02052003 8K Exhibit 10.1




                                                 Exhibit 10.1



ACCRUE SOFTWARE, INC.

 

 

 

 

SECURED CONVERTIBLE NOTE

PURCHASE AGREEMENT

 

 

 

 

February 4, 2003

ACCRUE SOFTWARE, INC.

SECURED CONVERTIBLE NOTE

PURCHASE AGREEMENT

This Secured Convertible Note Purchase Agreement (the
"Agreement") is made as of the 4th day of February, 2003 by and between
Accrue Software, Inc., a Delaware corporation (the "Company") and each of
the purchasers listed on Exhibit A attached to this Agreement (each
a "Purchaser" and together the "Purchasers").

RECITALS

The Company desires to issue and sell, and each
Purchaser desires to purchase, a secured convertible promissory note in
substantially the form attached to this Agreement as Exhibit B (the
"Note") which shall be convertible on the terms stated therein into
equity securities of the Company. The Notes and the equity securities issuable
upon conversion thereof (and the securities issuable upon conversion of
such equity securities) are collectively referred to herein as the
"Securities."

AGREEMENT

In consideration of the mutual promises contained
herein and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties to this Agreement agree as follows:

1.Purchase and Sale of Notes.

(a)Sale and Issuance of Notes. Subject
to the terms and conditions of this Agreement, each Purchaser agrees to purchase
at the Closing (as defined below) and the Company agrees to sell and issue to
each Purchaser a Note in the principal amount set forth opposite such
Purchaser's name on Exhibit A. The purchase price of each Note shall be
equal to 100% of the principal amount of such Note. The Company's agreements
with each of the Purchasers are separate agreements, and the sales of the Notes
to each of the Purchasers are separate sales, subject to Section 6(c)
hereof.

(b)Closing; Delivery. 

(i) The purchase and sale of the Notes
shall take place at the offices of Venture Law Group, a Professional
Corporation, 2775 Sand Hill Road, Menlo Park, California, at 10:00 a.m., on
February 4th, 2003, or at such other time and place as the Company and the
Purchasers mutually agree upon, orally or in writing (which time and place are
designated as the "Initial Closing"). In the event there is more than one
closing, the term "Closing" shall apply to each such closing, unless otherwise
specified herein.

(ii)At each Closing, the Company shall deliver to each
Purchaser the Note to be purchased by such Purchaser against (1) payment of the
purchase price therefor by check payable to the Company or by wire transfer to a
bank designated by the Company, (2) delivery of counterpart signature pages to
this Agreement and the Note, and (3) delivery of a validly completed and
executed IRS Form W-8 BEN or IRS Form W-9, as applicable, establishing such
Purchaser's exemption from withholding tax, which forms are attached to this
Agreement as Exhibit C.

(iii)Until the earlier of (A) such time as the aggregate
amount of principal indebtedness evidenced by the Notes equals a total of
$810,000, or (B) the date 150 days from the date hereof, the Company may sell
additional Notes to such persons or entities as determined by the Company, or to
any Purchaser who desires to acquire additional Notes. All such sales shall be
made on the terms and conditions set forth in this Agreement. For purposes of
this Agreement, and all other agreements contemplated hereby, any additional
purchaser so acquiring Notes shall be deemed to be a "Purchaser" for purposes of
this Agreement, and any notes so acquired by such additional purchaser shall be
deemed to be "Notes" and "Securities" as applicable.

2.Stock Purchase Agreement. Each Purchaser
understands and agrees that the conversion of the Notes into equity
securities of the Company in connection with a proposed equity financing of the
Company will require such Purchaser's execution of certain agreements relating
to the purchase and sale of such securities as well as any rights relating to
such equity securities.

3.Security Interest. The indebtedness
represented by the Notes shall be secured by certain of the assets of the
Company and its direct and indirect United States subsidiaries (the
"Collateral") in accordance with the provisions of the Note. 

4.Representations and Warranties of the
Company. The Company hereby represents and warrants to, and covenants
with, the Purchasers, as follows:

(a)Organization, Good Standing and
Qualification. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
financial condition or properties (a "Material Adverse Effect").

