Exhibit 10.1

AMENDMENT NUMBER FIVE TO CREDIT AGREEMENT

THIS AMENDMENT NUMBER FIVE TO CREDIT AGREEMENT (this “Amendment”), dated as of
September 23, 2014 and effective as of the “Effective Date” set forth below, is
entered into by and among WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”),
SABA SOFTWARE, INC., a Delaware corporation (“Borrower”), and the undersigned
Subsidiaries of Borrower party hereto as Subsidiary Guarantors, and in light of
the following:

W I T N E S S E T H

WHEREAS, Lender, Borrower and the Subsidiary Guarantors are parties to that
certain Amended and Restated Credit Agreement, dated as of June 27, 2011 (as
amended, restated, supplemented, or otherwise modified from time to time, the
“Credit Agreement”);

WHEREAS, Borrower has requested that Lender make certain amendments to the
Credit Agreement; and

WHEREAS, upon the terms and conditions set forth herein, Lender is willing to
accommodate Borrower’s request.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

1. Defined Terms. All initially capitalized terms used herein (including the
preamble and recitals hereof) without definition shall have the meanings
ascribed thereto in the Credit Agreement, as amended hereby.

2. Amendments to Credit Agreement. Subject to the satisfaction or waiver of the
conditions precedent set forth in Section 3 hereof:

(a) Section 1.01 of the Credit Agreement is hereby amended and modified by
amending and restating the following definitions, or adding (as applicable) the
following definitions, in the appropriate alphabetical order:

““Financial Covenant Liquidity Amount” means (a) as of any date of determination
prior to occurrence of the Financial Statement Event, $15,000,000, and (b) as of
any date of determination subsequent to occurrence of the Financial Statement
Event, $10,000,000.”

“Net Leverage Ratio” shall mean, as of any date, the ratio of:

(a) the total outstanding Debt of Borrower less the lesser of (i) $17,500,000
and (ii) the actual amount of Borrower’s Cash and Cash Equivalents as of such
date, as stated on Borrower’s most recent quarterly financial statements
delivered to Lender, to

(b) EBITDA for the trailing twelve (12) months immediately prior to such date,
as stated on Borrower’s most recent quarterly financial statements delivered to
Lender.

 

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“New Recurring Bookings” means, as of any date of determination, the annual
contract value of accepted subscription-based term contracts and contracted work
or services (including renewals (automatic and term extensions) upgrades and
add-ons, but excluding consulting or managed services bookings).

““Termination Fee” means, as of any date of determination, an amount equal to
(i) during the period from and including September 23, 2014 to and including
September 23, 2015, 2.00% times the Maximum Revolver Amount on the date
immediately prior to the date of determination, and (ii) during the period from
and after September 23, 2015 to, but not including, the Maturity Date, 1.00%
times the Maximum Revolver Amount on the date immediately prior to the date of
determination.”

(b) Section 2.03 of the Credit Agreement is hereby amended and modified by
adding the following new clause (h) at the end thereof:

“(h) Termination Fee. If Borrower has sent a notice of termination pursuant to
the provisions of Section 2.01(d)(viii), then on the date set forth as the date
of termination of this Agreement in such notice, Borrower shall pay to Lender,
in cash, the Termination Fee. In the event of a prepayment of the obligations
and indebtedness owing by Borrower hereunder or under the other Loan Documents
and termination of the commitments of Lender for any other reason, including
(a) acceleration of the obligations and indebtedness owing by Borrower hereunder
or under the other Loan Documents as a result of the occurrence of an Event of
Default, (b) foreclosure and sale of, or collection of, the Collateral, (c) sale
of the “Collateral” under and as defined in (i) in the case of Borrower, the
Borrower Security Agreement (as defined in the definition of Security
Agreement), and (ii) in the case of each Subsidiary Guarantor, the Third Party
Security Agreement (as defined in the definition of Security Agreement) in any
Insolvency Proceeding, or (d) the restructure, reorganization, or compromise of
the obligations and indebtedness owing by Borrower hereunder or the other Loan
Documents or Bank Product Agreements by the confirmation of a plan of
reorganization or any other plan of compromise, restructure, or arrangement in
any Insolvency Proceeding, then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender or profits
lost by the Lender as a result of such Prepayment, and by mutual agreement of
the parties as to a reasonable estimation and calculation of the lost profits or
damages of the Lender Group, Borrower shall pay to Lender, in cash, the
Termination Fee, measured as of the date of such prepayment. The Termination Fee
shall be fully earned on the date paid and shall not be refundable for any
reason.”

(c) Section 5.09(c) of the Credit Agreement is hereby amended and modified in
its entirety as follows:

“(c) [Reserved].”

(d) Section 5.09(d) of the Credit Agreement is hereby amended and modified in
its entirety as follows:

“(d) Borrower shall have New Recurring Bookings of at least the required amount
set forth on Schedule 5.09(d) for the period applicable thereto.”

(e) Section 5.09(e) of the Credit Agreement is hereby amended and modified in
its entirety as follows:

“(e) Borrower shall have, on the last day of each fiscal quarter set forth on
Schedule 5.09(e), a Net Leverage Ratio of no higher than the ratio set forth on
Schedule 5.09(e) for the date applicable thereto.”

 

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(f) Section 6.03(b) of the Credit Agreement is hereby amended and modified by
replacing the reference to “Thirty Five Million Dollars ($35,000,000)” contained
therein with “Fifty Five Million Dollars ($55,000,000)”.

(g) Exhibit A to the Credit Agreement is hereby amended and modified in its
entirety in the form of Exhibit A attached hereto.

(h) Exhibit D to the Credit Agreement is hereby amended and modified in its
entirety in the form of Exhibit B attached hereto.

