EXHIBIT 10.26

 

LOAN MODIFICATION AGREEMENT DATED APRIL 15, 2005 BETWEEN THE REGISTRANT AND
SILICON VALLEY BANK

 

LOAN MODIFICATION AGREEMENT

 

This LOAN MODIFICATION AGREEMENT (this “Modification”) is entered into as of
April 15, 2005 by and between Kana Software, Inc. (the “Borrower”) and Silicon
Valley Bank (“Bank”).

 

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, an Amended and Restated Loan and Security Agreement dated July 10,
2000, as amended or modified from time to time (the “Loan Agreement”). The Loan
Agreement provides for, among other things, a Committed Revolving Line in the
original principal amount of Ten Million Dollars ($10,000,000). The Loan
Agreement has been modified pursuant to, among other documents, a Loan
Modification Agreement dated December 28, 2001, pursuant to which, among other
things, the Committed Revolving Line was decreased to Three Million Dollars
($3,000,000). The Loan Agreement was further modified pursuant to, among other
documents, a Loan Modification Agreement, dated November 22, 2002, pursuant to
which, among other things, the Committed Revolving Line was increased to Five
Million Dollars ($5,000,000). Defined terms used but not otherwise defined
herein shall have the same meanings as set forth in the Loan Agreement.

 

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the “Obligations.”

 

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and in the Intellectual Property
Security Agreement.

 

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the “Security Documents”. Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations, shall be
referred to as the “Existing Loan Documents”.

 

3. DESCRIPTION OF CHANGE IN TERMS.

 

A. Modifications to Loan Agreement.

 

  (1) Subsection (a) of Section 2.3 entitled “Interest Rate, Payments” is hereby
amended to read as follows:

 

“(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate of 0.5 percentage points above the Prime Rate;
provided however, beginning July 1, 2005, Advances shall accrue interest on the
outstanding principal balance at a per annum rate of 1.0 percentage point above
the Prime Rate; further provided that if Borrower maintains at least $13,000,000
in unrestricted cash on its balance sheet, during such period, Advances shall
accrue interest on the outstanding principal balance at a per annum rate of the
Prime Rate.”

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  (2) Section 6.11 “Minimum Unrestricted Cash on Balance Sheet” is hereby
amended to read as follows:

 

“6.11. Minimum Unrestricted Cash on Balance Sheet. Borrower shall maintain at
least $11,000,000 in unrestricted cash on its balance sheet at all times and
tested monthly; provided however, if Borrower raises additional equity or
convertible debt of at least $2,500,000, then Borrower shall maintain at least
$13,000,000 in unrestricted cash on its balance sheet at all times and tested
monthly.

 

  (3) The following is hereby incorporated into the Loan Agreement to read as
follows:

 

6.12. Minimum EBITDA. Borrower shall not permit EBITDA, for the fiscal quarter
noted below to be less than the amount set forth below opposite such period:

 

Quarter Ending

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   Amount

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June 30, 2005

   $ 0

September 30, 2005 and each quarter thereafter

   $ 500,000

 

Notwithstanding the foregoing, if Borrower (a) raises additional equity or
convertible debt of at least $2,500,000, and (b) maintains at least $13,000,000
in unrestricted cash on its balance sheet at all times and tested monthly, then
this Section 6.12 shall be deleted in its entirety

 

  (4) The following new definition (which shall be inserted in alphabetical
order therein) is hereby incorporated into Section 13.1 of the Loan Agreement to
read as follows:

 

““EBITDA” means earnings before interest, taxes, depreciation and amortization
in accordance with GAAP.”

 

  (5) The definition of “Subordinated Debt” is hereby amended to read as
follows:

 

““Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s
debt to Bank (pursuant to a subordination agreement entered into between Bank,
the Borrower and the subordinated creditor), on terms acceptable to Bank.”

 

  (6) Subsection (h) of the definition of “Permitted Liens” is hereby amended by
deleting the “and” at the end of such subsection and subsection (i) of the
definition of “Permitted Liens” is hereby amended by replacing the “.” at the
end of such subsection with “; and” and inserting the following new subsection
“j” thereafter:

 

“(j) a second priority Lien securing debt owing by Borrower to a financial
institution or private equity company acceptable to Bank; provided that such
debt is subordinated to Borrower’s debt to Bank (pursuant to a subordination
agreement entered into between Bank, the Borrower and such financial institution
or such private equity company), on terms acceptable to Bank.”

 

  (7) The Compliance Certificate attached as Exhibit D to the Loan Agreement is
hereby deleted in its entirety and replaced with the Compliance Certificate
attached hereto as EXHIBIT A.

 

B. Waiver of Financial Covenant.

 

  (1)

Bank hereby waives Borrower’s existing default under Section 6.11 of the Loan
Agreement (prior to the modification hereto) by virtue of Borrower’s failure to
maintain at least $13,000,000 in unrestricted cash on its balance sheet for the
month ending

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February 28, 2005 (the “Existing Default”). Bank’s waiver of Borrower’s
compliance with this covenant shall apply only to such period. Accordingly, for
the month ending March 31, 2005, Borrower shall be in compliance with such
covenant, as revised hereto.

 

Bank’s agreement to waive the above-described default (1) in no way shall be
deemed an agreement by Bank to waive Borrower’s compliance with the above
described covenant as of all other dates and (2) shall not limit or impair
Bank’s right to demand strict performance of this covenant as of all other dates
and (3) shall not limit or impair Bank’s right to demand strict performance of
all other covenants as of any date.

 

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

 

5. BORROWER REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants as follows (both before and after giving effect to the effectiveness of
this Modification): (i) no Event of Default has occurred and is continuing under
the Loan Agreement (or would result from the transactions contemplated by this
Modification) other than the Existing Default; (ii) Borrower’s execution,
delivery and performance of the Loan Agreement, as modified by this
Modification, have been duly authorized by all necessary corporate action and do
not and will not require any registration with, consent or approval of, or
notice to or action by, any person (including any governmental authority) in
order to be effective and enforceable; (iii) the Loan Agreement, as modified by
this Modification, constitutes the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms except as
the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors’ rights or by general principles of equity; and (iv) each of the
representations and warranties set forth in Section 5 of the Loan Agreement is
true, correct and complete as of the date hereof (except to the extent such
representations and warranties expressly relate to another date, in which case
such representations and warranties are true, correct and complete as of such
other date).

 

6. NO DEFENSES OF BORROWER. Borrower agrees that, as of the date hereof, it has
no defenses against payment of any of the Obligations. Borrower acknowledges
that it is liable for all Obligations and all other obligations under the Loan
Documents.

 

7. PAYMENT OF LOAN FEE. Borrower shall pay Bank a fee in the amount of Two
Thousand Dollars ($2,000) (“Loan Fee”) plus all out-of-pocket fees, including
reasonable legal fees.

 

8. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties and agreements, as set forth
in the Loan Documents. Except as expressly modified pursuant to this
Modification, the terms of the Loan Documents remain unchanged and in full force
and effect. Bank’s agreement to modifications to the existing Obligations
pursuant to this Modification in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Modification shall constitute
a satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Loan Documents, unless the
party is expressly released by Bank in writing. Unless expressly released
herein, no maker, endorser, or guarantor will be released by virtue of this
Modification. The terms of this paragraph apply not only to this Modification,
but also to all subsequent loan modification agreements.

 

9. CONDITIONS. The effectiveness of this Modification is conditioned upon
payment of the Loan Fee and execution and delivery by Borrower of this
Modification.

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IN WITNESS WHEREOF, each of the parties has caused this Loan Modification
Agreement to be executed by one of its representatives thereunto duly
authorized, as of the date first above written.

 

BANK:       BORROWER: SILICON VALLEY BANK       KANA SOFTWARE, INC.

By:

 

/s/ Nick Tsiagkas

     

By:

 

/s/ John Thompson

Name:

 

Nick Tsiagkas

     

Name:

 

John Thompson

Title:

 

Relationship Manager

     

Title:

 

Chief Financial Officer