(b)Authorization. The Agreement and the
Notes, and the Common Stock issuable upon conversion of the Notes, have been
duly authorized by the Board of Directors of the Company. The Agreement and the
Notes, when executed and delivered by the Company, shall constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws of general application affecting enforcement of creditors' rights
generally, as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

(c)Non-Contravention. The execution and
delivery of this Agreement, the issuance and sale of the Notes (and the stock
issuable upon conversion of the Notes), to be sold by the Company under this
Agreement, the fulfillment of the terms of this Agreement and the consummation
of the transactions contemplated hereby will not (A) conflict with or constitute
a violation of, or default (with the passage of time or otherwise) under, (i)
any material bond, debenture, note or other evidence of indebtedness, or any
material lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Company is a party
or by which it or its property is bound, (ii) the certificate of incorporation,
by-laws or other organizational documents of the Company, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority binding as of the Closing upon the
Company or its property which is reasonably likely to result in a Material
Adverse Effect. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body, administrative
agency, or other governmental body in the United States is required for the
execution and delivery of this Agreement and the valid issuance and sale of the
Notes to be sold pursuant to this Agreement, other than such as have been made
or obtained, and except for any securities filings required to be made under
federal or state securities laws or the requirements of the National Association
of Securities Dealers, Inc. and which may be required to be made after the
Closing. For purposes of clauses (i) and (iii) of this paragraph (c), "the
Company" shall be deemed to include all direct and indirect United States
subsidiaries of the Company.

(d)Capitalization.
The capitalization of the Company is described in the Company's filings (the
"SEC Documents") with the Securities and Exchange Commission (the "SEC")
as of the dates set forth therein. The Company has not issued any capital stock
since September 21, 2000, other than pursuant to employee benefit plans
disclosed in the Company's SEC Documents. Except as set forth in or contemplated
by the Company's SEC Documents, there are no outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any unissued shares of capital
stock or other equity interest in the Company, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the Company is a
party and relating to the issuance or sale of any capital stock of the Company,
any such convertible or exchangeable securities or any such rights, warrants or
options. No preemptive right, co-sale right, registration right or limitation or
restriction on granting the registration rights set forth in Section 10 hereof,
right of first refusal or other similar right exists (or has not been waived)
with respect to the issuance and sale of the Notes. 

(e)Legal Proceedings. There is no legal
or governmental proceeding pending, or, to the knowledge of the Company,
threatened, to which the Company or any subsidiary of the Company is a party or
of which the business or property of the Company or any subsidiary of the
Company is subject that is not disclosed in the Company's SEC Documents, which
is reasonably likely to result in a Material Adverse Effect.

(f)No Violations. The Company is not in
violation of its certificate of incorporation, bylaws or other organizational
document, or, except as otherwise described in the SEC Documents, violation of
any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the Company,
which violation, individually or in the aggregate, has had, or would be
reasonably likely to have, a Material Adverse Effect, and the Company is not in
default (and there exists no condition which, with the passage of time or
otherwise, would constitute a material default) in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which the Company is bound or by which the property of
the Company is bound, which has had, or would be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect. For purposes of
this paragraph (f), "the Company" shall be deemed to include all direct and
indirect subsidiaries of the Company.

(g)Reporting Status. The Company has
filed all reports, schedules, registration statements, forms and other documents
required to be filed by the Company with the SEC, including those that the
Company may file with the SEC after the date of this Agreement until the Closing
("SEC Filings") required to be filed as of the date hereof. The SEC
Filings (i) were or will be filed on a timely basis, (ii) at the time filed,
were or will be prepared in compliance in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
SEC Filings, and (iii) did not or will not at the time they were or are filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such SEC Filings or necessary in order to make the
statements in such SEC Filings, in the light of the circumstances under which
they were made, not misleading.

(h)Collateral.The Company and each of
its direct and indirect United States subsidiaries has good title to the
Collateral, free of any Liens except Permitted Liens. This Agreement creates in
favor of the Purchasers a valid security interest in all of the Company's right,
title and interest in and to the Collateral, and upon the filing of appropriate
UCC financing statements with the Delaware Secretary of State, the Purchasers'
security interest hereunder and under the Notes will be duly perfected in all of
the Collateral in which a security interest may be perfected by such filing.

5.Representations and Warranties of the
Purchasers. Each Purchaser hereby represents and warrants to the Company
that:

(a)Authorization. Such Purchaser has full
power and authority to enter into this Agreement. This Agreement, when executed
and delivered by the Purchaser, will constitute a valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application affecting
enforcement of creditors' rights generally, and as limited by laws relating to
the availability of a specific performance, injunctive relief, or other
equitable remedies. 