(i) The Credit Agreement is hereby amended and modified by deleting Schedules
5.09(a), 5.09(d), and 5.09(e) and replacing such Schedules with the Schedules
5.09(a), 5.09(d), and 5.09(e) attached hereto.

(j) The Credit Agreement is hereby amended and modified by deleting Schedule
5.09(c).

3. Conditions Precedent to Amendment. Section 2 of this Amendment shall be
effective as of August 31, 2014 (the “Effective Date”), upon satisfaction of
each of the following conditions precedent:

(a) Lender shall have received this Amendment, duly executed and delivered by
the parties hereto, and the same shall be in full force and effect.

(b) Lender shall have received a fully executed copy of an amendment to the
Second Lien Credit Agreement and the same shall be (i) in form and substance
satisfactory to Lender, and (ii) in full force and effect.

(c) Lender shall have received (i) evidence that an additional $15,000,000 term
loan has been funded under the Second Lien Loan Documents, and (ii) a fully
executed copy of an amendment to the Intercreditor Agreement and the same shall
be (x) in form and substance satisfactory to Lender, and (y) in full force and
effect.

(d) Lender shall have received an updated Schedule 2 to each Security Agreement,
current as of the date hereof, and in form satisfactory to Lender.

(e) Lender shall have received an original of the Line of Credit Note in the
form of Exhibit A attached hereto, duly executed and delivered by Borrower, and
the same shall be in full force and effect.

(f) After giving effect to this Amendment, the representations and warranties
herein and in the Credit Agreement and the other Loan Documents shall be true,
correct and complete in all material respects (except 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) on and as
of the date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date, in which case
such representations and warranties shall be true, correct and complete in all
material respects as of such earlier date).

 

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(g) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
Governmental Authority against Borrower, any Subsidiary Guarantor, or Lender.

(h) After giving effect to this Amendment, no Default or Event of Default shall
have occurred and be continuing or shall result from the consummation of the
transactions contemplated herein.

4. Representations and Warranties. Each of Borrower and each Subsidiary
Guarantor hereby represents and warrants to Lender as follows:

(a) It has all requisite power and authority to enter into this Amendment and to
carry out the transactions contemplated hereby.

(b) The execution, delivery, and performance by it of this Amendment (i) has
been duly authorized by all necessary action of Borrower or such Subsidiary
Guarantor, and (ii) do not and will not (A) violate any material provision of
federal, state, or local law or regulation applicable to Borrower or such
Subsidiary Guarantor, the Organizational Documents of Borrower or such
Subsidiary Guarantor, or any order, judgment, or decree of any court or other
Governmental Authority binding on Borrower or such Subsidiary Guarantor,
(B) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material agreement of Borrower or
such Subsidiary Guarantor where any such conflict, breach or default could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect, (C) result in or require the creation or imposition of any Lien
of any nature whatsoever upon any assets of Borrower or such Subsidiary
Guarantor, other than Permitted Liens, or (D) require any approval of any holder
of Equity Interest of Borrower or such Subsidiary Guarantor or any approval or
consent of any Person under any material agreement of Borrower or such
Subsidiary Guarantor, other than consents or approvals that have been obtained
and that are still in force and effect and except, in the case of material
agreements, for consents or approvals, the failure to obtain could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Effect.

(c) This Amendment has been duly executed and delivered by Borrower and such
Subsidiary Guarantor. This Amendment is a party is the legally valid and binding
obligation of Borrower or such Subsidiary Guarantor, enforceable against
Borrower or such Subsidiary Guarantor in accordance with its respective terms,
except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors’ rights generally.

(d) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein has been issued and remains in force by any Governmental
Authority against Borrower, any Subsidiary Guarantor, or Lender.

(e) After giving effect to this Amendment, no Default or Event of Default has
occurred and is continuing as of the date hereof.

(f) After giving effect to this Amendment, the representations and warranties in
the Credit Agreement and the other Loan Documents are true, correct and complete
in all material respects (except 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) on and as of the date hereof, as
though

 

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made on such date (except to the extent that such representations and warranties
relate solely to an earlier date, in which case such representations and
warranties shall be true, correct and complete in all material respects as of
such earlier date).

(g) As of the date hereof, there is (i) no litigation pending that is related to
any Restatement-Related Event, the Restatement Completion, or the NASDAQ Listing
Event, other than as disclosed in Schedule 3.04 to the Credit Agreement and
(ii) no investigation or proceeding by any Governmental Authority that is
related to any Restatement-Related Event, the Restatement Completion, or the
NASDAQ Listing Event, other than (x) the SEC Investigation and (y) any potential
investigation arising in connection with Borrower’s self-disclosure pursuant to
FAR Subpart 3.10.

5. Payment of Costs and Fees. Borrower agrees to pay all reasonable and
documented out-of-pocket costs and expenses of Lender (including, without
limitation, the reasonable fees and disbursements of outside counsel to Lender)
in connection with the preparation, negotiation, execution and delivery of this
Amendment and any documents and instruments relating hereto.

6. Release.

(a) Borrower hereby acknowledges and agrees that as of September 23, 2014, the
aggregate outstanding principal amount of the indebtedness under the Credit
Agreement and the other Loan Documents (including the Line of Credit Note) was
$38,876,111.39 and that such principal amount is payable pursuant to the Credit
Agreement and the other Loan Documents as modified hereby without defense,
offset, withholding, counterclaim, or deduction of any kind.

