Business Financing Agreement



 Exhibit 10.01 
  
 BUSINESS FINANCING AGREEMENT 
 dated as of November 30, 2005 
 between 
 BRIDGE BANK, NATIONAL ASSOCIATION 
 and 
 KANA Software, Inc., a Delaware corporation (“Borrower”) 
  

Borrower and Lender agree as follows: 
  
 1. Definitions and Construction. 
  
 1.1 Definitions. In this Agreement: 
  
 “Account Balance” means at any time the aggregate of the Receivable Amounts of all Eligible Receivables at such time. 
  
 “Account Debtor” has the meaning in the California Uniform
Commercial Code and includes any person liable on any Receivable, including without limitation, any guaranty of any Receivable and any issuer of a letter of credit or banker’s acceptance assuring payment thereof. 
  
 “Adjustments” means all discounts, allowances, disputes,
offsets, defenses, rights of recoupment, rights of return, warranty claims, or short payments, asserted by or on behalf of any Account Debtor with respect to any Receivable. 
  
 “Advance Request” means a writing signed by an authorized representative of Borrower requesting (1) a
Revolving Advance which accurately identifies the Eligible Receivables and Receivable Amounts, including for each such Receivable the correct amount owed by the Account Debtor, the name and address of the Account Debtor, the invoice number, the
invoice date and the account code. 
  
 “Affiliate” means a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members. 
  
 “Agreement” means this Business Financing Agreement. 
  
 “Borrowing Base” means at any time the sum of the Account Balance multiplied by the Receivables Advance
Rate. 
  
 “Cash” means Borrowers cash and cash
equivalents. 
  
 “Cash Burn” means cash as of
three months immediately preceding the date of measurement minus the current month’s ending Cash, excluding the proceeds received during that period from any loans or investments, but adding back and payments made during that period on account
of long term indebtedness or purchase of capital equipment. 







 “Collateral” means all of Borrower’s rights and interest in any and all personal
property, whether now existing or hereafter acquired or created and wherever located, and all products and proceeds thereof and accessions thereto, including the following: accounts, including health care insurance receivables, chattel paper,
inventory, equipment, instruments, including promissory notes, investment property, documents, deposit accounts, letter of credit rights, any commercial tort claim of Borrower which is now or hereafter identified by Borrower or Lender, general
intangibles with the exception of              carve out for specific IP
                                , and supporting obligations. 
  
 “Collections” means all payments from or on behalf of an
Account Debtor with respect to Receivables. 
  
 “Compliance Certificate” means a certificate in the form attached to this Agreement by the chief financial officer or other authorized person of Borrower that, among other things, the representations and warranties set
forth in this Agreement are true and correct as of the date such certificate is delivered. 
  
 “Default” means any Event of Default or any event that with notice, lapse of time or otherwise would constitute an Event of Default. 
  
 “Default Rate” means 5.00 percentage points above the rate effective immediately before the Event of
Default. 
  
 “Eligible Receivable” means a
Receivable that satisfies all of the following: 
  
 (a) the
Receivable has been created by Borrower in the ordinary course of Borrower’s business and without any obligation on the part of Borrower to render any further performance; 
  
 (b) there are no conditions which must be satisfied before Borrower is entitled to receive payment of the Receivable, and
the Receivable does not arise from COD sales, consignments or guaranteed sales; 
  
 (c) the Account Debtor upon the Receivable does not claim any defense to payment of the Receivable, whether well founded or otherwise; 
  
 (d) the Receivable is not the obligation of an Account Debtor who has asserted or may assert any counterclaims or offsets
against Borrower, including offsets for any “contra accounts” owed by Borrower to the Account Debtor for goods purchased by Borrower or for services performed for Borrower, unless a credit balance is carried on the books of Borrower;

  
 (e) the Receivable represents a genuine obligation of the
Account Debtor and to the extent any credit balances exist in favor of the Account Debtor, such credit balances shall be deducted in calculating the Receivable Amount; 
  
 (f) Borrower has sent an invoice to the Account Debtor in the amount of the Receivable; 
  

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 (g) Borrower is not prohibited by the laws of the state where the Account Debtor is located from bringing
an action in the courts of that state to enforce the Account Debtor’s obligation to pay the Receivable. Borrower has taken all appropriate actions to ensure access to the courts of the state where the Account Debtor is located, including, where
necessary, the filing of a Notice of Business Activities Report or other similar filing with the applicable state agency or the qualification by Borrower as a foreign corporation authorized to transact business in such state; 
  
 (h) the Receivable is owned by Borrower free of any title defects or any
liens or interests of others except the security interest in favor of Lender, and Lender has a perfected, first priority security interest in such Receivable; 
  

(i) the Account Debtor on the Receivable is not any of the following: (1) an employee, Affiliate, parent or subsidiary of Borrower, or an entity
which has common officers or directors with Borrower; (2) the U.S. government or any agency or department of the U.S. government unless Borrower complies with the procedures in the Federal Assignment of Claims Act of 1940 (41 U.S.C. §15)
with respect to the Receivable, and the underlying contract expressly provides that neither the U.S. government nor any agency or department thereof shall have the right of set-off against Borrower; (3) any person or entity located in a foreign
country (other than IBM UK, Seimans AG and Deutsch Bank AG) unless (A) the Receivable is supported by an irrevocable letter of credit issued by a bank acceptable to Lender, and (B) if requested by Lender, the original of such letter of
credit and/or any usance drafts drawn under such letter of credit and accepted by the issuing or confirming bank have been delivered to Lender; or (4) an Account Debtor as to which 35% or more of the aggregate dollar amount of all
outstanding Receivables owing from such Account Debtor have not been paid within 90 days from invoice date; 
  
