<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 0-13022
INTELLICORP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 94-2756073
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1975 EL CAMINO REAL WEST
MOUNTAIN VIEW, CALIFORNIA 94040-2216
(Address of principal executive offices)
(Zip Code)
(650) 965-5500
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Outstanding as of
Class April 30, 1999
----- -----------------
Common stock,
$.001 par value 15,723,169 shares
This document is comprised of 14 pages.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets...........................................3
Condensed Consolidated Statements of Operations.................................4
Condensed Consolidated Statements of Cash Flows.................................5
Notes to Condensed Consolidated Financial Statements..........................6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................8-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................................12
SIGNATURE......................................................................................13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTELLICORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
(In thousands) 1999 1998(1)
-------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,446 $ 4,714
Short-term investments -- 1,472
Accounts receivable, net 4,852 7,157
Other current assets 1,085 327
-------- --------
Total current assets 8,383 13,670
Property and equipment, net 1,086 1,101
Purchased intangibles, net 2,736 3,431
Other assets 171 252
-------- --------
$ 12,376 $ 18,454
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,305 $ 1,410
Accrued compensation 1,237 1,321
Other current liabilities 1,434 1,589
Deferred revenues 1,660 2,377
-------- --------
Total current liabilities 5,636 6,697
Convertible notes 1,600 1,600
Stockholders' equity:
Preferred stock 1 1
Common stock 15 15
Additional paid - in capital 59,273 58,487
Accumulated deficit (54,149) (48,346)
-------- --------
Total stockholders' equity 5,140 10,157
-------- --------
$ 12,376 $ 18,454
======== ========
</TABLE>
- --------------
(1) The consolidated balance sheet at June 30, 1998, has been derived from the
audited consolidated financial statements at that date but does not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
INTELLICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
(In thousands, except --------------------- ---------------------
per share amounts) 1999 1998 1999 1998
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Software $ 1,614 $ 3,674 $ 4,473 $ 10,033
Contract services 2,477 2,228 8,773 4,924
Other services 935 935 2,568 2,176
-------- -------- -------- --------
Total revenues 5,026 6,837 15,814 17,133
-------- -------- -------- --------
Costs and expenses:
Cost of revenues:
Software 338 386 951 858
Contract services 1,997 1,304 6,428 2,708
Other services 189 323 557 708
Research and development 1,290 1,575 4,513 3,984
Marketing, general, and
administrative 2,803 2,637 8,754 7,172
In process R&D -- 2,700 -- 2,700
-------- -------- -------- --------
Total costs and expenses 6,617 8,925 21,203 18,130
-------- -------- -------- --------
Loss from operations (1,591) (2,088) (5,389) (997)
Other income (expense), net (30) 4 19 95
-------- -------- -------- --------
Loss before provision
for income taxes (1,621) (2,084) (5,370) (902)
Provision for income taxes 8 30 28 136
-------- -------- -------- --------
Net loss $ (1,629) $ (2,114) $ (5,398) $ (1,038)
======== ======== ======== ========
Series A and Series B Preferred
stock dividends (135) (158) (405) (480)
-------- -------- -------- --------
Net loss available to
common shareholders $ (1,764) $ (2,272) $ (5,803) $ (1,518)
======== ======== ======== ========
Basic and diluted loss per share $ (0.12) $ (0.16) $ (0.38) $ (0.11)
======== ======== ======== ========
Shares used in computing basic and
diluted net loss per share 15,220 13,999 15,202 13,505
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
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INTELLICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Increase (decrease) in cash and March 31,
cash equivalents (in thousands) ---------------------
1999 1998
------- -------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(5,398) $(1,038)
Adjustments to reconcile net loss to net
cash used in operating activities:
In process R&D charge -- 2,700
Depreciation and amortization 1,293 636
Issuance of common stock in lieu of interest payment -- 90
Changes in assets and liabilities:
Accounts receivable 2,305 (2,618)
Other current assets (258) (111)
Other assets 32 62
Accounts payable (105) 453
Accrued compensation (84) 501
Other current liabilities (155) 175
Deferred revenues (717) 755
------- -------
Net cash provided by (used in) operating activities (3,087) 1,605
------- -------
Cash flows from investing activities:
Property and equipment purchases (483) (612)
Purchase of assets (51) (2,572)
Purchase of short-term investments -- (3,620)
Maturities of short-term investments 1,472 5,649
------- -------
Net cash provided by (used in) investing activities 938 (1,155)
------- -------
Cash flows from financing activities:
Payment of dividends (405) --
Cash received from exercise of warrants -- 712
Cash received from sale of stock 286 270
------- -------
Net cash provided by (used in) financing activities (119) 982
------- -------
Increase (decrease) in cash and cash equivalents (2,268) 1,432
Cash and cash equivalents, beginning of period 4,714 4,363
------- -------
Cash and cash equivalents, end of period $ 2,446 $ 5,795
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION. The accompanying condensed consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements for the fiscal year ended June 30, 1998, included in the
Company's Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission. In the opinion of management, the interim statements reflect all
adjustments (consisting of normal recurring entries) which are necessary for a
fair presentation of the results of the interim periods presented. The interim
results are not necessarily indicative of the results for the full year.
RECLASSIFICATIONS. The Company has reclassified certain prior year balances to
conform with current year presentation.
2. SIGNIFICANT CUSTOMERS AND EXPORT SALES. A related party accounted for 21%
($1,079,000) and 25% (3,957,000), respectively, of the total revenues for the
three and nine month periods ended March 31, 1999 and 15% ($1,051,000) and 20%
($3,475,000), respectively, of the revenues for the three and nine month periods
ended March 31, 1998. One other related party accounted for 14% ($706,000) and
11% ($1,813,000), respectively, of the total revenues for the three and nine
month periods ended March 31, 1999. A commercial customer accounted for 11%
($530,000) and 3% (530,000) of the total revenues for the three and nine month
period ended March 31, 1999.
3. INCOME TAXES. The Company's provision for income taxes of $8,000 and $28,000
for the three and nine months ended March 31, 1999 is attributable to income
taxes, primarily state and local. The provision for income taxes of $30,000 and
$136,000, respectively, for the three and nine months ended March 31, 1998 is
attributable to income taxes and foreign withholding taxes.
4. NEW ACCOUNTING STANDARD. As of July 1, 1998, the Company adopted Statement
130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of SFAS 130 had no impact on the Company's net loss or
stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available for-sale securities, which prior to adoption were reported
separately in stockholders' equity, to be included in other comprehensive
income.