(b) Effective on the date hereof, each of Borrower and each Subsidiary
Guarantor, for itself and on behalf of its successors, assigns, and officers,
directors, employees, agents and attorneys, and any Person acting for or on
behalf of, or claiming through it, hereby waives, releases, remises and forever
discharges Lender, each of its Affiliates, and each of their respective
successors in title, past, present and future officers, directors, employees,
limited partners, general partners, investors, attorneys, assigns, subsidiaries,
shareholders, trustees, agents and other professionals and all other persons and
entities to whom any member of the Lenders would be liable if such persons or
entities were found to be liable to Borrower or such Subsidiary Guarantor (each
a “Releasee” and collectively, the “Releasees”), from any and all past, present
and future claims, suits, liens, lawsuits, adverse consequences, amounts paid in
settlement, debts, deficiencies, diminution in value, disbursements, demands,
obligations, liabilities, causes of action, damages, losses, costs and expenses
of any kind or character, whether based in equity, law, contract, tort, implied
or express warranty, strict liability, criminal or civil statute or common law
(each a “Claim” and collectively, the “Claims”), whether known or unknown, fixed
or contingent, direct, indirect, or derivative, asserted or unasserted, matured
or unmatured, foreseen or unforseen, past or present, liquidated or
unliquidated, suspected or unsuspected, which Borrower ever had from the
beginning of the world to the date hereof, or now has, against any such Releasee
which relates, directly or indirectly to the Credit Agreement, any other Loan
Document, or to any acts or omissions of any such Releasee with respect to the
Credit Agreement or any other Loan Document, or to the lender-borrower
relationship evidenced by the Loan Documents, except for the duties and
obligations set forth in any of the Loan Documents or in this Amendment. As to
each and every Claim released hereunder, Borrower and each Subsidiary Guarantor
hereby represents that it has received the advice of legal counsel with regard
to the releases contained herein, and having been so advised, specifically
waives the benefit of the provisions of Section 1542 of the Civil Code of
California which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

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As to each and every Claim released hereunder, Borrower and each Subsidiary
Guarantor also waives the benefit of each other similar provision of applicable
federal or state law (including without limitation the laws of the state of
California), if any, pertaining to general releases after having been advised by
its legal counsel with respect thereto.

Borrower and each Subsidiary Guarantor each acknowledges that it may hereafter
discover facts different from or in addition to those now known or believed to
be true with respect to such Claims and agrees that this instrument shall be and
remain effective in all respects notwithstanding any such differences or
additional facts. Each Borrower and each Subsidiary Guarantor understands,
acknowledges and agrees that the release set forth above may be pleaded as a
full and complete defense and may be used as a basis for an injunction against
any action, suit or other proceeding which may be instituted, prosecuted or
attempted in breach of the provisions of such release.

(c) Each of Borrower and each Subsidiary Guarantor, for itself and on behalf of
its successors, assigns, and officers, directors, employees, agents and
attorneys, and any Person acting for or on behalf of, or claiming through it,
hereby absolutely, unconditionally and irrevocably, covenants and agrees with
and in favor of each Releasee above that it will not sue (at law, in equity, in
any regulatory proceeding or otherwise) any Releasee on the basis of any Claim
released, remised and discharged by such Person pursuant to the above release.
If Borrower or any Subsidiary Guarantor or any of its respective successors,
assigns, or officers, directors, employees, agents or attorneys, or any Person
acting for or on behalf of, or claiming through it violate the foregoing
covenant, such Person, for itself and its successors, assigns and legal
representatives, agrees to pay, in addition to such other damages as any
Releasee may sustain as a result of such violation, all attorneys’ fees and
costs incurred by such Releasee as a result of such violation.

7. Choice of Law; Arbitration. THIS AMENDMENT SHALL BE SUBJECT TO THE PROVISIONS
REGARDING CHOICE OF LAW AND ARBITRATION SET FORTH IN SECTIONS 8.12 AND 8.13 OF
THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS
REFERENCE, MUTATIS MUTANDIS.

8. Counterpart Execution. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile or other
electronic method of transmission shall be equally as effective as delivery of
an original executed counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by telefacsimile or other electronic
method of transmission also shall deliver an original executed counterpart of
this Amendment but the failure to deliver an original executed counterpart shall
not affect the validity, enforceability, and binding effect of this Amendment.

9. Effect on Loan Documents.

(a) The Credit Agreement, as amended hereby, and each of the other Loan
Documents, as amended as of the date hereof, shall be and remain in full force
and effect in accordance with their respective terms and hereby are ratified and
confirmed in all respects. The execution, delivery, and performance of this
Amendment shall not operate, except as expressly set forth herein, as a waiver
of, consent to, or a modification or amendment of, any right, power, or remedy
of Lender under the Credit Agreement or any other Loan Document. Except for the
amendments to the Credit Agreement expressly

 

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set forth herein, the Credit Agreement and the other Loan Documents shall remain
unchanged and in full force and effect. The amendments, consents, waivers and
modifications set forth herein are limited to the specified hereof, shall not
apply with respect to any facts or occurrences other than those on which the
same are based, shall neither excuse future non-compliance with the Loan
Documents nor operate as a waiver of any Default or Event of Default, shall not
operate as a consent to any further or other matter under the Loan Documents and
shall not be construed as an indication that any future waiver of covenants or
any other provision of the Credit Agreement will be agreed to, it being
understood that the granting or denying of any waiver which may hereafter be
requested by Borrower remains in the sole and absolute discretion of Lenders.

(b) Upon and after the effectiveness of this Amendment, each reference in the
Credit Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to “the Credit Agreement”, “thereunder”, “therein”,
“thereof” or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as modified and amended hereby.

(c) To the extent that any of the terms and conditions in any of the Loan
Documents shall contradict or be in conflict with any of the terms or conditions
of the Credit Agreement, after giving effect to this Amendment, such terms and
conditions are hereby deemed modified or amended accordingly to reflect the
terms and conditions of the Credit Agreement as modified or amended hereby.