(b)Purchase Entirely for Own Account. This
Agreement is made with the Purchaser in reliance upon the Purchaser's
representation to the Company, which by the Purchaser's execution of this
Agreement, the Purchaser hereby confirms, that the Securities to be acquired by
the Purchaser will be acquired for investment for the Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities. The Purchaser has not been formed
for the specific purpose of acquiring any of the Securities.

(c)Knowledge. The Purchaser is aware of the
Company's business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities.

(d)Restricted Securities. The Purchaser
understands that the Securities have not been, and will not be, registered under
the Securities Act of 1933, as amended (the "Securities Act"), by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the Securities are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the Securities indefinitely unless
they are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that, except as expressly
set forth herein, the Company has no obligation to register or qualify the
Securities for resale. The Purchaser further acknowledges that if an exemption
from registration or qualification is available, it may be conditioned on
various requirements including, but not limited to, the time and manner of sale,
the holding period for the Securities, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under no obligation and may not be able to satisfy.

(e)Not a Listed Security. The Purchaser
understands that the Company's stock is not listed on a national securities
exchange, and that the Company has made no assurances that the Company's stock
will ever be traded on a national securities exchange.

(f)Legends. The Purchaser understands that
the Securities, and any securities issued in respect thereof or exchange
therefor, may bear one or all of the following legends:

(i)"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. EXCEPT IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 OR ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION, NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933."

(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON
WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE ACT.

(iii)Any legend required by the Blue Sky laws of any state to the extent
such laws are applicable to the shares represented by the certificate so
legended.

(g)Accredited Investor. The Purchaser is an
accredited investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act.

(h)Foreign Investors. If a Purchaser
is not a United States person (as defined by Rule 902(k) under the Securities
Act), such Purchaser hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Securities or any use of this Agreement,
including (i) the legal requirements within its jurisdiction for the purchase of
the Securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be obtained
and (iv) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale or transfer of the Securities. Such
Purchaser's subscription and payment for, and his or her continued beneficial
ownership of the Securities, will not violate any applicable securities or other
laws of Purchaser's jurisdiction. Such Purchaser also hereby represents that
such Purchaser is not a "10-percent shareholder" as defined in Section 871(h) of
the Internal Revenue Code of 1986, as amended.

6. Conditions of the Purchasers' Obligations at
Closing. The obligations of each Purchaser to the Company under this
Agreement are subject to the fulfillment, on or before the Closing, of each of
the following conditions, unless otherwise waived:

(a)Representations and Warranties. The
representations and warranties of the Company contained in Section 4 shall
be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.

(b)Qualifications. All authorizations,
approvals or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful issuance and sale of the Securities pursuant to this Agreement shall be
obtained and effective as of the Closing.

(c)Minimum Amount. A minimum of $500,000
aggregate principal amount of the Notes shall be purchased by the Purchasers at
the initial Closing under this Agreement.

7.Conditions of the Company's Obligations at
Closing. The obligations of the Company to each Purchaser under this
Agreement are subject to the fulfillment, on or before the Closing, of each of
the following conditions, unless otherwise waived:

(a)Representations and Warranties. The
representations and warranties of each Purchaser contained in Section 5
shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.

(b)Qualifications. All authorizations,
approvals or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful issuance and sale of the Securities pursuant to this Agreement shall be
obtained and effective as of the Closing. 

(c)Delivery of Form W-8 BEN or Form W-9.
Each Purchaser shall have completed and delivered to the Company a validly
executed IRS Form W-8 BEN or IRS Form W-9, as applicable, establishing such
Purchaser's exemption from withholding tax.

8.Covenants of the Company. 

(a)Negative Covenants. Until the earlier to occur of the
conversion or repayment in full of the Notes, the Company shall not do any of
the following without the prior written consent of Purchasers holding a majority
of the outstanding principal amount of the Notes, which consent will not be
unreasonably withheld or delayed:

(i)Secured Indebtedness. Create, incur, assume, or be
liable for any secured Indebtedness which is senior in right of payment to the
Notes other than Permitted Indebtedness or Permitted Senior Indebtedness.

(ii)Liens. Create, incur, or allow any Lien on any of its
property, except for Permitted Liens.