 (j) the Receivable is not in default. A Receivable will be considered in default if any of the following occur: (i) the Receivable is not paid within
90 days from its invoice date; (ii) the Account Debtor obligated upon the Receivable suspends business, makes a general assignment for the benefit of creditors, or fails to pay its debts generally as they come due; or (iii) any petition is
filed by or against the Account Debtor obligated upon the Receivable under any bankruptcy law or any other law or laws for the relief of debtors); 
  
 (k) the Receivable does not arise from the sale of goods which remain in Borrower’s possession or under Borrower’s control; 
  
 (1) the Receivable is not evidenced by a promissory note or chattel paper,
nor is the Account Debtor obligated to Borrower under any other obligation which is evidenced by a promissory note; 
  
 (m) the Receivable is not that portion of Receivables due from an Account Debtor which is in excess of 30% of Borrower’s aggregate dollar amount of
all outstanding Receivables, except for IBM, for which such percentage is 50% for the amounts that exceed that percentage; and 
  
 (n) the Receivable is otherwise acceptable to Lender. 
  

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 “Event of Default” has the meaning set forth in Section 7.1. 
  
 “Facility Fee” means a fee equal to .25% of the Total Credit
Limit, due upon execution of this Agreement. 
  
 “Formula
Advance” means a Revolving Advance made to Borrower under the Formula Sublimit. 
  
 “Formula Availability” means the lesser of the Borrowing Base or the Formula Sublimit. 
  
 “Formula Sublimit” means $5,000,000. 
  
 “Inventory” means and includes all of Borrower’s now owned or hereafter acquired goods, merchandise and other personal property,
wherever located, to be furnished under any consignment, arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might
be used or consumed in Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them. 
  
 “Lender” means Bridge Bank, National Association, and its
successors and assigns. 
  
 “Letter of Credit”
has the meaning set forth in Section 2.1(d). 
  
 “Letters of Credit Outstanding” means, at any time, the sum of, without duplication, (i) the maximum amount available to be drawn on all outstanding Letters of Credit issued by Lender or by Lender’s affiliate and
(ii) the aggregate amount of all amounts drawn and unreimbursed with respect to Letters of Credit issued by the Lender or by Lender’s affiliate. 
  
 “Letter of Credit Sublimit” has the meaning set forth in Section 2.1(d). 
  
 “Nonformula Advance” means a Revolving Advance made to
Borrower under the Nonformula Sublimit. 
  
 “Nonformula
Sublimit” means $6,000.000. 
  
 “Obligations” means all liabilities and obligations of Borrower to Lender of any kind or nature, present or future, arising under or in connection with this Agreement or under any other document, instrument or agreement,
whether or not evidenced by any note, guarantee or other instrument, whether arising on account or by overdraft, whether direct or indirect (including those acquired by assignment) absolute or contingent, primary or secondary, due or to become due,
now owing or hereafter arising, and however acquired; including, without limitation, all Advances, fees, interest, expenses, professional fees and attorneys’ fees. 
  
 “Overadvance” means (a) as to the total amount of the Formula Advances plus Nonformula Advances, the
amount, if any, that exceeds the Revolving Credit Limit, (b) as to any Formula Advance (i) with respect to any receivable which is not an Eligible Receivable, the entire outstanding amount of such Formula Advance, and (ii) the total
amount of the Revolving 
  

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 Advances then outstanding (including amounts deemed Revolving Advances under Sections 2.1(e) and (f)) plus the Letters of
Credit Outstanding exceeds the Revolving Credit Limit or the Borrowing Base, (c). 
  
 “Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. 
  
 “Prime Rate” means for any day, a variable rate of interest, per annum, most recently published by the Wall Street Journal, as the
“prime rate,” provided that if such day is not a business day, the Prime Rate for such day shall be such rate on such transactions on the next preceding business day as so published in the Money Rates Section of the Western Edition of the
Wall Street Journal on the next succeeding business day. 
  
 “Receivables Advance Rate” means 80% or such greater or lesser percentage as Lender may from time to time establish in its sole discretion upon notice to Borrower. 
  
 “Receivable Amount” means as to any Receivable, the net
amount due from the Account Debtor after deducting all discounts, credits, offsets, payments or other deductions of any nature whatsoever. 
  
 “Receivables” means Borrower’s rights to payment arising in the ordinary course of Borrower’s business, including accounts,
chattel paper, instruments, contract rights, documents, general intangibles, letters of credit, drafts, and bankers acceptances. 
  
 “Remaining Months Liquidity” means an amount equal to (a) Cash in which Lender has a first priority security interest plus the
amount available to Borrower under this Agreement minus outstanding Revolving Advances and Equipment Loans divided by (b) Cash Burn. 
  
 “Revolving Advance” means an advance made by Lender to Borrower pursuant to Section 2.1. 
  
