Insolvency. If an Insolvency Proceeding is commenced
by a Borrower, or if an Insolvency Proceeding is commenced against a Borrower
and is not dismissed or stayed within twenty (20) consecutive days (provided
that, except as Bank may determine in its sole and absolute discretion, no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.5 Other Agreements. If there is a default in any
agreement to which a Borrower is a party with a third party or parties or by
which a Borrower is otherwise bound resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000)
or which would be reasonably likely to have a Material Adverse Effect;
8.6 Subordinated Debt. If a Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed
under any subordination agreement entered into with Bank;
8.7 Judgments. If a final judgment or judgments for the
payment of money in an amount, individually or in the aggregate, of at least One
Hundred Fifty Thousand Dollars ($150,000) shall be rendered against a Borrower
and shall remain unsatisfied and unstayed for a period of ten (10) days
(provided that, except as Bank may determine in its sole and absolute
discretion, no Advances will be made prior to the satisfaction or stay of such
judgment); or
8.8 Misrepresentations. If any material
misrepresentation or material misstatement exists now or hereafter in any
warranty or representation made to Bank by any Responsible Officer of a
Borrower pursuant to this Agreement or any Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during
the continuance of an Event of Default, Bank may, at its election, without
notice of its election and without demand, except as required by law, do any
one or more of the following, all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement or under any other
agreement between either Borrower and Bank;
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(c) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower,
make such payments and do such acts as Bank considers necessary or reasonable
to protect its security interest in the Collateral. Borrowers agree to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrowers authorize Bank to enter the
premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of either Borrower's owned premises,
each Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to either Borrower set off and
apply to the Obligations any and all (i) balances and deposits of either
Borrower held by Bank, or (ii) indebtedness at any time owing to or for the
credit or the account of either Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, any Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section 9.1, any
Borrower's rights under all licenses and all franchise agreements shall inure
to Bank's benefit;
(g) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including any Borrower's
premises) as Bank determines is commercially reasonable;
(h) Bank may credit bid and purchase at any public
sale; and
(i) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrowers.
9.2 Power of Attorney. Effective only upon the
occurrence and during the continuance of an Event of Default, each Borrower
hereby irrevocably and appoints Bank (and any of Bank's designated officers, or
employees) as such Borrower's true and lawful attorney to: (a) send requests for
verification of Accounts or notify account debtors of Bank's security interest
in the Accounts; (b) endorse such Borrower's name on any checks or other forms
of payment or security that may come into Bank's possession; (c) sign the name
of such Borrower on any of the documents described in Section 4.5; (d) sign such
Borrower's name on any invoice or bill of lading relating to any Account, drafts
against account debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to account debtors; (e) make, settle, and adjust all
claims under and decisions with respect to such Borrower's policies of
insurance; and (f) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable. The appointment of Bank as such Borrower's attorney in fact,
and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank's obligation to provide advances hereunder is terminated.
9.3 Bank Expenses. If any Borrower fails to pay any
amounts or furnish any required proof of payment due to third Persons, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof, (b) set up such
reserves in
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such Borrower's loan account as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action
with respect to such policies as Bank deems prudent. Any amounts paid or
deposited by Bank shall constitute Bank Expenses, shall be immediately due and
payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the
future or a waiver by Bank of any Event of Default under this Agreement.
9.4 Remedies Cumulative. Bank's rights and remedies
under this Agreement and the Loan Documents, shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity. No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it.
10. WAIVERS, INDEMNIFICATION
10.1 Demand: Protest. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Bank on which
such Borrower may in any way be liable.
10.2 Banks liability for Collateral. So long as Bank
complies with its obligations under Section 9207 of the Code and reasonable
banking practices, Bank shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrowers.
10.3 Indemnification. Each Borrower shall defend,
indemnify and hold harmless Bank and its officers, employees, and agents against
(a) all obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by this Agreement;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, from, to transactions between
Bank and such Borrower under this Agreement, or any other Loan Document
(including without limitation reasonable attorneys fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct.
10.4 Subrogation and Similar Rights. Notwithstanding any
other provision of this Agreement or any other Loan Document, each Borrower
irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating the Borrower to the rights of Lender
under the Loan Documents) to seek contribution, indemnification, or any other
form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by the Borrower with respect to the Obligations in connection with
the Loan Documents or otherwise and all rights that it might have to benefit
from, or to participate in, any security for the Obligations as a result of any
payment made by the Borrower with respect to the Obligations in connection with
the Loan Documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this subsection (c)(i)
shall be null and void. If any payment is made to a Borrower in contravention
of this subsection (c)(i), such Borrower shall hold such payment in trust for
Bank and such payment shall be promptly delivered to Bank for application to
the Obligations, whether matured or unmatured.
10.5 Waivers of Notice. Each Borrower waives notice of
acceptance hereof, notice of the existence, creation or acquisition of any of
the Obligations; notice of the amount of the Obligations outstanding at any
time; notice of acceleration; notice of any adverse change in the financial
condition of any other Borrower or of any other fact that might increase the
Borrower's risk presentment for payment;
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demand; protest and notice thereof as to any instrument; and all other notices
and demands to which the Borrower would otherwise be entitled. Each Borrower
waives any defense arising from any defense of any other Borrower, or by reason
of the cessation from any cause whatsoever of the liability of any other
Borrower. Bank's failure at any time to require strict performance by any
Borrower of any provision of the Loan Documents shall not waive, alter or
diminish any right of Bank thereafter to demand strict compliance and
performance therewith. Nothing contained herein shall prevent Bank from
foreclosing on the Lien of any deed of trust, mortgage or other security
instrument, or exercising any rights available thereunder, and the exercise of
any such rights shall not constitute a legal or equitable discharge of any
Borrower. Each Borrower also waives any defense arising from any act or
omission of Bank that changes the scope of the Borrower's risks hereunder.
Each Borrower hereby waives any right to assert against Bank any defense (legal
or equitable), setoff, counterclaim, or claims that such Borrower individually
may now or hereafter have against another Borrower or any other Person liable
to Lender with respect to the Obligations in any manner or whatsoever.
10.6 Subrogation Defenses. Each Borrower hereby waives
any defense based on impairment or destruction of its subrogation or other
rights against any other Borrower and waives all benefits which might otherwise
be available to it under California Civil Code Sections 2809, 2810, 2819, 2839,
2845, 2848, 2849, 2850, 2899, and 3433, as those statutory provisions are now
in effect and hereafter amended, and under any other similar statutes now and
hereafter in effect.