(iii)Dividends and Distributions. Pay any dividends or make
any distribution or payment other than dividends payable solely in the Company's
Common Stock or redeem, retire or purchase any capital stock except for
repurchases of stock from former employees, consultants, or directors of Company
under the terms of applicable repurchase agreements, provided that no Event of
Default (as defined in the Notes) has occurred, is continuing or would exist
after giving effect to the repurchases. 

(b)Affirmative Covenants.

(i)Registration of Intellectual Property.
The Company shall, within a period of thirty (30) days following the initial
Closing, file with the U.S. Copyright Office (the "CO") registrations
with respect to all material copyrights of the Company, provided that the legal,
registration and other related costs and expenses associated with such
registrations and filings do not exceed $2,000 in the aggregate. With respect to
any registrations so filed, the Company shall also concurrently make such
filings as are required such that the Purchasers have a first priority security
interest in such copyrights (subject to Permitted Liens created to secure Senior
Permitted Indebtedness). At the request of the Purchasers holding a majority of
the outstanding principal amount of the Notes, the Company shall also take
commercially reasonable actions to register any additional copyrights developed
or acquired hereafter with the CO.

(ii)Perfection of Security Interest. The
Company shall file any amendments to UCC-1 financing statements or filings with
the CO and PTO, and shall make new filings, as are required in order to perfect
the Purchasers' security interest in the Collateral (including Collateral
developed or acquired hereafter), including without limitation as required upon
the reorganization of the Company under the laws of a jurisdiction other than
the State of Delaware.

(iii)Preservation of Collateral. The
Company shall keep all of its inventory in good and marketable condition, free
from material defects. Returns and allowances between the Company and its
account debtors will follow the Company's customary practices in the ordinary
course of business. 

(iv)Additional Closings. The Company shall
use reasonable efforts to sell the remaining amount of Notes authorized for sale
hereunder ($810,000 less the principal amount of Notes sold in the Initial
Closing) within the time period provided by Section 1(b) hereof (provided,
however, that the Company shall not be required to sell Notes in any transaction
that would not comply with applicable law). 
(c)Certain Definitions. As used in this
Agreement, the following capitalized terms have the following
meanings:



(i)"Indebtedness" shall mean indebtedness owed by
the Company to banks, commercial finance lenders, insurance companies, leasing
or equipment financing institutions, lending institutions or any other parties,
which is for money borrowed or the deferred purchase price or leasing of
equipment, whether or not secured.

(ii)"Lien" shall mean, with respect to any asset
or property of the Company, any security interest, mortgage, pledge, lien,
claim, charge or other encumbrance in, of, or on such property or the income
therefrom, including, without limitation, the interest of a vendor or lessor
under a conditional sale agreement, capital lease or other title retention
agreement, or any agreement to provide any of the foregoing, and the filing of
any financing statement or similar instrument under the Uniform Commercial Code
or comparable law of any jurisdiction.

(iii)"Permitted Indebtedness" shall mean: (i)
Indebtedness to trade creditors incurred in the ordinary course of business;
(ii) Indebtedness secured by Permitted Liens; (v) Indebtedness of Company to any
of its subsidiaries; (iii) Indebtedness which is first applied to fully pay all
amounts due under the Notes; and (iv) extensions, refinancings, modifications,
amendments and restatements of any items of Permitted Indebtedness set forth
above, provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Company, as the
case may be.

(iv)"Permitted Senior Indebtedness" shall mean Indebtedness
secured by the Permitted Liens described in subsections (iv), (v), (x) and (xii)
of the definition of Permitted Liens.