During the quarter and nine months ended March 31, 1999 and 1998, total
comprehensive income approximated net income or net loss for each of these
respective years.
5. BANK CREDIT LINE. In March 1999, the Company secured a $3,000,000 credit
facility from Silicon Valley Bank. The credit line is an asset-based facility,
and the amount that can be borrowed on the line is a function of the amount of
eligible accounts receivable balance at any point in time. The initial term of
this facility is two years. The credit facility is secured by essentially all of
the assets of the Company.
6. EQUITY INVESTMENT. In March 1999, the Company consummated an equity
arrangement which requires certain investors to purchase, in a private placement
up to $3,000,000, of the Company's common stock over the next year, if and when
requested by the Company. The purchase price is set at 10% above the market
price at the time the purchase is made, with a minimum price of $1.50 per share
and a maximum of $3.00 per share. As of March 31, 1999, IntelliCorp sold
$750,000 of common stock under this agreement, at a price of $1.50 per share (of
which $250,000 was received in cash by March 31 and $500,000 was reported as a
receivable as of March 31, 1999).
7. NET LOSS PER SHARE. The following table sets forth the computation of basic
and diluted loss per share.
6
<PAGE> 7
<TABLE>
<CAPTION>
(in thousands, except per share amounts) Three Months Ended Nine Months Ended
March 31, March 31,
------------------- ---------------------
1999 1998 1999 1998
------ -------- -------- --------
<S> <C> <C> <C>
Numerator:
Net loss $(1,629) $ (2,114) $ (5,398) $ (1,038)
Preferred stock dividends (135) (158) (405) (480)
------- -------- -------- --------
Net Loss available to common shareholders (1,764) (2,272) (5,803) (1,518)
======= ======== ======== ========
Denominator:
Weighted average shares outstanding-basic
and diluted 15,220 13,999 15,202 13,505
======= ======== ======== ========
Net loss per share-basic and diluted $ (0.12) $ (0.16) $ (0.38) $ (0.11)
======= ======== ======== ========
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Other than statements of historical fact, the statements made in this report on
Form 10-QSB are forward-looking statements that involve risks and uncertainties.
The Company's actual results may differ materially from the results discussed in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Results of Operations" and
"Liquidity and Capital Resources" below and in "Risk Factors" in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998.
In particular, it is important to note that achievement of revenue goals is
affected by numerous factors beyond the Company's control, including
competitors' product introductions, market price competition and market
acceptance of the Company's products. Historical results of the Company may not
be indicative of future operating results.
RESULTS OF OPERATIONS
The Company's total revenue is derived from three sources: contract services,
software licenses, and other services, which is primarily comprised of product
support revenue. In prior periods training revenue was included in other
services. The change in the classification of training revenue from other
services to contract services was made to more accurately reflect the manner in
which the business is managed internally. Certain prior period balances have
been restated to reflect this reclassification.
Total revenues were $5,026,000 and $15,814,000, respectively, for the three and
nine months ended March 31, 1999, compared to $6,837,000 and $17,133,000,
respectively, for the same periods in the prior year.
The geographic breakdown of revenue is as follows:
<TABLE>
<CAPTION>
Three months ended % Nine months ended %
(In thousands) March 31, Change March 31, Change
------------------ ------ ------------------ ------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
North America $ 3,405 $ 5,037 (32)% $10,781 $13,043 (17)%
Europe 1,543 1,667 (7)% 4,638 3,426 35%
Pacific Rim/Latin America 78 133 (41)% 395 664 (41)%
------- ------- ------- ------- ------- -------
Total revenue $ 5,026 $ 6,837 (26)% $15,814 $17,133 (8)%
</TABLE>
The geographic revenue as a percentage of revenue is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
North America 67% 74% 68% 76%
Europe 31% 24% 29% 20%
Pacific/Latin America 2% 2% 3% 4%
---- ---- ---- ----
Total 100% 100% 100% 100%
</TABLE>
Software revenues for the three and nine month periods ended March 31, 1999,
respectively, decreased compared to the same periods in the prior year. Both the
three and nine month decreases are primarily attributable to transitions in the
Company's sales and marketing organization, which began in the first quarter of
this fiscal year, and uncertainties created by a shift in SAP's business process
modeling direction. In the third quarter of fiscal 1999 the Company continued to
take actions to address these issues. In addition to a new executive vice
president of worldwide sales being hired in the second quarter, several new
field sales managers were hired to replace existing sales managers, the sales
and marketing organization was put through a focused
8
<PAGE> 9
training curriculum, and the Company has re-focused and increased its lead
generation efforts. In addition, the Company is further integrating its
LiveModel product with SAP's ASAP implementation methodology, and launched a new
business process management program called LiveCompass, which is sold to the
existing SAP R/3 install base. IntelliCorp also launched a new application
integration product in December called LiveTransfer which, combined with
LiveInterface, provides a robust end-to-end solution for transferring data
between SAP R/3 and other software applications.
Contract services revenues, which includes training revenues, for the three and
nine month periods ended March 31, 1999, increased 11% and 78%, respectively,
compared to the same prior year periods. The increases are due to growth in most
services, including custom development work, LiveModel consulting, LiveInterface
consulting, and configure to order consulting.
Other services revenue increased 0% and 18% during the three and nine months
ended March 31, 1999, compared to the same periods a year ago. The increase is
primarily due to product support revenues related to LiveInterface and
LiveModel.
Gross margin, as a percentage of total revenues for the three and nine months
ended March 31, 1999, was 50% compared to 71% and 75% in the same periods in the
prior year. Software margins were 79% for the three and nine months ended March
31, 1999, compared to 89% and 91% for same prior year periods. The decrease in
software margins is due to decreased sales volume on a relatively fixed cost
base, as well as amortization expense incurred in fiscal 1999 related to
acquired technology. Contract services margins were 19% and 27% for the three
and nine months ended March 31, 1999, compared to 41% and 45% in the same
periods in the prior year. The decrease in contract services margins compared to
the prior year quarters is due to two factors. First, the Company's shortfall in
software revenue resulted in lower utilization rates in the consulting business
as the consulting business is directly affected by the Company's software
license sales. Second, the Company had infrastructure costs in the first two
quarters of fiscal 1999 associated with the LiveInterface consulting business
acquired in the third quarter of fiscal 1998 that it did not have in the first
two quarters of fiscal 1998. Other services margins were 80% and 78% for the
three and nine month periods ended March 31, 1999 compared to 65% and 67% for
the same prior year periods. The increases in the fiscal 1999 quarters over the
prior year quarters is primarily due to increased support revenues on a
relatively fixed cost base.