10.7 Right to Settle. Release.
(a) The liability of Borrowers hereunder shall
not be diminished by (i) any agreement, understanding or representation that
any of the Obligations is or was to be guaranteed by another Person or secured
by other property, or (ii) any release or unenforceability, whether partial or
total, of rights, if any, which Lender may now or hereafter have against any
other Person, including another Borrower, or property with respect to any of
the Obligations.
(b) Without notice to any Borrower and without
affecting the liability of any Borrower hereunder, Bank may (i) compromise,
settle, renew, extend the time for payment, change the manner or terms of
payment, discharge the performance of, decline to enforce, or release all or any
of the Obligations with respect to a Borrower, (ii) grant other indulgences to a
Borrower in respect of the Obligations, (iii) modify in any manner any documents
relating to the Obligations with respect to a Borrower, (iv) release, surrender
or exchange any deposits or other property securing the Obligations, whether
pledged by a Borrower or any other Person, or (v) compromise, settle, renew, or
extend the time for payment, discharge the performance of, decline to enforce,
or release all or any obligations of any guarantor, endorser or other Person who
is now or may hereafter be liable with respect to any of the Obligations.
10.8 Primary Obligation. This Agreement is a primary and
original obligation of each Borrower and shall remain in effect notwithstanding
future changes in conditions, including any change of law or any invalidity or
irregularity in the creation or acquisition of any Obligations or in the
execution or delivery of any agreement between Bank and any Borrower. Each
Borrower shall be liable for existing and future Obligations as fully as if all
of the Advance were advanced to the Borrower Bank may rely on any certificate
or representation made by any Borrower as made on behalf of, and binding on,
all Borrowers, including without limitation Borrowing Certificates, Borrowing
Base Certificates and Compliance Certificates.
10.9 Subordination. All indebtedness of a Borrower now or
hereafter arising held by another Borrower is subordinated to the Obligations
and the Borrower holding the indebtedness shall take all actions reasonably
requested by Lender to effect, to enforce and to give notice of such
subordination.
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10.10 Enforcement of Rights. Borrowers are jointly and
severally liable for the Obligations and Bank may proceed against one or more
of the Borrowers to enforce the Obligations without waiving its right to
proceed against any of the other Borrowers.
11. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally, delivered or sent by certified
mail, postage prepaid, return receipt requested, or by prepaid telefacsimile to
Borrowers or to Bank, as the case may be, at its addresses set forth below:
If to Borrowers: Synon Corporation
1100 Larkspur Landing Circle
Larkspur, CA 94939
Attn: Mr. Paul K. Wilde
FAX: (415) 461-8948
Synon, Inc.
1100 Larkspur Landing Circle
Larkspur, CA 94939
Attn: Mr. Paul K. Wilde
FAX: (415) 461-8948
If to Bank: Silicon Valley Bank
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Mr. Greg Becker
FAX: (415) 812-0640
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law. Each of the Borrowers and Bank hereby
submits to the exclusive jurisdiction of the state and Federal courts located
in the County of Santa Clara, State of California. Borrowers and Bank each
hereby waive their respective rights to a jury trial of any claim
or cause of action based upon or arising out of any of the Loan Documents or
any of the transactions contemplated therein, including contract claims, tort
claims, breach of duty claims, and all other common law or statutory claims.
Each party recognizes and agrees that the foregoing waiver constitutes a
material inducement for it to enter into this Agreement. Each party represents
and warrants that it has reviewed this waiver with its legal counsel and that
it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel.
13. GENERAL PROVISIONS
13.1 Successors and Assigns. This Agreement shall bind
and inure to the benefit ot the respective successors and permitted assigns of
each of the parties; provided, however, that neither this Agreement nor any
rights hereunder may be assigned by either Borrower without Bank's prior
written consent, which consent may be granted or withheld in Bank's sole
discretion.
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(b) Bank may sell, negotiate or grant
participations to other financial institutions in all or part of the
obligations of the Borrowers outstanding under the Loan Agreements, without
notice to or the approval of Borrowers; provided that any such sale,
negotiation or participation shall be in compliance with the applicable federal
and state securities laws and the other requirements of this Section 13.1.
Notwithstanding the sale, negotiation or grant of participations, Bank shall
remain solely responsible for the performance of its obligations under this
Agreement, Bank shall remain the holder of the Note for all purposes under this
Agreement and Borrowers shall continue to deal solely and directly with Bank in
connection with this Agreement and the other Loan Documents.
(c) The grant of a participation interest shall
be on such terms as the Bank determines are appropriate, provided only that (1)
the holder of such a participation interest shall not have any of the rights of
Bank under this Agreement except, if the participation agreement so provides,
rights to demand the payment of costs of the type described in Section 2.7,
provided that the aggregate amount that the Borrowers shall be required to pay
under Section 2.7 with respect to any ratable share of the Committed Line or
any Advance (including amounts paid to participants) shall not exceed the
amount that Borrowers would have had to pay if no participation agreements had
been entered into, and (2) the consent of the holder of such a participation
interest shall not be required for amendments or waivers of provisions of the
Loan Agreement other than those which (i) increase the amount of the Committed
Line, (ii) extend the term of this Agreement, (iii) decrease the rate of
interest or the amount of any fee or any other amount payable to Bank under
this Agreement, (iv) reduce the principal amount payable under this Agreement,
or (v) extend the date fixed for the payment of principal or interest or any
other amount payable under this Agreement.
(d) The Bank may assign, from time to time, all
or any portion of its pro rata share of the Committed Line and the Note to an
Affiliate of the Bank or, subject to the prior written approval of Borrower
(which approval will not be unreasonably withheld), to any other financial
institution; provided, that (i) the amount the Committed Line being assigned
pursuant to each such assignment shall in no event be less than $2,500,000 and
shall be an integral multiple of $500,000 and (ii) the parties to each such
assignment shall execute and deliver to Borrower an assignment agreement in a
form reasonably acceptable to each. Upon such execution and delivery, from and
after the effective date specified in such assignment agreement (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment
agreement, have the rights and obligations of a Bank hereunder and (y) Bank
shall, to the extent that rights and obligations hereunder have been assigned
by it pursuant to such assignment agreement, relinquish its rights and be
released from its obligations under this Agreement (other than pursuant to this
Section 13.1(d)), and, in the case of an assignment agreement covering all or
the remaining portion of Bank's rights and obligations under this Agreement,
Bank shall cease to be a party hereto. In the event of as assignment hereunder,
the parties agree to amend this Agreement to the extent necessary to reflect the
mechanical changes which are necessary to document such assignment and which are
standard for a multi-bank credit facility. Each party shall bear its own
expenses (including without limitation attorneys' fees and costs) with respect
to such an amendment.