(v)"Permitted Liens" means (i) Liens for
taxes not yet delinquent or Liens for taxes being contested in good faith and by
appropriate proceedings for which adequate reserves have been established;
(ii) Liens in respect of property or assets imposed by law which were
incurred in the ordinary course of business, such as carriers', warehousemen's,
materialmen's and mechanics' Liens and other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable without
penalty or which are being contested in good faith and by appropriate
proceedings; (iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, contract bids, government
contracts, performance and return of money bonds and other similar obligations,
incurred in the ordinary course of business, whether pursuant to statutory
requirements, common law or consensual arrangements; (iv) Liens securing
obligations under a capital lease if such Liens do not extend to property other
than the property leased under such capital lease; (v) Liens upon any
equipment or other property acquired or held by Company or any of its
subsidiaries to secure the purchase price of such equipment or other property or
Indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other property, so long as such Lien extends only to the
equipment or other property financed, and any accessions, replacements,
substitutions and proceeds (including insurance proceeds) thereof or thereto;
(vi) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payments of customs duties in connection with the importation
of goods; (vii) Liens which constitute rights of setoff of a customary
nature or banker's liens, whether arising by law or by contract;
(viii) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Company's business; (ix) Liens securing Indebtedness which is
first applied to fully pay all amounts due under the Notes; (x) Liens securing
indebtedness of a Person (other than an existing subsidiary of the Company)
existing at the time such Person becomes a subsidiary of the Company or is
merged with or into the Company or a subsidiary of the Company or Liens securing
Indebtedness incurred in connection with an acquisition, merger or
consolidation; provided, that such Liens were in existence prior to the
date of such acquisition, merger or consolidation, were not incurred in
anticipation thereof, and do not extend to any other assets; (xi) Liens which
are expressly subordinate to the Notes; and (xii) Liens upon property or assets
purchased or otherwise acquired for consideration after the date hereof that do
not extend to any other property or assets except those purchased or otherwise
acquired; provided that, with respect to clauses (x)(but only if the primary
purpose of such acquisition, merger or consolidation is capital raising) and
(xii) above, the Company's consolidated net tangible assets are equal to or
greater than 250% of the Company's aggregate secured indebtedness (including the
Notes and the proposed secured indebtedness to be secured by such Liens).

(vi)"Person" means any corporation,
individual, limited liability company, joint stock company, joint venture,
partnership, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.

9. Covenant of the Holders.

(a) Further Assurances. At any time and from time to time,
upon the written request of the Company and at the Company's expense, the
Holders will promptly and duly authenticate and deliver such instruments and
documents and take such further action as the Company may reasonably request
for the purpose of enabling the Company to incur Permitted Indebtedness and
Senior Permitted Indebtedness and otherwise preserving such rights under this
Agreement including, without limitation, filing any financing statements or
amendments thereto under the UCC as in effect with respect to Permitted
Liens.

10. Registration Rights.

10.1Definitions. As used in this Section 10:

(a)The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the subsequent declaration or ordering of the
effectiveness of such registration statement;

(b)The term "Registrable Securities" means: (i) the
shares of the Company's Common Stock issued or issuable upon conversion of the
Notes (including Common Stock issued or issuable upon conversion of Preferred
Stock which is issued upon conversion of the Notes); and (ii) any other shares
of Common Stock of the Purchaser issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Securities, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which such person's rights under this Agreement
and the Note are not assigned; provided, however, that Common
Stock or other securities shall only be treated as Registrable Securities if and
so long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof so
that all transfer restrictions, and restrictive legends with respect thereto, if
any, are removed upon the consummation of such sale;

(c)The number of shares of "Registrable Securities then
outstanding" shall mean the number of shares of Common Stock outstanding
which are, and the number of shares of Common Stock issuable pursuant to the
then exercisable or convertible securities which are, Registrable
Securities;

(d)The term "Holder" means any holder of outstanding
Registrable Securities who, subject to the limitations set forth in Section 10.7
below, acquired such Registrable Securities in a transaction or series of
transactions not involving any registered public offering; and

(e)The term "Form S-3" means such form under the
Securities Act as in effect on the date hereof or any registration form under
the Securities Act subsequently adopted by the Securities and Exchange
Commission ("SEC") which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Purchaser
with the SEC.

10.2Company Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock under the Securities Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Securities Act, a registration in which the
only stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at such time,
promptly give each Holder written notice of such registration. Upon the written
request of each Holder given within 20 days after mailing of such notice by the
Company in accordance with Section 11(e), the Company shall, subject to the
provisions of Section 10.6, cause to be registered under the Securities Act
all of the Registrable Securities that each such Holder has requested to be
registered.

10.3Form S-3 Registration. In case the
Company shall receive from any Holder or Holders of not less than fifty percent
(50%) of the Registrable Securities then outstanding a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

(a)promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders;

(b)as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 10.3: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the
Form S-3 registration statement for a period of not more than 90 days after
receipt of the request of the Holder or Holders under this Section 10.3;
provided, however, that the Company shall not utilize this right more than once
in any twelve month period; (3) if the Company has, within the
12 month period preceding the date of such request, already effected two
registrations on Form S-3 for the Holders; or (4) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance; and

(c)Subject to the foregoing, the Company shall file a registration
statement on Form S-3 covering the Registrable Securities and other securities
so requested to be registered promptly after receipt of the request or requests
of the Holders. 