Research and development (R&D) expenses decreased $285,000 (18%) and increased
$529,000 (13%) during the three and nine months ended March 31, 1999 from the
same prior year periods. The year to date increase is due primarily to
development costs associated with LiveInterface. R&D expenses, as a percentage
of total revenues for the three and nine months ended March 31, 1999 were 26%
and 29% compared to 23% in each of the same prior year periods.
Marketing, general and administrative expenses increased $166,000 (6%) and
$1,582,000 (22%), respectively, during the three and nine months ended March 31,
1999, compared to the same prior year periods. The increases are due to several
factors, including, labor costs, contractor and consultant fees, recruiting
costs, trade show expenses, expenses related to the opening of a French office
and sales training expense. In total, marketing, general and administrative
expenses were 56% and 55% of revenues for the three and nine months ended March
31, 1999, compared to 39% and 42% of revenues for the same periods last year.
Other income and expense, net, which includes interest income and expense, for
the three and nine months ended March 31, 1999 decreased $34,000 and $76,000
compared with the same periods in the prior year primarily due to decreased
interest income due to lower short term investment balances.
The provision for income taxes of $28,000 for the nine months ended March 31,
1999 is due to income taxes (primarily state and local). This compares to
$136,000 related to income and foreign withholding taxes in the same prior year
period.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, cash, cash equivalents and short-term investments were
$2,446,000 compared to $5,795,000 at March 31, 1998.
Cash used in operations was $3,087,000 during the first nine months of fiscal
1999, compared to $1,605,000 provided by operations in the same period in the
prior year. The increase in cash used in operations is primarily due to the net
loss incurred in the current year period. Cash provided by investing activities
was $938,000 in the first nine months of fiscal 1999 compared to $1,155,000 used
in investing activities in the first nine months of fiscal 1998. The increase in
cash provided by investing activities is due primarily to the maturity of short
term investments in the first six months of fiscal 1999 whereas the maturity of
short term investments in the same prior year period is offset with additional
purchases of short term investments in that period and the cash payment in the
UPI acquisition
Cash used in financing activities was $119,000 in the nine months ended March
31, 1999 versus $982,000 provided by financing activities in the same prior year
period. One reason for this change is the requirement to pay the preferred stock
dividends in cash in fiscal year 1999 ($405,000) compared to stock dividends
that were issued in lieu of cash through the third fiscal quarter of last year.
In March 1999, the Company consummated an equity arrangement which requires
certain investors to purchase, in a private placement up to $3,000,000, of the
Company's common stock over the next year, if and when requested by the Company.
The purchase price is set at 10% above the market price at the time the purchase
is made, with a minimum price of $1.50 per share and a maximum of $3.00 per
share. As of March 31, 1999, IntelliCorp sold $750,000 of common stock under
this agreement, at a price of $1.50 per share (of which $250,000 was received in
cash by March 31 and $500,000 was reported as a receivable as of March 31,
1999).
In addition to the equity investment agreement, the Company also secured a
$3,000,000 credit facility from Silicon Valley Bank. The credit line is an
asset-based facility, and the amount that can be borrowed on the line is a
function of the amount of eligible accounts receivable balance at any point in
time. The initial term of this facility is two years. The credit facility is
secured by essentially all of the assets of the Company.
The Company believes its cash and cash equivalents at March 31, 1999 along with
expected cash generated from operations plus available funds from the equity
arrangement and bank credit lines will be adequate to fund its operations during
fiscal 1999. There can be no assurance, however, that the Company will be able
to raise additional capital on favorable terms, if at all. If revenues for the
remainder of fiscal 1999 do not meet management's expectations, and additional
financing is not available, management has the ability and may further reduce
certain expenditures to lower the Company's cost base, if required.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its information technology
and non-information technology systems to identify the systems that could be
affected by the year 2000 Issue. The year 2000 issue is the result of computer
programs being written using two digits rather than four to define applicable
year. Any of the Company's programs that have time-sensitive software or micro
controllers may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a major system failure or miscalculations. The
Company believes any modifications deemed necessary will be made on a timely
basis and does not believe that the cost of such modifications will have a
material effect on the Company's operating results. Additionally, the Company is
in the process of evaluating the need for contingency plans with respect to year
2000 requirements. The necessity of any contingency plan must be evaluated on a
case by case basis and will vary considerably in nature depending on the year
2000 issue it may need to address. The Company's expectations as to the extent
and timeliness of modifications required in order to achieve Year 2000
compliance is a forward-looking statement subject to risks and uncertainties.
Actual results may vary materially as a result of a number of
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factors, including, among others, those described in this paragraph and the
paragraph below. There can be no assurance however, that the Company will be
able to successfully modify on a timely basis such products, services and
systems to comply with year 2000 requirements, which failure could have a
material adverse effect on the Company's operating results.
Based on the Company's assessment to date, all newly introduced products and
services of the Company are year 2000 compliant, however, some of the Company's
customers are running product versions that are not year 2000 compliant. The
Company has been encouraging such customers to migrate to current product
versions. In addition, the Company faces risks to the extent that suppliers of
products, services and systems purchased by the Company and others with whom the
Company transacts business on a worldwide basis do not have business systems or
products that comply with the year 2000 requirements. To the extent that
IntelliCorp is not able to test technology provided by third party hardware or
software vendors, IntelliCorp is in the process of obtaining assurances from
such vendors that their systems are year 2000 compliant. In the event that any
third parties cannot provide the Company with products, services or systems that
meet the year 2000 requirements in a timely manner, the Company's operating
results could be materially adversely affected. Although the Company believes
that the cost of year 2000 modifications for internal use software and systems
and the Company's products is not material, there can be no assurance that
various factors relating to year 2000 compliance issues, including litigation,
will not have a material adverse effect on the Company's business, operating
results or financial position.
PURCHASED INTANGIBLE ASSETS
On January 23, 1998, the Company entered into an asset purchase agreement with
ICS Deloitte Management LLC, an affiliate of Deloitte & Touche, ("D&T") to
purchase the rights to the Universal Portable Interface ("UPI") technology. This
technology consisted of the intellectual and proprietary property comprised of
UPI and included all related copyrights, processes, designs, formulas,
inventions, trade secrets, know-how, technology, methodologies, principles of
operations flow charts, schematics, codes and databases.