13.2 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
13.3 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
13.4 Amendments in Writing, Integration. This Agreement
cannot be changed or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement.
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13.5 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
13.6 Survival. All covenants, representations and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding. The obligations of Borrowers to
indemnify Bank with respect to the expenses, damages, losses, costs and
liabilities described in Section 10.3 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought
against Bank have run, provided that so long as the obligations set forth in
the first sentence of this Section 13.6 have been satisfied, and Bank shall
have no commitment to make any Advances or to make any other loans to
Borrowers, Bank shall release all security interests granted hereunder and
redeliver all Collateral held by it to Borrowers.
13.7 Confidentiality. In handling any confidential
information of Borrowers Bank shall exercise the same degree of care that it
exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or
received pursuant to this Agreement except that disclosure of such information
may be made (i) to the subsidiaries or affiliates of Bank in connection with
their present or prospective business relations with Borrower, (ii) to
prospective transferees or purchasers of any interest in the Advances, provided
that they have entered into a comparable confidentiality agreement in favor of
Borrowers and have delivered a copy to Borrowers, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, provided
that Borrowers are notified and given an opportunity to seek a protective
order, and (iv) as may be required in connection with the examination, audit or
similar investigation of Bank. Notwithstanding any provision of this Agreement
to the contrary, prior to the occurrence of an Event of Default neither
Borrower nor any of its Subsidiaries will be required to disclose, permit the
inspection, examination, copying or making extracts of, or discussions of; any
document, information or other matter that (i) constitutes non-financial trade
secrets or non-financial proprietary information (provided that the terms of
agreements that generate Accounts shall not be deemed to be "non-financial
trade secrets or proprietary information"), or (ii) in respect to which
disclosure to Bank (or designated representative) is then prohibited by (a)
law, or (b) an agreement binding upon Borrowers or any Subsidiary that was not
entered into by Borrowers or such Subsidiary for the primary purpose of
concealing information from Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
SYNON CORPORATION
By: /s/ Richard Goldberg
---------------------------------
Title: President & CEO
------------------------------
By: /s/ Greg Becker
--------------------------------
Title: V. P. Finance & CFO
------------------------------
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SYNON, INC.
By: /s/ Richard Goldberg
----------------------------------
Title: President & CEO
-------------------------------
By: /s/ Paul Wilde
----------------------------------
Title: V. P. Finance & CFO
-------------------------------
SILICON VALLEY BANK
By: /s/ Greg Becker
----------------------------------
Title: A. V. P.
-------------------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of each
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products including such
inventory as is temporarily out of such 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, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
such Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by such 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 such
Borrower and Borrower's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities (other than
the outstanding Capital Stock of Non-Borrower Subsidiaries), letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter
acquired;
(g) 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;
(h) All mask work or similar rights available for the protection
of semiconductor chips, now owned or hereafter acquired;
(i) All claims for damages by way of any past, present and future
infringement of any of the rights described above; and
(j) Any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and proceeds thereof.
27
32
EXHIBIT B
Revolving Promissory Note
$4,000,000 Santa Clara, California
March___, 1994
FOR VALUE RECEIVED, the undersigned, Synon Corporation and Synon, Inc.
(the "Borrowers"), jointly and severally promise to pay to the order of Silicon
Valley Bank ("Bank"), at such place as the holder hereof may designate, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all advances ("Advances") made by Bank to Borrowers under the terms of
the Loan Agreement (as defined below) up to a maximum principal amount of Four
Million Dollars ($4,000,000). Borrowers shall also pay interest on the aggregate
unpaid principal amount of such Advances at the rates and in accordance with the
terms of the Loan and Security Agreement between Borrowers and Bank of even date
herewith, as amended from time to time (the "Loan Agreement") on the last
Business Day of each month after an Advance has been made. The entire principal
amount and all accrued interest shall be due and payable on April 30, 1995.
Borrowers irrevocably waive after the occurrence and during the
continuance of an Event of Default the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrowers, and each Borrower irrevocably agrees that Bank shall have the
continuing exclusive right to apply any and all such payments against the then
due and owing obligations of Borrowers as Bank may deem advisable. In the
absence of a specific determination by Bank with respect thereto, all payments
shall be applied in the following order: (a) then due and payable fees and
expenses; (b) then due and payable interest payments and mandatory prepayments;
and (c) then due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrowers to endorse on Bank's book and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any errors in
notation) shall not affect the obligations of Borrowers with respect to Advances
made hereunder, and payments of principal by Borrowers shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Each Borrower promises to pay Bank all costs and expenses of collection
of this Note and to pay all reasonable attorneys' fees incurred in such
collection or in any suit or action to collect this Note or in any appeal
thereof. Borrowers waive presentment, demand, protest, notice of protest, notice
of dishonor, notice of nonpayment, and any and all other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, as well as any applicable statute of limitations. No delay by Bank in
exercising any power or right hereunder shall operate as a waiver of any power
or right. Time is of the essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of California, excluding
conflicts of laws principles.
SYNON CORPORATION
By: _________________________________
Title: ______________________________
SYNON, Inc.
By: _________________________________
Title: ______________________________
28
33
EXHIBIT C
BORROWING CERTIFICATE
The undersigned hereby certifies as follows:
I, _______________, am the duly elected and acting _______________ of
Synon Corporation.
This certificate is delivered pursuant to Section 2.1 of that certain
Loan and Security Agreement by and between Synon Corporation and Synon, Inc.
(collectively, "Borrowers") and Silicon Valley Bank ("Bank") (the "Loan
Agreement"). This certificate is made on behalf of both Borrowers. The terms
used in this Borrowing Certificate which are defined in the Loan Agreement have
the same meaning herein as ascribed to them therein.
Borrower is confirming its telephone request made on __________, 19___
for an Advance as follows:
(a) The date on which the Advance is to be made
is __________, 19___.
(b) The amount of the Advance is to be
$_________.
All representations and warranties of Borrower stated in the Loan
Agreement are true, accurate and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, accurate and complete in all
material respects as of such date.
IN WITNESS WHEREOF, this Borrowing Certificate is executed by the
undersigned as of this __________ day of ___________, 199__.