10.4Obligations of the Company. Whenever
required under this Section 10 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

(a)Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its commercially reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to 90 days;

(b)Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement;

(c)Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;

(d)Cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed.

10.5Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 10 with respect to the Registrable Securities of any selling Holder
that such Holder shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities. 

10.6Expenses of Registration.

(a)Company Registration. All expenses
other than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
Section 10.2 for each Holder (which right may be assigned as provided in
Section 10.10), including (without limitation) all registration, filing,
and qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company shall be borne by the Company. The Company shall not be
required to pay the fees or expenses of separate counsel to the selling
Holders.

(b)Registration on Form S-3. All expenses
incurred in connection with a registration requested pursuant to
Section 10.3, including (without limitation) all registration, filing,
qualification, printer and accounting fees shall be borne by the Company.
The Company shall not be required to pay any underwriters' or brokers' fees,
discounts or commissions relating to the Registrable Securities, or the fees or
expenses of separate counsel to the selling Holders.

10.7Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 10.2 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall the amount of securities of
the selling Holders included in the offering be reduced below 20% of the total
amount of securities included in such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single
"selling stockholder," and any pro-rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.

10.8Indemnification. In the event any Registrable
Securities are included in a registration statement under this
Section 10:

(a)To the extent permitted by law, the Company will indemnify
and hold harmless each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law; and the Company
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 10.8(a), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 10.8(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld, nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder or controlling person;

(b)To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, any other Holder selling securities in such registration statement and any
controlling person of any such other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 10.8(b),
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 10.8(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided that in no event shall any indemnity under this
subsection 10.8(b) exceed the gross proceeds from the offering received by
such Holder;

(c)Promptly after receipt by an indemnified party under this
Section 10.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 10.8, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 10.8;

(d)If the indemnification provided in this Section 10.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; and

(e)The obligations of the Company and Holders under this
Section 10.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 10, and
otherwise.

10.9Reports Under Securities Exchange Act of 1934.
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Securities Act ("Rule 144") and any other rule
or regulation of the SEC that may at any time permit a Holder to sell securities
of the Company to the public without registration, the Company agrees to use its
best efforts to:

(a)make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;

(b)file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

(c)furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such securities without registration.

10.10Assignment of Registration Rights. The rights
to cause the Company to register Registrable Securities pursuant to this
Section 10 may only be assigned by a Holder to a transferee or assignee of
all of such Holder's interest in Holder's Note, and shall be subject to the
restrictions on transfers contained in such Note. Such assignment shall be
effective only if immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act. 

10.11Termination of Registration
Rights. The rights granted under this Section 10 shall terminate upon
the earlier of (a) five (5) years following the date of this Agreement, or
(b) with respect to any Holder, at such time as such Holder may sell all of
such Holder's Registrable Securities in any one three month period pursuant to
Rule 144 or such successor rule as may be adopted.

11.Miscellaneous.

(a)Successors and Assigns. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

(b)Governing Law. This Agreement and all
acts and transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of law. 

(c)Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one instrument.

(d)Titles and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.

(e)Notices. Any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon receipt, when delivered personally or by courier, overnight delivery
service or confirmed facsimile, or 48 hours after being deposited in the U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below or as subsequently modified by written
notice.

(f)Finder's Fee. Each party represents that
it neither is nor will be obligated for any finder's fee or commission in
connection with this transaction. Each Purchaser agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending
against such liability or asserted liability) for which each Purchaser or
any of its officers, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless each Purchaser from any liability for any
commission or compensation in the nature of a finder's fee (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of its officers, employees or representatives
is responsible.

(g)Amendments and Waivers. Any term of this
Agreement may only be amended or waived with the written consent of the Company
and the holders of at least a majority of the outstanding principal amount of
the Notes (provided that amendment of Section 10 hereof shall instead require
the written consent of the holders of at least of majority of the Registrable
Securities then outstanding). Any amendment or waiver effected in accordance
with this Section 11(g) shall be binding upon each Purchaser and each transferee
of the Securities, each future holder of all such Securities, and the
Company.