At the time of acquisition, revenues for developed and core technology were
estimated for the remainder of fiscal 1998 through fiscal 2004. The Company
anticipated that sales of the acquired developed product would decline
significantly during fiscal 1999. While Q1 and Q2 fiscal 1999 revenues related
to the acquired developed product were lower than initial estimates, Q3 and Q4
fiscal 1998 revenues were higher than initial estimates. Revenues from the
acquisition date through the end of the third quarter of fiscal 1999, related to
the developed and core technology, have been lower than initial expectations.
Management believes that the cause of the revenue shortfall is due to a
combination of internal sales and marketing transition issues and increased
competitive pressures. As of the end of the third quarter of fiscal 1999, the
Company believes that total revenues over the life of the product will not
differ to such an extent as to require a devaluation of the current carrying
value of the intangible assets. It should be noted that while revenues allocated
to the developed and in-process technologies are expected to individually phase
down over time (consistent with normal software product life cycles), the
composite revenue attributed to all applications integration products and
technologies (including future follow-on technologies) is planned to continue
growing in the foreseeable future.
At the time of acquisition, the Company estimated that an aggregate of
approximately $2.0 million of research and development spending is anticipated
over an approximately one year development period from the acquisition date in
order to develop the acquired in-process research and development into a viable
product offering. While the Company expects the completion of this viable
product offering to be delayed a few months, compared to the original estimate,
the total cost needed to complete development is not expected to differ
materially from initial estimates.
11
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10TT Purchase and Sale of Common Stock
10UU Silicon Valley Bank Loan Agreement
27 Financial Data Schedule.
c) Reports on Form 8-K
No reports have been filed for the quarter ended
March 31, 1999.
12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1999 INTELLICORP, INC.
/s/ Kenneth A. Czaja
-----------------------------
Kenneth A. Czaja
Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
<S> <C> <C>
10TT Purchase and Sale of Common Stock
10UU Silicon Valley Bank Loan Agreement
27 Financial Data Schedule
</TABLE>
14
<PAGE> 1
EXHIBIT 10TT
[LOGO] INTELLICORP
1975 EL CAMINO REAL WEST
MOUNTAIN VIEW, CA 94040-2216
March 30, 1999
To Investor
Re: PURCHASE AND SALE OF COMMON STOCK
Dear XXX:
This letter documents our agreement regarding the purchase and sale of
shares of Common Stock of IntelliCorp, Inc. (the "Company"). When signed by you
it will constitute a binding agreement between us for the period of one year
from March 30, 1999 until March 30, 2000 (the "Demand Period"). The Company
shall have the right to sell to you (and to require you to purchase) shares of
Company Common Stock, on the terms set forth below, which right shall terminate
on expiration of the Demand Period.
This will confirm that the Company is entitled to sell, and you will
purchase, during the Demand Period, up to a total of $XXX ("Investment Maximum")
in value of Common Stock of the Company in one or more separate transactions
("Investment"). This agreement, in conjunction with like agreements separately
executed effective March 30, 1999 with Delaware State Employees' Retirement
Fund, Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc.,
and Declaration of Trust for Defined Benefit Plans of ICI American Holdings
Inc., represent an aggregate maximum financing of $3,000,000 (collectively
called the "Financing").
For your convenience, when the Company decides to exercise its right
under this agreement, the Company will first attempt to arrive at a mutually
agreeable ratio of Investment between you and the other parties in this
financing. If no agreement can be reached between you, the Company has the right
to demand an Investment mix based on the proportional share of each party's
Investment Maximum compared to the aggregate combined maximum of $3,000,000 in
this Financing.
<PAGE> 2
Purchase and Sale of Common Stock
March 30, 1999
Page 2
When the Company determines that it wishes to sell shares, it will
provide you written notice ("notice date") of its election to exercise its right
under this agreement; the notice shall specify the dollar amount of the shares
to be sold by the Company and purchased by you and the purchase date, which
shall be not more than ten (10) business days after such notice. The purchase
price for any shares purchased by you hereunder shall be equal to $1.50 per
share or 10% above market price (where market price is as defined below),
whichever is greater, up to a maximum price of $3.00 per share. However, if
during the term of this agreement, the Company sells and issues additional
shares of common stock (excluding issuances on exercise of employee or director
stock options or issuance of shares under this agreement or like agreements with
the parties to this Financing) at a price per share less than the purchase price
per share under this agreement, the purchase price for such shares sold to you
shall be adjusted in the same manner as the conversion price is adjusted in the
Company's Convertible Note dated April 19, 1996 (Section 3), and following any
such adjustment, additional common stock shares will be issued to you by the
Company to reflect this adjustment of the purchase price.
Market price is defined as the average closing price over the five (5)
trading days ending the day prior to the notice date. On the purchase date (or
as soon thereafter as practically possible), you will deliver cash in
immediately available funds in the amount of the purchase price of such shares.
Within five (5) days after the receipt of funds, the Company will deliver to you
a certificate representing the number of shares being purchased by you.
This letter will also confirm your investment intent with respect to the
purchase and sale of the shares thereunder. You agree and acknowledge that you
are purchasing the shares for your own account, not with a view to resell them,
and that the certificates for any shares will bear restrictive legends to that
effect. Such shares shall also be subject to registration rights in your favor
which will require the Company to file with the SEC an S-3 Registration
Statement (or equivalent) covering your resale of such shares within 3 months
after the end of the demand period, or within 3 months of the last transaction
purchase date, if earlier.
<PAGE> 3
Purchase and Sale of Common Stock
March 30, 1999
Page 3
If the foregoing accurately describes our agreement regarding the
purchase and sale of the Shares, please so indicate by signing and returning
this letter to me.
Sincerely,
INTELLICORP, INC.
By:________________________________
Kenneth A. Czaja
Chief Financial Officer
THE FOREGOING IS HEREBY
AGREED TO AND ACCEPTED:
XXXX.
By:_________________________________
<PAGE> 1
EXHIBIT 10UU
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: INTELLICORP, INC.
ADDRESS: 1975 EL CAMINO REAL W.