SYNON CORPORATION
By: _____________________________
Title: __________________________
29
34
EXHIBIT D
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower: Synon Corporation Silicon Valley Bank
Synon, Inc. 1731 Embarcadero Road, Suite 220
1100 Larkspur Landing Circle Palo Alto, CA 94303
Larkspur, CA 94939
Commitment Amount: $4,000,000
- --------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _______ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL ACCOUNTS RECEIVABLE $_________
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Amounts over 90 days due $__________
5. Balance of 50% over 90 day accounts $__________
6. Concentration Limits $__________
7. Foreign Accounts $__________
8. Governmental Accounts $__________
9. Contra Accounts $__________
10. Promotion or Demo Accounts $__________
11. Intercompany/Employee Accounts $__________
12. Other,incl. fixed contract consulting accts $__________
(explain on reverse)
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
14. Eligible Accounts (No. 13 - No. 14) $__________
15. LOAN VALUE OF ACCOUNTS (70% of No. 14)
BALANCES
16. Maximum Loan Amount $__________
17. Total Funds Available (Lesser of #16 or #15) $__________
18. Present balance owing on Line of Credit $__________
19. Outstanding under Sublimits ( ) $__________
20. RESERVE POSITIVE (#17-#18 and #19) $__________
The undersigned represents and warrants that the foregoing is true, complete
and correct, and that the information reflected in this Borrowing Base
Certificate complies with the representations and warranties set forth in
Section 5.4 of the Loan and Security Agreement between the undersigned and
Silicon Valley Bank.
COMMENTS:
BANK USE ONLY
Rec'd By:_____________________
Auth. Signer
_______________________________ Date:_________________________
Verified:_____________________
By:____________________________ Auth. Signer
Authorized Signer Date:_________________________
__________________________
30
35
EXHIBIT E
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
FROM: Synon Corporation
Synon,Inc.
1100 Larkspur Landing Circle
Larkspur, CA 94939
The undersigned authorized officer of Synon Corporation hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrowers and Bank (the "Agreement"), (i) Borrowers
are in complete compliance for the period ending ________ of all required
conditions and terms except as noted below and (ii) all representations and
warranties of Borrowers stated in the Agreement are true, accurate and complete
in all material respects as of the date hereof. Attached herewith are the
required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principals (GAAP) and are consistent from one period to the next
except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
Consolidating financials Monthly within 30 days Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and up to 3 annually Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly
Basis:
Minimum Quick Ratio 1.05:1/1.1:1/1.25:1 _____:1.0 Yes No
Additional Quick 1.05:1/1.1:1/1.25:1 _____:1.0 Yes No
Ratio
Maximum Debt/NW 3.0:1/2.25:1 _____:1.0 Yes No
Profitability Ql:(75O,OOO); $________ Yes No
Q2: Profitable; $________
Q3: (300,000); $________
Q4: Profitable $________
BANK USE ONLY
COMMENTS REGARDING EXCEPTIONS:
Received by:___________________
AUTHORIZED SIGNER
Sincerely,
_____________________________ Date:__________________________
SIGNATURE
Verified:______________________
_____________________________ AUTHORIZED SIGNER
TITLE
Date:
_____________________________ __________________________
DATE
Compliance Status: Yes No
36
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Synon Corporation Lender: SILICON VALLEY BANK
Synon, Inc. 1731 Embarcadero Road, Suite 220
1100 Larkspur Landing Circle Palo Alto, CA 94303
Larkspur, CA 94939
- --------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $4,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
--------------
Amount paid to Borrower directly: $__________
Undisbursed Funds $__________
Note Principal $__________
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:
Prepaid Finance Charges Paid in Cash: $__________
$______Loan Fee
$______Accounts Receivables Audit
Other Charges Paid in Cash: $__________
$______UCC Search Fees
$______UCC Filing Fees
$______Patent Filing Fees
$______Trademark Filing Fees
$______Copyright Filing Fees
$______Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $__________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment. At any time and for any
reason, Borrower or Bank may voluntarily terminate Automatic Payments.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF______, 1994.
BORROWER:
-----------------------------------------------
-----------------------------------------------
Authorized Officer
================================================================================
37
DISCLOSURE SCHEDULE
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF MARCH 17, 1994
BETWEEN SYNON CORPORATION, SYNON, INC. AND SILICON VALLEY BANK
Section 1.1
Indebtedness being disclosed pursuant to clause (b) of the definition
of "Permitted Indebtedness":
Indebtedness in the amount of $1,500,000 to International Business
Machines Corporation ("IBM") pursuant to a Development Incentive
Agreement, dated as of September 27, 1990, between Synon Inc. and IBM,
as amended on August 28, 1992.
Synon Corporation and Synon Inc. have provided unlimited guarantees to
Midland Corporate Banking on behalf of Synon Europe Ltd. and Synon
Limited (inactive) with respect to a pounds 200,000 multi-currency
borrowing facility.
Synon Corporation has provided an unconditional guarantee for a rental
bond related to the lease of office space to Barclays Bank PLC on
behalf on Synon France SARL.
Synon Corporation has provided various guarantees to landlords and
lessors on behalf of Synon Corporation's subsidiaries.
Various intercompany balances as disclosed in the financial statements.
Various royalties due to third parties as accrued for in the financial
statements.
Investments being disclosed pursuant to clause (a) of the definition
of "Permitted Investments":
Loan to Chris Herron with a principal balance at December 31, 1993 to
$750,000 which is secured by Synon stock (was paid off March 10, 1994).
Loan to John de Wit with a principal balance at December 31, 1993 of
$45,000 which is secured by Synon stock.
Loan to Paul Wilde with a principal balance at December 31, 1993 of
$95,000 which is secured by real property and which is being forgiven
with passage of time.
Loan to Rick Brown with a principal balance at December 31, 1993 of
$24,764 which is secured by stock options and which is being forgiven
with passage of time.
38
Various intercompany balances as disclosed in the financial statements.
Miscellaneous promissory notes for payment associated with the sales of
software licenses.
Miscellaneous prepaid royalties to third parties as reflected in the
financial statements.
Investments in the following direct or indirect Subsidiaries:
Subsidiary Stock Ownership
---------- ---------------
Synon Europe Ltd. 100% owned by Synon Corporation
Synon, Inc. 100% owned by Synon Europe Ltd.
Synon Canada Ltd. 100% owned by Synon, Inc.
Synon International
Limited (inactive) 100% owned by Synon Europe Ltd.
Synon U.K. Limited
(inactive) 100% owned by Synon Europe Ltd.
Synon Limited
(being liquidated) 100% owned by Synon Corporation
Synon France SARL 100% owned by Synon Corporation
Synon Japan Ltd. 51% owned by Synon corporation
49% owned by Toppan Moore
Systems Limited (Synon
Distributor)
Synon Italia S.r.l. 65% owned by Synon Corporation
35% owned by Systems &
Management S.p.A (Synon
distributor)
Synon Asia Ltd. 75% owned by Synon corporation
25% owned by Commercial Software
Services Limited (Synon
distributor)
Mallaig Enterprises Ltd.