(d) This Amendment is a Loan Document.

(e) Unless the context of this Amendment clearly requires otherwise, references
to the plural include the singular, references to the singular include the
plural, the terms “includes” and “including” are not limiting, and the term “or”
has, except where otherwise indicated, the inclusive meaning represented by the
phrase “and/or”. The words “hereof”, “herein”, “hereby”, “hereunder”, and
similar terms in this Amendment refer to this Amendment as a whole and not to
any particular provision of this Amendment. Section, subsection, clause,
schedule, and exhibit references herein are to this Amendment unless otherwise
specified. Any reference in this Amendment to any agreement, instrument, or
document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements,
thereto and thereof, as applicable (subject to any restrictions on such
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein). The
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts, and contract rights. Any
reference herein to any Person shall be construed to include such Person’s
successors and assigns.

10. Entire Agreement. This Amendment, and the terms and provisions hereof, the
Credit Agreement and the other Loan Documents constitute the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and supersede any and all prior or contemporaneous
amendments or understandings with respect to the subject matter hereof, whether
express or implied, oral or written.

11. Reaffirmation of Obligations. Borrower and each Subsidiary Guarantor hereby
reaffirms its obligations under each Loan Document to which it is a party, as
amended hereby. Borrower and each Subsidiary Guarantor hereby further ratifies
and reaffirms the validity and enforceability of all of the liens and security
interests heretofore granted, pursuant to and in connection with the Security
Agreements or any other Loan Document, to Lender, as collateral security for the
obligations under the Loan Documents in accordance with their respective terms,
and acknowledges that all of such Liens and security interests, and all
collateral heretofore pledged as security for such obligations, continue to be
and remain collateral

 

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for such obligations from and after the date hereof. Each of Borrower and each
Subsidiary Guarantor hereby further does grant to Lender for the benefit of
itself and the Bank Product Providers, a perfected security interest in the
Collateral in order to secure all of its present and future obligations under
the Loan Documents.

12. Ratification. Borrower and each Subsidiary Guarantor hereby restates,
ratifies and reaffirms each and every term and condition set forth in the Credit
Agreement and the other Loan Documents to which it is a party effective as of
the date hereof and as amended hereby.

13. Severability. In case any provision in this Amendment shall be invalid,
illegal or unenforceable, such provision shall be severable from the remainder
of this Amendment and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

14. Subsidiary Guarantors. Each of the undersigned Subsidiary Guarantors consent
to the amendments to the Credit Agreement and waiver contained herein. Although
the undersigned Subsidiary Guarantors have been informed of the matters set
forth herein with respect to the Credit Agreement and have consented to same,
each Subsidiary Guarantor understands that Lender has no obligation to inform it
of such matters in the future or to seek its acknowledgement or agreement to
future consents or amendments related to the Credit Agreement (other than
Section 8.06), and nothing herein shall create such a duty.

[signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
and delivered as of the date first above written.

 

SABA SOFTWARE, INC., a Delaware corporation, as Borrower By:  

/s/ Mark Robinson

Name:  

Mark Robinson

Title:  

Chief Financial Officer

HAL ACQUISITION SUB INC.,

a Delaware corporation, as a Subsidiary Guarantor

By:  

/s/ Peter E. Williams

Name:  

Peter E. Williams

Title:  

President

HUMANCONCEPTS, LLC,

a California limited liability company, as a Subsidiary Guarantor

By:  

/s/ Peter E. Williams

Name:  

Peter E. Williams

Title:  

President

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

By:  

/s/ John Noeita

Name:  

John Noeita

Title:  

Managing Director

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Schedule 5.09(a)

to Credit Agreement

MINIMUM EBITDA

 

Applicable Amount

    

Applicable Period

$ 2,500,000      

For the trailing 12 month period ending August 31, 2014

$ 1,700,000      

For the trailing 12 month period ending November 30, 2014

$ 1,000,000      

For the trailing 12 month period ending February 28, 2015

$ 5,100,000      

For the trailing 12 month period ending May 31, 2015

$ 9,000,000      

For the trailing 12 month period ending August 31, 2015

$ 11,900,000      

For the trailing 12 month period ending November 30, 2015

$ 14,900,000      

For the trailing 12 month period ending February 29, 2016

$ 14,700,000      

For the trailing 12 month period ending May 31, 2016

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Schedule 5.09(d)

to Credit Agreement

NEW RECURRING BOOKINGS

 

Applicable Amount

    

Applicable Period

$ 100,000,000      

For the trailing 12 month period ending August 31, 2014

$ 100,000,000      

For the trailing 12 month period ending November 30, 2014

$ 103,416,000      

For each trailing 12 month period ending as of the end of a fiscal quarter on or
after February 28, 2015

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Schedule 5.09(e)

to Credit Agreement

MAXIMUM NET LEVERAGE RATIO

 

Applicable Ratio

    

Applicable Date

  9.00:1.00      

As of August 31, 2015

  6.80:1.00      

As of November 30, 2015

  5.40:1.00      

As of February 29, 2016

  5.50:1.00      

As of May 31, 2016

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EXHIBIT A

EXHIBIT A TO

CREDIT AGREEMENT

[FORM OF] COMPLIANCE CERTIFICATE

WELLS FARGO BANK, NATIONAL ASSOCIATION

c/o Wells Fargo Capital Finance, LLC

2450 Colorado Avenue

Suite 3000 West

Santa Monica, California 90404

Attn: Technology Finance Manager

Facsimile: (310) 453-7442

This Compliance Certificate is furnished pursuant to that certain Amended and
Restated Credit Agreement, dated as of June 27, 2011 (as amended, restated,
supplemented, or otherwise modified from time to time, the “Credit Agreement”)
among SABA SOFTWARE, INC., a Delaware corporation (“Borrower”), each of the
Domestic Subsidiaries of Borrower party thereto as Subsidiary Guarantors (each a
“Subsidiary Guarantor” and collectively the “Subsidiary Guarantors”), and WELLS
FARGO BANK, NATIONAL ASSOCIATION (“Lender”). Unless otherwise defined herein,
the terms used in this Compliance Certificate have the meanings ascribed thereto
in the Credit Agreement.