MOUNTAIN VIEW, CALIFORNIA 94040
DATE: APRIL 26, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its sole discretion, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing, and subject to deduction of any Reserves for accrued
interest and such other Reserves as Silicon deems proper from time to time.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
1.4 FEES. Borrower shall pay Silicon the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 LETTERS OF CREDIT. [Not Applicable]
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to Silicon a security interest
in all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitation,
all of Borrower's Deposit Accounts, and all money, and all property now or at
any time in the future in Silicon's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing (all of the foregoing,
together with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively, as the
"Collateral").*
*NOTWITHSTANDING THE FOREGOING, THE COLLATERAL SHALL NOT INCLUDE ANY
RIGHTS TO EXERCISE ANY PUT UNDER THE EQUITY LETTER AGREEMENT DATED MARCH 30,
1999 BETWEEN BORROWER AND CERTAIN INVESTORS, PURSUANT TO WHICH BORROWER HAS THE
RIGHT TO REQUIRE SUCH INVESTORS TO PURCHASE EQUITY SECURITIES OF THE BORROWER,
AS IN
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<PAGE> 2
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
EFFECT AT THE DATE HEREOF (A TRUE COPY OF WHICH HAS BEEN PROVIDED BY BORROWER TO
SILICON).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make
Loans, Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is
and will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon * days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
*10
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business * and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Silicon at least ** days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule***.
*IN THE UNITED STATES
**10
***TO MAINTAIN PERFECTION OF SILICON'S SECURITY INTEREST
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Silicon now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims
of others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its * to cause such third
party to execute and deliver to Silicon, in form acceptable to Silicon, such
waivers and subordinations as Silicon shall specify, so as to ensure that
Silicon's rights in the Collateral are, and will continue to be, superior to the
rights of any such third party. Borrower will keep in full force and effect, and
will comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located**.
*COMMERCIALLY REASONABLE EFFORTS
**IF A FAILURE TO SO COMPLY WOULD MATERIALLY AND ADVERSELY AFFECT THE
COLLATERAL
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Silicon have been, and will be,
prepared in conformity with generally accepted accounting principles and now and
in the future will * the financial condition of Borrower, at the times and for
the periods therein stated. Between the last date covered by any such statement
provided to Silicon and the date hereof, there has been no material adverse
change in the
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<PAGE> 3
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
financial condition or business of Borrower. Borrower is now and will continue
to be solvent.
*FAIRLY PRESENT
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower *, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
*THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON BORROWER
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of *
or more, or involving ** or more in the aggregate.
*$100,000 **$200,000
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall * comply
with all applicable laws and governmental rules and regulations. All signatures
and endorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
*MATERIALLY
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Silicon transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on Silicon's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit Silicon's security interest and other
rights in all of Borrower's Receivables, nor shall Silicon's failure to advance
or lend against a specific Receivable affect or limit Silicon's security
interest and other rights therein. Loan requests received after 12:00 Noon will
not be considered by Silicon until the next Business Day. * with each such
schedule and assignment, or later if requested by Silicon, Borrower shall
furnish Silicon with copies (or, at Silicon's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
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<PAGE> 4
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
in such form and at such intervals as Silicon shall request. In addition,
Borrower shall deliver to Silicon the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which shall
be with recourse. Borrower shall also provide Silicon with copies of all credit
memos ** within two days after the date issued.
*IF REQUESTED BY SILICON, TOGETHER
**IN EXCESS OF $20,000
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has
occurred*. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for Silicon, and Borrower shall immediately deliver all such payments and
proceeds to Silicon in their original form, duly endorsed in blank, to be
applied to the Obligations in such order as Silicon shall determine**. Silicon
may, in its discretion, require that all proceeds of Collateral be deposited by
Borrower into a lockbox account, or such other "blocked account" as Silicon may
specify, pursuant to a blocked account agreement in such form as Silicon may
specify. *** Silicon or its designee may, at any time, notify Account Debtors
that the Receivables have been assigned to Silicon.
*AND IS CONTINUING
**AND IF AT ANY TIME SILICON IS HOLDING FUNDS IN EXCESS OF THE
OBLIGATIONS AND NO EVENT OF DEFAULT OR EVENT WHICH, WITH NOTICE OR PASSAGE OF
TIME OR BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT UNDER THE LOAN AGREEMENT, HAS
OCCURRED AND IS CONTINUING, THEN SILICON WILL RELEASE SUCH EXCESS FUNDS TO
BORROWER.
***NOTWITHSTANDING THE FOREGOING, BORROWER SHALL HAVE THE RIGHT TO
MAINTAIN COMMERCIALLY REASONABLE AMOUNTS OF CASH IN FOREIGN CURRENCIES TO
SUPPORT ITS FOREIGN OPERATIONS, PROVIDED THE SAME REPRESENT THE PROCEEDS OF
FOREIGN RECEIVABLES WHICH ARE PAYABLE IN FOREIGN CURRENCIES, AND PROVIDED NO
EVENT OF DEFAULT AND NO EVENT WHICH, WITH NOTICE OR PASSAGE OF TIME OR BOTH,
WOULD CONSTITUTE AN EVENT OF DEFAULT, HAS OCCURRED AND IS CONTINUING
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition
of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred, Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement. *
*NOTWITHSTANDING THE FOREGOING, BORROWER SHALL HAVE THE RIGHT TO
MAINTAIN COMMERCIALLY REASONABLE AMOUNTS OF CASH IN FOREIGN CURRENCIES TO
SUPPORT ITS FOREIGN OPERATIONS, PROVIDED THE SAME REPRESENT THE PROCEEDS OF
FOREIGN RECEIVABLES WHICH ARE PAYABLE IN FOREIGN CURRENCIES, AND PROVIDED NO
EVENT OF DEFAULT AND NO EVENT WHICH, WITH NOTICE OR PASSAGE OF TIME OR BOTH,
WOULD CONSTITUTE AN EVENT OF DEFAULT, HAS OCCURRED AND IS CONTINUING
4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence * of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
*AND DURING THE CONTINUANCE
4.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and * promptly issue a credit memorandum to the Account Debtor
in the appropriate amount (sending a copy to Silicon). In the event any
attempted return occurs after the occurrence of any Event of Default, Borrower
shall (i) hold the returned Inventory in trust for Silicon, (ii) segregate all
returned Inventory from all of Borrower's other property, (iii) conspicuously
label the returned Inventory as Silicon's property, and (iv) immediately notify
Silicon of the return of any Inventory, specifying the reason for such return,
the loca-
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<PAGE> 5
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
tion and condition of the returned Inventory, and on Silicon's request deliver
such returned Inventory to Silicon.
*, IF BORROWER WISHES TO ACCEPT THE RETURN,
4.8 VERIFICATION. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect. All such insurance policies * shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of all reports made to insurance companies. **
*(EXCEPT THOSE WITH RESPECT TO EQUIPMENT SUBJECT TO PERMITTED LIENS)
**NOTWITHSTANDING THE FOREGOING, SILICON SHALL RELEASE ALL INSURANCE
PROCEEDS TO BORROWER IF NO LOANS ARE OUTSTANDING.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $500 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent +, do any of the
following: (i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter into
any other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower's business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business *; (v) store any Inventory
or other Collateral with any warehouseman or other third party; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets **; (viii) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on Borrower or on the prospect of repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of BORROWER***); (xi) redeem,
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<PAGE> 6
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock ****; (xii) make any change in Borrower's capital structure which would
have a material adverse effect on Borrower or on the prospect of repayment of
the Obligations; or (xiii) or (xiv) dissolve or elect to dissolve. Transactions
permitted by the foregoing provisions of this Section are only permitted if no
Default or Event of Default would occur as a result of such transaction.
*AND EXCEPT FOR PAYMENT OF BORROWER'S OBLIGATIONS IN THE ORDINARY COURSE
OF BUSINESS
**OTHER THAN LOANS TO EMPLOYEES IN THE ORDINARY COURSE OF BUSINESS IN AN
AMOUNT NOT TO EXCEED $100,000 OUTSTANDING IN THE AGGREGATE AT ANY ONE TIME
***AND EXCEPT FOR DIVIDENDS ON BORROWER'S PREFERRED STOCK IN AN AMOUNT
NOT TO EXCEED $600,000 IN THE AGGREGATE IN ANY FISCAL YEAR (PROVIDED THAT SAID
$600,000 LIMIT MAY BE INCREASED TO NOT MORE THAN $1,000,000 IN ORDER TO PAY
REQUIRED CASH DIVIDENDS ON PREFERRED STOCK WHICH IS ISSUED AFTER THE DATE
HEREOF)
****EXCEPT FOR THE REPURCHASE OF EMPLOYEES' STOCK IN ACCORDANCE WITH
BORROWER'S STOCK OPTION PLANS IN AN AMOUNT NOT TO EXCEED $75,000 IN THE
AGGREGATE IN ANY FISCAL YEAR (PROVIDED THAT SAID $75,000 LIMIT SHALL NOT APPLY
TO STOCK REPURCHASED FROM A STOCKHOLDER SIMULTANEOUSLY WITH ITS ISSUANCE TO THE
STOCKHOLDER FOR THE SAME PRICE AS IS CONCURRENTLY PAID BY THE STOCKHOLDER)
+WHICH WILL BE A MATTER OF SILICON'S GOOD FAITH BUSINESS JUDGMENT
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.3 below.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Silicon under
this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount
equal to * of the Maximum Credit Limit, provided that no termination fee shall
be charged if the credit facility hereunder is replaced with a new facility from
another division of Silicon Valley Bank. The termination fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.
*$45,000 IF TERMINATION OCCURS ON OR BEFORE THE FIRST ANNIVERSARY OF THE
DATE HEREOF AND $18,500 IF TERMINATION OCCURS AFTER THE FIRST ANNIVERSARY OF THE
DATE HEREOF
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Silicon
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
immediate written notice thereof: (a) Any warranty, representation, statement,
report or certificate made or delivered to Silicon by Borrower or any of
Borrower's officers, employees or agents, now or in the future, shall be untrue
or misleading in a material respect; or (b) Borrower shall fail to pay when due
any Loan or any interest thereon or any other monetary Obligation; or (c) the
total Loans and other Obligations outstanding at any time shall exceed the
Credit Limit *; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within 5 Business Days after the date due; or (f) Any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien **, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted Lien;
or (h) Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) **** ; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) there shall be a material adverse change in Borrower's business or
financial condition; or (q) Silicon, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an event
prior to the effective date hereof of which Silicon had no knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date. Silicon may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred***.
*AND THE EXCESS IS NOT REPAID TO SILICON WITHIN ONE BUSINESS DAY AFTER
DEMAND
**SECURING AN AMOUNT IN EXCESS OF $100,000
***AND IS CONTINUING
****A PERSON OR GROUP OF RELATED PERSONS CONTROLS 50% OR MORE OF THE
OUTSTANDING STOCK AS A RESULT OF ISSUANCES OF STOCK AFTER THE DATE HEREOF BY
BORROWER AND SILICON FAILS TO CONSENT THERETO IN WRITING (WHICH CONSENT SHALL BE
A MATTER OF SILICON'S GOOD-FAITH BUSINESS JUDGMENT)
7.2 REMEDIES. Upon the occurrence * of any Event of Default, and at any
time thereafter, Silicon, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence * of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional ** percent per annum.
*AND DURING THE CONTINUANCE
**TWO
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence * of any Event of Default,
without limiting Silicon's other rights and remedies, Borrower grants to Silicon
an irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral ; (c) Execute on behalf of Borrower, any
invoices relating to any Receivable, any draft against any Account Debtor and
any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice
of Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien; (d) Take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into Silicon's possession; (e) Endorse all
checks and other forms of remittances received by Silicon; (f) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
judgment based thereon, or otherwise take any action to terminate or discharge
the same; (g) Grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (h) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (i) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (j) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (k) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.
*AND DURING THE CONTINUATION
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Eligible Inventory" [NOT APPLICABLE].
"Eligible Receivables" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
billings, or be due under a fulfillment or requirements contract with the
Account Debtor*, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom the
Borrower has any dispute (whether or not relating to the particular Receivable),
(v) the Receivable must not be owing from an Affiliate of Borrower **, (vi) the
Receivable must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Receivable must not be owing from the United States or any
department, agency or
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
instrumentality thereof (unless there has been compliance, to Silicon's
satisfaction, with the United States Assignment of Claims Act), (viii) the
Receivable must not be owing from an Account Debtor located outside the United
States or Canada ** (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) + . Receivables owing from one Account
Debtor will not be deemed Eligible Receivables to the extent they exceed 25% of
the total Receivables outstanding. In addition, if more than 50% of the
Receivables owing from an Account Debtor are outstanding more than 90 days from
their invoice date (without regard to unapplied credits) or are otherwise not
eligible Receivables, then all Receivables owing from that Account Debtor will
be deemed ineligible for borrowing. Silicon may, from time to time, in its *** ,
revise the Minimum Eligibility Requirements, upon **** written notice to the
Borrower.