 “Revolving Interest Rate” means a per annum rate equal to
(a) the Prime Rate plus two percentage points with respect to Formula Advances and (b) the Prime Rate plus one-half percentage points with respect to Non-Formula Advances. After an Event of Default, the outstanding principal balance of the
Revolving Advances shall accrue interest at the Default Rate. 
  
 “Revolving Credit Limit” means $7,000,000. 
  
 “Revolving Maturity Date” means November 29, 2006. 
  
 “Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s debt to Lender (pursuant to a subordination agreement entered into between Lender, Borrower and the subordinated
creditor), on terms acceptable to Lender. 
  

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 “Termination Date” means the earlier of (i) the date in which all Obligations are
indefeasibly paid in full, or (ii) the date on which Lender elects to terminate this Agreement pursuant to the terms herein. 
  
 “Unrestricted Cash” means unrestricted, unencumbered marketable securities, cash and cash equivalents. 
  
 1.2 Construction: 
  
 (a) In this Agreement: (i) references to the plural include the
singular and to the singular include the plural; (ii) references to any gender include any other gender; (iii) the terms “include” and “including” are not limiting; (iv) the term “or” has the inclusive
meaning represented by the phrase “and/or,” (v) unless otherwise specified, section and subsection references are to this Agreement, and (vi) any reference to any statute, law, or regulation shall include all amendments thereto
and revisions thereof 
  
 (b) Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved using any presumption against either Borrower or Lender, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each party hereto and
their respective counsel. In case of any ambiguity or uncertainty, this Agreement shall be construed and interpreted according to the ordinary meaning of the words used to accomplish fairly the purposes and intentions of all parties hereto.

  
 (c) Titles and section headings used in this Agreement are for
convenience only and shall not be used in interpreting this Agreement. 
  
 2.
The Credit. 
  
 2.1 Revolving Loans. 
  
 (a) Revolving Credit Line. Subject to the terms and conditions of
this Agreement, from the date on which this Agreement becomes effective until the Revolving Maturity Date, Lender will make advances (each, a “Revolving Advance”) to Borrower not exceeding (i) the Formula Sublimit or the Borrowing
Base, whichever is less with respect to Formula Advances and (ii) the Nonformula Sublimit with respect to Nonformula Advances; provided that in no event shall the aggregate amount of Formula Advances and Nonformula Advances at any one time
exceed the Revolving Credit Limit. Lender shall not be obligated to make any Revolving Advance that results in an Overadvance or while any Overadvance is outstanding. It shall be a condition precedent to the initial Formula Advance that
(i) Lender shall have conducted a collateral audit, the results of which must be satisfactory to Lender and (ii) Lender shall have received Borrower’s 2006 annual projections which must be in form and substance acceptable to Lender.
Amounts borrowed under this Section may be repaid and reborrowed during the term of this Agreement. It shall be a condition to each Advance that (a) all of the representations and warranties set forth in Section 4 are true and correct on
the date of such Revolving Advance as though made at and as of each such date and (b) no Default has occurred and is continuing, or would result from such Revolving Advance. 
  

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 (b) Advance Requests. Borrower may request that Lender make a Revolving Advance by delivering to
Lender an Advance Request. Lender shall be entitled to rely on all the information provided by Borrower to Lender on or with the Advance Request and to rely on the signature on any Advance Request as an authorized signature of Borrower. 

 
 (c) Due Diligence. Lender may at any time and from time to time
contact Account Debtors and other persons obligated or knowledgeable in respect of Receivables to confirm the Receivable Amount of such Receivables, to determine whether Receivables constitute Eligible Receivables, and for any other purpose in
connection with this Agreement. Lender may audit Borrower’s Receivables and any and all records pertaining to the Collateral, at Lender’s sole discretion and at Borrower’s expense. 
  
 (d) Letter of Credit Line. Subject to the terms and conditions of this
Agreement, Lender hereby agrees to issue or cause an affiliate to issue letters of credit for the account of Borrower (each, a “Letter of Credit” and collectively, “Letters of Credit”) from time to time up to and including the
Termination Date; provided however, that the aggregate of all undrawn amounts, and all amounts drawn and unreimbursed, under any Letters of Credit issued under the Letter of Credit Line shall not at any time exceed the principal amount of Two
Million Dollars ($2,000,000) minus amounts outstanding under paragraphs (e) and (f) (the “Letter of Credit Sublimit”). The form and substance of each Letter of Credit shall be subject to approval by Lender, in its sole
discretion. Each Letter of Credit shall be subject to the additional terms of the Letter of Credit agreements, applications and any related documents required by Lender in connection with the issuance thereof (each, a “Letter of Credit
Agreement”). Each draft paid under any Letter of Credit shall be repaid by Borrower in accordance with the provisions of the applicable Letter of Credit Agreement. No Letter of Credit shall be made that results in an Overadvance or while any
Overadvance is outstanding. Upon the Revolving Maturity Date, the amount of Letters of Credit Outstanding shall be secured by unencumbered cash on terms acceptable to Lender if the term of this Agreement is not extended by Lender. 
  
 (e) Cash Management Services. Borrower may use up to $2,000,000 minus
amounts outstanding under paragraphs (d) and (f) for Lender’s cash management services, which may include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in various cash
management services agreements related to such services (the “Cash Management Services”). All amounts Lender pays for any Cash Management Services will be treated as Revolving Advances under the Revolving Credit Limit and shall decrease,
on a dollar-for-dollar basis, the amount available for other Revolving Advances. The Cash Management Services shall be subject to additional terms set forth in applicable cash management services agreements. 
  