The undersigned hereby certifies that:

1. I am the duly elected [chief executive] [chief financial] officer of
Borrower;

2. I have reviewed the terms of the Credit Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Borrower and its Subsidiaries during the [fiscal quarter]
[fiscal year] covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and we have no
knowledge of, the existence of any condition or the occurrence of any event
which constitutes a Default or an Event of Default, during or at the end of the
[fiscal quarter] [fiscal year] covered by the attached financial statements or
as of the date of this Compliance Certificate, except as set forth below;

4. The financial statements required by Section 5.03 of the Credit Agreement and
being furnished to you concurrently with this Compliance Certificate present
fairly, in all material respects, the financial condition of Borrower, as of the
date and for the [fiscal quarter] [fiscal year] covered thereby; and

5. Schedule I hereto sets forth financial data and computations evidencing
Borrower’s compliance with certain covenants of the Credit Agreement, including
Sections 5.09, 6.03, 6.04, 6.05, 6.06 and 6.07 thereof, all of which data and
computations are, to the best of my knowledge, true, complete and correct and
have been made in accordance with the relevant Sections of the Credit Agreement.

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Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which Borrowers have taken, are taking, or proposes to
take with respect to each such condition or event:

 

 

 

 

 

The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Compliance
Certificate in support hereof, are made and delivered this      day of
             201    .

 

SABA SOFTWARE, INC.,

a Delaware corporation

By:  

 

  Name:  

 

  Title:   [Chief Executive] [Chief Financial] Officer

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SCHEDULE I

TO COMPLIANCE CERTIFICATE

Compliance Calculations

for Amended and Restated Credit Agreement dated as of June 27, 2011

Calculations as of [            ,         ]

for [fiscal quarter][fiscal year] ending [            ,         ]

 

A.      

MINIMUM EBITDA (SECTION 5.09(a))

             1.  

EBITDA FOR THE FOR THE PERIOD COMMENCING ON [                    ] AND ENDING ON
[                    ]:

     $                   2.   LINE A1 MUST BE GREATER THAN:      $             
     3.   BORROWER IS IN COMPLIANCE (CHECK YES OR NO):        ¨ YES / ¨ NO    B.
      AVAILABILITY PLUS QUALIFIED CASH (SECTION 5.09(b))                1.   

AVAILABILITY PLUS QUALIFIED CASH WAS AT ALL TIMES DURING THE PRIOR FISCAL
QUARTER GREATER THAN OR EQUAL TO $        

         2.   

BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO    C.       NET DEBT (SECTION 5.09(c))              1.  

TOTAL OUTSTANDING DEBT LESS CASH AND CASH EQUIVALENTS FOR THE PERIOD COMMENCING
ON [                    ] AND ENDING ON [                    ]:

     $                   2.   LINE C1 MUST BE LESS THAN:      $                
  3.   BORROWER IS IN COMPLIANCE (CHECK YES OR NO):        ¨ YES / ¨ NO    D.  
    MINIMUM NEW RECURRING BOOKINGS (SECTION 5.09(d))              1.  

NEW RECURRING BOOKINGS FOR THE PERIOD COMMENCING ON [                    ] AND
ENDING ON [                    ]:

     $                   2.   LINE D1 MUST BE LESS THAN:      $                
  3.   BORROWER IS IN COMPLIANCE (CHECK YES OR NO):        ¨ YES / ¨ NO    E.  
    NET LEVERAGE RATIO (SECTION 5.09(e))              1.   LINE B1:A1       
[    ]      2.   LINE E1 MUST BE GREATER THAN:        [    ]      3.  

BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO   

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F.      

MAXIMUM OTHER INDEBTEDNESS (SECTION 6.03)

              

1. AGGREGATE PRINCIPAL AMOUNT OF SECOND LIEN OBLIGATIONS CURRENTLY OUTSTANDING:

     $                    

2. CAPITAL LEASES OF BORROWER AND EACH SUBSIDIARY GUARANTOR CURRENTLY
OUTSTANDING:

     $                    

3. LINE F1 MUST NOT BE GREATER THAN:

     $ 55,000,000.00       

4. LINE F2 MUST NOT BE GREATER THAN:

     $ 4,000,000.00       

5. BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO    G.      

TRANSFER OF ASSETS (SECTION 6.04(b))

              

1. AMOUNT OF ASSETS DISPOSED BY BORROWER AND EACH SUBSIDIARY GUARANTOR IN A
SINGLE TRANSACTION NOT COVERED BY SECTION 6.04(b)(ii)(A) –
SECTION 6.04(b)(ii)(E):

     $                    

2. AGGREGATE AMOUNT OF ASSETS DISPOSED BY BORROWER AND EACH SUBSIDIARY GUARANTOR
IN ALL TRANSACTIONS NOT COVERED BY SECTION 6.04(b)(ii)(A) – SECTION
6.04(b)(ii)(E):

     $                    

3. LINE G1 MUST NOT BE GREATER THAN:

     $ 1,000,000.00       

4. LINE G2 MUST NOT BE GREATER THAN:

     $ 5,000,000.00       

5. BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO    H.      

GUARANTIES (SECTION 6.05)

              