*EXCEPT FOR SUMS DUE UNDER FIXED PRICE CONSULTING CONTRACTS ENTERED INTO
BY BORROWER IN THE ORDINARY COURSE OF BUSINESS
**EXCEPT SAP AND DELOITTE & TOUCHE
***GOOD FAITH BUSINESS JUDGMENT
****30 DAYS PRIOR
+ IF THERE IS ANY INDEBTEDNESS OWING FROM THE BORROWER TO AN ACCOUNT
DEBTOR, THEN RECEIVABLES OWING FROM THAT ACCOUNT DEBTOR WILL BE ELIGIBLE
RECEIVABLES ONLY TO THE EXTENT THEY EXCEED THE INDEBTEDNESS OWING FROM THE
BORROWER TO THE ACCOUNT DEBTOR
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit), and all materials and supplies of every kind, nature and description
which are or might be used or consumed in Borrower's business or used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, merchandise or other personal property, and all
warehouse receipts, documents of title and other documents representing any of
the foregoing.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable *; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
which are not delinquent; (vii) liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by liens of the type
described above in clauses (i) or (ii) above, provided that any extension,
renewal or replacement lien is limited to the property encumbered by the
existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods. Silicon will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on Silicon's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate security interest shall also constitute an Event of
Default under this Agreement.
*OR WHICH ARE BEING CONTESTED IN GOOD FAITH BY BORROWER BY APPROPRIATE
PROCEEDINGS (PROVIDED NO SUCH LIEN HAS PRIORITY OVER ANY OF SILICON'S SECURITY
INTERESTS)
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as
Silicon may from time to time establish and revise in good faith reducing the
amount of Loans, Letters of Credit and other financial accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
in the Schedule: (a) to reflect events, conditions, contingencies or risks
which, as determined by Silicon in good faith, do or may affect (i) the
Collateral or any other property which is security for the Obligations or its
value (including without limitation any increase in delinquencies of
Receivables), (ii) the assets, business or prospects of Borrower or any
Guarantor, or (iii) the security interests and other rights of Silicon in the
Collateral (including the enforceability, perfection and priority thereof); or
(b) to reflect Silicon's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Guarantor to
Silicon is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Silicon determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations three Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in Silicon's sole discretion reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its sole discretion.
9.3 CHARGES TO ACCOUNTS. * Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
*UNLESS PAID BY THE BORROWER IN CASH
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either
-11-
<PAGE> 12
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
personally or by reputable private delivery service or by regular first-class
mail, or certified mail return receipt requested, addressed to Silicon or
Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. Notices to
Silicon shall be directed to the Commercial Finance Division, to the attention
of the Division Manager or the Division Credit Manager. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered, or at the expiration of one Business Day following delivery to the
private delivery service, or two Business Days following the deposit thereof in
the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 WAIVERS. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Borrower or any other party through the ordinary negligence of Silicon, or
any of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon, but nothing herein shall relieve
Silicon from liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
only Silicon and not Borrower in connection with this Agreement. If either
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of
-12-
<PAGE> 13
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
its rights under this Agreement without the prior written consent of Silicon,
and any prohibited assignment shall be void. No consent by Silicon to any
assignment shall release Borrower from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
INTELLICORP, INC.
BY _______________________________
PRESIDENT OR VICE PRESIDENT
BY _______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY _______________________________
TITLE ____________________________
-13-
<PAGE> 14
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: INTELLICORP, INC.
ADDRESS: 1975 EL CAMINO REAL W.
MOUNTAIN VIEW, CALIFORNIA 94040
DATE: APRIL 26, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. CREDIT LIMIT
(Section 1.1):
An amount not to exceed the lesser of: (i) $3,000,000 at
any one time outstanding (the "Maximum Credit Limit");
or (ii) 80% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above).
================================================================================
2. INTEREST.
INTEREST RATE (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to
time, plus 2% per annum. Interest shall be calculated on
the basis of a 360-day year for the actual number of
days elapsed. "Prime Rate" means the rate announced from
time to time by Silicon as its "prime rate;" it is a
base rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate available
at Silicon. The interest rate applicable to the
Obligations shall change on each date there is a change
in the Prime Rate.
================================================================================
3. FEES (Section 1.4):
Loan Fee: $45,000, payable concurrently herewith. (Any Commitment
Fee previously paid by the Borrower in connection with
this loan shall be credited against this Fee.) In
addition, at such time as the total Loans outstanding
reach $2,250,000, Borrower shall pay Silicon an
additional one-time Loan Fee of $15,000.
-1-
<PAGE> 15
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
================================================================================
Unused Line Fee: In the event, in any calendar month (or
portion thereof at the beginning and end of
the term hereof), the average daily principal
balance of the Loans outstanding during the
month is less than the amount of the Maximum
Credit Limit, Borrower shall pay Silicon an
unused line fee in an amount equal to 0.25%
per annum on the difference between the
amount of the Maximum Credit Limit and the
average daily principal balance of the Loans
outstanding during the month, which unused
line fee shall be computed and paid monthly,
in arrears, on the first day of the following
month.
Collateral Monitoring
Fee: $1,000 per month, payable in arrears *
(prorated for any partial month at the
beginning and at termination of this
Agreement). *AT THE END OF EVERY MONTH
================================================================================
4. MATURITY DATE
(Section 6.1): Two years from the date of this Agreement.
================================================================================
5. FINANCIAL COVENANTS
(Section 5.1): Not applicable.
================================================================================
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the
following:
1. Monthly Receivable agings, aged by
invoice date, within twenty days after
the end of each month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held
check registers, if any, within twenty
days after the end of each month.
3. Monthly reconciliations of Receivable
agings (aged by invoice date),
transaction reports, and general ledger,
within twenty days after the end of each
month.
4. Monthly unaudited financial statements,
as soon as available, and in any event
within thirty days after the end of each
month.
5. Monthly Compliance Certificates, within
thirty days after the end of each month,
in such form as Silicon shall reasonably
specify, signed by the Chief Financial
Officer of Borrower (or, if Borrower's
Chief Financial Officer is not available,
by the Controller of Borrower),
certifying that as of the end of such
month Borrower was in full compliance
with all of the terms and conditions of
this Agreement, and setting forth
calculations showing compliance with the
financial
-2-
<PAGE> 16
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
================================================================================
covenants set forth in this Agreement and
such other information as Silicon shall
reasonably request, including, without
limitation, a statement that at the end
of such month there were no held checks.
6. Quarterly unaudited financial statements,
as soon as available, and in any event
within forty-five days after the end of
each fiscal quarter of Borrower.
7. Annual operating budgets (including
income statements, balance sheets and
cash flow statements, by month) for the
upcoming fiscal year of Borrower within
sixty days after the end of each fiscal
year of Borrower.