 (f) Foreign Exchange Facility. Borrower may enter in foreign exchange
forward contracts with Lender under which Borrower commits to purchase from or sell to Lender a set amount of foreign currency more than one business day after the contract date (the “FX Forward Contract”). Lender will subtract 10%, or
such greater amount as determined by Lender, of each outstanding FX Forward Contract from the foreign exchange sublimit which is a maximum of $2,000,000 minus amounts outstanding under paragraphs (e) and (d) (the “FX Reserve”).
The total FX Forward Contracts at any one time may not exceed 10 times the amount of the FX Reserve. Ten percent (10%) of the amount of each outstanding FX Forward Contract 
  

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 shall be treated as Revolving Advances hereunder and shall decrease, on a dollar-for-dollar basis, the amount available
for other Revolving Advances. Lender may terminate the FX Forward Contracts if an Event of Default occurs. Each FX Forward Contract shall be subject to additional terms set forth in the applicable FX Forward Contract or other agreements executed in
connection with the foreign exchange facility. 
  
 (g)
Overadvances. Upon any occurrence of an Overadvance, Borrower shall immediately pay down the Revolving Advances so that, after giving effect to such payments, no Overadvance exists. 
  
 3. Interest, Fees and Remittances. 
  
 3.1 Interest. Revolving Advances accrue interest on the outstanding
principal balance at the Revolving Interest Rate and shall be payable on the tenth day of each month. After an Event of Default, Obligations accrue interest at the applicable Default Rate. The applicable interest rate increases or decreases when the
Prime Rate changes. Interest is computed on a 360 day year for the actual number of days elapsed. 
  
 3.2 Fees. 
  
 (a) Facility Fee. On the date of this Agreement and on each anniversary thereof prior to the termination of this Agreement, Borrower shall pay to
Lender the Facility Fee. 
  
 (b) Letter of Credit Fees.
Borrower shall pay to Lender fees upon the issuance of each Letter of Credit, upon the payment or negotiation of each draft under any Letter of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including
without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Lender’s standard fees and charges then in effect for such activity. 
  
 (c) Cash Management and FX Forward Contract Fees. Borrower shall pay
to Lender fees in connection with the Cash Management Services and the FX Forward Contracts as determined in accordance with Lender’s standard fees and charges then in effect for such activity. 
  
 3.3 Reporting. Within 15 days after the end of each month, Lender
shall send to Borrower a report covering the transactions for such month, including the amount of interest and other fees and charges. The accounting shall be deemed correct and conclusive unless Borrower makes written objection to Lender within 30
days after Lender mails the accounting to Borrower. 
  
 3.4
Borrower’s Payment. When any Overadvance or other amount owing to Lender becomes due, Lender shall inform Borrower of the manner of payment which may be any one or more of the following in Lender’s sole discretion: (a) in cash
immediately upon demand therefor; (b) by deduction from or offset against the amount that otherwise would be forwarded to Borrower in respect of any further Revolving Advances that may be made by Lender; or (c) by any combination of the
foregoing as Lender may from time to time choose. 
  

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 4. Representations and Warranties. Borrower represents and warrants: 
  
 4.1 Receivables. With respect to each Receivable (except as disclosed
to Lender in writing that such Receivable is not an Eligible Receivable): 
  
 (a) it is the owner with legal right to sell, transfer and assign it; 
  
 (b) the correct Receivable Amount has been accurately reported to Lender and is not disputed; and 
  
 (c) Lender has the right to endorse and/ or require Borrower to endorse all
payments received on Receivables and all proceeds of Collateral. 
  
 4.2 Representations and Warranties. No representation, warranty or other statement of Borrower in any certificate or written statement given to Lender contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statement contained in the certificates or statement not misleading. 
  
 4.3 Formation and Qualification. Borrower is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state or country in which the
conduct of its business or its ownership of property requires that it be qualified. 
  
 4.4 Authority; No Conflict. The execution, delivery and performance of this Agreement has been duly authorized, and does not conflict with Borrower’s organizational documents, nor constitute an Event of
Default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound. 
  
 4.5 Collateral. Borrower has good title to the Collateral and all Inventory is in all material respects of good and marketable quality, free from
material defects. 
  
 4.6 Name; Locations. Borrower’s
name, form of organization, chief executive office, and the place where the records concerning all Receivables and Collateral are kept is set forth at the beginning of this Agreement and Borrower is located at its address for notices set forth in
this Agreement. 
  
 4.7 Intellectual Property. If Borrower
owns, holds or has any interest in, any copyrights (whether registered, or unregistered), patents or trademarks, and licenses of any of the foregoing (the “Intellectual Property”), such interest has been specifically disclosed and
identified to Lender in writing. All Intellectual Property owned or utilized by Borrower are valid and constitute all of the intellectual property rights which are necessary for the operation of its business; there is no objection to or pending
challenge to the validity of any such Intellectual Property and Borrower is not aware of any grounds for any challenge. Each Intellectual Property owned or held by Borrower and all trade secrets used by Borrower consist of original material or
property developed by Borrower or was lawfully acquired by Borrower from the proper and lawful owner thereof. 
  