1. ALL GUARANTEES BY BORROWER AND EACH SUBSIDIARY GUARANTOR NOT COVERED BY
SECTION 6.05(a) OR (b):

     $                    

2. LINE H1 MUST NOT BE GREATER THAN:

     $ 1,000,000.00       

3. BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO    I.      

LOANS, ADVANCES AND INVESTMENTS (SECTION 6.06)

              

1. AGGREGATE AMOUNT OF CASH ACQUISITION CONSIDERATION FOR ALL PERMITTED
ACQUISITIONS:

     $                    

2. INTERCOMPANY LOANS OR ADVANCES TO ANY SUBSIDIARY OF BORROWER

     $                

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

   

3. ANY EVENTS OF DEFAULT AT THE TIME OF, OR RESULTING FROM, ANY LOANS OR
ADVANCES DESCRIBED IN LINE I2?

       ¨ YES / ¨ NO       

4. AVAILABILITY PLUS QUALIFIED CASH IN EXCESS OF $10,000,000 AT THE TIME OF, AND
AFTER GIVING EFFECT TO, ANY LOANS OR ADVANCES DESCRIBED IN LINE I2?

       ¨ YES / ¨ NO       

5. ALL LOANS, ADVANCES OR INVESTMENTS NOT COVERED BY SECTION 6.06(a) THROUGH
(g):

     $                    

6. ALL ADVANCES TO EMPLOYEES IN THE ORDINARY COURSE OF BUSINESS:

     $                    

7. LINE I1 MUST NOT BE GREATER THAN:

     $ 40,000,000.00       

8. LINE I5 MUST NOT BE GREATER THAN:

     $ 250,000.00       

9. LINE I6 MUST NOT BE GREATER THAN:

     $ 1,000,000.00       

10. BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO    J.      

DIVIDENDS, DISTRIBUTIONS (SECTION 6.07)

              

1. AGGREGATE OF ALL REPURCHASES OF BORROWER’S OR ANY SUBSIDIARY’S STOCK DURING
THE PRIOR TWELVE CONSECUTIVE MONTH PERIOD (EXCLUDING REPURCHASES OF BORROWER’S
OR ANY SUBSIDIARY’S COMMON STOCK OR COMMON STOCK OPTIONS OF ITS PRESENT OR
FORMER OFFICERS OR EMPLOYEES UPON THE DEATH, DISABILITY OR TERMINATION OF
EMPLOYMENT OF SUCH OFFICER OR EMPLOYEE):

     $                    

2. AGGREGATE OF ALL REPURCHASES OF BORROWER’S OR ANY SUBSIDIARY’S STOCK AS OF
THE DATE OF THIS COMPLIANCE CERTIFICATE (EXCLUDING REPURCHASES OF BORROWER’S OR
ANY SUBSIDIARY’S COMMON STOCK OR COMMON STOCK OPTIONS OF ITS PRESENT OR FORMER
OFFICERS OR EMPLOYEES UPON THE DEATH, DISABILITY OR TERMINATION OF EMPLOYMENT OF
SUCH OFFICER OR EMPLOYEE):

     $                    

3. AGGREGATE OF ALL REPURCHASES OF BORROWER’S OR ANY SUBSIDIARY’S COMMON STOCK
OR COMMON STOCK OPTIONS OF ITS PRESENT OR FORMER OFFICERS OR EMPLOYEES UPON THE
DEATH, DISABILITY OR TERMINATION OF EMPLOYMENT OF SUCH OFFICER OR EMPLOYEE AS OF
THE DATE OF THIS COMPLIANCE CERTIFICATE:

     $                

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

   

4. LINE J1 MUST NOT BE GREATER THAN

     $ 900,000.00       

5. LINE J2 MUST NOT BE GREATER THAN

     $ 2,900,000.00       

6. LINE J3 MUST NOT BE GREATER THAN

     $ 2,500,000.00       

7. ANY EVENTS OF DEFAULT AT THE TIME OF EACH SUCH REPURCHASE?

       ¨ YES / ¨ NO       

8. BORROWER IS IN COMPLIANCE (CHECK YES OR NO):

       ¨ YES / ¨ NO   

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Exhibit B

EXHIBIT D TO

CREDIT AGREEMENT

[FORM OF] THIRD AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE

 

$40,000,000.00    Palo Alto, California    September     , 2014

FOR VALUE RECEIVED, the undersigned SABA SOFTWARE, INC., a Delaware corporation
(“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Lender”) to the Lender’s Account (as defined in the below-defined
Credit Agreement), or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Forty Million Dollars ($40,000,000.00), or so much thereof
as may be advanced and be outstanding, with interest thereon, to be computed on
each advance from the date of its disbursement as set forth herein.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after each
definition, any other term defined in this Note shall have the meaning set forth
at the place defined, and any capitalized terms used herein without definition
shall have the meaning set forth in that certain Amended and Restated Credit
Agreement, dated as of June 27, 2011 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among Borrower,
the Subsidiary Guarantors party thereto from time to time, and Lender:

“Applicable Margin” means, as of any date of determination, 5.00 percentage
points per annum for the Base Rate and 6.00 percentage points per annum for
LIBOR;

provided that upon the occurrence of a Financial Statement Event, the applicable
margin for the Base Rate or LIBOR, as applicable, shall be set forth in the
following table that corresponds to the most recent First Lien Leverage Ratio
calculation delivered to Lender pursuant to Section 5.03 of the Credit Agreement
(the “First Lien Leverage Ratio Calculation”):

 

Level

  

First Lien Leverage Ratio Calculation

  

Applicable Margin for the

Base Rate

  

Applicable Margin for LIBOR

I    If the First Lien Leverage Ratio is less than 2.0:1.0   
3.75 percentage points    4.75 percentage points II    If the First Lien
Leverage Ratio is greater than or equal to 2.0:1.0 and less than to 3.0:1.0   
4.25 percentage points    5.25 percentage points III    If the First Lien
Leverage Ratio is greater than or equal to 3.0:1.0    4.75 percentage points   
5.75 percentage points