8. Annual financial statements, as soon as
available, and in any event within 120
days following the end of Borrower's
fiscal year, certified by independent
certified public accountants acceptable
to Silicon.
================================================================================
7. COMPENSATION
(Section 5.5):
================================================================================
8. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): See Representations and Warranties of
Borrower dated March 22, 1999.
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): See Representations and Warranties of
Borrower dated March 22, 1999.
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): See Representations and Warranties of
Borrower dated March 22, 1999.
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): Brandywine 4 Bldg., Chadds Ford, PA
19317, plus home offices of sales
representatives
MATERIAL ADVERSE
LITIGATION (Section 3.10): None
================================================================================
-3-
<PAGE> 17
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
================================================================================
9. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking
relationship with Silicon, provided that
Borrower may continue to maintain certain of
its bank accounts with Bank of America.
(2) COPYRIGHT FILINGS. Concurrently, Borrower is
executing and delivering to Silicon a
Collateral Assignment, Patent Mortgage and
Security Agreement (the "IP Agreement").
Within 45 days after the date hereof, Borrower
shall (i) file for registration all of its
computer software, the licensing of which
results in Receivables, with the United States
Copyright Office, (ii) complete the Exhibits
to the IP Agreement with all of the
information called for with respect to such
software, (iii) cause the IP Agreement to be
recorded in the United States Copyright
Office, and (iv) provide evidence of such
recordation to Silicon.
(3) BROKERAGE ACCOUNTS. * , Borrower shall execute
and cause its brokers to execute control
agreements and other appropriate documentation
reasonably requested by Silicon in order to
give it a first-priority perfected security
interest in Borrower's brokerage, money market
and other securities accounts.
*IF AT ANY TIME BORROWER ESTABLISHES A BROKERAGE
ACCOUNT
Borrower: Silicon:
INTELLICORP, INC. SILICON VALLEY BANK
By _______________________________ By _______________________________
President or Vice President Title_____________________________
By _______________________________
Secretary or Ass't Secretary
-4-
<PAGE> 18
SILICON VALLEY BANK
CERTIFIED RESOLUTION AND INCUMBENCY CERTIFICATE
BORROWER: INTELLICORP, INC.,
A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
DATE: APRIL 26, 1999
I, the undersigned, Secretary or Assistant Secretary of the above-named
borrower, a corporation organized under the laws of the state set forth above,
do hereby certify that the following is a full, true and correct copy of
resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and that
said resolutions are still in full force and effect and have not been in any way
modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Silicon Valley Bank
("Silicon"), from time to time, such sum or sums of money as, in the
judgment of the officer or officers hereinafter authorized hereby, this
corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she
is hereby authorized, directed and empowered, in the name of this
corporation, to execute and deliver to Silicon, and Silicon is requested
to accept, the loan agreements, security agreements, notes, financing
statements, and other documents and instruments providing for such loans
and evidencing and/or securing such loans, with interest thereon, and said
authorized officers are authorized from time to time to execute renewals,
extensions and/or amendments of said loan agreements, security agreements,
and other documents and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, directed and empowered, as security for any and all
indebtedness of this corporation to Silicon, whether arising pursuant to
this resolution or otherwise, to grant, transfer, pledge, mortgage,
assign, or otherwise hypothecate to Silicon, or deed in trust for its
benefit, any property of any and every kind, belonging to this
corporation, including, but not limited to, any and all real property,
accounts, inventory, equipment, general intangibles, instruments,
documents, chattel paper, notes, money, deposit accounts, furniture,
fixtures, goods, and other property of every kind, and to execute and
deliver to Silicon any and all grants, transfers, trust receipts, loan or
credit agreements, pledge agreements, mortgages, deeds of trust, financing
statements, security agreements and other hypothecation agreements, which
said instruments and the note or notes and other instruments referred to
in the preceding paragraph may contain such provisions, covenants,
recitals and agreements as Silicon may require and said authorized
officers may approve, and the execution thereof by said authorized
officers shall be conclusive evidence of such approval.
RESOLVED FURTHER, that Silicon may conclusively rely upon a certified copy
of these resolutions and a certificate of the Secretary or Ass't Secretary
of this corporation as to the officers of this corporation and their
offices and signatures, and continue to conclusively rely on such
certified copy of these resolutions and said certificate for all past,
present and future transactions until written notice of any change hereto
or thereto is given to Silicon by this corporation by certified mail,
return receipt requested.
-1-
<PAGE> 19
SILICON VALLEY BANK CERTIFIED RESOLUTION AND INCUMBENCY CERTIFICATE
================================================================================
The undersigned further hereby certifies that the following persons are
the duly elected and acting officers of the corporation named above as borrower
and that the following are their actual signatures:
NAMES OFFICE(S) ACTUAL SIGNATURES
----- --------- -----------------
______________________ ______________________ X______________________
______________________ ______________________ X______________________
______________________ ______________________ X______________________
______________________ ______________________ X______________________
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or
Assistant Secretary on the date set forth above.
_____________________________________
Secretary or Assistant Secretary
-2-
<PAGE> 20
SILICON VALLEY BANK
NOTICE OF SECURITY INTEREST
April 26, 1999
Certified Mail, Return Receipt Requested
Bank of America
PO Box 27128
Concord, California 94520
Re: INTELLICORP, INC.
Ladies and Gentlemen:
Notice is hereby given that your above-named customer has granted a
security interest in all of its present and future deposit accounts maintained
with your institution, general and special, and of every other kind, to Silicon
Valley Bank, 3003 Tasman Drive, Santa Clara, California 95054.
Please contact the undersigned at 408-654-1070, if you have any
questions about this matter.
Sincerely yours,
Silicon Valley Bank
By ______________________________
Title ___________________________
INTELLICORP, INC.
By ______________________________
Title ___________________________
-1-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,446
<SECURITIES> 0
<RECEIVABLES> 5,348
<ALLOWANCES> 496
<INVENTORY> 0
<CURRENT-ASSETS> 8,383
<PP&E> 10,000
<DEPRECIATION> 8,915
<TOTAL-ASSETS> 12,376
<CURRENT-LIABILITIES> 5,636
<BONDS> 1,600
0
1
<COMMON> 15
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,376
<SALES> 1,614
<TOTAL-REVENUES> 5,026
<CGS> 338
<TOTAL-COSTS> 6,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (1,621)
<INCOME-TAX> 8
<INCOME-CONTINUING> (1,629)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,629)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