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 5. Covenants. So long as Borrower owes any Obligation to Lender, Borrower covenants to Lender that Borrower shall
observe and perform each and every one of the following: 
  
 5.1
Existence. Maintain its corporate existence and good standing in its jurisdictions of incorporation and maintain its qualification in each jurisdiction necessary to Borrower’s business or operations. 
  
 5.2 Change in Name. Give Lender at least 30 days prior written notice
of changes to its name, organization, chief executive office or location of records. 
  
 5.3 Taxes. Pay all its taxes including gross payroll, withholding and sales taxes when due and will deliver satisfactory evidence of payment to Lender if requested. 
  
 5.4 Financial Statements. Give Lender copies of (i) all of
Borrower’s quarterly balance sheets and income statements, Forms 10-K, 10-Q and 8-K (or equivalents) within five days of filing any of the foregoing with the Securities and Exchange Commission, (ii) annual financial statements, as soon as
available, and in any event within 120 days following the end of Borrower’s fiscal year, certified by, and with an unqualified opinion of, an independent certified public accountants acceptable to Lender and (iii) annual operating
projections (including income statements, balance sheets and cash flow statements) for the upcoming fiscal year approved by the Borrower’s board of directors within fifteen days of the end of each fiscal year of Borrower in form and substance
satisfactory to Lender. 
  
 5.5 Merger; Sale of Assets. Not
merge or consolidate with or into any other business organization, or acquire all or substantially all of the capital stock or property of a third party, unless (i) any such acquired entity becomes a “Borrower” under this Agreement
and (ii) Lender has previously consented to the applicable transaction in writing. 
  
 5.6 Indebtedness. Not create, incur, assume, or be liable for any indebtedness other than indebtedness incurred in the ordinary course of business. 
  
 5.7 Reports. Provide to Lender: 
  
 (a) within 45 days after the end of each calendar quarter the following for such period then ending: consolidated financial
statements including, balance sheet, income statement, statement of cash flows and Compliance Certificate; 
  
 (b) within 30 days after the end of each month the following for such month and the period then ending: statement of cash balance and equity statement;

  
 (c) concurrent with the initial Formula Advance and within 30
days after the end of each month thereafter, the following for such month and the period then ending; accounts receivable and accounts payable aging reports, together with a Borrowing Base Certificate in form and substance acceptable to Lender
setting forth the Eligible Receivables and Receivable Amounts thereof; 
  
 (d) immediately upon Lender’s request, a written report if payment of any Receivable does not occur by its due date and include the reasons for the delay. 
  

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 5.8 Audit. Lender shall have the right from time to time hereafter to audit Borrower’s
Receivables and the Collateral at Borrower’s expense. Such audits shall be conducted prior to the initial Formula Advance and annually thereafter or as otherwise requested by Lender. 
  
 5.9 Accounts. Maintain its primary depository and operating accounts with Lender and, in the case of any deposit
accounts not maintained with Lender, grant to Lender a first priority perfected security interest in and “control” (within the meaning of Section 9104 of the California Uniform Commercial Code) of such deposit account pursuant to
documentation acceptable to Lender. 
  
 5.10 Insurance. At
all times insure all of the tangible Collateral and carry such other business insurance, with insurers reasonably acceptable to Lender, in such form and amounts as Lender may reasonably require and that are customary and in accordance with standard
practices for Borrower’s industry and locations, and Borrower shall provide evidence of such insurance to Lender. All such insurance policies shall name Lender as an additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Lender. Upon receipt of the proceeds of any such insurance, Lender shall apply such proceeds in reduction of the Obligations as Lender shall determine in its good faith business judgment, provided that no Default or
Event of Default has occurred and is continuing. If Borrower fails to provide or pay for any insurance, Lender may, but is not obligated to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to Lender copies of all material
reports made to insurance companies. 
  
 5.11 Adjustments.
In the event of a breach of Sections 4 or 5, or in the event any Adjustment or dispute is asserted by any Account Debtor, Borrower shall promptly advise Lender and shall, subject to Lender’s approval, resolve such disputes and advise Lender of
any adjustments. Lender shall have the right, at any time, to take possession of any rejected, returned, or recovered personal property. If such possession is not taken by Lender, Borrower is to resell it for Lender’s account at Borrower’s
expense with the proceeds made payable to Lender. While Borrower retains possession of any returned goods, Borrower shall segregate said goods and mark them as property of Lender. 
  
 5.12 Intellectual Property. Immediately notify Lender if Borrower hereafter obtains any interest in any copyrights,
patents, trademarks or licenses that are significant in value or are material to the conduct of its business or the value of any Receivable. 
  
 5.13 Further Assurances. Execute any further instruments and take further action as Lender requests to perfect or continue Lender’s security
interest in the Collateral or to effect the purposes of this Agreement. 
  
 5.14 Financial Covenants. Maintain Borrower’s financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the
definitions herein), with compliance determined commencing with Borrower’s financial statements for the period ending: 
  
 (a) Remaining Months Liquidity of at least 3.00 to 1.00 (3 months) as of the last day of each month. 
  

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 (b) So long as there are any Nonformula Advances outstanding, Borrower shall maintain Unrestricted Cash
on deposit with Lender in an amount equal to at least 100% of the aggregate amount of outstanding Nonformula Advances. 
  