(inactive N.Z. corp.) 100% owned by Synon Corporation
Synon Pty Ltd. 100% owned by Synon Corporation
39
Strategic Information
Systems Pty (inactive) 43% owned by Synon Pty Ltd
57% owned by M. Slattery (former
managing director)
Synon Research Limited 100% owned by Synon Corporation
Liens being disclosed pursuant to clause (a) of the definition of
"Permitted Liens":
A purchase money security interest in one Xerox 4050 laser printer in
favor of Xerox Corporation.
A purchase money security interest in one Xerox 1090 copier in favor of
Xerox Corporation.
Synon, Inc. has leased various items of computer equipment from IBM
pursuant to equipment leases and related supplements.
Purchase money security interests in certain items of
telecommunications equipment in favor of Bruce Baum Associates, Inc.
Purchase money security interest in a telephone system in favor of NEC
America, Inc.
A lien in favor of IBM under the Development Incentive Agreement.
Liens falling within the exception set forth in clause (j) of the
definition of Permitted Liens:
Liens of the type described in such clause (j) arising in connection
with certain deposit accounts with Wells Fargo Bank, which accounts
will be closed promptly upon the clearance of outstanding checks under
such accounts or arising in connection with Borrower's investment
account at Morgan Stanley. One account (#4539-036939) at Wells Fargo
Bank will remain open pursuant to Section 6.7 of the Loan and Security
Agreement.
Section 4.1
Borrower's representation set forth in the second sentence of Section
4.1 is subject to the possible existence of Liens of the types set forth in
paragraphs (b), (c), (d), (e), (f), (h), (i), (j) and (k) of the definition of
Permitted Liens.
Section 5.3
3
40
On September 15, 1992, Synon Corporation purchased the entire issued
share capital of Dysys (since renamed to Synon Research Limited) and in
conjunction with the purchase gave certain individuals author's
royalties on Synon's next generation tool.
Section 5.6
Synon Consulting, Inc. which was merged into Synon, Inc. did business
under the "Synon Consulting, Inc." name.
Prior to the establishment of Synon Corporation, Synon Limited acted as
the corporate parent for the Synon family.
Section 5.7
Synon Inc. has been served by ABC Home Health care in its suit against
IBM Corporation, but was not named in the suit. Synon Inc. was a
subcontractor to IBM.
4
41
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 5, 1995, by
and between Synon, Inc. and Synon Corporation (the "Borrower") whose address is
1100 Larkspur Landing Circle, Larkspur, California 94939 and Silicon Valley
Bank ("Bank"), whose address is 3000 Lakeside Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Revolving Promissory Note dated June 5, 1995, in the
original principal amount of Four Million and 00/100 ($4,000,000.00) (the
"Line"). The Line, together with other promissory Lines from Borrower to
Lender, is governed by a Loan and Security Agreement dated March 1994, between
Borrower and Lender, as such agreement may be amended from time to time (the
"Loan Agreement"). Defined terms used but not otherwise defined herein shall
have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the Indebtedness
is secured by a Collateral as described in the Loan Agreement. Additionally,
repayment of the indebtedness is guaranteed by Synon Europe (the "Guarantor")
pursuant to an Unconditional Guaranty (the "Guaranty").
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing payment of the Note (and other notes executed
by Borrower in favor of Bank) shall be referred to as the "Security Documents".
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement
1. The term "Maturity Date" is hereby amended to mean May
31, 1996.
2. The term "Revolving Note" shall mean the Promissory Note
dated June 5, 1995, in the amount of Four Million and
00/100 Dollars ($4,000,000.00), which amends and
restates that certain Revolving Note dated March 17,
1994.
3. Section 6.8 entitled "Quick Ratio" is hereby amended to
read in its entirety:
Parent shall maintain, on a consolidated basis with its
Subsidiaries, on a monthly basis, as of the last day of
each calendar month, a ratio of Quick Assets to Current
Liabilities (excluding deferred revenue relating to
maintenance income) of at least 1.10 to 1.00.
4. Section 6.9 entitled "Additional Quick Ratio" is hereby
amended to read in its entirety:
Synon, Inc. shall maintain, on a quarterly basis, a
Quick Ratio of 0.90 to 1.00.
5. Section 6.10 entitled "Debt-Net Worth Ratio" is hereby
amended to read-in its entirety:
1
42
Parent shall maintain, on a consolidated basis with its
Subsidiaries, on a monthly basis, as of the last day of
each calendar month, a ratio of Total Liabilities less
Subordinated Debt (and excluding deferred revenue
relating to maintenance income) to Net Worth plus
Subordinated Debt of not more than (i) for the period
from execution of this Loan Agreement until December
31, 1995, 3.00 to 1.00 and (ii) decreasing to 2.50 to
1.00 thereafter.
6. Section 6.11 entitled "Profitability" is hereby amended
to read in its entirety:
Parent shall, on a consolidated basis with its
Subsidiaries, not suffer a loss in excess of Seven
Hundred Fifty Thousand Dollars ($750,000) for the
second fiscal quarter of 1995, and Three Hundred
Thousand Dollars ($300,000) for the third fiscal
quarter of 1995 and, thereafter, shall be profitable
before taxes and after taxes for each fiscal quarter.
Additionally: Synon Corporation, on a consolidated
basis shall be profitable annually and Synon, Inc., on
a consolidating basis, shall be profitable annually.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay Lender a fee either in the
amount of Thirty Thousand Three Hundred Fifty and No/100 Dollars ($30,000.00) or
Fifteen Thousand and 00/100 Dollars ($15,000.00) plus 15,000 shares of stocks in
the amount of $3.00 per share (the "Loan Fee").
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of this date, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will be
released by virtue of this Loan Modification Agreement. The terms of this
Paragraph apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of the Loan Fee.
2
43
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
SYNON, INC. SILICON VALLEY BANK
By: /s/ PAUL WILDE By: /s/ KATHLEEN BARIE
-------------------------------- --------------------------------
Name: Paul Wilde Name: Kathleen Barie
------------------------------ ------------------------------
Title: CEO Title: Vice President
----------------------------- -----------------------------
SYNON CORPORATION
By: /s/ PAUL WILDE
--------------------------------
Name: Paul Wilde
------------------------------
Title: CEO
-----------------------------
Guarantor consents to the modifications to the indebtedness pursuant to this
Loan Modification Agreement, hereby ratifies the provisions of the Guaranty and
confirms that all provisions of that document are in full force and effect.
