Exhibit 10.1

 
LOAN AND SECURITY AGREEMENT
 
 
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of June___, 2014
(the “Effective Date”) between (i) SILICON VALLEY BANK, a California corporation
(“Bank”), and (ii) ASTEA INTERNATIONAL INC., a Delaware corporation (“Astea”),
NETWORK DATA, INC., A Delaware corporation (“Network”), VIRTUAL SERVICE
CORPORATION, a Delaware corporation (“Virtual”), and FC ACQUISITION CORP., a
Delaware corporation (“FC”, and together with Astea, Network and Virtual,
individually and collectively, jointly and severally, the “Borrower”), provides
the terms on which Bank shall lend to Borrower and Borrower shall repay
Bank.  The parties agree as follows:
 
1           ACCOUNTING AND OTHER TERMS
 
Accounting terms not defined in this Agreement shall be construed following
GAAP.  Calculations and determinations must be made following GAAP.  Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13.  All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.
 
2           LOAN AND TERMS OF PAYMENT
 
2.1        Promise to Pay.  Borrower hereby unconditionally, individually and
collectively, jointly and severally, promises to pay Bank the outstanding
principal amount of all Credit Extensions and accrued and unpaid interest
thereon as and when due in accordance with this Agreement.
 
2.2        Revolving Advances.
 
(a)           Availability.  Subject to the terms and conditions of this
Agreement and to deduction of Reserves, following completion of the Initial
Audit Bank shall make Advances not exceeding the Availability Amount.  Amounts
borrowed under the Revolving Line may be repaid and, prior to the Revolving Line
Maturity Date, reborrowed, subject to the applicable terms and conditions
precedent herein.
 
(b)           Termination; Repayment.  The Revolving Line terminates on the
Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.
 
2.3        Overadvances.  If, at any time, the outstanding principal amount of
any Advances exceeds the lesser of either the Revolving Line or the Borrowing
Base, Borrower shall immediately pay to Bank in cash the amount of such excess
(such excess, the “Overadvance”). Without limiting Borrower’s obligation to
repay Bank any Overadvance, Borrower agrees to pay Bank interest on the
outstanding amount of any Overadvance, on demand, at the Default Rate.
 
 
 
 
 
 

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2.4        Payment of Interest on the Credit Extensions.
 
(a)           Advances.  Subject to Section 2.4(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to the greater of (i) two percentage points (2.00%) above the
Prime Rate or (ii) five and one-quarter percent (5.25%), which interest shall in
any event be payable monthly in accordance with Section 2.4(e) below.
 
(b)           Default Rate.  Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is three percentage points (3.00%) above the rate that is
otherwise applicable thereto (the “Default Rate”).  Fees and expenses which are
required to be paid by Borrower pursuant to the Loan Documents (including,
without limitation, Bank Expenses) but are not paid when due shall bear interest
until paid at a rate equal to the highest rate applicable to the
Obligations.  Payment or acceptance of the increased interest rate provided in
this Section 2.4(b) is not a permitted alternative to timely payment and shall
not constitute a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of Bank.
 
(c)           Adjustment to Interest Rate.  Changes to the interest rate of any
Credit Extension based on changes to the Prime Rate shall be effective on the
effective date of any change to the Prime Rate and to the extent of any such
change.
 
(d)           Minimum Interest.  From and after the first anniversary of the
Effective Date, in the event the aggregate amount of interest earned by Bank in
connection with the Revolving Line in any month following the initial Credit
Extension (such period, the “Minimum Interest Period,” which period shall begin
on the Effective Date and continue with each month thereafter until the earlier
of the Revolving Line Maturity Date or the date this Agreement is terminated) is
less than Four Thousand Five Hundred Dollars ($4,500.00) (exclusive of any
collateral monitoring fees, unused line fees, or any other fees and charges
hereunder) (“Minimum Interest”), Borrower shall pay to Bank, upon demand by
Bank, an amount equal to the (i) Minimum Interest minus (ii) the aggregate
amount of all interest earned by Bank (exclusive of any collateral monitoring
fees, unused line fees, or any other fees and charges hereunder) in such Minimum
Interest Period.  The amount of Minimum Interest charged shall be prorated for
any partial Minimum Interest Period upon termination of this Agreement.  Except
as provided in this Section 2.4(d) on account of any prorated period, Borrower
shall not be entitled to any credit, rebate, or repayment of any Minimum
Interest pursuant to this Section 2.4(d) notwithstanding any termination of this
Agreement or the suspension or termination of Bank’s obligation to make loans
and advances hereunder.  Bank may deduct amounts owing by Borrower under this
Section 2.4(d) pursuant to the terms of Section 2.6(c).  Bank shall provide
Borrower written notice of deductions made from the Designated Deposit Account
pursuant to the terms of this Section 2.4(d).
 
(e)           Payment; Interest Computation.  Interest is payable monthly on the
last calendar day of each month and shall be computed on the basis of a 360-day
year for the actual number of days elapsed.  In computing interest, (i) all
payments received after 12:00 noon Pacific time on any day shall be deemed
received at the opening of business on the next Business Day, and (ii) the date
of the making of any Credit Extension shall be included and the date of payment
shall be excluded; provided, however, that if any Credit Extension is repaid on
the same day on which it is made, such day shall be included in computing
interest on such Credit Extension.
 
 
 
 
 
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2.5        Fees.  Borrower shall pay to Bank:
 
(a)           Commitment Fee.  A fully earned, non-refundable commitment fee of
Fifteen Thousand Dollars ($15,000), payable on the Effective Date; and
 
(b)           Anniversary Fee.  A fully earned, non-refundable anniversary fee
of Fifteen Thousand Dollars ($15,000), payable on or before the first
anniversary of the Effective Date.
 
(c)           Bank Expenses.  All Bank Expenses (including reasonable attorneys’
fees and out-of-pocket expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due (or, if no
stated due date, upon demand by Bank).
 
(d)           Fees Fully Earned.  Unless otherwise provided in this Agreement or
in a separate writing by Bank, Borrower shall not be entitled to any credit,
rebate, or repayment of any fees earned by Bank pursuant to this Agreement
notwithstanding any termination of this Agreement or the suspension or
termination of Bank’s obligation to make loans and advances hereunder.  Bank may
deduct amounts owing by Borrower under the clauses of this Section 2.5 pursuant
to the terms of Section 2.6(c).  Bank shall provide Borrower written notice of
deductions made from the Designated Deposit Account pursuant to the terms of the
clauses of this Section 2.5.
 
2.6          Payments; Application of Payments; Debit of Accounts.
 
(a)           All payments to be made by Borrower under any Loan Document shall
be made in immediately available funds in Dollars, without setoff or
counterclaim, before 12:00 noon Pacific time on the date when due.  Payments of
principal and/or interest received after 12:00 noon Pacific time are considered
received at the opening of business on the next Business Day.  When a payment is
due on a day that is not a Business Day, the payment shall be due the next
Business Day, and additional fees or interest, as applicable, shall continue to
accrue until paid.
 
(b)           Bank has the exclusive right to determine the order and manner in
which all payments with respect to the Obligations may be applied.  Borrower
shall have no right to specify the order or the accounts to which Bank shall
allocate or apply any payments required to be made by Borrower to Bank or
otherwise received by Bank under this Agreement when any such allocation or
application is not specified elsewhere in this Agreement.
 
(c)           Bank may debit any of Borrower’s deposit accounts, including the
Designated Deposit Account, for principal and interest payments or any other
amounts Borrower owes Bank when due.  These debits shall not constitute a
set-off.
 
 
 
 
 
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3           CONDITIONS OF LOANS
 
3.1        Conditions Precedent to Initial Credit Extension.  Bank’s obligation
to make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, such
documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
 
(a)           duly executed original signatures to the Loan Documents;
 
(b)           duly executed original signatures to the Control Agreements, if
any;
 
(c)            [reserved];
 
(d)            [reserved];
 
(e)            the Operating Documents and long-form good standing certificates
(or equivalent) of Borrower certified by the Secretary of State (or equivalent
agency) of Borrower’s jurisdiction of organization or formation and each
jurisdiction in which Borrower is qualified to conduct business, each as of a
date no earlier than thirty (30) days prior to the Effective Date;
 
(f)             [reserved];
 
(g)            duly executed original signatures to the completed Borrowing
Resolutions for Borrower;
 
(h)            the Subordination Agreement by Zack B. Bergreen in favor of Bank,
together with the duly executed original signatures thereto;
 
(i)             evidence that (i) the Liens securing Indebtedness owed by
Borrower to any third party will be terminated and (ii) the documents and/or
filings evidencing the perfection of such Liens, including without limitation
any financing statements and/or control agreements, have or will, concurrently
with the initial Credit Extension, be terminated;
 
(j)             certified copies, dated as of a recent date, of financing
statement searches and UK Companies House register searches as Bank may request,
accompanied by written evidence (including any UCC termination statements) that
the Liens indicated in any such financing statements either constitute Permitted
Liens or have been or, in connection with the initial Credit Extension, will be
terminated or released;
 
(k)            the consolidated Perfection Certificate of Borrower, together
with the duly executed original signature thereto;
 
(l)             a landlord’s consent in favor of Bank for (i) 240 Gibraltar
Road, Suite 300, Horsham, Pennsylvania 19044; and (ii) 8 Hughes, Suite 100,
Irvine, California 92618, each by the respective landlord thereof, together with
the duly executed original signatures thereto;
 
(m)           [reserved];
 
(n)            [reserved];
 
 
 
 
 
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(o)            [reserved];
 
(p)            evidence satisfactory to Bank that the insurance policies and
endorsements required by Section 6.7 hereof are in full force and effect,
together with appropriate evidence showing lender loss payable and/or additional
insured clauses or endorsements in favor of Bank;
 
(q)            the completion of the Initial Audit; and
 
(r)             payment of the fees and Bank Expenses then due as specified in
Section 2.5 hereof.
 
3.2          Conditions Precedent to all Credit Extensions.  Bank’s obligations
to make each Credit Extension, including the initial Credit Extension, is
subject to the following conditions precedent:
 
(a)             timely receipt of an executed Transaction Report;
 
(b)            the representations and warranties in this Agreement shall be
true, accurate, and complete in all material respects on the date of the
Transaction Report and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Default or Event of Default shall have occurred and be continuing or result from
the Credit Extension.  Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in this Agreement
remain true, accurate, and complete in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and
 
(c)            Bank determines in its good faith business judgment that there
has not been any material impairment in the general affairs, management, results
of operation, financial condition or the prospect of repayment of the
Obligations, or any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Bank.
 
3.3          Covenant to Deliver.  Borrower agrees to deliver to Bank each item
required to be delivered to Bank under this Agreement as a condition precedent
to any Credit Extension.  Borrower expressly agrees that a Credit Extension made
prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.
 
3.4          Procedures for Borrowing.  Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall
be irrevocable) by electronic mail by 12:00 noon Pacific time on the Funding
Date of the Advance.  In connection with such notification, Borrower must
promptly deliver to Bank by electronic mail a completed Transaction Report
executed by an Authorized Signer together with such other reports and
information, including without limitation, sales journals, cash receipts
journals, accounts receivable aging reports, as Bank may request in its sole
discretion.  Bank shall credit proceeds of an Advance to the Designated Deposit
Account.  Bank may make Advances under this Agreement based on instructions from
an Authorized Signer or without instructions if the Advances are necessary to
meet Obligations which have become due.
 
 
 
 
 
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4             CREATION OF SECURITY INTEREST
 
4.1          Grant of Security Interest.  Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof.
 
Borrower acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank.  Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to
Permitted Liens that are permitted pursuant to the terms of this Agreement to
have superior priority to Bank’s Lien in this Agreement).
 
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations) are repaid in
full in cash.  Upon payment in full in cash of the Obligations (other than
inchoate indemnity obligations) and at such time as Bank’s obligation to make
Credit Extensions has terminated, Bank shall, at the sole cost and expense of
Borrower, release its Liens in the Collateral granted herein and all rights
therein shall revert to Borrower.  In the event (x) all Obligations (other than
inchoate indemnity obligations), except for Bank Services, are satisfied in
full, and (y) this Agreement is terminated, Bank shall terminate the security
interest granted herein upon Borrower providing cash collateral acceptable to
Bank in its good faith business judgment for Bank Services, if any.  In the
event such Bank Services consist of outstanding Letters of Credit, Borrower
shall provide to Bank cash collateral in an amount equal to (x) if such Letters
of Credit are denominated in Dollars, then at least one hundred five percent
(105.0%); and (y) if such Letters of Credit are denominated in a Foreign
Currency, then at least one hundred ten percent (110.0%), of the Dollar
Equivalent of the face amount of all such Letters of Credit plus all interest,
fees, and costs due or to become due in connection therewith (as estimated by
Bank in its good faith business judgment), to secure all of the Obligations
relating to such  Letters of Credit.
 
4.2         Priority of Security Interest.  Borrower represents, warrants, and
covenants that the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the Collateral
(subject only to Permitted Liens that are permitted pursuant to the terms of
this Agreement to have superior priority to Bank’s Lien under this
Agreement).  If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.
 
 
 
 
 
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4.3        Authorization to File Financing Statements.  Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions to perfect or protect Bank’s interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.   Such financing statements may indicate the Collateral as “all
assets of the Debtor” or words of similar effect, or as being of an equal or
lesser scope, or with greater detail, all in Bank’s discretion.
 
5           REPRESENTATIONS AND WARRANTIES
 
  Borrower represents and warrants as follows:
 
5.1        Due Organization, Authorization; Power and Authority.  Each Borrower
is duly existing and in good standing as a Registered Organization (if
applicable) in its jurisdiction of formation and is qualified and licensed to do
business and is in good standing in any jurisdiction in which the conduct of its
business or its ownership of property requires that it be qualified except where
the failure to do so could not reasonably be expected to have a material adverse
effect on Borrower’s business.  In connection with this Agreement, Borrower has
delivered to Bank a completed consolidated certificate signed by Astea, entitled
“Perfection Certificate”.  Borrower represents and warrants to Bank that (a)
Borrower’s exact legal name is that indicated on the Perfection Certificate and
on the signature page hereof; (b) Borrower is an organization of the type and is
organized in the jurisdiction set forth in the Perfection Certificate; (c) the
Perfection Certificate accurately sets forth Borrower’s organizational
identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth Borrower’s place of business, or,
if more than one, its chief executive office as well as Borrower’s mailing
address (if different than its chief executive office); (e) Borrower (and each
of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to Borrower and
each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement).  If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower’s organizational
identification number.
 
The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect), or (v) conflict with, contravene, constitute a default
or breach under, or result in or permit the termination or acceleration of, any
material agreement by which Borrower is bound.  Borrower is not in default under
any agreement to which it is a party or by which it is bound in which the
default could reasonably be expected to have a material adverse effect on
Borrower’s business.
 
 
 
 
 
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5.2          Collateral.  Borrower has good title to, rights in, and the power
to transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens.  Borrower
has no Collateral Accounts at or with any bank or financial institution other
than Bank or Bank’s Affiliates except for the Collateral Accounts described in
the Perfection Certificate delivered to Bank in connection herewith and which
Borrower has taken such actions as are necessary to give Bank a perfected
security interest therein, pursuant to the term of Section 6.8(b).  The Accounts
are bona fide, existing obligations of the Account Debtors.
 
The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate.  None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
 
All Inventory is in all material respects of good and marketable quality, free
from material defects.
 
Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) non-exclusive licenses granted to its customers
in the ordinary course of business, (b) over-the-counter software that is
commercially available to the public, and (c) material Intellectual Property
licensed to Borrower and noted on the Perfection Certificate.  Each Patent which
it owns or purports to own and which is material to Borrower’s business is valid
and enforceable, and no part of the Intellectual Property which Borrower owns or
purports to own and which is material to Borrower’s business has been judged
invalid or unenforceable, in whole or in part.  To the best of Borrower’s
knowledge, no claim has been made that any part of the Intellectual Property
violates the rights of any third party except to the extent such claim would not
reasonably be expected to have a material adverse effect on Borrower’s business.
 
Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is it bound by, any Restricted License.
 
5.3          Accounts Receivable.
 
(a)           For each Account with respect to which Advances are requested, on
the date each Advance is requested and made, such Account shall be an Eligible
Account.
 
(b)           All statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all respects what they
purport to be.  All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
laws and governmental rules and regulations.  Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are Eligible Accounts in any Transaction Report.  To the best of Borrower’s
knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Eligible Accounts are genuine, and all such
documents, instruments and agreements are legally enforceable in accordance with
their terms.
 
 
 
 
 
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5.4           Litigation.  There are no actions or proceedings pending or, to
the knowledge of any Responsible Officer, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than, individually or in the
aggregate, One Hundred Thousand Dollars ($100,000).
 
5.5           Financial Statements; Financial Condition.  All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower’s consolidated financial
condition and Borrower’s consolidated results of operations.  There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
 
5.6           Solvency.  The fair salable value of Borrower’s consolidated
assets (including goodwill minus disposition costs) exceeds the fair value of
Borrower’s liabilities; Borrower is not left with unreasonably small capital
after the transactions in this Agreement; and Borrower is able to pay its debts
(including trade debts) as they mature.
 
5.7           Regulatory Compliance.  Borrower is not an “investment company” or
a company “controlled” by an “investment company” under the Investment Company
Act of 1940, as amended.  Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations X, T and U of
the Federal Reserve Board of Governors).  Borrower (a) has complied in all
material respects with all Requirements of Law, and (b) has not violated any
Requirements of Law the violation of which could reasonably be expected to have
a material adverse effect on its business.  None of Borrower’s or any of its
Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally.  Borrower and each of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Government Authorities that are necessary to continue
their respective businesses as currently conducted.
 
5.8           Subsidiaries; Investments.  Borrower does not own any stock,
partnership, or other ownership interest or other equity securities except for
Permitted Investments.
 
5.9           Tax Returns and Payments; Pension Contributions.  Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except (a) to the extent such taxes are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, so long as such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made therefor,
or (b) if such taxes, assessments, deposits and contributions do not,
individually or in the aggregate, exceed Twenty Five Thousand Dollars ($25,000).
 
 
 
 
 
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To the extent Borrower defers payment of any contested taxes, Borrower shall
(i) notify Bank in writing of the commencement of, and any material development
in, the proceedings, and (ii) post bonds or take any other steps required to
prevent the Governmental Authority levying such contested taxes from obtaining a
Lien upon any of the Collateral that is other than a “Permitted Lien.”  Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower in excess of Twenty Five Thousand Dollars ($25,000).  Borrower has paid
all amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
 
5.10         Use of Proceeds.  Borrower shall use the proceeds of the Credit
Extensions (i) for the repayment of up to Two Hundred Fifty Thousand Dollars
($250,000) of Subordinated Debt owed to Mr. Zack B. Bergreen; and (ii) as
working capital and to fund its general business requirements and not for
personal, family, household or agricultural purposes.
 
5.11         Full Disclosure.  No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or, to Borrower’s
knowledge, omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being recognized
by Bank that the projections and forecasts provided by Borrower in good faith
and based upon reasonable assumptions are not viewed as facts and that actual
results during the period or periods covered by such projections and forecasts
may differ from the projected or forecasted results).
 
5.12         Definition of “Knowledge.”  For purposes of the Loan Documents,
whenever a representation or warranty is made to Borrower’s knowledge or
awareness, to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of any Key Person.
 
6              AFFIRMATIVE COVENANTS
 
Borrower shall do all of the following:
 
6.1          Government Compliance.
 
(a)           Maintain its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on Borrower’s business
or operations.  Borrower shall comply, and have each Subsidiary comply, in all
material respects, with all laws, ordinances and regulations to which it is
subject.
 
 
 
 
 
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(b)           Obtain all of the Governmental Approvals necessary for the
performance by Borrower of its obligations under the Loan Documents to which it
is a party and the grant of a security interest to Bank in all of its
property.  Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Bank.
 
6.2           Financial Statements, Reports, Certificates.  Provide Bank with
the following:
 
(a)           a Transaction Report (and any schedules related thereto) (i) with
each request for an Advance, (ii) on the 15th days (or the immediately preceding
Business Day if the 15th is not a Business Day) and the last Business Day of
each month when a Streamline Period is not in effect, and (iii) within fifteen
(15) days after the end of each month when a Streamline Period is in effect;
 
(b)           within fifteen (15) days after the end of each month, (A) monthly
accounts receivable agings, aged by invoice date, (B) monthly accounts payable
agings, aged by invoice date, and outstanding or held check registers, if any,
and (C) monthly reconciliations of accounts receivable agings (aged by invoice
date), transaction reports, Deferred Revenue report, and general ledger;
 
(c)           as soon as available, but no later than thirty (30) days after the
last day of each month, a company prepared consolidated and consolidating
balance sheet, income statement and statement of cash flows, covering Borrower’s
and each of its Subsidiary’s operations for such month certified by a
Responsible Officer and in a form acceptable to Bank (the “Monthly Financial
Statements”);
 
(d)           within thirty (30) days after the last day of each month and
together with the Monthly Financial Statements, and within forty-five days after
the end of each quarter and together with the Quarterly Financial Statements, a
duly completed Compliance Certificate signed by a Responsible Officer,
certifying that as of the end of such month/quarter, as applicable, Borrower was
in full compliance with all of the terms and conditions of this Agreement, and
setting forth calculations showing compliance with the financial covenants set
forth in this Agreement and such other information as Bank may reasonably
request, including, without limitation, a statement that at the end of such
month there were no held checks;
 
(e)           as soon as available, and in any event within forty-five (45) days
after the end of each fiscal quarter of Borrower, company prepared consolidated
and consolidating balance sheet, income statement and statement of cash flows
covering Borrower’s and each of its Subsidiary’s operations for such quarter
certified by a Responsible Officer and in a form acceptable to Bank (the
“Quarterly Financial Statements”);
 
(f)           within thirty (30) days after the end of each fiscal year of
Borrower, (A) annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal year of
Borrower, and (B) annual financial projections for the following fiscal year (on
a quarterly basis) as approved by Borrower’s board of directors, together with
any related business forecasts used in the preparation of such annual financial
projections;
 
(g)           as soon as available, and in any event within 180 days following
the end of Borrower’s fiscal year, audited consolidated financial statements
prepared under GAAP, consistently applied, together with an unqualified opinion
on the financial statements from an independent certified public accounting firm
reasonably acceptable to Bank;
 
 
 
 
 
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(h)         within five (5) days of filing, copies of all periodic and other
reports, proxy statements and other materials filed by Borrower with the SEC,
any Governmental Authority succeeding to any or all of the functions of the SEC
or with any national securities exchange, or distributed to its shareholders, as
the case may be.  Documents required to be delivered pursuant to the terms
hereof (to the extent any such documents are included in materials otherwise
filed with the SEC) may be delivered electronically and if so delivered, shall
be deemed to have been delivered on the date on which Borrower posts such
documents, or provides a link thereto, on Borrower’s website on the Internet at
Borrower’s website address; provided, however, Borrower shall promptly notify
Bank in writing (which may be by electronic mail) of the posting of any such
documents;
 
(i)           within five (5) days of delivery, copies of all statements,
reports and notices made available to Borrower’s security holders or to any
holders of Subordinated Debt;
 
(j)           prompt report of any legal actions pending or threatened in
writing against Borrower or any of its Subsidiaries that could result in damages
or costs to Borrower or any of its Subsidiaries of, individually or in the
aggregate, One Hundred Thousand Dollars ($100,000) or more; and
 
(k)          other financial information reasonably requested by Bank.
 
6.3           Accounts Receivable.
 
(a)          Schedules and Documents Relating to Accounts. Borrower shall
deliver to Bank transaction reports and schedules of collections, as provided in
Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s
failure to execute and deliver the same shall not affect or limit Bank’s Lien
and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit Bank’s Lien and other
rights therein.  If requested by Bank, Borrower shall furnish Bank with copies
(or, at Bank’s request, originals) of all contracts, orders, invoices, and other
similar documents, and all shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Accounts.  In addition, Borrower shall deliver to Bank,
on its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.
 
(b)          Disputes.  Borrower shall promptly notify Bank of all disputes or
claims relating to Accounts in excess of Twenty Five Thousand Dollars ($25,000)
in any one instance or Fifty Thousand Dollars ($50,000) in the aggregate at any
time.  Borrower may forgive (completely or partially), compromise, or settle any
Account for less than payment in full, or agree to do any of the foregoing so
long as (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, in arm’s-length transactions, and reports
the same to Bank in the regular reports provided to Bank; (ii) no Default or
Event of Default has occurred and is continuing; and (iii) after taking into
account all such discounts, settlements and forgiveness, the total outstanding
Advances will not exceed the lesser of the Revolving Line or the Borrowing Base.
 
 
 
 
 
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(c)          Collection of Accounts.  Borrower shall have the right to collect
all Accounts, unless and until a Default or an Event of Default has occurred and
is continuing and Bank instructs Borrower otherwise.  Bank shall require that
Borrower direct Account Debtors to deliver or transmit all proceeds of Accounts
into a lockbox account, or such other “blocked account” as specified by Bank
(any such account, a “Cash Collateral Account”), pursuant to a blocked account
agreement in form and substance reasonably satisfactory to as Bank.  Whether or
not an Event of Default has occurred and is continuing, Borrower shall
immediately deliver all payments on and proceeds of Accounts to a Cash
Collateral Account to be applied to immediately reduce the Obligations;
provided, that (i) in respect of any Cash Collateral Account located outside the
UK, during a Streamline Period, such payments and proceeds shall not be applied
to immediately reduce the Obligations and shall instead be transferred to an
account of Borrower maintained at Bank and (ii) in respect of any Cash
Collateral Account located within the UK, during a Streamline Period, Borrower
may request in writing and Bank may accede in writing that such payments and
proceeds not be applied to immediately reduce the Obligations and instead be
transferred to an account of Borrower maintained at Bank.
 
(d)           Returns.  Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly (i) determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and (iii) provide a
copy of such credit memorandum to Bank, upon request from Bank.  In the event
any attempted return occurs after the occurrence and during the continuance of
any Event of Default, Borrower shall hold the returned Inventory in trust for
Bank, and immediately notify Bank of the return of the Inventory.
 
(e)           Verification.  Bank may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, either in the name of Borrower or Bank or such other name as
Bank may choose, and notify any Account Debtor of Bank’s security interest in
such Account.
 
(f)           No Liability.  Bank shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Bank be
deemed to be responsible for any of Borrower's obligations under any contract or
agreement giving rise to an Account.  Nothing herein shall, however, relieve
Bank from liability for its own gross negligence or willful misconduct.
 
6.4           Remittance of Proceeds.  Except as otherwise provided in Section
6.3(c), deliver, in kind, all proceeds arising from the disposition of any
Collateral to Bank in the original form in which received by Borrower not later
than the following Business Day after receipt by Borrower, to be applied to the
Obligations (a) prior to an Event of Default, pursuant to the terms of Section
2.5(b) hereof, and (b) after the occurrence and during the continuance of an
Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if
no Event of Default has occurred and is continuing, Borrower shall not be
obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of Twenty Five Thousand Dollars ($25,000) or
less (for all such transactions in any fiscal year).  Borrower agrees that it
will not commingle proceeds of Collateral with any of Borrower’s other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for Bank.  Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
 
 
 
 
 
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6.5           Taxes; Pensions.  Timely file, and require each of its
Subsidiaries to timely file, all required tax returns and reports and timely
pay, and require each of its Subsidiaries to timely pay, all foreign, federal,
state and local taxes, assessments, deposits and contributions owed by Borrower
and each of its Subsidiaries, except for deferred payment of any taxes contested
pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on
demand, appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.
 
6.6           Access to Collateral; Books and Records.  In addition to the
Initial Audit, at reasonable times, on three (3) Business Days’ notice (provided
no notice is required if an Event of Default has occurred and is continuing),
Bank, or its agents, shall have the right to inspect the Collateral and the
right to audit and copy Borrower’s Books.  The foregoing inspections and audits
shall be conducted at Borrower’s expense and no more often than once every six
(6) months unless an Event of Default has occurred and is continuing in which
case such inspections and audits shall occur as often as Bank shall determine is
necessary.  The charge therefor and for the Initial Audit shall be $850 per
person per day (or such higher amount as shall represent Bank’s then-current
standard charge for the same), plus reasonable out-of-pocket expenses.  In the
event Borrower and Bank schedule an audit more than ten (10) days in advance,
and Borrower cancels or seeks to or reschedules the audit with less than ten
(10) days written notice to Bank, then (without limiting any of Bank’s rights or
remedies) Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket
expenses incurred by Bank to compensate Bank for the anticipated costs and
expenses of the cancellation or rescheduling.
 
6.7           Insurance.
 
(a)           Keep its business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s industry and location and as Bank
may reasonably request.  Insurance policies shall be in a form, with financially
sound and reputable insurance companies that are not Affiliates of Borrower, and
in amounts that are reasonably satisfactory to Bank.  All property policies
shall have a lender’s loss payable endorsement showing Bank as the sole lender
loss payee.  All liability policies shall show, or have endorsements showing,
Bank as an additional insured.  Bank shall be named as lender loss payee and/or
additional insured with respect to any such insurance providing coverage in
respect of any Collateral.
 
(b)           Ensure that proceeds payable under any property policy are, at
Bank’s option, payable to Bank on account of the Obligations.
 
 
 
 
 
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(c)           At Bank’s request, Borrower shall deliver certified copies of
insurance policies and evidence of all premium payments.  Each provider of any
such insurance required under this Section 6.7 shall agree, by endorsement upon
the policy or policies issued by it or by independent instruments furnished to
Bank, that it will give Bank thirty (30) days prior written notice before any
such policy or policies shall be materially altered or canceled.  If Borrower
fails to obtain insurance as required under this Section 6.7 or to pay any
amount or furnish any required proof of payment to third persons and Bank, Bank
may make all or part of such payment or obtain such insurance policies required
in this Section 6.7, and take any action under the policies Bank deems prudent.
 
6.8           Operating Accounts.
 
(a)           Maintain all of its and all of its Subsidiaries’ operating and
other deposit accounts and securities accounts located in the United States
and/or the United Kingdom with Bank and Bank’s Affiliates, with all excess funds
maintained with Bank and Bank’s Affiliates. 
 
(b)           Provide Bank five (5) days prior-written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Bank or Bank’s Affiliates. For each Collateral Account that Borrower
at any time maintains, Borrower shall cause the applicable bank or financial
institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder, which Control
Agreement may not be terminated without the prior written consent of Bank.  The
provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes, and other employee wage and benefit
payments to or for the benefit of Borrower’s employees and identified to Bank by
Borrower as such.
 
6.9           Financial Covenants.
 
Maintain at all times, subject to periodic reporting as of the last day of each
month, unless otherwise noted, on a consolidated basis with respect to Borrower
and its Subsidiaries:
 
(a)           Adjusted Quick Ratio.  An Adjusted Quick Ratio of at least 1.25 to
1.00.
 
(b)           Profitability/Maximum Loss.  Achieve a minimum positive Net
Income, measured as indicated below for each quarterly period listed below, of
at least the following:
 
 
Quarterly Period Ending
Minimum Net Income
 
June 30, 2014, measured on a trailing three month basis
$1.00
   
September 30, 2014, measured on a trailing six month basis
$450,000
   
December 31, 2014, measured on a trailing nine month basis
$350,000

 
 
 
 
 
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Minimum Net Income covenant requirements for the quarterly periods ending in
2015 shall be mutually agreed upon by Borrower and Bank, in their mutual good
faith business judgment, on or before February 28, 2015; provided that failure
to establish such requirements on or before February 28, 2015 shall result in an
immediate Event of Default, for which no cure or grace period shall apply.
 
 
6.10       Protection and Registration of Intellectual Property Rights.

(a)           (i) Protect, defend and maintain the validity and enforceability
of its Intellectual Property material to its business; (ii) promptly advise Bank
upon Borrower becoming aware in writing of material infringements or any other
event that could reasonably be expected to materially and adversely affect the
value of its Intellectual Property; and (iii) not allow any Intellectual
Property material to Borrower’s business to be abandoned, forfeited or dedicated
to the public without Bank’s written consent.
 
(b)           Provide written notice to Bank within fifteen (15) days of
entering or becoming bound by any Restricted License (other than
over-the-counter software that is commercially available to the
public).  Borrower shall take such steps as Bank reasonably requests to obtain
the consent of, or waiver by, any person whose consent or waiver is necessary
for (i) any Restricted License to be deemed “Collateral” and for Bank to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such Restricted License, whether now existing or entered
into in the future, and (ii) Bank to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with
Bank’s rights and remedies under this Agreement and the other Loan Documents.
 
6.11        Litigation Cooperation.  From the date hereof and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
 
6.12        Formation or Acquisition of Subsidiaries.  Notwithstanding and
without limiting the negative covenants contained in Sections 7.3 and 7.7
hereof, at the time that Borrower forms any direct or indirect Subsidiary or
acquires any direct or indirect Subsidiary after the Effective Date, Borrower
shall (a) cause such new Subsidiary to provide to Bank a joinder to the Loan
Agreement to cause such Subsidiary to become a co-borrower hereunder together
with such appropriate financing statements and/or Control Agreements, all in
form and substance satisfactory to Bank (including being sufficient to grant
Bank a first priority Lien (subject to Permitted Liens) in and to the assets of
such newly formed or acquired Subsidiary), (b) provide to Bank appropriate
certificates and powers and financing statements, pledging all of the direct or
beneficial ownership interest in such new Subsidiary, in form and substance
satisfactory to Bank; and (c) provide to Bank all other documentation in form
and substance satisfactory to Bank, including one or more opinions of counsel
satisfactory to Bank, which in its opinion is appropriate with respect to the
execution and delivery of the applicable documentation referred to above.  Any
document, agreement, or instrument executed or issued pursuant to this Section
6.12 shall be a Loan Document.
 
 
 
 
 
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6.13        Further Assurances.  Execute any further instruments and take
further action as Bank reasonably requests to perfect or continue Bank’s Lien in
the Collateral or to effect the purposes of this Agreement.  Deliver to
Bank, within five (5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.
 
6.14        Post-closing Matters.  The following matters shall be completed on a
post-closing basis, in each case in form and substance acceptable to Bank, in
its reasonable discretion:
 
(a)      On or before the date that is thirty (30) days after the Effective
Date, provide Bank evidence of the conversion of not less than Two Million
Dollars ($2,000,000) of Indebtedness owed to Zack B. Bergreen into equity
securities of the Borrower; and
 
(b)      On or before the date that is thirty (30) days after the Effective
Date, provide Bank a copy of an amended and restated revolving promissory note
in an amount not to exceed One Million Dollars ($1,000,000).
 
7              NEGATIVE COVENANTS
 
Borrower shall not do any of the following without Bank’s prior written consent:
 
7.1          Dispositions.  Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers (a)
of Inventory in the ordinary course of business; (b) of worn-out or obsolete
Equipment that is, in the reasonable judgment of Borrower, no longer
economically practicable to maintain or useful in the ordinary course of
business of Borrower; (c) consisting of Permitted Liens and Permitted
Investments; (d) consisting of the sale or issuance of any stock of Borrower
permitted under Section 7.2 of this Agreement; and (e) consisting of Borrower’s
use or transfer of money or Cash Equivalents in the ordinary course of its
business for the payment of ordinary course business expenses in a manner that
is not prohibited by the terms of this Agreement or the other Loan Documents.
 
7.2          Changes in Business, Management, Control, or Business
Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower and such
Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or
dissolve; or (c) (i) fail to provide notice to Bank of any Key Person departing
from or ceasing to be employed by Borrower within fifteen (15) days after such
Key Person’s departure from Borrower; or (ii) permit or suffer any Change in
Control.
 
 
 
 
 
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Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Fifty Thousand
Dollars ($50,000) in Borrower’s assets or property) or deliver any portion of
the Collateral valued, individually or in the aggregate, in excess of Fifty
Thousand Dollars ($50,000) to a bailee at a location other than to a bailee and
at a location already disclosed in the Perfection Certificate, (2) change its
jurisdiction of organization, (3) change its organizational structure or type,
(4) change its legal name, or (5) change any organizational number (if any)
assigned by its jurisdiction of organization.  If Borrower intends to deliver
any portion of the Collateral valued, individually or in the aggregate, in
excess of Fifty Thousand Dollars ($50,000) to a bailee, and Bank and such bailee
are not already parties to a bailee agreement governing both the Collateral and
the location to which Borrower intends to deliver the Collateral, then Borrower
will first receive the written consent of Bank, and such bailee shall execute
and deliver a bailee agreement in form and substance reasonably satisfactory to
Bank.
 
7.3           Mergers or Acquisitions.  Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person (including, without limitation, by
the formation of any Subsidiary).  A Subsidiary may merge or consolidate into
another Subsidiary or into Borrower.
 
7.4           Indebtedness.  Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
 
7.5           Encumbrance.  Create, incur, allow, or suffer any Lien on any of
its property, or assign or convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, permit any Collateral not to be subject to the first priority
security interest granted herein, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Bank) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s Intellectual Property, except as is otherwise permitted in Section
7.1 hereof and the definition of “Permitted Liens” herein.
 
7.6           Maintenance of Collateral Accounts.  Maintain any Collateral
Account except pursuant to the terms of Section 6.8(b) hereof.
 
7.7           Distributions; Investments.  (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock;
provided that Borrower may (i) (X) convert any of its convertible securities
into other securities pursuant to the terms of such convertible securities or
otherwise in exchange thereof, (Y) Borrower may pay dividends solely in common
stock; and (Z) during a Dividend Trigger Period, Borrower may repurchase the
stock of former employees or consultants pursuant to stock repurchase agreements
so long as an Event of Default does not exist at the time of such repurchase and
would not exist after giving effect to such repurchase, provided that the
aggregate amount of all such repurchases does not exceed Fifty Thousand Dollars
($50,000) per fiscal year; and (ii) during a Dividend Trigger Period, pay
dividends in cash to Mr. Zack Bergreen, so long as an Event of Default does not
exist at the time of such payment and would not exist after giving effect to
such payment; provided further that the aggregate amount of all such dividend
payments shall not exceed One Hundred Fifteen Thousand Dollars ($115,000) per
fiscal quarter; or (b) directly or indirectly make any Investment (including,
without limitation, by the formation of any Subsidiary) other than Permitted
Investments, or permit any of its Subsidiaries to do so.
 
 
 
 
 
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7.8           Transactions with Affiliates.  Other than the dividend payments
permitted pursuant to Section 7.7(a) and the payment of Subordinated Debt
described in Section 5.10, directly or indirectly enter into or permit to exist
any material transaction with any Affiliate of Borrower, except for transactions
that are in the ordinary course of Borrower’s business, upon fair and reasonable
terms that are no less favorable to Borrower than would be obtained in an arm’s
length transaction with a non-affiliated Person.
 
7.9           Subordinated Debt.  (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or
(b) amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof, provide for earlier or greater principal,
interest, or other payments thereon, or adversely affect the subordination
thereof to Obligations owed to Bank.
 
7.10         Compliance.  Become an “investment company” or a company controlled
by an “investment company”, under the Investment Company Act of 1940, as
amended, or undertake as one of its important activities extending credit to
purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonably be expected to
have a material adverse effect on Borrower’s business, or permit any of its
Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit
sharing and deferred compensation plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.
 
8              EVENTS OF DEFAULT
 
Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:
 
8.1           Payment Default.  Borrower fails to (a) make any payment of
principal or interest on any Credit Extension when due, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day cure period shall not apply to payments
due on the Revolving Line Maturity Date).  During the cure period, the failure
to make or pay any payment specified under clause (b) hereunder is not an Event
of Default (but no Credit Extension will be made during the cure period);
 
 
 
 
 
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8.2           Covenant Default.
 
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.5,
6.7, 6.8, 6.9, 6.10(b), 6.12 or violates any covenant in Section 7; or
 
(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; 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, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period).  Cure periods provided under this section shall not
apply, among other things, to financial covenants or any other covenants set
forth in clause (a) above;
 
8.3           Material Adverse Change.  A Material Adverse Change occurs;
 
8.4           Attachment; Levy; Restraint on Business.
 
(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under the control of Borrower (including
a Subsidiary), or (ii) a notice of lien or levy is filed against any of
Borrower’s assets by any Governmental Authority, and the same under subclauses
(i) and (ii) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day
cure period; or
 
(b) (i) any material portion of Borrower’s assets is attached, seized, levied
on, or comes into possession of a trustee or receiver, or (ii) any court order
enjoins, restrains, or prevents Borrower from conducting all or any material
part of its business;
 
8.5           Insolvency.  (a) Borrower or any of its Subsidiaries is unable to
pay its debts (including trade debts) as they become due or otherwise becomes
insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of
its Subsidiaries and is not dismissed or stayed within thirty (30) days (but no
Credit Extensions shall be made while any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);
 
8.6           Other Agreements.  There is, under any agreement to which Borrower
is a party with a third party or parties, (a) any default resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount individually or in the aggregate in
excess of One Hundred Thousand Dollars ($100,000); or (b) any breach or default
by Borrower, the result of which could have a material adverse effect on
Borrower’s business;
 
8.7           Judgments; Penalties.  One or more fines, penalties or final
judgments, orders or decrees for the payment of money in an amount, individually
or in the aggregate, of at least One Hundred Thousand Dollars ($100,000) (not
covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower by any
Governmental Authority, and the same are not, within ten (10) days after the
entry, assessment or issuance thereof, discharged, satisfied, or paid, or after
execution thereof, stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the satisfaction, payment, discharge, stay, or
bonding of such fine, penalty, judgment, order or decree);
 
 
 
 
 
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8.8          Misrepresentations.  Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce
Bank to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made;
 
8.9          Subordinated Debt.  Any document, instrument, or agreement
evidencing any Subordinated Debt shall for any reason be revoked or invalidated
or otherwise cease to be in full force and effect, any Person shall be in breach
thereof or contest in any manner the validity or enforceability thereof or deny
that it has any further liability or obligation thereunder, or the Obligations
shall for any reason be subordinated or shall not have the priority contemplated
by this Agreement or the Subordination Agreement; or
 
8.10        Governmental Approvals.  Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) cause, or could reasonably be expected to cause,
a Material Adverse Change, or (ii) adversely affects the legal qualifications of
Borrower or any of its Subsidiaries to hold such Governmental Approval in any
applicable jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of Borrower or any of its Subsidiaries to hold any
Governmental Approval in any other jurisdiction.
 
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, without notice or demand, do any
or all of the following:
 
(a)           declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
 
(b)           stop advancing money or extending credit for Borrower’s benefit
under this Agreement or under any other agreement between Borrower and Bank;
 
(c)           demand that Borrower (i) deposit cash with Bank in an amount equal
to at least 105% (110% for Letters of Credit denominated in a currency other
than Dollars) of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit remaining undrawn (plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment)), to secure all of the Obligations relating to such Letters
of Credit, as collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid
or payable over the remaining term of any Letters of Credit;
 
 
 
 
 
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(d)           terminate any foreign exchange forward contracts;
 
(e)           verify the amount of, demand payment of and performance under, and
collect any Accounts and General Intangibles, settle or adjust disputes and
claims directly with Account Debtors for amounts on terms and in any order that
Bank considers advisable, and notify any Person owing Borrower money of Bank’s
security interest in such funds;
 
(f)           make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral.  Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates.  Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank’s rights or remedies;
 
(g)           apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
 
(h)           ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;
 
(i)            place a “hold” on any account maintained with Bank and/or deliver
a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;
 
(j)            demand and receive possession of Borrower’s Books; and
 
(k)           exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms thereof).
 
9.2           Power of Attorney.  Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to:  (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on any
invoice or bill of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower’s insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits.  Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents
necessary to perfect or continue the perfection of Bank’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.
 
 
 
 
 
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9.3           Protective Payments.  If Borrower fails to obtain the insurance
called for by Section 6.7 or fails to pay any premium thereon or fails to pay
any other amount which Borrower is obligated to pay under this Agreement or any
other Loan Document or which may be required to preserve the Collateral, Bank
may obtain such insurance or make such payment, and all amounts so paid by Bank
are Bank Expenses and immediately due and payable, bearing interest at the then
highest rate applicable to the Obligations, and secured by the Collateral.  Bank
will make reasonable efforts to provide Borrower with notice of Bank obtaining
such insurance at the time it is obtained or within a reasonable time
thereafter.  No payments by Bank are deemed an agreement to make similar
payments in the future or Bank’s waiver of any Event of Default.
 
9.4           Application of Payments and Proceeds.  If an Event of Default has
occurred and is continuing, Bank shall have the right to apply in any order any
funds in its possession, whether from Borrower account balances, payments,
proceeds realized as the result of any collection of Accounts or other
disposition of the Collateral, or otherwise, to the Obligations.  Bank shall pay
any surplus to Borrower by credit to the Designated Deposit Account or to other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency.  If Bank, directly or indirectly, enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.
 
9.5           Bank’s Liability for Collateral.  So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person.  Borrower bears
all risk of loss, damage or destruction of the Collateral.
 
9.6           No Waiver; Remedies Cumulative.  Bank’s failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith.  No waiver hereunder shall be effective unless signed by the party
granting the waiver and then is only effective for the specific instance and
purpose for which it is given.  Bank’s rights and remedies under this Agreement
and the other Loan Documents are cumulative.  Bank has all rights and remedies
provided under the Code, by law, or in equity.  Bank’s exercise of one right or
remedy is not an election and shall not preclude Bank from exercising any other
remedy under this Agreement or other remedy available at law or in equity, and
Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay
in exercising any remedy is not a waiver, election, or acquiescence.
 
 
 
 
 
 
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9.7           Demand Waiver.  Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.
 
10           NOTICES
 
All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below.  Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.
 
If to Borrower:
Astea International Inc.
 
240 Gibraltar Road, Suite 300
 
Horsham, Pennsylvania 19044
 
Attn:  Fredric Etskovitz
 
Email:  retskovitz@astea.com
 
Website URL: www.astea.com
   
with a copy to:
Morgan, Lewis & Bockius, LLP
 
502 Carnegie Center
 
Princeton, New Jersey 08540
 
Attn:  Steven M. Cohen, Esquire
 
Fax: (609) 919-6701
 
Email: scohen@morganlewis.com
   
If to Bank:
Silicon Valley Bank
 
275 Grove Street, Suite 2-200
 
Newton, Massachusetts 02466
 
Attn: Steve Lyons
 
Fax:  (617) 969-4395
 
Email: slyons@svb.com
   
with a copy to:
Riemer & Braunstein LLP
 
Three Center Plaza
 
Boston, Massachusetts 02108
 
Attn:  Charles W. Stavros, Esquire
 
Fax: (617) 880-3456
 
Email: cstavros@riemerlaw.com

 
 
 
 
 
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11           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
 
Except as otherwise expressly provided in any of the Loan Documents, New York
law governs the Loan Documents without regard to principles of conflicts of
law.  Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in New York; provided, however, that nothing in this
Agreement shall be deemed to operate to preclude Bank from bringing suit or
taking other legal action in any other jurisdiction to realize on the Collateral
or any other security for the Obligations, or to enforce a judgment or other
court order in favor of Bank.  Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court,
and Borrower hereby waives any objection that it may have based upon lack of
personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court.  Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.
 
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
 
This Section 11 shall survive the termination of this Agreement.
 
12           GENERAL PROVISIONS
 
12.1       Termination Prior to Revolving Line Maturity Date; Survival.  All
covenants, representations and warranties made in this Agreement shall continue
in full force until this Agreement has terminated pursuant to its terms and all
Obligations have been satisfied.  So long as Borrower has satisfied the
Obligations (other than inchoate indemnity obligations, any other obligations
which, by their terms, are to survive the termination of this Agreement, and any
Obligations under Bank Services Agreements that are cash collateralized in
accordance with Section 4.1 of this Agreement), this Agreement may be terminated
prior to the Revolving Line Maturity Date by Borrower, effective three (3)
Business Days after written notice of termination is given to Bank.  Those
obligations that are expressly specified in this Agreement as surviving this
Agreement’s termination shall continue to survive notwithstanding this
Agreement’s termination.
 
 
 
 
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12.2       Successors and Assigns.  This Agreement binds and is for the benefit
of the successors and permitted assigns of each party.  Borrower may not assign
this Agreement or any rights or obligations under it without Bank’s prior
written consent (which may be granted or withheld in Bank’s discretion).  Bank
has the right, without the consent of or notice to Borrower, to sell, transfer,
assign, negotiate, or grant participation in all or any part of, or any interest
in, Bank’s obligations, rights, and benefits under this Agreement and the other
Loan Documents.
 
12.3       Indemnification.  Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against: (i) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any third party in connection with the
transactions contemplated by the Loan Documents; and (ii) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower contemplated by the Loan Documents
(including reasonable attorneys’ fees and out-of-pocket expenses), except for
Claims and/or losses directly caused by such Indemnified Person’s gross
negligence or willful misconduct. This Section 12.3 shall survive until all
statutes of limitation with respect to the Claims, losses, and expenses for
which indemnity is given shall have run.
 
12.4       Time of Essence.  Time is of the essence for the performance of all
Obligations in this Agreement.
 
12.5       Severability of Provisions.  Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
 
12.6       Correction of Loan Documents.  Bank may correct patent errors and
fill in any blanks in the Loan Documents consistent with the agreement of the
parties.
 
12.7       Amendments in Writing; Waiver; Integration.  No purported amendment
or modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought.  Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document.  Any waiver granted shall be limited to the
specific circumstance expressly described in it, and shall not apply to any
subsequent or other circumstance, whether similar or dissimilar, or give rise
to, or evidence, any obligation or commitment to grant any further waiver.  The
Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into the Loan
Documents.
 
 
 
 
 
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12.8       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, is an original, and all taken together, constitute
one Agreement.
 
12.9       Confidentiality.  In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with
Bank, collectively, “Bank Entities”); (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, Bank
shall use commercially reasonable efforts to obtain any prospective transferee’s
or purchaser’s agreement to the terms of this provision); (c) as required by
law, regulation, subpoena, or other order; (d) to Bank’s regulators or as
otherwise required in connection with Bank’s examination or audit; (e) as Bank
considers appropriate in exercising remedies under the Loan Documents; and (f)
to third-party service providers of Bank so long as such service providers have
executed a confidentiality agreement with Bank with terms no less restrictive
than those contained herein.  Confidential information does not include
information that is either: (i) in the public domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain (other than as a
result of its disclosure by Bank in violation of this Agreement) after
disclosure to Bank; or (ii) disclosed to Bank by a third party, if Bank does not
know that the third party is prohibited from disclosing the information.
 
Bank Entities may use confidential information for the development of databases,
reporting purposes, and market analysis so long as such confidential information
is aggregated and anonymized prior to distribution unless otherwise expressly
permitted by Borrower.  The provisions of the immediately preceding sentence
shall survive the termination of this Agreement.
 
12.10     Attorneys’ Fees, Costs and Expenses.  In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
Bank shall be entitled to recover its reasonable attorneys’ fees and other costs
and expenses incurred, in addition to any other relief to which it may be
entitled.
 
12.11     Electronic Execution of Documents.  The words “execution,” “signed,”
“signature” and words of like import in any Loan Document executed by any party
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity and
enforceability as a manually executed signature or the use of a paper-based
recordkeeping systems, as the case may be, to the extent and as provided for in
any applicable law, including, without limitation, any state law based on the
Uniform Electronic Transactions Act.
 
 
12.12      Right of Setoff.   Borrower hereby grants to Bank a Lien and a right
of setoff as security for all Obligations to Bank, whether now existing or
hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Bank (including a subsidiary of Bank) or
in transit to any of them.  At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may setoff
the same or any part thereof and apply the same to any liability or Obligation
of Borrower even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
 
 
 
 
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12.13           Captions.  The headings used in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement.
 
12.14           Construction of Agreement.  The parties mutually acknowledge
that they and their attorneys have participated in the preparation and
negotiation of this Agreement.  In cases of uncertainty this Agreement shall be
construed without regard to which of the parties caused the uncertainty to
exist.
 
12.15           Relationship.  The relationship of the parties to this Agreement
is determined solely by the provisions of this Agreement.  The parties do not
intend to create any agency, partnership, joint venture, trust, fiduciary or
other relationship with duties or incidents different from those of parties to
an arm’s-length contract.
 
12.16           Third Parties.  Nothing in this Agreement, whether express or
implied, is intended to: (a) confer any benefits, rights or remedies under or by
reason of this Agreement on any persons other than the express parties to it and
their respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.
 
12.17           Borrower Liability.  Any Borrower may, acting singly, request
Advances hereunder.  Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder, including with respect to requesting Advances
hereunder.  Each Borrower hereunder shall be jointly and severally obligated to
repay all Advances made hereunder, regardless of which Borrower actually
receives said Advance, as if each Borrower hereunder directly received all
Advances.  Each Borrower waives (a) any suretyship defenses available to it
under the Code or any other applicable law, and (b) any right to require Bank
to: (i) proceed against any Borrower or any other person; (ii) proceed against
or exhaust any security; or (iii) pursue any other remedy.  Bank may exercise or
not exercise any right or remedy it has against any Borrower or any security it
holds (including the right to foreclose by judicial or non-judicial sale)
without affecting any Borrower’s liability.  Notwithstanding any other provision
of this Agreement or other related document, each Borrower irrevocably waives
all rights that it may have at law or in equity (including, without limitation,
any law subrogating Borrower to the rights of Bank under this Agreement) 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 Borrower with respect to the
Obligations in connection with this Agreement 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 Borrower with respect to the
Obligations in connection with this Agreement or otherwise.  Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void.  If any payment is made to a Borrower
in contravention of this Section, 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.
 
 
 
 
 
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13              DEFINITIONS
 
13.1           Definitions.  As used in the Loan Documents, the word “shall” is
mandatory, the word “may” is permissive, the word “or” is not exclusive, the
words “includes” and “including” are not limiting, and the singular includes the
plural.  As used in this Agreement, the following capitalized terms have the
following meanings:
 
“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.
 
“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.
 
“Adjusted Quick Ratio” is, for any Person as of any date of measurement, the
ratio of (i) Quick Assets to (ii) Current Liabilities minus the current portion
of Deferred Revenue.
 
“Advance” or “Advances” means a revolving credit loan (or revolving credit
loans) under the Revolving Line.
 
“Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.
 
“Agreement” is defined in the preamble hereof.
 
“Astea” is defined in the preamble.
 
“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution
who is authorized to execute the Loan Documents, including any Advance request,
on behalf of Borrower.
 
“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the
amount available under the Borrowing Base minus (b) the outstanding principal
balance of any Advances.
 
“Bank” is defined in the preamble hereof.
 
“Bank Entities” is defined in Section 12.9.
 
“Bank Expenses” are all audit fees and expenses, out-of-pocket costs, and
expenses (including reasonable attorneys’ fees and expenses) for preparing,
amending, negotiating, administering, defending and enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or
Insolvency Proceedings) or otherwise incurred with respect to Borrower.
 
 
 
 
 
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“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).
 
“Borrower” is defined in the preamble hereof.
 
“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
 
“Borrowing Base” is (a) eighty percent (80%) of Eligible Accounts plus (b)
eighty percent (80%) of Eligible Foreign Accounts, but in any event under this
clause (b) not to exceed twenty-five percent (25%) of total outstanding or
requested Advances under the Revolving Line, in each case as determined by Bank
from Borrower’s most recent Transaction Report; provided, however, that Bank has
the right to decrease the foregoing percentage in its good faith business
judgment to mitigate the impact of events, conditions, contingencies, or risks
which may adversely affect the Collateral or its value.
 
“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s board of directors (and, if required under the terms of
such Person’s Operating Documents, stockholders) and delivered by such Person to
Bank approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying (a) such Person has the authority
to execute, deliver, and perform its obligations under each of the Loan
Documents to which it is a party, (b) that set forth as a part of or attached as
an exhibit to such certificate is a true, correct, and complete copy of the
resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents, including any Advance request, on behalf of such Person,
together with a sample of the true signature(s) of such Person(s), and (d) that
Bank may conclusively rely on such certificate unless and until such Person
shall have delivered to Bank a further certificate canceling or amending such
prior certificate.
 
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank
is closed.
 
“Capital Expenditures” means, with respect to any Person for any period, the sum
of (a) the aggregate of all expenditures by such Person and its Subsidiaries
during such period that are capital expenditures as determined in accordance
with GAAP, whether such expenditures are paid in cash or financed, plus (b) to
the extent not covered by clause (a), the aggregate of all expenditures by such
Person and its Subsidiaries during such period to acquire by purchase or
otherwise the business or capitalized assets or the capital stock of any other
Person.
 
 
 
 
 
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“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
 
“Change in Control” means any event, transaction, or occurrence as a result of
which (a) stockholders of Borrower who were not stockholders immediately prior
to such event, transaction or occurrence own more than forty nine percent (49%)
of the voting stock of Borrower immediately after giving effect to such event,
transaction occurrence (other than by the sale of the Borrower’s equity
securities in a public offering); or (b) during any period of twelve (12)
consecutive calendar months, individuals who at the beginning of such period
constituted the Board of Directors of Borrower (together with any new directors
whose election by the Board of Directors of Borrower was approved by a vote of
not less than two-thirds of the directors then still in office who either were
directions at the beginning of such period  or whose election or nomination for
election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office or (c) Astea
ceases to own one hundred percent (100%) of the voting securities of any other
Borrower or Astea Services and Distribution Systems BV (Netherlands), a company
organized and existing under the laws of The Netherlands.
 
“Claims” is defined in Section 12.3.
 
“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
Code in effect in a jurisdiction other than the State of New York, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority, or remedies and for purposes of
definitions relating to such provisions.
 
 
 
 
 
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“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.
 
“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.
 
“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.
 
“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit B.
 
“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation, in each
case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold
with recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of
business.  The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or,
if not determinable, the maximum reasonably anticipated liability for it
determined by the Person in good faith; but the amount may not exceed the
maximum of the obligations under any guarantee or other support arrangement.
 
“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
 
“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.
 
“Credit Extension” is any Advance, any Overadvance, Letter of Credit, foreign
exchange forward contract, amount utilized for cash management services, or any
other extension of credit by Bank for Borrower’s benefit.
 
“Currency” is coined money and such other banknotes or other paper money as are
authorized by law and circulate as a medium of exchange.
 
“Current Liabilities” are all obligations and liabilities of Borrower to Bank,
plus, without duplication, the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year.
 
“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.
 
 
 
 
 
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“Default Rate” is defined in Section 2.4(b).
 
“Deferred Revenue” is all amounts received or invoiced in advance of performance
under contracts and not yet recognized as revenue.
 
“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.
 
“Designated Deposit Account” is account number 3301149706, maintained by
Borrower with Bank.
 
“Dividend Trigger Period” is, on and after the Effective Date, provided no Event
of Default has occurred and is continuing, the period (a) commencing on the
first day of the quarter following the day that Borrower provides to Bank a
written report that Borrower has, as of the last day of the immediately
preceding fiscal quarter, maintained Free Cash Flow equal to or greater than One
Dollar ($1.00), as determined by Bank in its discretion (the “Dividend
Threshold”); and (b) terminating on the earlier to occur of (i) the occurrence
of an Event of Default, and (ii) the first quarterly reporting period thereafter
in which Borrower fails to achieve the Dividend Threshold, as determined by Bank
in its discretion.  Upon the termination of a Dividend Trigger Period, Borrower
must achieve the Dividend Threshold as of the last day of a subsequent quarter,
as determined by Bank in its discretion, prior to entering into a subsequent
Dividend Trigger Period.  Borrower shall give Bank prior written notice of
Borrower’s election to enter into any such Dividend Trigger Period, and each
such Dividend Trigger Period shall commence on the first day of the quarterly
period following the date the Bank determines, in its reasonable discretion,
that the Dividend Threshold has been achieved.
 
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.
 
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.
 
“Effective Date” is defined in the preamble hereof.
 
“Eligible Accounts” means Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3.  Bank reserves the right at any time after the Effective Date to
adjust any of the criteria set forth below and to establish new criteria in its
good faith business judgment.  Unless Bank otherwise agrees in writing, Eligible
Accounts shall not include:
 
 
 
 
 
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(a)           Accounts for which the Account Debtor is Borrower’s Affiliate,
officer, employee, or agent;
 
(b)           Accounts that the Account Debtor has not paid within ninety (90)
days of invoice date regardless of invoice payment period terms;
 
(c)           Accounts with credit balances over ninety (90) days from invoice
date;
 
(d)           Accounts owing from an Account Debtor if fifty percent (50%) or
more of the Accounts owing from such Account Debtor have not been paid within
ninety (90) days of invoice date;
 
(e)           Accounts owing from an Account Debtor which does not have its
principal place of business in the United States or Canada;
 
(f)           Accounts billed from and/or payable to Borrower outside of the
United States (sometimes called foreign invoiced accounts);
 
(g)           Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called “contra” accounts, accounts
payable, customer deposits or credit accounts);
 
(h)           Accounts owing from an Account Debtor which is a United States
government entity or any department, agency, or instrumentality thereof unless
Borrower has assigned its payment rights to Bank and the assignment has been
acknowledged under the Federal Assignment of Claims Act of 1940, as amended;
 
(i)           Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on
approval”, or other terms if Account Debtor’s payment may be conditional;
 
(j)           Accounts owing from an Account Debtor where goods or services have
not yet been rendered to the Account Debtor (sometimes called memo billings or
pre-billings);
 
(k)           Accounts subject to contractual arrangements between Borrower and
an Account Debtor where payments shall be scheduled or due according to
completion or fulfillment requirements where the Account Debtor has a right of
offset for damages suffered as a result of Borrower’s failure to perform in
accordance with the contract (sometimes called contracts accounts receivable,
progress billings, milestone billings, or fulfillment contracts), unless
otherwise permitted by Bank, in its sole discretion, on a case-by-case basis;
 
(l)           Accounts owing from an Account Debtor the amount of which may be
subject to withholding based on the Account Debtor’s satisfaction of Borrower’s
complete performance (but only to the extent of the amount withheld; sometimes
called retainage billings);
 
 
 
 
 
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(m)           Accounts subject to trust provisions, subrogation rights of a
bonding company, or a statutory trust;
 
(n)           Accounts owing from an Account Debtor that has been invoiced for
goods that have not been shipped to the Account Debtor unless Bank, Borrower,
and the Account Debtor have entered into an agreement acceptable to Bank wherein
the Account Debtor acknowledges that (i) it has title to and has ownership of
the goods wherever located, (ii) a bona fide sale of the goods has occurred, and
(iii) it owes payment for such goods in accordance with invoices from Borrower
(sometimes called “bill and hold” accounts);
 
(o)           Accounts for which the Account Debtor has not been invoiced;
 
(p)           Accounts that represent non-trade receivables or that are derived
by means other than in the ordinary course of Borrower’s business;
 
(q)           Accounts for which Borrower has permitted Account Debtor’s payment
to extend beyond ninety (90) days;
 
(r)           Accounts arising from chargebacks, debit memos or other payment
deductions taken by an Account Debtor;
 
(s)           Accounts arising from product returns and/or exchanges (sometimes
called “warranty” or “RMA” accounts);
 
(t)           Accounts in which the Account Debtor disputes liability or makes
any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;
 
(u)           [reserved];
 
(v)           Accounts owing from an Account Debtor, whose total obligations to
Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that
exceed that percentage, unless Bank approves in writing; and
 
(w)           Accounts for which Bank in its good faith business judgment
determines collection to be doubtful, including, without limitation, accounts
represented by “refreshed” or “recycled” invoices.
 
“Eligible Foreign Accounts” are Accounts the Account Debtors for which do not
have their principal place of business located in the United States, Canada or
the United Kingdom and that may be billed and/or collected outside the United
States or the United Kingdom, that are otherwise Eligible Accounts, that are in
each case reasonably acceptable to Bank, determined on a case-by-case basis in
Bank’s sole and absolute discretion.
 
“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.
 
 
 
 
 
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“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.
 
“Event of Default” is defined in Section 8.
 
“Exchange Act” is the Securities Exchange Act of 1934, as amended.
 
“Foreign Currency” means lawful money of a country other than the United States.
 
“Free Cash Flow” is, tested quarterly, as of the last day of each fiscal quarter
of Borrower, the result of the follow for each such fiscal quarter of Borrower:
(a) Net Income; minus (b) unfinanced Capital Expenditures; minus (c) capitalized
software development expense (excluding FieldCentric software development
expense); minus (d) taxes actually paid in cash; plus (e) the net change (gain
or loss) from the beginning of such fiscal quarter in Deferred Revenue; plus (f)
depreciation and amortization expense (including, without limitation,
amortization of FieldCentric capitalized software expense) plus (g) such other
one-time noncash charges acceptable to Bank, in its sole discretion, on a
case-by-case basis.
 
“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower which shall be a Business Day.
 
“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.
 
“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.
 
           “Governmental Approval” is any consent, authorization, approval,
order, license, franchise, permit, certificate, accreditation, registration,
filing or notice, of, issued by, from or to, or other act by or in respect of,
any Governmental Authority.
 
“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
 
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.
 
 
 
 
 
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“Indemnified Person” is defined in Section 12.3.
 
“Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and
Borrower’s Books, with results satisfactory to Bank in its sole and absolute
discretion.
 
“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
 
“Intellectual Property” means, with respect to any Person, means all of such
Person’s right, title, and interest in and to the following:
 
(a)           its Copyrights, Trademarks and Patents;
 
(b)           any and all trade secrets and trade secret rights, including,
without limitation, any rights to unpatented inventions, know-how and operating
manuals;
 
(c)           any and all source code;
 
(d)           any and all design rights which may be available to such Person;
 
(e)           any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and
 
(f)           all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents.
 
“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
 
“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.
 
“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Zack
Bergreen as of the Effective Date, (b) Chief Financial Officer and Treasurer,
who is Frederic Etskovitz as of the Effective Date, and (c) President and
Secretary, who is John Tobin as of the Effective Date.
 
 
 
 
 
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“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.
 
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.
 
“Loan Documents” are, collectively, this Agreement and any schedules, exhibits,
certificates, notices, and any other documents related to this Agreement, the
Debenture, any Bank Services Agreement, any subordination agreement, any note,
or notes or guaranties executed by Borrower, and any other present or future
agreement by Borrower with or for the benefit of Bank in connection with this
Agreement or Bank Services, all as amended, restated, or otherwise modified.
 
“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; (c) a material impairment of the prospect
of repayment of any portion of the Obligations; or (d) Bank determines, after
consultation with Borrower, based upon information available to it and in its
good faith reasonable judgment, that there is a substantial likelihood that
Borrower shall fail to comply with one or more of the financial covenants in
Section 6 during the next succeeding financial reporting period.
 
“Minimum Interest” is defined in Section 2.4(d).
 
“Minimum Interest Period” is defined in Section 2.4(d).
 
“Monthly Financial Statements” is defined in Section 6.2(c).
 
“Net Income” means, as calculated on a consolidated basis for Borrower and its
Subsidiaries for any period as at any date of determination, the net profit (or
loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.
 
“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, fees, Bank Expenses, and other amounts Borrower owes Bank now or
later, whether under this Agreement, the other Loan Documents, or otherwise,
including, without limitation, all obligations relating to Letters of Credit
(including reimbursement obligations for drawn and undrawn Letters of Credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under
the Loan Documents.
 
“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.
 
 
 
 
 
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“Overadvance” is defined in Section 2.2.
 
“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
 
“Perfection Certificate” is defined in Section 5.1.
 
“Permitted Indebtedness” is:
 
(a)           Borrower’s Indebtedness to Bank under this Agreement and the other
Loan Documents;
 
(b)           Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;
 
(c)           Subordinated Debt;
 
(d)           unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
 
(e)           Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business;
 
(f)           Indebtedness secured by Liens permitted under clauses (a) and (c)
of the definition of “Permitted Liens” hereunder; and
 
(g)           extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above;
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
 
“Permitted Investments” are:
 
(a)           Investments (including, without limitation, Subsidiaries) existing
on the Effective Date and shown on the Perfection Certificate;
 
(b)           Investments consisting of Cash Equivalents;
 
(c)           Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;
 
(d)           Investments consisting of deposit accounts in which Bank has a
perfected security interest;
 
(e)           Investments accepted in connection with Transfers permitted by
Section 7.1;
 
 
 
 
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(f)           Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business; and
 
(g)           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 (g)
shall not apply to Investments of Borrower in any Subsidiary.
 
 
“Permitted Liens” are:
 
(a)           Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;
 
(b)           Liens for taxes, fees, assessments or other government charges or
levies, either (i) not due and payable or (ii) being contested in good faith and
for which Borrower maintains adequate reserves on its Books, provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
 
(c)           purchase money Liens or capital leases securing no more than Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate amount outstanding
(i) on Equipment acquired or held by Borrower incurred for financing the
acquisition of the Equipment, or (ii) existing on Equipment when acquired, if
the Lien is confined to the property and improvements and the proceeds of the
Equipment;
 
(d)           Liens to secure payment of workers’ compensation, employment
insurance, old-age pensions, social security and other like obligations incurred
in the ordinary course of business (other than Liens imposed by ERISA);
 
(e)           Liens incurred in the extension, renewal or refinancing of the
Indebtedness secured by Liens described in (a) through (c) [and (g], but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may
not increase;
 
(f)            Liens of carriers, warehousemen, suppliers, or other Persons that
are possessory in nature arising in the ordinary course of business so long as
such Liens attach only to Inventory and which are not delinquent or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;
 
(g)           leases or subleases of real property granted in the ordinary
course of Borrower’s business (or, if referring to another Person, in the
ordinary course of such Person’s business), and leases, subleases, non-exclusive
licenses or sublicenses of personal property (other than Intellectual Property)
granted in the ordinary course of Borrower’s business (or, if referring to
another Person, in the ordinary course of such Person’s business), if the
leases, subleases, licenses and sublicenses do not prohibit granting Bank a
security interest therein;
 
 
 
 
 
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(h)           non-exclusive license of Intellectual Property granted to third
parties in the ordinary course of business and licenses that would not result in
a legal transfer of title of the licensed property that may be exclusive in
respects other than territory and that may be exclusive as to territory only as
to discreet geographical areas outside of the United States; and
 
(i)            Liens arising from attachments or judgments, orders, or decrees
in circumstances not constituting an Event of Default under Sections 8.4 and
8.7.
 
“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
 
“Prime Rate” is the rate of interest per annum from time to time published in
the money rates section of The Wall Street Journal or any successor publication
thereto as the “prime rate” then in effect; provided that if such rate of
interest, as set forth from time to time in the money rates section of The Wall
Street Journal, becomes unavailable for any reason as determined by Bank, the
“Prime Rate” shall mean the rate of interest per annum announced by Bank as its
prime rate in effect at its principal office in the State of California (such
Bank announced Prime Rate not being intended to be the lowest rate of interest
charged by Bank in connection with extensions of credit to debtors).
 
“Quarterly Financial Statements” is defined in Section 6.2(e).
 
“Quick Assets” is, on any date, Borrower’s consolidated, unrestricted cash and
Cash Equivalents plus net booked accounts receivable for services performed or
products sold.
 
“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.
 
“Regulatory Change” means, with respect to Bank, any change on or after the date
of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
 
“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
 
“Reserves” means, as of any date of determination, such amounts as Bank may from
time to time establish and revise in its reasonable good faith business
judgment, reducing the amount of Advances and other financial accommodations
which would otherwise be available to Borrower (a) to reflect events,
conditions, contingencies or risks which, as determined by Bank in its
reasonable good faith business judgment, do or would adversely affect (i) the
Collateral or any other property which is security for the Obligations or its
value (including without limitation any increase in delinquencies of Accounts),
(ii) the assets or business of Borrower, or (iii) the security interests and
other rights of Bank in the Collateral (including the enforceability, perfection
and priority thereof); or (b) to reflect Bank’s reasonable belief that any
collateral report or financial information furnished by or on behalf of Borrower
to Bank is or would have been incomplete, inaccurate or misleading in any
material respect; or (c) in respect of any state of facts which Bank determines
constitutes an Event of Default or would, with notice or passage of time or
both, constitute an Event of Default.
 
 
 
 
 
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“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer and Controller of Borrower.
 
“Restricted License” is any material license or other agreement with respect to
which Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default under or
termination of could interfere with the Bank’s right to sell any Collateral.
 
“Revolving Line” is an aggregate principal amount not to exceed Three Million
Dollars ($3,000,000) outstanding at any time.
 
“Revolving Line Maturity Date” is June____, 2016 (two years after the Effective
Date).
 
“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.
 
“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.
 
“Streamline Period” is, on and after the initial Credit Extension, provided no
Event of Default has occurred and is continuing, the period (a) commencing on
the first day of the month following the day that Borrower provides to Bank a
written report that Borrower has, as of the last day of the immediately
preceding month, maintained an Adjusted Quick Ratio equal to or greater than
1.50:1.00, as determined by Bank in its discretion (the “Streamline Threshold”);
and (b) terminating on the earlier to occur of (i) the occurrence of an Event of
Default, and (ii) the first day thereafter in which Borrower fails to maintain
the Streamline Threshold, as determined by Bank in its discretion.  Upon the
termination of a Streamline Period, Borrower must maintain the Streamline
Threshold as of the last day of any month following such termination as
determined by Bank in its discretion, prior to entering into a subsequent
Streamline Period.  Borrower shall give Bank prior written notice of Borrower’s
election to enter into any such Streamline Period, and each such Streamline
Period shall commence on the first day of the monthly period following the date
the Bank determines, in its reasonable discretion, that the Streamline Threshold
has been achieved.
 
“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms reasonably
acceptable to Bank.
 
 
 
 
 
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“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person.
 
“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness.
 
“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.
 
“Transaction Report” is that certain report for reporting sales, collections,
credit memos and other Collateral adjustments, a form of which has been provided
by Bank to Borrower.
 
“Transfer” is defined in Section 7.1.

 
 
[Signature page follows.]
 
 
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.
 
BORROWER:
 
ASTEA INTERNATIONAL INC.
 
 
By: ___________________________________
Name: _________________________________
Title: __________________________________
 
VIRTUAL SERVICE CORPORATION
 
 
By: ___________________________________
Name: _________________________________
Title: __________________________________
     
NETWORK DATA, INC.
 
 
By: ___________________________________
Name: _________________________________
Title: __________________________________
 
FC ACQUISITION CORP.
 
 
By: ___________________________________
Name: _________________________________
Title: __________________________________
                 
BANK:
         
SILICON VALLEY BANK
         
By__________________________________
   
Name:_______________________________
   
Title:________________________________
   

 
 
 
 
 
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EXHIBIT A – COLLATERAL DESCRIPTION
 
The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:
 
All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), securities, and all
other investment property, supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and
 
all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
 
Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided that solely with respect to Intellectual Property, such
security interest shall not be effective unless or until an Event of Default has
occurred and is continuing; provided further, however, that at all times
(whether before or after the security interest in Intellectual Property has
become effective) the Collateral shall include all Accounts and all proceeds of
Intellectual Property.  If a judicial authority (including a U.S. Bankruptcy
Court) would hold that a security interest in the underlying Intellectual
Property is necessary to have a security interest in such Accounts and such
property that are proceeds of Intellectual Property, then the Collateral shall
automatically, and effective as of the Effective Date, include the Intellectual
Property to the extent necessary to permit perfection of Bank’s security
interest in such Accounts and such other property of Borrower that are proceeds
of the Intellectual Property.
 
Pursuant to the terms of a certain negative pledge arrangement with Bank,
Borrower has agreed not to encumber any of its Intellectual Property without
Bank’s prior written consent.
 
 
 
 
 
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EXHIBIT B

COMPLIANCE CERTIFICATE

                                                                                              
 

TO:           SILICON VALLEY BANK Date: ______________
FROM:    ASTEA INTERNATIONAL INC., et al.
 

 
 
The undersigned authorized officer of Astea International Inc. (for itself and
each other “Borrower” under the Loan and Security Agreement, the “Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (1) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all
material respects on this date except as noted below; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, (4) Borrower, and each of its
Subsidiaries, has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no
Liens have been levied or claims made against Borrower or any of its
Subsidiaries, if any, relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank.  Attached are
the required documents supporting the certification.  The undersigned certifies
that these are prepared in accordance with GAAP consistently applied from one
period to the next except as explained in an accompanying letter or
footnotes.  The undersigned acknowledges that no borrowings may be requested at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered.  Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.
 
Please indicate compliance status by circling Yes/No under “Complies” column.

 
Reporting Covenant
Required
Complies
     
Monthly/Quarterly financial statements with
Compliance Certificate
Monthly within 30 days; quarterly within 45 days
 
Yes   No
Annual financial statement (CPA Audited) + CC
FYE within 180 days
 
Yes   No
10-Q, 10-K and 8-K
Within 5 days after filing with SEC
 
Yes   No
A/R & A/P Agings
Monthly within 15 days
 
Yes   No
Transaction Reports
15th and last Business Day of each month (during a Streamline Period, monthly
within 15 days) and with
each request for an Advance
 
Yes   No
Projections
FYE within 30 days
   
 
The following Intellectual Property was registered after the Effective Date (if
no registrations, state “None”)
____________________________________________________________________________
 

 
 
 
 
 
1

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Financial Covenant
Required
Actual
Complies
       
Maintain as indicated:
     
Minimum Adjusted Quick Ratio (tested monthly)
1.25:1.00
_____:1.00
Yes   No
Profitability/Maximum Net Loss (tested quarterly)
*
$_______
Yes   No

*           See Section 6.9(b)

Streamline Period
Applies
     
Adjusted Quick Ratio > 1.50:1.00
Streamline Period in Effect
Yes   No
Adjusted Quick Ratio < 1.50:1.00
Streamline Period NOT in Effect
Yes   No

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Astea International Inc., for itself and each other Borrower
 
 
By: _________________________
Name: _______________________
Title: ________________________
BANK USE ONLY
 
Received by: _____________________
authorized signer
Date: _________________________
 
Verified: ________________________
authorized signer
Date: _________________________
 
Compliance Status:         Yes     No

 
 
 

 
 
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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

Dated:  ____________________

 
I.           Adjusted Quick Ratio (Section 6.9(a))
 
Required:     Maintain an Adjusted Quick Ratio of at least 1.25 to 1.00.

Actual:

A.
Aggregate value of the unrestricted cash and Cash Equivalents of Borrower
 
$                      
 
B.
Aggregate value of the net booked accounts receivable of Borrower for services
performed or products sold
 
$                      
 
C.
Quick Assets (the sum of lines A and B)
$                      
 
D.
Aggregate value of all Obligations owed to Bank
$                      
 
E.
Without duplication, the aggregate value of liabilities of Borrower and its
Subsidiaries (including all Indebtedness) that matures within one (1) year
 
 
$                      
 
F.
Current Liabilities (the sum of lines D and E)
$                      
 
G.
Aggregate value of the current portion of all amounts received or invoiced by
Borrower in advance of performance under contracts and not yet recognized as
revenue
 
$                      
 
H.
Adjusted Current Liabilities (line F minus line G)
$                      
 
I.
Adjusted Quick Ratio (line C divided by line H)
 
                     :1.00

 
Is line I equal to or greater than 1.25:1:00?
 
             No, not in compliance
             Yes, in compliance
       
Is line I equal to or greater than 1.50:1:00?
     
            No, Streamline Period NOT in Effect
             Yes, Streamline Period in Effect

 
 
 
 
 
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II.           Profitability/Maximum Net Loss (Section 6.9(b))

 
Required:                      Achieve a minimum positive Net Income, measured
as indicated below for each quarterly period listed below, of at least the
following:
 
 
Quarterly Period Ending
 
Minimum Net Income
 
June 30, 2014, measured on a trailing three month basis
$1.00
   
September 30, 2014, measured on a trailing six month basis
$450,000
   
December 31, 2014, measured on a trailing nine month basis
$350,000
 

 
Minimum Net Income covenant requirements for the quarterly periods ending in
2015 shall be mutually agreed upon by Borrower and Bank, in their mutual good
faith business judgment, on or before February 28, 2015; provided that failure
to establish such requirements on or before February 28, 2015 shall result in an
immediate Event of Default, for which no cure or grace period shall apply.
 

Actual: All amounts measured as indicated above

A.
Net Income (net loss)
$                                
 

Is line A equal to or greater than (loss no worse than)
$[                                                                         ]?
 

 
             No, not in compliance
                Yes, in compliance

 
 
 
4 

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