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

provided further that upon the occurrence of a NASDAQ Listing Event, the
applicable margin for the Base Rate or LIBOR, as applicable, shall be set forth
in the following table that corresponds to the most recent First Lien Leverage
Ratio Calculation:

 

Level

  

First Lien Leverage Ratio Calculation

  

Applicable Margin for the

Base Rate

  

Applicable Margin for LIBOR

I    If the First Lien Leverage Ratio is less than 2.0:1.0   
3.50 percentage points    4.50 percentage points II    If the First Lien
Leverage Ratio is greater than or equal to 2.0:1.0 and less than to 3.0:1.0   
4.00 percentage points    5.00 percentage points III    If the First Lien
Leverage Ratio is greater than or equal to 3.0:1.0    4.50 percentage points   
5.50 percentage points

If Applicable Margin is calculated based on the First Lien Leverage Ratio
Calculation: (a) it shall be based upon the most recent First Lien Leverage
Ratio Calculation, which will be calculated as of the end of each fiscal quarter
and (b) the Applicable Margin shall be re-determined quarterly on the first day
of the month following the date of delivery to Lender of the certified
calculation of the First Lien Leverage Ratio pursuant to Section 5.03 of the
Credit Agreement; provided, that if Borrower fails to provide such certification
when such certification is due, the Applicable Margin shall be set at the margin
in the row styled “Level III” as of the first day of the month following the
date on which the certification was required to be delivered until the date on
which such certification is delivered (on which date (but not retroactively),
without constituting a waiver of any Default or Event of Default occasioned by
the failure to timely deliver such certification, the Applicable Margin shall be
set at the margin based upon the calculations disclosed by such certification.
In the event that the information regarding the First Lien Leverage Ratio
contained in any certificate delivered pursuant to Section 5.03 of the Agreement
is shown to be inaccurate, and such inaccuracy, if corrected, would have led to
the application of a higher Applicable Margin for any period (an “Applicable
Period”) than the Applicable Margin actually applied for such Applicable Period,
then (i) Borrower shall immediately deliver to Lender a correct certificate for
such Applicable Period, (ii) the Applicable Margin shall be determined as if the
correct Applicable Margin (as set forth in the table above) were applicable for
such Applicable Period, and (iii) Borrower shall immediately deliver to Lender
full payment in respect of the accrued additional interest as a result of such
increased Applicable Margin for such Applicable Period, which payment shall be
promptly applied by Lender to the affected obligations.

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

(b) “Base Rate” means, for any day, a fluctuating rate equal to the highest of:
(i) the Prime Rate in effect on such day, (ii) a rate determined by Lender to be
one percent (1.00%) above Daily Three Month LIBOR in effect on such day, and
(iii) the Federal Funds Rate plus one-half percent (0.50%).

(c) “Business Day” means any day except a Saturday, Sunday or any other day on
which commercial banks in California are authorized or required by law to close.

(d) “Daily Three Month LIBOR” means, for any day, the rate of interest equal to
LIBOR then in effect for delivery for a three (3) month period.

(e) “Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers for the
immediately preceding day, as published by the Federal Reserve Bank of New York;
provided that if no such rate is so published on any day, then the Federal Funds
Rate for such day shall be the rate most recently published.

(f) “Fixed Rate Term” means a period commencing on a Business Day and continuing
for one (1), two (2), three (3), or six (6) months, as designated by Borrower,
during which all or a portion of the outstanding principal balance of this Note
bears interest determined in relation to LIBOR; provided however, that no Fixed
Rate Term may be selected for a principal amount less than One Hundred Thousand
Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall
extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would
end on a day which is not a Business Day, then such Fixed Rate Term shall be
extended to the next succeeding Business Day.

“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/8 of 1%) and determined pursuant to the following formula:

 

  LIBOR =  

Base LIBOR

      100% - LIBOR Reserve Percentage.  

(i) “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Lender (A) for the purpose of calculating effective rates of interest
for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with
the understanding that such rate is quoted by Lender for the purpose of
calculating effective rates of interest for loans making reference thereto, on
the first day of a Fixed Rate Term for delivery of funds on said date for a
period of time approximately equal to the number of days in such Fixed Rate Term
and in an amount approximately equal to the principal amount to which such Fixed
Rate Term applies, or (B) for the purpose of calculating effective rates of
interest for loans making reference to the Daily One Month LIBOR Rate, as the
Inter-Bank Market Offered Rate in effect from time to time for delivery of funds
for one (1) month in amounts approximately equal to the principal amount of such
loans. Borrower understands and agrees that Lender may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Lender in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Lender for expected changes in such reserve
percentage during the applicable term of this Note.

(g) “Prime Rate” means at any time the rate of interest most recently announced
within Wells Fargo Bank, N.A. at its principal office as its Prime Rate, with
the understanding that the Prime

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

Rate is one of Wells Fargo Bank, N.A.’s base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Lender may
designate.

INTEREST:

(h) Interest. The outstanding principal balance of this Note shall bear interest
(computed on the basis of a 360-day year, actual days elapsed) either (i) at a
fluctuating rate per annum of the Applicable Margin plus the Base Rate in effect
from time to time, or (ii) at a fixed rate per annum determined by Lender to be
Applicable Margin plus LIBOR in effect on the first day of the applicable Fixed
Rate Term. When interest is determined in relation to the Base Rate, each change
in the rate of interest hereunder shall become effective on the date each Base
Rate change is announced within Lender. With respect to each LIBOR selection
hereunder, Lender is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Lender’s books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.