GUARANTOR:
SYNON EUROPE
By: /s/ RICHARD GOLDBERG Date: 6-15-95
-------------------------------- -----------
Name: Richard Goldberg
------------------------------
Title: Director
-----------------------------
44
PROMISSORY NOTE
================================================================================
BORROWER: Synon, Inc. LENDER: Silicon Valley Bank
Synon Corporation Embarcadero/Technology
1100 Larkspur Landing Circle 1731 Embarcadero, Suite 220
Larkspur, CA 94939 Palo Alto, CA 94303
================================================================================
INITIAL RATE: 11.000%
PRINCIPAL AMOUNT: $4,000,000.00 DATE OF NOTE: JUNE 5, 1995
PROMISE TO PAY. Synon, Inc. and Synon Corporation ("Borrower") promise to pay
to Silicon Valley Bank ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Four Million & 00/100 Dollars
($4,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on May 31, 1996. In addition, Borrower will pay
regular monthly payments of accrued unpaid interest beginning July 31, 1995, and
all subsequent interest payments are due on the same day of each month after
that. Interest on this Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days in the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may or
may not be the lowest rate available from Lender at any given time. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each time the prime rate is
adjusted by Silicon Valley Bank. The Index currently is 9.000% per annum. The
interest rate to be applied to the unpaid principal balance of this Note will
be at a rate of 2.000 percentage points over the Index, resulting in an initial
rate of 11.000% per annum. NOTICE: Under no circumstances will the interest
rate on this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sale agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect. (e) Borrower dies or becomes insolvent, a
receiver is appointed for any part of Borrower's property, Borrower makes an
assignment for the benefit of creditors, or any proceeding is commenced either
by Borrower or against Borrower under any bankruptcy or insolvency laws. (f)
Any creditor tries to take any of Borrower's property on or in which Lender has
a lien or security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any of the events described in this default section
occurs with respect to any guarantor of this Note.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay
upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 7.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law. This Note has been
delivered to Lender and accepted by Lender in the State of California. If there
is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Santa Cruz County, the State of California.
(Initial here _______). Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Note shall be governed by and construed in
accordance with the laws of the State of California.
LINE OF CREDIT. This Note evidence a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligations to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the term of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; or (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender.
REQUEST TO DEBIT ACCOUNTS. Borrower will regularly deposit all funds received
from its business activities in accounts maintained by Borrower at Silicon
Valley Bank. Borrower hereby requests and authorizes Lender to debit any of
Borrower's accounts with Lender, specifically, without limitation, Account
Number 02721376-70, for payments of principal and interest due on the loan and
any other obligations owing by Borrower to Lender. Lender will notify Borrower
of all debits which Lender makes against Borrower's accounts. Any such debits
against Borrower's accounts in no way shall be deemed a set-off.
LOAN AND SECURITY AGREEMENT. This Note is subject to and shall be governed by
all the terms and conditions of the Loan and Security Agreement dated March,
1994 between Lender and Borrower, as the same may be amended from time to time,
which Business Loan Agreement is incorporated herein by reference.
45
PROMISSORY NOTE Page 2
(Continued)
===============================================================================
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
any applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made. The obligations under
this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH
BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE NOTE.
SYNON, INC. SYNON CORPORATION
By: /s/ Paul Wilde By: /s/ Paul Wilde
---------------------------- ----------------------------
Name: Paul Wilde, Title: CFO Name: Paul Wilde, Title: CFO
===============================================================================
Variable Rate, Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off.,
Var. 3, 19(c) 1985 CFI Pro Services, Inc.
All rights reserved. [CA-O20 SYNON.LN
G1.OVL]
AMENDMENT TO INTEREST RATE: Rate will decrease to prime plus 1.25% upon the
company achieving an aggregate Modified Profit of $250,000.
46
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement (this "Agreement") is entered into as
of July 15, 1996, by and between Synon, Inc. and Synon Corporation
(individually, the "Borrower" and collectively, the "Borrowers") whose address
is 1100 Larkspur Landing Circle, Larkspur, CA 94939, and Silicon Valley Bank
("Bank") whose address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Promissory Note, dated June 5, 1995, in the original
principal amount of Four Million and 00/100 Dollars ($4,000,000.00) (the
"Revolving Note") and, being executed concurrently herewith, a Promissory Note
in the original principal amount of Four Hundred Thousand and 00/100 Dollars
($400,000.00) (the "Term Note"). The Revolving Note and the Term Note, together
with other promissory note from Borrower to Bank, are governed by a Loan and
Security Agreement dated March 1994, between Borrower and Bank, as such
agreement may be amended from time to time (the "Loan Agreement"). Defined terms
used but not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the
Indebtedness is secured by the Collateral as described in the Loan Agreement and
an Intellectual Property Security Agreement dated March 17, 1994. Additionally,
repayment of the Indebtedness is guaranteed by Synon Europe (the "Guarantor")
pursuant to an Unconditional Guaranty (the "Guaranty").
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Revolving Note.
1. Payable in one payment of all outstanding principal
plus all accrued unpaid interest on July 14, 1997. In
addition, Borrower will pay regular monthly payments
of all accrued unpaid interest due as of each payment
date beginning August 14, 1996, and all subsequent
interest payments will be due on the same day of each
month thereafter.
2. The interest rate to be applied to the unpaid
principal balance of the Revolving Note is hereby
decreased, effective as of this date, to one and
one-quarter (1.25) percentage points over the Bank's
current Index (as defined therein).
B. Modification(s) to Loan Agreement.
1. The first paragraph of Section 2.1 entitled
"Revolving Advances" is hereby amended in its
entirety, to read as follows:
Subject to the terms and conditions of this
Agreement, Bank agrees to make cash advances
("Advances") to Borrowers in an aggregate amount not
to exceed the lesser of the Committed Line or the
Borrowing Base. For purposes of this Agreement,
"Borrowing Base" shall mean an amount equal to
seventy percent
1
47
(70%) of Eligible Accounts less the Daylight
Overdraft Reserve (as defined herein) less any
outstandings under the Letter of Credit Sublimit (as
defined herein) less any outstandings under the Cash
Management Sublimit (as defined herein).
2. The following sections are hereby incorporated into
the Loan Agreement:
2.1.1 Letter of Credit Sublimit.
Subject to the terms and conditions of this
Agreement, as may be amended from time to time, Bank
agrees to issue or cause to be issued under the
Revolving Facility standby letters of credit for the
account of Borrowers in an aggregate face amount not
to exceed (i) the lesser of Two Million and 00/100
Dollars ($2,000,000.00) or the Borrowing Base. Each
such letter of credit shall have an expiry date of no
later than ninety (90) days after the maturity date
of the Revolving Facility; provided that Borrower's
letter of credit reimbursement obligation shall be
secured by cash on terms acceptable to Bank at any
time after the maturity date of Revolving Facility if
the term of this Agreement is not extended by Bank.