 (c) Actual losses not to exceed 120% of its projected losses with respect to any quarter. 
  
 5.15 Use of Proceeds. Not use the proceeds of the Revolving Advances for any other purposes other than working
capital. 
  
 5.16 Management. Not to make any substantial
change in the present executive or management personnel of Borrower. 
  
 6.
Security Interest. 
  
 6.1 Security Interest in the
Collateral. To secure the prompt payment and performance to Lender of all of the Obligations, Borrower hereby grants to Lender a continuing security interest in the Collateral. Borrower is not authorized to sell, assign, transfer or otherwise
convey any Collateral without Lender’s prior written consent, except for the sale of finished inventory in Borrower’s usual course of business. Borrower agrees to sign any instruments and documents requested by Lender to evidence, perfect,
or protect the interests of Lender in the Collateral. Borrower agrees to deliver to Lender the originals of all instruments, chattel paper and documents evidencing or related to Receivables and other Collateral. Borrower shall not grant or permit
any lien or security interest in the Collateral or any interest therein. Notwithstanding anything to the contrary herein, upon Borrower’s request and so long as Borrower is not in default under this Agreement at the time of such request, Lender
agrees to consider permitting Borrower to grant a security interest in certain items of Collateral to another secured party and to subordinate Lender’s security interest in such items of Collateral to the security interest granted by Borrower
to such other secured party. 
  
 6.2 Power of Attorney.
Borrower irrevocably appoints Lender and its successors and assigns as Borrower’s true and lawful attorney in fact, and authorizes Lender (a) upon the occurrence of an Event of Default, to (i) sell, assign, transfer, pledge,
compromise, or discharge the whole or any part of the Collateral; (ii) demand, collect, receive, sue, and give releases to any Account Debtor for the monies due or which may become due upon or with respect to the Receivables and to compromise,
prosecute, or defend any action, claim, case or proceeding relating to the Collateral, including the filing of a claim or the voting of such claims in any bankruptcy case, all in Lender’s name or Borrower’s name, as Lender may choose; and
(iii) prepare, file and sign Borrower’s name on any notice, claim, assignment, demand, draft, or notice of or satisfaction of lien or mechanics’ lien or similar document with respect to the Collateral, and (b) whether or not
there has been an Event of Default, to (i) notify all Account Debtors with the with respect to Receivables to pay Lender directly, (ii) receive and open all mail addressed to Borrower for the purpose of collecting the Receivables;
(iii) endorse Borrower’s name on any checks or other forms of payment on the Receivables; (iv) execute on behalf of Borrower any and all instruments, documents, financing statements and the like to perfect Lender’s interests in
the Receivables and Collateral; (v) debit Borrower’s checking account maintained with Lender for any and all Obligations due under this Agreement; and 
  


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 (vi) do all acts and things necessary or expedient, in furtherance of any such purposes. Upon the occurrence and
continuation of an Event of Default, Lender shall have all the rights set forth in this Section 6.2. 
  
 7. Default and Remedies. 
  
 7.1 Events of Default. The occurrence of any one or more of the following shall constitute an Event of Default hereunder. 
  
 (a) Failure to Pay. Borrower fails to make a payment under this Agreement. 
  
 (b) Lien Priority. Lender fails to have an enforceable first lien (except for any prior liens to which Lender has
consented in writing) on or security interest in the Collateral. 
  
 (c) False Information. Borrower (or any guarantor) has given Lender false or misleading information or representations. 
  
 (d) Bankruptcy. Borrower (or any guarantor) files a bankruptcy petition, a bankruptcy petition is filed against Borrower (or any guarantor) or
Borrower (or any guarantor) makes a general assignment for the benefit of creditors. 
  
 (e) Receivers. A receiver or similar official is appointed for a substantial portion of Borrower’s (or any guarantor’s) business, or the business is terminated. 
  
 (f) Judgments. Any judgments or arbitration awards are entered against
Borrower (or any guarantor), or Borrower (or any guarantor) enters into any settlement agreements with respect to any litigation or arbitration. 
  
 (g) Material Adverse Change. A material adverse change occurs, or is reasonably likely to occur, in Borrower’s (or any guarantor’s)
business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit; or Lender determines that it is insecure for any other reason. 
  
 (h) Investor Abandonment. If Lender determines, in its good faith judgment, that it is the clear intention of
Borrower’s investors to not continue to fund the Borrower in the amounts and timeframe necessary to enable Borrower to satisfy the Obligations as they become due and payable. 
  
 (i) Cross-default. Any default occurs under any agreement in connection with any credit Borrower (or any guarantor)
or any of Borrower’s related entities or Affiliates has obtained from anyone else or which Borrower (or any guarantor) or any of Borrower’s related entities or Affiliates has guaranteed. 
  
 (j) Default under Related Documents. Any default occurs under any
guaranty, subordination agreement, security agreement, deed of trust, mortgage, or other document required by or delivered in connection with this Agreement or any such document is no longer in effect. 
  

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 (k) Other Agreements. Borrower (or any guarantor) or any of Borrower’s related entities or
Affiliates fails to meet the conditions of, or fails to perform any obligation under any other agreement Borrower (or any guarantor) or any of Borrower’s related entities or Affiliates has with Lender or any affiliate of Lender. 
  
 (l) Other Breach Under Agreement. Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to above. 
  
 (m) Change of Control. The holders of the capital ownership of the Borrower as of the date hereof cease to own and control, directly or indirectly,
at least 90% of the capital ownership of the Borrower. 
  
 (n)
Death. If Borrower or any guarantor dies or becomes legally incompetent. 
  
 7.2 Remedies. Upon the occurrence of an Event of Default, (1) without implying any obligation to do so, Lender may cease making Revolving Advances, Equipment Loans or extending any other financial
accommodations to Borrower; (2) all or a portion of the Obligations shall be, at the option of and upon demand by Lender, or with respect to an Event of Default described in Sections 7.1(d) or (e), automatically and without notice or demand,
due and payable in full; (3) Lender may notify Account Debtors that the underlying Receivables have been assigned to Lender and that payment thereof is to be made to the order of Lender and sent directly to Lender, and (4) Lender shall
have and may exercise all the rights and remedies under this Agreement and under applicable law, including the rights and remedies of a secured party under the California Uniform Commercial Code, all the power of attorney rights described in
Section 6.2 with respect to all Collateral, and the right to collect, dispose of, sell, lease, use, and realize upon all Receivables and all Collateral in any commercial reasonable manner. 
  
 8. Accrual of Interest. If any amount owed by Borrower hereunder is not paid when due,
including, without limitation, amounts due under Section 3.2, Overadvances, amounts due under Section 9, and any other Obligations, such amounts shall bear interest at a per annum rate equal to the per annum rate of the Revolving Interest
Rate until the earlier of (i) payment in good funds or (ii) entry of a final judgment thereof, at which time the principal amount of any money judgment remaining unsatisfied shall accrue interest at the highest rate allowed by applicable
law. All interest hereunder calculated at an annual rate shall be based on a year of 360 days, which results in a higher effective rate of interest than if a year of 365 or 366 days were used. 
  
 9. Fees, Costs and Expenses; Indemnification. Borrower will pay to Lender upon demand
all fees, costs and expenses (including fees of attorneys and professionals and their costs and expenses) that Lender incurs or may from time to time impose in connection with any of the following: (a) preparing, negotiating, administering, and
enforcing this Agreement or any other agreement executed in connection herewith, including any amendments, waivers or consents in connection with any of the foregoing, (b) any litigation or dispute (whether instituted by Lender, Borrower or any
other person) in any way relating to the Receivables, the Collateral, this Agreement or any other agreement executed in connection herewith or therewith, (c) enforcing any rights against Borrower or any guarantor, or any Account Debtor,
(d) protecting or enforcing its interest in the Collateral, (e) collecting the Receivables and the Obligations, or (f) the 
  

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 representation of Lender in connection with any bankruptcy case or insolvency proceeding involving Borrower, any
Receivable, the other Collateral, any Account Debtor, or any guarantor. Borrower shall indemnify and hold Lender harmless from and against any and all claims, actions, damages, costs, expenses, and liabilities of any nature whatsoever arising in
connection with any of the foregoing. 
  
 10. Integration, Severability,
Waiver, and Choice of Law. This Agreement and any related security or other agreements required by this Agreement, collectively: (a) represent the sum of the understandings and agreements between Lender and Borrower concerning this credit;
(b) replace any prior oral or written agreements between Lender and Borrower concerning this credit; and (c) are intended by Lender and Borrower as the final, complete and exclusive statement of the terms agreed to by them. In the event of
any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. If any provision of this Agreement is deemed invalid by reason of law, this Agreement will be construed as not containing such
provision and the remainder of the Agreement shall remain in full force and effect. Lender retains all of its rights, even if it makes an Advance after a default. If Lender waives a default, it may enforce a later default. Any consent or waiver
under, or amendment of, this Agreement must be in writing, and no such consent, waiver, or amendment shall imply any obligation by Lender to make any subsequent consent, waiver, or amendment. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA. 
  
 11.
Notices. All notices shall be given to Lender and Borrower at the addresses or faxes set forth on the signature page of this Agreement and shall be deemed to have been delivered and received: (a) if mailed, three (3) calendar days
after deposited in the United States mail, first class, postage pre-paid, (b) one (1) calendar day after deposit with an overnight mail or messenger service; or (c) on the same date of confirmed transmission if sent by hand delivery,
telecopy, or electronic means. 
  
 12. Jury Trial. EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING IN CONNECTION WITH THE OBLIGATIONS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO ANY OBLIGATION, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND VOLUNTARILY
WAIVES ALL RIGHTS TO A JURY TRIAL. 
  

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 13. Reference Provision. The parties prefer that any dispute between them be resolved in litigation subject to a
Jury Trial Waiver set forth above, but the California Supreme Court has held that pre-dispute Jury Trial Waivers not authorized by statute are unenforceable. This Reference Provision will be applicable unless: (i) the California Supreme Court
holds that a pre-dispute Jury Trial Waiver provision similar to that set forth above is valid or enforceable; (ii) the California Legislature enacts a statute which becomes law, authorizing pre-dispute Jury Trial Waivers of the type set forth
above and, as a result, such waivers become enforceable, or (iii) the Jury Trial Waiver set forth above is otherwise determined to be enforceable. 
  
 13.1 Other than (i) nonjudicial foreclosure of security interests in real or personal property, (ii) the appointment of a receiver or
(iii) the exercise of other provisional remedies (any of which may be initiated pursuant to applicable law), any controversy, dispute or claim (each, a “Claim”) between the parties arising out of or relating to this Agreement or any
other document, instrument or agreement between the Bank and the undersigned (collectively in this Section, the “Loan Documents”), will be resolved by a reference proceeding in California in accordance with the provisions of
Section 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference
proceeding. Except as otherwise provided in the Loan Documents, venue for the reference proceeding will be in the Superior Court or Federal District Court in the County or District where the real property, if any, is located or in a County or
District where venue is otherwise appropriate under applicable law (the “Court”). 
  
 13.2 The referee shall be a retired Judge or Justice selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her
representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. The referee shall be appointed to sit with all the
powers provided by law. Pending appointment of the referee, the Court has power to issue temporary or provisional remedies. 
  
 13.3 The parties agree that time is of the essence in conducting the reference proceedings. Accordingly, the referee shall be requested, subject to change
in the time periods specified herein for good cause shown, to (a) set the matter for a status and trial-setting conference within 15 days after the date of selection of the referee, (b) if practicable, try all issues of law or fact within
90 days after the date of the conference and (c) report a statement of decision within 20 days after the matter has been submitted for decision. 
  
 13.4 The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for
good cause, including a party’s failure to provide requested discovery for any reason whatsoever. Unless otherwise ordered based upon good cause shown, no party shall be entitled to “priority” in conducting discovery, depositions may
be taken by either party upon seven days written notice, and all other discovery shall be responded to within 15 days after service. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding. 
  

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 13.5 Except as expressly set forth in this Agreement, the referee shall determine the manner in which the
reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court reporter, except that when any party so requests, a court reporter will be used at any hearing conducted before the referee, and the referee will be provided a courtesy copy of
the transcript. The party making such a request shall have the obligation to arrange for and pay the court reporter. Subject to the referee’s power to award costs to the prevailing party, the parties will equally share the cost of the referee
and the court reporter at trial. 
  
 13.6 The referee shall be
required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a
trial, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision and pursuant to CCP Section 644. The referee’s decision shall be entered by the Court as a judgment or an order in
the same manner as if the action had been tried by the Court. The final judgment or order or from any appealable decision or order entered by the referee shall be fully appealable as provided by law. The parties reserve the right to findings of
fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision. 
  
 13.7 If the enabling legislation which provides for appointment of a referee
is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or
Justice, in accordance with the California Arbitration Act, CCP Sections 1280 through 1294.2. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding. 
  
 13.8 THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS
REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS
REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS. 
  
 14. Term and Termination. This Agreement shall become effective upon the execution and delivery hereof by Borrower and Lender and shall continue in full force and
effect until the Termination Date. Upon the Termination Date, the unpaid balance of the Obligations shall be due and payable without demand or notice. Notwithstanding any of the foregoing, the obligations of Borrower to indemnify Lender with respect
to the expenses, damages, losses, costs and liabilities described in Section 9 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Lender have run. 
  

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 15. Other Agreements. 
  
 15.1 Security Agreements. Any security agreements, liens and/or security interests securing payment of any obligations of Borrower owing to Lender
or its affiliates also secure the Obligations, and are valid and subsisting and are not adversely affected by execution of this Agreement. An Event of Default under this Agreement constitutes a default under other outstanding agreements between
Borrower and Lender or its affiliates; 
  
 15.2 Publicity.
Lender reserves the right to issue press releases, advertisements, and other promotional materials describing any successful outcome of services provided on Borrower’s behalf. Borrower agrees that Lender shall have the right to identify
Borrower by name in those materials. 
  
 16. GENERAL PROVISIONS 
  
 16.1 Successors and Assigns. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it without Lender’s prior written consent which may be granted or withheld in Lender’s discretion. Lender has the
right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Lender’s obligations, rights and benefits under this Agreement. 
  
 16.2 Time of Essence. Time is of the essence for the performance of
all obligations in this Agreement. 
  
 16.3 Amendments in
Writing, Integration. All amendments to this Agreement must be in writing and signed by Borrower and Lender; provided, that, any amendment to correct typographical, grammar or similar errors shall be made pursuant to a letter from the Lender to
the Borrower. This Agreement represents the entire agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about
the subject matter of this Agreement merge into this Agreement and the Loan Documents. 
  
 16.4 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken
together, constitute one Agreement. 
  
 16.5 Survival. All
covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 9 to indemnify Lender will survive until all statutes of limitations for
actions that may be brought against Lender have run. 
  
 *        *        * 
  

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 IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day and year above written.

  

							
	BORROWER:	 	LENDER:
	KANA Software, Inc., a Delaware corporation	 	BRIDGE BANK, NATIONAL ASSOCIATION
				
	By	 	 /s/    John M. Thompson

	 	By	 	 /s/    Debra Bowman


	Name:	 	 John Thompson

	 	Name:	 	 Debra Bowman


	Title:	 	 CFO

	 	Title:	 	 Vice President


		
	Address for Notices:	 	Address for Notices:
	181 Constitution Drive	 	55 Almaden Boulevard
	Menlo Park, CA 94025	 	San Jose, CA 95113
	Fax: (650) 614-8350	 	Fax: (408) 423-8510

  

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