(h)Severability. If one or more provisions
of this Agreement are held to be unenforceable under applicable law, the
parties agree to renegotiate such provision in good faith, in order to maintain
the economic position enjoyed by each party as close as possible to that under
the provision rendered unenforceable. In the event that the parties cannot reach
a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the
balance of the Agreement shall be interpreted as if such provision were so
excluded and (iii) the balance of the Agreement shall be enforceable in
accordance with its terms.

(i)Entire Agreement. This Agreement, and
the documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto are expressly
canceled.

(j)Exculpation Among Purchasers. Each
Purchaser acknowledges that it is not relying upon any person, firm or
corporation, other than the Company and its officers and directors, in making
its investment or decision to invest in the Company. Each Purchaser agrees that
no Purchaser nor the respective controlling persons, officers, directors,
partners, agents, or employees of any Purchaser shall be liable for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the Securities.

(k)Advice of Legal Counsel. Each party
acknowledges and represents that, in executing this Agreement, it has had the
opportunity to seek advice as to its legal rights from legal counsel and that
the person signing on its behalf has read and understood all of the terms and
provisions of this Agreement. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.

(l)Fees and Expenses. The Company shall pay
promptly after the Closing the fees and expenses of Fenwick & West, the
counsel for the Purchasers, incurred in connection with performing due diligence
with respect to this Agreement, the documents referred to herein and the
transactions contemplated hereby and thereby, provided such fees and expenses do
not exceed, in the aggregate, $15,000.

(m)Corporate Securities Law. THE SALE OF
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS
THE SALE IS SO EXEMPT.

[Signature Pages Follow]

The parties have executed this Secured Convertible Note
Purchase Agreement as of the date first written above.
COMPANY:

ACCRUE SOFTWARE, INC.

 

By: /s/ Jonathan D. Becher
President and CEO


Name: Jonathan D. Becher

Address: 48634 Milmont Drive
Fremont, CA 94538-7353




Facsimile Number: (510) 580-4501

 

PURCHASERS:

 

RS Orphan Fund, LP

By: /s/ Paul H. Stephens

Name: Paul H. Stephens



Title: Investment Advisory

General Partner
Address: 388 Market St.

San Francisco, CA 94111




Facsimile Number: 

 

PURCHASERS:

RS Orphan Offshore Fund, LP

By: /s/ Paul H. Stephens

Name: Paul H. Stephens



Title: Investment Advisory

 General Partner
Address: 388 Market St.

San Francisco, CA 94111




Facsimile Number: 

 

Sterling Payot Capital, LP

By: /s/ Robert M. Smelick

Name: Robert M. Smelick



Title: General Partner
Address: 65 Cloudview Rd.

Sausalito, CA 94956




Facsimile Number: 

 

Robert M. Smelick

/s/ Robert M. Smelick

Robert M. Smelick


Address: 65 Cloudview Rd.

Sausalito, CA 94956




Facsimile Number: 

PURCHASERS:

 

ELIZABETH W. KORRELL

/s/ Elizabeth W. Korrell

Elizabeth W. Korrell


Address: 2607 Ninth Avenue West

Seattle, WA 98119




Facsimile Number: 206-266-1860















Exhibit A -Schedule of Purchasers

Exhibit B -Form of Promissory Note

Exhibit C -Purchaser Withholding Exemptions
















EXHIBIT A

SCHEDULE OF PURCHASERS

FIRST CLOSING


	


Purchaser Name and Address
	
Type of

Consideration
	
Original Principal Amount of
Note

	
 

RS Orphan Fund, LP

388 Market Street

San Francisco, CA 94111

 

RS Orphan Offshore Fund, LP

388 Market Street

San Francisco, CA 94111
	
 

Cash

 

 

 

Cash
	
 

$79,000

 

 

 

$21,000

 

 

 

	
Sterling Payot Capital, LP

65 Cloudview Rd.

Sausalito, CA 94956
	
Forgiveness of indebtedness
	
$335,573.57

	
Robert M. Smelick

65 Cloudview Rd.

Sausalito, CA 94956
	
Forgiveness of indebtedness
	
$60,349.72

	
Elizabeth W. Korrell

2607 Ninth Avenue West

Seattle WA 98119
	
Cash
	
$5,000.00





















EXHIBIT B

 

 

FORM OF SECURED CONVERTIBLE PROMISSORY NOTE



















EXHIBIT C

 

PURCHASER WITHHOLDING EXEMPTIONS