All such letters of credit shall be, in form and
substance, acceptable to Bank in its sole discretion
and shall be subject to the terms and conditions of
Bank's form of application and letter of credit
agreement.
2.1.2 Cash Management Sublimit.
Borrowers may utilize up to an aggregate amount not
to exceed Five Hundred Thousand and 00/100 Dollars
($500,000.00) for Cash Management Services provided
by Bank, which services may include merchant
services, PC-ACH, direct deposit of payroll, Business
Visa, Firstax, and other check cashing services as
defined in that certain Cash Management Services
Agreement provided to Borrowers in connection
herewith (a "Cash Management Service", or the "Cash
Management Services"). All amounts actually paid by
Bank in respect of a Cash Management Service or Cash
Management Services shall, when paid, constitute an
Advance under the Revolving Facility.
2.1.3 Daylight Overdraft Reserve.
Three Hundred Thousand and 00/100 Dollars
($300,000.00) (the "Daylight Overdraft Reserve") of
the Revolving Facility will be reserved to support
any daylight overdrafts created by the issuance of
checks or other debits (including wire transfers) in
excess of the collected funds in Borrower's deposit
account. The Daylight Overdraft Reserve shall be at
all times deducted from the Borrowing Base and the
Revolving Facility when determining availability
under the Borrowing Base. Borrowers agree that all
overdrafts which cannot be collected within five (5)
working days shall be deemed an Advance under the
Revolving Facility from the date the overdraft
occurred and shall accrue interest at the prevailing
interest rate.
2.1.4 Equipment Advances.
(a) At any time from the date hereof through April
15, 1997 (the "Equipment Availability End Date"),
Borrowers may from time to time request advances
(each an "Equipment Advance" and collectively, the
"Equipment Advances") from Bank in
2
48
an aggregate amount not to exceed the Committed
Equipment Line. To evidence the Equipment Advance or
Equipment Advances, Borrowers shall deliver to Bank,
at the time of each Equipment Advance request, an
invoice for the equipment to be purchased. The
Equipment Advances shall be used only to purchase
equipment and shall not exceed one-hundred percent
(100%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes,
shipping, warranty charges, freight discounts and
installation expense. SOFTWARE MAY, HOWEVER,
CONSTITUTE UP TO TWENTY PERCENT (20%) OF EACH
EQUIPMENT ADVANCE.
(b)Interest shall accrue from the date of each
Equipment Advance at the rate specified in Section in
Section 2.4(a), and shall be payable monthly for each
month through the month in which the Equipment
Availability End Date falls. Any Equipment Advances
or Equipment Advances that are outstanding on the
Equipment Availability End Date will be payable in
twenty-four (24) equal monthly installments of
principal plus all accrued interest, beginning on the
Payment Date of each month following the Equipment
Availability End Date.
(c)When Borrowers desires to obtain an Equipment
Advance, Borrowers shall notify Bank (which notice
shall be irrevocable) by facsimile transmission to be
received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment
Advance is to be made. Such notice shall be
substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer and include
a copy of the invoice for the Equipment to be
financed.
3. Section 2.4(a) entitled "Interest Rate" is hereby
amended in its entirety, to read as follows:
Except as set forth in Section 2.4(b), (i) any
Advances evidenced by the Revolving Note shall bear
interest, on the average Daily Balance, at a rate
equal to one and one-quarter (1.25) percentage points
above the Prime Rate and (ii) any Equipment Advanced
evidenced by the Term Note shall bear interest, on
the average Daily Balance, at a rate equal to one and
three-quarters (1.75) percentage points above the
Prime Rate.
4. The first sentence of Section 2.4(c) entitled
"Payments" is hereby amended in its entirety, to read
as follows:
Interest under the Revolving Facility shall be due
and payable on the fourteenth (14th) Business Day of
each calendar month during the term hereof.
5. The fourth paragraph of Section 6.3 entitled
"Financial Statements, Reports, Certificates" is
hereby amended in its entirety, to read as follows:
For any period in which any Advances or Equipment
Advances are outstanding under this Agreement, Bank
shall have a right from time to time thereafter to
audit either Borrower's Accounts at such Borrower's
expense, provided that such audits will be conducted
no more often than two (2) times per year unless an
Event of Default has occurred and is continuing. In
addition, Borrowers shall provide to Bank, no later
than December 15, 1996, its projections for the year
1997.
3
49
6. Section 6.8 entitled "Quick Ratio" is hereby amended
in its entirety, to read as follows:
Parent shall maintain, on a consolidated basis with
its Subsidiaries, on a monthly basis, as of the last
day of each calendar month, a ratio of Quick Assets
to Current Liabilities (excluding deferred revenue)
of at least 1.25 to 1.00.
7. Section 6.10 entitled "Debt-Net Worth Ratio" is
hereby amended in its entirety, to read as follows:
Parent shall maintain, on a consolidated basis with
its Subsidiaries, on a monthly basis, as of the last
day of each calendar month, a ratio of Total
Liabilities less Subordinated Debt (excluding
deferred revenue) to Net Worth (including intangible
assets) plus Subordinated Debt of not more than (i)
for the period from execution of this Agreement until
December 31,1996, of 2.50 to 1.00 and (ii) 2.00 to
1.00 thereafter.
8. Section 6.l1 entitled "Profitability" is hereby
amended in its entirety, to read as follows:
Parent shall, on a consolidated basis with its
Subsidiaries, not suffer a loss in excess of Four
Hundred Thousand Dollars ($400,000.00) for the second
fiscal quarter of 1996, and shall be profitable
before taxes and after taxes for each fiscal quarter
thereafter. Furthermore, Parent shall achieve minimum
profitability before taxes and after taxes, of One
Million Seven Hundred Thousand and 00/100 Dollars
($1,750,000.00) for the fourth fiscal quarter of
1996.
Additionally: Synon Corporation, on a consolidated
basis, shall be profitable annually and Synon, Inc.,
on a consolidating basis, shall be profitable
annually.
9. The following section is hereby incorporated into
Loan Agreement:
6.14. Liquidity Ratio. Borrowers shall maintain, for
Borrowers only and not on a consolidated basis with
any other entity, as of the last day of each month, a
ratio of Liquid Cash plus availability under the
Revolving Facility to outstandings under the Term
Facility of not more than 2.00 to 1.00.
10. Section 6.14 is hereby added to the list of Sections
under Section 8.2 entitled "Covenant Default".
11. The following Definitions are hereby added and/or
amended, and shall supersede any and all prior
Definitions"
"COMMITTED EQUIPMENT LINE" means Four Hundred
Thousand and 00/100 Dollars ($400,000.00).
"LIQUID CASH" means all of Borrowers cash on hand
(and cash equivalents).
"MATURITY DATE" means, for the Revolving Facility,
July 14, 1997.
"PROFITABILITY" means net income plus amortization of
capitalized software minus new capitalized software.
4
50
"TERM FACILITY" means the facility under which
Borrowers may request Bank to make Equipment
Advances, as specified in Section 2.1.4 hereof.
"TERM FACILITY MATURITY DATE" means April 15,1999.
"TERM NOTE" mean a promissory note, dated July 15,
1996, in substantially the form of Exhibit A attached
hereto.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF FACILITY FEE. Borrower shall pay to Bank a fee in the amount
of Thirty Thousand and 00/100 Dollars ($30,000.00) (the "Facility Fee")
plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that it has no defenses against the obligations
to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing
Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan
Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is
the intention of Bank and Borrower to retain as liable parties all
makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor
will be released by virtue of this Loan Modification Agreement. The
terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon:
(i) Borrower's payment of the Facility Fee;
(ii) an accounts receivable examination to be completed with
results satisfactory to Bank; and
(iii) Bank's receipt of Borrowers audited 1995 fiscal year end
financial statements.
5
51
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: BANK:
SYNON, INC. SILICON VALLEY BANK
By: /s/ Paul K. Wilde By: /s/ Kathleen Borie
------------------------------- -------------------------------
Name: Paul K. Wilde Name: Kathleen Borie
----------------------------- -----------------------------
Title: CFO Title: Senior Vice President
---------------------------- ----------------------------
SYNON, CORP
By: /s/ Paul K. Wilde
-------------------------------
Name: Paul K. Wilde
-----------------------------
Title: CFO
----------------------------
The undersigned hereby consents to the modifications to the Indebtedness
pursuant to this Loan Modification Agreement, hereby ratifies all the provisions
of the Guaranty and confirms that all provisions of that document are in full
force and effect.
GUARANTOR:
SYNON EUROPE
By: /s/ Richard Goldberg
-------------------------------
Name: Richard Goldberg
-----------------------------
Title: Director
----------------------------
6
52
PROMISSORY NOTE
================================================================================
Borrower: Synon, Inc. and Synon Corporation Lender: Silicon Valley Bank
1100 Larkspur Landing Circle 3003 Tasman Drive
Larkspur, CA 94939 Santa Clara, CA 95054
================================================================================
Principal Initial
Amount: $400,000.00 Rate: 10.000% Date of Note: July 15, 1996
PROMISE TO PAY Synon, Inc. and Synon Corporation ("Borrower") promises to pay to
Silicon Valley Bank ("Lender"), or order, in lawful money of the United States
of America, the principal amount of Four Hundred Thousand and 00/100 Dollars
($400,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following
payment schedule:
The Draw Period shall begin as of this date and shall end on April 15, 1997
(the "Draw Period"). During the Draw Period, Borrower shall pay regular
monthly payments of all accrued unpaid interest due as of each payment date,
beginning August 15, 1996 and all subsequent interest payments will be due on
the same day of each month thereafter. The outstanding principal balance on
April 15, 1997, will be payable in twenty-four (24) even payments of principal
plus interest will be due as of each payment date, beginning May 15,1997 and
all subsequent payments of principal plus interest will be due on the same day
of each month thereafter. The final payment, due, on April 15, 1999, will be
for all outstanding principal plus all accrued interest not yet paid.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's, request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each time the prime rate is adjusted by
Silicon Valley Bank. The Index currently is 8.250 per annum. The interest rate
to be applied to the unpaid principal balance of this Note will be at a rate of
1.750 percentage point over the Index, resulting in an initial rate of 10.000%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrowers behalf is false or
misleading in any material respect. (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs with
respect to any guarantor of this Note.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrowers failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, do one or both of the following: (a) increase the variable interest rate on
this Note to 5.000 percentage points over the otherwise effective interest rate,
and (b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note (including any
increased rate). Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lenders attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE
IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF SANTA CLARA COUNTY, THE STATE OF CALIFORNIA.
(INITIAL HERE /s/ PW). Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Note shall be governed by and construed in
accordance with the laws of the State of California.
53
PROMISSORY NOTE
CONTINUED
LINE OF CREDIT. This note evidences a straight line of credit through the end of
the Draw Period. Once the total amount of principal has been advanced, Borrower
is not entitled to further loan advances. Advances under this Note, as well as
directions for payment from Borrower's accounts, may be requested orally or in
writing by Borrower or by an authorized person. Lender may, but need not,
require that all oral requests be confirmed in writing. Borrower agrees to be
liable for all sums either: (a) advanced in accordance with the instructions of
an authorized person or (b) credited to any of Borrowers accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if; (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantors
guarantee of this Note or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.
ADVANCE RATE. At any time from the date hereof through the end of the Draw
Period, Borrower may request advances (each an "Equipment Advance" and
collectively, the "Equipment Advances") from Lender in an aggregate amount not
to exceed the principal amount of this Note. To evidence the Equipment Advances,
Borrower shall deliver to Lender, at the time of each advance request, an
invoice for the equipment to be purchased. The Advances shall be used only to
purchase equipment and shall not exceed one hundred percent (100%) of the
invoice amount approved from time to time by Lender, excluding taxes, shipping,
software and installation expense. Software may, however, constitute up to
twenty percent (20%) of each Equipment Advance.
LOAN AND SECURITY AGREEMENT. This Note is subject to and shall be governed by
all the terms and conditions of the Loan and Security Agreement dated March
1994, as such agreement may be amended from time to time, between Borrower and
Lender, which Loan and Security Agreement is incorporated herein by reference.
REQUEST TO DEBIT. Borrower will regularly deposit funds received from its
business activities in accounts maintained at Silicon Valley Bank. Borrower
hereby authorizes Lender to debit any accounts with Lender, including, without
limitation, Account Number ______________ for payments of principal and interest
due on the loan and any other obligations owing by Borrower to Lender. Lender
will notify Borrower of all debts which Lender makes against Borrower's
accounts. Any such debits against Borrower's accounts in no way shall be deemed
a set-off.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by low, waive any
applicable statute of limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lenders security interest
in the collateral and take any other action deemed necessary by Lender without
the consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES
TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
BORROWER:
SYNON INC. SYNON CORPORATION
By: /s/ PAUL K. WILDE By: /s/ PAUL K. WILDE
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Name: Paul K. Wilde Name: Paul K. Wilde
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Title: CFO Title: CFO
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