(i) Selection of Interest Rate Options. At any time any portion of this Note
bears interest determined in relation to LIBOR, it may be continued by Borrower
at the end of the Fixed Rate Term applicable thereto so that all or a portion
thereof bears interest determined in relation to the Base Rate or to LIBOR for a
new Fixed Rate Term designated by Borrower. At any time any portion of this Note
bears interest determined in relation to the Base Rate, Borrower may convert all
or a portion thereof so that it bears interest determined in relation to LIBOR
for a Fixed Rate Term designated by Borrower. At such time as Borrower requests
an advance hereunder or wishes to select a LIBOR option for all or a portion of
the outstanding principal balance hereof, and at the end of each Fixed Rate
Term, Borrower shall give Lender notice specifying: (i) the interest rate option
selected by Borrower; (ii) the principal amount subject thereto; and (iii) for
each LIBOR selection, the length of the applicable Fixed Rate Term. Any such
notice may be given by telephone (or such other electronic method as Lender may
permit) so long as, with respect to each LIBOR selection, (A) if requested by
Lender, Borrower provides to Lender written confirmation thereof not later than
three (3) Business Days after such notice is given, and (B) such notice is given
to Lender prior to 10:00 a.m. (California) on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Lender, at its sole option
but without obligation to do so, accepts Borrower’s notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Lender, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Lender of the applicable
fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Base Rate interest selection for such advance or
the principal amount to which such Fixed Rate Term applied.

(j) Taxes and Regulatory Costs. (i) Borrower shall pay to Lender immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (A) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (B) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Lender with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, subject to
clause (c)(ii) below, any reasonable allocation made by Lender among its
operations shall be conclusive and binding upon Borrower.

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

(ii) If claiming reimbursement or compensation under this clause (d), Lender
shall deliver to Borrower a notice of its intent to make such claim. Each such
notice shall be delivered within the 120-day period commencing on the date the
officer of Lender charged with the credit responsibility for Borrower and the
Loan Documents first becomes aware of the specific facts on which such claim is
to be based and shall include a certificate setting forth in reasonable detail
the amount payable to Lender under this clause (c). Notwithstanding any other
provision in this Note or any other Loan Document, Lender shall not be entitled
to any reimbursement or compensation pursuant to this clause (c) for any period
of time prior to such notice if Lender shall have not given notice within such
120-day period. The determination by Lender of any amount due pursuant to this
clause (c) as set forth in a certificate setting forth the calculation thereof
in reasonable detail, shall, in the absence of manifest or demonstrable error,
be final and conclusive and binding on all of the parties hereto.

(iii) Notwithstanding any other provision of this Note or any other Loan
Document, Borrower shall only be liable for additional amounts pursuant to
clause (c) to the extent that Lender has required similarly situated borrowers
or obligors to pay comparable amounts in respect of such increased costs or
reduced returns.

(k) Payment of Interest. Interest accrued on this Note at the Base Rate shall be
payable on the first day of each month, commencing June 1, 2013. Interest
accrued on this Note at LIBOR shall be payable on the last day of each Fixed
Rate Term, but with respect to any Fixed Rate Term that is longer than three
(3) months, interest shall be payable on each successive date three (3) months
after the first day of such Fixed Rate Term.

(l) Default Interest. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Lender’s option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to two percent (2%) above
the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

(m) Borrowing and Repayment. Borrower may from time to time during the term of
this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note,
the Credit Agreement, and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount permitted
pursuant to Section 2.01(a)(i) of the Credit Agreement. The unpaid principal
balance of this Note at any time shall be the total amounts advanced hereunder
by the holder hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on June 27, 2016.

(n) Advances. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of an
Authorized Person in accordance with the Credit Agreement, any one acting alone,
who are authorized to request Advances and direct the disposition of any
Advances until written notice of the revocation of such authority is received by
the holder at the office designated above. The holder shall have no obligation
to determine whether any person requesting an Advance is or has been authorized
by Borrower.

(o) Application of Payments. All payments credited to principal of this Note
shall be applied first, to the outstanding principal balance of this Note which
bears interest determined in relation to the Base Rate, if any, and second, to
the outstanding principal balance of this Note which bears interest determined
in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.

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

PREPAYMENT:

(p) Base Rate. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to the Base Rate at any time, in any
amount and without penalty.

(q) LIBOR. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to LIBOR at any time and in the minimum amount
of One Hundred Thousand Dollars ($100,000.00); provided however, that if the
outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Lender providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto by
acceleration or otherwise, Borrower shall pay to Lender immediately upon demand
a fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month:

(i) Determine the amount of interest which would have accrued each month on the
amount prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the Fixed Rate Term applicable thereto.

(ii) Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.

(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Lender
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Lender. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum two percent (2.0%) above
the Base Rate in effect from time to time (computed on the basis of a 360- day
year, actual days elapsed).

EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and conditions of the
Credit Agreement. Any default in the payment or performance of any obligation
under this Note, or any defined event of default under the Credit Agreement,
shall constitute an “Event of Default” under this Note.

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

MISCELLANEOUS:

(r) Remedies. Upon the occurrence and during the continuance of any Event of
Default, the holder of this Note, at the holder’s option, may declare all sums
of principal and interest outstanding hereunder to be immediately due and
payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived by
Borrower, and the obligation, if any, of the holder to extend any further credit
hereunder shall immediately cease and terminate. Borrower shall pay to the
holder immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of the holder’s in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder’s rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Lender or any other
person) relating to Borrower or any other person or entity.

(s) Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California, without regard to principles of
conflicts of laws that would result in the application of the law of any other
jurisdiction.

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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

 

SABA SOFTWARE, INC. By:  

 

Name:  

 

Title: