10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

For Annual and Transitional Reports Pursuant to Sections 13 or 15(d) of The Securities
Exchange Act of 1934

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2001
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-25040

APPLIX, INC.
(Exact name of registrant as specified in its charter)

Massachusetts	04-2781676
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

289 Turnpike Road, Westborough, Massachusetts	01581-2831
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (508) 870-0300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.0025 par value per share

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S- K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

     On March 19, 2002, the aggregate market value of Common Stock held by non-affiliates of the registrant was $25,354,992 based on the closing price of the Common Stock on the Nasdaq National Market on March 19, 2002.

     The number of shares of Common Stock outstanding as of March 19, 2002 was 12,189,900.

Documents Incorporated By Reference

Document Part	Form 10-K
Definitive Proxy Statement with respect to the Annual Meeting of Stockholders to be held on May 30, 2002 to be filed with the Securities and Exchange Commission	Part III

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2.   Properties
	Item 3.   Legal Proceedings
	Item 4.   Submission of Matters to a Vote of Security Holders
	Item 5.   Market for Registrant’s Common Stock and Related Stockholder Matters
	Item 6.   Selected Financial Data
	Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A.   Quantitative and Qualitative Disclosures about Market Risk
	Item 8.   Financial Statements and Supplementary Data
	Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 11.   Executive Compensation
	Item 12.   Security Ownership of Certain Beneficial Owners and Management
	Item 13.   Certain Relationships and Related Transactions
PART IV
	Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
	Item 14(a)  Index to Consolidated Financial Statements and Financial Statement Schedule
	Report of Ernst & Young LLP, Independent Auditors
	Report of Independent Accountants
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Stockholders’ Equity
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
	Schedule II — Valuation and Qualifying Accounts for the Years ended December 31, 2001, 2000 and 1999
EXHIBIT INDEX
EX-10.14 EXPORT-IMPORT BANK LOAN AND SEC AGREEMENT
EX-10.15 BORROWER AGREEMENT
EX-10.16 LOAN AND SECURITY AGREEMENT
Ex-10.17 Non-Recourse Receivables Purchase Agrmnt
EX-21.1 SUBSIDIARIES
EX-23.1 CONSENT OF ERNST & YOUNG LLP
EX-23.2 CONSENT OF PRICEWATERHOUSECOOPERS LLP

APPLIX, INC.

FORM 10-K

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	3
Item 2.	Properties	8
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8
PART II
Item 5.	Market for the Registrant’s Common Equity and Related Stockholder Matters	9
Item 6.	Selected Financial Data	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
PART III
Item 10.	Directors and Executive Officers of the Registrant	23
Item 11.	Executive Compensation	24
Item 12.	Security Ownership of Management and Certain Beneficial Owners	24
Item 13.	Certain Relationships and Related Transactions	24
PART IV
Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	24
Signatures		26

     Applix iTM1, Applix iEnterprise, Applix iCustomersight, Applix iHelpdesk and Applix iService are trademarks of Applix, Inc. All other trademarks and company names mentioned are the property of their respective owners. All rights reserved.

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     Certain information contained in this Annual Report on Form 10-K is forward-looking in nature. All statements included in this Annual Report on Form 10-K or made by management of Applix, Inc. (“Applix” or the “Company”) and its subsidiaries, other than statements of historical facts, are forward-looking statements. Examples of forward-looking statements include statements regarding Applix’s future financial results, operation results, business strategies, projected costs, products, competitive positions and plans and objectives of management for future operations. In some cases, forward- looking statements can be identified by terminology such as “may”, “ will”, “should”, “would”, “expect”, “plan”, “anticipates”, “intend”, “believes”, “estimates”, “predicts”, “potential”, “continue”, or the negative of these terms or other comparable terminology. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the section below entitled “Risk Factors”. These and many other factors could affect Applix’s future financial and operating results, and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by Applix or on its behalf. Applix does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

PART I

Item 1. Business

General

     Applix is a global provider of enterprise performance management solutions that include interactive planning, customer relationship management (CRM) and analytics and business intelligence solutions that enable companies to achieve better, faster decision-making. Applix solutions capture information from across the extended enterprise and enable continual marketplace responsiveness. Adaptable, scalable and real-time, Applix solutions support unique, complex and disparate business processes, providing analysis, planning, measurement and response to changing customer requirements and business dynamics. Headquartered in Westborough, MA, Applix has more than 2,600 customers worldwide, including many of the Fortune 500.

     Applix’s award-winning “Applix iCRM” and “Applix iTM1” solution sets are designed to easily accommodate even the most unique business processes of companies. In 2001, Applix was honored with several prestigious awards for its leading-edge technology, including Global Finance’s Top Internet Infrastructure Award, ISM’s Top (CRM) Software Solution, Cebit’s Top CRM Solution in the Wireless Category, the eWeek Excellence Award, and the Aberdeen Group’s Top Ten CRM Implementation award. Applix is one of the world’s only single-source providers of iCRM, customer analytics and business planning software and solutions.

Industry Background

     The harsh economy in 2001, and the impact from global events in the second half of the year, forced companies to adopt rigorous methods for assessing the impact that any future investments would have on their business. With limited resources, many companies were pressed to make difficult decisions as to those areas of their business in which investment spending should be increased and those in which it should be decreased, sometimes requiring a complete redesign of the business model. It is not sufficient to simply gather data at the departmental level; businesses need to gather, integrate, measure and analyze enterprise-wide data, especially key performance indicators. At the end of the day – or the year – it is becoming increasingly critical to establish closer ties between departmental and enterprise level processes and data.

     In the key markets Applix serves, companies continue to implement a variety of customer and employee-facing systems that capture, aggregate, and, equally importantly, report and analyze data from all potential “touch points,” including websites, call centers and mobile devices. By properly analyzing all of this data, companies can be proactive in assessing changing needs and addressing them with an eye towards profitability. In January 2002, Information Week reported that the two most important “business intelligence” (BI) applications today are financial analysis, at 38% of total BI applications and CRM analytics, which represents 35% of total BI applications. Growth is predicted to be especially strong in business analytics: Datamonitor expects the business intelligence market to double from the estimated 2002 level of $3 billion to $6 billion in 2004. Further, Gartner, Inc. estimates that more than 40% of Global 2000 enterprises will have implemented a corporate performance management (CPM) system by 2005. This strong projected growth rate validates Applix’s conviction that in today’s competitive corporate marketplace, companies can no longer succeed by solely automating their day-to-day transactions. As importantly, companies must also aggregate, analyze, react to key metrics such as customer retention and product profitability, and fine-tune their business processes accordingly.

     Applix is well positioned to deliver enterprise performance management solutions, as evidenced by the numerous awards won last year and the growing number of customers who have selected Applix software solutions to maximize business performance.

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Applix Solutions

     Applix’s business solutions are based on two solution sets, Applix iTM1 and Applix iCRM.

     Applix iTM1 and Applix iCRM are solution sets that can function independently and together. They allow customers to build CRM or multidimensional “On-Line Analytical Processing” (OLAP) solutions.

     In December 2001, Applix announced the combination of iCRM and iTM1 as a new integrated product, which will provide enterprise-wide workflow within an enabled business planning solution. Applix Integra combines the strengths of Applix's two product lines and provides the analytics solutions for both the back- and front-office. In fact, Applix believes it will be one of the first single-source vendors of an iCRM solution and an OLAP solution, and the first to develop customer analytics solutions that rely on a formal integration between two such solution sets.

     Applix’s analytics solutions enable companies to turn from reactive to predictive when interacting with their customers and prospective customers. Applix enables companies with even the most commoditized products to reduce their customer defection rates, and create greater customer loyalty, all by delivering the high degree of service that more and more customers are beginning to expect.

     Applix iCRM and Applix iTM1 owe their adaptability to the robust “Applix iEnterprise” and “Applix iTM1” technology platforms that power them. Applix continues to enhance these platforms and the integration between them, in order to continue providing software that best supports companies’ unique, competitive business processes.

Applix Integra

     The recently announced Applix Integra integrates the planning, analytics, business workflow, collaboration, exception alerting and forecasting functions of the Applix iTM1 and Applix iCRM solutions. Development efforts during the year are expected to result in commercial availability of Applix Integra in 2002. Applix Integra will provide customers with immediate visibility into their operational and financial data, in a single view, enabling the decision makers to take advantage of unforeseen opportunities and quickly stabilize fluctuations that threaten financial targets. Applix Integra will integrate disparate data from multiple applications in real time and seamlessly – and provide a clear picture of the status of the company’s operations. Decision makers will be able to foresee trends, respond quickly to changing customer needs, detect deviating business indicators and alert managers with actionable analytics, collaboratively manage the budget process and optimize service delivery a host of high-level capabilities previously unavailable in real time. In addition to the benefit of real-time, enterprise-spanning intelligence, Applix Integra also means lower cost of ownership for the business with an adaptable, upgradeable, low-support system and a proven technology with proven results.

Planned components of Applix Integra include:

• Real-time planning and analytics. With these capabilities, businesses can not only view the current situation at an enterprise level, but can perform what-if analyses against the data and receive the answers in real time, without having to wait for lengthy, back-office batch processes to answer hours or even days later.

• Dynamic business workflow. This enables a business to map its processes with Applix Integra’s escalation, notification, detection, and workflow capabilities. Easy-to-use “wizards” conform to complex business rules so that users can stay ahead of opportunities and issues.

• Complex business modeling. Applix Integra’s unique architecture of multi-cubes, rules, a real-time engine, and workflow allow a business to manage its complex business models.

• Actionable alerts. Timely alerts generated from a company’s analyses and business processes enable it to be proactive to its business environment.

• Integrated application and deployment platform. Blending the best of Applix iEnterprise and Applix iTM1 platforms means that a business can easily develop and deploy Applix Integra solutions. Using the Development Studio, a company can develop complex solutions with simple drag-and-drop objects.

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Applix iTM1 Solution

     Applix iTM1 enables budgeting/financial planning, business forecasting and management reporting solutions to be developed for the entire enterprise. Its unique real-time approach to consolidating, viewing and even editing vast volumes of multidimensional data is an undisputable differentiator in the OLAP market. With over 30,000 users in over 70% of the Fortune-50 companies and over 50% of the Fortune-500 companies, Applix iTM1 has been one of the leading multi-dimensional databases for highly complex business and financial analytical applications for over fifteen years.

     Applix iTM1 solutions expand the scope of business planning processes to continuously support changing customer demands, operational requirements, and evolving eBusiness models in the new economy. It also allows for the quick and effortless integration of information from CRM, enterprise resource planning (ERP), financial systems, human resources, and other “legacy” databases in order to allow a business to run according to supply resources and customer demand. Using Applix iTM1, the back office and the front office staff can work together seamlessly to manage the demand chain on a real-time basis.

     Applix iTM1 allows business users to access their critical data via a desktop browser, Microsoft Excel or the Web. With its powerful client-server database engine and an elegant, easy-to-use interface, users are able to spend more time analyzing information and less time maintaining data.

     The Applix iTM1 approach provides the following benefits:

• Instantaneous response times: Because of Applix iTM1’s ability to quickly load vast data sets into memory, it avoids other products’ drawbacks that result from having to pre-calculate all consolidations and derived values before anyone can view them.

• Real-time what-if analyses: Because of Applix iTM1’s memory-based approach, users can instantly view the results of any what-if analyses and updates they perform to ad hoc analyses of vast data sets.

• Scalability: Applix iTM1’s 64-bit capability, combined with its ability to support multiple servers, multiple cubes, multi-threaded processing and multi-user data updating, make it a logical choice for large-scale operations.

• Efficient use of system resources: Because Applix iTM1 never resorts to pre-calculating customers’ data, it requires much less hardware and processing power than other products, which suffer from a common “data explosion” predicament.

• Rapid deployment: Applix iTM1 typically builds complete applications for customers in a fraction of the time required by competing products.

Applix iCRM

     Applix iCRM is a suite of collaborative, Internet-based CRM solutions that streamline companies’ methods for capturing, accessing and interpreting customer data and responding to their needs from every corner of their multi-channel enterprises. The suite of software automates Web-based marketing, sales, customer service, partner service, product quality assurance and internal helpdesks. With Applix iCRM, companies can operate their entire enterprise system from a central site, enabling users anywhere in a global organization to quickly and easily access and analyze corporate information.

     The Applix iCRM solution set consists of the following application modules, which are available as a fully integrated iCRM solution or on a stand-alone basis:

     Applix iSales is a comprehensive marketing and sales force automation solution that manages every phase of the sales cycle, from initial lead generation and qualification to closure, fulfillment and follow-on sales. Telemarketers, inside and outside sales representatives and managers can optimize campaigns, lead tracking, forecasting, quote generation and account management. Sales methodologies and other pre-defined application components can be adapted to suit specific needs. Applix iSales supports wireless communication, such as Web-enabled phones and personal data assistants (PDAs), so a company’s sales force can access important customer and prospect information when and where they need it.

     Applix iService is a customer service and customer support module for managing existing customers and partners and their service level agreements (SLAs). iCRM allows iService personnel to provide customer-facing services through a variety of mediums including call centers, the Web, e-mail, fax and wireless mobile links. Applix iService maintains information about customer calls, resolutions, escalation status, and notifications; provides customer feedback on product performance, function and features directly to an organization’s product development and quality assurance departments; and displays customer history so customer service representatives are always informed and ready to answer questions. Applix iService also provides Web-based self-service features that allow customers of a global organization to report problems, receive their resolutions and help themselves to a variety of knowledge bases that assist them in solving problems.

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     Applix iHelpdesk is an enterprise-wide incident management system for internal information technology (IT) support groups. Applix iHelpdesk helps manage customer problems from initial login through resource allocation, escalation, modification and resolution. With powerful features that streamline call management, problem diagnostics, caller profile management and even caller training, Applix iHelpdesk provides the tools to be responsive to customer and internal staff request. iHelpDesk features include automated load balancing and on-demand graphic and text-based reporting, combined with integration to industry-leading network management and asset management products. Like Applix iService, Applix iHelpDesk enables an organization to collect problems and access solutions, and it also provides feedback on product performance, function and features directly to an organization’s product development and quality assurance departments.

     The Applix iCRM approach provides the following benefits:

• Integration of complex dependencies: All Applix iCRM applications share a common data source, which ensures the consistency and integrity of a company’s data across all work groups. The interconnectedness of multiple departments is further facilitated by Applix iCRM’s rich library of configurable business rules that easily accommodate the way people want to share data and communicate with one another throughout all corners of an extended enterprise.

• Rapid adaptation: The Developer’s Studio provides a self-sufficient, intuitive environment for building, adapting and viewing all aspects of an iCRM implementation. Customers can accommodate all of their unique business processes without resorting to external, disconnected programming efforts.

• Rapid deployment: Applix iCRM’s rapid customization translates to rapid deployment. Further, its thin-client architecture allows thousands of users to run Applix iCRM applications on their Web browsers without ever installing any software on their desktop machines, thereby minimizing installation and maintenance chores throughout an enterprise.

• Low total cost of ownership (TCO): All of the above benefits, combined with the scalability of Web-based applications, provide an impressively low total cost of ownership.

Technology Platforms

     All of Applix’s software solutions are based on the Applix iEnterprise and Applix iTM1 technology platforms.

     Applix products owe their adaptability to the robust Applix technology platforms that power them. The platforms provide a multi-tier, highly scalable architecture featuring an XML-compliant “Developer’s Studio” development environment, a central data schema, a wizard-driven business rule generator, and other tools that drive application development.

     Applix iTM1 solutions utilize the Applix iTM1 OLAP technology, which includes 64-bit technology to analyze some of the biggest volumes of multi-dimensional data in the industry. Applix iTM1 provides a multi-tier, highly scalable engine whose efficient, in-memory methods for building multidimensional cubes and calculating their values, are fully leveraged by Applix iTM1 software solutions. Its flexible, scalable products – designed to adapt to companies’ unique and competitive business processes – provide analysis, planning, measurement and response to changing customer requirements and business dynamics, all in real time.

     By integrating Applix iCRM solutions with a solid, full-featured technology platform, Applix is able to provide straightforward methods for adapting its software to customers’ needs, rather than forcing customers to compromise their business processes by adapting to the software.

Marketing And Sales

     The Company focuses its Applix Integra, Applix iTM1, and Applix iCRM marketing efforts on Global-2000 companies committed to customer service and enhancing customer relations. The Company has focused its marketing efforts for its Applix iCRM products on the following four industry sectors: financial services, telecommunications, healthcare, and retail banking. For Applix iTM1, the Company markets to enterprises seeking applications in budgeting, forecasting, and operational planning. The Company feels that these industry sectors are, and will continue to be, some of the fastest growing sectors for its products. A key part of the Company’s marketing strategy is an emphasis on its single-sourced solution, its internet-architected product capabilities, its rapid deployment and lower total cost of ownership for customers.

     The Company strongly believes that its hybrid sales and marketing strategy, utilizing both a direct sales force and strategic resellers, is an important part of the Company’s future success. The Company plans on continuing to establish strategic marketing relationships with leading hardware and software vendors and systems integrators within targeted industry sectors. This is expected to support the Company in penetrating both new accounts within its existing markets and also entirely new market segments.

     Applix’s Integra, Applix iTM1, and Applix iCRM solutions are sold through a direct sales force and a network of value added resellers (VARs) and original equipment manufacturers (OEMs). The Company’s sales teams operate out of the Company’s offices in major metropolitan cities in the U.S. as well as its offices in the United Kingdom, Germany, Canada, The Netherlands, Japan, Singapore and Australia. These direct selling efforts are supplemented both domestically and abroad with support from strategic marketing partners. While the sales cycle for Applix products varies substantially from customer to customer, it traditionally requires three to six months.

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Customer Training, Support, and Consulting Services

     The Company believes that its superior consulting services and customer support are a critical part of the Company’s sales and marketing efforts. Many of the Company’s customers use the Company’s products to develop and support “mission critical” applications, and the Company therefore recognizes that quality training, support and consulting services are especially important to its customers.

     The Company’s in-house consultants assist in the sales process by working directly with potential customers, educating them as to the benefits of the Company’s products. In support of customers’ rapid implementation success, the Company utilizes a structured implementation methodology called “Rapid Results”. This program ensures that CRM and analytics implementations are completed on time, on budget, and meet business requirements by following four highly defined steps. In addition, the Company’s consultants work directly with customer personnel in both information technology departments and in the functional areas relevant to the application, to assist them in the planning and deploying of Applix solutions.

     Customers may elect to purchase a maintenance support plan for an annual fee that is generally 18% of the license fee for covered products. Included in the maintenance support plans are product upgrades and interim fixes to reported problems. Maintenance support plan revenues accounted for approximately 59% of the Company’s professional services and maintenance revenue from continuing operations in 2001, compared to approximately 49% of professional services and maintenance revenue from continuing operations in 2000.

Product Development

     The Company believes strongly that the path to success is predicated upon constantly being at the forefront of technology and product innovation. With a strong commitment to the future, Applix has continued its long history of investing in product research and development. In 2001, Applix invested approximately $7.7 million, or 19% of total revenues, on product research and development (including capitalized software development costs).

     The Company’s product development team includes resources in the United States and Europe.

     With the integration of the Company’s technology platforms, the Applix Integra product development has resulted in a consolidation of resources, resulting in reduced costs while maintaining, or increasing, product development productivity.

Competition

     The Company believes that it competes principally on the basis of product features and functionality (including cross-platform availability, interoperability, integration and extensibility), reliability, ease of use, supportability, and total costs of ownership (initial investment and on-going operating costs of the solution).

     The markets for the Company’s products are highly competitive and subject to rapid change. The CRM market, a very broadly defined market, is in great flux due to mergers and acquisitions that are expected to continue redefining the market as ERP and telephony vendors encroach on this space.

     Software vendors are under increasing pressure to provide solutions that are easy to map to customers’ rapidly evolving business models and that integrate with other solutions. Customers have become more methodical in their methods of evaluating vendors’ solutions, and they often require that vendors substantiate their claims with case studies that demonstrate compelling return on investment benefits.

     In the CRM market, and to a lesser degree in the business intelligence market, many of the Company’s competitors have significantly greater financial, technological, and marketing resources than the Company. No assurance can be given that the Company will be able to compete successfully against current and future competition or that the competitive pressures faced by the Company will not adversely affect its financial performance.

Proprietary Rights

     Applix relies primarily on a combination of copyright law and trade secret law to protect its proprietary technology. The Company has internal policies and systems to ensure limited access to, and the confidential treatment of, its trade secrets. The Company generally distributes its products under “shrink-wrap” software license agreements, which contain various provisions to protect the Company’s ownership and confidentiality of the underlying technology. The Company also requires its employees and other parties with access to confidential information to execute agreements prohibiting the unauthorized use or disclosure of the Company’s technology. Despite these precautions, it may be possible for a third party to misappropriate the Company’s technology or to independently develop similar technology. In addition, effective copyright and trade secret protection may not be available in every foreign country in which the Company’s products are distributed, and “shrink-wrap” licenses, which are not signed by the customer, may be unenforceable in certain jurisdictions.

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     Certain technologies used in or added onto the Company’s products are licensed from third parties. The Company generally pays royalties on such technologies on a percentage of revenue basis (the amount of which is not material to the Company). Applix believes that if the license for any such third-party technology were terminated, it would be able to develop such technology internally or license equivalent technology from another vendor without significant expense. If the Company’s right to distribute such third-party products were terminated, sales of the Company’s products could be adversely affected.

     The Company believes that, due to the rapid pace of technological innovation for software applications, the Company’s ability to establish and maintain a position of technology leadership in the industry is dependent more upon the skills of its development personnel than upon the legal protections afforded its existing technology.

     Applix is not engaged in any material disputes with other parties with respect to the ownership or use of the Company’s proprietary technology. However, there can be no assurance that other parties will not assert technology infringement claims or other claims against the Company in the future. The litigation of such a claim may involve significant expense and management time. In addition, if any such claims were successful, the Company could be required to pay monetary damages and may also be required to either refrain from distributing the infringing product or obtain a license from the party asserting the claim (which license may not be available on commercially reasonable terms).

Employees

     As of December 31, 2001, the Company had 243 total employees. Domestically, the Company had 44 employees in product research and development, 53 employees in sales and marketing, 14 employees in professional services, 8 employees in information systems, and 19 employees in finance, administration and facilities. Internationally, the Company had 105 employees, which includes 62 employees in sales and marketing, 36 employees in professional services, 3 employees in information systems, and 4 employees in finance, administration and facilities. None of the Company’s employees are represented by a labor union, and the Company believes that its employee relations are good.

Item 2.   Properties

     The Company moved into new headquarters (49,920 square feet) in November 2001, located at 289 Turnpike Road in Westboro, Massachusetts. The lease has an original twelve-year term, which will expire in November 2013, with one 5-year option to extend the term. The Company’s lease for 112-114 Turnpike Road Westborough, Massachusetts expired on December 31, 2001. The Company also leases smaller facilities in several metropolitan areas within the United States and the United Kingdom, Germany, Canada, Singapore, Japan, The Netherlands and Australia. The Company believes that its existing facilities are adequate for its current needs and that suitable additional or substitute space will be available as needed.

Item 3.   Legal Proceedings

     The Company is not party to any legal proceedings material to the Company’s business.

Item 4.   Submission of Matters to a Vote of Security Holders

     Not applicable.

Executive Officers of the Registrant

     The following table sets forth the names, ages and positions of all executive officers of the Company.

Name	Age		Position
Alan Goldsworthy		53	President and Chief Executive Officer
Walt Hilger		36	Chief Financial Officer and Treasurer
Craig Cervo		54	Chief Technology Officer

     Mr. Goldsworthy was elected President, Chief Executive Officer and a director of Applix in April 2000. Mr. Goldsworthy joined Applix in January 2000 and was elected President, eBusiness Division on January 21, 2000. Prior to joining the Company, he served as Executive Vice President and then Chief Executive Officer of CMI-Competitive Solutions, Inc. (“CSI”), a provider of enterprise resource planning (ERP) solutions, from September 1996 to December 1999. Prior to CSI, Mr. Goldsworthy worked from 1981 to 1996 at Digital Equipment Corporation, holding various sales, marketing, and operational management positions.

     Mr. Hilger was elected as Chief Financial Officer and Treasurer on September 25, 2001. Mr. Hilger joined the Company in November 1999 as the Vice President of Operations and Planning. From 1997 to 1999, Mr. Hilger was Vice President of Corporate Finance for Cahners Business Information, a billion dollar business-to-business web content company. From 1988 to 1997, he worked at Houghton-Mifflin Company, where he served as Corporate Manager of Financial Planning and Analysis and later as Divisional Business Manager.

     Mr. Cervo joined the Company in October 1992 as Vice President, Research & Development and was elected Vice President of Product Development in October of 1994 and Chief Technology Officer in March 2001.

     There are no family relationships among any of the executive officers.

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PART II

Item 5.   Market for Registrant’s Common Stock and Related Stockholder Matters

     The Company’s Common Stock is listed on the Nasdaq National Market (“Nasdaq”) under the symbol “APLX”. The table below sets forth the Nasdaq high and low sale price of its common stock during the two most recent fiscal years.

	Fiscal 2001				Fiscal 2000
Period	High		Low		High		Low
First Quarter	$	6.000	$	2.130	$	21.000	$	10.875
Second Quarter	$	2.880	$	1.590	$	12.000	$	5.500
Third Quarter	$	1.990	$	0.640	$	8.125	$	2.880
Fourth Quarter	$	2.000	$	0.430	$	4.500	$	1.630

     The Company has never paid any cash dividends on its common stock. The Company currently intends to retain any earnings for future growth and therefore does not anticipate paying any cash dividends on its common stock in the foreseeable future.

     The approximately number of holder of record of the Company’s common stock on March 19, 2002 was 194. This number does not include shareholders for whom shares are held in a “nominee” or “street” name.

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Item 6.   Selected Financial Data

		2001			2000			1999			1998			1997
For the years ended December 31,
(In thousands, except per share data)
Statement of Operations Data
	Total revenues	$	40,303		$	40,239		$	36,871		$	29,062		$	22,036
	Restructuring and other charges		1,700			—			—			—			—
	Amortization of goodwill and acquired intangible assets		374			127			—			—			—
	Operating loss		(9,541	)		(12,877	)		(7,624	)		(10,901	)		(7,158	)
	Permanent impairment of cost based investment		1,250			—			—			—			—
	Net loss from continuing operations		(10,975	)		(15,307	)		(4,251	)		(6,259	)		(5,423	)
	Net income (loss)		(9,894	)		(18,912	)		2,380			1,187			(404	)
Per Share Data
	Basic and diluted loss per share from continuing operation	$	(0.93	)	$	(1.36	)	$	(0.40	)	$	(0.61	)	$	(0.54	)
	Basic and diluted income (loss) per share	$	(0.83	)	$	(1.68	)	$	0.22		$	0.12		$	(0.04	)

		2001		2000(a)		1999		1998		1997
AS of December 31,
(In thousands, except per share data)
Balance Sheet Data
	Cash, cash equivalents and short-term investments	$	8,228	$	12,546	$	25,476	$	21,445	$	21,368
	Restricted cash		1,050		—		—		—		—
	Working capital		2,254		12,113		28,455		24,866		22,632
	Total assets		24,938		33,074		54,681		45,613		44,365
	Long-term debt		—		—		1,080		—		—
	Total stockholders’ equity		9,381		18,234		35,713		29,575		27,987

(a) The balance sheet for December 31, 2000 reflects the net liabilities of the VistaSource business unit within current liabilities.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

     OVERVIEW

     The Company was incorporated in 1983 to develop and market software applications for the Unix workstation market. In October 1995, the Company acquired Target Systems Corporation, which developed and marketed customer interaction software. In October 1996, the Company acquired Sinper Corporation, doing business under the name TM1, which developed and marketed software used for on-line analytical processing (OLAP). These two acquisitions enabled Applix to expand its product offerings to include customer analytics and business planning. Applix focuses on customer analytics and business planning through Applix iCRM, the Company’s solution in the customer relationship management (CRM) market and Applix iTM1, the Company’s real time multi-dimensional analysis software for business planning solutions.

     The Company acquired Veriteam, Inc., doing business as CoSource.com, in December 1999 to expand into the Linux market with an Internet accessible, collaborative open source software development web site. In April 2000, the Company announced the establishment of VistaSource, Inc. to focus on the emerging Linux and open source markets. VistaSource, Inc. was established with the assets of the Company’s Applixware product suite and CoSource.com.

     In December 2000, the board of directors decided to dispose of VistaSource. As a result of this decision, VistaSource was classified as a discontinued operation as of December 31, 2000, and the Company recorded an estimated loss of $3,605,000 which included approximately $367,000 in losses from operations for the period from January 1, 2000 through the measurement date of December 17, 2000, $2,200,000 relating to the removal of the net assets of the VistaSource business, $1,100,000 in estimated losses from operations from the measurement date through the estimated date of disposal and $1,300,000 in provisions for employee severance and benefits, transaction costs, bank fees and other contractual commitments. These losses were partially offset by proceeds of $1,300,000 received from the acquirer on March 31, 2001.

     On March 30, 2001 the Company completed the sale of the VistaSource business and received the purchase price of $1,300,000. For the twelve months ended December 31, 2001, the Company recognized a gain of $1,081,000 for discontinued operations due to a favorable liquidation of the net assets and liabilities of the VistaSource business compared to previous estimates. The reserve balance for the estimated costs associated with the disposition as of December 31, 2001 was $182,000, consisting primarily of severance costs.

10

     On March 30, 2001, the Company acquired Dynamic Decisions Pty Limited of Australia in an effort to expand its customer analytics and business planning software presence in Southeast Asia. Applix is building upon Dynamic Decisions’ strong customer base and ability to offer high quality customer analytics and business planning software and support services to the Company’s customers. The total cost of the acquisition was approximately $5,867,000, consisting of up to $5,640,000 in consideration payable in cash and 100,000 shares of the Company’s common stock. The acquisition was accounted for under the purchase method of accounting, and the purchase price was allocated based on the estimated fair value of the assets acquired and liabilities assumed. An intangible asset, acquired customer base, of $1,500,000 was recorded based on its fair value. The excess of the purchase price over the fair value of the net assets acquired at the time of acquisition of $934,000 has been recorded as goodwill and has been amortized on a straight-line basis over its estimated useful life of six years.

     Of the cash portion of the purchase price, $5,150,000 is payable in installments over a maximum of 30 months beginning on July 1, 2001. As of December 31, 2001, the Company had paid $1,267,000 of the maximum cash consideration, which has been accounted for as purchase price. The remaining amount of $3,883,000 is contingent upon continued employment of two key executives of Dynamic Decisions, and will be accounted for as compensation expense.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and assumptions on expected or known trends or events, historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     Management believes the following critical accounting policies, among others, involve the more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

     The Company recognizes revenue in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition” (SOP 97-2), and SOP 98-9, “Software Revenue Recognition with Respect to Certain Transactions”. SOP 97-2 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists via a valid executed customer order and/or signed license agreement; (2) physical or electronic delivery has occurred including availability of license keys or services rendered; (3) the fee is fixed or determinable representing amounts that are due unconditionally with no future obligations under customary payment terms; and (4) collectibility is probable. In the event that the Company is unable to meet any one or all of the above criteria on a timely basis, revenue recognized for any reporting period could be adversely affected.

Account Receivable and Bad Debt

     The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company continuously monitors collections and payments from its customers and determines the allowance for doubtful accounts based upon historical experience and specific customer collection issues. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company generally invoices the customer in the same local currency as to be paid by the customer. The Company does not hedge its foreign customer receivables due to the relatively small exposure from foreign currency rate fluctuations.

Capitalized Software Development Costs

     The Company’s policy for capitalized software development costs is to capitalize eligible research, design, and development costs relating to its software products incurred between the time that the product’s technological feasibility is established and the general release of the product to customers. This policy requires management to use professional judgment in determining what development costs are eligible and at what point technological feasibility has been reached. Capitalized software development costs are amortized as a cost of software license revenue over the estimated product life, and development costs not capitalized under the policy are classified as a development expense in the same period as incurred. If management determines that the recoverability of these unamortized capitalized software costs is not probable, these costs may require adjustment to their net realizable value, which could affect the results of the reporting period.

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Accounting For Cost Based Investments

     The Company has two cost based investments, which had a zero value at December 31, 2001. In assessing potential impairment for cost based investments, the Company considers various factors including but not limited to investees’ financial performance, anticipated funding needs, comparable companies’ performance, and volatility inherent in the external market for these investments. If these factors are not supportive of the carrying value of the investment, the Company may record impairment charges not previously recognized to reflect management’s best estimate of recoverability. With the divestment of its VistaSource business unit, the Company retained a cost based investment in Real-Time International, Inc. that was deemed to have no value at the date of the transaction. The Company also has a cost based investment in TurboLinux, Inc., which was determined to be impaired, resulting in recognition of a $1,250,000 impairment loss in 2001.

Goodwill and Other Intangible Assets and Related Impairment

     During 2001, the Company completed its acquisition of Dynamic Decisions and recorded goodwill in the amount of $934,000 associated with the excess purchase price over the fair value of the net assets acquired and identifiable intangible assets of $1,500,000 assigned to identified customer relationships. The amounts assigned to the identifiable assets and liabilities acquired in connection with the acquisition were based on estimated fair values at the date of acquisition. The fair values were determined by the Company’s management, based in part upon information supplied by the management of the acquired business and a valuation prepared by an independent appraiser. The valuation of identified customer relationships has been based primarily upon future cash flow projections discounted to present value using a risk-adjusted discount rate.

     In assessing the recoverability of the Company’s goodwill and other intangible assets, the Company must make assumptions regarding estimated future cash flows and other factors including legal factors, market conditions and operational performance of its acquired businesses to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded. In addition, the estimated lives of goodwill and other intangible assets are based on current facts. If events change, and the Company has overestimated the economic life of these assets, the Company will begin to amortize the remaining unamortized carrying value of these assets over the newly estimated life, which may result in additional amortization expense.

     Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” and is now required to analyze its goodwill for impairment during the first six months of fiscal 2002, and subsequently on an annual basis thereafter, unless facts or circumstances arise earlier which indicate impairment. Any resulting impairment loss could have a material adverse impact on financial condition and results of operations. During the year ended December 31, 2001, the Company did not record any impairment losses related to goodwill and other intangible assets.

Restructuring

     During 2001, the Company recorded significant charges in connection with its restructuring programs. These charges include estimates pertaining to employee separation costs and the settlements of contractual obligations resulting from the Company’s actions. Although the Company does not anticipate significant changes, the actual costs may differ from these estimates, which would result in adjustments to the original estimates.

Deferred Taxes

     The Company accounts for income taxes in accordance with Statement of Accounting Standards No. 109 (FAS 109), “Accounting for Income Taxes” which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. FAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company evaluates quarterly the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. At December 31, 2001 and 2000, the Company’s deferred tax asset was fully reserved. In the event the Company were to determine in the future that it would be able to realize its deferred tax assets in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made.

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RESULTS OF OPERATIONS

     The following table sets forth certain items from the Company’s consolidated statements of operations as a percentage of net revenue for the period from continuing operations:

			For The Years Ended December 31,
			2001			2000			1999
Software license revenue				47.9	%		59.0	%		58.6	%
Professional service and maintenance revenue				52.1	%		41.0	%		41.4	%
		Total revenue		100.0	%		100.0	%		100.0	%
Cost of software license revenue				5.8	%		4.9	%		3.9	%
Cost of professional services and maintenance revenue				31.1	%		34.2	%		31.3	%
	Gross margin			63.1	%		60.9	%		64.8	%
Operating expenses
	Selling and marketing			53.8	%		63.6	%		54.1	%
	Research and development			17.0	%		18.6	%		19.2	%
	General and administrative			11.8	%		10.7	%		12.2	%
	Restructuring and other charges			4.2	%		—			—
	Total operating expenses			86.8	%		92.9	%		85.5	%
	Operating loss			(23.7	%)		(32.0	%)		(20.7	%)
Loss on impaired investment				(3.1	%)		—			—
Interest income, net				0.9	%		2.9	%		2.8	%
(Provision for) benefit from income taxes				(1.4	%)		(8.9	%)		6.4	%
Net loss from continuing operations				(27.2	%)		(38.0	%)		(11.5	%)

Year Ended December 31, 2001 compared to Year Ended December 31, 2000

     Total revenue from continuing operations increased to $40,303,000 in 2001 from $40,239,000 in 2000. Software license revenue in 2001 of $19,304,000 was approximately 19% lower than 2000 at $23,735,000 and represented 48% of revenue from continuing operations for 2001 and 59% of revenue from continuing operations for 2000. Domestic software license revenue from continuing operations decreased 20% to $8,789,000 in 2001 from $11,011,000 in 2000. International software license revenue from continuing operations decreased 17% to $10,515,000 in 2001 from $12,724,000 in 2000. The decreases were primarily due to the decline in the global economy and the continued slowdown in information technology spending. The Company expects software license revenue to increase as a percent of total revenue in the future primarily due to an expected increase in software license revenues through new channel partners. The Company’s three largest customers (including resellers) comprised a total of 11% of total software license revenue from continuing operations during 2001 and 9% of total software license revenue from continuing operations in 2000.

     Professional services and maintenance revenue from continuing operations increased 27% to $20,999,000 in 2001 from $16,504,000 in 2000 and represented 52% and 41% of total revenue from continuing operations for 2001 and 2000, respectively. Domestic professional services and maintenance revenue from continuing operations increased 14% to $7,199,000 in 2001 from $6,304,000 in 2000. International professional services and maintenance revenue increased 35% to $13,800,000 as compared to $10,200,000 in 2000. The increase was primarily due to increased maintenance revenue as a result of the improved renewal rates for maintenance from existing customers. The Company expects the maintenance revenue as a component of total professional service and maintenance revenue to continue to increase due to continuing improvement in maintenance renewals from existing customers. The Company expects professional service revenue to decrease as percentage of total professional services and maintenance revenue due to the Company’s increasing reliance on external consultants. The Company expects the maintenance revenue to increase as a percentage of professional services and maintenance revenue due to further increases in maintenance revenues and the decrease in consulting revenue. Maintenance revenues increased $4,340,000 to $12,387,000 in 2001 from $8,047,000 in 2000. Maintenance revenue continues to grow as a higher percentage of existing customers are choosing to extend maintenance support contracts. The Company expects overall professional services and maintenance revenue from continuing operations to decrease as a percent of total revenue as a result of the expected decrease in professional service revenues.

13

     Gross margin from continuing operations increased to 63% in 2001 from 61% in 2000. Software license revenue gross margin from continuing operations decreased to 88% in 2001 from 92% in 2000. Professional services and maintenance revenue gross margin from continuing operations increased to 40% in 2001 from 17% in 2000, due to a change in revenue mix from lower margin consulting revenues to higher margin maintenance revenues.

     Selling and marketing expenses from continuing operations, which include domestic sales and marketing expenses and the cost of the Company’s international operations, decreased 15% to $21,671,000 in 2001 from $25,580,000 in 2000. Selling and marketing expenses from continuing operations decreased as a percentage of total revenue to 54% in 2001 from 64% in 2000. Decreases in selling and marketing expenses are related primarily to completion of the corporate rebranding and remarketing effort that was initiated in 2000. The decrease also reflects the declining staffing levels associated with corporate restructuring initiatives including reduction in headcount during 2001.

     Product research and development expenses from continuing operations, which consist primarily of employee salaries, benefits and related expenses, decreased 9% to $6,848,000 in 2001 from $7,502,000 in 2000. The Company’s investment in product research and development represented 17% and 19% of total revenue from continuing operations for 2001 and 2000, respectively. The Company's product research and development costs decreased slightly due to productivity gains recognized during 2001. The development costs reflect continued investments in features and functionality for the core Applix iTM1 and Applix iCRM products and the development of the product platform supporting Applix Integra.

     General and administrative expenses from continuing operations, which include the costs of the Company’s finance, human resources, and administrative functions increased 11% to $4,754,000 in 2001 from $4,292,000 in 2000. A decrease in staff costs as a result of restructuring actions was more than offset by an increase in the amortization expense from acquisition activity. General and administrative expenses from continuing operations increased as a percentage of total revenue to 12% in 2001 from 11% in 2000. The Company expects that the general and administrative costs as a percent of revenue will decrease in the future as the full benefit from the Company’s restructuring initiatives are fully realized.

     The Company initiated three restructuring actions in 2001 involving strategic decisions and continues to re-evaluate the current state of on-going businesses. Restructuring charges consisted primarily of contract terminations, severance charges and equipment charges incurred as a result of the cessation of operations of a subsidiary and actions taken at the corporate level and several remaining subsidiaries to increase operational efficiencies improve margins and further reduce expenses.

     In the second quarter of 2001, the Company adopted a plan of restructuring aimed at reducing current operating costs company-wide. In connection with this plan, 28 non-management employees; primarily sales, marketing, and administrative personnel, and 2 executive level employees were terminated. The Company’s restructuring plan also included the closure of the Company’s sales office in France. As a result of the restructuring plan, the Company recorded a restructuring charge of $512,000 for the three months ended June 30, 2001. The restructuring charge consisted of $449,000 for severance costs and $63,000 for the loss on disposal of the Company’s French subsidiary, which was sold on June 30, 2001. In connection with the sale, the Company paid $100,000 to the purchaser to account for the assumed liabilities, which is included in the restructuring charge. At December 31, 2001, $12,000 remained accrued for severance cost. As a result of these plans, the Company expects to save $4,000,000 on an annual basis.

     In the third quarter of 2001, the Company adopted a plan of restructuring to further reduce current operating costs company-wide through headcount reductions. In connection with this plan, the Company recorded an additional restructuring charge of $438,000 for severance related to the termination of 26 non-management employees, primarily sales, marketing, and administrative personnel. Subsequent to the initial recording of the charge, adjustments totaling $90,000 were recorded, reducing the charge to $348,000. At December 31, 2001, $58,000 remained accrued for severance costs. As a result of the plan, the Company expects to save $1,000,000 on an annual basis.

     In the fourth quarter of 2001, the Company adopted a plan of restructuring to further reduce current operating costs company-wide. The plan included the further reduction of headcount of one senior level executive and 16 non-management employees, primarily professional services, sales, and administrative personnel. The plan also included the closure of several domestic offices and the consolidation of space within one European office, and the abandonment of leasehold improvements and support assets associated with these locations, which were removed from service shortly after the implementation of the plan. As a result of the restructuring plan, the Company recorded a charge of $840,000, consisting of $363,000 for severance, $385,000 for office closures and contractual obligations and $92,000 for the write-off of impaired assets. At December 31, 2001, $696,000 remained accrued for severance and other costs. As a result of this plan, the Company expects to save $1,100,000 on an annual basis.

14

     In December 2001, the Company determined that its cost-based investment in TurboLinux, Inc. of $1,250,000 was impaired. This assessment was based on the Company’s review of operating results for TurboLinux and the Company’s anticipated future cash flows from its investment. Accordingly, the investment was written down to its estimated net realizable value of zero.

     The operating loss, before restructuring costs of $1,700,000 in 2001 and $0 in 2000 and amortization of $374,000 in 2001 and $127,000 in 2000, improved 41% to a loss of $7,467,000 in 2001 as compared to an operating loss of $12,750,000 in 2000. Benefits from the restructuring actions resulted in lower operating expenses and led to a quarterly decline in operating losses. In the fourth quarter, the Company reported an operating profit of $136,000 excluding the restructuring charges and acquisition related amortization expense.

     Net interest income from continuing operations decreased to $376,000 in 2001 from $1,153,000 in 2000 due to lower interest rates earned on investments and a decrease in the Company’s average cash position.

     As a result of net operating losses incurred in 2001 and 2000 and after evaluating the Company’s anticipated performance over its normal planning horizon, the Company has provided a full valuation allowance for its net operating loss carryforwards and other net deferred tax assets for federal and state tax purposes as of December 31, 2001. The provision in 2000 includes $7,832,000 relating to the establishment of a valuation allowance against the deferred tax asset that was established following the decision to dispose of VistaSource and based on the Company’s historical operating losses from continuing operations. The valuation allowance was established during the fourth quarter of 2000 and reflects the reversal of the income tax benefits recognized in the first three quarters of 2000 as well as the deferred tax asset at December 31, 1999. Additionally, the Company generates taxable income in many of the foreign jurisdictions in which it transacts business. Accordingly, the Company has a recorded a tax provision of $558,000 for the year ended December 31, 2001, for state and foreign income tax liabilities, as compared to a provision of $3,583,000 for the year ended December 31, 2000, which included $582,000 for state and foreign income taxes.

     Net loss from continuing operations was $10,975,000 in 2001 compared to $15,307,000 in 2000. The decrease in net loss was attributed to declining operating expenses, lower provisions for income taxes and improved gross margin profitability. The decreases in selling and marketing operating costs ($3,909,000) were offset by restructuring charges and a loss from impaired investment ($2,950,000).

Year Ended December 31, 2000 compared to Year Ended December 31, 1999

     Total revenue from continuing operations increased to $40,239,000 in 2000 from $36,871,000 in 1999. Software license revenue in 2000 of $23,735,000 was approximately 10% higher than 1999 at $21,610,000 and represented 59% of revenue from continuing operation for both years. Domestic software license revenue from continuing operations increased 28% to $11,011,000 from $8,621,000 in 1999. International software license revenue from continuing operations decreased 2% to $12,724,000 in 2000 from $12,989,000 in 1999. The Company’s three largest customers (including resellers) comprised a total of 9% of total software license revenue from continuing operations during 2000 and 7% of total software license revenue from continuing operations in 1999.

     Professional services and maintenance revenue from continuing operations increased 8% to $16,504,000 in 2000 from $15,261,000 in 1999 and represented 41% of total revenue from continuing operations for both years.

     Gross margin from continuing operations decreased to 61% in 2000 from 65% in 1999. Software license revenue gross margin from continuing operations decreased to 92% in 2000 from 93% in 1999. Professional services and maintenance revenue gross margin from continuing operations decreased to 17% in 2000 from 25% in 1999, due to an increase in the number of support and consulting personnel and lower utilization of consulting resources in 2000 versus 1999.

     Selling and marketing expenses from continuing operations increased 28% to $25,580,000 in 2000 from $19,957,000 in 1999. Selling and marketing expenses from continuing operations increased as a percentage of total revenue to 64% from 54% in 1999. The Company invested an incremental $ 5 - $ 5.5 million in sales and marketing initiatives in 2000 to reposition and rebrand the iCRM and iTM1 solutions and expand its sales organization. The additional expenditures related primarily to these increased staffing levels associated with hiring additional sales representatives and additional spending for marketing programs.

     Research and development expenses from continuing operations increased 6% to $7,502,000 in 2000 from $7,101,000 in 1999, representing 19% of total revenue from continuing operations for both years. The increase in research and development costs was primarily due to adding thin client and distinct features and functionality to the iCRM and iTM1 solutions.

15

     General and administrative expenses from continuing operations decreased 4% to $4,292,000 in 2000 from $4,485,000 in 1999, and decreased slightly as a percentage of total revenue to 11% in 2000 from 12% in 1999. The general and administrative expenses from continuing operations include corporate overhead costs, which supported continuing and discontinued operations.

     Net interest income from continuing operations increased to $1,153,000 in 2000 from $1,031,000 in 1999 due to slightly higher interest rates.

     The Company recorded a provision for income taxes of $3.6 million in 2000. This provision included $7,832,000 relating to the establishment of a valuation allowance against the deferred tax asset that was established following the decision to dispose of VistaSource and based on the Company’s historical operating losses from continuing operations. The valuation allowance was established during the fourth quarter of 2000 and reflects the reversal of the income tax benefits recognized in the first three quarters of 2000 as well as the deferred tax asset at December 31, 1999. The Company also recorded a provision for income taxes of $566,000 in 2000 in connection with taxable income in its foreign subsidiaries.

     Net loss from continuing operations was $15,307,000 compared to $4,251,000 in 1999. The increase in net loss was primarily attributed to increased sales and marketing costs of $5.6 million and the establishment of a valuation allowance on the Company’s deferred tax asset of $7.8 million. The increase in sales and marketing costs was attributed to the Company’s previous announced plans to reposition its customer analytics and business planning software business which resulted in incremental spending of $5.0 — $5.5 million.

     The net loss from discontinued operation was $367,000 compared to the net income from discontinued operation of $6,631,000 in 1999. The reduced net income from discontinued operation was attributed to lower revenue from the VistaSource business unit of $9 million and increased operating expenses associated with the repositioning of VistaSource, Inc.

     The loss on the disposal of VistaSource was $3.2 million attributed to estimate expenses of $2.4 million to operate the business through its disposition in the end of March 2001, $2.2 million relating to the removal of the net assets of VistaSource, offset by $1.3 million in the expected proceeds from the distribution.

Liquidity and Capital Resources

     The Consolidated Statements of Cash Flows for fiscal years 2000 and 1999 include the cash flows from the VistaSource segment on a fully consolidated basis and have not been restated to reflect discontinued operations. The Consolidated Statement of Cash Flows for the fiscal year 2001 includes the cash flows from the VistaSource segment as discontinued operations.

     As of December 31, 2001, the Company had cash and cash equivalents of $9,278,000, which included restricted cash of $1,050,000 that represents the security deposit for the headquarter office lease, as compared to $12,546,000 as of December 31, 2000. Cash used in the Company’s operations was $3,586,000 for the year ended December 31, 2001 compared to $8,972,000 for the year ended December 31, 2000. The net loss of $9,894,000 for 2001 was partially offset by the decrease in operating assets and liabilities of $3,472,000, which was primarily due to an increase of accounts receivable collections of $4,635,000, and an increase in deferred revenue bookings of $1,491,000.

     Cash used in investing activities totaled $2,233,000 for the year ended December 31, 2001 compared to cash provided by investing activities of $10,697,000 for the year ended December 31, 2000. The decrease in cash provided by investing activities primarily resulted from the Company’s reduced short-term investment activities in 2001 compared to 2000. This was partially offset by the proceeds received from the sale of the discontinued operation of $1,300,000, net cash payments in connection with the acquisition of Dynamic Decisions of $1,733,000, net purchase of capital equipment of $856,000, capitalized software development costs of $844,000, and a payment of $100,000 in connection with the sale of the Company’s French subsidiary.

     Cash provided from financing activities totaled $1,466,000 for the year ended December 31, 2001, which consisted of proceeds received from the exercise of incentive stock options and the Company’s employee stock purchase plan of $737,000, and net proceeds from factoring of receivables to a certain bank of $729,000. This compares to total cash provided by financing activities of $524,000 for 2000.

     In connection with the Company's acquisition of Dynamic Decisions, the Company expects to pay out additional contingent consideration of $3,883,000 in eight quarterly installments between January 1, 2002 and January 1, 2004.

16

     In connection with the office lease agreement for the Company’s new corporate headquarters, the Company established a $1,050,000 irrevocable standby letter of credit on August 1, 2001. The letter of credit has been fully collateralized by a restricted cash balance of $1,050,000 as required by the issuing bank. The amount of the letter of credit and restricted cash will be reduced over the term of the lease from December 1, 2002 to December 1, 2006, provided the Company has not defaulted on the office lease agreement. The Company anticipates that it will partially utilize the credit facilities described below to obtain a new, replacement letter of credit, which will not require cash collateral. The irrevocable standby letter of credit and underlying security deposit (restricted cash) requirement of $1,050,000 will be reduced starting the first day of the second lease year as follows:

	Reduction Amount
Second lease year (December 1, 2002)	$	116,667
Third lease year (December 1, 2003)	$	116,667
Fourth lease year (December 1, 2004)	$	175,001
Fifth lease year (December 1, 2005)	$	233,330
Sixth lease year (December 1, 2006)	$	283,335

     At the end of the sixth year, the Company can reduce the letter of credit to $125,000 or substitute $125,000 in cash in lieu of the Letter of Credit.

     The Company has no commitments or specific plans for any significant capital expenditures in the next twelve months.

     The Company has secured two revolving credit facilities, providing for loans and other financial accommodations, with a bank totaling approximately $5.0 million. The first facility has an interest rate of prime plus 1.25% and is in the aggregate principal amount of up to the lesser of (i) $2.5 million and (ii) an amount based upon a percentage the Company’s qualifying domestic accounts receivable. The second facility has an interest rate of prime plus 1.00% and is in the aggregate principal amount of up to the lesser of (i) $2.5 million and (ii) an amount based upon a percentage of the Company’s qualifying foreign accounts receivable. This second facility is guaranteed by the Export-Import Bank of the United States (“EXIM Bank”) and includes certain additional obligations of the Company in favor of EXIM Bank. The obligations of the Company to SVB are guaranteed by certain of the Company’s subsidiaries and are secured by substantially all of the assets of the Company and such subsidiaries. Because the Company has not yet satisfied certain conditions precedent, covenants, and other requirements, the Company currently has no availability to borrow or receive other financial accommodations under either of the credit facilities. The facilities expire on December 5, 2002. At the time the credit facility becomes available, a default in the bank covenants could adversely affect the Company’s ability to access its existing credit facilities or obtain access to new credit facilities in the future and could increase the cost of such facilities.

     The Company has a non-recourse accounts receivable purchase arrangement with a bank, pursuant to which the Company and the bank may agree from time to time for the Company to sell qualifying accounts receivable to the bank, in an aggregate amount of up to $2 million outstanding, at a purchase price equal to the balance of the accounts less a discount rate and a fee. On or about December 31, 2001, the Company factored certain accounts receivable to the bank pursuant to the purchase arrangement in the amount of $729,000.

     In accordance with generally accepted accounting principles (GAAP), the Company recognized a sale for those accounts receivable balances for which there was not a future obligation to the customer in the amount of $361,000. The Company has concluded that these accounts have been legally isolated, and accordingly, these amounts have been removed from the Company’s accounts receivable balance at December 31, 2001. The loss from the sale of the financial assets and retained interest for cash collection were not material to the Company’s results of operations or financial position. The remainder of $368,000 did not reduce the accounts receivable balance, and has been recorded as a financing transaction and recognized as a liability at December 31, 2001. This amount is expected to be repaid by the Company to the bank during 2002. The sale of the receivables had an immaterial impact on the Company’s days sales outstanding (DSO) by reducing approximately 3 days from approximately 73 to 70 days.

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     The following summarizes the expected effect of the Company’s contractual obligations (future minimum operating lease payments of its office facilities and certain equipment) on the Company’s liquidity and cash flow in the future periods:

	Operating
	Leases
2002	$	2,550,000
2003		2,407,000
2004		2,139,000
2005		2,014,000
2006		1,796,000
2007 and thereafter		11,674,000
Total minimum lease payments	$	22,580,000

     The Company has incurred losses from continuing operations for the last several years. As of December 31, 2001, the Company had an accumulated deficit of $37.2 million. Operating losses and negative cash flows may continue because of costs and expenses relating to brand development, marketing and other promotional activities, continued development of the Company's information technology infrastructure, expansion of product offerings and development of relationships with other businesses. Management's plans include increasing revenue and generating positive cash flows from operations. The Company made progress during the year towards decreasing operating losses on a quarterly sequential basis. Additionally, the Company improved its fourth quarter 2001 cash flow and improved its cash position at December 31, 2001. The Company currently expects that the principal sources of funding for its operating expenses, capital expenditures and other liquidity needs will be a combination of its available cash balances, funds generated from operations and its available credit facilities. The Company believes that its currently available sources of funds will be sufficient to fund its operations for at least the next 12 months. However, there are a number of factors that may negatively impact the Company's available sources of funds. The amount of cash generated from operations will be dependent upon such factors as the successful execution of the Company's business plan, the successful introduction of Applix Integra and worldwide economic conditions. In addition, borrowings under the Company's credit facilities are dependent upon adequate borrowings base and the maintenance of certain financial covenants, which may limit the availability of borrowing. The Company does not currently anticipate the need to draw down on the two revolving credit lines for its working capital needs. Should the Company not meet its plans to generate sufficient revenue or positive cash flows, it may need to raise additional capital or reduce spending. Failure to do so could have an adverse effect on the Company's ability to continue as a going concern.

     To date, inflation has not had a material adverse effect on the Company’s operating results.

Euro Conversion

     On January 1, 2002, 12 of the 15 members of the European Union established fixed conversion rates among their existing sovereign currencies and adopted the Euro as their common legal currency and eliminated their legacy currencies. The Company is currently conducting transactions in the Euro and fully converted its information systems as of January 2002. The Company does not expect the Euro conversion to have a material effect on its competitive position or financial results.

New Accounting Pronouncements

     In July 2001, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 141 (FAS 141), “Business Combinations” and No. 142 (FAS 142), “Goodwill and Other Intangible Assets.” FAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. FAS 141 further clarifies the criteria for recognizing intangible assets separately from goodwill. The requirements of FAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. Under FAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The Company adopted FAS 142 on January 1, 2002, and is currently in the process of evaluating the impact that FAS 142 will have on its consolidated financial position and results of operations.

     In June 2001, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 (FAS 143), “Accounting for Asset Retirement Obligations”, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It also applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and/or the normal operation of a long-lived asset, except for certain obligations of lessees. The Company is required to adopt FAS 143 in the first quarter of fiscal 2003, and the Company does not believe that the adoption of FAS 143 will have a material effect on its financial position or results of operations.

     In August 2001, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 144 (FAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”, which addresses the financial accounting and reporting for the impairment of long-lived assets. This statement supersedes Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions for the disposal of a segment of a business of APB Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequent Occurring Events and Transactions.” The Company is required to adopt FAS 144 in the first quarter of fiscal 2002. The Company has not yet determined what effect, if any, the adoption of FAS 144 will have on its financial position and results of operations.

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RISK FACTORS

OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS.

     We expect to experience significant fluctuations in our future results of operations due to a variety of factors, many of which are outside of our control, including:

• demand for and market acceptance of our products and services;

• the size and timing of customer orders, particularly large orders, some of which represent more than 10% of total revenue during a particular quarter;

• introduction of products and services or enhancements by us and our competitors;

• competitive factors that affect our pricing;

• the mix of products and services we sell;

• the hiring and retention of key personnel;

• our expansion into international markets;

• the timing and magnitude of our capital expenditures, including costs relating to the expansion of our operations;

• changes in generally accepted accounting policies, especially those related to the recognition of software revenue; and

• new government legislation or regulation.

     We typically receive a majority of our orders in the last month of each fiscal quarter because our customers often delay purchases of products until the end of the quarter and our sales organization and our individual sales representatives strive to meet quarterly sales targets. As a result, any delay in anticipated sales is likely to result in the deferral of the associated revenue beyond the end of a particular quarter, which would have a significant effect on our operating results for that quarter. In addition, most of our operating expenses do not vary directly with net sales and are difficult to adjust in the short term. As a result, if net sales for a particular quarter were below expectations, we could not proportionately reduce operating expenses for that quarter, and, therefore, that revenue shortfall would have a disproportionate adverse effect on our operating results for that quarter. If our operating results are below the expectations of public market analysts and investors, the price of our common stock may fall significantly.

OUR FUTURE SUCCESS IS DEPENDENT IN LARGE PART ON THE SUCCESS OF APPLIX INTEGRA

     We have devoted a substantial amount of resources to the development and marketing of our new Applix Integra product. We believe that our future financial performance will be dependent in large part on the success of Applix Integra. Because Applix Integra has been announced only recently and has not yet begun commercial shipments, we cannot yet assess its market acceptance or predict with accuracy the amount of revenue it will generate.

IF WE DO NOT INTRODUCE NEW PRODUCTS AND SERVICES IN A TIMELY MANNER, OUR PRODUCTS AND SERVICES WILL BECOME OBSOLETE, AND OUR OPERATING RESULTS WILL SUFFER.

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     The customer analytics and business planning software markets are characterized by rapid technological change, frequent new product enhancements, uncertain product life cycles, changes in customer demands and evolving industry standards. Our products could be rendered obsolete if products based on new technologies are introduced or new industry standards emerge.

     Enterprise computing environments are inherently complex. As a result, we cannot accurately estimate the life cycles of our products. New products and product enhancements can require long development and testing periods, which requires us to hire and retain increasingly scarce, technically competent personnel. Significant delays in new product releases or significant problems in installing or implementing new products could seriously damage our business. We have, on occasion, experienced delays in the scheduled introduction of new and enhanced products and may experience similar delays in the future.

     Our future success depends upon our ability to enhance existing products, develop and introduce new products, satisfy customer requirements and achieve market acceptance. We may not successfully identify new product opportunities and develop and bring new products to market in a timely and cost-effective manner.

FUTURE CAPITAL NEEDS.

     We believe, based upon our current business plan, that our current cash and cash equivalents, funds generated from operations and available credit lines should be sufficient to fund our operations as planned for at least the next twelve months. However, we may need additional funds sooner than anticipated if our performance deviates significantly from our current business plan or if there are significant changes in competitive or other market factors. Such funds, whether from equity or debt financing or other sources, may not be available, or available on terms acceptable to us.

ATTEMPTS TO EXPAND BY MEANS OF BUSINESS COMBINATIONS AND ACQUISITIONS MAY NOT BE SUCCESSFUL AND MAY DISRUPT OUR OPERATIONS OR HARM OUR REVENUES.

     We have in the past, and may in the future, buy businesses, products or technologies. In the event of any future purchases, we will face additional financial and operational risks, including:

• difficulty in assimilating the operations, technology and personnel of acquired companies;

• disruption in our business because of the allocation of resources to consummate these transactions and the diversion of management’s attention from our core business;

• difficulty in retaining key technical and managerial personnel from acquired companies;

• dilution of our stockholders, if we issue equity to fund these transactions;

• assumption of increased expenses and liabilities;

• our relationships with existing employees, customers and business partners may be weakened or terminated as a result of these transactions; and

• additional ongoing expenses associated with write-downs of goodwill and other purchased intangible assets.

WE RELY HEAVILY ON KEY PERSONNEL.

     We rely heavily on key personnel throughout the organization. The loss of any of our members of management, or any of our staff of sales and development professionals, could prevent us from successfully executing our business strategies. Any such loss of technical knowledge and industry expertise could negatively impact our success. Moreover, the loss of any critical employees or a group thereof, particularly to a competing organization, could cause us to lose market share, and the Applix brand could be diminished.

WE MAY NOT BE ABLE TO MEET THE OPERATIONAL AND FINANCIAL CHALLENGES THAT WE ENCOUNTER IN OUR INTERNATIONAL OPERATIONS.

     Due to the Company’s significant international operations, we face a number of additional challenges associated with the conduct of business overseas. For example:

• we may have difficulty managing and administering a globally-dispersed business;

• fluctuations in exchange rates may negatively affect our operating results;

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• we may not be able to repatriate the earnings of our foreign operations;

• we have to comply with a wide variety of foreign laws;

• we may not be able to adequately protect our trademarks overseas due to the uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property rights;

• reductions in business activity during the summer months in Europe and certain other parts of the world could negatively impact the operating results of our foreign operations;

• export controls could prevent us from shipping our products into and from some markets;

• multiple and possibly overlapping tax structures could significantly reduce the financial performance of our foreign operations;

• changes in import/export duties and quotas could affect the competitive pricing of our products and services and reduce our market share in some countries; and

• economic or political instability in some international markets could result in the forfeiture of some foreign assets and the loss of sums spent developing and marketing those assets.

BECAUSE THE CUSTOMER ANALYTICS AND BUSINESS PLANNING MARKETS ARE HIGHLY COMPETITIVE, WE MAY NOT BE ABLE TO SUCCEED.

     If we fail to compete successfully in the highly competitive and rapidly changing customer analytics and business planning markets, we may not be able to succeed. We face competition primarily from customer relationship management software firms, Internet customer interaction software vendors and computer telephony software companies. We also face competition from traditional call center technology providers, large enterprise application software vendors, independent systems integrators, consulting firms and in-house IT departments. Because barriers to entry into the software market are relatively low, we expect to face additional competition in the future.

     Many of our competitors can devote significantly more resources to the development, promotion and sale of products than we can, and many of them can respond to new technologies and changes in customer preferences more quickly than we can. Further, other companies with resources greater than ours may attempt to gain market share in the customer analytics and business planning markets by acquiring or forming strategic alliances with our competitors.

BECAUSE WE DEPEND ON THIRD-PARTY SYSTEMS INTEGRATORS TO SELL OUR PRODUCTS, OUR OPERATING RESULTS WILL LIKELY SUFFER IF WE DO NOT DEVELOP AND MAINTAIN THESE RELATIONSHIPS.

     We rely in part on systems integrators to promote, sell and implement our solutions. If we fail to maintain and develop relationships with systems integrators, our operating results will likely suffer. In addition, if we are unable to rely on systems integrators to install and implement our products, we will likely have to provide these services ourselves, resulting in increased costs. As a result, our results of operation may be harmed. In addition, systems integrators may develop, market or recommend products that compete with our products. Further, if these systems integrators fail to implement our products successfully, our reputation may be harmed.

BECAUSE THE SALES CYCLE FOR OUR PRODUCTS CAN BE LENGTHY, IT IS DIFFICULT FOR US TO PREDICT WHEN OR WHETHER A SALE WILL BE MADE.

     The timing of our revenue is difficult to predict in large part due to the length and variability of the sales cycle for our products. Companies often view the purchase of our products as a significant and strategic decision. As a result, companies tend to take significant time and effort evaluating our products. The amount of time and effort depends in part on the size and the complexity of the deployment. This evaluation process frequently results in a lengthy sales cycle, typically ranging from three to six months. During this time we may incur substantial sales and marketing expenses and expend significant management efforts. We do not recoup these investments if the prospective customer does not ultimately license our product.

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OUR BUSINESS WILL BE HARMED IF WE ARE UNABLE TO PROTECT OUR TRADEMARKS FROM MISUSE BY THIRD PARTIES.

     Our collection of trademarks is important to our business. The protective steps we take or have taken may be inadequate to deter misappropriation of our trademark rights. We have filed applications for registration of some of our trademarks in the United States. Effective trademark protection may not be available in every country in which we offer or intend to offer our products and services. Failure to protect our trademark rights adequately could damage our brand identity and impair our ability to compete effectively. Furthermore, defending or enforcing our trademark rights could result in the expenditure of significant financial and managerial resources.

OUR PRODUCTS MAY CONTAIN DEFECTS THAT MAY BE COSTLY TO CORRECT, DELAY MARKET ACCEPTANCE OF OUR PRODUCTS AND EXPOSE US TO LITIGATION.

     Despite testing by Applix and our customers, errors may be found in our products after commencement of commercial shipments. If errors are discovered, we may have to make significant expenditures of capital to eliminate them and yet may not be able to successfully correct them in a timely manner or at all. Errors and failures in our products could result in a loss of, or delay in, market acceptance of our products and could damage our reputation and our ability to convince commercial users of the benefits of our products.

     In addition, failures in our products could cause system failures for our customers who may assert warranty and other claims for substantial damages against us. Although our license agreements with our customers typically contain provisions designed to limit our exposure to potential product liability claims, it is possible that these provisions may not be effective or enforceable under the laws of some jurisdictions. Our insurance policies may not adequately limit our exposure to this type of claim. These claims, even if unsuccessful, could be costly and time-consuming to defend.

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

     As a multinational corporation, the Company is exposed to market risk, primarily from changes in foreign exchange rates. These exposures may change over time and could have a material adverse impact on the Company’s financial results. The Company uses foreign currency forward contracts to manage the risk of exchange rate fluctuations. Most of the Company’s international sales through it subsidiaries are denominated in foreign currencies. Relative to foreign currency exposures existing at December 31, 2001, a 10% unfavorable movement in foreign exchange rates would not expose the Company to significant losses in earnings or cash flows or significantly diminish the fair value of the Company’s foreign currency financial instruments, primarily due to the short lives of the affected financial instruments. To date, foreign currency fluctuations have not had a material effect on the Company’s operating results. In all cases, the Company uses these derivative instruments to reduce its foreign exchange risk by essentially creating offsetting market exposures. The instruments that the Company holds are not leveraged and are not held for trading or speculative purposes.

     At December 30, 2001, the Company held $9,278,000 in cash equivalents, including $1,050,000 of restricted cash, consisting primarily of money market funds. Cash equivalents are classified as available for sale and carried at fair value, which approximates cost. A hypothetical 10% increase in interest rates would not have a material impact on the fair market value of these instruments due to their short maturity, and the Company’s intention that all the securities will be sold within one year. There have been no significant changes since December 31, 2001.

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Item 8.   Financial Statements and Supplementary Data

Quarterly Operating Results for 2001 and 2000

	Q1 2001			Q2 2001			Q3 2001			Q4 2001
(Unaudited)
(In thousands, except per share data)
Revenue from continuing operations	$	11,327		$	10,444		$	8,858		$	9,674
Gross margin from continuing operations		6,868			6,718			5,352			6,494
Operating profit before restructuring and amortization		(3,367	)		(2,012	)		(2,134	)		136
Restructuring and other charges		—			512			438			750
Amortization of goodwill and acquired assets		32			114			114			114
Permanent impairment of cost based investment		—			—			—			1,250
Net loss from continuing operations	$	(3,310	)	$	(2,679	)	$	(2,678	)	$	(2,308	)
Gain from discontinued operation		718			—			363			—
Net loss	$	(2,592	)	$	(2,679	)	$	(2,315	)	$	(2,308	)
Net loss per share	$	(0.22	)	$	(0.23	)	$	(0.19	)	$	(0.19	)
Weighted average number of basic and diluted shares outstanding		11,689			11,740			11,934			11,975

	Q1 2000			Q2 2000			Q3 2000			Q4 2000
(Unaudited)
(In thousands, except per share data)
Revenue from continuing operations	$	9,277		$	8,938		$	10,967		$	11,057
Revenue from discontinued operation		3,144			2,708			1,898			2,500
Revenue as previously reported in the 10-Q	$	12,421		$	11,646		$	12,865		$	13,557
Gross margin from continuing operations	$	5,280		$	5,101		$	7,209		$	6,907
Gross margin from discontinued operation		2,628			1,979			1,183			1,827
Gross margin as previously reported in the 10-Q	$	7,908		$	7,080		$	8,392		$	8,734
Operating profit before amortization	$	(2,639	)	$	(4,919	)	$	(2,468	)	$	(2,724	)
Amortization of goodwill and acquired assets	$	31		$	32		$	32		$	32
Net loss from continuing operations	$	(1,544	)	$	(3,054	)	$	(1,124	)	$	(9,585	)
Net income (loss) from discontinued operation		747			(214	)		(1,101	)		(3,037	)
Net loss	$	(797	)	$	(3,268	)	$	(2,225	)	$	(12,622	)
Net loss per share	$	(0.07	)	$	(0.29	)	$	(0.20	)	$	(1.09	)
Weighted average number of basic and diluted shares outstanding		11,043			11,245			11,352			11,580

     The Company’s Consolidated Financial Statement and Supplementary Data are included under Item 14 of this Annual Report on Form 10-K are incorporated herein by reference.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     This information has been previously reported by the Registrant in a Current Report on Form 8-K filed with the Commissioner on April 13, 2001.

PART III

Item 10.   Directors and Executive Officers of the Registrant

     The response to this item is contained in part under the caption “Executive Officers of the Company” in Part I of this Annual Report on Form 10-K, and in part in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 30, 2002 (the “2002 Proxy Statement”) in the sections entitled “Election of Directors – Members of the Board of Directors” and “Other Matters — Section 16(a) Beneficial Ownership Reporting Compliance”, which sections are incorporated herein by reference.

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Item 11.   Executive Compensation

     The response to this item is contained in the 2002 Proxy Statement in the sections entitled “Election of Directors — Compensation of Directors” and “Executive Compensation”, which sections are incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

     The response to this item is contained in the 2002 Proxy Statement in the section entitled “Beneficial Ownership of Voting Stock”, which section is incorporated herein by reference.

Item 13.   Certain Relationships and Related Transactions

     The response to this item is item is contained in the 2002 Proxy Statement in the section entitled “Certain Relationships and Related Transactions,” which is incorporated herein by reference.

PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)	1.  Consolidated Financial Statements The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedule is filed as part of this Annual Report.
	2.  Consolidated Financial Statement Schedule The consolidated financial statement schedule listed in the accompanying Index to Consolidated Financial Statement and Financial Statement Schedule is filed as part of this Annual Report.
	3.  Exhibits The Exhibits filed as a part of this Annual Report on Form 10-K are the following:

3.1(1)	—	Restated Articles of Organization.
3.2(1)	—	By-laws.
4.1(2)	—	Form of Rights Agreement, dated as of September 18, 2000, between the Company and American Stock Transfer & Trust Company, which includes as Exhibit A the terms of the Series A Junior Participating Preferred Stock, as Exhibit B the Form of Rights Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Stock.
10.1(1)+	—	Applix, Inc. 1994 Equity Incentive Plan.
10.2(1)+	—	Applix, Inc. 1984 Stock Option Plan.
10.3(3)+	—	Applix, Inc. 2000 Director Stock Option Plan.
10.4(6)	—	Applix, Inc. 2001 Employee Stock Purchase Plan.
10.5(5)	—	Single Tenant Commercial Lease by and between Westborough Land Realty Trust and the Registrant, dated January 23, 2001.
10.6+(5)	—	Employment Agreement dated June 27, 2000 between the Registrant and Jitendra Saxena, and Supplemental Agreement to Employment Agreement, dated March 19, 2001 between the Registrant and Jitendra Saxena.
10.7(7)	—	Consulting Agreement between the Registrant and David C. Mahoney, dated September 10, 2001.
10.8(6)+	—	Executive Stock Option Acceleration Agreement between the Registrant and Craig Cervo, dated June 9, 2000.

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10.9(6)+	—	Executive Change-in-Control Agreement between the Registrant and Alan Goldsworthy, dated July 3, 2001.
10.10(7)+	—	Executive Change-in-Control Agreement between the Registrant and Walt Hilger, dated September 27, 2001.
10.11(4)	—	Secured Promissory Note and Pledge Agreement entered into on July 31, 2000 between the Company and Alan Goldsworthy.
10.12(4)	—	Secured Promissory Note and Pledge Agreement entered into on July 31, 2000 between the Company and Ed Terino.
10.13(5)	—	Asset Purchase Agreement by and among Real-Time International, Inc., VistaSource, Inc., Applix, Inc., Veriteam, Inc., VistaSource France, VistaSource GmbH and VistaSource UK, Ltd., dated as of March 14, 2001.
10.14	—	Export-Import Bank Loan and Security Agreement, dated December 5, 2001 among the Registrant, Applix (UK) Limited, Applix Australia Pty, Ltd., Veritem Ltd. And Silicon Valley Bank.
10.15	—	Borrower Agreement by the Registrant, Applix (UK) Limited, Applix Australia Pty, Ltd., Veriteam, Ltd. in favor of the Export-Import Bank and Silicon Valley Bank.
10.16	—	Loan and Security Agreement, dated December 5, 2001 between the Registrant and Silicon Valley Bank.
10.17	—	Non-Recourse Receivables Purchase Agreement dated December 31, 2001, between the Registrant and Silicon Valley Bank.
21.1	—	Subsidiaries of the Registrant.
23.1	—	Consent of Ernst & Young LLP.
23.2	—	Consent of PricewaterhouseCoopers LLP.

1.	Incorporated by reference from the Company’s Registration Statement on Form S-1 (File no. 33-85688).
2.	Incorporated by reference to the Company’s Registration Statement on Form 8-A dated September 20, 2000.
3.	Incorporated by reference to the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Commission on March 30, 2000.
4.	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000, as filed with the Commission on November 14, 2000.
5.	Incorporated by reference to the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000, as originally filed with the Commission on April 2, 2001 and amended on June 15, 2001.
6.	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001, as filed with the Commission on August 13, 2001.
7.	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001, as filed with the Commission on November 14, 2001.
+	Management contract or compensatory plan.

(b)	Reports on Form 8-K filed in the fourth quarter of 2001.
	None.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf as of March 27, 2001 by the undersigned, thereunto duly authorized.

APPLIX, INC.

By: /s/ Alan Goldsworthy                                    
Alan Goldsworthy
President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Alan Goldsworthy Alan Goldsworthy	President and Chief Executive Officer, and Director (Principal Executive Officer)	March 27, 2002
/s/ Walt Hilger Walt Hilger	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	March 27, 2002
/s/ Jitendra Saxena Jitendra Saxena	Director	March 27, 2002
/s/ Peter Gyenes Peter Gyenes	Director	March 23, 2002
/s/ Alain J. Hanover Alain J. Hanover	Director	March 22, 2002
/s/ David C. Mahoney David C. Mahoney	Director	March 22, 2002
/s/ John D. Loewenberg John D. Loewenberg	Director	March 25, 2002
/s/ Charles F. Kane Charles F. Kane	Director	March 27, 2002

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Item 14(a)  Index to Consolidated Financial Statements and Financial Statement Schedule

	Page
Report of Ernst & Young LLP, Independent Auditors		28
Report of Independent Accountants		29
Consolidated Balance Sheets at December 31, 2001 and 2000		30
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999		32
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2001, 2000 and 1999		33
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999		34
Notes to Consolidated Financial Statements		35
Financial Statement Schedule for the year ended December 31, 2001. Schedule II – Valuation and Qualifying Accounts		50

     All other schedules have been omitted since the required information is not present, or the amounts are not sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements.

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Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders
Applix, Inc.

     We have audited the accompanying consolidated balance sheet of Applix, Inc. as of December 31, 2001 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. Our audit also included the financial statement schedule for the year ended December 31, 2001 listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

     We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Applix, Inc. at December 31, 2001, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the year ended December 31, 2001, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Boston, Massachusetts
January 25, 2002, except for Note 16,
as to which the date
is February 8, 2002

28

Report of Independent Accountants

To the Board of Directors and Stockholders of Applix, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) present fairly, in all material respects, the financial position of Applix, Inc. and its subsidiaries at December 31, 2000, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
January 24, 2001

29

Applix, Inc.
Consolidated Balance Sheets
December 31, 2001 and 2000
(in thousands, except share amounts)

              ASSETS

				2001			2000
Current assets:
		Cash and cash equivalents		$	8,228		$	12,546
		Accounts receivable, net of allowances of $1,446 and $1,397, respectively			7,202			12,026
	Other current assets				1,672			2,381
	Total current assets				17,102			26,953
Restricted cash					1,050			—
Property and equipment, at cost:
		Computer equipment			11,959			11,817
		Office furniture, equipment and leasehold improvements			2,292			3,658
					14,251			15,475
			Less accumulated depreciation and amortization		(11,722	)		(12,379	)
			Net property and equipment		2,529			3,096
Capitalized software costs, net of accumulated amortization of $1,598 and $886, respectively					1,042			910
Goodwill, net of accumulated amortization of $1,084 and $896, respectively					1,117			370
Intangible assets, net of accumulated amortization of $186					1,314			—
Other assets					784			1,745
TOTAL ASSETS				$	24,938		$	33,074

See accompanying Notes to Consolidated Financial Statements.

30

Applix, Inc.
Consolidated Balance Sheets (continued)
December 31, 2001 and 2000
(in thousands, except share and per share amounts)

                        LIABILITIES AND STOCKHOLDERS’ EQUITY

		2001			2000
Current liabilities:
	Accounts payable	$	2,137		$	2,406
	Accrued liabilities		6,716			7,145
	Deferred revenue		5,813			4,222
	Net liabilities of discontinued operation		182			1,067
	Total current liabilities		14,848			14,840
Long term liabilities			709			—
Commitments and contingencies (Note 6)			—			—
Stockholders’ equity:
	Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued and outstanding
	Common stock, $.0025 par value; 30,000,000 shares authorized; 12,320,096 and 11,893,893 shares issued at December 31, 2001 and 2000, respectively		31			30
	Capital in excess of par value		49,212			48,249
	Accumulated deficit		(37,162	)		(27,268	)
	Accumulated other comprehensive loss		(503	)		(580	)
	Notes receivable from stock purchase agreements		(1,120	)		(1,120	)
			10,458			19,311
	Less 306,198 shares of treasury stock		(1,077	)		(1,077	)
Total stockholders’ equity			9,381			18,234
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	24,938		$	33,074

See accompanying Notes to Consolidated Financial Statements.

31

Applix, Inc.
Consolidated Statements of Operations
Years Ended December 31, 2001, 2000 and 1999
(in thousands, except per share data)

			2001			2000			1999
Software license revenue			$	19,304		$	23,735		$	21,610
Professional services and maintenance revenue				20,999			16,504			15,261
	Total revenue			40,303			40,239			36,871
Cost of software license revenue				2,335			1,985			1,454
Cost of professional services and maintenance revenue				12,536			13,757			11,498
	Gross margin			25,432			24,497			23,919
Operating expenses
	Selling and marketing			21,671			25,580			19,957
	Research and development			6,848			7,502			7,101
	General and administrative			4,754			4,292			4,485
	Restructuring and other charges			1,700			—			—
	Total operating expenses			34,973			37,374			31,543
Operating loss				(9,541	)		(12,877	)		(7,624	)
Non-operating income (expense)
	Permanent impairment of cost based investment			(1,250	)		—			—
	Interest income, net			374			1,153			1,031
Loss from continuing operations before income taxes				(10,417	)		(11,724	)		(6,593	)
Provision (benefit) for income taxes				558			3,583			(2,342	)
	Net loss from continuing operations			(10,975	)		(15,307	)		(4,251	)
Discontinued operation
	Income (loss) from discontinued operation, including income tax provision of $63 and $3,739 in 2000 and 1999, respectively			—			(367	)		6,631
	Gain (loss) on disposal of discontinued operation, including a provision of $2,367 for losses during the phase-out period in 2000			1,081			(3,238	)		—
Net income (loss)			$	(9,894	)	$	(18,912	)	$	2,380
Basic and diluted income (loss) per share
	Continuing operations		$	(0.93	)	$	(1.36	)	$	(0.40	)
	Discontinued operation		$	0.09		$	(0.32	)	$	0.62
		Total income (loss) per share	$	(0.83	)	$	(1.68	)	$	0.22
Weighted average number of basic and diluted shares outstanding				11,861			11,246			10,625

See accompanying Notes to Consolidated Financial Statements.

32

Applix, Inc.
Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2001, 2000 and 1999
(in thousands, except share data)

									ACCUMULATED
			CAPITAL						OTHER
	COMMON		IN EXCESS OF			ACCUMULATED			COMPREHENSIVE			UNEARNED
	STOCK		PAR VALUE			DEFICIT			(LOSS) INCOME			COMPENSATION
Balance, December 31, 1998	$	26	$	41,689		$	(10,736	)	$	(471	)	$	—
Stock option income tax benefit				921
Stock issued for purchase of Cosource.com (148,571 shares)				640
Stock issued under stock plans (749,391 shares)		3		2,423
Issuance of restricted stock				1,440									(1,440	)
Repurchase of common stock (27,500 shares)
Net income							2,380
Foreign currency exchange translation adjustment										(85	)
Comprehensive income
Balance, December 31, 1999		29		47,113			(8,356	)		(556	)		(1,440	)
Stock issued under stock plans (188,591 shares)				1,184
Issuance of restricted stock (256,002 shares)		1		1,119
Amortization of unearned compensation													273
Forfeiture of restricted stock				(1,167	)								1,167
Net loss							(18,912	)
Foreign currency exchange translation adjustment										(24	)
Comprehensive loss
Balance, December 31, 2000		30		48,249			(27,268	)		(580	)		—
Stock issued under stock plans (326,203 shares)		1		736
Stock issued for the acquisition of Dynamic Decisions (100,000 shares)				227
Net loss							(9,894	)
Foreign currency exchange translation adjustment										77
Comprehensive loss
Balance, December 31, 2001		31		49,212			(37,162	)		(503	)		—

[Additional columns below]

[Continued from above table, first column(s) repeated]

	NOTES
	RECEIVABLE
	FROM STOCK
	PURCHASE			TREASURY
	AGREEMENTS			STOCK			TOTAL
Balance, December 31, 1998	$	—		$	(933	)	$	29,575
Stock option income tax benefit								921
Stock issued for purchase of Cosource.com (148,571 shares)								640
Stock issued under stock plans (749,391 shares)								2,426
Issuance of restricted stock								—
Repurchase of common stock (27,500 shares)					(144	)		(144	)
Net income								2,380
Foreign currency exchange translation adjustment								(85	)
Comprehensive income								2,295
Balance, December 31, 1999		—			(1,077	)		35,713
Stock issued under stock plans (188,591 shares)								1,184
Issuance of restricted stock (256,002 shares)		(1,120	)					—
Amortization of unearned compensation								273
Forfeiture of restricted stock								—
Net loss								(18,912	)
Foreign currency exchange translation adjustment								(24	)
Comprehensive loss								(18,936	)
Balance, December 31, 2000		(1,120	)		(1,077	)		18,234
Stock issued under stock plans (326,203 shares)								737
Stock issued for the acquisition of Dynamic Decisions (100,000 shares)								227
Net loss								(9,894	)
Foreign currency exchange translation adjustment								77
Comprehensive loss								(9,817	)
Balance, December 31, 2001		(1,120	)		(1,077	)		9,381

See accompanying Notes to Consolidated Financial Statements.

33

Applix, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2001, 2000 and 1999
( in thousands)

Years ended December 31,				2001			2000			1999
Operating activities
	Net income (loss)			$	(9,894	)	$	(18,912	)	$	2,380
	Adjustments to reconcile net income (loss) to net cash provided by (used for ) operating activities:
		Depreciation			1,410			2,032			1,633
		Amortization			1,086			1,330			862
		(Gain) loss on sale of discontinued operation			(1,081	)		3,238			—
		Write-off of impaired investment			1,250			—			—
		Non-cash restructuring charges			92			—			—
		Non-cash stock compensation expense			30			573			—
		Provision for doubtful accounts			49			344			—
		Deferred tax asset			—			3,001			(406	)
	Changes in operating assets and liabilities:
		(Increase) decrease in accounts receivable			4,635			(1,214	)		61
		(Increase) decrease in other assets			566			864			(1,165	)
		Increase in restricted cash			(1,050	)		—			—
		Increase (decrease) in accounts payable			(540	)		433			592
		Increase (decrease) in accrued liabilities			(2,021	)		381			61
		Increase in other liabilities			195			—			—
		Increase (decrease) in deferred revenue			1,491			(1,042	)		705
		Increase in accrued discontinued operations			196			—			—
			Cash (used in) provided by operating activities		(3,586	)		(8,972	)		4,723
Investing activities
		Property and equipment expenditures			(856	)		(2,655	)		(1,709	)
		Capitalized software costs			(844	)		(1,803	)		(784	)
		Payment for disposition of subsidiary			(100	)		—			—
		Net proceeds from sale of discontinued operation			1,300			—			—
		Payments for acquisition, net of cash acquired			(1,733	)		—			(1,197	)
		Purchase of short-term investments			—			(31,715	)		(41,000	)
		Maturities of short-term investments			—			46,870			29,885
			Cash provided by (used in) investing		(2,233	)		10,697			(14,805	)
Financing activities
		Proceeds from issuance of stock under stock plans			737			1,184			3,346
		Purchase of common stock			—			—			(144	)
		Payment on notes payable			—			(660	)		—
		Proceeds from factoring of receivables			729			—			—
		Principal payments under capital lease obligations			—			—			(118	)
			Cash provided by financing activities		1,466			524			3,084
Effect of exchange rate changes on cash					35			(24	)		(85	)
Net increase (decrease) in cash and cash equivalents					(4,318	)		2,225			(7,083	)
Cash and cash equivalents at beginning of period					12,546			10,321			17,404
Cash and cash equivalents at end of period				$	8,228		$	12,546		$	10,321
Supplemental disclosure of cash flow information
		Cash paid during the period for income taxes		$	311		$	110		$	312
		Stock issued in exchange for stockholder notes		$	—		$	1,120		$	—
		Stock issued for acquisition of Dynamic Decision Pty		$	227		$	—		$	—

See accompanying Notes to Consolidated Financial Statements.

34

Applix, Inc.
Notes to Consolidated Financial Statements

1.   NATURE OF BUSINESS

     Applix, Inc. (“Applix” or the “Company”) develops, markets and supports a suite of Internet-based software applications. The Company has one principal business segment, its customer analytics and business planning software segment, which is reported as continuing operations. The Company provides customer relationship management and business planning software that enables customers to automate their front office business operations, including customer relationship management and business planning. On March 30, 2001, the Company sold its VistaSource business unit, previously reported as the Linux Division. This unit has been reported as a discontinued operation for all periods presented.

     The Company has incurred losses from continuing operations for the last several years. As of December 31, 2001, the Company had an accumulated deficit of $37.2 million. Operating losses and negative cash flows may continue because of costs and expenses relating to brand development, marketing and other promotional activities, continued development of the Company’s information technology infrastructure, expansion of product offerings and development of relationships with other businesses. Management’s plans include increasing revenue and generating positive cash flows from operations. The Company made progress during the year towards decreasing operating losses on a quarterly sequential basis. Additionally, the Company improved its fourth quarter 2001 cash flow and improved its cash position at December 31, 2001. The Company currently expects that the principal sources of funding for its operating expenses, capital expenditures and other liquidity needs will be a combination of its available cash balances, funds generated from operations and its available credit facilities. The Company believes that its currently available sources of funds will be sufficient to fund its operations for at least the next 12 months. However, there are a number of factors that may negatively impact the Company’s available sources of funds. The amount of cash generated from operations will be dependent upon such factors as the successful execution of the Company’s business plan, the successful introduction of Applix Integra and worldwide economic conditions. In addition, borrowings under the Company’s credit facilities are dependent upon adequate borrowings base and the maintenance of certain financial covenants, which may limit the availability of borrowing. The Company does not currently anticipate the need to draw down on the two revolving credit lines for its working capital needs. Should the Company not meet its plans to generate sufficient revenue or positive cash flows, it may need to raise additional capital or reduce spending. Failure to do so could have an adverse effect on the Company’s ability to continue as a going concern.

2.   SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated financial statements include the accounts of Applix, Inc. and all of its wholly owned subsidiaries. Upon consolidation all significant intercompany accounts and transactions are eliminated.

Revenue Recognition

     The Company derives its revenues from licenses of its software products and from services the Company provides to its customers. Revenue from software licensing and services fees is recognized in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition”, and SOP 98-9, “Software Revenue Recognition with Respect to Certain Transactions”. Accordingly, the Company recognizes software license revenue when: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed or determinable; and (4) collectibility is probable.

     The Company’s software arrangements may contain multiple elements, such as software products, services and post-contract customer support (PCS). Revenue earned on software arrangements involving multiple elements which qualify for separate element treatment is allocated to each element based on the relative fair values of those elements based on vendor specific objective evidence. Typically, the Company’s software licenses do not include significant post-delivery obligations to be fulfilled by the Company and payments are due within a three-month period from date of delivery. Consequently, license fee revenue is generally recognized when the product is shipped. Revenue from training, consulting and implementation services is recognized as the services are performed. Revenue for PCS under software maintenance arrangements is recognized ratably over the term of the arrangement, generally one year. Revenue for license renewals is recognized when all the criteria under SOP 97-2 have been met.

Cash and Cash Equivalents

     The Company considers highly liquid investments with maturities of less than 90 days at time of acquisition to be cash equivalents. The Company’s investment portfolio consists of cash equivalents placed with institutions, which management believes to be of high credit quality. Cash equivalents consist of money market instruments, which are designated as available for sale securities and are carried at fair value with unrealized gains and losses, if any, reported as a separate component of stockholders’ equity. Cash equivalents totaled $1,166,000 and $8,471,000 at December 31, 2001 and 2000 respectively. Restricted cash of $1,050,000 represents required collateral on a certain operating lease. The restricted cash will be released to the Company ratably over the term of the lease agreement.

35

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

Concentrations of Credit Risk

     The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, investments and trade receivables. The Company maintains cash, cash equivalents and investment with high credit quality financial institutions and monitors the amount of credit exposure to any one financial institution.

     The Company performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, letters of credit may be required from its customers in certain circumstances. Reserves are provided for estimated amounts of accounts receivable that may not be collected.

Property and Equipment

     Property and equipment are stated at cost and are depreciated by use of the straight-line and double declining balance methods over the estimated useful lives of the related assets (2 to 6 years) as detailed below. Assets recorded under capital leases are amortized by the straight-line method over their respective useful lives or the lease term, whichever is shorter.

	Estimated
	Useful Life
Asset Type	(In years)
Office furniture		6
Leasehold improvement		5	(or life of lease, whichever is shorter)
Equipment		3
Computer equipment		3
Software		2

Capitalized Software Costs

     Costs related to research, design and development of computer software are charged to research and development expense as incurred. The Company capitalizes eligible software costs incurred between the time that the product’s technological feasibility is established and the general release of the product to customers. Such capitalized costs are then amortized on a product-by-product basis generally over one to two years.

     The Company evaluates the net realizable value of capitalized software on an ongoing basis, relying on a number of factors including demand for a product, operating results, business plans, and economic projections. In addition, the Company’s evaluation considers nonfinancial data such as market trends, product development cycles, and changes in management’s market emphasis.

     Amortization expense totaled $712,000, $983,000, and $797,000 for the years ended December 31, 2001, 2000, 1999, respectively, and is included in the cost of software license revenue.

Impairment of Long-Lived Assets

     The Company evaluates the net realizable value of long-lived assets, including goodwill and other intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These events or changes in circumstances are identified by a number of factors including a significant decrease in demand for a product related to an asset, history of operating cash flow losses, operating results, business plans, and economic projections. In addition, the Company’s evaluation considers nonfinancial data such as market trends, product development cycles, and changes in management’s market emphasis. Management believes that no such events have occurred.

     The Company uses the undiscounted cash flow method to determine if impairment has occurred. If indicators of impairment are present, and the estimated undiscounted cash flows to be derived from the related assets are not expected to be sufficient to recover the asset’s carrying amount, an impairment loss is charged to expense in the period identified. The impairment loss is based upon the difference between the carrying amount and the fair value, as determined based upon discounted cash flows. The rates that would be

36

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

utilized to discount the net cash flows to net present value would take into account the time value of money and investment risk factors.

Income Taxes

     Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using enacted income tax rates and laws that will be in effect when the temporary differences are expected to reverse. A valuation allowance is established against net deferred tax assets if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Computation of Net Income (Loss) Per Common Share

     Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of common stock equivalents. Potentially dilutive common shares consist of stock options. The diluted computations do not include common stock equivalents for the years ended December 31, 2001, 2000 and 1999, as their inclusion would have been antidilutive. For the years ended December 31, 2001, 2000 and 1999, the Company excluded dilutive potential common shares of 142,029, 1,034,000 and 1,391,000, respectively, from its calculation of income (loss) per share. The Company has an additional 3,519,571 and 2,069,182 of antidilutive common stock equivalents for the years ended December 31, 2001 and 2000, respectively, which would not be included in the fully dilutive calculation of income (loss) per share had the Company reported net income as the stock option exercise price exceeded the average market price for the respective periods.

Translation of Foreign Currencies

     The functional currency for all of the locations in which the Company has a foreign operation is the applicable local currency. Assets and liabilities of all foreign subsidiaries are translated at period-end rates of exchange. Revenues and expenses are translated at average exchange rates during the period. The resulting translation adjustments are included in other comprehensive income. Transaction gains and losses that arise from exchange rate changes included in income are immaterial for all periods presented.

     The Company uses foreign currency forward contracts to mitigate the effects of exchange rate changes on intercompany balances and amounts denominated in a currency other than the functional currency of the respective subsidiary. Such exposures result from the portion of the Company’s operations, assets and liabilities are in currencies other than the US dollar, primarily the Netherlands Guilders, Germany Deutsche Marks, United Kingdom Pounds, Switzerland Francs and Australia Dollars as of December 31, 2001. These foreign exchange contracts are entered into in the ordinary course of business, and accordingly, are not speculative in nature. The Company typically hedges intercompany and receivable balances for a 90-day period. In accordance with FAS 133, as defined below, the changes in the fair value of these undesignated hedges are recognized in the statement of operations immediately as an offset to the changes in fair value of the asset or liability being hedged. For the years ended December 31, 2001, 2000 and 1999, the impact to the Company’s statements of operations was not material. The estimated fair value of foreign currency forward contracts is based on the difference between the foreign currency contract rate and period-end rate. At December 31, 2001 and 2000, the fair value of the Company’s outstanding foreign currency forward contracts was not material to the Company’s financial position.

Comprehensive Income

     Components of comprehensive income include net income (loss) and certain transactions that have generally been reported in the consolidated statement of stockholders’ equity. Other comprehensive income is comprised of foreign currency translation adjustments.

Advertising Expense

     Advertising costs are expensed as incurred. Advertising expense was $485,000 in 2001, $442,000 in 2000 and $244,000 in 1999.

Stock-Based Compensation

     The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and accordingly, recognizes no compensation expense for the stock options grants.

37

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

Use of Estimates

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions in these financial statements relate to, among other items, the useful lives of fixed assets, capitalized software costs and intangible assets, valuation of deferred tax assets, the allowance for doubtful accounts and accrued liabilities.

Reclassifications

     Certain prior year financial statement items have been reclassified to conform to the current year’s presentation.

Effect of Recent Accounting Pronouncements

     In June 1998, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (FAS 133), “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Company adopted FAS 133 on January 1, 2001, which did not result in a material impact to its consolidated financial position or results of operations.

     In September 2000, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 140 (FAS 140), “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - - a Replacement of Statement of Financial Accounting Standards No. 125 (FAS 125). FAS 140 revises the standards of accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, and reiterates many of the provisions of FAS 125. FAS 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company adopted FAS No. 140 on April 1, 2001, which did not result in a material impact to its consolidated financial position or results of operations.

     In July 2001, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 141 (FAS 141), “Business Combinations” and No. 142 (FAS 142), “Goodwill and Other Intangible Assets.” FAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. FAS 141 further clarifies the criteria for recognizing intangible assets separately from goodwill. The requirements of FAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. Under FAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The Company is required to adopt FAS 142 on January 1, 2002, and is currently in the process of evaluating the impact that FAS 142 will have on its consolidated financial position and results of operations.

     In June 2001, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 (FAS 143), “Accounting for Asset Retirement Obligations”, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It also applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. The Company is required to adopt FAS 143 in the first quarter of fiscal 2003, and the Company does not believe that the adoption of FAS 143 will have a material effect on its financial position or results of operations.

     In August 2001, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 144 (FAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”, which addresses the financial accounting and reporting for the impairment of long-lived assets. This statement supersedes Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions for the disposal of a segment of a business of APB Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequent Occurring Events and Transactions.” The Company is required to adopt FAS 144 in the first quarter of fiscal 2002 and the Company has not yet determined what effect, if any, the adoption of FAS 144 will have on its financial position and results of operations.

38

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

3.   DISCONTINUED OPERATION

     In December 2000, the Board of Directors committed to a plan to dispose of the operations of its VistaSource business. On March 30, 2001, the Company completed the sale of the VistaSource business unit to Real Time International, Inc. (“Real-Time”), a subsidiary of Parallax Capital Partners, LLC for $1,300,000 and a 19% equity interest in Real-Time. The results of operations including revenue, operating expenses, other income and expense, and income taxes of the VistaSource business unit for 2001, 2000 and 1999 have been reclassified in the accompanying statements of operations as a discontinued operation. The Company’s balance sheets at December 31, 2001 and 2000 reflect the net liabilities of the VistaSource business as net liabilities of discontinued operation within current liabilities.

     At December 31, 2000, the estimated net losses associated with the disposition of the VistaSource business were approximately $3,605,000. These losses included approximately $367,000 in losses from operations for the period from January 1, 2000 through the measurement date of December 17, 2000, $2,200,000 relating to the removal of the net assets of the VistaSource business, $1,100,000 in estimated losses from operations from the measurement date through the estimated date of disposal and $1,300,000 in provisions for employee severance and benefits, transaction costs, bank fees and other contractual commitments. These losses were partially offset by proceeds of $1,300,000 received from the divestiture.

     The VistaSource business generated a loss from its operations of $870,000 in the first quarter of 2001 (through the date of disposal) compared to the estimated $1,100,000 loss recognized at December 31, 2000. After adjustments for the actual results of operations of the VistaSource business through the date of disposal, changes in net assets delivered at closing and changes in estimates of certain obligations, the net loss on the disposal was approximately $2,524,000.

     On March 30, 2001 the Company closed the sale of the VistaSource business and received the purchase price of $1,300,000. For the twelve months ended December 31, 2001, the Company has recognized a gain of $1,081,000 for discontinued operations due to a favorable liquidation of the net assets and liabilities of the VistaSource business compared to previous estimates. The reserve balance for the estimated costs associated with the disposition as of December 31, 2001 was $182,000, consisting primarily of severance costs.

     Summary operating results and balance sheet information of the discontinued operation are as follows (in thousands):

	2001			2000			1999
Operating Results:
Revenue	$	1,666		$	10,250		$	18,970
Income (loss) before income taxes		(870	)		(304	)		10,370
Net income (loss)		(870	)		(367	)		6,631
Balance sheet information:
Accounts receivable, less allowance for doubtful accounts of $200 and $0 for 2000 and 1999, respectively	$	—		$	3,159		$	4,178
Other current assets		—			200			302
Property and equipment, less accumulated depreciation of $602 and $243 for 2000 and 1999, respectively		—			1,218			646
Capitalized software, less accumulated amortization of $425 and $1,557 for 2000 and 1999, respectively		—			367			165
Intangible assets, less accumulated amortization of $220 and $18 for 2000 and 1999, respectively		—			1,098			1,300
Accounts payable		—			(254	)		(216	)
Accrued liabilities		(182	)		(985	)		(588	)
Deferred revenue		—			(2,632	)		(2,858	)
Note payable, current portion		—			—			(358	)
Note payable, noncurrent portion		—			—			(1,080	)
Accrued loss on disposal		—			(3,238	)		—
Net assets (liabilities) of discontinued operation	$	(182	)	$	(1,067	)	$	1,491

39

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

4.    ACCRUED LIABILITIES

     Accrued liabilities at December 31, 2001 and 2000 consisted of the following (in thousands):

	2001		2000
Income taxes	$	938	$	1,240
Sales and value added taxes		1,278		1,777
Accrued compensation and benefits		2,524		2,463
Restructuring		766		—
Other		1,210		1,665
Total	$	6,716	$	7,145

5.    INCOME TAXES

     Income (loss) from continuing operations before income taxes was taxed under the following jurisdictions (in thousands):

			2001			2000			1999
Domestic			$	(11,617	)	$	(12,831	)	$	(7,330	)
Foreign				1,200			1,107			737
		Total	$	(10,417	)	$	(11,724	)	$	(6,593	)
The components of the income tax provision (benefit) from continuing operations are as follows (in thousands):
Current:
	Federal and state		$	77		$	16		$	(2,859	)
	Foreign			481			566			207
		Total Current		558			582			(2,652	)
Deferred:
	Federal and state			—			(4,831	)		215
	Foreign			—			—			95
	Change in valuation allowance			—			7,832			—
		Total Deferred		—			3,001			310
		Total income tax provision	$	558		$	3,583		$	(2,342	)

     The approximate tax effect of each type of temporary difference and carryforward is as follows (in thousands):

	2001			2000			1999
Net operating loss carryforwards	$	10,861		$	5,066		$	616
Deferred revenue		264			719			243
Accounts receivable		505			607			193
Accrued expenses		392			135			53
Vacation and benefits		254			549			776
Software/fixed assets		434			49			325
Tax credit carryforwards		1,752			1,297			795
Valuation allowance		(14,462	)		(8,422	)		—
NET DEFERRED TAX ASSET	$	—		$	—		$	3,001

40

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

     The following schedule reconciles the difference between the federal income tax rate and the effective income tax rate for continuing operations (in thousands):

	2001			2000			1999
U.S. federal statutory rate	$	(3,541	)	$	(3,986	)	$	(2,241	)
State and foreign tax provision, net		(602	)		(589	)		(194	)
Research and experimentation tax credit		—			(211	)		(237	)
Permanent items		185			512			195
Other		43			25			135
Unbenefitted losses		4,473			7,832			—
TAX PROVISION	$	558		$	3,583		$	(2,342	)

     The Company had net operating loss carryforwards of approximately $26,900,000 and $11,800,000 at December 31, 2001 and 2000, respectively. The Company also has federal research tax credits of approximately $1,100,000 and $1,300,000 at December 31, 2001 and 2000, respectively. These net operating loss carryforwards and credits expire in various amounts through 2021.

     A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. As a result of the Company’s review of its available evidence supporting the deferred tax asset, the Company established a valuation allowance for the full amount of the deferred tax asset due to the uncertainty of realization. The valuation allowance increased by $6,040,000 during 2001, primarily due to the increase in net operating loss carryforwards.

     Any subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2001 would be allocated as follows (in thousands):

Reported in the statement of operations	$	12,102
Reported in capital in excess of par		2,360
	$	14,462

     Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may have limited, or may limit in the future, the amount of net operating loss carryforwards which could be utilized annually to offset future taxable income and income tax liabilities. The amount of any annual limitation is determined based upon the Company’s value prior to an ownership change.

6.    COMMITMENTS

     The Company leases facilities and computer equipment under operating lease agreements that expire on various dates through April 2010. Total rent expense was $2,360,000, $2,095,000 and $1,846,000 for 2001, 2000 and 1999, respectively. The following is a schedule of future minimum lease payments at December 31, 2001 (in thousands):

2002	$	2,550
2003		2,407
2004		2,139
2005		2,014
2006		1,796
2007 and thereafter		11,674
Total minimum lease payments	$	22,580

     The Company’s office lease for its headquarters has an original 12 year term, which will expire in November 2013, with one five year option to extend the term.

41

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

7.    STOCKHOLDERS’ EQUITY

Preferred Stock

     The Company has 1,000,000 authorized shares of Preferred Stock, $0.01 per value per share. The Board of Directors is authorized to fix designations, relative rights, preferences and limitations on the preferred stock at the time of issuance. As of December 31, 2001, none of the preferred stock was issued and outstanding.

Common Stock Purchase Rights

     On September 15, 2000, the Board of Directors of the Company declared a dividend of one right for each outstanding share of the Company’s common stock at the close of business on October 2, 2000. Under certain circumstances, each right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, $0.01 par value per share (the “Preferred Stock”), at a purchase price of $42.00 in cash, subject to adjustment.

     The rights are not exercisable and cannot be transferred separately from the common stock until the earlier of (i) 10 business days following the later of (a) the first date of a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired (or obtained the right to acquire) beneficial ownership of 15% or more of the outstanding shares of common stock or (b) the first date on which an executive officer of the Company has actual knowledge that an Acquiring Person has become such (the “Stock Acquisition Date”), or (ii) 10 business days (or such later date as may be determined by the Board of Directors of the Company) following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of the outstanding shares of common stock (the earlier of (i) and (ii) being the “Distribution Date”).

     In the event that any person becomes an Acquiring Person, unless the event causing the 15% threshold to be crossed is a Permitted Offer (as defined in the Rights Agreement), each holder of a right, with certain exceptions, shall have the right to receive, upon exercise, in lieu of the Preferred Stock, that number of shares of common stock (or in certain circumstances, cash, property or other securities of the Company) that equals the exercise price of the right divided by 50% of the current market price (as defined in the Rights Agreement) per share of common stock at the date of the occurrence of such event. However, the rights are not exercisable following such event until the time that the rights are no longer redeemable by the Company as described below. Notwithstanding the foregoing, following such event, all rights that are, or (under certain circumstances specified in the Rights Agreement), were, beneficially owned by any Acquiring Person will be null and void. Following such event, subject to certain conditions, the Board of Directors of the Company may exchange the Rights (other than rights owned by such Acquiring Person which have become void), in whole or in part, at an exchange ratio of one share of common stock, or one one-thousandth of a share of Preferred Stock, per right, subject to adjustment.

     In the event that, at any time after any person becomes an Acquiring Person, (i) the Company is consolidated with, or merged with and into, another entity and the Company is not the surviving entity of such consolidation or merger (other than a consolidation or merger which follows a Permitted Offer) or if the Company is the surviving entity, but shares of its outstanding common stock are not changed or exchanged for stock or securities (of any other person) or cash or any other property, or (ii) more than 50% of the Company’s assets or earning power is sold or transferred, each holder of a right shall thereafter have the right to receive, upon exercise, that number of shares of common stock of the acquiring company that equals the exercise price of the right divided by 50% of the current market price (as defined in the Rights Agreement) of such common stock at the date of the occurrence of the event.

     The rights have certain anti-takeover effects, in that they would cause substantial dilution to a person or group that attempts to acquire a significant interest in the Company on terms not approved by the Board of Directors of the Company. The rights expire on September 18, 2010 (the “Final Expiration Date”), but may be redeemed by the Company in whole, but not in part, for $0.001 per right (the “Redemption Price”), payable in cash or stock, at any time prior to (i) the tenth business day after the Stock Acquisition Date, or (ii) the Final Expiration Date. Immediately upon the action of the Board of Directors of the Company ordering redemption of the rights, the rights will terminate and the only right of the holders of the rights will be to receive the Redemption Price. The rights may also be redeemable following certain other circumstances specified in the Rights Agreement. Rights shall be issued (i) in respect of each new share of common stock issued after October 2, 2000 but prior to the earlier of the Distribution Date or the Expiration Date and (ii) in connection with the issuance or sale of common stock following the Distribution Date but prior to the Expiration Date upon the exercise of stock options or under any employee benefit plan or arrangement, or upon the exercise, conversion or exchange of securities, granted or issued by the Company prior to the Distribution Date.

42

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

Stock Option Plans

     In 1994, the stockholders approved the 1994 Equity Incentive Plan of the Company (the “Equity Plan”). As the result of several amendments, the Equity Plan authorizes the issuance of options to purchase up to 5,490,157 shares of common stock. The Equity Plan enables the Company to make awards of restricted common stock and to grant options to purchase common stock to employees, officers or directors of and consultants to the Company. Restricted stock awards entitle the recipient to purchase common stock from the Company under terms, which provide for vesting over a period of time. The Company has the right to repurchase the unvested portion of the common stock subject to the award upon the termination of the recipient’s employment or other relationship with the Company. Stock options entitle the optionee to purchase common stock from the Company, for a specified exercise price, during a period specified in the applicable option agreement. The Equity Plan is administered by the Compensation Committee of the Board of Directors, which selects the persons to whom restricted stock awards and stock options are granted and determines the number of shares of common stock covered by the award or option, its purchase price or exercise price, its vesting schedule and (in the case of stock options) its expiration date. Under the Equity Plan, the incentive stock options must be granted with an exercise price of no less than fair market value of the stock on the grant date. To date, no restricted stock awards have been granted under the Equity Plan.

     The Company also has a 1984 Stock Option Plan (the “Option Plan”) for certain employees, directors, and consultants, under which both incentive stock options and nonqualified options were issued. Under the Option Plan, the incentive stock options must have been granted with an exercise price of no less than the fair market of the stock on the date of grant. The exercise price of the stock options and the terms of exercise for all options granted were determined by the Board of Directors. Generally, stock options granted under the Option Plan vest over a four or five-year period.

     In 1996, the Board of Directors adopted, and the stockholders approved, the 1996 Director Stock Option Plan (the “Director Plan”). The Director Plan provides for the grant of nonstatutory options not intended to meet the requirements of the Section 422 of the Internal Revenue Code of 1986, as amended. Only directors of the Company who are not full-time employees of the Company or any subsidiary of the Company are eligible to be granted options under the Plan. A total of 50,000 shares of the Company’s common stock were initially reserved for issuance pursuant to the Director Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. The Director Plan is administered by the Board of Directors of the Company. The directors are elected by the stockholders of the Company in accordance with the provisions of the Restated Articles of Organization, as amended, and the By-Laws of the Company. Under the Director Plan, the stock options must have been granted with an exercise price of no less than the fair market value of the stock on the date of grant. Each option granted pursuant to the Director Plan becomes exercisable in full on the first anniversary of the date of grant, provided the optionee is serving as a director of the Company on such date.

     In 1996, the Board of Directors adopted the 1996 Sinper Stock Option Plan (the “Sinper Plan”). The purpose of this plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by employees of Sinper Corporation (Sinper), which became a wholly owned subsidiary of the Company pursuant to terms of the Agreement and Plan of Merger among the Company, Applix Acquisition Corporation and Sinper. The Sinper Plan is administered by the Board of Directors of the Company. Under the Sinper Plan, the stock options must have been granted with an exercise price of no less than the fair market value of the stock on the date of grant. No additional options will be granted under the Sinper Plan.

     In 1999, the Board of Directors adopted, and the stockholders approved, the 2000 Director Stock Option Plan (the “2000 Director Plan”). The 2000 Director Plan provides for the grant of non-statutory options not intended to meet the requirements of the Section 422 of the Internal Revenue Code of 1986, as amended. Only directors of the Company who are not full-time employees of the Company or any subsidiary of the Company are eligible to be granted options under the Plan. A total of 50,000 shares of the Company’s common stock may be issued upon the exercise of options granted under the 2000 Director Plan. Any shares subject to options granted pursuant to the 2000 Director Plan which terminate or expire unexercised will be available for future grants under the 2000 Director Plan. The 2000 Director Plan is administered by the Board of Directors of the Company. The directors are elected by the stockholders of the Company in accordance with the provisions of the Restated Articles of Organization, as amended, and the By-Laws of the Company. Under the 2000 Director Plan, the stock options must be granted with an exercise price of no less than the fair market value of the stock on the date of grant.

43

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

     The 2000 Director Plan provides for the automatic grant of stock options under the following circumstances: (i) an option for 1,500 shares of common stock was automatically granted to each non-employee Director upon the approval of the 2000 Director Plan by the stockholders of the Company, (ii) an option for 10,000 shares of common stock will automatically be granted to each non-employee Director who is initially elected to the Board of Directors after the approval of the 2000 Director Plan by the stockholders of the Company, upon his or her initial election to the Board of Directors (an “Election Grant”); and (iii) on January 1 of each year (beginning January 1, 2001), an option for 4,000 shares of common stock will automatically be granted to each non-employee Director, provided he or she attended at least 75% of the meetings of the Board of Directors or any committees on which he or she served in the preceding year. Each option will become exercisable (or “vest”), with respect to Election Grants, in two equal annual installments on the first and second anniversary of the date of grant, and with respect to all other options, on the first anniversary of the date of grant, provided in each case that the optionee continues to serve as a director on such date. The Board of Directors may suspend, discontinue or amend the 2000 Director Plan.

     Information with respect to activity under the stock option plans is as shown below:

				Options Outstanding
	Available						Weighted Average
	for Grant			Number			Exercise Price
Balance at December 31, 1998		308,842			2,342,673		$	3.90
Additional authorized		500,000			—			—
Expiration of options under the 1984 and Sinper Plan		(8,093	)		—			—
Option granted		(1,013,400	)		1,013,400		$	5.78
Option exercised		—			(559,292	)	$	3.29
Options cancelled		495,179			(495,179	)	$	4.67
Balance at December 31, 1999		282,528			2,301,602		$	4.82
Additional authorized		1,550,000			—			—
Stock issued		(256,002	)		—			—
Expiration of options under 1984 Plan		(202	)		—			—
Options granted		(1,451,080	)		1,451,080		$	10.08
Options exercised		—			(117,826	)	$	16.13
Options cancelled		531,674			(531,674	)	$	3.56
Balance at December 31, 2000		656,918			3,103,182		$	6.97
Additional authorized		1,000,000			—			—
Stock issued		(35,000	)		—			—
Expiration of options under 1984 Plan and Sinper Plan		(7,328	)		—			—
Options granted		(1,880,301	)		1,880,301		$	1.90
Options exercised		—			(66,241	)	$	3.06
Options cancelled		1,255,642			(1,255,642	)	$	6.74
Balance at December 31, 2001		989,931			3,661,600		$	4.52

44

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

     Related information for options outstanding and exercisable as of December 31, 2001 under the stock option plans is as follows:

	Options Outstanding						Options Exercisable
			Weighted Average
Range of	Number		Remaining		Weighted Average		Number		Weighted Average
Exercise Price	Outstanding		Contractual Life		Exercise Price		Exercisable		Exercise Price
$0.61-$0.99		171,000		6.75	$	0.74		—		—
$1.00-$1.65		468,455		6.37	$	1.39		11,404	$	1.35
$1.66-$2.91		951,006		6.38	$	2.15		94,686	$	2.39
$2.92-$4.88		945,252		3.18	$	3.57		813,946	$	3.50
$4.89-$9.88		670,620		4.19	$	5.98		392,346	$	5.93
$9.89-$17.75		437,962		5.04	$	13.53		183,746	$	13.42
$17.76-$24.06		9,805		4.94	$	18.18		9,180	$	18.19
$24.07-$34.75		7,500		1.35	$	34.75		7,500	$	34.75
		3,661,600		4.99	$	4.52		1,512,808	$	5.49

     At December 31, 2001, 4,651,531 shares of common stock were reserved for future issuance under the stock plans.

Stock-Based Compensation

     As permitted under Statement of Financial Accounting Standards No. 123, (FAS 123), “Accounting for Stock-Based Compensation,” the Company has elected to follow Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,” and related Interpretations, in accounting for stock-based awards to employees. Under APB 25, the Company generally recognized no compensation expense with respect to such awards.

     Pro forma information regarding net income and earnings per share is required by FAS 123 for awards granted after October 28, 1995 as if the Company had accounted for its stock-based awards to employees under the fair value method of FAS 123. The fair value of the Company’s stock-based awards to employees was estimated using the Black-Scholes options pricing model. The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s stock-based awards to employees have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock-based awards to employees. The fair value of the Company’s stock-based awards to employees was estimated assuming no expected dividends and the following weighted average assumptions:

	2001			2000			1999
Expected life (years)		5			5			5
Expected stock price volatility		96.0	%		95.2	%		94.9	%
Risk free interest rate		4.72	%		6.42	%		5.18	%

     Using the above assumption the weighted average grant date fair values for options granted were $1.42, $7.70 and $4.46 in 2001, 2000 and 1999, respectively.

     As required under FAS 123, the reported net loss and diluted loss per share have been presented to reflect the impact had the Company been required to include the amortization of the Black-Scholes option value as expense. For purposes of this disclosure, the estimated fair value of the options is amortized to expense over the options’ vesting periods. The Company’s pro forma information follows:

	2001			2000			1999
Pro forma net loss	$	(11,931	)	$	(22,514	)	$	773
Pro forma loss per share	$	(1.01	)	$	(2.00	)	$	0.07

45

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

Employee Stock Purchase Plan

     The Company established its Employee Stock Purchase Plan during 1995 (1995 Plan), allowing eligible employees to purchase common stock, in a series of offerings, through payroll deductions of up to 10% of their total compensation. The purchase price in each offering is 85% of the fair market value of the stock on (i) the offering commencement date or (ii) the offering termination date (six months after commencement date), whichever is lower. On February 26, 2001, the Board of Directors adopted, and on May 4, 2001, the stockholders approved the Company’s Employee Stock Purchase Plan (2001 Plan), which authorized the issuance of up to 800,000 shares of common stock and has generally the same terms as the 1995 Plan. Employees purchased 224,962 shares in 2001, of which 124,958 shares were issued under the 2001 Plan and 100,004 shares were issued under the 1995 Plan. During 2000, 70,765 shares were issued under the 1995 Plan. At December 31, 2001, 681,805 shares were available for issuance under the 2001 Plan.

Notes Receivable from Stock Purchase Agreements

     In September 2000, the Company sold 256,002 shares of common stock to certain company executives. The purchase was funded by loans evidenced by full-recourse promissory notes due and payable on July 31, 2005. Interest is calculated on the unpaid principal balance at a rate of 6% per year, compounded annually until paid in full. In the event that the stockholder sells any shares prior to July 31, 2005, the net proceeds from such sale shall become immediately due and payable without notice or demand. In the event the executive leaves the Company, the loan is due and payable. Repayment terms were extended to the original maturity date for several employees who subsequently left the Company. The aggregate amount of the notes totaled $1,120,000 at December 31, 2001 and 2000. These loans, which are shown as a deduction to Stockholders’ equity, are secured by the common stock purchased.

8.    EMPLOYEE BENEFIT PLAN

     Applix has a defined contribution plan (401(k)) in which all full time employees are eligible to participate once they have reached the age of 21. Employee and employer contributions vest immediately. The Company may make discretionary contributions to the plan as determined by the Board of Directors. The Company’s matching contribution to the plan was $205,000, $267,000, and $225,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

9.    MAJOR CUSTOMER AND GEOGRAPHIC SEGMENT INFORMATIONS

     As a result of the Vistasource disposition, the Company had only one operating segment at December 31, 2001. Accordingly, the Company has restated the historical segment data to exclude the Vistasource business unit, for which the segment data is included in Note 3.

     The Company operates in three major geographic areas. The following geographic area data include sales based upon the location from which the sale was made. Based on the structure of the Company’s operations to achieve consolidated objectives, there are significant interdependencies and overlaps for each geographic area, and long-lived assets shown for each geographic area may not be indicative of the amounts which would have been reported if the operating entities were independent of one another.

     A summary of the Company’s operations by geographic locations for the years ended December 31, 2001, 2000 and 1999 is as follows (in thousands):

Geographic Segment Information		2001		2000		1999
Revenue from continuing operations
	United States	$	15,054	$	14,065	$	12,714
	Europe		20,865		23,019		22,508
	Pacific Rim		4,384		3,155		1,649
	Total revenue from continuing operations	$	40,303	$	40,239	$	36,871
Revenue from discontinued operations
	United States	$	—		5,738		10,075
	Europe		—		4,512		8,895
	Pacific Rim		—		—		—
	Total revenue from discontinued operations	$	—	$	10,250	$	18,970
Long-lived Assets
	United States	$	2,999	$	4,544	$	7,613
	Europe		778		1,082		725
	Pacific Rim		2,225		—		—
	Total long-lived assets	$	6,002	$	5,626	$	8,338

46

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

10.    ACQUISITIONS

     On March 31, 2001, the Company acquired all of the outstanding capital stock of Dynamic Decisions Pty Limited (“Dynamic Decisions”) for total cost of approximately $5,867,000 consisting of $5,640,000 in maximum cash consideration to be paid and 100,000 shares of the Company’s common stock. The acquisition was accounted for under the purchase method of accounting. The purchase price was allocated based on the estimated fair value of the assets acquired and liabilities assumed. An intangible asset, acquired customer base, of $1,500,000 was recorded based on the fair value of the asset at the time of acquisition and will be amortized on a straight–line basis over its estimated useful life of six years. The excess of the purchase price over the fair value of the net assets acquired of $934,000 has been recorded as goodwill, and has been amortized on a straight-line basis over its estimated useful life of six years.

     Of the cash portion of the purchase price, $5,150,000 is payable in installments over a maximum of 30 months beginning on July 1, 2001. As of December 31, 2001, the Company had paid $1,267,000 of the maximum cash consideration, which has been accounted for as purchase price. The remaining amount of $3,883,000 is contingent upon the continued employment of two key executives of Dynamic Decisions, and will be accounted for as compensation expense. The results of operations of Dynamic Decisions are included in the financial statements from the date of acquisition.

     Unaudited pro forma revenue, net loss, and loss per share shown below for the years ended December 31, 2001 and 2000 assumes the acquisition of Dynamic Decisions occurred on January 1 of each respective period.

	TWELVE MONTHS ENDED
(in thousands, except for per share amounts)	December 31 (UNAUDITED)
	2001			2000
Revenue	$	40,878		$	43,311
Net income (loss)	$	(9,543	)	$	(17,059	)
Total basic and diluted earning (loss) per share	$	(0.80	)	$	(1.52	)

     On December 10, 1999, the Company acquired Cosource.com for an aggregate cost of $4,300,000 consisting of cash of $480,000, stock valued at $2,100,000, promissory notes for $1,400,000 and the estimated acquisition costs of approximately $250,000. The acquisition was accounted for under the purchase method of accounting. Accordingly, the balance sheet accounts of Cosource.com and the results of its operations have been included in the 1999 financial statements of the Company since the date of the acquisition. The notes payable were expected to be paid in eight equal installments over a four-year period at a 5% annual interest rate. $1,400,000 of the stock issued was expected to vest in eight equal installments over a four-year period. The notes payable and the stock were contingent on the continued employment during that period of two key employees and were therefore recorded as unearned compensation. In 2000, these two key employees left the Company. As a result, the Company repurchased the stock which had not yet vested, and the Company’s obligation to make further payment on the notes terminated. Accordingly, the items related to the unearned compensation and notes payable have been removed from the balance sheet in 2000. The purchase resulted in $1,300,000 in goodwill, various other intangible assets, which were being amortized over a seven-year period from the acquisition date. The unamortized balance of the intangible assets of $1,098,000 is included in the calculation of the loss on disposal of VistaSource .

11.    RESTRUCTURING EXPENSES

     In the second quarter of 2001, the Company adopted a plan of restructuring aimed at reducing current operating costs company-wide. In connection with this plan, 28 non-management employees, primarily sales, marketing, and administrative personnel, and 2 executive level employees were terminated. The Company’s restructuring plan also included the closure of the Company’s sales office in France. As a result of the restructuring plan, the Company recorded a restructuring charge of $512,000 for the three months ended June 30, 2001. The restructuring charge consisted of $449,000 for severance costs and $63,000 for the loss on disposal of the Company’s French subsidiary, which was sold on June 30, 2001. In connection with the sale, the Company paid $100,000 to the purchaser, which is included in the restructuring charge. Payments made for severance during the year totaled $437,000 resulting in a remaining accrued severance balance of $12,000 at December 31, 2001.

     In the third quarter of 2001, the Company adopted a plan of restructuring to further reduce current operating costs company-wide through headcount reductions. In connection with this plan, the Company recorded an additional restructuring charge of $438,000 for severance related to the termination of 26 non-management employees, primarily sales, marketing, and administrative personnel. Subsequent to the initial recording of the charge, adjustments totaling $90,000 were recorded, reducing the charge to $348,000. Payments for severance during the year totaled $290,000, resulting in a remaining accrued severance balance of $58,000 at December 31, 2001.

47

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

     In the fourth quarter of 2001, the Company adopted a plan of restructuring to further reduce current operating costs company-wide. The plan included the further reduction of headcount of one senior level executive and 16 non-management employees, primarily professional services, sales, and administrative personnel. The plan also included the closure of several domestic offices and the consolidation of space within one European office and the abandonment of leasehold improvements and support assets associated with these locations, which were removed from service shortly after the implementation of the plan. As a result of the restructuring plan, the Company recorded a charge of $840,000. The components of the fourth quarter charge, as well as the Company’s payments made against accruals is detailed as follows:

						Balance at
Cash charges	Charges incurred		Payment made			December 31, 2001
Cash Charges
Work force reduction	$	363,000	$	(52,000	)	$	311,000
Office closures		274,000		—			274,000
Other contractual obligations		111,000		—			111,000
Subtotal		748,000		(52,000	)		696,000
Non-cash charges
Impaired assets		92,000		—			—
Total	$	840,000	$	(52,000	)	$	696,000

12.    RESTRICTED CASH

     On August 1, 2001, the Company established a $1,050,000 irrevocable standby letter of credit in connection with executing an agreement to lease certain office space. The irrevocable standby letter of credit is collateralized by a restricted cash deposit of $1,050,000. The funds can be drawn down over the term of the lease, provided the Company has not defaulted on the office lease. The irrevocable standby letter of credit and underlying security deposit (restricted cash) requirement of $1,050,000 will be reduced starting the first day of the second lease year as follows:

	Reduction Amount
Second lease year (December 31, 2002)	$	116,667
Third lease year (December 31, 2003)	$	116,667
Fourth lease year (December 31, 2004)	$	175,001
Fifth lease year (December 31, 2005)	$	233,330
Sixth lease year (December 31, 2006)	$	283,335

     At the end of the sixth year, the Company can reduce the letter of credit to $125,000 or substitute $125,000 in cash in lieu of the Letter of Credit.

48

Applix, Inc.
Notes to Consolidated Financial Statements (continued)

13.    NON-RECOURSE RECEIVABLE SALE

     The Company has a non-recourse accounts receivable purchase arrangement with a certain bank, pursuant to which the Company and the bank may agree from time to time for the Company to sell qualifying accounts receivable to the bank, in an aggregate amount of up to $2 million outstanding, at a purchase price equal to the balance of the accounts less a discount rate and a fee. On or about December 31, 2001, the Company factored certain accounts receivable to the bank pursuant to the Purchase Arrangement in the amount of $729,000.

     In accordance with FAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, the Company recognized a sale for those account receivable balances for which there was no future obligation to the customer in the amount of $361,000. The Company has concluded that these accounts have been legally isolated, and accordingly, this amount has been derecognized from the Company’s accounts receivable balance at December 31, 2001. The loss from the sale of the financial assets and retained interest for cash collection were not material to the Company’s results of operations or financial position. The remainder of $368,000 has been recorded as a financing transaction and recognized as a liability at December 31, 2001. This amount is expected to be repaid by the Company to the bank during 2002.

14.    IMPAIRMENT OF INVESTMENT

     In December 2001, the Company determined that its cost-based investment in TurboLinux, Inc. (“TurboLinux”) of $1,250,000 was impaired. This assessment was based on the Company’s review of TurboLinux’s operating results and the Company’s anticipated future cash flows from its investment. Accordingly, the investment was written down to its estimated net realizable value of zero.

15.    BANK CREDIT FACILITIES

     The Company has two secured revolving credit facilities, providing for loans and other financial accommodations, with Silicon Valley Bank (“SVB”). The first facility has an interest rate of prime plus 1.25% and is in the aggregate principal amount of up to the lesser of (i) $2,500,000 and (ii) an amount based upon a percentage the Company’s qualifying domestic accounts receivable. The second facility has an interest rate of prime plus 1.00% and is in the aggregate principal amount of up to the lesser of (i) $2,500,000 and (ii) an amount based upon a percentage of the Company’s qualifying foreign accounts receivable. This second facility is guaranteed by the Export-Import Bank of the United States (“EXIM Bank”) and includes certain additional obligations of the Company in favor of EXIM Bank. The obligations of the Company to SVB are guaranteed by certain of the Company’s subsidiaries and are secured by substantially all of the assets of the Company and such subsidiaries. Because the Company has not yet satisfied certain conditions precedent, covenants and other requirements, the Company currently has no availability to borrow or receive other financial accommodations under either of the credit facilities. The facilities expire on December 5, 2002.

16.    SUBSEQUENT EVENT

     On February 8, 2002, a customer of the Company’s divested business unit filed a claim in Germany against the Company’s German subsidiary, Veriteam GmbH. The claim alleges a breach of contract pertaining to software sold and implemented by the divested business unit on behalf of the Company. The customer is seeking repayment for the cost of the software and related services for approximately $800,000. The Company has answered the customer’s claim, denying the claim’s allegations. Due to the early nature of the claim, the Company has been unable to fully assess the likely outcome of the claim, however, the Company intends to vigorously defend its position and believes the claim lacks substantial merit.

49

Schedule II — Valuation and Qualifying Accounts for the Year ended December 31, 2001.

	Balance at		Additions
	beginning		Charges to cost		Charges to		Balance at
	of year		and expenses		accounts		end of year
2001
Allowance for accounts receivable		1,397,000		316,000		267,000		1,446,000

50

EXHIBIT INDEX

     The Exhibits filed as a part of this Annual Report on Form 10-K are the following:

3.1(1)	—	Restated Articles of Organization.
3.2(1)	—	By-laws.
4.1(2)	—	Form of Rights Agreement, dated as of September 18, 2000, between the Company and American Stock Transfer & Trust Company, which includes as Exhibit A the terms of the Series A Junior Participating Preferred Stock, as Exhibit B the Form of Rights Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Stock.
10.1(1)+	—	Applix, Inc. 1994 Equity Incentive Plan.
10.2(1)+	—	Applix, Inc. 1984 Stock Option Plan.
10.3(3)+	—	Applix, Inc. 2000 Director Stock Option Plan.
10.4(6)	—	Applix, Inc. 2001 Employee Stock Purchase Plan.
10.5(5)	—	Single Tenant Commercial Lease by and between Westborough Land Realty Trust and the Registrant, dated January 23, 2001.
10.6+(5)	—	Employment Agreement dated June 27, 2000 between the Registrant and Jitendra Saxena, and Supplemental Agreement to Employment Agreement, dated March 19, 2001 between the Registrant and Jitendra Saxena.
10.7(7)	—	Consulting Agreement between the Registrant and David C. Mahoney, dated September 10, 2001.
10.8(6)+	—	Executive Stock Option Acceleration Agreement between the Registrant and Craig Cervo, dated June 9, 2000.
10.9(6)+	—	Executive Change-in-Control Agreement between the Registrant and Alan Goldsworthy, dated July 3, 2001.
10.10(7)+	—	Executive Change-in-Control Agreement between the Registrant and Walt Hilger, dated September 27, 2001.
10.11(4)	—	Secured Promissory Note and Pledge Agreement entered into on July 31, 2000 between the Company and Alan Goldsworthy.
10.12(4)	—	Secured Promissory Note and Pledge Agreement entered into on July 31, 2000 between the Company and Ed Terino.
10.13(5)	—	Asset Purchase Agreement by and among Real-Time International, Inc., VistaSource, Inc., Applix, Inc., Veriteam, Inc., VistaSource France, VistaSource GmbH and VistaSource UK, Ltd., dated as of March 14, 2001.
10.14	—	Export-Import Bank Loan and Security Agreement, dated December 5, 2001 among the Registrant, Applix (UK) Limited, Applix Australia Pty, Ltd., Veritem Ltd. And Silicon Valley Bank.

51

10.15	—	Borrower Agreement by the Registrant, Applix (UK) Limited, Applix Australia Pty, Ltd., Veriteam, Ltd. in favor of the Export-Import Bank and Silicon Valley Bank.
10.16	—	Loan and Security Agreement, dated December 5, 2001 between the Registrant and Silicon Valley Bank.
10.17	—	Non-Recourse Receivables Purchase Agreement dated December 31, 2001, between the Registrant and Silicon Valley Bank
21.1	—	Subsidiaries of the Registrant.
23.1	—	Consent of Ernst & Young LLP.
23.2	—	Consent of PricewaterhouseCoopers LLP.

1.	Incorporated by reference from the Company’s Registration Statement on Form S-1 (File no. 33-85688).
2.	Incorporated by reference to the Company’s Registration Statement on Form 8-A dated September 20, 2000.
3.	Incorporated by reference to the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Commission on March 30, 2000.
4.	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000, as filed with the Commission on November 14, 2000.
5.	Incorporated by reference to the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000, as originally filed with the Commission on April 2, 2001 and amended on June 15, 2001.
6.	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001, as filed with the Commission on August 13, 2001.
7.	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001, as filed with the Commission on November 14, 2001.
+	Management contract or compensatory plan.

52 EX-10.14 3 b42037aiex10-14.txt EX-10.14 EXPORT-IMPORT BANK LOAN AND SEC AGREEMENT EXHIBIT 10.14 EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT THIS EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT (this "Exim Agreement") dated as of December 5, 2001,between SILICON VALLEY BANK, a California chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462, doing business under the name "Silicon Valley East" ("Bank") and APPLIX, INC., a Massachusetts corporation ("Applix US") with its chief executive office at 289-291 Turnpike Road, Westboro, Massachusetts 01581, APPLIX (UK) LIMITED ("Applix UK"), with offices at 289-291 Turnpike Road, Westboro, Massachusetts 01581, APPLIX AUSTRALIA PTY, LTD. ("Applix Australia") with offices at 289-291 Turnpike Road, Westboro, Massachusetts 01581, and VERITEAM LIMITED ("Veriteam") with offices at 289-291 Turnpike Road, Westboro, Massachusetts 01581, (Applix US, Applix UK, Applix Australia and Veriteam are hereinafter jointly, severally and collectively referred to as "Borrower" and each as "Borrower Entity"), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows: 1 RECITALS. A. Applix US and Bank are parties to that certain Loan and Security Agreement of even date, as may be amended from time to time (as may be amended, the "Domestic Agreement"), together with related documents executed in conjunction therewith. B. Borrower and Bank desire in this Exim Agreement to set forth their agreement with respect to a working capital facility to be guaranteed by the Export-Import Bank of the United States (the "Exim Bank"). SECTION 2. LOAN AND TERMS OF PAYMENT 2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank the unpaid principal amount of all Advances and interest on the unpaid principal amount of the Advances as and when due in accordance with this Exim Agreement. 2.2 REVOLVING ADVANCES. Subject to the terms and conditions of this Exim Agreement, Bank agrees to make Advances to Borrower in an amount not to exceed (i) the Exim Committed Line or the Borrowing Base, whichever is less, minus (ii) the FX Reserve, minus (iii) the aggregate outstanding Advances hereunder, as determined by the Borrowing Base Certificate to be delivered to the Bank. To evidence the Advances, Borrower shall execute and deliver to Bank on the date hereof a promissory note (the "Note") in substantially the form attached hereto as EXHIBIT B. Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile transmission or telephone no later than 3:00 p.m. Eastern time, on the Business Day that the Advance is to be made. Each such notification shall be promptly confirmed by a Payment/Advance Form in substantially the form of EXHIBIT C hereto together with any additional documentation required under the Borrower Agreement, including without limitation, as set forth in Section 2.03 of the Borrower Agreement. In addition to the procedure set forth in the preceding sentence, Bank is authorized to make Advances under this Exim Agreement, based upon instructions received from a Responsible Officer. Bank shall be entitled to rely on any telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer or a designee (as designated in writing by a Responsible Officer) thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section to Borrower's deposit account. Amounts borrowed pursuant to this Section may be repaid at any time and re-borrowed at any time during the term of this Exim Agreement so long as no Event of Default has occurred and is continuing. Only Applix US may request Advances hereunder. Notwithstanding the foregoing, each Borrower hereunder shall be obligated to repay all Advances made hereunder, regardless of which Borrower actually receives said Advance, as if each Borrower hereunder directly received ALL Advances. Each Borrower acknowledges and agrees that, to the extent the other Borrower has or may have certain rights of subrogation or reimbursement against the other for claims arising out of this Exim Agreement, that those rights are hereby waived. 2.3 FOREIGN EXCHANGE SUBLIMIT. If there is availability under the Exim Committed Line and the Borrowing Base, then Borrower may enter in foreign exchange forward contracts with the Bank under which Borrower commits to purchase from or sell to Bank a set amount of foreign currency more than one business day after the contract date (the "FX Forward Contract"). Bank shall subtract 10% of each outstanding FX Forward Contract from the foreign exchange sublimit which is a maximum of $2,500,000.00 (the "FX Reserve"). The total FX Forward Contracts at any one time may not exceed 10 times the amount of the FX Reserve. Bank may terminate the FX Forward Contracts if an Event of Default occurs. 2.4 OVERADVANCES. If, at any time or for any reason, the amount of Obligations under this Exim Agreement owed by Borrower to Bank pursuant to Section 2.2 and 2.3 of this Exim Agreement is greater than the lesser of (i) the Borrowing Base or (ii) the Exim Committed Line, the Borrower shall immediately pay to Bank, in cash, the amount of such excess. 2.5 INTEREST RATE; PAYMENTS. (i) INTEREST RATE. Advances accrue interest on the outstanding principal balance at a per annum rate equal to the aggregate of the Bank's Prime Rate, and one percent (1.0%). After an Event of Default, Obligations shall bear interest at four percent (4.0%) above the rate effective immediately before the Event of Default. The interest rate shall increase or decrease when the Prime Rate changes. Interest is computed on the basis of a 360 day year for the actual number of days elapsed. (ii) PAYMENTS. Interest is payable on the Payment Date of each month. Bank may debit any of Borrower's deposit accounts (unless prohibited by law) including Account Number __________ for principal and interest payments or any amounts Borrower owes Bank, including, without limitation, Bank Expenses. Bank shall promptly notify Borrower when it debits Borrower's accounts. These debits are not a set-off. Payments received after 12:00 noon Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue. (iii) ADDITIONAL PAYMENTS. Whenever Borrower is obliged to make a deduction in respect of Tax from any payment under any Obligation: (A) it shall promptly pay the amount deducted to the appropriate Government Agency; (B) within 30 days of the end of the month in which the deduction is made, it shall deliver to Bank official receipts or other evidence of payment acceptable to Bank; and (C) unless the Tax is an Excluded Tax, it shall pay Bank on the due date of the payment any additional amounts necessary (as determined by Bank) to ensure that Bank receives when due a net amount (after payment of any Taxes in respect of those additional amounts) in the relevant currency equal to the full amount which it would have received had a deduction not been made. It shall indemnify Bank against the Tax and any amounts recoverable from Bank in respect of the Tax. Borrower waives any statutory right to recover from Bank any amount paid under this clause. The obligations of Borrower under this clause survive the payment of all moneys owing under this Exim Agreement or the termination of this Exim Agreement. 2.6 FEES. Borrower shall pay to Bank: (i) EXIM FEE. A fully earned, non-refundable facility fee of $37,250.00 due on the Closing Date; and 2 (ii) BANK EXPENSES. All Bank Expenses (including reasonable attorneys' fees and expenses incurred through and after the Closing Date) when due. 2.7 USE OF PROCEEDS. Borrower will use the proceeds of Advances only for the purposes specified in the Borrower Agreement. Borrower shall not use the proceeds of the Advances for any purpose prohibited herein or by the Borrower Agreement. SECTION 3. CONDITIONS OF LOANS 3.1 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank to make each Advance, including the initial Advance, is subject to the following conditions: (a) timely receipt by Bank of the Payment/Advance Form as provided in Section 2.2; (b) timely receipt by Bank of an Export-Related Borrowing Base Certificate as defined in the Borrower Agreement; (c) the Exim Guarantee shall be in full force and effect; (d) the Bank shall have received, in form and substance satisfactory to Bank, all of the documents set forth in Section 3.1 of the Domestic Agreement; (e) evidence, in a form reasonably satisfactory to Bank, that the Charge upon Applix Australia's business assets has been provisionally registered by the Australian Securities and Investments Commission and Bank has received a properly executed and registered (to the satisfaction of Bank) Australian Securities & Investments Commission Form 309 and 350; (f) evidence, in a form reasonably satisfactory to Bank, that the Charge and each document required to be stamped with duty under Australian law has been lodged for stamping at the relevant Australian State agency with a cheque for the appropriate stamp duty; (g) a statutory declaration, in a form satisfactory to Bank, made on behalf of Applix Australia stating the location of its assets to be subject to the Charge; (h) a certificate entitled "Declaration of Solvency", in a form satisfactory to Bank, be provided by two directors of Applix Australia; (i) if required by Bank or applicable law, a registered power of attorney under which Applix Australia executed the Exim Loan Documents and any documents relating to them to in which it is expressed to be a party; (j) extracts of minutes of a meeting of directors of Applix Australia authorising the execution of the Exim Loan Documents, explaining why the directors believe it is in the best interests of the Applix Australia; (k) extracts of minutes of a meeting of all members of Applix Australia authorising execution of the Exim Loan Documents and any documents the execution of which are contemplated by the Exim Loan Documents or are necessary or incidental to the execution and performance of the Exim Loan Documents; (l) a certificate of incorporation constituent documents for Applix Australia, if they are not already held by Bank; 3 (m) the acceptance by the appropriate party of its appointment as agent of Applix Australia for accepting service of process; and (n) except as otherwise disclosed to the Bank, the representations and warranties contained in Section 5 hereof shall be true and accurate in all material respects on and as of the date of such Payment/Advance Form and on the effective date of each Advance as though made at and as of each such date (except to the extent they relate specifically to an earlier date, in which case such representations and warranties shall continue to have been true and accurate as of such date or such representations and warranties that are no longer true due to changes or subsequent events permitted or not prohibited hereunder), and no potential Event of Default or Event of Default shall have occurred and be continuing, or would result from such Advance. The making of each Advance shall be deemed to be a representation and warranty by Borrower on the date of such Advance as to the accuracy of the facts referred to in this Section 3.1 (other than Section 3.1(c) above). SECTION 4. CREATION OF SECURITY INTEREST 4.1 GRANT OF SECURITY INTEREST. Applix US hereby grants Bank, to secure the payment and performance in full of all of the Obligations and the performance of each of Applix US's duties under the Exim Loan Documents, a continuing security interest in the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Applix US warrants and represents that the security interest granted herein shall be a first priority security interest in the Collateral. The Collateral may also be subject to Permitted Liens. Notwithstanding the foregoing, it is expressly acknowledged and agreed that the security interest created in this Exim Agreement in all of the Collateral (with the exception of Exim Eligible Foreign Accounts, but only to the extent any Advances are actually made by the Bank to the Borrower based upon such Exim Eligible Foreign Accounts), is subject to and subordinate to the security interest granted to the Bank in the Domestic Agreement with respect to the Collateral. Borrower agrees that Bank may file (with the UCC Financing Statements to be filed hereunder) a notice that any disposition of the Collateral in violation of this Exim Agreement, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code. If this Exim Agreement is terminated, Bank's lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. Notwithstanding the foregoing, the security interest granted herein does not extend to and the term "Collateral" does not include any portion of any license or contract solely to the extent (i) the granting of a security interest in such license or contract would be contrary to applicable law, or (ii) that such licenses or contracts are nonassignable by their terms (but only to the extent the prohibition is enforceable under applicable law, including, without limitation, the Code) without the consent of the licensor or other party (but only to the extent such consent has not been obtained). Bank agrees to subordinate or release its security interest in certain specific Equipment financed by Borrower in the manner set forth in the Domestic Agreement, subject to the limitations and restrictions thereon set forth in the Domestic Agreement. SECTION 5. REPRESENTATIONS AND WARRANTIES Borrower represents, warrants and covenants as follows: 5.1 DOMESTIC LOAN DOCUMENTS. The representations and warranties contained in the Domestic Loan Documents, which are incorporated by reference into this Exim Agreement, are true and correct. SECTION 6. AFFIRMATIVE COVENANTS Borrower covenants and agrees that, until payment in full of all Obligations, it shall do all of the following: 6.1 DOMESTIC LOAN DOCUMENTS. Applix US shall comply in all respects with the terms and provisions of the Domestic Loan Documents, which terms and provisions are incorporated into this Exim Agreement and shall survive the termination of Domestic Agreement, which shall include, without limitation, compliance with the financial 4 reporting requirements set forth in Section 6.2 of the Domestic Agreement and the financial covenants set forth in Section 6.6 of the Domestic Agreement. In addition to the foregoing, each of Applix UK, Applix Australia and Veriteam shall remit monthly to the United States all proceeds of collected Accounts; provided, however, that so long as no event of default occurs and is continuing hereunder, Applix UK, Applix Australia and Veriteam shall remit monthly to the United States all proceeds of collected Accounts net of reasonable and customary operating expenses of each of Applix UK, Applix Australia and Veriteam. Notwithstanding the foregoing, the proceeds of Advances hereunder may not be transferred to any of Applix UK, Applix Australia or Veriteam. 6.2 TERMS OF SALE. Borrower shall cause all sales of products upon which Advances are based to be on open account to creditworthy buyers that have been preapproved in writing by Bank and Exim Bank. 6.3 BORROWER AGREEMENT. Borrower shall comply with all of the terms of the Borrower Agreement, including without limitation, the delivery of any and all notices required pursuant to Sections 2.11 and/or 2.18 of the Borrower Agreement. Unless otherwise specifically indicated in this Exim Agreement that the provisions of this Exim Agreement control due to the Exim Bank's written waiver dated September 21, 2001 of certain terms of the Borrower Agreement, in the event of any conflict or inconsistency between any provision contained in the Borrower Agreement with any provision contained in this Exim Agreement, the more strict provision, with respect to Borrower, shall control. 6.4 NOTICE IN EVENT OF FILING OF ACTION FOR DEBTOR'S RELIEF. Borrower shall notify Bank in writing within five (5) days of the occurrence of any of the following: (1) Borrower begins or consents in any manner to any proceeding or arrangement for its liquidation in whole or in part or to any other proceeding or arrangement whereby any of its assets are subject generally to the payment of its liabilities or whereby any receiver, trustee, liquidator or the like is appointed for it or any substantial part of its assets (including without limitation the filing by Borrower of a petition for appointment as debtor-in-possession under Title 11 of the U.S. Code); (2) Borrower fails to obtain the dismissal or stay on appeal within thirty (30) calendar days of the commencement of any proceeding arrangement referred to in (1) above; (3) Borrower begins any other procedure for the relief of financially distressed or insolvent debtors, or such procedure has been commenced against it, whether voluntarily or involuntarily, and such procedure has not been effectively terminated, dismissed or stayed within thirty (30) calendar days after the commencement thereof, or (4) Borrower begins any procedure for its dissolution, or a procedure therefor has been commenced against it. 6.5 PAYMENT IN DOLLARS. Borrower shall require payment of the Exim Eligible Foreign Accounts in United States Dollars or an Acceptable Foreign Currency subject to the terms of this Exim Agreement for the products, unless the Exim Bank otherwise agrees in writing hereafter. 6.6 FURTHER ASSURANCES. At any time and from time to time Borrower shall (i) execute and deliver such further instruments, (ii) take such further action as may reasonably be requested by Bank, and (iii) deliver such additional information, reports, contracts, invoices and other data concerning the Collateral as may reasonably be requested by Bank, all of the foregoing in furtherance of the purposes of this Exim Agreement. SECTION 7. NEGATIVE COVENANTS Prior to the (i) payment in full of outstanding Obligations, and (ii) termination of Bank's commitment to make any Advance: 7.1 DOMESTIC LOAN DOCUMENTS. Applix US shall not violate or otherwise fail to comply with any provisions of the Domestic Loan Documents, which provisions are incorporated into this Exim Agreement. 7.2 BORROWER AGREEMENT. Borrower shall not violate or otherwise fail to comply with any provision of the Borrower Agreement, including without limitation the negative covenants set forth in Section 2.15. 7.3 EXIM GUARANTEE. Borrower shall not take any action, or permit any action to be taken, that causes 5 or, with the passage of time, could reasonably be expected to cause, the Exim Guarantee to cease to be in full force and effect. SECTION 8. EVENTS OF DEFAULT Any one of the following is an Event of Default: 8.1 PAYMENT DEFAULT. If Borrower fails to pay within three (3) days of when due, any of the Obligations. 8.2 COVENANT DEFAULT; CROSS DEFAULT. If Borrower fails or neglects to perform, keep, or observe any material term, provision, condition, covenant, or agreement contained in this Exim Agreement, in any of the Domestic Loan Documents (applicable to such Borrower Entity) which terms and provisions are incorporated into this Exim Agreement and shall survive the termination of Domestic Agreement, the Borrower Agreement, or the Exim Loan Documents, or an Event of Default occurs under any of the Domestic Loan Documents or the Borrower Agreement and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure such default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default (provided that no Advances will be required to be made during such cure period); 8.3 INSOLVENCY, ADMINISTRATION, WINDING UP. (i) Borrower becomes insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made before any Insolvency Proceeding is dismissed). With respect to Applix Australia: (i) An administrator of is appointed; (ii) Except for the purpose of a solvent reconstruction or amalgamation previously approved by Bank: (A) an application or an order is made, proceedings are commenced, a resolution is passed or proposed in a notice of meeting, an application to a court or other steps are taken for: (I) the winding up, dissolution or administration of Applix Australia; or (II) Applix Australia entering into an arrangement, compromise or composition with or assignment for the benefit of its creditors or a class of them, (other than frivolous or vexatious applications, proceedings, notices and steps); or (B) Applix Australia ceases, suspends or threatens to cease or suspend the conduct of all or a substantial part of its business or disposes of or threatens to dispose of a substantial part of its assets; or (iii) Applix Australia: (A) is, or under legislation is presumed or taken to be, insolvent (other than as the result of a failure to pay a debt or claim the subject of a good faith dispute); or (B) stops or suspends or threatens to stop or suspend payment of all or a class of its debts; 8.4 ENFORCEMENT AGAINST ASSETS. (i) A receiver, receiver and manager, administrative receiver or similar officer is appointed to: (ii) a security interest is enforced over; or (iii) a distress, attachment or other execution is levied or enforced or applied for over, all or any of the assets and undertaking of Applix Australia; or 8.5 EXIM GUARANTEE. If the Exim Guarantee ceases for any reason to be in full force and effect, or if the Exim Bank declares the Exim Guarantee void or revokes or purports to revoke any obligations under the Exim Guarantee. SECTION 9. BANK'S RIGHTS AND REMEDIES 9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following: (a) Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 of the Domestic Agreement occurs all Obligations are immediately due and payable without any action by Bank); 6 (b) Stop advancing money or extending credit for Borrower's benefit under this Exim Agreement or under any other agreement between Borrower and Bank; (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; (d) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law, Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law, Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank's rights or remedies; (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower; (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral in accordance with the Code or other applicable law. Subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law, Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Bank's benefit, subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law; and (g) Otherwise dispose of the Collateral according to the Code. 9.2 EXIM DIRECTION. Upon the occurrence of an Event of Default, Exim Bank shall have a right to: (i) direct Bank to exercise the remedies specified in Section 9.1 and (ii) request that Bank accelerate the maturity of any other loans to Borrower as to which Bank has a right to accelerate. 9.3 EXIM NOTIFICATION. Bank shall have the right to immediately notify Exim Bank in writing if it has knowledge of the occurrence of any of the following events: (1) any failure to pay any amount due under this Exim Agreement or the Note; (2) the Borrowing Base is less than the sum of outstanding Advances hereunder and not promptly repaid in accordance with Section 2.4 hereof; (3) any failure to pay when due any amount payable to Bank by the Borrower under any loan(s) extended by Bank to Borrower; (4) the filing of an action for debtor's relief by, against, or on behalf of Borrower; or (5) any threatened or pending material litigation against Borrower, or any material dispute involving Borrower. In the event that it sends such a notification to Exim Bank, Bank shall have the right to thereafter send Exim Bank a written report on the status of the events covered by said notification on each Business Day which occurs every thirty (30) calendar days after the date of said notification, until such time as Bank files a claim with Exim Bank or said default or other events have been cured. Bank shall not have any obligation to make any Advances following said notification to Exim Bank, unless Exim Bank gives its written approval thereto. If directed to do so by Exim Bank, Bank shall have a right promptly to exercise any rights it may have against Borrower to demand the immediate repayment of all amounts outstanding under the Exim Loan Documents. 9.4 REMEDIES CUMULATIVE. Bank's rights and remedies under this Exim Agreement, the Exim Loan Documents, the Domestic Loan Documents and all other agreements shall be cumulative. Bank shall have all other 7 rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given. 9.5 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, to be effective upon the occurrence and during the continuance of an Event of Default, to: (i) endorse Borrower's name on any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors; (iii) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; (iv) make, settle, and adjust all claims under Borrower's insurance policies; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank its power of attorney to sign Borrower's name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Advances hereunder. Bank's foregoing appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank's obligation to provide Advances terminates. 9.6 ACCOUNTS COLLECTION. In the event that an Event of Default occurs and is continuing, Bank may notify any account debtor of any Exim Eligible Foreign Accounts or other collateral of Bank's security interest in the funds and verify and/or collect the amount of such Account. Following and during the continuance of an Event of Default, any amounts received by Borrower shall be held in trust by such Borrower Entity for Bank, and, if requested by Bank, Borrower Entity shall immediately deliver such receipts to Bank in the form received from the account debtor, with proper endorsements for deposit. 9.7 BANK EXPENSES. Any Bank Expenses are immediately due and payable, and shall bear interest at the then applicable rate and be secured by the Collateral. No payments by Bank shall be deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. 9.8 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with reasonable banking practices regarding the safekeeping of collateral, the Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Except for the foregoing, Borrower bears all risk of loss, damage or destruction of the Collateral. 9.9 DEMAND WAIVER. Except as otherwise expressly set forth herein or as required by applicable law, Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. SECTION 10. NOTICES Unless otherwise provided in this Exim Agreement, all notices or demands by any party relating to this Exim Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at the address set forth in the Domestic Loan Documents. The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. 8 SECTION 11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER Massachusetts law governs the Exim Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Massachusetts; provided, however, that if for any reason Bank cannot avail itself of such courts in the Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY. BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS EXIM AGREEMENT, THE EXIM LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS EXIM AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. SECTION 12. GENERAL PROVISIONS 12.1 SUCCESSORS AND ASSIGNS. This Exim Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Exim Agreement or any rights or Obligations under it without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the consent of or prior notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Exim Agreement, the Exim Loan Documents or any related agreement. 12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the Bank and its officers, employees and agents harmless against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Exim Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys' fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 12.3 RIGHT OF SET-OFF. Applix US hereby grants to Bank, a lien, security interest and right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of the Bank or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower and any guarantor even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 12.4 TIME OF ESSENCE. Time is of the essence for the performance of all Obligations in this Exim Agreement. 12.5 SEVERABILITY OF PROVISION. Each provision of this Exim Agreement is severable from every other provision in determining the enforceability of any provision. 12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Exim Agreement must be in writing signed by both Bank and Borrower. This Exim Agreement and the Exim Loan Documents represent the entire agreement about this subject matter, and supersede prior negotiations or agreements. Without the prior written consent of Exim Bank, no material amendment of or deviation from the terms of this Exim Agreement or the Note shall be made 9 that would adversely affect the interests of Exim Bank under the Exim Guarantee, including without limitation the rescheduling of any payment terms provided for in this Exim Agreement. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Exim Agreement and the Exim Loan Documents merge into this Exim Agreement and the Exim Loan Documents. 12.7 COUNTERPARTS. This Exim Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one agreement. 12.8 SURVIVAL. All covenants, representations and warranties made in this Exim Agreement continue in full force while any Obligations remain outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run. SECTION 13. DEFINITIONS 13.1 DEFINITIONS. Except as otherwise defined, terms that are capitalized in this Exim Agreement shall have the meanings assigned in the Domestic Agreement. As used in this Exim Agreement, the following terms shall have the following definitions: "ACCEPTABLE FOREIGN CURRENCY" means any one of British Pounds Sterling, the Euro, French Francs, Australian Dollars and Dutch Guilders. "ACCOUNTS" means all presently existing and hereafter arising accounts, contract rights, and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower's books relating to any of the foregoing. "ADVANCES" means any loans or other extensions of credit hereunder. "BANK EXPENSES" means all: reasonable costs or expenses (including reasonable attorneys' fees and expenses) incurred in connection with the preparation, negotiation, and administration, registration of the Exim Loan Documents (including stamp duties imposed by Australian law, registration fees imposed by Australian law and fees and penalties imposed by Australian law), including any costs incurred in relation to opposing or seeking to obtain relief from any stay or restructuring order prohibiting Bank from exercising its rights as a secured creditor, foreclosing upon or disposing of Collateral, or such related matters; and Bank's reasonable attorneys' fees and expenses incurred in enforcing or defending the Exim Loan Documents or any transaction contemplated by the Exim Loan Documents, whether or not suit is brought, unless a final court of competent jurisdiction finds the Bank acted with gross negligence or willful misconduct. "BORROWER AGREEMENT" means the Export-Import Bank of the United States Working Capital Guarantee Program Borrower Agreement between Borrower and Bank. "BORROWING BASE" means an amount equal to ninety percent (90%) of Exim Eligible Foreign Accounts which Exim Eligible Foreign Accounts (i) are billed and collected by each of the entities comprising the Borrower Entities in the United States, United Kingdom or Australia AND (ii) if payable in an Acceptable Foreign Currency, Borrower has made arrangements satisfactory to the Bank in its sole discretion with respect to a hedge on such Exim Eligible Foreign Accounts, PROVIDED HOWEVER that such percentage shall be reduced to (A) eighty (80%) percent with respect to Exim Eligible Foreign Accounts which (i) are billed and collected by the Borrower in the United States, United Kingdom, or Australia (ii) are billed in British Pounds AND (iii) Borrower has NOT made arrangements satisfactory to the Bank in its sole discretion with respect to a hedge on such Exim Eligible Foreign Accounts, and (B) seventy (70%) percent with respect to Exim Eligible Foreign Accounts which (i) are billed and collected by the Borrower in the United States or United Kingdom (ii) are 10 billed in any Acceptable Foreign Currency other than British Pounds AND (iii) Borrower has NOT made arrangements satisfactory to the Bank in its sole discretion with respect to a hedge on such Exim Eligible Foreign Accounts. Notwithstanding the terms of the Borrower Agreement, Bank will not consider Borrower's Inventory (if any) for inclusion in the Borrowing Base. "CHARGE" means any deed of charge to be entered into by Applix Australia and Bank on or about the date of this Agreement. "COLLATERAL" is the property described on EXHIBIT A. "DOMESTIC AGREEMENT" has the meaning set forth in recital paragraph A. "DOMESTIC LOAN DOCUMENTS" means the Domestic Agreement and all instruments, documents, and agreements executed in connection with the Domestic Agreement. "EXIM BANK" means Export-Import Bank of the United States. "EXIM COMMITTED LINE" means Two Million Five Hundred Thousand Dollars ($2,500,000.00). "EXIM ELIGIBLE FOREIGN ACCOUNTS" means those Accounts that arise in the ordinary course of Borrower's business and are derived from exports of goods or services originating in the United States, AND (i) with respect to which the account debtor is not a resident of the United States; (ii) that have been validly assigned or pledged to Bank in a manner satisfactory to the Bank giving the Bank a first priority perfected security interest, or its equivalent, in such Accounts, (iii) comply with all of Borrower's representations and warranties to Bank, and (iv) that either (A) the Bank approves on a case by case basis (which shall be required with respect to foreign Accounts on open account terms), or (B) are supported by letter(s) of credit acceptable to Bank. Standards of eligibility may be fixed revised from time to time by Bank in Bank's reasonable judgment and upon notification thereof to the Borrower in accordance with the provisions hereof. Exim Eligible Foreign Accounts shall NOT include the following: (a) Accounts with a term in excess of ninety (90) days; (b) Accounts that the account debtor has failed to pay within sixty (60) calendar days of the original due date of the invoice unless such accounts are insured through Exim Bank export credit insurance for comprehensive commercial and political risk, or through Exim Bank approved private insurers for comparable coverage, in which case ninety (90) calendar days shall apply; (c) Accounts with respect to an account debtor, fifty percent (50%) or more of whose Accounts the account debtor has failed to pay within ninety (90) days of the original date of invoice; (d) Accounts evidenced by a letter of credit until the date of shipment of the items covered by the subject letter of credit; (e) Accounts with respect to which an invoice has not been sent; (f) Accounts with respect to which the account debtor is an Affiliate, officer or director of Borrower; (g) Accounts with respect to which the account debtor is located in a country in which Exim Bank is legally prohibited from doing business as designated in the Country Limitation Schedule (as such term is defined in the Borrower Agreement); (h) Accounts with respect to which the account debtor is located in a country in which Exim 11 Bank coverage is not available for commercial reasons; (i) Accounts with respect to which Borrower is liable to the account debtor for goods sold or services rendered by the account debtor to Borrower, but only to the extent of Borrower's liability to such account debtor, or if the account debtor is subject to an Insolvency Proceeding or is otherwise insolvent. (j) Account which arise for the sales of items not in the ordinary course of Borrower's business; (k) Accounts not owned by Borrower or which are subject to any rights, claim or interest of another Person or than the lien in favor of the Bank; (l) Accounts with a credit balance over sixty (60) days from invoice date; (m) Accounts with respect to which the account debtor has disputed liability or makes any claim with respect thereto (but only to the extent of the amount subject to such dispute or claim), or is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of business; (n) Accounts with respect to an account debtor, including Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%) of the aggregate dollar amount of all Accounts, only to the extent such obligations exceed such percentage, except as approved in writing by Bank; (o) Accounts generated by the sale of products purchased for military purposes or that are due and payable from a military Buyer; (p) Accounts, if any, generated by sales of Inventory which constitutes defense articles or defense services; (q) Accounts payable in currency other than Dollars or an Acceptable Foreign Currency, except as may be approved in writing by the Bank and the Exim Bank; (r) Accounts which are due and owing and the collection of which must be made outside the United States or the United Kingdom or Australia; (s) Accounts the collection of which Bank or Exim Bank determines in its reasonable judgment to be doubtful; and (t) Accounts which are not "Eligible Export-Related Accounts Receivable", as such term is defined in the Borrower Agreement. Notwithstanding the terms of the Borrower Agreement to the contrary, due to Exim Bank's written waiver dated September 21, 2001 of certain terms of the Borrower Agreement, and subject to the terms and conditions of this Exim Agreement, Exim Eligible Foreign Accounts may include Accounts that are billed in the United States, the United Kingdom or Australia and also may include Accounts that are billed in United States Dollars or an Acceptable Foreign Currency. "EXIM GUARANTEE" means that certain Master Guarantee Agreement or other agreement, as amended from time to time, the terms of which are incorporated by reference into this Exim Agreement, pursuant to which Exim Bank guarantees Borrower's obligations under this Exim Agreement. "EXIM LOAN DOCUMENTS" means, collectively, this Exim Agreement, any note or notes executed by Borrower, and any other agreement entered into between Borrower and Bank in connection with this Exim Agreement, all as amended or extended from time to time. 12 "EXIM MATURITY DATE"shall be the date which is twelve (12) months from the closing date of the Domestic Agreement. "FX FORWARD CONTRACT" is defined in Section 2.3. "FX RESERVE" is defined in Section 2.3. "NOTE" is defined in Section 2.2. "OBLIGATIONS" shall mean all debts, principal, interest, Bank Expenses arising under the Exim Loan Documents, the Borrower Agreement, the Domestic Loan Documents and other amounts Borrower owes Bank now or later, and including interest accruing after Insolvency Proceedings begin. "PAYMENT DATE" means the first calendar day of each month commencing on the first such date after the Closing Date and ending on the Exim Maturity Date. "RESPONSIBLE OFFICER" means each of the Chief Executive Officer and Chief Financial Officer of the Borrower. 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the date first above written. BORROWER: APPLIX, INC. By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ------------------------------------------- Title: President and CEO ------------------------------------------- APPLIX (UK) LIMITED By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ------------------------------------------- Title: Director ------------------------------------------- APPLIX AUSTRALIA PTY, LTD. By /s/ Bruce McCarthy ------------------------------------------- Name: Bruce McCarthy ------------------------------------------- Office Held: Director -------------------------------------- By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ------------------------------------------- Office Held: Director ------------------------------------- VERITEAM LIMITED By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ------------------------------------------- Title: Director ------------------------------------------- 14 BANK: SILICON VALLEY BANK, d/b/a SILICON VALLEY EAST By /s/ R. Bryan Jadot ------------------------------------------- Name: R. Bryan Jadot ------------------------------------------- Title: Vice President ------------------------------------------- SILICON VALLEY BANK by /s/ Maggie Garcia ------------------------------------------- Name: Maggie Garcia ------------------------------------------- Title: Loan Admin. Team Leader ------------------------------------------- (Signed in Santa Clara County, California) 15 EXHIBIT A The Collateral consists of all right, title and interest of Applix US in and to the following: All goods, equipment, inventory, contract rights or rights to payment of money, franchise agreements, general intangibles (including payment intangibles), accounts (including health-care receivables), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities, and all other investment property supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and All Applix US's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. Notwithstanding the foregoing, the Collateral does not include in any event: Any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished; any and all trade secrets, and any and all intellectual property rights in computer software and computer software products; any and all design rights which may be available to Applix US; all mask work or similar rights available for the protection of semiconductor chips; all patents, patent applications and like protections; any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections; all licenses or other rights to use any of the foregoing; or any claims for damages by way of any past, present and future infringement of any of the foregoing. Notwithstanding the foregoing, the Collateral shall include all accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing intellectual property. To the extent a court of competent jurisdiction holds that a security interest in any Intellectual Property is necessary to have a security interest in any accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing Intellectual Property, then the Collateral shall, effective as of the Closing Date, include the Intellectual Property, to the extent necessary to permit perfection of the Bank's security interest in such accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the Intellectual Property and to the extent such inclusion is not violative of, prohibited by or would trigger an adverse consequence under any material agreement relating to such Intellectual Property or applicable law. 16 EXHIBIT B $2,500,000.00 _____________, 2001 FOR VALUE RECEIVED, the undersigned (the "Borrower"), promises to pay to the order of Silicon Valley Bank ("Bank"), at such place as the holder hereof may designate, in lawful money of the United States of America, the aggregate unpaid principal amount of all advances ("Advances") made by Bank to Borrower, up to a maximum principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00), plus interest on the aggregate unpaid principal amount of such Advances, at the rates and in accordance with the terms of the Export-Import Bank Loan and Security Agreement between Borrower and Bank of even date herewith, as amended from time to time (the "Loan Agreement") on the first calendar day of each month after an Advance has been made. The entire principal amount and all accrued interest shall be due and payable on __________________, 2002, or on such earlier date, as provided for in the Loan Agreement. Borrower irrevocably waives the right to direct the application of any and all payments at any time hereafter received by Bank from or on behalf of Borrower, and Borrower irrevocably agrees that Bank shall have the continuing exclusive right to apply any and all such payments against the then due and owing obligations of Borrower as Bank may reasonably deem advisable. In the absence of a specific determination by Bank with respect thereto, all payments shall be applied in the following order: (a) then due and payable fees and expenses; (b) then due and payable interest payments and mandatory prepayments; and (c) then due and payable principal payments and optional prepayments. Bank is hereby authorized by Borrower to endorse on Bank's books and records each Advance made by Bank under this Note and the amount of each payment or prepayment of each such Advance received by Bank; it being understood, however, that failure to make any such endorsement (or any errors in notation) shall not affect the obligations of Borrower with respect to Advances made hereunder, and payments by Borrower shall be credited to Borrower notwithstanding the failure to make a notation (or any errors in notation) thereof on such books and records. Borrower promises to pay Bank all reasonable costs and reasonable expenses including all reasonable attorneys' fees, incurred in such collection or in any suit or action to collect this Note or in any appeal thereof, unless a final court of competent jurisdiction finds that the Bank acted with gross negligence or willful misconduct. Borrower waives presentment, demand, protest, notice of protest, notice of dishonor, notice of nonpayment, and any and all other notices and demands in connection with the delivery, acceptance, performance, default or enforcement of this Note, except as provided under the Loan Agreement or required under applicable law. No delay by Bank in exercising any power or right hereunder shall operate as a waiver of any power or right. Time is of the essence as to all obligations hereunder. This Note is issued pursuant to the Loan Agreement, which shall govern the rights and obligations of Borrower with respect to all obligations hereunder. The law of the Commonwealth of Massachusetts shall apply to this Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS NOTE OR THE LOAN AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE EXIM LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER 17 RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. BORROWER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. APPLIX, INC. By ----------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------ APPLIX (UK) LIMITED By ----------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------ APPLIX AUSTRALIA PTY, LTD. By ----------------------------------------------- Name: -------------------------------------------- Office Held: ------------------------------------- By ----------------------------------------------- Name: -------------------------------------------- Office Held: ------------------------------------- VERITEAM LIMITED By ----------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------ 18 EX-10.15 4 b42037aiex10-15.txt EX-10.15 BORROWER AGREEMENT EXHIBIT 10.15 EXPORT-IMPORT BANK OF THE UNITED STATES WORKING CAPITAL GUARANTEE PROGRAM BORROWER AGREEMENT THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by the entities identified as Borrower on the signature page hereof (collectively, the "Borrower") in favor of the Export-Import Bank of the United States ("Ex-Im Bank") and the institution identified as Lender on the signature page hereof ("Lender"). RECITALS Borrower has requested that Lender establish a Loan Facility in favor of Borrower for the purposes of providing Borrower with pre-export working capital to finance the manufacture, production or purchase and subsequent export sale of Items. It is a condition to the establishment of such Loan Facility that Ex-Im Bank guarantee the payment of ninety percent (90%) of certain credit accommodations subject to the terms and conditions of a Master Guarantee Agreement, the Loan Authorization Agreement, and to the extent applicable, the Delegated Authority Letter Agreement. Borrower is executing this Agreement for the benefit of Lender and Ex-Im Bank in consideration for and as a condition to Lender's establishing the Loan Facility and Ex-Im Bank's agreement to guarantee such Loan Facility pursuant to the Master Guarantee Agreement. NOW, THEREFORE, Borrower hereby agrees as follows: ARTICLE I DEFINITIONS 1.01 DEFINITION OF TERMS. As used in this Agreement, including the Recitals to this Agreement and the Loan Authorization Agreement, the following terms shall have the following meanings: "Accounts Receivable" shall mean all of Borrower's now owned or hereafter acquired (a) "accounts" (as such term is defined in the UCC), other receivables, book debts and other forms of obligations, whether arising out of goods sold or services rendered or from any other transaction; (b) rights in, to and under all purchase orders or receipts for goods or services; (c) rights to any goods represented or purported to be represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods); (d) moneys due or to become due to such Borrower under all purchase orders and contracts for the sale of goods or the performance of services or both by Borrower (whether or not yet earned by performance on the part of Borrower), including the proceeds of the foregoing; (e) any notes, drafts, letters of credit, insurance proceeds or other instruments, documents and writings evidencing or supporting the foregoing; and (f) all collateral security and guarantees of any kind given by any other Person with respect to any of the foregoing. "Advance Rate" shall mean the rate specified in Section 5(C) of the Loan Authorization Agreement for each category of Collateral. "Business Day" shall mean any day on which the Federal Reserve Bank of New York is open for business. "Buyer" shall mean a Person that has entered into one or more Export Orders with Borrower. "Collateral" shall mean all property and interest in property in or upon which Lender has been granted a Lien as security for the payment of all the Loan Facility Obligations including the Collateral identified in Section 6 of the Loan Authorization Agreement and all products and proceeds (cash and non-cash) thereof. "Commercial Letters of Credit" shall mean those letters of credit subject to the UCP payable in Dollars and issued or caused to be issued by Lender on behalf of Borrower under a Loan Facility for the benefit of a supplier(s) of Borrower in connection with Borrower's purchase of goods or services from the supplier in support of the export of the Items. "Country Limitation Schedule" shall mean the schedule published from time to time by Ex-Im Bank and provided to Borrower by Lender which sets forth on a country by country basis whether and under what conditions Ex-Im Bank will provide coverage for the financing of export transactions to countries listed therein. "Credit Accommodation Amount" shall mean, the sum of (a) the aggregate outstanding amount of Disbursements and (b) the aggregate outstanding face amount of Letter of Credit Obligations. "Credit Accommodations" shall mean, collectively, Disbursements and Letter of Credit Obligations. "Debarment Regulations" shall mean, collectively, (a) the Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204 (May 26, 1988), (b) Subpart 9.4 (Debarment, Suspension, and Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R. 9.400-9.409 and (c) the revised Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common Rule), 60 Fed. Reg. 33037 (June 26, 1995). "Delegated Authority Letter Agreement" shall mean the Delegated Authority Letter Agreement, if any, between Ex-Im Bank and Lender. "Disbursement" shall mean, collectively, (a) an advance of a working capital loan from Lender to Borrower under the Loan Facility, and (b) an advance to fund a drawing under a Letter of Credit issued or caused to be issued by Lender for the account of Borrower under the Loan Facility. "Dollars" or "$" shall mean the lawful currency of the United States. "Effective Date" shall mean the date on which (a) the Loan Documents are executed by Lender and Borrower or the date, if later, on which agreements are executed by Lender and Borrower adding the Loan Facility to an existing working capital loan arrangement between Lender and Borrower and (b) all of the conditions to the making of the initial Credit Accommodations under the Loan Documents or any amendments thereto have been satisfied. "Eligible Export-Related Accounts Receivable" shall mean an Export-Related Account Receivable which is acceptable to Lender and which is deemed to be eligible pursuant to the Loan Documents, but in no event shall Eligible Export-Related Accounts Receivable include any Account Receivable: (a) that does not arise from the sale of Items in the ordinary course of Borrower's business; (b) that is not subject to a valid, perfected first priority Lien in favor of Lender; (c) as to which any covenant, representation or warranty contained in the Loan Documents with respect to such Account Receivable has been breached; (d) that is not owned by Borrower or is subject to any right, claim or interest of another Person other than the Lien in favor of Lender; (e) with respect to which an invoice has not been sent; (f) that arises from the sale of defense articles or defense services; (g) that is due and payable from a Buyer located in a country with which Ex-Im Bank is prohibited from doing business as designated in the Country Limitation Schedule; (h) that does not comply with the requirements of the Country Limitation Schedule; (i) that is due and payable more than one hundred eighty (180) days from the date of the invoice; (j) that is not paid within sixty (60) calendar days from its original due date, unless it is insured through Ex-Im Bank export credit insurance for comprehensive commercial and political risk, or through Ex-Im Bank approved private insurers for comparable coverage, in which case it is not paid within ninety (90) calendar days from its due date; (k) that arises from a sale of goods to or performance of services for an employee of Borrower, a stockholder of Borrower, a subsidiary of Borrower, a Person with a controlling interest in Borrower or a Person which shares common controlling ownership with Borrower; (l) that is backed by a letter of credit unless the Items covered by the subject letter of credit have been shipped; (m) that Lender or Ex-Im Bank, in its reasonable judgment, deems uncollectible for any reason; (n) that is due and payable in a currency other than Dollars, except as may be approved in writing by Ex-Im Bank; (o) that is due and payable from a military Buyer, except as may be approved in writing by Ex-Im Bank; (p) that does not comply with the terms of sale set forth in Section 7 of the Loan Authorization Agreement; (q) that is due and payable from a Buyer who (i) applies for, suffers, or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or calls a meeting of its creditors, (ii) admits in writing its inability, or is generally unable, to pay its debts as they become due or ceases operations of its present business, (iii) makes a general assignment for the benefit of creditors, (iv) commences a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as bankrupt or insolvent, (vi) files a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesces to, or fails to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) takes any action for the purpose of effecting any of the foregoing; (r) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper; (s) for which the Items giving rise to such Account Receivable have not been shipped and delivered to and accepted by the Buyer or the services giving rise to such Account Receivable have not been performed by Borrower and accepted by the Buyer or the Account Receivable otherwise does not represent a final sale; (t) that is subject to any offset, deduction, defense, dispute, or counterclaim or the Buyer is also a creditor or supplier of Borrower or the Account Receivable is contingent in any respect or for any reason; (u) for which Borrower has made any agreement with the Buyer for any deduction therefrom, except for discounts or allowances made in the ordinary course of business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto; or (v) for which any of the Items giving rise to such Account Receivable have been returned, rejected or repossessed. "Eligible Export-Related Inventory" shall mean Export-Related Inventory which is acceptable to Lender and which is deemed to be eligible pursuant to the Loan Documents, but in no event shall Eligible Export-Related Inventory include any Inventory: (a) that is not subject to a valid, perfected first priority Lien in favor of Lender; (b) that is located at an address that has not been disclosed to Lender in writing; (c) that is placed by Borrower on consignment or held by Borrower on consignment from another Person; (d) that is in the possession of a processor or bailee, or located on premises leased or subleased to Borrower, or on premises subject to a mortgage in favor of a Person other than Lender, unless such processor or bailee or mortgagee or the lessor or sublessor of such premises, as the case may be, has executed and delivered all documentation which Lender shall require to evidence the subordination or other limitation or extinguishment of such Person's rights with respect to such Inventory and Lender's right to gain access thereto; (e) that is produced in violation of the Fair Labor Standards Act or subject to the "hot goods" provisions contained in 29 US.C.ss.215 or any successor statute or section; (f) as to which any covenant, representation or warranty with respect to such Inventory contained in the Loan Documents has been breached; (g) that is not located in the United States; (h) that is demonstration Inventory; (i) that consists of proprietary software (i.e. software designed solely for Borrower's internal use and not intended for resale); (j) that is damaged, obsolete, returned, defective, recalled or unfit for further processing; (k) that has been previously exported from the United States; (l) that constitutes defense articles or defense services; (m) that is to be incorporated into Items destined for shipment to a country as to which Ex-Im Bank is prohibited from doing business as designated in the Country Limitation Schedule; (n) that is to be incorporated into Items destined for shipment to a Buyer located in a country in which Ex-Im Bank coverage is not available for commercial reasons as designated in the Country Limitation Schedule, unless and only to the extent that such Items are to be sold to such country on terms of a letter of credit confirmed by a bank acceptable to Ex-Im Bank; or (o) that is to be incorporated into Items whose sale would result in an Account Receivable which would not be an Eligible Export-Related Account Receivable. "Eligible Person" shall mean a sole proprietorship, partnership, limited liability partnership, corporation or limited liability company which (a) is domiciled, organized, or formed, as the case may be, in the United States; (b) is in good standing in the state of its formation or otherwise authorized to conduct business in the United States; (c) is not currently suspended or debarred from doing business with the United States government or any instrumentality, division, agency or department thereof; (d) exports or plans to export Items; (e) operates and has operated as a going concern for at least one (1) year; (f) has a positive tangible net worth determined in accordance with GAAP; and (g) has revenue generating operations relating to its core business activities for at least one year. "ERISA" shall mean the Employee Retirement Income Security Act of 1974 and the rules and regulations promulgated thereunder. "Export Order" shall mean a written export order or contract for the purchase by the Buyer from Borrower of any of the Items. "Export-Related Accounts Receivable" shall mean those Accounts Receivable arising from the sale of Items which are due and payable to Borrower in the United States. "Export-Related Accounts Receivable Value" shall mean, at the date of determination thereof, the aggregate face amount of Eligible Export-Related Accounts Receivable less taxes, discounts, credits, allowances and Retainages, except to the extent otherwise permitted by Ex-Im Bank in writing. "Export-Related Borrowing Base" shall mean, at the date of determination thereof, the sum of (a) the Export-Related Inventory Value multiplied by the Advance Rate applicable to Export-Related Inventory set forth in Section 5(C)(1) of the Loan Authorization Agreement, (b) the Export-Related Accounts Receivable Value multiplied by the Advance Rate applicable to Export-Related Accounts Receivable set forth in Section 5(C)(2) of the Loan Authorization Agreement, (c) if permitted by Ex-Im Bank in writing, the Retainage Value multiplied by the Retainage Advance Rate set forth in Section 5(C)(3) of the Loan Authorization Agreement and (d) the Other Assets Value multiplied by the Advance Rate applicable to Other Assets set forth in Section 5(C)(4) of the Loan Authorization Agreement. "Export-Related Borrowing Base Certificate" shall mean a certificate in the form provided or approved by Lender, executed by Borrower and delivered to Lender pursuant to the Loan Documents detailing the Export-Related Borrowing Base supporting the Credit Accommodations which reflects, to the extent included in the Export-Related Borrowing Base, Export-Related Accounts Receivable, Eligible Export-Related Accounts Receivable, Export-Related Inventory and Eligible Export-Related Inventory balances that have been reconciled with Borrower's general ledger, Accounts Receivable aging report and Inventory schedule. "Export-Related General Intangibles" shall mean those General Intangibles necessary or desirable to or for the disposition of Export-Related Inventory. "Export-Related Inventory" shall mean the Inventory of Borrower located in the United States that has been purchased, manufactured or otherwise acquired by Borrower for resale pursuant to Export Orders. "Export-Related Inventory Value" shall mean, at the date of determination thereof, the lower of cost or market value of Eligible Export-Related Inventory of Borrower as determined in accordance with GAAP. "Final Disbursement Date" shall mean, unless subject to an extension of such date agreed to by Ex-Im Bank, the last date on which Lender may make a Disbursement set forth in Section 10 of the Loan Authorization Agreement or, if such date is not a Business Day, the next succeeding Business Day; PROVIDED, HOWEVER, to the extent that Lender has not received cash collateral or an indemnity with respect to Letter of Credit Obligations outstanding on the Final Disbursement Date, the Final Disbursement Date with respect to an advance to fund a drawing under a Letter of Credit shall be no later than thirty (30) Business Days after the expiry date of the Letter of Credit related thereto. "GAAP" shall mean the generally accepted accounting principles issued by the American Institute of Certified Public Accountants as in effect from time to time. "General Intangibles" shall mean all intellectual property and other "general intangibles" (as such term is defined in the UCC) necessary or desirable to or for the disposition of Inventory. "Guarantor" shall mean each Person, if any, identified in Section 3 of the Loan Authorization Agreement who shall guarantee (jointly and severally if more than one) the payment and performance of all or a portion of the Loan Facility Obligations. "Guaranty Agreement" shall mean a valid and enforceable agreement of guaranty executed by each Guarantor in favor of Lender. "Inventory" shall mean all "inventory" (as such term is defined in the UCC), now or hereafter owned or acquired by Borrower, wherever located, including all inventory, merchandise, goods and other personal property which are held by or on behalf of Borrower for sale or lease or are furnished or are to be furnished under a contract of service or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in Borrower's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies. "ISP" shall mean the International Standby Practices-ISP98, International Chamber of Commerce Publication No. 590 and any amendments and revisions thereof. "Issuing Bank" shall mean the bank that issues a Letter of Credit, which bank is Lender itself or a bank that Lender has caused to issue a Letter of Credit by way of guarantee. "Items" shall mean the finished goods or services which are intended for export from the United States, as specified in Section 4(A) of the Loan Authorization Agreement. "Letter of Credit" shall mean a Commercial Letter of Credit or a Standby Letter of Credit. "Letter of Credit Obligations" shall mean all outstanding obligations incurred by Lender, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance or guarantee by Lender or the Issuing Bank of Letters of Credit. "Lien" shall mean any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction) by which property is encumbered or otherwise charged. "Loan Agreement" shall mean a valid and enforceable agreement between Lender and Borrower setting forth the terms and conditions of the Loan Facility. "Loan Authorization Agreement" shall mean the Loan Authorization Agreement entered into between Lender and Ex-Im Bank or the Loan Authorization Notice setting forth certain terms and conditions of the Loan Facility, a copy of which is attached hereto as Annex A. "Loan Authorization Notice" shall mean the Loan Authorization Notice executed by Lender and delivered to Ex-Im Bank in accordance with the Delegated Authority Letter Agreement setting forth the terms and conditions of each Loan Facility. "Loan Documents" shall mean the Loan Authorization Agreement, the Loan Agreement, this Agreement, each promissory note (if applicable), each Guaranty Agreement, and all other instruments, agreements and documents now or hereafter executed by Borrower or any Guarantor evidencing, securing, guaranteeing or otherwise relating to the Loan Facility or any Credit Accommodations made thereunder. "Loan Facility" shall mean the Revolving Loan Facility, the Transaction Specific Loan Facility or the Transaction Specific Revolving Loan Facility established by Lender in favor of Borrower under the Loan Documents. "Loan Facility Obligations" shall mean all loans, advances, debts, expenses, fees, liabilities, and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by Borrower to Lender, of any kind or nature, present or future, arising in connection with the Loan Facility. "Loan Facility Term" shall mean the number of months from the Effective Date to the Final Disbursement Date as originally set forth in the Loan Authorization Agreement. "Master Guarantee Agreement" shall mean the Master Guarantee Agreement between Ex-Im Bank and Lender, as amended, modified, supplemented and restated from time to time. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of Borrower or any Guarantor, (b) Borrower's ability to pay or perform the Loan Facility Obligations in accordance with the terms thereof, (c) the Collateral or Lender's Liens on the Collateral or the priority of such Lien or (d) Lender's rights and remedies under the Loan Documents. "Maximum Amount" shall mean the maximum principal balance of Credit Accommodations that may be outstanding at any time under the Loan Facility specified in Section 5(A) of the Loan Authorization Agreement. "Other Assets" shall mean the Collateral, if any, described in Section 5(C)(4) of the Loan Authorization Agreement. "Other Assets Value" shall mean, at the date of determination thereof, the value of the Other Assets as determined in accordance with GAAP. "Permitted Liens" shall mean (a) Liens for taxes, assessments or other governmental charges or levies not delinquent, or, being contested in good faith and by appropriate proceedings and with respect to which proper reserves have been taken by Borrower; PROVIDED, THAT, the Lien shall have no effect on the priority of the Liens in favor of Lender or the value of the assets in which Lender has such a Lien and a stay of enforcement of any such Lien shall be in effect; (b) deposits or pledges securing obligations under worker's compensation, unemployment insurance, social security or public liability laws or similar legislation; (c) deposits or pledges securing bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of Borrower's business; (d) judgment Liens that have been stayed or bonded; (e) mechanics', workers', materialmen's or other like Liens arising in the ordinary course of Borrower's business with respect to obligations which are not due; (f) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided, that, any such Lien shall not encumber any other property of Borrower; (g) security interests being terminated concurrently with the execution of the Loan Documents; (h) Liens in favor of Lender securing the Loan Facility Obligations; and (i) Liens disclosed in Section 6(D) of the Loan Authorization Agreement. "Person" shall mean any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether national, federal, provincial, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof), and shall include such Person's successors and assigns. "Principals" shall mean any officer, director, owner, partner, key employee, or other Person with primary management or supervisory responsibilities with respect to Borrower or any other Person (whether or not an employee) who has critical influence on or substantive control over the transactions covered by this Agreement. "Retainage" shall mean that portion of the purchase price of an Export Order that a Buyer is not obligated to pay until the end of a specified period of time following the satisfactory performance under such Export Order. "Retainage Accounts Receivable" shall mean those portions of Eligible Export-Related Accounts Receivable arising out of a Retainage. "Retainage Advance Rate" shall mean the percentage rate specified in Section 5(C)(3) of the Loan Authorization Agreement as the Advance Rate for the Retainage Accounts Receivable of Borrower. "Retainage Value" shall mean, at the date of determination thereof, the aggregate face amount of Retainage Accounts Receivable, less taxes, discounts, credits and allowances, except to the extent otherwise permitted by Ex-Im Bank in writing. "Revolving Loan Facility" shall mean the credit facility or portion thereof established by Lender in favor of Borrower for the purpose of providing pre-export working capital in the form of loans and/or Letters of Credit to finance the manufacture, production or purchase and subsequent export sale of Items pursuant to Loan Documents under which Credit Accommodations may be made and repaid on a continuous basis based solely on the Export-Related Borrowing Base during the term of such credit facility. "Special Conditions" shall mean those conditions, if any, set forth in Section 13 of the Loan Authorization Agreement. "Specific Export Orders" shall mean those Export Orders specified in Section 5(D) of the Loan Authorization Agreement. "Standby Letter of Credit" shall mean those letters of credit subject to the ISP or UCP issued or caused to be issued by Lender for Borrower's account that can be drawn upon by a Buyer only if Borrower fails to perform all of its obligations with respect to an Export Order. "Transaction Specific Loan Facility" shall mean a credit facility or a portion thereof established by Lender in favor of Borrower for the purpose of providing pre-export working capital in the form of loans and/or Letters of Credit to finance the manufacture, production or purchase and subsequent export sale of Items pursuant to Loan Documents under which Credit Accommodations are made based solely on the Export-Related Borrowing Base relating to Specific Export Orders and once such Credit Accommodations are repaid they may not be reborrowed. "Transaction Specific Revolving Loan Facility" shall mean a Revolving Credit Facility established to provide financing of Specific Export Orders. "UCC" shall mean the Uniform Commercial Code as the same may be in effect from time to time in the jurisdiction in which Borrower or Collateral is located. "UCP" shall mean the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 and any amendments and revisions thereof. "U.S." or "United States" shall mean the United States of America and its territorial possessions. "U.S. Content" shall mean with respect to any Item all the labor, materials and services which are of U.S. origin or manufacture, and which are incorporated into an Item in the United States. "Warranty" shall mean Borrower's guarantee to Buyer that the Items will function as intended during the warranty period set forth in the applicable Export Order. "Warranty Letter of Credit" shall mean a Standby Letter of Credit which is issued or caused to be issued by Lender to support the obligations of Borrower with respect to a Warranty or a Standby Letter of Credit which by its terms becomes a Warranty Letter of Credit. 1.02 RULES OF CONSTRUCTION. For purposes of this Agreement, the following additional rules of construction shall apply, unless specifically indicated to the contrary: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (b) the term "or" is not exclusive; (c) the term "including" (or any form thereof) shall not be limiting or exclusive; (d) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; (e) the words "this Agreement", "herein", "hereof", "hereunder" or other words of similar import refer to this Agreement as a whole including the schedules, exhibits, and annexes hereto as the same may be amended, modified or supplemented; (f) all references in this Agreement to sections, schedules, exhibits, and annexes shall refer to the corresponding sections, schedules, exhibits, and annexes of or to this Agreement; and (g) all references to any instruments or agreements, including references to any of the Loan Documents, or the Delegated Authority Letter Agreement shall include any and all modifications, amendments and supplements thereto and any and all extensions or renewals thereof to the extent permitted under this Agreement. 1.03 INCORPORATION OF RECITALS. The Recitals to this Agreement are incorporated into and shall constitute a part of this Agreement. ARTICLE II OBLIGATIONS OF BORROWER Until payment in full of all Loan Facility Obligations and termination of the Loan Documents, Borrower agrees as follows: 2.01 USE OF CREDIT ACCOMMODATIONS. (a) Borrower shall use Credit Accommodations only for the purpose of enabling Borrower to finance the cost of manufacturing, producing, purchasing or selling the Items. Borrower may not use any of the Credit Accommodations for the purpose of: (i) servicing or repaying any of Borrower's pre-existing or future indebtedness unrelated to the Loan Facility (unless approved by Ex-Im Bank in writing); (ii) acquiring fixed assets or capital goods for use in Borrower's business; (iii) acquiring, equipping or renting commercial space outside of the United States; (iv) paying the salaries of non U.S. citizens or non-U.S. permanent residents who are located in offices outside of the United States; or (v) in connection with a Retainage or Warranty (unless approved by Ex-Im Bank in writing). (b) In addition, no Credit Accommodation may be used to finance the manufacture, purchase or sale of any of the following: (i) Items to be sold or resold to a Buyer located in a country as to which Ex-Im Bank is prohibited from doing business as designated in the Country Limitation Schedule; (ii) that part of the cost of the Items which is not U.S. Content unless such part is not greater than fifty percent (50%) of the cost of the Items and is incorporated into the Items in the United States; (iii) defense articles or defense services; or (iv) without Ex-Im Bank's prior written consent, any Items to be used in the construction, alteration, operation or maintenance of nuclear power, enrichment, reprocessing, research or heavy water production facilities. 2.02 LOAN DOCUMENTS AND LOAN AUTHORIZATION AGREEMENT. (a) Each Loan Document and this Agreement have been duly executed and delivered on behalf of Borrower, and each such Loan Document and this Agreement are and will continue to be a legal and valid obligation of Borrower, enforceable against it in accordance with its terms. (b) Borrower shall comply with all of the terms and conditions of the Loan Documents, this Agreement and the Loan Authorization Agreement. 2.03 EXPORT-RELATED BORROWING BASE CERTIFICATES AND EXPORT ORDERS. In order to receive Credit Accommodations under the Loan Facility, Borrower shall have delivered to Lender an Export-Related Borrowing Base Certificate as frequently as required by Lender but at least within the past thirty (30) calendar days and a copy of the Export Order(s) (or, for Revolving Loan Facilities, if permitted by Lender, a written summary of the Export Orders) against which Borrower is requesting Credit Accommodations. If Lender permits summaries of Export Orders, Borrower shall also deliver promptly to Lender copies of any Export Orders requested by Lender. In addition, so long as there are any Credit Accommodations outstanding under the Loan Facility, Borrower shall deliver to Lender at least once each month no later than the twentieth (20th) day of such month or more frequently as required by the Loan Documents, an Export-Related Borrowing Base Certificate. 2.04 EXCLUSIONS FROM THE EXPORT-RELATED BORROWING BASE. In determining the Export-Related Borrowing Base, Borrower shall exclude therefrom Inventory which is not Eligible Export-Related Inventory and Accounts Receivable which are not Eligible Export-Related Accounts Receivable. Borrower shall promptly, but in any event within five (5) Business Days, notify Lender (a) if any then existing Export-Related Inventory no longer constitutes Eligible Export-Related Inventory or (b) of any event or circumstance which to Borrower's knowledge would cause Lender to consider any then existing Export-Related Accounts Receivable as no longer constituting an Eligible Export-Related Accounts Receivable. 2.05 FINANCIAL STATEMENTS. Borrower shall deliver to Lender the financial statements required to be delivered by Borrower in accordance with Section 11 of the Loan Authorization Agreement. 2.06 SCHEDULES, REPORTS AND OTHER STATEMENTS. Borrower shall submit to Lender in writing each month (a) an Inventory schedule for the preceding month and (b) an Accounts Receivable aging report for the preceding month detailing the terms of the amounts due from each Buyer. Borrower shall also furnish to Lender promptly upon request such information, reports, contracts, invoices and other data concerning the Collateral as Lender may from time to time specify. 2.07 ADDITIONAL SECURITY OR PAYMENT. (a) Borrower shall at all times ensure that the Export-Related Borrowing Base equals or exceeds the Credit Accommodation Amount. If informed by Lender or if Borrower otherwise has actual knowledge that the Export-Related Borrowing Base is at any time less than the Credit Accommodation Amount, Borrower shall, within five (5) Business Days, either (i) furnish additional Collateral to Lender, in form and amount satisfactory to Lender and Ex-Im Bank or (ii) pay to Lender an amount equal to the difference between the Credit Accommodation Amount and the Export-Related Borrowing Base. (b) For purposes of this Agreement, in determining the Export-Related Borrowing Base there shall be deducted from the Export-Related Borrowing Base (i) an amount equal to twenty-five percent (25%) of the outstanding face amount of Commercial Letters of Credit and Standby Letters of Credit and (ii) one hundred percent (100%) of the face amount of Warranty Letters of Credit less the amount of cash collateral held by Lender to secure Warranty Letters of Credit. (c) Unless otherwise approved in writing by Ex-Im Bank, for Revolving Loan Facilities (other than Transaction Specific Revolving Loan Facilities), Borrower shall at all times ensure that the outstanding principal balance of the Credit Accommodations that is supported by Export-Related Inventory does not exceed sixty percent (60%) of the sum of the total outstanding principal balance of the Disbursements and the undrawn face amount of all outstanding Commercial Letters of Credit. If informed by Lender or if Borrower otherwise has actual knowledge that the outstanding principal balance of the Credit Accommodations that is supported by Inventory exceeds sixty percent (60%) of the sum of the total outstanding principal balance of the Disbursements and the undrawn face amount of all outstanding Commercial Letters of Credit, Borrower shall, within five (5) Business Days, either (i) furnish additional non-Inventory Collateral to Lender, in form and amount satisfactory to Lender and Ex-Im Bank, or (ii) pay down the applicable portion of the Credit Accommodations so that the above described ratio is not exceeded. 2.08 CONTINUED SECURITY INTEREST. Borrower shall not change (a) its name or identity in any manner, (b) the location of its principal place of business, (c) the location of any of the Collateral or (d) the location of any of the books or records related to the Collateral, in each instance without giving thirty (30) days prior written notice thereof to Lender and taking all actions deemed necessary or appropriate by Lender to continuously protect and perfect Lender's Liens upon the Collateral. 2.09 INSPECTION OF COLLATERAL. Borrower shall permit the representatives of Lender and Ex-Im Bank to make at any time during normal business hours inspections of the Collateral and of Borrower's facilities, activities, and books and records, and shall cause its officers and employees to give full cooperation and assistance in connection therewith. 2.10 GENERAL INTANGIBLES. Borrower represents and warrants that it owns, or is licensed to use, all General Intangibles necessary to conduct its business as currently conducted except where the failure of Borrower to own or license such General Intangibles could not reasonably be expected to have a Material Adverse Effect. 2.11 NOTICE OF CERTAIN EVENTS. Borrower shall promptly, but in any event within five (5) Business Days, notify Lender in writing of the occurrence of any of the following: (a) Borrower or any Guarantor (i) applies for, consents to or suffers the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property or calls a meeting of its creditors, (ii) admits in writing its inability, or is generally unable, to pay its debts as they become due or ceases operations of its present business, (iii) makes a general assignment for the benefit of creditors, (iv) commences a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) is adjudicated as bankrupt or insolvent, (vi) files a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesces to, or fails to have dismissed within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (viii) takes any action for the purpose of effecting any of the foregoing; (b) any Lien in any of the Collateral, granted or intended by the Loan Documents to be granted to Lender, ceases to be a valid, enforceable, perfected, first priority Lien (or a lesser priority if expressly permitted pursuant to Section 6 of the Loan Authorization Agreement) subject only to Permitted Liens; (c) the issuance of any levy, assessment, attachment, seizure or Lien, other than a Permitted Lien, against any of the Collateral which is not stayed or lifted within thirty (30) calendar days; (d) any proceeding is commenced by or against Borrower or any Guarantor for the liquidation of its assets or dissolution; (e) any litigation is filed against Borrower or any Guarantor which has had or could reasonably be expected to have a Material Adverse Effect and such litigation is not withdrawn or dismissed within thirty (30) calendar days of the filing thereof; (f) any default or event of default under the Loan Documents; (g) any failure to comply with any terms of the Loan Authorization Agreement; (h) any material provision of any Loan Document or this Agreement for any reason ceases to be valid, binding and enforceable in accordance with its terms; (i) any event which has had or could reasonably be expected to have a Material Adverse Effect; or (j) the Credit Accommodation Amount exceeds the applicable Export-Related Borrowing Base. 2.12 INSURANCE. Borrower will at all times carry property, liability and other insurance, with insurers acceptable to Lender, in such form and amounts, and with such deductibles and other provisions, as Lender shall require, and Borrower will provide evidence of such insurance to Lender, so that Lender is satisfied that such insurance is, at all times, in full force and effect. Each property insurance policy shall name Lender as loss payee and shall contain a lender's loss payable endorsement in form acceptable to Lender and each liability insurance policy shall name Lender as an additional insured. All policies of insurance shall provide that they may not be cancelled or changed without at least ten (10) days' prior written notice to Lender and shall otherwise be in form and substance satisfactory to Lender. Borrower will promptly deliver to Lender copies of all reports made to insurance companies. 2.13 TAXES. Borrower has timely filed all tax returns and reports required by applicable law, has timely paid all applicable taxes, assessments, deposits and contributions owing by Borrower and will timely pay all such items in the future as they became due and payable. Borrower may, however, defer payment of any contested taxes; provided, that Borrower (a) in good faith contests Borrower's obligation to pay such taxes by appropriate proceedings promptly and diligently instituted and conducted; (b) notifies Lender in writing of the commencement of, and any material development in, the proceedings; (c) posts bonds or takes any other steps required to keep the contested taxes from becoming a Lien upon any of the Collateral; and (d) maintains adequate reserves therefor in conformity with GAAP. 2.14 COMPLIANCE WITH LAWS. Borrower represents and warrants that it has complied in all material respects with all provisions of all applicable laws and regulations, including those relating to Borrower's ownership of real or personal property, the conduct and licensing of Borrower's business, the payment and withholding of taxes, ERISA and other employee matters, safety and environmental matters. 2.15 NEGATIVE COVENANTS. Without the prior written consent of Ex-Im Bank and Lender, Borrower shall not (a) merge, consolidate or otherwise combine with any other Person; (b) acquire all or substantially all of the assets or capital stock of any other Person; (c) sell, lease, transfer, convey, assign or otherwise dispose of any of its assets, except for the sale of Inventory in the ordinary course of business and the disposition of obsolete equipment in the ordinary course of business; (d) create any Lien on the Collateral except for Permitted Liens; (e) make any material changes in its organizational structure or identity; or (f) enter into any agreement to do any of the foregoing. 2.16 REBORROWINGS AND REPAYMENT TERMS. (a) If the Loan Facility is a Revolving Loan Facility, provided that Borrower is not in default under any of the Loan Documents, Borrower may borrow, repay and reborrow amounts under the Loan Facility until the close of business on the Final Disbursement Date. Unless the Revolving Loan Facility is renewed or extended by Lender with the consent of Ex-Im Bank, Borrower shall pay in full the outstanding Loan Facility Obligations and all accrued and unpaid interest thereon no later than the first Business Day after the Final Disbursement Date. (b) If the Loan Facility is a Transaction Specific Loan Facility, Borrower shall, within two (2) Business Days of the receipt thereof, pay to Lender (for application against the outstanding Loan Facility Obligations and accrued and unpaid interest thereon) all checks, drafts, cash and other remittances it may receive in payment or on account of the Export-Related Accounts Receivable or any other Collateral, in precisely the form received (except for the endorsement of Borrower where necessary). Pending such deposit, Borrower shall hold such amounts in trust for Lender separate and apart and shall not commingle any such items of payment with any of its other funds or property. 2.17 CROSS DEFAULT. Borrower shall be deemed in default under the Loan Facility if Borrower fails to pay when due any amount payable to Lender under any loan or other credit accommodations to Borrower whether or not guaranteed by Ex-Im Bank. 2.18 MUNITIONS LIST. If any of the Items are articles, services, or related technical data that are listed on the United States Munitions List (part 121 of title 22 of the Code of Federal Regulations), Borrower shall send a written notice promptly, but in any event within five (5) Business Days, of Borrower learning thereof to Lender describing the Items(s) and the corresponding invoice amount. 2.19 SUSPENSION AND DEBARMENT, ETC. On the date of this Agreement neither Borrower nor its Principals are (a) debarred, suspended, proposed for debarment with a final determination still pending, declared ineligible or voluntarily excluded (as such terms are defined under any of the Debarment Regulations referred to below) from participating in procurement or nonprocurement transactions with any United States federal government department or agency pursuant to any of the Debarment Regulations or (b) indicted, convicted or had a civil judgment rendered against Borrower or any of its Principals for any of the offenses listed in any of the Debarment Regulations. Unless authorized by Ex-Im Bank, Borrower will not knowingly enter into any transactions in connection with the Items with any person who is debarred, suspended, declared ineligible or voluntarily excluded from participation in procurement or nonprocurement transactions with any United States federal government department or agency pursuant to any of the Debarment Regulations. Borrower will provide immediate written notice to Lender if at any time it learns that the certification set forth in this Section 2.19 was erroneous when made or has become erroneous by reason of changed circumstances. ARTICLE III RIGHTS AND REMEDIES 3.01 INDEMNIFICATION. Upon Ex-Im Bank's payment of a Claim to Lender in connection with the Loan Facility pursuant to the Master Guarantee Agreement, Ex-Im Bank may assume all rights and remedies of Lender under the Loan Documents and may enforce any such rights or remedies against Borrower, the Collateral and any Guarantors. Borrower shall hold Ex-Im Bank and Lender harmless from and indemnify them against any and all liabilities, damages, claims, costs and losses incurred or suffered by either of them resulting from (a) any materially incorrect certification or statement knowingly made by Borrower or its agent to Ex-Im Bank or Lender in connection with the Loan Facility, this Agreement, the Loan Authorization Agreement or any other Loan Documents or (b) any material breach by Borrower of the terms and conditions of this Agreement, the Loan Authorization Agreement or any of the other Loan Documents. Borrower also acknowledges that any statement, certification or representation made by Borrower in connection with the Loan Facility is subject to the penalties provided in Article 18 U.S.C. Section 1001. 3.02 LIENS. Borrower agrees that any and all Liens granted by it to Lender are also hereby granted to Ex-Im Bank to secure Borrower's obligation, however arising, to reimburse Ex-Im Bank for any payments made by Ex-Im Bank pursuant to the Master Guarantee Agreement. Lender is authorized to apply the proceeds of, and recoveries from, any property subject to such Liens to the satisfaction of Loan Facility Obligations in accordance with the terms of any agreement between Lender and Ex-Im Bank. ARTICLE IV MISCELLANEOUS 4.01 GOVERNING LAW. This Agreement and the Loan Authorization Agreement and the obligations arising under this Agreement and the Loan Authorization Agreement shall be governed by, and construed in accordance with, the law of the state governing the Loan Documents. 4.02 NOTIFICATION. All notices required by this Agreement shall be given in the manner and to the parties provided for in the Loan Agreement. 4.03 PARTIAL INVALIDITY. If at any time any of the provisions of this Agreement becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, the validity nor the enforceability of the remaining provisions hereof shall in any way be affected or impaired. 4.04 WAIVER OF JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT, PROCEEDING OR OTHER LITIGATION BROUGHT TO RESOLVE ANY DISPUTE ARISING UNDER, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN AUTHORIZATION AGREEMENT, ANY LOAN DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OR OMISSIONS OF LENDER, EX-IM BANK, OR ANY OTHER PERSON, RELATING TO THIS AGREEMENT, THE LOAN AUTHORIZATION AGREEMENT OR ANY OTHER LOAN DOCUMENT. [signature page follows] IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed as of the 5th day of December, 2001. APPLIX, INC. By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ----------------------------------------- Title: President and CEO ---------------------------------------- APPLIX (UK) LIMITED By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ----------------------------------------- Title: Director ---------------------------------------- APPLIX AUSTRALIA PTY, LTD. By /s/ Bruce McCarthy ------------------------------------------- Name: Bruce McCarthy ----------------------------------------- Title: Director ---------------------------------------- By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ----------------------------------------- Title: Director ---------------------------------------- VERITEAM LIMITED By /s/ Alan Goldsworthy ------------------------------------------- Name: Alan Goldsworthy ----------------------------------------- Title: Director ---------------------------------------- ACKNOWLEDGED: SILICON VALLEY BANK By /s/ R. Bryan Jadot ------------------------------------------- Name: R. Bryan Jadot ----------------------------------------- Title: Vice President ---------------------------------------- ANNEXES: Annex A - Loan Authorization Agreement or Loan Authorization Notice EX-10.16 5 b42037aiex10-16.txt EX-10.16 LOAN AND SECURITY AGREEMENT EXHIBIT 10.16 LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of December 5, 2001, between SILICON VALLEY BANK, a California chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462, doing business under the name "Silicon Valley East" ("Bank") and APPLIX, INC., a Massachusetts corporation with its chief executive office at 289-291 Turnpike Road, Westboro, Massachusetts 01581 ("Borrower"), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows: 1 ACCOUNTING AND OTHER TERMS Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. The term "financial statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any Loan Document. Capitalized terms in this Agreement shall have the meanings set forth in Section 13. 2 LOAN AND TERMS OF PAYMENT 2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions as and when due in accordance with this Agreement. 2.1.1 REVOLVING ADVANCES. (a) Bank shall make Advances not exceeding (i) the Committed Revolving Line or the Borrowing Base, whichever is less, minus (ii) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), minus (iii) the FX Reserve, and minus (iv) the aggregate outstanding Advances hereunder (including any Cash Management Services). Amounts borrowed under this Section may be repaid and reborrowed during the term of this Agreement. (b) To obtain an Advance, Borrower must notify Bank by facsimile or telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be made. If such notification is by telephone, Borrower must promptly confirm the notification by delivering to Bank a completed Payment/Advance Form in the form attached as EXHIBIT B. Bank shall credit Advances to Borrower's deposit account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank reasonably believes is a Responsible Officer or designee. Borrower shall indemnify Bank for any loss Bank suffers due to such reliance. (c) The Committed Revolving Line terminates on the Revolving Maturity Date, when the principal amount of all Advances and the unpaid interest thereon, shall be immediately payable. 2.1.2 LETTERS OF CREDIT. (a) Bank shall issue or have issued Letters of Credit for Borrower's account not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing Base minus (ii) the outstanding principal balance of any Advances (including any Cash Management Services), minus (iii) the amount of all Letters of Credit (including drawn but unreimbursed Letters of Credit), plus an amount equal to any Letter of Credit Reserves. The face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed $2,500,000.00. Each Letter of Credit shall have an expiry date no later than 180 days after the Revolving Maturity Date provided Borrower's Letter of Credit reimbursement obligation shall be secured by cash on terms acceptable to Bank on and after (i) the Revolving Maturity Date if the term of this Agreement is not extended by Bank, or (ii) the occurrence of an Event of Default hereunder. All Letters of Credit shall be, in form and substance, acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank's form of standard Application and Letter of Credit Agreement. Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. (b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit, under all circumstances whatsoever. Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss, cost, expense or liability, including, without limitation, reasonable attorneys' fees, arising out of or in connection with any Letters of Credit. (c) Borrower may request that Bank issue a Letter of Credit payable in a currency other than United States Dollars. If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the equivalent of the amount thereof (plus cable charges) in United States currency at the then prevailing rate of exchange in San Francisco, California, for sales of that other currency for cable transfer to the country of which it is the currency. (d) Upon the issuance of any letter of credit payable in a currency other than United States Dollars, Bank shall create a reserve (the "Letter of Credit Reserve") under the Committed Revolving Line for letters of credit against fluctuations in currency exchange rates, in an amount equal to ten percent (10%) of the face amount of such letter of credit. The amount of such reserve may be amended by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Committed Revolving Line shall be reduced by the amount of such reserve for so long as such letter of credit remains outstanding. 2.1.3 FOREIGN EXCHANGE SUBLIMIT. If there is availability under the Committed Revolving Line and the Borrowing Base, then Borrower may enter in foreign exchange forward contracts with the Bank under which Borrower commits to purchase from or sell to Bank a set amount of foreign currency more than one business day after the contract date (the "FX Forward Contract"). Bank shall subtract 10% of each outstanding FX Forward Contract from the foreign exchange sublimit which is a maximum of $2,500,000.00 (the "FX Reserve"). The total FX Forward Contracts at any one time may not exceed 10 times the amount of the FX Reserve. Bank may terminate the FX Forward Contracts if an Event of Default occurs. 2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to $2,500,000.00 for the Bank's Cash Management Services, which may include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in the various cash management services agreements related to such services Cash Management Services Agreement (the "Cash Management Services"). Such aggregate amounts utilized under the Cash Management Services Sublimit shall at all times reduce the amount otherwise available for Credit Extensions under the Committed Revolving Line. Any amounts Bank pays for any Cash Management Services on behalf of Borrower that are not paid by Borrower as required by the applicable terms thereof will be treated as Advances under the Committed Revolving Line and will accrue interest at the interest rate applicable to Advances. 2.1.5 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the undisbursed portion of the Credit Extensions shall terminate if there has been a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospects of Borrower, whether or not arising from transactions in the ordinary course of business, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement. 2.2 OVERADVANCES. If Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower must immediately pay in cash to Bank the excess. 2 2.3 INTEREST RATE; PAYMENTS. (a) INTEREST RATE. Advances accrue interest on the outstanding principal balance at a per annum rate equal to the aggregate of the Bank's Prime Rate plus one and one-quarter percent (1.25%). After an Event of Default, Obligations shall bear interest at four percent (4.0%) above the rate effective immediately before the Event of Default. The interest rate shall increase or decrease when the Prime Rate changes. Interest is computed on the basis of a 360 day year for the actual number of days elapsed. (b) PAYMENTS. Interest is payable on the Payment Date of each month. Bank may debit any of Borrower's deposit accounts (unless prohibited by law) including Account Number __________ for principal and interest payments or any amounts Borrower owes Bank. Bank shall promptly notify Borrower when it debits Borrower's accounts. These debits are not a set-off. Payments received after 3:00 p.m. Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue. (c) ADDITIONAL PAYMENTS. Whenever Borrower is obliged to make a deduction in respect of Tax from any payment under any Obligation: (i) it shall promptly pay the amount deducted to the appropriate Government Agency; (ii) within 30 days of the end of the month in which the deduction is made, it shall deliver to Bank official receipts or other evidence of payment acceptable to Bank; and (iii) unless the Tax is an Excluded Tax, it shall pay Bank on the due date of the payment any additional amounts necessary (as determined by Bank) to ensure that Bank receives when due a net amount (after payment of any Taxes in respect of those additional amounts) in the relevant currency equal to the full amount which it would have received had a deduction not been made. It shall indemnify Bank against the Tax and any amounts recoverable from Bank in respect of the Tax. Borrower waives any statutory right to recover from Bank any amount paid under this clause. The obligations of Borrower under this clause survive the payment of all moneys owing under this Agreement or discharge of any Letter of Credit and the termination of this Agreement or any Letter of Credit. 2.4 FEES. Borrower shall pay to Bank: (a) FACILITY FEE. A fully earned, non-refundable facility fee of $18,750.00 due on the Closing Date; and (b) BANK EXPENSES. All Bank Expenses (including reasonable attorneys' fees and expenses incurred through and after the Closing Date) when due. 3 CONDITIONS OF LOANS 3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following: (a) this Agreement; (b) a certificate of the Secretary of Borrower with respect to articles, bylaws, incumbency and resolutions authorizing the execution and delivery of this Agreement; (c) Negative Pledge Agreement covering Intellectual Property; (d) landlord's waiver; 3 (e) a legal opinion of Borrower's counsel, in form and substance acceptable to Bank; (f) Exim Agreement; (g) Exim Borrower Agreement; (h) Exim Promissory Note; (i) an Initial Audit of Borrower's Accounts as described in Section 6.2; (j) financing statements (Forms UCC-1); (k) Account Control Agreement/ Investment Account Control Agreement (l) insurance certificate; (m) payment of the fees and Bank Expenses then due specified in Section 2.4 hereof; (n) Certificate of Foreign Qualification (if applicable); (o) Certificate of Good Standing/Legal Existence; and (p) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate. 3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following: (a) timely receipt of any Payment/Advance Form; and (b) the representations and warranties in Section 5 shall be materially true on the date of the Payment/Advance Form and on the effective date of each Credit Extension and no Event of Default shall have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and warranties in Section 5 remain true. 4 CREATION OF SECURITY INTEREST 4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations and the performance of each of Borrower's duties under the Loan Documents, a continuing security interest in the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower warrants and represents that the security interest granted herein shall be a first priority security interest in the Collateral, except as otherwise provided herein. The Collateral may also be subject to Permitted Liens. If the Agreement is terminated, Bank's lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. Notwithstanding the foregoing, it is expressly acknowledged and agreed that the security interest created in this Agreement only with respect to Exim Eligible Foreign Accounts (as such term is defined in the Exim Agreement) is subject to and subordinate to the security interest granted to the Bank in the Exim Agreement with respect to such Exim Eligible Foreign Accounts, but only to the extent any Advances are actually made to the Borrower based upon such Exim Eligible Foreign Accounts. Borrower agrees that Bank may file (with the UCC Financing Statements to be filed hereunder) a notice that any disposition of the Collateral in violation of this Agreement, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code. If the Borrower shall at any time have knowledge that it has acquired a material commercial tort claim, Borrower shall use best efforts to promptly notify Bank in a writing signed by Borrower of the brief details thereof and 4 grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Bank. Notwithstanding the foregoing, the security interest granted herein does not extend to and the term "Collateral" does not include any portion of any license or contract solely to the extent (i) the granting of a security interest in such license or contract would be contrary to applicable law, or (ii) that such licenses or contracts are nonassignable by their terms (but only to the extent the prohibition is enforceable under applicable law, including, without limitation, the Code) without the consent of the licensor or other party (but only to the extent such consent has not been obtained). Bank agrees to subordinate its security interest in certain specific Equipment financed by Borrower (or release its security interest in such financed Equipment if reasonably required by Borrower or such financing party), up to an aggregate fair market value (as reasonably determined by Bank and Borrower) of such Equipment not to exceed $1,000,000 for all such financing transactions. 5 REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows: 5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. The Borrower has previously delivered to the Bank a certificate signed by the Borrower and entitled "Perfection Certificate". The Borrower represents and warrants to the Bank that: (a) the Borrower's exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; and (b) the Borrower is an organization of the type, and is organized in the jurisdiction, set forth in the Perfection Certificate; and (c) the Perfection Certificate accurately sets forth the Borrower's organizational identification number or accurately states that the Borrower has none; and (d) the Perfection Certificate accurately sets forth the Borrower's place of business, or, if more than one, its chief executive office as well as the Borrower's mailing address if different, and (e) all other information set forth on the Perfection Certificate pertaining to the Borrower is accurate and complete. If the Borrower does not now have an organizational identification number, but later obtains it, Borrower shall forthwith notify the Bank or such organizational identification number. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower's organizational documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 5.2 COLLATERAL. Borrower has good title to the Collateral, free of Liens except Permitted Liens. Borrower has no other deposit account, other than the deposit accounts with Bank and deposit accounts described in the Perfection Certificate delivered to the Bank in connection herewith. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. The Collateral is not in the possession of any third party bailee (such as a warehouse). In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral to a bailee, then Borrower will first receive the written consent of Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of Bank. Borrower has no actual knowledge of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account in any Borrowing Base Certificate that has not been superceded. All Inventory is in all material respects of good and marketable quality, free from material defects. 5.3 LITIGATION. Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change. 5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated financial statements for Borrower and any Subsidiary delivered to Bank fairly present in all material respects Borrower's consolidated financial 5 condition and Borrower's consolidated results of operations as of the date of such financial statements. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements submitted to Bank. 5.5 SOLVENCY. Borrower is able to pay its debts (including trade debts) as they mature. 5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower's or any Subsidiary's properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to make such declarations, notices or filings would not reasonably be expected to cause a Material Adverse Change. 5.7 SUBSIDIARIES. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 5.8 FULL DISCLOSURE. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank contains any untrue statement of a material fact when made or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading when made. 6 AFFIRMATIVE COVENANTS Until Borrower satisfies all obligations under this Agreement and Bank has no obligation to lend hereunder, Borrower shall do all of the following: 6.1 GOVERNMENT COMPLIANCE. Borrower shall maintain its and all Subsidiaries' legal existence and good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change. 6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. (a) Borrower shall deliver to Bank: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than forty-five (45) days after the last day of each quarter, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during the previous quarter certified by a Responsible Officer and in a form acceptable to Bank; (iii) as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iv) within five (5) days of filing, copies of all statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (iv) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that is reasonably 6 likely to result in damages or costs awarded against Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000.00) or more; and (v) budgets, sales projections, operating plans or other financial information reasonably requested by Bank. (b) Within thirty (30) days after the last day of each month (during any month in which Borrower has outstanding Advances or is seeking an Advance), Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form of EXHIBIT C, with aged listings of accounts receivable (by invoice date). (c) Within thirty (30) days after the last day of each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D. (d) Within forty-five (45) days after the last day of each fiscal quarter, Borrower shall deliver to Bank with the quarterly financial statements a Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D. (e) Within one hundred twenty (120) days after the last day of Borrower's fiscal year, Borrower shall deliver to Bank with the audit annual financial statements a Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D. (f) Borrower shall allow Bank to audit Borrower's Collateral at Borrower's expense. Such audits shall be conducted no more often than once every six (6) months unless an Event of Default has occurred and is continuing. Borrower shall provide Bank with reasonable access to all its records and financial information so that the next such audit (the "Initial Audit") of Borrower's Collateral shall be completed by Bank prior to the initial Advance under the Committed Revolving Line. 6.3 TAXES. Borrower shall make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to such payments. 6.4 INSURANCE. Borrower shall keep its business and the Collateral insured for risks and in amounts, standard for Borrower's industry, and as Bank may reasonably request in Bank's reasonable discretion. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Bank. All property policies shall have a lender's loss payable endorsement showing Bank as an additional loss payee and all liability policies shall show the Bank as an additional insured and all policies shall provide that the insurer must give Bank at least twenty (20) days notice before canceling its policy. At Bank's request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Bank's option, be payable to Bank on account of the Obligations. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to $250,000.00, in the aggregate, toward the replacement or repair of destroyed or damaged property; provided that (i) any such replaced or repaired property (a) shall be of equal or like value as the replaced or repaired Collateral and (b) shall be deemed Collateral in which Bank has been granted a first priority security interest and (ii) after the occurrence and during the continuation of an Event of Default all proceeds payable under such casualty policy shall, at the option of the Bank, be payable to Bank on account of the Obligations. 6.5 PRIMARY ACCOUNTS. Borrower shall maintain its primary depository and operating accounts and securities accounts with Bank, and a majority of the Borrower's cash or securities in excess of that amount used for Borrower's operations shall be maintained or administered through the Bank. Borrower shall identify to Bank, in writing, any bank or securities account opened by Borrower with any institution other than Bank. In addition, for each such account that the Borrower at any time opens or maintains, Borrower shall, at the Bank's request and option, pursuant to an agreement in form and substance acceptable to the Bank, cause the depositary bank or securities intermediary to agree that such account is the collateral of the Bank pursuant to the terms hereunder. The provisions of this paragraph shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage 7 and benefit payments to or for the benefit of the Borrower's employees. 6.6 FINANCIAL COVENANTS. Borrower shall maintain at all times, to be tested as of the last day of each month, unless otherwise noted: (a) ADJUSTED QUICK RATIO. A ratio of Quick Assets to Current Liabilities minus Deferred Maintenance Revenue of at least 1.50 to 1.0. (b) TANGIBLE NET WORTH. A Tangible Net Worth of (i) at the end of each month, which month is not also the end of a fiscal quarter, at least $7,000,000.00 and (ii) at the end of each fiscal quarter, at least $10,000,000.00. (c) EBITDA. Borrower shall not suffer quarterly EBITDA losses for two (2) consecutive quarters. 6.7 FURTHER ASSURANCES. Borrower shall execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the Collateral or to effect the purposes of this Agreement. 7 NEGATIVE COVENANTS Until Borrower satisfies all obligations under this Agreement and Bank has no obligation to lend hereunder, Borrower shall not do any of the following without the Bank's prior written consent: 7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of (collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) of worn-out or obsolete Equipment or (iv) transfers of Equipment which are the subject of a sale/leaseback transaction otherwise permitted hereunder (subject to the limitations and restrictions for all such transactions set forth herein). 7.2 CHANGES IN BUSINESS, MANAGEMENT OR BUSINESS LOCATIONS. Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or have a material change in its management. Borrower shall not, without at least thirty (30) days prior written notice to Bank: (i) relocate its chief executive office, or add any new offices or business locations (unless such new offices or business locations contain less than Twenty- Five Thousand Dollars ($25,000.00) in Borrower's assets or property), or (ii) change its jurisdiction of organization, or (iii) change its organizational structure or type, or (iv) change its legal name, or (v) change any organizational number (if any) assigned by its jurisdiction of organization. 7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. 7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein. The Collateral may also be subject to Permitted Liens. 7.6 DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so; or (ii) pay any 8 dividends or make any distribution or payment or redeem, retire or purchase any capital stock. 7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter or permit any material transaction with any Affiliate, except transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a non-affiliated Person. Notwithstanding the foregoing, Borrower may make loans and other advances to its Subsidiaries up to an aggregate outstanding amount of $500,000 at any time. 7.8 SUBORDINATED DEBT. Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt, without Bank's prior written consent. 7.9 COMPLIANCE. Become an "investment company" or a company controlled by an "investment company", under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 8 EVENTS OF DEFAULT Any one of the following is an Event of Default: 8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within three (3) days after their due date. During the additional period the failure to cure the default is not an Event of Default (but no Credit Extension shall be made during the cure period); 8.2 COVENANT DEFAULT. Borrower does not perform any obligation in Section 6 or violates any covenant in Section 7 or does not perform or observe any other material term, condition or covenant in this Agreement, any Loan Documents, or in any agreement between Borrower and Bank and as to any default under a term, condition or covenant that can be cured, has not cured the default within ten (10) days after it occurs, or if the default cannot be cured within ten (10) days or cannot be cured after Borrower's attempts in the ten (10) day period, and the default may be cured within a reasonable time, then Borrower shall have additional time, (of not more than thirty (30) days) to attempt to cure the default. Grace periods provided under this section shall not apply, among other things, to financial covenants or any other covenants that are required to be satisfied, completed or tested by a date certain. During the additional period the failure to cure the default is not an Event of Default (but no Credit Extensions shall be made during the cure period); 8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs; 8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in ten (10) days; (ii) the service of process upon the Borrower seeking to attach, by trustee or similar process any funds of the Borrower in excess of $100,000 in the aggregate on deposit with the Bank; (iii) Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business; (iv) a judgment or other claim becomes a Lien on a material portion of Borrower's assets; or (v) a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency and not paid within ten (10) days after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions shall be made during the cure period); 8.5 INSOLVENCY, ADMINISTRATION, WINDING UP. (i) Borrower becomes insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made before any Insolvency Proceeding is dismissed); 9 8.6 OTHER AGREEMENTS. If there is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000) or that is reasonably likely to result in a Material Adverse Change; 8.7 JUDGMENTS. If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Thousand Dollars ($200,000) shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of ten (10) days (provided that no Credit Extensions will be made prior to the satisfaction or stay of such judgment); 8.8 MISREPRESENTATIONS. If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document. 8.9 EXIM AGREEMENT. An Event of Default under the Exim Agreement or any other agreement or instrument executed in connection therewith. 9 BANK'S RIGHTS AND REMEDIES 9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues Bank may, without prior notice or demand, do any or all of the following: (a) Declare all Obligations (including, without limitation, all obligations under the EXIM Agreement) immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank); (b) Stop advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Bank; (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; (d) Make any payments and do any acts it considers reasonably necessary to protect its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law, Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law, Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank's rights or remedies; (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower; (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral in accordance with the Code or other applicable law. Subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law, Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Bank's benefit, subject to the rights of third parties, prohibitions or limitations in agreements with third parties, and applicable law; and 10 (g) Otherwise dispose of the Collateral according to the Code. 9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, to be effective upon the occurrence and during the continuance of an Event of Default, to: (i) endorse Borrower's name on any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors; (iii) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; (iv) make, settle, and adjust all claims under Borrower's insurance policies; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank its power of attorney to sign Borrower's name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder. Bank's foregoing appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank's obligation to provide Credit Extensions terminates. 9.3 ACCOUNTS COLLECTION. In the event that an Event of Default occurs and is continuing, Bank may notify any Person owing Borrower money of Bank's security interest in the funds and verify and/or collect the amount of the Account. After Borrower is notified that Bank has demanded that all such funds be paid directly to Bank following an Event of Default, any amounts received by Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank, Borrower shall immediately deliver such receipts to Bank in the form received from the account debtor, with proper endorsements for deposit. 9.4 BANK EXPENSES. All Bank Expenses are immediately due and payable, and shall bear interest at the then applicable rate and be secured by the Collateral. No payments by Bank shall be deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. 9.5 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with reasonable banking practices regarding the safekeeping of collateral, the Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Except for the foregoing, Borrower bears all risk of loss, damage or destruction of the Collateral. 9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver hereunder shall be effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 9.7 DEMAND WAIVER. Except as otherwise expressly set forth herein or as required by applicable law, Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 10 NOTICES All notices or demands by any party to this Agreement or any other related agreement must be in writing and be personally delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile at the addresses listed below. Either Bank or Borrower may change its notice address by giving the other written notice. If to Borrower: APPLIX, INC. 289-291 Turnpike Road 11 Westboro, Massachusetts 01581 Attn: Chief Financial Officer FAX: (508) 366-9313 with a copy to: Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Attn: Patrick J. Rondeau, Esquire FAX: (617) 526-5000 If to Bank: Silicon Valley Bank One Newton Executive Park, Suite 200 2221 Washington Street Newton, Massachusetts 02462 Attn: Mr. Jonathan Gray, Senior Vice President Fax: (617) 969-4395 with a copy to: Riemer & Braunstein LLP Three Center Plaza Boston, Massachusetts 02108 Attn: David A. Ephraim, Esquire FAX: (617) 880-3456 11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER Massachusetts law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Massachusetts; provided, however, that if for any reason Bank cannot avail itself of such courts in the Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY. BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 12 GENERAL PROVISIONS 12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or Obligations under it without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the consent of or prior notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement, the Loan Documents or any related agreement. 12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the Bank and its officers, employees and agents harmless against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys' fees and expenses), except in each case for losses caused by Bank's 12 gross negligence or willful misconduct. 12.3 RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Bank, a lien, security interest and right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of the Bank or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower and any guarantor even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 12.4 TIME OF ESSENCE. Time is of the essence for the performance of all Obligations in this Agreement. 12.5 SEVERABILITY OF PROVISION. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement must be in writing signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire agreement about this subject matter, and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents. 12.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 12.8 SURVIVAL. All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run. 12.9 CONFIDENTIALITY. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (i) to Bank's subsidiaries or affiliates in connection with their business with Borrower; (ii) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee's or purchaser's agreement to the terms of this provision); (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank's examination or audit; and (v) as Bank considers reasonably necessary in exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank's possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 13 DEFINITIONS 13.1 DEFINITIONS. "ACCOUNTS" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower's Books relating to any of the foregoing, as such definition may be amended from time to time according to the Code. 13 "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the Committed Revolving Line. "AFFILIATE" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and members. "BANK EXPENSES" are all audit fees and expenses and reasonable costs or expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings) with respect to Borrower. "BORROWER'S BOOKS" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information. "BORROWING BASE" is 75.0% of Eligible Accounts as determined by Bank from Borrower's most recent Borrowing Base Certificate. "BORROWING BASE CERTIFICATE" is set forth on Exhibit C hereto. "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which the Bank is closed. "CLOSING DATE" is the date of this Agreement. "CODE" is the Uniform Commercial Code as adopted in Massachusetts, as amended and as may be amended and in effect from time to time. "COLLATERAL" is any and all properties, rights and assets of the Borrower granted by the Borrower to Bank or arising under the Code, now, or in the future, in which the Borrower obtains an interest, or the power to transfer rights, including, without limitation, the property described on EXHIBIT A. "COMMITTED REVOLVING LINE" is Two Million Five Hundred Thousand Dollars ($2,500,000.00). "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. "CREDIT EXTENSION" is each Advance, Letter of Credit, FX Forward Contract, or any other extension of credit by Bank for Borrower's benefit. "CURRENT ASSETS" are amounts that under GAAP should be included on that date as current assets on Borrower's consolidated balance sheet. "CURRENT LIABILITIES" are the aggregate amount of Borrower's Total Liabilities which mature within one (1) year, which shall include, without limitation, all obligations and liabilities of Borrower to Bank. 14 "DEFERRED MAINTENANCE REVENUE" is all amounts received in advance of performance under maintenance contracts and not yet recognized as revenue. "EBITDA" means earnings before interest, taxes, depreciation and amortization in accordance with GAAP. "ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's business that meet all Borrower's representations and warranties in Section 5.2; but Bank may change eligibility standards by giving Borrower thirty (30) days prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts shall not include: (a) Accounts that the account debtor has not paid within ninety (90) days of invoice date; (b) Accounts for an account debtor, fifty percent (50%) or more of whose Accounts have not been paid within ninety (90) days of invoice date; (c) Credit balances over ninety (90) days from invoice date; (d) Accounts for an account debtor, including Affiliates, whose total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in writing; (e) Accounts for which the account debtor does not have its principal place of business in the United States; (f) Accounts for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality thereof; (g) Accounts for which Borrower owes the account debtor, but only up to the amount owed (sometimes called "contra" accounts, accounts payable, customer deposits or credit accounts); (h) Accounts for demonstration or promotional equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or other terms if account debtor's payment may be conditional; (i) Accounts for which the account debtor is Borrower's Affiliate, officer, employee, or agent; (j) Accounts in which the account debtor disputes liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; (k) Accounts for which Bank reasonably determines after inquiry and consultation with Borrower collection to be doubtful. "EQUIPMENT" is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. "EXCLUDED TAX" means a Tax imposed by a jurisdiction on the net income of Bank because Bank has a connection with that jurisdiction but not a Tax: (i) calculated by reference to the gross amount of a payment under the Obligations (without the allowance of a deduction); or (ii) imposed because Bank is taken to be connected with that jurisdiction solely because it is party to a document constituting the Obligations or a transaction contemplated by the Obligations. 15 "EXIM AGREEMENT" is that certain Export-Import Bank Loan and Security Agreement of even date herewith by and between the Borrower and the Bank and all documents, instruments and agreements executed in conjunction therewith, each as may be amended from time to time. "FX FORWARD CONTRACT" is defined in Section 2.1.3. "FX RESERVE" is defined in Section 2.1.3. "GAAP" is generally accepted accounting principles. "GOVERNMENT AGENCY" means any government or any governmental, semi-governmental or judicial entity or authority. It also includes any self-regulatory organisation established under statute or any stock exchange. "INDEBTEDNESS" is present and future (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations. "INSOLVENCY PROCEEDING" is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law of any State, country or jurisdiction, including assignments for the benefit of creditors, compositions, administrations, winding up, receivership, liquidation dissolution, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. "INTELLECTUAL PROPERTY" is any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished; any and all trade secrets, and any and all intellectual property rights in computer software and computer software products; any and all design rights which may be available to Borrower; all mask work or similar rights available for the protection of semiconductor chips; all patents, patent applications and like protections; any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections; all licenses or other rights to use any of the foregoing; or any claims for damages by way of any past, present and future infringement of any of the foregoing. "INVENTORY" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title. "INVESTMENT" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. "LETTER OF CREDIT" means a letter of credit or similar undertaking issued by Bank pursuant to Section 2.1.2. "LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2. "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. "LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated. "MATERIAL ADVERSE CHANGE " is: (i) A material impairment in the perfection or priority of Bank's security interest in the Collateral or in the value of such Collateral; (ii) a material adverse change in the business, operations, or 16 condition (financial or otherwise) of the Borrower; (iii) a material impairment of the prospect of repayment of any portion of the Obligations ;or (iv) Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period. "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including letters of credit, cash management services, and foreign exchange contracts, if any, including, without limitation, all Obligations under the Exim Agreement, and including interest accruing after Insolvency Proceedings begin. "PAYMENT DATE" is the first day of each calendar month. "PERMITTED INDEBTEDNESS" is: (a) Borrower's indebtedness to Bank under this Agreement or the Loan Documents; (b) Indebtedness existing on the Closing Date and shown on the Schedule; (c) Subordinated Debt; (d) Indebtedness to trade creditors incurred in the ordinary course of business; (e) Indebtedness incurred for the purchase, lease, or other financing (including a sale/leaseback transaction) of Equipment not to exceed $1,000,000.00 in the aggregate during the term hereof, which Indebtedness may be secured in accordance with subsection (c) of the definition of Permitted Liens; (f) Indebtedness secured by Permitted Liens other than subsection (c) thereof; (g) Other Indebtedness not otherwise permitted by Section (a)- (f) above not exceeding $100,000 in the aggregate outstanding at any time; and (h) Extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. "PERMITTED INVESTMENTS" are: (a) Investments shown on the Investments Schedule and existing on the Closing Date; (b) Loans or advances to Borrower's employees as determined by Borrower's management up to an aggregate outstanding amount of $100,000 at any time or loans or advances to its Subsidiaries up to an aggregate outstanding amount of $500,000 at any time; and (c) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any state maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii) Bank's certificates of deposit issued maturing no more than 1 year after issue; and (iv) any other investments administered through the Bank. "PERMITTED LIENS" are: (a) Liens existing on the Closing Date and shown on the Schedule or arising under this 17 Agreement or other Loan Documents; (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank's security interests; (c) Purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment; (d) Carriers', warehousemen's, mechanics', materialmen's repairmen's or other like liens arising in the ordinary course of business which are not overdue for a period of more than ninety (90) days or which are being contested in good faith by appropriate proceedings; (e) Leases or subleases and non-exclusive licenses or sublicenses granted by Borrower in the ordinary course of Borrower's business, if the leases, subleases, licenses and sublicenses permit granting Bank a security interest; (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (e), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase. "PERSON" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. "PRIME RATE" is Bank's most recently announced "prime rate," even if it is not Bank's lowest rate. "QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted cash, cash equivalents, net billed accounts receivable and investments with maturities of fewer than 12 months determined according to GAAP. "RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower. "REVOLVING MATURITY DATE" is one day prior to the one year anniversary of the Closing Date. "SCHEDULE" is any attached schedule of exceptions. "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to Borrower's debt to Bank (pursuant to a subordination agreement entered into between the Bank, the Borrower and the subordinated creditor), on terms acceptable to Bank. "SUBSIDIARY" is any Person, joint venture, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by Borrower. "TANGIBLE NET WORTH" is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (i) any amounts attributable to (a) goodwill, (b) intangible items including unamortized debt discount and expense, patents, trade and service marks and names, copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets, minus (ii) Total Liabilities, plus (iii) Subordinated Debt. "TAX" includes any tax, levy, impost, deduction, charge, rate, duty, compulsory loan or withholding which is levied or imposed by a Government Agency, and any related interest, penalty, charge, fee or other amount. 18 "TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance sheet, including all Indebtedness, and current portion of Subordinated Debt permitted to be paid by Bank, but excluding all Subordinated Debt. 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the date first above written. BORROWER: APPLIX, INC. By /s/ Alan Goldsworthy ---------------------------------------- Name: CEO ---------------------------------------- Title: 12/5/01 ---------------------------------------- BANK: SILICON VALLEY BANK, d/b/a SILICON VALLEY EAST By /s/ R. Bryan Jadot --------------------------------------- Name: R. Bryan Jadot --------------------------------------- Title: Vice President --------------------------------------- SILICON VALLEY BANK By /s/ Maggie Garcia --------------------------------------- Name: Maggie Garcia --------------------------------------- Title: Loan Admin. Team Leader --------------------------------------- (Signed in Santa Clara County, California) 20 SCHEDULE LOAN AND SECURITY AGREEMENT BY AND BETWEEN APPLIX, INC. ("Applix") AND SILICON VALLEY BANK December 5, 2001 SECTION 5.3 LITIGATION 1. OneSource Information Services, Inc., ("OneSource") has alleged that Applix is liable to OneSource for the payment of license fees in the approximate amount of $42,000. Applix has disputed such liability. OneSource and Applix are in the process of settling this dispute. 2. Mehta Corporation ("Mehta") has alleged that Applix has infringed on a trademark or trade name of Mehta. Applix has disputed such liability. 3. Computer Associates ("CA") has filed a complaint against Applix with respect to a contract between CA and Applix. Applix has denied the allegations set forth in the complaint. Applix and CA are in the process of settling the dispute. 4. Parallax Capital Partners LLC ("Parallax") has alleged that Applix is liable to Parallax for amounts related to the sale of assets by Applix to Parallax. Applix has disputed such liability. Applix and Parallax have reached a settlement of this dispute. 5. The Massachusetts Department of Revenue ("DOR") has alleged that certain tax credits claimed by Applix, in the approximate amount of $90,000, should be disallowed. Applix has disputed such disallowance. Applix and DOR are in the process of settling this dispute. 6. United Information Technologies, Inc. ("UIT") has alleged that Applix is liable for amounts due under an agreement between UIT and Applix. Applix has disputed such liability. SECTION 13.1 PERMITTED INDEBTEDNESS 1. Letter of Credit, dated July 31, 2001, issued by Citizens Bank to secure a commercial lease under which Applix is lessee; Payments by Citizens Bank to the lessor under the Letter of Credit are secured by $1,050,000 account with Citizens Bank (see Permitted Liens and Permitted Investments). 2. Payment obligations outstanding with respect to acquisition of Dynamic Decisions Pty Ltd (27 monthly payments aggregating $10,610,000, contingent upon continued employment of certain individuals by Dynamic Decisions Pry Ltd). 3. Intercompany payables to the following subsidiaries of Applix in the corresponding amounts (as of 10/31/01): Applix Netherlands, $120,000; Applix UK, $599,238; Applix Germany, $554,479; Applix Switzerland, $343,611; Applix Australia, $253,773. SECTION 13.1 PERMITTED INVESTMENTS 1. 342,466 shares of Series B Preferred Stock of Turbo Linux. 2. 190,000 shares of common stock of Real-Time International, Inc. 3. Notes Receivable in the approximate aggregate amount of $1,120,000 pursuant to the executive stock purchase loan program of Applix. As previously agreed by Silicon Valley Bank, Applix plans to make future advances, up to an additional $500,000, under this executive stock purchase loan program and to take additional notes receivable in return for such advances. 4. Money market account (marketable securities) with Citizens Bank in the approximate amount of $1,050,000 to secure Letter of Credit (see Permitted Liens and Permitted Indebtedness). 5. Intercompany receivables based on advances made to the following subsidiaries of Applix in the corresponding amounts (as of 10/31/01): Applix Netherlands, $120,000; Applix UK, $581,912; Applix Germany, $554,480; Applix Switzerland, $355,730; Applix Australia, $233,103. SECTION 13.1 PERMITTED LIENS 1. Letter of Credit, dated July 31, 2001, issued by Citizens Bank to secure a commercial lease under which Applix is lessee; Payments by Citizens Bank to the lessor under the Letter of Credit are secured by $1,050,000 in cash on deposit with Citizens Bank (see Permitted Indebtedness and Permitted Investments). EXHIBIT A The Collateral consists of all right, title and interest of Borrower in and to the following: All goods, equipment, inventory, contract rights or rights to payment of money, franchise agreements, general intangibles (including payment intangibles), accounts (including health-care receivables), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities, and all other investment property supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and All Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. Notwithstanding the foregoing, the Collateral does not include in any event: Any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished; any and all trade secrets, and any and all intellectual property rights in computer software and computer software products; any and all design rights which may be available to Borrower; all mask work or similar rights available for the protection of semiconductor chips; all patents, patent applications and like protections; any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections; all licenses or other rights to use any of the foregoing; or any claims for damages by way of any past, present and future infringement of any of the foregoing. Notwithstanding the foregoing, the Collateral shall include all accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing intellectual property. To the extent a court of competent jurisdiction holds that a security interest in any Intellectual Property is necessary to have a security interest in any accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing Intellectual Property, then the Collateral shall, effective as of the Closing Date, include the Intellectual Property, to the extent necessary to permit perfection of the Bank's security interest in such accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the Intellectual Property and to the extent such inclusion is not violative of, prohibited by or would trigger an adverse consequence under any material agreement relating to such Intellectual Property or applicable law. 21 EX-10.17 6 b42037aiex10-17.txt EX-10.17 NON-RECOURSE RECEIVABLES PURCHASE AGRMNT EXHIBIT 10.17 NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT This NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT (the "Agreement"), dated as of December 31, 2001, is between SILICON VALLEY BANK ("Buyer") having a place of business at 3003 Tasman Drive, Santa Clara, California 95054 and APPLIX, INC. ("Seller"), a Massachusetts corporation with its chief executive office at 289-291 Turnpike Road, Westboro, Massachusetts 01581. 1. DEFINITIONS. When used herein, the following terms have the following meanings. 1.1 "ACCOUNT DEBTOR" has the meaning set forth in the Massachusetts Uniform Commercial Code and shall include any person liable on any Purchased Receivable, including without limitation, any guarantor of the Purchased Receivable and any issuer of a letter of credit or banker's acceptance. 1.2 "ADJUSTMENTS" means all discounts, allowances, returns, disputes, counterclaims, offsets, defenses, rights of recoupment, rights of return, warranty claims, or short payments, asserted by or on behalf of any Account Debtor with respect to any Purchased Receivable. 1.3 "ADMINISTRATIVE FEE" means for any Purchase the percentage of the Total Purchased Receivables Amount set forth in the Schedule for such Purchase. 1.4 "BUSINESS DAY" means any day other than a Saturday, Sunday, or other day on which banks in California or Massachusetts are required or authorized by law to close. 1.5 "DISCOUNT RATE" means for any Purchase the "Discount Rate" set forth in the Schedule for such Purchase. 1.6 "DUE DATE" means for any Purchase the "Due Date" set forth in the Schedule for such Purchase. 1.7 "EVENT OF DEFAULT" has the meaning set forth in SECTION 10 hereof. 1.8 "INSOLVENCY EVENT" means, with respect to any Account Debtor, (a) the commencement of a case, action or proceeding with respect to such Account Debtor before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, (b) such Account Debtor is generally not paying its debts when due, or (c) the making or commencement of any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other similar arrangement in respect of the creditors generally or any substantial portion of the creditors of such Account Debtor. 1.9 "INVOICE AMOUNT" means for any Purchase, the "Invoice Amount" set forth in the Schedule for such Purchase. 1.10 "LATE PAYMENT SETTLEMENT FEE" has the meaning set forth in Section 2.2. 1.11 "LATE PAYMENT SETTLEMENT PERIOD" has the meaning set forth in Section 2.2. 1.12 "OPEN AMOUNT" means the portion of any Purchased Receivable which has been pre-paid to the Seller. 1.13 "PAYMENT IN FULL" means for any Purchase that Buyer has received payments on account of the Purchased Receivables under such Purchase equal to the Total Purchased Receivables Amount for such Purchase. 1.14 "PRIME RATE" means per annum rate of interest from time to time announced and made effective by Buyer as its Prime Rate (which rate may or may not be the lowest rate available from Buyer at any given time). 1.15 "PURCHASE" means the purchase by Buyer from Seller of one or more Purchased Receivables on a Purchase Date as listed in the Schedule applicable to such Purchase. 1.16 "PURCHASE DATE" means for any Purchase the date set forth as the "Purchase Date" in the Schedule for such Purchase. 1.17 "PURCHASE PRICE" means for any Purchase the "Purchase Price" set forth on the Schedule for such Purchase. 1.18 "PURCHASED RECEIVABLES" means for any Purchase all those Receivables arising out of the invoices and other agreements identified on the Schedule for such Purchase. 1.19 "PURCHASED RECEIVABLE AMOUNT" means for any Purchased Receivable, the"Invoice Amount" set forth with respect to such Purchased Receivable on the applicable Schedule minus the Open Amount. 1.20 "RECEIVABLES" means accounts, receivables, chattel paper, instruments, contract rights, documents, general intangibles, letters of credit, drafts, bankers acceptances, and other rights to payment, and all proceeds thereof. 1.21 "RELATED PROPERTY" has the meaning as set forth in SECTION 9 hereof. 1.22 "REPURCHASE AMOUNT" has the meaning set forth in SECTION 4.2 hereof. 1.23 "SCHEDULE" means for each Purchase a schedule executed by the parties in substantially the form of EXHIBIT A hereto identifying the Purchased Receivables subject to such Purchase and setting forth financial and other details relating to such Purchase, all as contemplated by EXHIBIT A. 1.24 "SETTLEMENT DATE" has the meaning set forth in SECTION 3.2 hereof. 1.25 "TOTAL PURCHASED RECEIVABLES AMOUNT" means for any Purchase the total of the Purchased Receivable Amounts for all Purchased Receivables subject to such Purchase as set forth on the applicable Schedule. 2. PURCHASE AND SALE OF RECEIVABLES. 2.1 SALE AND PURCHASE. Subject to the terms and conditions of this Agreement, with respect to each Purchase, effective on each applicable Purchase Date, Seller agrees to sell to Buyer and Buyer agrees to buy from Seller all right, title, and interest (but none of the obligations with respect to) of the Seller to the payment of all sums owing or to be owing from the Account Debtors under each Purchased Receivable to the extent of the Purchased Receivable Amount for such Purchased Receivable. Each purchase and sale hereunder shall be in the sole discretion of Buyer and Seller. In any event, Buyer will not (i) purchase any Receivables in excess of an aggregate outstanding amount exceeding Two Million and 00/100 Dollars ($2,000,000.00), or (ii) purchase any Receivables under this Agreement after September 28, 2002. The purchase of each Purchased Receivable may be evidenced by an assignment in a form reasonably acceptable to Buyer. 2.2 PURCHASE PRICE AND RELATED MATTERS. With respect to each Purchase: (A) PAYMENT OF PURCHASE PRICE. On the Purchase Date, the Purchase Price, less the Administrative Fee and legal fees (that are due and payable by Seller, if any), shall be paid by Buyer to Seller. (B) LATE PAYMENT SETTLEMENT FEE. If, for any reason, Payment in Full does not occur on or before the Due Date, then, upon the first to occur of Payment in Full, 90 days after the Due Date or the filing of a bankruptcy proceeding by or against the applicable Account Debtor that failed to pay in full by the Due Date, and in addition to any other obligations of Seller hereunder, Seller shall pay to Buyer an amount which is equal to (i) the product of the Discount Rate and the average daily balance of the Total Purchased Receivables Amount outstanding during the period from the Due Date until the first to occur of Payment in Full, 90 days after the Due Date or the filing of a bankruptcy proceeding by or against the applicable Account Debtor that failed to pay in full by the Due Date (the "Late Payment Settlement Period") multiplied by (ii) a fraction the numerator of which is the number of days in the Late Payment Settlement Period and the denominator of which is 360 ("Late Payment Settlement Fee"). 2.3 FACILITY FEE. A fully earned, non-refundable facility fee of Five Thousand Dollars ($5,000.00) is due to the Buyer from the Seller upon execution of this Agreement. 2.4 NATURE OF TRANSACTION. It is the intent of the parties hereto that each purchase and sale of Receivables hereunder is and shall be a true sale of such Receivables for all purposes and not a financing arrangement. Each such sale shall be, subject to the terms hereof, absolute and irrevocable, providing Buyer with the full risks and benefits of ownership of the Purchased Receivables (such that the Purchased Receivables would not be property of the Seller's estate in the event of the Seller's bankruptcy). The parties agree that appropriate UCC financing statements have been or shall promptly be filed to reflect that Seller is the seller and Buyer is the purchaser of Receivables hereunder. 3. COLLECTIONS, CHARGES AND REMITTANCES. 3.1 APPLICATION OF PAYMENTS. All payments in respect of any Purchased Receivable, whether received from an Account Debtor or any other source and whether received by Seller or Buyer, shall be the property of Buyer and Seller shall have no ownership interest therein. 3.2 COLLECTION BY SELLER. In order to facilitate the collection of the Purchased Receivables in the ordinary course of business, Seller agrees to act as Buyer's agent for collection. Accordingly, Buyer hereby appoints the Seller its attorney-in-fact to ask for, demand, take, collect, sue for and receive all payments made in respect of the Purchased Receivables and to enforce all rights and remedies thereunder and designates Seller as Buyer's assignee for collection; PROVIDED that such appointment of Seller as such attorney-in-fact or assignee for collection may be revoked by Buyer at any time. Seller, as such attorney-in-fact, shall use due diligence and commercially reasonable lawful efforts in accordance with its usual policies and practices to collect all amounts owed by the Account Debtors on each Purchased Receivable when the same become due. In the enforcement or the collection of Purchased Receivables, Seller shall commence any legal proceedings only in its own name as an assignee for collection or on behalf of Buyer or, with Buyer's prior written consent, in Buyer's name. Seller shall have no obligation to commence any such legal proceedings unless Buyer has agreed to pay the legal fees and other expenses to be incurred in such proceedings on a basis which is acceptable to Seller. In no event shall Seller take any action which would make Buyer a party to any litigation or arbitration proceeding without Buyer's prior written consent. Until Buyer has received Payment in Full as to any Purchase, Seller shall (i) hold in trust for Buyer and turn over to Buyer forthwith upon receipt all payments made to Seller by Account Debtors with respect to the Purchased Receivables subject to such Purchase and (ii) turn over to Buyer forthwith on receipt all instruments, chattel paper and other proceeds of the Purchased Receivables; PROVIDED that unless an Event of Default has occurred and is continuing, Seller may remit amounts received by Seller and due to Buyer on a monthly basis no later than the last business day of each month (each a "Settlement Date") after the Purchase Date, commencing on the last business day of the month after the Purchase Date. On each Settlement Date, Seller shall deliver to Buyer a report, in form and substance acceptable to Buyer, of the account activity (including dates and amounts of payments) and changes in account status for each Purchased Receivable. 3.3 NO OBLIGATION TO TAKE ACTION. Buyer shall have no obligation to perform any of Seller's obligations under any Purchased Receivables or to take any action or commence any proceedings to realize upon any Purchased Receivables (including without limitation any defaulted Purchased Receivables), or to enforce any of its rights or remedies with respect thereto. 4. NON-RECOURSE; REPURCHASE OBLIGATIONS. 4.1 NON-RECOURSE. Except as otherwise set forth in this Agreement, Buyer's acquisition of Purchased Receivables from Seller hereunder shall be without recourse against Seller. 4.2 SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer on demand, the full face amount, or any unpaid portion, of any Purchased Receivable: (A) with respect to which there has been any breach of warranty or representation set forth in SECTION 6 hereof (except for breaches of warranty or representations which are permitted to be, and have been, cured pursuant to SECTION 7 hereof) or any breach of any covenant contained in this Agreement; or (B) with respect to which the Account Debtor asserts any discount, allowance, return, dispute, counterclaim, offset, defense, right of recoupment, right of return, warranty claim, or short payment (except for (i) such matters as are permitted to be, and have been, cured pursuant to SECTION 7 hereof or (ii) such matters with respect to which Seller provides evidence satisfactory to Buyer that such assertion was not made in good faith. (collectively, the "Repurchase Amount"). Upon such payment, the respective Purchased Receivables shall be deemed property of and owned solely by the Seller (and shall not be deemed to be a Purchased Receivable hereunder). 4.3 SELLER'S PAYMENT OF THE AMOUNTS DUE BUYER. All amounts due from Seller to Buyer shall be paid by Seller to Buyer in immediately available funds by fedwire to Buyer's address for notices. 5. POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer and its successors and assigns as Seller's true and lawful attorney-in-fact, and hereby authorizes Buyer: (a) to sell, assign, transfer, pledge, compromise, or discharge the whole or any part of the Purchased Receivables; (b) to demand, collect, receive, sue, and give releases to any Account Debtor for the monies due or which may become due upon or with respect to the Purchased Receivables and to compromise, prosecute, or defend any action, claim, case or proceeding relating to the Purchased Receivables, including the filing of a claim or the voting of such claims in any bankruptcy case, all in Buyer's name or Seller's name, as Buyer may choose; (c) to prepare, file and sign Seller's name on any notice, claim, assignment, demand, draft, or notice of or satisfaction of lien or mechanics' lien or similar document with respect to Purchased Receivables; (d) to notify all Account Debtors with respect to the Purchased Receivables to pay Buyer directly; (e) to receive, open, and dispose of all mail addressed to Seller for the purpose of collecting the Purchased Receivables; (f) to endorse Seller's name on any checks or other forms of payment on the Purchased Receivables; (g) to execute on behalf of Seller any and all instruments, documents, financing statements and the like to perfect Buyer's interests in the Purchased Receivables; and (h) to do all acts and things necessary or expedient, in furtherance of any such purposes. 6. REPRESENTATIONS, WARRANTIES AND COVENANTS. 6.1 RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To induce Buyer to purchase the Purchased Receivables and to render its services to Seller, and with full knowledge that the truth and accuracy of the following are being relied upon by the Buyer in determining whether to accept receivables as Purchased Receivables, Seller represents, warrants, covenants and agrees, with respect to each Purchased Receivable, that, as of the date of the applicable Purchase pertaining to such Purchased Receivable: (A) Seller is the absolute owner of each of the Purchased Receivables and has full legal right to sell, transfer and assign such receivables; (B) The correct amount of each Purchased Receivable is as set forth on the applicable Schedule and is not in dispute; (C) The payment of each Purchased Receivable is not contingent upon the fulfillment of any obligation or contract, and any and all obligations required of the Seller have been fulfilled as of the applicable Purchase Date; (D) Such Purchased Receivable is based on an actual sale and delivery of goods and/or services actually rendered, is due no later than the applicable Due Date and is owing to Seller, is not past due or in default, has not been previously sold, assigned, transferred, or pledged, and is free of any and all liens, security interests and encumbrances other than liens, security interests or encumbrances in favor of Buyer or any other division or affiliate of Silicon Valley Bank; (E) There are no defenses, offsets, or counterclaims against such Purchased Receivable, and no agreement has been made under which the Account Debtor may claim any deduction or discount, except as otherwise stated on the applicable Schedule; (F) Seller and, to Seller's knowledge, each Account Debtor set forth on the applicable Schedule with respect to such Purchased Receivable, is not insolvent as that term is defined in the United States Bankruptcy Code and the Massachusetts Uniform Commercial Code, and no such Account Debtor, to the knowledge of Seller, has filed or had filed against it a voluntary or involuntary petition for relief under the United States Bankruptcy Code; and (G) No Account Debtor set forth on the applicable Schedule with respect to such Purchased Receivable has objected to the payment for, or the quality or the quantity of the subject matter of, the Purchased Receivable, and, to the best of Seller's knowledge, each such Account Debtor is liable for the amount set forth on such Schedule. 6.2 ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition to the foregoing warranties, representations and covenants, to induce Buyer to buy the Purchased Receivables, Seller hereby represents, warrants, covenants and agrees that: (A) Seller will not assign, transfer, sell, or grant, or permit any lien or security interest in any interest the Seller may have in any Purchased Receivables to or in favor of any other party, without Buyer's prior written consent. (B) The Seller's name, form of organization, chief executive office, and the place where the records concerning all Purchased Receivables are kept is set forth at the beginning of this Agreement or, if located at any additional location, as set forth on a schedule attached to this Agreement, and Seller will give Buyer at least 10 days prior written notice if such name, organization, chief executive office or records concerning Purchased Receivables is changed or added and shall execute any documents necessary to perfect Buyer's interest in the Purchased Receivables. (C) Seller shall (i) pay all of its normal gross payroll for employees, and all federal and state taxes, as and when due, including without limitation all payroll and withholding taxes and state sales taxes; (ii) deliver at any time and from time to time at Buyer's request, evidence satisfactory to Buyer that all such amounts have been paid to the proper taxing authorities. (D) Seller has not filed a voluntary petition for relief under the United States Bankruptcy Code or had filed against it an involuntary petition for relief and is not contemplating or anticipating any such filing. (E) If Payment in Full of any Purchased Receivable has not occurred by the applicable Due Date, then Seller shall within 10 days of such date provide a written report to Buyer setting forth the reasons for such delay in payment. (F) So long as any Purchased Receivable is outstanding, Seller shall deliver to Buyer: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Seller's consolidated operations during the period in a form acceptable to Buyer, along with an aged listing of all accounts receivable and accounts payable (by invoice date); (ii) as soon as available, but no later than forty-five (45) days after the last day of each quarter, a company prepared consolidated balance sheet and income statement covering Seller's consolidated operations during the previous quarter in a form acceptable to Seller; (iii) as soon as available, but no later than one hundred twenty (120) days after the last day of Seller's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Seller; (iv) within five (5) days of filing, copies of all statements, reports and notices made available to Seller's security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission. 7. ADJUSTMENTS. In the event any Adjustment or dispute is asserted by any Account Debtor, Seller shall promptly advise Buyer and Seller shall, subject to the Buyer's approval, resolve such disputes and advise Buyer of any Adjustments and promptly remit to Buyer the difference between the Invoice Amount on the Purchase Date and the Invoice Amount after such Adjustment. Unless Buyer has otherwise elected to exercise its rights under Section 4.2 hereof, Buyer shall remain the absolute owner of any Purchased Receivable which is subject to Adjustment, and, until the amount of such adjustment (as set forth above) is paid by Seller to Buyer, any rejected, returned, or recovered personal property, with the right to take possession thereof at any time, and if such possession is not taken by Buyer, Seller is to resell it for Buyer's account at Seller's expense with the proceeds made payable to Buyer. While Seller retains possession of said returned goods and such goods are the property of Buyer, Seller shall segregate said goods and mark them "property of Silicon Valley Bank." 8. INDEMNIFICATION. (A) Seller hereby agrees that in the event any Account Debtor is released from all or any part of its payment obligations with respect to any Purchased Receivable by reason of: (1) any act or omission of Seller not permitted by this Agreement or consented to in writing by Buyer; or (2) the operation of any of the provisions of the documentation pertaining to such Purchased Receivables, which result in the termination of the Account Debtor's obligation to pay all of any part of the Purchased Receivables, then, upon the happening of any such event, Seller shall thereafter pay to Buyer on the date when the Account Debtor would otherwise have paid the Purchased Receivable to Buyer an amount equal to the lesser of (a) the amount of the Purchased Receivable not payable by the Account Debtor as a result of such event and (b) the unpaid portion of the Purchased Receivable Amount for such Purchased Receivable. (B) Seller hereby agrees to pay, and to indemnify and hold harmless Buyer from and against, any taxes which may at any time be asserted in respect of this transaction or the subject matter thereof (including, without limitation, any sales, occupational, excise, gross receipts, general corporation, personal property, privilege or license taxes, but not including taxes imposed upon the Buyer with respect to its income arising out of this transaction) and costs, expenses and reasonable counsel fees in defending against the same, whether arising by reason of the acts to be performed by Seller hereunder or imposed against Buyer, Seller, the property involved or otherwise; PROVIDED that with respect to any of the foregoing for which Seller shall be liable, Seller shall receive reasonably prompt notice from Buyer of this assertion of any such taxes on Buyer of which Buyer has notice. 9. ADDITIONAL RIGHTS. To secure the prompt payment and performance to Buyer of all of the Purchased Receivables and the obligations of Seller hereunder, Seller hereby grants to Buyer a continuing lien upon and security interest in all of Seller's now existing or hereafter arising rights and interest in the following, whether now owned or existing or hereafter created, acquired, or arising, and wherever located (the "Related Property"): (A) Seller's rights to any returned or rejected goods in respect of the Purchased Receivables, with respect to which Buyer has all the rights of any unpaid seller, including the rights of replevin, claim and delivery, reclamation, and stoppage in transit; (B) All books and records pertaining to the Purchased Receivables or the foregoing goods; and (C) All proceeds of the foregoing, whether due to voluntary or involuntary disposition, including insurance proceeds. Notwithstanding the foregoing, the Related Property shall not include, in any event, any license agreements or other intellectual property of Seller. Seller is not authorized to sell, assign, transfer or otherwise convey any interest in any Related Property without Buyer's prior written consent. Seller agrees to sign UCC financing statements, in a form acceptable to Buyer, and any other instruments and documents requested by Buyer to evidence, perfect, or protect the interests of Buyer in the Purchased Receivables and the Related Property. Seller agrees to deliver to Buyer the originals of all instruments, chattel paper and documents evidencing or related to Purchased Receivables and Related Property. 10. DEFAULT. The occurrence of any one or more of the following shall constitute an Event of Default hereunder: (A) Seller fails to pay any amount owed to Buyer as and when due; (B) There shall be commenced by or against Seller any voluntary or involuntary case under the United States Bankruptcy Code, or any assignment for the benefit of creditors, or appointment of a receiver or custodian for any of its assets; (C) Seller shall become insolvent in that its debts are greater than the fair value of its assets, or Seller is generally not paying its debts as they become due or is left with unreasonably small capital; (D) Any involuntary lien, garnishment, attachment or the like is issued against or attaches to the Purchased Receivables or any Related Property; (E) Seller shall breach any covenant, agreement, warranty, or representation set forth herein, and the same is not cured (whether pursuant to the provisions of Section 6 hereof, if applicable, or otherwise) to Buyer's satisfaction within 10 days after Buyer has given Seller oral or written notice thereof; provided, that if such breach is incapable of being cured it shall constitute an immediate default hereunder; (F) Seller is not in compliance with, or otherwise is in default under, any term of any document, instrument or agreement evidencing a debt, obligation or liability of any kind or character of Seller, now or hereafter existing, in favor of Buyer or any division or affiliate of Silicon Valley Bank, regardless of whether such debt, obligation or liability is direct or indirect, primary or secondary, joint, several or joint and several, or fixed or contingent, together with any and all renewals and extensions of such debts, obligations and liabilities, or any part thereof; or (G) An event of default shall occur under any guaranty executed by any guarantor of the obligations of Seller to Buyer under this Agreement, or any material provision of any such guaranty shall for any reason cease to be valid or enforceable or any such guaranty shall be repudiated or terminated, including by operation of law. 11. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, Buyer has and may exercise all the rights and remedies under this Agreement and under applicable law, including the rights and remedies of a secured party under the Massachusetts Uniform Commercial Code. 12. ACCRUAL OF INTEREST. If any amount owed by Seller to Buyer hereunder is not paid when due, such amount shall bear interest from such date until paid at a per annum rate equal to the Prime Rate plus 4.0%. 13. FEES, COSTS AND EXPENSES. The Seller will pay to Buyer immediately upon demand all reasonable fees, costs and expenses (including reasonable fees of attorneys and professionals [excluding full time Bank employees] and their costs and expenses) that Buyer incurs with any of the following: (a) preparing, negotiating, and administering this Agreement or any other agreement executed by Buyer and Seller in connection herewith, including any amendments, waivers or consents in connection with any of the foregoing, (b) enforcing Buyer's rights under, or collecting amounts owed by Seller to Buyer in connection with, this Agreement, including, without limitation, to enforce (i) Seller's agreement to repurchase as set forth in Section 4.2, (ii) Seller's payment of any amounts owing by Seller pursuant to Section 7 hereof, or (iii) Seller's payment of any amounts owing by Seller pursuant to Section 8 hereof, (c) enforcing any other rights against Seller or any guarantor, (d) protecting or enforcing its title to the Purchased Receivables or its security interest in the Related Property, and (e) the representation of Buyer in connection with any bankruptcy case or insolvency proceeding involving Seller or any guarantor, except to the extent arising as a result of Buyer's own gross negligence or willful misconduct. 14. SEVERABILITY, WAIVER, AND CHOICE OF LAW. In the event that any provision of this Agreement is deemed invalid by reason of law, this Agreement will be construed as not containing such provision and the remainder of the Agreement shall remain in full force and effect. If Buyer waives a default it may enforce a later default. Any consent or waiver under, or amendment of, this Agreement must be in writing. Nothing contained herein, or any action taken or not taken by Buyer at any time, shall be construed at any time to be indicative of any obligation or willingness on the part of Buyer to amend this Agreement or to grant to Seller any waivers or consents. This Agreement has been transmitted by Seller to Buyer at Buyer's office in the Commonwealth of Massachusetts and has been executed and accepted by Buyer in the Commonwealth of Massachusetts. This Agreement shall be governed by and interpreted in accordance with the internal laws of the Commonwealth of Massachusetts. 15. NOTICES. All notices shall be given to Buyer and Seller at the addresses or faxes set forth on the first page of this Agreement and shall be deemed to have been delivered and received: (a) if mailed, three calendar days after deposited in the United States mail, first class, postage pre-paid, (b) one calendar day after deposit with an overnight mail or messenger service; or (c) on the same date of confirmed transmission if sent by hand delivery, telecopy, telefax or telex. 16. JURY TRIAL. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL. 17. TITLES AND SECTION HEADINGS. The titles and section headings used herein are for convenience only and shall not be used in interpreting this Agreement. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the day and year above written. SELLER: APPLIX, INC. By: /s/ Walt Hilger ------------------------------------------------- Title: Vice President, CFO --------------------------------------------- BUYER: SILICON VALLEY BANK By: /s/ David Reich ------------------------------------------------- Title: Senior Vice President --------------------------------------------- EX-21.1 7 b42037aiex21-1.txt EX-21.1 SUBSIDIARIES EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT

JURISDICTION OF NAME OF ENTITY: INCORPORATION: - --------------- -------------- Applix B.V. The Netherlands Applix Canada, Inc. Delaware Applix Foreign Sales Corporation Barbados Veriteam France France Applix GmbH Germany Veriteam GmbH Germany Applix (UK) Limited United Kingdom Veriteam Limited United Kingdom Applix Securities Corp. Massachusetts Applix Singapore, Inc. Delaware Applix Australia Pty. Ltd. Australia Dynamic Decisions Pty. Limited Australia Sinper Corporation Florida Target Systems Corporation Massachusetts Veriteam, Inc. Delaware Applix (Schweiz) AG Switzerland

EX-23.1 8 b42037aiex23-1.txt EX-23.1 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-87882, 33-87776, 33-89382, 333-02340, 333-06303, 333-16963, 333-20853, 333-52603, 333-80861, 333-39462, 333-57670 and 333-63550, and Form S-3 No. 333-63564) of Applix, Inc. of our report dated January 25, 2002, (except for Note 16, as to which the date is February 8, 2002) with respect to the consolidated financial statements and schedule of Applix, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2001. /s/ Ernst & Young LLP Boston, Massachusetts March 29, 2002 EX-23.2 9 b42037aiex23-2.txt EX-23.2 CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-63564) and Form S-8 (File Nos. 33-87882, 33-87776, 33-89382, 333-02340, 333-06303, 333-16963, 333-20853, 333-52603, 333-80861, 333-39462, 333-57670, and 333-63550) of Applix, Inc. of our report dated January 24, 2001 relating to the financial statements, which is included in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts March 29, 2002 10-K 10 b42037aie10-k_pdf.pdf COURTESY PDF begin 644 b42037aie10-k_pdf.pdf M)5!$1BTQ+C(-)>+CS],-"C(S-2`P(&]B:@T\/"`-+TQI;F5A7!E M("]#871A;&]G(`TO4&%G97,@,C$W(#`@4B`-+TI4(#(S,R`P(%(@#3X^(`UE M;F1O8FH-,C4U(#`@;V)J#3P\("]3(#$Q.3$@+T9I;'1E,Y;(^K#NZTJ9-G!98%7RF;F&8=<7NF5>6NQ MYBJCGF)5KZ`I2U>Z9-:R+:^,IBR5@7N`39/O^BX#Q:Y*VXTEG$IS MSM;$,HNYV"[[X?:V4"58[O(RO1_;]5I58B2>U"5<=]E4G?1(8OGDN!<'-AG? 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EX-10.14

                                                                   EXHIBIT 10.14

                 EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT


         THIS EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT (this "Exim
Agreement") dated as of December 5, 2001,between SILICON VALLEY BANK, a
California chartered bank, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and APPLIX, INC., a Massachusetts corporation ("Applix US") with its
chief executive office at 289-291 Turnpike Road, Westboro, Massachusetts 01581,
APPLIX (UK) LIMITED ("Applix UK"), with offices at 289-291 Turnpike Road,
Westboro, Massachusetts 01581, APPLIX AUSTRALIA PTY, LTD. ("Applix Australia")
with offices at 289-291 Turnpike Road, Westboro, Massachusetts 01581, and
VERITEAM LIMITED ("Veriteam") with offices at 289-291 Turnpike Road, Westboro,
Massachusetts 01581, (Applix US, Applix UK, Applix Australia and Veriteam are
hereinafter jointly, severally and collectively referred to as "Borrower" and
each as "Borrower Entity"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:

         1        RECITALS.

         A.       Applix US and Bank are parties to that certain Loan and
Security Agreement of even date, as may be amended from time to time (as may be
amended, the "Domestic Agreement"), together with related documents executed in
conjunction therewith.

         B.       Borrower and Bank desire in this Exim Agreement to set forth
their agreement with respect to a working capital facility to be guaranteed by
the Export-Import Bank of the United States (the "Exim Bank").

         SECTION 2.        LOAN AND TERMS OF PAYMENT

         2.1      PROMISE TO PAY. Borrower hereby unconditionally promises to
pay Bank the unpaid principal amount of all Advances and interest on the unpaid
principal amount of the Advances as and when due in accordance with this Exim
Agreement.

         2.2      REVOLVING ADVANCES. Subject to the terms and conditions of
this Exim Agreement, Bank agrees to make Advances to Borrower in an amount not
to exceed (i) the Exim Committed Line or the Borrowing Base, whichever is less,
minus (ii) the FX Reserve, minus (iii) the aggregate outstanding Advances
hereunder, as determined by the Borrowing Base Certificate to be delivered to
the Bank.

         To evidence the Advances, Borrower shall execute and deliver to Bank on
the date hereof a promissory note (the "Note") in substantially the form
attached hereto as EXHIBIT B.

         Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. Eastern time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
EXHIBIT C hereto together with any additional documentation required under the
Borrower Agreement, including without limitation, as set forth in Section 2.03
of the Borrower Agreement. In addition to the procedure set forth in the
preceding sentence, Bank is authorized to make Advances under this Exim
Agreement, based upon instructions received from a Responsible Officer. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a designee (as designated in
writing by a Responsible Officer) thereof, and Borrower shall indemnify and hold
Bank harmless for any damages or loss suffered by Bank as a result of such
reliance. Bank will credit the amount of Advances made under this Section to
Borrower's deposit account. Amounts borrowed pursuant to this Section may be
repaid at any time and re-borrowed at any time during the term of this Exim
Agreement so long as no Event of Default has occurred and is continuing.

         Only Applix US may request Advances hereunder. Notwithstanding the
foregoing, each Borrower hereunder shall be obligated to repay all Advances made
hereunder, regardless of which Borrower actually receives said Advance, as if
each Borrower hereunder directly received ALL Advances. Each Borrower
acknowledges and agrees that, to the


extent the other Borrower has or may have certain rights of subrogation or
reimbursement against the other for claims arising out of this Exim Agreement,
that those rights are hereby waived.

         2.3      FOREIGN EXCHANGE SUBLIMIT. If there is availability under the
Exim Committed Line and the Borrowing Base, then Borrower may enter in foreign
exchange forward contracts with the Bank under which Borrower commits to
purchase from or sell to Bank a set amount of foreign currency more than one
business day after the contract date (the "FX Forward Contract"). Bank shall
subtract 10% of each outstanding FX Forward Contract from the foreign exchange
sublimit which is a maximum of $2,500,000.00 (the "FX Reserve"). The total FX
Forward Contracts at any one time may not exceed 10 times the amount of the FX
Reserve. Bank may terminate the FX Forward Contracts if an Event of Default
occurs.

         2.4      OVERADVANCES. If, at any time or for any reason, the amount of
Obligations under this Exim Agreement owed by Borrower to Bank pursuant to
Section 2.2 and 2.3 of this Exim Agreement is greater than the lesser of (i) the
Borrowing Base or (ii) the Exim Committed Line, the Borrower shall immediately
pay to Bank, in cash, the amount of such excess.

         2.5      INTEREST RATE; PAYMENTS.

                           (i)      INTEREST RATE. Advances accrue interest on
                  the outstanding principal balance at a per annum rate equal to
                  the aggregate of the Bank's Prime Rate, and one percent
                  (1.0%). After an Event of Default, Obligations shall bear
                  interest at four percent (4.0%) above the rate effective
                  immediately before the Event of Default. The interest rate
                  shall increase or decrease when the Prime Rate changes.
                  Interest is computed on the basis of a 360 day year for the
                  actual number of days elapsed.

                           (ii)     PAYMENTS. Interest is payable on the Payment
                  Date of each month. Bank may debit any of Borrower's deposit
                  accounts (unless prohibited by law) including Account Number
                  __________ for principal and interest payments or any amounts
                  Borrower owes Bank, including, without limitation, Bank
                  Expenses. Bank shall promptly notify Borrower when it debits
                  Borrower's accounts. These debits are not a set-off. Payments
                  received after 12:00 noon Eastern time are considered received
                  at the opening of business on the next Business Day. When a
                  payment is due on a day that is not a Business Day, the
                  payment is due the next Business Day and additional fees or
                  interest, as applicable, shall continue to accrue.

                           (iii)    ADDITIONAL PAYMENTS. Whenever Borrower is
                  obliged to make a deduction in respect of Tax from any payment
                  under any Obligation:

                           (A)      it shall promptly pay the amount deducted to
                  the appropriate Government Agency;

                           (B)      within 30 days of the end of the month in
                  which the deduction is made, it shall deliver to Bank official
                  receipts or other evidence of payment acceptable to Bank; and

                           (C)      unless the Tax is an Excluded Tax, it shall
                  pay Bank on the due date of the payment any additional amounts
                  necessary (as determined by Bank) to ensure that Bank receives
                  when due a net amount (after payment of any Taxes in respect
                  of those additional amounts) in the relevant currency equal to
                  the full amount which it would have received had a deduction
                  not been made. It shall indemnify Bank against the Tax and any
                  amounts recoverable from Bank in respect of the Tax. Borrower
                  waives any statutory right to recover from Bank any amount
                  paid under this clause.

                  The obligations of Borrower under this clause survive the
                  payment of all moneys owing under this Exim Agreement or the
                  termination of this Exim Agreement.

         2.6      FEES. Borrower shall pay to Bank:

                           (i)      EXIM FEE. A fully earned, non-refundable
                  facility fee of $37,250.00 due on the Closing Date; and


                                       2


                           (ii)     BANK EXPENSES. All Bank Expenses (including
                  reasonable attorneys' fees and expenses incurred through and
                  after the Closing Date) when due.

         2.7      USE OF PROCEEDS. Borrower will use the proceeds of Advances
only for the purposes specified in the Borrower Agreement. Borrower shall not
use the proceeds of the Advances for any purpose prohibited herein or by the
Borrower Agreement.

         SECTION 3.        CONDITIONS OF LOANS

         3.1      CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank
to make each Advance, including the initial Advance, is subject to the following
conditions:

                  (a)      timely receipt by Bank of the Payment/Advance Form as
         provided in Section 2.2;

                  (b)      timely receipt by Bank of an Export-Related Borrowing
         Base Certificate as defined in the Borrower Agreement;

                  (c)      the Exim Guarantee shall be in full force and effect;

                  (d)      the Bank shall have received, in form and substance
         satisfactory to Bank, all of the documents set forth in Section 3.1 of
         the Domestic Agreement;

                  (e)      evidence, in a form reasonably satisfactory to Bank,
         that the Charge upon Applix Australia's business assets has been
         provisionally registered by the Australian Securities and Investments
         Commission and Bank has received a properly executed and registered (to
         the satisfaction of Bank) Australian Securities & Investments
         Commission Form 309 and 350;

                  (f)      evidence, in a form reasonably satisfactory to Bank,
         that the Charge and each document required to be stamped with duty
         under Australian law has been lodged for stamping at the relevant
         Australian State agency with a cheque for the appropriate stamp duty;

                  (g)      a statutory declaration, in a form satisfactory to
         Bank, made on behalf of Applix Australia stating the location of its
         assets to be subject to the Charge;

                  (h)      a certificate entitled "Declaration of Solvency", in
         a form satisfactory to Bank, be provided by two directors of Applix
         Australia;

                  (i)      if required by Bank or applicable law, a registered
         power of attorney under which Applix Australia executed the Exim Loan
         Documents and any documents relating to them to in which it is
         expressed to be a party;

                  (j)      extracts of minutes of a meeting of directors of
         Applix Australia authorising the execution of the Exim Loan Documents,
         explaining why the directors believe it is in the best interests of the
         Applix Australia;

                  (k)      extracts of minutes of a meeting of all members of
         Applix Australia authorising execution of the Exim Loan Documents and
         any documents the execution of which are contemplated by the Exim Loan
         Documents or are necessary or incidental to the execution and
         performance of the Exim Loan Documents;

                  (l)      a certificate of incorporation constituent documents
         for Applix Australia, if they are not already held by Bank;

                                       3


(m)      the acceptance by the  appropriate  party of its  appointment  as agent
         of Applix  Australia for accepting service of process; and

(n)      except as otherwise  disclosed to the Bank,  the  representations  and
         warranties  contained in Section 5 hereof shall be true and accurate in
         all material  respects on and as of the date of such  Payment/Advance
         Form and on the  effective  date of each Advance as though made at and
         as of each such date (except to the extent they relate  specifically
         to an earlier date, in which case such  representations  and
         warranties shall  continue to have been true and  accurate  as of such
         date or such  representations  and  warranties that are no longer true
         due to changes or subsequent  events permitted or not prohibited
         hereunder),  and no potential  Event of Default or Event of Default
         shall have occurred and be continuing,  or would result from such
         Advance.

         The making of each Advance shall be deemed to be a representation and
warranty by Borrower on the date of such Advance as to the accuracy of the facts
referred to in this Section 3.1 (other than Section 3.1(c) above).

         SECTION 4.        CREATION OF SECURITY INTEREST

         4.1      GRANT OF SECURITY INTEREST. Applix US hereby grants Bank, to
secure the payment and performance in full of all of the Obligations and the
performance of each of Applix US's duties under the Exim Loan Documents, a
continuing security interest in the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
Applix US warrants and represents that the security interest granted herein
shall be a first priority security interest in the Collateral. The Collateral
may also be subject to Permitted Liens. Notwithstanding the foregoing, it is
expressly acknowledged and agreed that the security interest created in this
Exim Agreement in all of the Collateral (with the exception of Exim Eligible
Foreign Accounts, but only to the extent any Advances are actually made by the
Bank to the Borrower based upon such Exim Eligible Foreign Accounts), is subject
to and subordinate to the security interest granted to the Bank in the Domestic
Agreement with respect to the Collateral. Borrower agrees that Bank may file
(with the UCC Financing Statements to be filed hereunder) a notice that any
disposition of the Collateral in violation of this Exim Agreement, by either the
Borrower or any other Person, shall be deemed to violate the rights of the Bank
under the Code. If this Exim Agreement is terminated, Bank's lien and security
interest in the Collateral shall continue until Borrower fully satisfies its
Obligations. Notwithstanding the foregoing, the security interest granted herein
does not extend to and the term "Collateral" does not include any portion of any
license or contract solely to the extent (i) the granting of a security interest
in such license or contract would be contrary to applicable law, or (ii) that
such licenses or contracts are nonassignable by their terms (but only to the
extent the prohibition is enforceable under applicable law, including, without
limitation, the Code) without the consent of the licensor or other party (but
only to the extent such consent has not been obtained). Bank agrees to
subordinate or release its security interest in certain specific Equipment
financed by Borrower in the manner set forth in the Domestic Agreement, subject
to the limitations and restrictions thereon set forth in the Domestic Agreement.

         SECTION 5.        REPRESENTATIONS AND WARRANTIES

         Borrower represents, warrants and covenants as follows:

         5.1      DOMESTIC LOAN DOCUMENTS. The representations and warranties
contained in the Domestic Loan Documents, which are incorporated by reference
into this Exim Agreement, are true and correct.

         SECTION 6.        AFFIRMATIVE COVENANTS

         Borrower covenants and agrees that, until payment in full of all
Obligations, it shall do all of the following:

         6.1      DOMESTIC LOAN DOCUMENTS. Applix US shall comply in all
respects with the terms and provisions of the Domestic Loan Documents, which
terms and provisions are incorporated into this Exim Agreement and shall survive
the termination of Domestic Agreement, which shall include, without limitation,
compliance with the financial

                                       4

reporting requirements set forth in Section 6.2 of the Domestic Agreement and
the financial covenants set forth in Section 6.6 of the Domestic Agreement. In
addition to the foregoing, each of Applix UK, Applix Australia and Veriteam
shall remit monthly to the United States all proceeds of collected Accounts;
provided, however, that so long as no event of default occurs and is continuing
hereunder, Applix UK, Applix Australia and Veriteam shall remit monthly to the
United States all proceeds of collected Accounts net of reasonable and customary
operating expenses of each of Applix UK, Applix Australia and Veriteam.
Notwithstanding the foregoing, the proceeds of Advances hereunder may not be
transferred to any of Applix UK, Applix Australia or Veriteam.

         6.2      TERMS OF SALE. Borrower shall cause all sales of products upon
which Advances are based to be on open account to creditworthy buyers that have
been preapproved in writing by Bank and Exim Bank.

         6.3      BORROWER AGREEMENT. Borrower shall comply with all of the
terms of the Borrower Agreement, including without limitation, the delivery of
any and all notices required pursuant to Sections 2.11 and/or 2.18 of the
Borrower Agreement. Unless otherwise specifically indicated in this Exim
Agreement that the provisions of this Exim Agreement control due to the Exim
Bank's written waiver dated September 21, 2001 of certain terms of the Borrower
Agreement, in the event of any conflict or inconsistency between any provision
contained in the Borrower Agreement with any provision contained in this Exim
Agreement, the more strict provision, with respect to Borrower, shall control.

         6.4      NOTICE IN EVENT OF FILING OF ACTION FOR DEBTOR'S RELIEF.
Borrower shall notify Bank in writing within five (5) days of the occurrence of
any of the following: (1) Borrower begins or consents in any manner to any
proceeding or arrangement for its liquidation in whole or in part or to any
other proceeding or arrangement whereby any of its assets are subject generally
to the payment of its liabilities or whereby any receiver, trustee, liquidator
or the like is appointed for it or any substantial part of its assets (including
without limitation the filing by Borrower of a petition for appointment as
debtor-in-possession under Title 11 of the U.S. Code); (2) Borrower fails to
obtain the dismissal or stay on appeal within thirty (30) calendar days of the
commencement of any proceeding arrangement referred to in (1) above; (3)
Borrower begins any other procedure for the relief of financially distressed or
insolvent debtors, or such procedure has been commenced against it, whether
voluntarily or involuntarily, and such procedure has not been effectively
terminated, dismissed or stayed within thirty (30) calendar days after the
commencement thereof, or (4) Borrower begins any procedure for its dissolution,
or a procedure therefor has been commenced against it.

         6.5      PAYMENT IN DOLLARS. Borrower shall require payment of the Exim
Eligible Foreign Accounts in United States Dollars or an Acceptable Foreign
Currency subject to the terms of this Exim Agreement for the products, unless
the Exim Bank otherwise agrees in writing hereafter.

         6.6      FURTHER ASSURANCES. At any time and from time to time Borrower
shall (i) execute and deliver such further instruments, (ii) take such further
action as may reasonably be requested by Bank, and (iii) deliver such additional
information, reports, contracts, invoices and other data concerning the
Collateral as may reasonably be requested by Bank, all of the foregoing in
furtherance of the purposes of this Exim Agreement.

         SECTION 7.        NEGATIVE COVENANTS

         Prior to the (i) payment in full of outstanding Obligations, and (ii)
termination of Bank's commitment to make any Advance:

         7.1      DOMESTIC LOAN DOCUMENTS. Applix US shall not violate or
otherwise fail to comply with any provisions of the Domestic Loan Documents,
which provisions are incorporated into this Exim Agreement.

         7.2      BORROWER AGREEMENT. Borrower shall not violate or otherwise
fail to comply with any provision of the Borrower Agreement, including without
limitation the negative covenants set forth in Section 2.15.

         7.3      EXIM GUARANTEE. Borrower shall not take any action, or permit
any action to be taken, that causes


                                       5



or, with the passage of time, could reasonably be expected to cause, the Exim
Guarantee to cease to be in full force and effect.

         SECTION 8.        EVENTS OF DEFAULT

         Any one of the following is an Event of Default:

         8.1      PAYMENT DEFAULT. If Borrower fails to pay within three (3)
days of when due, any of the Obligations.

         8.2      COVENANT DEFAULT; CROSS DEFAULT. If Borrower fails or neglects
to perform, keep, or observe any material term, provision, condition, covenant,
or agreement contained in this Exim Agreement, in any of the Domestic Loan
Documents (applicable to such Borrower Entity) which terms and provisions are
incorporated into this Exim Agreement and shall survive the termination of
Domestic Agreement, the Borrower Agreement, or the Exim Loan Documents, or an
Event of Default occurs under any of the Domestic Loan Documents or the Borrower
Agreement and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure such default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Advances will be required to be made during such
cure period);

         8.3      INSOLVENCY, ADMINISTRATION, WINDING UP. (i) Borrower becomes
insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency
Proceeding is begun against Borrower and not dismissed or stayed within
forty-five (45) days (but no Credit Extensions shall be made before any
Insolvency Proceeding is dismissed). With respect to Applix Australia: (i) An
administrator of is appointed; (ii) Except for the purpose of a solvent
reconstruction or amalgamation previously approved by Bank: (A) an application
or an order is made, proceedings are commenced, a resolution is passed or
proposed in a notice of meeting, an application to a court or other steps are
taken for: (I) the winding up, dissolution or administration of Applix
Australia; or (II) Applix Australia entering into an arrangement, compromise or
composition with or assignment for the benefit of its creditors or a class of
them, (other than frivolous or vexatious applications, proceedings, notices and
steps); or (B) Applix Australia ceases, suspends or threatens to cease or
suspend the conduct of all or a substantial part of its business or disposes of
or threatens to dispose of a substantial part of its assets; or (iii) Applix
Australia: (A) is, or under legislation is presumed or taken to be, insolvent
(other than as the result of a failure to pay a debt or claim the subject of a
good faith dispute); or (B) stops or suspends or threatens to stop or suspend
payment of all or a class of its debts;

         8.4      ENFORCEMENT AGAINST ASSETS. (i) A receiver, receiver and
manager, administrative receiver or similar officer is appointed to: (ii) a
security interest is enforced over; or (iii) a distress, attachment or other
execution is levied or enforced or applied for over, all or any of the assets
and undertaking of Applix Australia; or

         8.5      EXIM GUARANTEE. If the Exim Guarantee ceases for any reason to
be in full force and effect, or if the Exim Bank declares the Exim Guarantee
void or revokes or purports to revoke any obligations under the Exim Guarantee.

         SECTION 9.        BANK'S RIGHTS AND REMEDIES

         9.1      RIGHTS AND REMEDIES. When an Event of Default occurs and
continues Bank may, without notice or demand, do any or all of the following:

                  (a)      Declare all Obligations immediately due and payable
         (but if an Event of Default described in Section 8.5 of the Domestic
         Agreement occurs all Obligations are immediately due and payable
         without any action by Bank);


                                       6



                 (b)      Stop advancing money or extending credit for
         Borrower's benefit under this Exim Agreement or under any other
         agreement between Borrower and Bank;

                 (c)      Settle or adjust disputes and claims directly with
         account debtors for amounts, on terms and in any order that Bank
         considers advisable;

                 (d)      Make any payments and do any acts it considers
         necessary or reasonable to protect its security interest in the
         Collateral. Borrower shall assemble the Collateral if Bank requests and
         make it available as Bank designates. Subject to the rights of third
         parties, prohibitions or limitations in agreements with third parties,
         and applicable law, Bank may enter premises where the Collateral is
         located, take and maintain possession of any part of the Collateral,
         and pay, purchase, contest, or compromise any Lien which appears to be
         prior or superior to its security interest and pay all expenses
         incurred. Subject to the rights of third parties, prohibitions or
         limitations in agreements with third parties, and applicable law,
         Borrower grants Bank a license to enter and occupy any of its premises,
         without charge, to exercise any of Bank's rights or remedies;

                  (e)      Apply to the Obligations any (i) balances and
         deposits of Borrower it holds, or (ii) any amount held by Bank owing to
         or for the credit or the account of Borrower;

                  (f)      Ship, reclaim, recover, store, finish, maintain,
         repair, prepare for sale, advertise for sale, and sell the Collateral
         in accordance with the Code or other applicable law. Subject to the
         rights of third parties, prohibitions or limitations in agreements with
         third parties, and applicable law, Bank is granted a non-exclusive,
         royalty-free license or other right to use, without charge, Borrower's
         labels, patents, copyrights, mask works, rights of use of any name,
         trade secrets, trade names, trademarks, service marks, and advertising
         matter, or any similar property as it pertains to the Collateral, in
         completing production of, advertising for sale, and selling any
         Collateral and, in connection with Bank's exercise of its rights under
         this Section, Borrower's rights under all licenses and all franchise
         agreements inure to Bank's benefit, subject to the rights of third
         parties, prohibitions or limitations in agreements with third parties,
         and applicable law; and

                  (g)      Otherwise dispose of the Collateral according to the
         Code.

         9.2      EXIM DIRECTION. Upon the occurrence of an Event of Default,
Exim Bank shall have a right to: (i) direct Bank to exercise the remedies
specified in Section 9.1 and (ii) request that Bank accelerate the maturity of
any other loans to Borrower as to which Bank has a right to accelerate.

         9.3      EXIM NOTIFICATION. Bank shall have the right to immediately
notify Exim Bank in writing if it has knowledge of the occurrence of any of the
following events: (1) any failure to pay any amount due under this Exim
Agreement or the Note; (2) the Borrowing Base is less than the sum of
outstanding Advances hereunder and not promptly repaid in accordance with
Section 2.4 hereof; (3) any failure to pay when due any amount payable to Bank
by the Borrower under any loan(s) extended by Bank to Borrower; (4) the filing
of an action for debtor's relief by, against, or on behalf of Borrower; or (5)
any threatened or pending material litigation against Borrower, or any material
dispute involving Borrower.

         In the event that it sends such a notification to Exim Bank, Bank shall
have the right to thereafter send Exim Bank a written report on the status of
the events covered by said notification on each Business Day which occurs every
thirty (30) calendar days after the date of said notification, until such time
as Bank files a claim with Exim Bank or said default or other events have been
cured. Bank shall not have any obligation to make any Advances following said
notification to Exim Bank, unless Exim Bank gives its written approval thereto.
If directed to do so by Exim Bank, Bank shall have a right promptly to exercise
any rights it may have against Borrower to demand the immediate repayment of all
amounts outstanding under the Exim Loan Documents.

         9.4      REMEDIES CUMULATIVE. Bank's rights and remedies under this
Exim Agreement, the Exim Loan Documents, the Domestic Loan Documents and all
other agreements shall be cumulative. Bank shall have all other


                                       7


rights and remedies not inconsistent herewith as provided under the Code, by
law, or in equity. No exercise by Bank of one right or remedy shall be deemed an
election, and no waiver by Bank of any Event of Default on Borrower's part shall
be deemed a continuing waiver. No delay by Bank shall constitute a waiver,
election, or acquiescence by it. No waiver by Bank shall be effective unless
made in a written document signed on behalf of Bank and then shall be effective
only in the specific instance and for the specific purpose for which it was
given.

         9.5      POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank
as its lawful attorney-in-fact, to be effective upon the occurrence and during
the continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank its power of attorney to sign Borrower's
name on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred until
all Obligations have been satisfied in full and Bank is under no further
obligation to make Advances hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Advances terminates.

         9.6      ACCOUNTS COLLECTION. In the event that an Event of Default
occurs and is continuing, Bank may notify any account debtor of any Exim
Eligible Foreign Accounts or other collateral of Bank's security interest in the
funds and verify and/or collect the amount of such Account. Following and during
the continuance of an Event of Default, any amounts received by Borrower shall
be held in trust by such Borrower Entity for Bank, and, if requested by Bank,
Borrower Entity shall immediately deliver such receipts to Bank in the form
received from the account debtor, with proper endorsements for deposit.

         9.7      BANK EXPENSES. Any Bank Expenses are immediately due and
payable, and shall bear interest at the then applicable rate and be secured by
the Collateral. No payments by Bank shall be deemed an agreement to make similar
payments in the future or Bank's waiver of any Event of Default.

         9.8      BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies
with reasonable banking practices regarding the safekeeping of collateral, the
Bank shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other person. Except for the foregoing, Borrower bears all risk of
loss, damage or destruction of the Collateral.

         9.9      DEMAND WAIVER. Except as otherwise expressly set forth herein
or as required by applicable law, Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.

         SECTION 10.        NOTICES

         Unless otherwise provided in this Exim Agreement, all notices or
demands by any party relating to this Exim Agreement or any other agreement
entered into in connection herewith shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by a
recognized overnight delivery service, by certified mail, postage prepaid,
return receipt requested, or by telefacsimile to Borrower or to Bank, as the
case may be, at the address set forth in the Domestic Loan Documents. The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

                                       8

         SECTION 11.       CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

         Massachusetts law governs the Exim Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Massachusetts; provided,
however, that if for any reason Bank cannot avail itself of such courts in the
Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts and
venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS EXIM AGREEMENT, THE EXIM LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF
DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES
TO ENTER INTO THIS EXIM AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.

         SECTION 12.       GENERAL PROVISIONS

         12.1     SUCCESSORS AND ASSIGNS. This Exim Agreement binds and is for
the benefit of the successors and permitted assigns of each party. Borrower may
not assign this Exim Agreement or any rights or Obligations under it without
Bank's prior written consent which may be granted or withheld in Bank's
discretion. Bank has the right, without the consent of or prior notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Exim Agreement, the Exim Loan Documents or any related agreement.

         12.2     INDEMNIFICATION. Borrower hereby indemnifies, defends and
holds the Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Exim Loan Documents; and
(b) all losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.

         12.3     RIGHT OF SET-OFF. Applix US hereby grants to Bank, a lien,
security interest and right of setoff as security for all Obligations to Bank,
whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY
GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

         12.4     TIME OF ESSENCE. Time is of the essence for the performance of
all Obligations in this Exim Agreement.

         12.5     SEVERABILITY OF PROVISION. Each provision of this Exim
Agreement is severable from every other provision in determining the
enforceability of any provision.

         12.6     AMENDMENTS IN WRITING; INTEGRATION. All amendments to this
Exim Agreement must be in writing signed by both Bank and Borrower. This Exim
Agreement and the Exim Loan Documents represent the entire agreement about this
subject matter, and supersede prior negotiations or agreements. Without the
prior written consent of Exim Bank, no material amendment of or deviation from
the terms of this Exim Agreement or the Note shall be made


                                       9

that would adversely affect the interests of Exim Bank under the Exim Guarantee,
including without limitation the rescheduling of any payment terms provided for
in this Exim Agreement. All prior agreements, understandings, representations,
warranties, and negotiations between the parties about the subject matter of
this Exim Agreement and the Exim Loan Documents merge into this Exim Agreement
and the Exim Loan Documents.

         12.7     COUNTERPARTS. This Exim Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, are an original, and all taken together,
constitute one agreement.

         12.8     SURVIVAL. All covenants, representations and warranties made
in this Exim Agreement continue in full force while any Obligations remain
outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall
survive until the statute of limitations with respect to such claim or cause of
action shall have run.

         SECTION 13.       DEFINITIONS

         13.1     DEFINITIONS. Except as otherwise defined, terms that are
capitalized in this Exim Agreement shall have the meanings assigned in the
Domestic Agreement. As used in this Exim Agreement, the following terms shall
have the following definitions:

                  "ACCEPTABLE FOREIGN CURRENCY" means any one of British Pounds
         Sterling, the Euro, French Francs, Australian Dollars and Dutch
         Guilders.

                  "ACCOUNTS" means all presently existing and hereafter arising
         accounts, contract rights, and all other forms of obligations owing to
         Borrower arising out of the sale or lease of goods (including, without
         limitation, the licensing of software and other technology) or the
         rendering of services by Borrower, whether or not earned by
         performance, and any and all credit insurance, guaranties, and other
         security therefor, as well as all merchandise returned to or reclaimed
         by Borrower and Borrower's books relating to any of the foregoing.

                  "ADVANCES" means any loans or other extensions of credit
         hereunder.

                  "BANK EXPENSES" means all: reasonable costs or expenses
         (including reasonable attorneys' fees and expenses) incurred in
         connection with the preparation, negotiation, and administration,
         registration of the Exim Loan Documents (including stamp duties imposed
         by Australian law, registration fees imposed by Australian law and fees
         and penalties imposed by Australian law), including any costs incurred
         in relation to opposing or seeking to obtain relief from any stay or
         restructuring order prohibiting Bank from exercising its rights as a
         secured creditor, foreclosing upon or disposing of Collateral, or such
         related matters; and Bank's reasonable attorneys' fees and expenses
         incurred in enforcing or defending the Exim Loan Documents or any
         transaction contemplated by the Exim Loan Documents, whether or not
         suit is brought, unless a final court of competent jurisdiction finds
         the Bank acted with gross negligence or willful misconduct.

                  "BORROWER AGREEMENT" means the Export-Import Bank of the
         United States Working Capital Guarantee Program Borrower Agreement
         between Borrower and Bank.

                  "BORROWING BASE" means an amount equal to ninety percent (90%)
         of Exim Eligible Foreign Accounts which Exim Eligible Foreign Accounts
         (i) are billed and collected by each of the entities comprising the
         Borrower Entities in the United States, United Kingdom or Australia AND
         (ii) if payable in an Acceptable Foreign Currency, Borrower has made
         arrangements satisfactory to the Bank in its sole discretion with
         respect to a hedge on such Exim Eligible Foreign Accounts, PROVIDED
         HOWEVER that such percentage shall be reduced to (A) eighty (80%)
         percent with respect to Exim Eligible Foreign Accounts which (i) are
         billed and collected by the Borrower in the United States, United
         Kingdom, or Australia (ii) are billed in British Pounds AND (iii)
         Borrower has NOT made arrangements satisfactory to the Bank in its sole
         discretion with respect to a hedge on such Exim Eligible Foreign
         Accounts, and (B) seventy (70%) percent with respect to Exim Eligible
         Foreign Accounts which (i) are billed and collected by the Borrower in
         the United States or United Kingdom (ii) are

                                       10


         billed in any Acceptable Foreign Currency other than British Pounds AND
         (iii) Borrower has NOT made arrangements satisfactory to the Bank in
         its sole discretion with respect to a hedge on such Exim Eligible
         Foreign Accounts. Notwithstanding the terms of the Borrower Agreement,
         Bank will not consider Borrower's Inventory (if any) for inclusion in
         the Borrowing Base.

                  "CHARGE" means any deed of charge to be entered into by Applix
         Australia and Bank on or about the date of this Agreement.

                  "COLLATERAL" is the property described on EXHIBIT A.

                  "DOMESTIC AGREEMENT" has the meaning set forth in recital
                   paragraph A.

                  "DOMESTIC LOAN DOCUMENTS" means the Domestic Agreement and all
         instruments, documents, and agreements executed in connection with the
         Domestic Agreement.

                  "EXIM BANK" means Export-Import Bank of the United States.

                  "EXIM COMMITTED LINE" means Two Million Five Hundred Thousand
         Dollars ($2,500,000.00).

                  "EXIM ELIGIBLE FOREIGN ACCOUNTS" means those Accounts that
         arise in the ordinary course of Borrower's business and are derived
         from exports of goods or services originating in the United States, AND
         (i) with respect to which the account debtor is not a resident of the
         United States; (ii) that have been validly assigned or pledged to Bank
         in a manner satisfactory to the Bank giving the Bank a first priority
         perfected security interest, or its equivalent, in such Accounts, (iii)
         comply with all of Borrower's representations and warranties to Bank,
         and (iv) that either (A) the Bank approves on a case by case basis
         (which shall be required with respect to foreign Accounts on open
         account terms), or (B) are supported by letter(s) of credit acceptable
         to Bank. Standards of eligibility may be fixed revised from time to
         time by Bank in Bank's reasonable judgment and upon notification
         thereof to the Borrower in accordance with the provisions hereof. Exim
         Eligible Foreign Accounts shall NOT include the following:

                  (a)      Accounts with a term in excess of ninety (90) days;

                  (b)      Accounts that the account debtor has failed to pay
         within sixty (60) calendar days of the original due date of the invoice
         unless such accounts are insured through Exim Bank export credit
         insurance for comprehensive commercial and political risk, or through
         Exim Bank approved private insurers for comparable coverage, in which
         case ninety (90) calendar days shall apply;

                  (c)      Accounts with respect to an account debtor, fifty
         percent (50%) or more of whose Accounts the account debtor has failed
         to pay within ninety (90) days of the original date of invoice;

                  (d)      Accounts evidenced by a letter of credit until the
         date of shipment of the items covered by the subject letter of credit;

                  (e)      Accounts with respect to which an invoice has not
         been sent;

                  (f)      Accounts with respect to which the account debtor is
         an Affiliate, officer or director of Borrower;

                  (g)      Accounts with respect to which the account debtor is
         located in a country in which Exim Bank is legally prohibited from
         doing business as designated in the Country Limitation Schedule (as
         such term is defined in the Borrower Agreement);

                  (h)      Accounts with respect to which the account debtor is
         located in a country in which Exim

                                       11


         Bank coverage is not available for commercial reasons;

                  (i)      Accounts with respect to which Borrower is liable to
         the account debtor for goods sold or services rendered by the account
         debtor to Borrower, but only to the extent of Borrower's liability to
         such account debtor, or if the account debtor is subject to an
         Insolvency Proceeding or is otherwise insolvent.

                  (j)      Account which arise for the sales of items not in the
         ordinary course of Borrower's business;

                  (k)      Accounts not owned by Borrower or which are subject
         to any rights, claim or interest of another Person or than the lien in
         favor of the Bank;

                  (l)      Accounts with a credit balance over sixty (60) days
         from invoice date;

                  (m)      Accounts with respect to which the account debtor has
         disputed liability or makes any claim with respect thereto (but only to
         the extent of the amount subject to such dispute or claim), or is
         subject to any Insolvency Proceeding, or becomes insolvent, or goes out
         of business;

                  (n)      Accounts with respect to an account debtor, including
         Subsidiaries and Affiliates, whose total obligations to Borrower exceed
         twenty-five percent (25%) of the aggregate dollar amount of all
         Accounts, only to the extent such obligations exceed such percentage,
         except as approved in writing by Bank;

                  (o)      Accounts generated by the sale of products purchased
         for military purposes or that are due and payable from a military
         Buyer;

                  (p)      Accounts, if any, generated by sales of Inventory
         which constitutes defense articles or defense services;

                  (q)      Accounts payable in currency other than Dollars or an
         Acceptable Foreign Currency, except as may be approved in writing by
         the Bank and the Exim Bank;

                  (r)      Accounts which are due and owing and the collection
         of which must be made outside the United States or the United Kingdom
         or Australia;

                  (s)      Accounts the collection of which Bank or Exim Bank
         determines in its reasonable judgment to be doubtful; and

                  (t)      Accounts which are not "Eligible Export-Related
         Accounts Receivable", as such term is defined in the Borrower
         Agreement.

                  Notwithstanding the terms of the Borrower Agreement to the
         contrary, due to Exim Bank's written waiver dated September 21, 2001 of
         certain terms of the Borrower Agreement, and subject to the terms and
         conditions of this Exim Agreement, Exim Eligible Foreign Accounts may
         include Accounts that are billed in the United States, the United
         Kingdom or Australia and also may include Accounts that are billed in
         United States Dollars or an Acceptable Foreign Currency.

                  "EXIM GUARANTEE" means that certain Master Guarantee Agreement
         or other agreement, as amended from time to time, the terms of which
         are incorporated by reference into this Exim Agreement, pursuant to
         which Exim Bank guarantees Borrower's obligations under this Exim
         Agreement.

                  "EXIM LOAN DOCUMENTS" means, collectively, this Exim
         Agreement, any note or notes executed by Borrower, and any other
         agreement entered into between Borrower and Bank in connection with
         this Exim Agreement, all as amended or extended from time to time.



                                       12



                  "EXIM MATURITY DATE"shall be the date which is twelve (12)
         months from the closing date of the Domestic Agreement.

                  "FX FORWARD CONTRACT" is defined in Section 2.3.

                  "FX RESERVE" is defined in Section 2.3.

                  "NOTE" is defined in Section 2.2.

                  "OBLIGATIONS" shall mean all debts, principal, interest, Bank
         Expenses arising under the Exim Loan Documents, the Borrower Agreement,
         the Domestic Loan Documents and other amounts Borrower owes Bank now or
         later, and including interest accruing after Insolvency Proceedings
         begin.

                  "PAYMENT DATE" means the first calendar day of each month
         commencing on the first such date after the Closing Date and ending on
         the Exim Maturity Date.

                  "RESPONSIBLE OFFICER" means each of the Chief Executive
         Officer and Chief Financial Officer of the Borrower.


                                       13


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
         executed as a sealed instrument under the laws of the Commonwealth of
         Massachusetts as of the date first above written.

BORROWER:

APPLIX, INC.


By     /s/ Alan Goldsworthy
       -------------------------------------------

Name:  Alan Goldsworthy
       -------------------------------------------

Title: President and CEO
       -------------------------------------------


APPLIX (UK) LIMITED


By     /s/ Alan Goldsworthy
       -------------------------------------------

Name:  Alan Goldsworthy
       -------------------------------------------

Title: Director
       -------------------------------------------


APPLIX AUSTRALIA PTY, LTD.


By     /s/ Bruce McCarthy
       -------------------------------------------

Name:  Bruce McCarthy
       -------------------------------------------

Office Held: Director
            --------------------------------------



By     /s/ Alan Goldsworthy
       -------------------------------------------

Name:  Alan Goldsworthy
       -------------------------------------------

Office Held: Director
             -------------------------------------


VERITEAM LIMITED


By     /s/ Alan Goldsworthy
       -------------------------------------------

Name:  Alan Goldsworthy
       -------------------------------------------

Title: Director
       -------------------------------------------

                                       14


BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST


By     /s/ R. Bryan Jadot
       -------------------------------------------

Name:  R. Bryan Jadot
       -------------------------------------------

Title: Vice President
       -------------------------------------------


SILICON VALLEY BANK


by     /s/ Maggie Garcia
       -------------------------------------------

Name:  Maggie Garcia
       -------------------------------------------

Title: Loan Admin. Team Leader
       -------------------------------------------
       (Signed in Santa Clara County, California)



                                       15



                                    EXHIBIT A


         The Collateral consists of all right, title and interest of Applix US
in and to the following:

         All goods, equipment, inventory, contract rights or rights to payment
of money, franchise agreements, general intangibles (including payment
intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

         All Applix US's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.


         Notwithstanding the foregoing, the Collateral does not include in any
event:

Any and all copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished; any and all trade secrets, and any and all
intellectual property rights in computer software and computer software
products; any and all design rights which may be available to Applix US; all
mask work or similar rights available for the protection of semiconductor chips;
all patents, patent applications and like protections; any trademark and
servicemark rights, whether registered or not, applications to register and
registrations of the same and like protections; all licenses or other rights to
use any of the foregoing; or any claims for damages by way of any past, present
and future infringement of any of the foregoing. Notwithstanding the foregoing,
the Collateral shall include all accounts, license and royalty fees and other
revenues, proceeds, or income arising out of or relating to any of the foregoing
intellectual property. To the extent a court of competent jurisdiction holds
that a security interest in any Intellectual Property is necessary to have a
security interest in any accounts, license and royalty fees and other revenues,
proceeds, or income arising out of or relating to any of the foregoing
Intellectual Property, then the Collateral shall, effective as of the Closing
Date, include the Intellectual Property, to the extent necessary to permit
perfection of the Bank's security interest in such accounts, license and royalty
fees and other revenues, proceeds, or income arising out of or relating to any
of the Intellectual Property and to the extent such inclusion is not violative
of, prohibited by or would trigger an adverse consequence under any material
agreement relating to such Intellectual Property or applicable law.


                                       16


                                    EXHIBIT B



$2,500,000.00                                                _____________, 2001

         FOR VALUE RECEIVED, the undersigned (the "Borrower"), promises to pay
to the order of Silicon Valley Bank ("Bank"), at such place as the holder hereof
may designate, in lawful money of the United States of America, the aggregate
unpaid principal amount of all advances ("Advances") made by Bank to Borrower,
up to a maximum principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00), plus interest on the aggregate unpaid principal amount of such
Advances, at the rates and in accordance with the terms of the Export-Import
Bank Loan and Security Agreement between Borrower and Bank of even date
herewith, as amended from time to time (the "Loan Agreement") on the first
calendar day of each month after an Advance has been made. The entire principal
amount and all accrued interest shall be due and payable on __________________,
2002, or on such earlier date, as provided for in the Loan Agreement.

         Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may reasonably deem advisable. In the
absence of a specific determination by Bank with respect thereto, all payments
shall be applied in the following order: (a) then due and payable fees and
expenses; (b) then due and payable interest payments and mandatory prepayments;
and (c) then due and payable principal payments and optional prepayments.

         Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of each such Advance received by Bank; it being understood,
however, that failure to make any such endorsement (or any errors in notation)
shall not affect the obligations of Borrower with respect to Advances made
hereunder, and payments by Borrower shall be credited to Borrower
notwithstanding the failure to make a notation (or any errors in notation)
thereof on such books and records.

         Borrower promises to pay Bank all reasonable costs and reasonable
expenses including all reasonable attorneys' fees, incurred in such collection
or in any suit or action to collect this Note or in any appeal thereof, unless a
final court of competent jurisdiction finds that the Bank acted with gross
negligence or willful misconduct. Borrower waives presentment, demand, protest,
notice of protest, notice of dishonor, notice of nonpayment, and any and all
other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note, except as provided under the
Loan Agreement or required under applicable law. No delay by Bank in exercising
any power or right hereunder shall operate as a waiver of any power or right.
Time is of the essence as to all obligations hereunder.

         This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.

         The law of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
NOTE OR THE LOAN AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK
CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER
ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.

         BORROWER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE EXIM LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER



                                       17


RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. BORROWER REPRESENTS AND WARRANTS
THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.

APPLIX, INC.


By
  -----------------------------------------------

Name:
     --------------------------------------------

Title:
       ------------------------------------------

APPLIX (UK) LIMITED


By
  -----------------------------------------------

Name:
     --------------------------------------------

Title:
       ------------------------------------------



APPLIX AUSTRALIA PTY, LTD.


By
  -----------------------------------------------

Name:
     --------------------------------------------

Office Held:
            -------------------------------------


By
  -----------------------------------------------

Name:
     --------------------------------------------

Office Held:
            -------------------------------------



VERITEAM LIMITED

By
  -----------------------------------------------

Name:
     --------------------------------------------

Title:
       ------------------------------------------


                                     18

EX-10.15

                                                                   EXHIBIT 10.15

                     EXPORT-IMPORT BANK OF THE UNITED STATES
                        WORKING CAPITAL GUARANTEE PROGRAM




                               BORROWER AGREEMENT

         THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by
the entities identified as Borrower on the signature page hereof (collectively,
the "Borrower") in favor of the Export-Import Bank of the United States ("Ex-Im
Bank") and the institution identified as Lender on the signature page hereof
("Lender").

                                    RECITALS

         Borrower has requested that Lender establish a Loan Facility in favor
of Borrower for the purposes of providing Borrower with pre-export working
capital to finance the manufacture, production or purchase and subsequent export
sale of Items.

         It is a condition to the establishment of such Loan Facility that Ex-Im
Bank guarantee the payment of ninety percent (90%) of certain credit
accommodations subject to the terms and conditions of a Master Guarantee
Agreement, the Loan Authorization Agreement, and to the extent applicable, the
Delegated Authority Letter Agreement.

         Borrower is executing this Agreement for the benefit of Lender and
Ex-Im Bank in consideration for and as a condition to Lender's establishing the
Loan Facility and Ex-Im Bank's agreement to guarantee such Loan Facility
pursuant to the Master Guarantee Agreement.

         NOW, THEREFORE, Borrower hereby agrees as follows:

ARTICLE I
                                   DEFINITIONS

         1.01     DEFINITION OF TERMS. As used in this Agreement, including the
                  Recitals to this Agreement and the Loan Authorization
                  Agreement, the following terms shall have the following
                  meanings:

                  "Accounts Receivable" shall mean all of Borrower's now owned
         or hereafter acquired (a) "accounts" (as such term is defined in the
         UCC), other receivables, book debts and other forms of obligations,
         whether arising out of goods sold or services rendered or from any
         other transaction; (b) rights in, to and under all purchase orders or
         receipts for goods or services; (c) rights to any goods represented or
         purported to be represented by any of the foregoing (including unpaid
         sellers' rights of rescission,


         replevin, reclamation and stoppage in transit and rights to returned,
         reclaimed or repossessed goods); (d) moneys due or to become due to
         such Borrower under all purchase orders and contracts for the sale of
         goods or the performance of services or both by Borrower (whether or
         not yet earned by performance on the part of Borrower), including the
         proceeds of the foregoing; (e) any notes, drafts, letters of credit,
         insurance proceeds or other instruments, documents and writings
         evidencing or supporting the foregoing; and (f) all collateral security
         and guarantees of any kind given by any other Person with respect to
         any of the foregoing.


                  "Advance Rate" shall mean the rate specified in Section 5(C)
         of the Loan Authorization Agreement for each category of Collateral.

                  "Business Day" shall mean any day on which the Federal Reserve
         Bank of New York is open for business.

                  "Buyer" shall mean a Person that has entered into one or more
         Export Orders with Borrower.

                  "Collateral" shall mean all property and interest in property
         in or upon which Lender has been granted a Lien as security for the
         payment of all the Loan Facility Obligations including the Collateral
         identified in Section 6 of the Loan Authorization Agreement and all
         products and proceeds (cash and non-cash) thereof.

                  "Commercial Letters of Credit" shall mean those letters of
         credit subject to the UCP payable in Dollars and issued or caused to be
         issued by Lender on behalf of Borrower under a Loan Facility for the
         benefit of a supplier(s) of Borrower in connection with Borrower's
         purchase of goods or services from the supplier in support of the
         export of the Items.

                  "Country Limitation Schedule" shall mean the schedule
         published from time to time by Ex-Im Bank and provided to Borrower by
         Lender which sets forth on a country by country basis whether and under
         what conditions Ex-Im Bank will provide coverage for the financing of
         export transactions to countries listed therein.

                  "Credit Accommodation Amount" shall mean, the sum of (a) the
         aggregate outstanding amount of Disbursements and (b) the aggregate
         outstanding face amount of Letter of Credit Obligations.

                  "Credit Accommodations" shall mean, collectively,
         Disbursements and Letter of Credit Obligations.

                  "Debarment Regulations" shall mean, collectively, (a) the
         Governmentwide Debarment and Suspension (Nonprocurement) regulations
         (Common Rule), 53 Fed. Reg. 19204 (May 26, 1988), (b) Subpart 9.4
         (Debarment, Suspension, and Ineligibility) of the Federal Acquisition
         Regulations, 48 C.F.R. 9.400-9.409 and (c) the revised Governmentwide
         Debarment and Suspension (Nonprocurement) regulations (Common Rule), 60
         Fed. Reg. 33037 (June 26, 1995).


                  "Delegated Authority Letter Agreement" shall mean the
         Delegated Authority Letter Agreement, if any, between Ex-Im Bank and
         Lender.

                  "Disbursement" shall mean, collectively, (a) an advance of a
         working capital loan from Lender to Borrower under the Loan Facility,
         and (b) an advance to fund a drawing under a Letter of Credit issued or
         caused to be issued by Lender for the account of Borrower under the
         Loan Facility.

                  "Dollars" or "$" shall mean the lawful currency of the United
         States.

                  "Effective Date" shall mean the date on which (a) the Loan
         Documents are executed by Lender and Borrower or the date, if later, on
         which agreements are executed by Lender and Borrower adding the Loan
         Facility to an existing working capital loan arrangement between Lender
         and Borrower and (b) all of the conditions to the making of the initial
         Credit Accommodations under the Loan Documents or any amendments
         thereto have been satisfied.

                  "Eligible Export-Related Accounts Receivable" shall mean an
         Export-Related Account Receivable which is acceptable to Lender and
         which is deemed to be eligible pursuant to the Loan Documents, but in
         no event shall Eligible Export-Related Accounts Receivable include any
         Account Receivable:

                           (a)      that does not arise from the sale of Items
                  in the ordinary course of Borrower's business;

                           (b)      that is not subject to a valid, perfected
                  first priority Lien in favor of Lender;

                           (c)      as to which any covenant, representation or
                  warranty contained in the Loan Documents with respect to such
                  Account Receivable has been breached;

                           (d)      that is not owned by Borrower or is subject
                  to any right, claim or interest of another Person other than
                  the Lien in favor of Lender;

                           (e)      with respect to which an invoice has not
                  been sent;

                           (f)      that arises from the sale of defense
                  articles or defense services;

                           (g)      that is due and payable from a Buyer located
                  in a country with which Ex-Im Bank is prohibited from doing
                  business as designated in the Country Limitation Schedule;

                           (h)      that does not comply with the requirements
                  of the Country


                  Limitation Schedule;

                           (i)      that is due and payable more than one
                  hundred eighty (180) days from the date of the invoice;

                           (j)      that is not paid within sixty (60) calendar
                  days from its original due date, unless it is insured through
                  Ex-Im Bank export credit insurance for comprehensive
                  commercial and political risk, or through Ex-Im Bank approved
                  private insurers for comparable coverage, in which case it is
                  not paid within ninety (90) calendar days from its due date;

                           (k)      that arises from a sale of goods to or
                  performance of services for an employee of Borrower, a
                  stockholder of Borrower, a subsidiary of Borrower, a Person
                  with a controlling interest in Borrower or a Person which
                  shares common controlling ownership with Borrower;

                           (l)      that is backed by a letter of credit unless
                  the Items covered by the subject letter of credit have been
                  shipped;

                           (m)      that Lender or Ex-Im Bank, in its reasonable
                  judgment, deems uncollectible for any reason;

                           (n)      that is due and payable in a currency other
                  than Dollars, except as may be approved in writing by Ex-Im
                  Bank;

                           (o)      that is due and payable from a military
                  Buyer, except as may be approved in writing by Ex-Im Bank;

                           (p)      that does not comply with the terms of sale
                  set forth in Section 7 of the Loan Authorization Agreement;

                           (q)      that is due and payable from a Buyer who (i)
                  applies for, suffers, or consents to the appointment of, or
                  the taking of possession by, a receiver, custodian, trustee or
                  liquidator of itself or of all or a substantial part of its
                  property or calls a meeting of its creditors, (ii) admits in
                  writing its inability, or is generally unable, to pay its
                  debts as they become due or ceases operations of its present
                  business, (iii) makes a general assignment for the benefit of
                  creditors, (iv) commences a voluntary case under any state or
                  federal bankruptcy laws (as now or hereafter in effect), (v)
                  is adjudicated as bankrupt or insolvent, (vi) files a petition
                  seeking to take advantage of any other law providing for the
                  relief of debtors, (vii) acquiesces to, or fails to have
                  dismissed, any petition which is filed against it in any
                  involuntary case under such bankruptcy laws, or (viii) takes
                  any action for the purpose of effecting any of the foregoing;

                           (r)      that arises from a bill-and-hold, guaranteed
                  sale, sale-and-return, sale on approval, consignment or any
                  other repurchase or return basis or is evidenced by chattel
                  paper;

                           (s)      for which the Items giving rise to such
                  Account Receivable have not been shipped and delivered to and
                  accepted by the Buyer or the services giving rise to such
                  Account Receivable have not been performed by Borrower and
                  accepted by the Buyer or the Account Receivable otherwise does
                  not represent a final sale;

                           (t)      that is subject to any offset, deduction,
                  defense, dispute, or counterclaim or the Buyer is also a
                  creditor or supplier of Borrower or the Account Receivable is
                  contingent in any respect or for any reason;

                           (u)      for which Borrower has made any agreement
                  with the Buyer for any deduction therefrom, except for
                  discounts or allowances made in the ordinary course of
                  business for prompt payment, all of which discounts or
                  allowances are reflected in the calculation of the face value
                  of each respective invoice related thereto; or

                           (v)      for which any of the Items giving rise to
                  such Account Receivable have been returned, rejected or
                  repossessed.

                  "Eligible Export-Related Inventory" shall mean Export-Related
         Inventory which is acceptable to Lender and which is deemed to be
         eligible pursuant to the Loan Documents, but in no event shall Eligible
         Export-Related Inventory include any Inventory:

                           (a)      that is not subject to a valid, perfected
                  first priority Lien in favor of Lender;

                           (b)      that is located at an address that has not
                  been disclosed to Lender in writing;

                           (c)      that is placed by Borrower on consignment or
                  held by Borrower on consignment from another Person;

                           (d)      that is in the possession of a processor or
                  bailee, or located on premises leased or subleased to
                  Borrower, or on premises subject to a mortgage in favor of a
                  Person other than Lender, unless such processor or bailee or
                  mortgagee or the lessor or sublessor of such premises, as the
                  case may be, has executed and delivered all documentation
                  which Lender shall require to evidence the subordination or
                  other limitation or extinguishment of such Person's rights
                  with respect to such Inventory and Lender's right to gain
                  access thereto;

                           (e)      that is produced in violation of the Fair
                  Labor Standards Act or subject to the "hot goods" provisions
                  contained in 29 US.C.ss.215 or any successor statute or
                  section;

                           (f)      as to which any covenant, representation or
                  warranty with respect to such Inventory contained in the Loan
                  Documents has been breached;


                           (g)      that is not located in the United States;

                           (h)      that is demonstration Inventory;

                           (i)      that consists of proprietary software (i.e.
                  software designed solely for Borrower's internal use and not
                  intended for resale);

                           (j)      that is damaged, obsolete, returned,
                  defective, recalled or unfit for further processing;

                           (k)      that has been previously exported from the
                  United States;

                           (l)      that constitutes defense articles or defense
                  services;

                           (m)      that is to be incorporated into Items
                  destined for shipment to a country as to which Ex-Im Bank is
                  prohibited from doing business as designated in the Country
                  Limitation Schedule;

                           (n)      that is to be incorporated into Items
                  destined for shipment to a Buyer located in a country in which
                  Ex-Im Bank coverage is not available for commercial reasons as
                  designated in the Country Limitation Schedule, unless and only
                  to the extent that such Items are to be sold to such country
                  on terms of a letter of credit confirmed by a bank acceptable
                  to Ex-Im Bank; or

                           (o)      that is to be incorporated into Items whose
                  sale would result in an Account Receivable which would not be
                  an Eligible Export-Related Account Receivable.

                  "Eligible Person" shall mean a sole proprietorship,
         partnership, limited liability partnership, corporation or limited
         liability company which (a) is domiciled, organized, or formed, as the
         case may be, in the United States; (b) is in good standing in the state
         of its formation or otherwise authorized to conduct business in the
         United States; (c) is not currently suspended or debarred from doing
         business with the United States government or any instrumentality,
         division, agency or department thereof; (d) exports or plans to export
         Items; (e) operates and has operated as a going concern for at least
         one (1) year; (f) has a positive tangible net worth determined in
         accordance with GAAP; and (g) has revenue generating operations
         relating to its core business activities for at least one year.

                  "ERISA" shall mean the Employee Retirement Income Security Act
         of 1974 and the rules and regulations promulgated thereunder.

                  "Export Order" shall mean a written export order or contract
         for the purchase by the Buyer from Borrower of any of the Items.

                  "Export-Related Accounts Receivable" shall mean those Accounts
         Receivable arising from the sale of Items which are due and payable to
         Borrower in the United States.



                  "Export-Related Accounts Receivable Value" shall mean, at the
         date of determination thereof, the aggregate face amount of Eligible
         Export-Related Accounts Receivable less taxes, discounts, credits,
         allowances and Retainages, except to the extent otherwise permitted by
         Ex-Im Bank in writing.

                  "Export-Related Borrowing Base" shall mean, at the date of
         determination thereof, the sum of (a) the Export-Related Inventory
         Value multiplied by the Advance Rate applicable to Export-Related
         Inventory set forth in Section 5(C)(1) of the Loan Authorization
         Agreement, (b) the Export-Related Accounts Receivable Value multiplied
         by the Advance Rate applicable to Export-Related Accounts Receivable
         set forth in Section 5(C)(2) of the Loan Authorization Agreement, (c)
         if permitted by Ex-Im Bank in writing, the Retainage Value multiplied
         by the Retainage Advance Rate set forth in Section 5(C)(3) of the Loan
         Authorization Agreement and (d) the Other Assets Value multiplied by
         the Advance Rate applicable to Other Assets set forth in Section
         5(C)(4) of the Loan Authorization Agreement.

                  "Export-Related Borrowing Base Certificate" shall mean a
         certificate in the form provided or approved by Lender, executed by
         Borrower and delivered to Lender pursuant to the Loan Documents
         detailing the Export-Related Borrowing Base supporting the Credit
         Accommodations which reflects, to the extent included in the
         Export-Related Borrowing Base, Export-Related Accounts Receivable,
         Eligible Export-Related Accounts Receivable, Export-Related Inventory
         and Eligible Export-Related Inventory balances that have been
         reconciled with Borrower's general ledger, Accounts Receivable aging
         report and Inventory schedule.

                  "Export-Related General Intangibles" shall mean those General
         Intangibles necessary or desirable to or for the disposition of
         Export-Related Inventory.

                  "Export-Related Inventory" shall mean the Inventory of
         Borrower located in the United States that has been purchased,
         manufactured or otherwise acquired by Borrower for resale pursuant to
         Export Orders.

                  "Export-Related Inventory Value" shall mean, at the date of
         determination thereof, the lower of cost or market value of Eligible
         Export-Related Inventory of Borrower as determined in accordance with
         GAAP.

                  "Final Disbursement Date" shall mean, unless subject to an
         extension of such date agreed to by Ex-Im Bank, the last date on which
         Lender may make a Disbursement set forth in Section 10 of the Loan
         Authorization Agreement or, if such date is not a Business Day, the
         next succeeding Business Day; PROVIDED, HOWEVER, to the extent that
         Lender has not received cash collateral or an indemnity with respect to
         Letter of Credit Obligations outstanding on the Final Disbursement
         Date, the Final Disbursement Date with respect to an advance to fund a
         drawing under a Letter of Credit shall be no later than thirty (30)

         Business Days after the expiry date of the Letter of Credit related
         thereto.

                  "GAAP" shall mean the generally accepted accounting principles
         issued by the American Institute of Certified Public Accountants as in
         effect from time to time.

                  "General Intangibles" shall mean all intellectual property and
         other "general intangibles" (as such term is defined in the UCC)
         necessary or desirable to or for the disposition of Inventory.

                  "Guarantor" shall mean each Person, if any, identified in
         Section 3 of the Loan Authorization Agreement who shall guarantee
         (jointly and severally if more than one) the payment and performance of
         all or a portion of the Loan Facility Obligations.

                  "Guaranty Agreement" shall mean a valid and enforceable
         agreement of guaranty executed by each Guarantor in favor of Lender.

                  "Inventory" shall mean all "inventory" (as such term is
         defined in the UCC), now or hereafter owned or acquired by Borrower,
         wherever located, including all inventory, merchandise, goods and other
         personal property which are held by or on behalf of Borrower for sale
         or lease or are furnished or are to be furnished under a contract of
         service or which constitute raw materials, work in process or materials
         used or consumed or to be used or consumed in Borrower's business or in
         the processing, production, packaging, promotion, delivery or shipping
         of the same, including other supplies.

                  "ISP" shall mean the International Standby Practices-ISP98,
         International Chamber of Commerce Publication No. 590 and any
         amendments and revisions thereof.

                  "Issuing Bank" shall mean the bank that issues a Letter of
         Credit, which bank is Lender itself or a bank that Lender has caused to
         issue a Letter of Credit by way of guarantee.

                  "Items" shall mean the finished goods or services which are
         intended for export from the United States, as specified in Section
         4(A) of the Loan Authorization Agreement.

                  "Letter of Credit" shall mean a Commercial Letter of Credit or
         a Standby Letter of Credit.

                  "Letter of Credit Obligations" shall mean all outstanding
         obligations incurred by Lender, whether direct or indirect, contingent
         or otherwise, due or not due, in connection with the issuance or
         guarantee by Lender or the Issuing Bank of Letters of Credit.

                  "Lien" shall mean any mortgage, security deed or deed of
         trust, pledge, hypothecation, assignment, deposit arrangement, lien,
         charge, claim, security interest, security title, easement or
         encumbrance, or preference, priority or other security agreement or
         preferential arrangement of any kind or nature whatsoever (including
         any lease or title retention agreement, any financing lease having
         substantially the same economic effect as any of the foregoing, and the
         filing of, or agreement to give, any

         financing statement perfecting a security interest under the UCC or
         comparable law of any jurisdiction) by which property is encumbered or
         otherwise charged.

                  "Loan Agreement" shall mean a valid and enforceable agreement
         between Lender and Borrower setting forth the terms and conditions of
         the Loan Facility.

                  "Loan Authorization Agreement" shall mean the Loan
         Authorization Agreement entered into between Lender and Ex-Im Bank or
         the Loan Authorization Notice setting forth certain terms and
         conditions of the Loan Facility, a copy of which is attached hereto as
         Annex A.

                  "Loan Authorization Notice" shall mean the Loan Authorization
         Notice executed by Lender and delivered to Ex-Im Bank in accordance
         with the Delegated Authority Letter Agreement setting forth the terms
         and conditions of each Loan Facility.

                  "Loan Documents" shall mean the Loan Authorization Agreement,
         the Loan Agreement, this Agreement, each promissory note (if
         applicable), each Guaranty Agreement, and all other instruments,
         agreements and documents now or hereafter executed by Borrower or any
         Guarantor evidencing, securing, guaranteeing or otherwise relating to
         the Loan Facility or any Credit Accommodations made thereunder.

                  "Loan Facility" shall mean the Revolving Loan Facility, the
         Transaction Specific Loan Facility or the Transaction Specific
         Revolving Loan Facility established by Lender in favor of Borrower
         under the Loan Documents.

                  "Loan Facility Obligations" shall mean all loans, advances,
         debts, expenses, fees, liabilities, and obligations for the performance
         of covenants, tasks or duties or for payment of monetary amounts
         (whether or not such performance is then required or contingent, or
         amounts are liquidated or determinable) owing by Borrower to Lender, of
         any kind or nature, present or future, arising in connection with the
         Loan Facility.

                  "Loan Facility Term" shall mean the number of months from the
         Effective Date to the Final Disbursement Date as originally set forth
         in the Loan Authorization Agreement.

                  "Master Guarantee Agreement" shall mean the Master Guarantee
         Agreement between Ex-Im Bank and Lender, as amended, modified,
         supplemented and restated from time to time.

                  "Material Adverse Effect" shall mean a material adverse effect
         on (a) the business, assets, operations, prospects or financial or
         other condition of Borrower or any Guarantor, (b) Borrower's ability to
         pay or perform the Loan Facility Obligations in accordance with the
         terms thereof, (c) the Collateral or Lender's Liens on the Collateral
         or the priority of such Lien or (d) Lender's rights and remedies under
         the Loan Documents.

                  "Maximum Amount" shall mean the maximum principal balance of
         Credit Accommodations that may be outstanding at any time under the
         Loan Facility specified in Section 5(A) of the Loan Authorization
         Agreement.

                  "Other Assets" shall mean the Collateral, if any, described in
         Section 5(C)(4) of the Loan Authorization Agreement.

                  "Other Assets Value" shall mean, at the date of determination
         thereof, the value of the Other Assets as determined in accordance with
         GAAP.

                  "Permitted Liens" shall mean (a) Liens for taxes, assessments
         or other governmental charges or levies not delinquent, or, being
         contested in good faith and by appropriate proceedings and with respect
         to which proper reserves have been taken by Borrower; PROVIDED, THAT,
         the Lien shall have no effect on the priority of the Liens in favor of
         Lender or the value of the assets in which Lender has such a Lien and a
         stay of enforcement of any such Lien shall be in effect; (b) deposits
         or pledges securing obligations under worker's compensation,
         unemployment insurance, social security or public liability laws or
         similar legislation; (c) deposits or pledges securing bids, tenders,
         contracts (other than contracts for the payment of money), leases,
         statutory obligations, surety and appeal bonds and other obligations of
         like nature arising in the ordinary course of Borrower's business; (d)
         judgment Liens that have been stayed or bonded; (e) mechanics',
         workers', materialmen's or other like Liens arising in the ordinary
         course of Borrower's business with respect to obligations which are not
         due; (f) Liens placed upon fixed assets hereafter acquired to secure a
         portion of the purchase price thereof, provided, that, any such Lien
         shall not encumber any other property of Borrower; (g) security
         interests being terminated concurrently with the execution of the Loan
         Documents; (h) Liens in favor of Lender securing the Loan Facility
         Obligations; and (i) Liens disclosed in Section 6(D) of the Loan
         Authorization Agreement.

                  "Person" shall mean any individual, sole proprietorship,
         partnership, limited liability partnership, joint venture, trust,
         unincorporated organization, association, corporation, limited
         liability company, institution, public benefit corporation, entity or
         government (whether national, federal, provincial, state, county, city,
         municipal or otherwise, including any instrumentality, division,
         agency, body or department thereof), and shall include such Person's
         successors and assigns.

                  "Principals" shall mean any officer, director, owner, partner,
         key employee, or other Person with primary management or supervisory
         responsibilities with respect to Borrower or any other Person (whether
         or not an employee) who has critical influence on or substantive
         control over the transactions covered by this Agreement.

                  "Retainage" shall mean that portion of the purchase price of
         an Export Order that a Buyer is not obligated to pay until the end of a
         specified period of time following the satisfactory performance under
         such Export Order.

                  "Retainage Accounts Receivable" shall mean those portions of
         Eligible Export-Related Accounts Receivable arising out of a Retainage.


                  "Retainage Advance Rate" shall mean the percentage rate
         specified in Section 5(C)(3) of the Loan Authorization Agreement as the
         Advance Rate for the Retainage Accounts Receivable of Borrower.

                  "Retainage Value" shall mean, at the date of determination
         thereof, the aggregate face amount of Retainage Accounts Receivable,
         less taxes, discounts, credits and allowances, except to the extent
         otherwise permitted by Ex-Im Bank in writing.

                  "Revolving Loan Facility" shall mean the credit facility or
         portion thereof established by Lender in favor of Borrower for the
         purpose of providing pre-export working capital in the form of loans
         and/or Letters of Credit to finance the manufacture, production or
         purchase and subsequent export sale of Items pursuant to Loan Documents
         under which Credit Accommodations may be made and repaid on a
         continuous basis based solely on the Export-Related Borrowing Base
         during the term of such credit facility.

                  "Special Conditions" shall mean those conditions, if any, set
         forth in Section 13 of the Loan Authorization Agreement.

                  "Specific Export Orders" shall mean those Export Orders
         specified in Section 5(D) of the Loan Authorization Agreement.

                  "Standby Letter of Credit" shall mean those letters of credit
         subject to the ISP or UCP issued or caused to be issued by Lender for
         Borrower's account that can be drawn upon by a Buyer only if Borrower
         fails to perform all of its obligations with respect to an Export
         Order.

                  "Transaction Specific Loan Facility" shall mean a credit
         facility or a portion thereof established by Lender in favor of
         Borrower for the purpose of providing pre-export working capital in the
         form of loans and/or Letters of Credit to finance the manufacture,
         production or purchase and subsequent export sale of Items pursuant to
         Loan Documents under which Credit Accommodations are made based solely
         on the Export-Related Borrowing Base relating to Specific Export Orders
         and once such Credit Accommodations are repaid they may not be
         reborrowed.

                  "Transaction Specific Revolving Loan Facility" shall mean a
         Revolving Credit Facility established to provide financing of Specific
         Export Orders.

                  "UCC" shall mean the Uniform Commercial Code as the same may
         be in effect from time to time in the jurisdiction in which Borrower or
         Collateral is located.

                  "UCP" shall mean the Uniform Customs and Practice for
         Documentary Credits (1993 Revision), International Chamber of Commerce
         Publication No. 500 and any amendments and revisions thereof.

                  "U.S." or "United States" shall mean the United States of
         America and its territorial possessions.

                  "U.S. Content" shall mean with respect to any Item all the
         labor, materials and services which are of U.S. origin or manufacture,
         and which are incorporated into an Item in the United States.

                  "Warranty" shall mean Borrower's guarantee to Buyer that the
         Items will function as intended during the warranty period set forth in
         the applicable Export Order.

                  "Warranty Letter of Credit" shall mean a Standby Letter of
         Credit which is issued or caused to be issued by Lender to support the
         obligations of Borrower with respect to a Warranty or a Standby Letter
         of Credit which by its terms becomes a Warranty Letter of Credit.


         1.02     RULES OF CONSTRUCTION. For purposes of this Agreement, the
                  following additional rules of construction shall apply, unless
                  specifically indicated to the contrary: (a) wherever from the
                  context it appears appropriate, each term stated in either the
                  singular or plural shall include the singular and the plural,
                  and pronouns stated in the masculine, feminine or neuter
                  gender shall include the masculine, the feminine and the
                  neuter; (b) the term "or" is not exclusive; (c) the term
                  "including" (or any form thereof) shall not be limiting or
                  exclusive; (d) all references to statutes and related
                  regulations shall include any amendments of same and any
                  successor statutes and regulations; (e) the words "this
                  Agreement", "herein", "hereof", "hereunder" or other words of
                  similar import refer to this Agreement as a whole including
                  the schedules, exhibits, and annexes hereto as the same may be
                  amended, modified or supplemented; (f) all references in this
                  Agreement to sections, schedules, exhibits, and annexes shall
                  refer to the corresponding sections, schedules, exhibits, and
                  annexes of or to this Agreement; and (g) all references to any
                  instruments or agreements, including references to any of the
                  Loan Documents, or the Delegated Authority Letter Agreement
                  shall include any and all modifications, amendments and
                  supplements thereto and any and all extensions or renewals
                  thereof to the extent permitted under this Agreement.

         1.03     INCORPORATION OF RECITALS. The Recitals to this Agreement are
                  incorporated into and shall constitute a part of this
                  Agreement.



ARTICLE II
                             OBLIGATIONS OF BORROWER

         Until payment in full of all Loan Facility Obligations and termination
of the Loan Documents, Borrower agrees as follows:

         2.01     USE OF CREDIT ACCOMMODATIONS. (a) Borrower shall use Credit
                  Accommodations




                  only for the purpose of enabling Borrower to finance the cost
                  of manufacturing, producing, purchasing or selling the Items.
                  Borrower may not use any of the Credit Accommodations for the
                  purpose of: (i) servicing or repaying any of Borrower's
                  pre-existing or future indebtedness unrelated to the Loan
                  Facility (unless approved by Ex-Im Bank in writing); (ii)
                  acquiring fixed assets or capital goods for use in Borrower's
                  business; (iii) acquiring, equipping or renting commercial
                  space outside of the United States; (iv) paying the salaries
                  of non U.S. citizens or non-U.S. permanent residents who are
                  located in offices outside of the United States; or (v) in
                  connection with a Retainage or Warranty (unless approved by
                  Ex-Im Bank in writing).

                  (b)      In addition, no Credit Accommodation may be used to
finance the manufacture, purchase or sale of any of the following:

                           (i)      Items to be sold or resold to a Buyer
                  located in a country as to which Ex-Im Bank is prohibited from
                  doing business as designated in the Country Limitation
                  Schedule;

                           (ii)     that part of the cost of the Items which is
                  not U.S. Content unless such part is not greater than fifty
                  percent (50%) of the cost of the Items and is incorporated
                  into the Items in the United States;

                           (iii)    defense articles or defense services; or

                           (iv)     without Ex-Im Bank's prior written consent,
                  any Items to be used in the construction, alteration,
                  operation or maintenance of nuclear power, enrichment,
                  reprocessing, research or heavy water production facilities.

         2.02     LOAN DOCUMENTS AND LOAN AUTHORIZATION AGREEMENT. (a) Each Loan
                  Document and this Agreement have been duly executed and
                  delivered on behalf of Borrower, and each such Loan Document
                  and this Agreement are and will continue to be a legal and
                  valid obligation of Borrower, enforceable against it in
                  accordance with its terms.

                  (b)      Borrower shall comply with all of the terms and
conditions of the Loan Documents, this Agreement and the Loan Authorization
Agreement.

         2.03     EXPORT-RELATED BORROWING BASE CERTIFICATES AND EXPORT ORDERS.
                  In order to receive Credit Accommodations under the Loan
                  Facility, Borrower shall have delivered to Lender an
                  Export-Related Borrowing Base Certificate as frequently as
                  required by Lender but at least within the past thirty (30)
                  calendar days and a copy of the Export Order(s) (or, for
                  Revolving Loan Facilities, if permitted by Lender, a written
                  summary of the Export Orders) against which Borrower is
                  requesting Credit Accommodations. If Lender permits summaries
                  of Export Orders, Borrower shall also deliver promptly to
                  Lender copies of any Export Orders requested by Lender. In
                  addition, so long as there are any Credit




                  Accommodations outstanding under the Loan Facility, Borrower
                  shall deliver to Lender at least once each month no later than
                  the twentieth (20th) day of such month or more frequently as
                  required by the Loan Documents, an Export-Related Borrowing
                  Base Certificate.

         2.04     EXCLUSIONS FROM THE EXPORT-RELATED BORROWING BASE. In
                  determining the Export-Related Borrowing Base, Borrower shall
                  exclude therefrom Inventory which is not Eligible
                  Export-Related Inventory and Accounts Receivable which are not
                  Eligible Export-Related Accounts Receivable. Borrower shall
                  promptly, but in any event within five (5) Business Days,
                  notify Lender (a) if any then existing Export-Related
                  Inventory no longer constitutes Eligible Export-Related
                  Inventory or (b) of any event or circumstance which to
                  Borrower's knowledge would cause Lender to consider any then
                  existing Export-Related Accounts Receivable as no longer
                  constituting an Eligible Export-Related Accounts Receivable.

         2.05     FINANCIAL STATEMENTS. Borrower shall deliver to Lender the
                  financial statements required to be delivered by Borrower in
                  accordance with Section 11 of the Loan Authorization
                  Agreement.

         2.06     SCHEDULES, REPORTS AND OTHER STATEMENTS. Borrower shall submit
                  to Lender in writing each month (a) an Inventory schedule for
                  the preceding month and (b) an Accounts Receivable aging
                  report for the preceding month detailing the terms of the
                  amounts due from each Buyer. Borrower shall also furnish to
                  Lender promptly upon request such information, reports,
                  contracts, invoices and other data concerning the Collateral
                  as Lender may from time to time specify.

         2.07     ADDITIONAL SECURITY OR PAYMENT. (a) Borrower shall at all
                  times ensure that the Export-Related Borrowing Base equals or
                  exceeds the Credit Accommodation Amount. If informed by Lender
                  or if Borrower otherwise has actual knowledge that the
                  Export-Related Borrowing Base is at any time less than the
                  Credit Accommodation Amount, Borrower shall, within five (5)
                  Business Days, either (i) furnish additional Collateral to
                  Lender, in form and amount satisfactory to Lender and Ex-Im
                  Bank or (ii) pay to Lender an amount equal to the difference
                  between the Credit Accommodation Amount and the Export-Related
                  Borrowing Base.

                  (b) For purposes of this Agreement, in determining the
Export-Related Borrowing Base there shall be deducted from the Export-Related
Borrowing Base (i) an amount equal to twenty-five percent (25%) of the
outstanding face amount of Commercial Letters of Credit and Standby Letters of
Credit and (ii) one hundred percent (100%) of the face amount of Warranty
Letters of Credit less the amount of cash collateral held by Lender to secure
Warranty Letters of Credit.

                  (c) Unless otherwise approved in writing by Ex-Im Bank, for
Revolving Loan Facilities (other than Transaction Specific Revolving Loan
Facilities), Borrower shall at all times ensure that the outstanding principal
balance of the Credit Accommodations that is supported by Export-Related
Inventory does not exceed sixty percent (60%) of the sum of the total
outstanding principal balance of the Disbursements and the undrawn face amount
of all outstanding Commercial Letters of Credit. If informed by Lender or if
Borrower otherwise has actual knowledge that the outstanding principal balance
of the Credit Accommodations that is supported by Inventory exceeds sixty
percent (60%) of the sum of the total outstanding principal balance of the
Disbursements and the undrawn face amount of all


outstanding Commercial Letters of Credit, Borrower shall, within five (5)
Business Days, either (i) furnish additional non-Inventory Collateral to Lender,
in form and amount satisfactory to Lender and Ex-Im Bank, or (ii) pay down the
applicable portion of the Credit Accommodations so that the above described
ratio is not exceeded.

         2.08     CONTINUED SECURITY INTEREST. Borrower shall not change (a) its
                  name or identity in any manner, (b) the location of its
                  principal place of business, (c) the location of any of the
                  Collateral or (d) the location of any of the books or records
                  related to the Collateral, in each instance without giving
                  thirty (30) days prior written notice thereof to Lender and
                  taking all actions deemed necessary or appropriate by Lender
                  to continuously protect and perfect Lender's Liens upon the
                  Collateral.

         2.09     INSPECTION OF COLLATERAL. Borrower shall permit the
                  representatives of Lender and Ex-Im Bank to make at any time
                  during normal business hours inspections of the Collateral and
                  of Borrower's facilities, activities, and books and records,
                  and shall cause its officers and employees to give full
                  cooperation and assistance in connection therewith.

         2.10     GENERAL INTANGIBLES. Borrower represents and warrants that it
                  owns, or is licensed to use, all General Intangibles necessary
                  to conduct its business as currently conducted except where
                  the failure of Borrower to own or license such General
                  Intangibles could not reasonably be expected to have a
                  Material Adverse Effect.

         2.11     NOTICE OF CERTAIN EVENTS. Borrower shall promptly, but in any
                  event within five (5) Business Days, notify Lender in writing
                  of the occurrence of any of the following:

                                (a)      Borrower or any Guarantor (i) applies
                        for, consents to or suffers the appointment of, or the
                        taking of possession by, a receiver, custodian, trustee,
                        liquidator or similar fiduciary of itself or of all or a
                        substantial part of its property or calls a meeting of
                        its creditors, (ii) admits in writing its inability, or
                        is generally unable, to pay its debts as they become due
                        or ceases operations of its present business, (iii)
                        makes a general assignment for the benefit of creditors,
                        (iv) commences a voluntary case under any state or
                        federal bankruptcy laws (as now or hereafter in effect),
                        (v) is adjudicated as bankrupt or insolvent, (vi) files
                        a petition seeking to take advantage of any other law
                        providing for the relief of debtors, (vii) acquiesces
                        to, or fails to have dismissed within thirty (30)



                        days, any petition filed against it in any involuntary
                        case under such bankruptcy laws, or (viii) takes any
                        action for the purpose of effecting any of the
                        foregoing;

                                (b)      any Lien in any of the Collateral,
                        granted or intended by the Loan Documents to be granted
                        to Lender, ceases to be a valid, enforceable, perfected,
                        first priority Lien (or a lesser priority if expressly
                        permitted pursuant to Section 6 of the Loan
                        Authorization Agreement) subject only to Permitted
                        Liens;

                                (c)      the issuance of any levy, assessment,
                        attachment, seizure or Lien, other than a Permitted
                        Lien, against any of the Collateral which is not stayed
                        or lifted within thirty (30) calendar days;

                                (d)      any proceeding is commenced by or
                        against Borrower or any Guarantor for the liquidation of
                        its assets or dissolution;

                                (e)      any litigation is filed against
                        Borrower or any Guarantor which has had or could
                        reasonably be expected to have a Material Adverse Effect
                        and such litigation is not withdrawn or dismissed within
                        thirty (30) calendar days of the filing thereof;

                                (f)      any default or event of default under
                        the Loan Documents;

                                (g)      any failure to comply with any terms of
                        the Loan Authorization Agreement;

                                (h)      any material provision of any Loan
                        Document or this Agreement for any reason ceases to be
                        valid, binding and enforceable in accordance with its
                        terms;

                                (i)      any event which has had or could
                        reasonably be expected to have a Material Adverse
                        Effect; or

                                (j)      the Credit Accommodation Amount exceeds
                        the applicable Export-Related Borrowing Base.

         2.12     INSURANCE. Borrower will at all times carry property,
                  liability and other insurance, with insurers acceptable to
                  Lender, in such form and amounts, and with such deductibles
                  and other provisions, as Lender shall require, and Borrower
                  will provide evidence of such insurance to Lender, so that
                  Lender is satisfied that such insurance is, at all times, in
                  full force and effect. Each property insurance policy shall
                  name Lender as loss payee and shall contain a lender's loss
                  payable endorsement in form acceptable to Lender and each
                  liability insurance policy shall name Lender as an additional
                  insured. All policies of insurance shall provide that they may
                  not be cancelled or changed without at least ten (10) days'
                  prior written notice to Lender and shall otherwise be in form
                  and substance satisfactory to Lender. Borrower will promptly
                  deliver to Lender copies of all reports made to insurance
                  companies.

         2.13     TAXES. Borrower has timely filed all tax returns and reports
                  required by applicable law, has timely paid all applicable
                  taxes, assessments, deposits and contributions owing by
                  Borrower and will timely pay all such items in the future as
                  they became due and payable. Borrower may, however, defer
                  payment of any contested taxes; provided, that Borrower (a) in
                  good faith contests Borrower's obligation to pay such taxes by
                  appropriate proceedings promptly and diligently instituted and
                  conducted; (b) notifies Lender in writing of the commencement
                  of, and any material development in, the proceedings; (c)
                  posts bonds or takes any other steps required to keep the
                  contested taxes from becoming a Lien upon any of the
                  Collateral; and (d) maintains adequate reserves therefor in
                  conformity with GAAP.

         2.14     COMPLIANCE WITH LAWS. Borrower represents and warrants that it
                  has complied in all material respects with all provisions of
                  all applicable laws and regulations, including those relating
                  to Borrower's ownership of real or personal property, the
                  conduct and licensing of Borrower's business, the payment and
                  withholding of taxes, ERISA and other employee matters, safety
                  and environmental matters.

         2.15     NEGATIVE COVENANTS. Without the prior written consent of Ex-Im
                  Bank and Lender, Borrower shall not (a) merge, consolidate or
                  otherwise combine with any other Person; (b) acquire all or
                  substantially all of the assets or capital stock of any other
                  Person; (c) sell, lease, transfer, convey, assign or otherwise
                  dispose of any of its assets, except for the sale of Inventory
                  in the ordinary course of business and the disposition of
                  obsolete equipment in the ordinary course of business; (d)
                  create any Lien on the Collateral except for Permitted Liens;
                  (e) make any material changes in its organizational structure
                  or identity; or (f) enter into any agreement to do any of the
                  foregoing.

         2.16     REBORROWINGS AND REPAYMENT TERMS. (a) If the Loan Facility is
                  a Revolving Loan Facility, provided that Borrower is not in
                  default under any of the Loan Documents, Borrower may borrow,
                  repay and reborrow amounts under the Loan Facility until the
                  close of business on the Final Disbursement Date. Unless the
                  Revolving Loan Facility is renewed or extended by Lender with
                  the consent of Ex-Im Bank, Borrower shall pay in full the
                  outstanding Loan Facility Obligations and all accrued and
                  unpaid interest thereon no later than the first Business Day
                  after the Final Disbursement Date.

                  (b) If the Loan Facility is a Transaction Specific Loan
Facility, Borrower shall, within two (2) Business Days of the receipt thereof,
pay to Lender (for application against the outstanding Loan Facility Obligations
and accrued and unpaid interest thereon) all checks, drafts, cash and other
remittances it may receive in payment or on account of the Export-Related
Accounts Receivable or any other Collateral, in precisely the form received
(except for the endorsement of Borrower where necessary). Pending such deposit,
Borrower shall hold such amounts in trust for Lender separate and apart and
shall not commingle any such items of payment with any of its other funds or
property.



         2.17     CROSS DEFAULT. Borrower shall be deemed in default under the
                  Loan Facility if Borrower fails to pay when due any amount
                  payable to Lender under any loan or other credit
                  accommodations to Borrower whether or not guaranteed by Ex-Im
                  Bank.

         2.18     MUNITIONS LIST. If any of the Items are articles, services, or
                  related technical data that are listed on the United States
                  Munitions List (part 121 of title 22 of the Code of Federal
                  Regulations), Borrower shall send a written notice promptly,
                  but in any event within five (5) Business Days, of Borrower
                  learning thereof to Lender describing the Items(s) and the
                  corresponding invoice amount.

         2.19     SUSPENSION AND DEBARMENT, ETC. On the date of this Agreement
                  neither Borrower nor its Principals are (a) debarred,
                  suspended, proposed for debarment with a final determination
                  still pending, declared ineligible or voluntarily excluded (as
                  such terms are defined under any of the Debarment Regulations
                  referred to below) from participating in procurement or
                  nonprocurement transactions with any United States federal
                  government department or agency pursuant to any of the
                  Debarment Regulations or (b) indicted, convicted or had a
                  civil judgment rendered against Borrower or any of its
                  Principals for any of the offenses listed in any of the
                  Debarment Regulations. Unless authorized by Ex-Im Bank,
                  Borrower will not knowingly enter into any transactions in
                  connection with the Items with any person who is debarred,
                  suspended, declared ineligible or voluntarily excluded from
                  participation in procurement or nonprocurement transactions
                  with any United States federal government department or agency
                  pursuant to any of the Debarment Regulations. Borrower will
                  provide immediate written notice to Lender if at any time it
                  learns that the certification set forth in this Section 2.19
                  was erroneous when made or has become erroneous by reason of
                  changed circumstances.



ARTICLE III
                               RIGHTS AND REMEDIES

         3.01     INDEMNIFICATION. Upon Ex-Im Bank's payment of a Claim to
                  Lender in connection with the Loan Facility pursuant to the
                  Master Guarantee Agreement, Ex-Im Bank may assume all rights
                  and remedies of Lender under the Loan Documents and may
                  enforce any such rights or remedies against Borrower, the
                  Collateral and any Guarantors. Borrower shall hold Ex-Im Bank
                  and Lender harmless from and indemnify them against any and
                  all liabilities, damages, claims, costs and losses incurred or
                  suffered by either of them resulting from (a) any materially
                  incorrect certification or statement knowingly made by
                  Borrower or its agent to Ex-Im Bank or Lender in connection
                  with the Loan Facility, this Agreement, the Loan Authorization
                  Agreement or any other Loan Documents or (b) any material
                  breach by Borrower of the terms and conditions of this
                  Agreement, the Loan Authorization Agreement or any of the
                  other Loan Documents. Borrower also acknowledges that any
                  statement, certification or representation made by Borrower in
                  connection with the Loan Facility is subject



                  to the penalties provided in Article 18 U.S.C. Section 1001.

         3.02     LIENS. Borrower agrees that any and all Liens granted by it to
                  Lender are also hereby granted to Ex-Im Bank to secure
                  Borrower's obligation, however arising, to reimburse Ex-Im
                  Bank for any payments made by Ex-Im Bank pursuant to the
                  Master Guarantee Agreement. Lender is authorized to apply the
                  proceeds of, and recoveries from, any property subject to such
                  Liens to the satisfaction of Loan Facility Obligations in
                  accordance with the terms of any agreement between Lender and
                  Ex-Im Bank.

                                   ARTICLE IV
                                  MISCELLANEOUS

         4.01     GOVERNING LAW. This Agreement and the Loan Authorization
                  Agreement and the obligations arising under this Agreement and
                  the Loan Authorization Agreement shall be governed by, and
                  construed in accordance with, the law of the state governing
                  the Loan Documents.

         4.02     NOTIFICATION. All notices required by this Agreement shall be
                  given in the manner and to the parties provided for in the
                  Loan Agreement.

         4.03     PARTIAL INVALIDITY. If at any time any of the provisions of
                  this Agreement becomes illegal, invalid or unenforceable in
                  any respect under the law of any jurisdiction, neither the
                  legality, the validity nor the enforceability of the remaining
                  provisions hereof shall in any way be affected or impaired.

         4.04     WAIVER OF JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY
                  AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A
                  TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT, PROCEEDING OR
                  OTHER LITIGATION BROUGHT TO RESOLVE ANY DISPUTE ARISING UNDER,
                  ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN
                  AUTHORIZATION AGREEMENT, ANY LOAN DOCUMENT, OR ANY OTHER
                  AGREEMENT, DOCUMENT OR INSTRUMENT EXECUTED OR DELIVERED IN
                  CONNECTION HEREWITH OR THEREWITH OR ANY COURSE OF CONDUCT,
                  COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR
                  ACTIONS OR OMISSIONS OF LENDER, EX-IM BANK, OR ANY OTHER
                  PERSON, RELATING TO THIS AGREEMENT, THE LOAN AUTHORIZATION
                  AGREEMENT OR ANY OTHER LOAN DOCUMENT.

                            [signature page follows]





         IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly
executed as of the 5th day of December, 2001.

APPLIX, INC.


By     /s/ Alan Goldsworthy
     -------------------------------------------

Name:  Alan Goldsworthy
      -----------------------------------------

Title: President and CEO
       ----------------------------------------


APPLIX (UK) LIMITED


By     /s/ Alan Goldsworthy
     -------------------------------------------

Name:  Alan Goldsworthy
      -----------------------------------------

Title: Director
       ----------------------------------------


APPLIX AUSTRALIA PTY, LTD.


By     /s/ Bruce McCarthy
     -------------------------------------------

Name:  Bruce McCarthy
      -----------------------------------------

Title: Director
       ----------------------------------------



By     /s/ Alan Goldsworthy
     -------------------------------------------

Name:  Alan Goldsworthy
      -----------------------------------------

Title: Director
       ----------------------------------------


VERITEAM LIMITED


By     /s/ Alan Goldsworthy
     -------------------------------------------

Name:  Alan Goldsworthy
      -----------------------------------------

Title: Director
       ----------------------------------------


ACKNOWLEDGED:


SILICON VALLEY BANK



By     /s/ R. Bryan Jadot
     -------------------------------------------

Name:  R. Bryan Jadot
      -----------------------------------------

Title: Vice President
       ----------------------------------------



ANNEXES:

Annex A  -  Loan Authorization Agreement or Loan Authorization Notice

EX-10.16

                                                                   EXHIBIT 10.16

                           LOAN AND SECURITY AGREEMENT


      THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of December
5, 2001, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite
200, 2221 Washington Street, Newton, Massachusetts 02462, doing business under
the name "Silicon Valley East" ("Bank") and APPLIX, INC., a Massachusetts
corporation with its chief executive office at 289-291 Turnpike Road, Westboro,
Massachusetts 01581 ("Borrower"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:

      1     ACCOUNTING AND OTHER TERMS

      Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.

      2     LOAN AND TERMS OF PAYMENT

      2.1   PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.

      2.1.1 REVOLVING ADVANCES.

            (a) Bank shall make Advances not exceeding (i) the Committed
Revolving Line or the Borrowing Base, whichever is less, minus (ii) the amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit), minus (iii) the FX Reserve, and minus (iv) the aggregate outstanding
Advances hereunder (including any Cash Management Services). Amounts borrowed
under this Section may be repaid and reborrowed during the term of this
Agreement.

            (b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. If such notification is by telephone, Borrower must promptly confirm the
notification by delivering to Bank a completed Payment/Advance Form in the form
attached as EXHIBIT B. Bank shall credit Advances to Borrower's deposit account.
Bank may make Advances under this Agreement based on instructions from a
Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due. Bank may rely
on any telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss Bank
suffers due to such reliance.

            (c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when the principal amount of all Advances and the unpaid interest
thereon, shall be immediately payable.

      2.1.2 LETTERS OF CREDIT.

            (a) Bank shall issue or have issued Letters of Credit for Borrower's
account not exceeding (i) the lesser of the Committed Revolving Line or the
Borrowing Base minus (ii) the outstanding principal balance of any Advances
(including any Cash Management Services), minus (iii) the amount of all Letters
of Credit (including drawn but unreimbursed Letters of Credit), plus an amount
equal to any Letter of Credit Reserves. The face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed $2,500,000.00. Each Letter of Credit shall have
an expiry date no later than 180 days after the Revolving Maturity Date provided
Borrower's Letter of Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank on and after (i) the Revolving Maturity Date if the
term of this Agreement is not extended by Bank, or (ii) the occurrence of an
Event of Default hereunder. All Letters of Credit shall be, in form and
substance,




acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of standard Application and Letter of Credit
Agreement. Borrower agrees to execute any further documentation in connection
with the Letters of Credit as Bank may reasonably request.

            (b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.

            (c) Borrower may request that Bank issue a Letter of Credit payable
in a currency other than United States Dollars. If a demand for payment is made
under any such Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus cable charges) in United
States currency at the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for cable transfer to the country
of which it is the currency.

            (d) Upon the issuance of any letter of credit payable in a currency
other than United States Dollars, Bank shall create a reserve (the "Letter of
Credit Reserve") under the Committed Revolving Line for letters of credit
against fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such letter of credit. The amount of such
reserve may be amended by Bank from time to time to account for fluctuations in
the exchange rate. The availability of funds under the Committed Revolving Line
shall be reduced by the amount of such reserve for so long as such letter of
credit remains outstanding.

      2.1.3 FOREIGN EXCHANGE SUBLIMIT. If there is availability under the
Committed Revolving Line and the Borrowing Base, then Borrower may enter in
foreign exchange forward contracts with the Bank under which Borrower commits to
purchase from or sell to Bank a set amount of foreign currency more than one
business day after the contract date (the "FX Forward Contract"). Bank shall
subtract 10% of each outstanding FX Forward Contract from the foreign exchange
sublimit which is a maximum of $2,500,000.00 (the "FX Reserve"). The total FX
Forward Contracts at any one time may not exceed 10 times the amount of the FX
Reserve. Bank may terminate the FX Forward Contracts if an Event of Default
occurs.

      2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to
$2,500,000.00 for the Bank's Cash Management Services, which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in the various cash management services agreements
related to such services Cash Management Services Agreement (the "Cash
Management Services"). Such aggregate amounts utilized under the Cash Management
Services Sublimit shall at all times reduce the amount otherwise available for
Credit Extensions under the Committed Revolving Line. Any amounts Bank pays for
any Cash Management Services on behalf of Borrower that are not paid by Borrower
as required by the applicable terms thereof will be treated as Advances under
the Committed Revolving Line and will accrue interest at the interest rate
applicable to Advances.

      2.1.5 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospects of Borrower,
whether or not arising from transactions in the ordinary course of business, or
there has been any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.

      2.2   OVERADVANCES. If Borrower's Obligations under Section 2.1.1, 2.1.2,
2.1.3 and 2.1.4 exceed the lesser of either (i) the Committed Revolving Line or
(ii) the Borrowing Base, Borrower must immediately pay in cash to Bank the
excess.


                                       2




      2.3   INTEREST RATE; PAYMENTS.

            (a) INTEREST RATE. Advances accrue interest on the outstanding
principal balance at a per annum rate equal to the aggregate of the Bank's Prime
Rate plus one and one-quarter percent (1.25%). After an Event of Default,
Obligations shall bear interest at four percent (4.0%) above the rate effective
immediately before the Event of Default. The interest rate shall increase or
decrease when the Prime Rate changes. Interest is computed on the basis of a 360
day year for the actual number of days elapsed.

            (b) PAYMENTS. Interest is payable on the Payment Date of each month.
Bank may debit any of Borrower's deposit accounts (unless prohibited by law)
including Account Number __________ for principal and interest payments or any
amounts Borrower owes Bank. Bank shall promptly notify Borrower when it debits
Borrower's accounts. These debits are not a set-off. Payments received after
3:00 p.m. Eastern time are considered received at the opening of business on the
next Business Day. When a payment is due on a day that is not a Business Day,
the payment is due the next Business Day and additional fees or interest, as
applicable, shall continue to accrue.

            (c) ADDITIONAL PAYMENTS. Whenever Borrower is obliged to make a
deduction in respect of Tax from any payment under any Obligation:

            (i)   it shall promptly pay the amount deducted to the appropriate
      Government Agency;

            (ii)  within 30 days of the end of the month in which the deduction
      is made, it shall deliver to Bank official receipts or other evidence of
      payment acceptable to Bank; and

            (iii) unless the Tax is an Excluded Tax, it shall pay Bank on the
      due date of the payment any additional amounts necessary (as determined by
      Bank) to ensure that Bank receives when due a net amount (after payment of
      any Taxes in respect of those additional amounts) in the relevant currency
      equal to the full amount which it would have received had a deduction not
      been made. It shall indemnify Bank against the Tax and any amounts
      recoverable from Bank in respect of the Tax. Borrower waives any statutory
      right to recover from Bank any amount paid under this clause.

      The obligations of Borrower under this clause survive the payment of all
      moneys owing under this Agreement or discharge of any Letter of Credit and
      the termination of this Agreement or any Letter of Credit.

      2.4   FEES. Borrower shall pay to Bank:

            (a) FACILITY FEE. A fully earned, non-refundable facility fee of
$18,750.00 due on the Closing Date; and

            (b) BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.

      3     CONDITIONS OF LOANS

      3.1   CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:

            (a) this Agreement;

            (b) a certificate of the Secretary of Borrower with respect to
      articles, bylaws, incumbency and resolutions authorizing the execution and
      delivery of this Agreement;

            (c) Negative Pledge Agreement covering Intellectual Property;

            (d) landlord's waiver;

                                       3




            (e) a legal opinion of Borrower's counsel, in form and substance
      acceptable to Bank;

            (f) Exim Agreement;

            (g) Exim Borrower Agreement;

            (h) Exim Promissory Note;

            (i) an Initial Audit of Borrower's Accounts as described in
      Section 6.2;

            (j) financing statements (Forms UCC-1);

            (k) Account Control Agreement/ Investment Account Control Agreement

            (l) insurance certificate;

            (m) payment of the fees and Bank Expenses then due specified in
      Section 2.4 hereof;

            (n) Certificate of Foreign Qualification (if applicable);

            (o) Certificate of Good Standing/Legal Existence; and

            (p) such other documents, and completion of such other matters, as
      Bank may reasonably deem necessary or appropriate.

      3.2   CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:

            (a) timely receipt of any Payment/Advance Form; and

            (b) the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true.

      4     CREATION OF SECURITY INTEREST

      4.1   GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a continuing
security interest in the Collateral, wherever located, whether now owned or
hereafter acquired or arising, and all proceeds and products thereof. Borrower
warrants and represents that the security interest granted herein shall be a
first priority security interest in the Collateral, except as otherwise provided
herein. The Collateral may also be subject to Permitted Liens. If the Agreement
is terminated, Bank's lien and security interest in the Collateral shall
continue until Borrower fully satisfies its Obligations. Notwithstanding the
foregoing, it is expressly acknowledged and agreed that the security interest
created in this Agreement only with respect to Exim Eligible Foreign Accounts
(as such term is defined in the Exim Agreement) is subject to and subordinate to
the security interest granted to the Bank in the Exim Agreement with respect to
such Exim Eligible Foreign Accounts, but only to the extent any Advances are
actually made to the Borrower based upon such Exim Eligible Foreign Accounts.
Borrower agrees that Bank may file (with the UCC Financing Statements to be
filed hereunder) a notice that any disposition of the Collateral in violation of
this Agreement, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code. If the Borrower shall at any time
have knowledge that it has acquired a material commercial tort claim, Borrower
shall use best efforts to promptly notify Bank in a writing signed by Borrower
of the brief details thereof and

                                       4



grant to Bank in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to Bank. Notwithstanding the foregoing, the security
interest granted herein does not extend to and the term "Collateral" does not
include any portion of any license or contract solely to the extent (i) the
granting of a security interest in such license or contract would be contrary to
applicable law, or (ii) that such licenses or contracts are nonassignable by
their terms (but only to the extent the prohibition is enforceable under
applicable law, including, without limitation, the Code) without the consent of
the licensor or other party (but only to the extent such consent has not been
obtained). Bank agrees to subordinate its security interest in certain specific
Equipment financed by Borrower (or release its security interest in such
financed Equipment if reasonably required by Borrower or such financing party),
up to an aggregate fair market value (as reasonably determined by Bank and
Borrower) of such Equipment not to exceed $1,000,000 for all such financing
transactions.

      5     REPRESENTATIONS AND WARRANTIES

      Borrower represents and warrants as follows:

      5.1   DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary is
duly existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. The Borrower has previously delivered to the
Bank a certificate signed by the Borrower and entitled "Perfection Certificate".
The Borrower represents and warrants to the Bank that: (a) the Borrower's exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; and (b) the Borrower is an organization of the type, and is
organized in the jurisdiction, set forth in the Perfection Certificate; and (c)
the Perfection Certificate accurately sets forth the Borrower's organizational
identification number or accurately states that the Borrower has none; and (d)
the Perfection Certificate accurately sets forth the Borrower's place of
business, or, if more than one, its chief executive office as well as the
Borrower's mailing address if different, and (e) all other information set forth
on the Perfection Certificate pertaining to the Borrower is accurate and
complete. If the Borrower does not now have an organizational identification
number, but later obtains it, Borrower shall forthwith notify the Bank or such
organizational identification number.

      The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.

      5.2   COLLATERAL. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. Borrower has no other deposit account, other than the
deposit accounts with Bank and deposit accounts described in the Perfection
Certificate delivered to the Bank in connection herewith. The Accounts are bona
fide, existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. The Collateral is not in the
possession of any third party bailee (such as a warehouse). In the event that
Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank. Borrower has no
actual knowledge of any actual or imminent Insolvency Proceeding of any account
debtor whose accounts are an Eligible Account in any Borrowing Base Certificate
that has not been superceded. All Inventory is in all material respects of good
and marketable quality, free from material defects.

      5.3   LITIGATION. Except as shown in the Schedule, there are no actions or
proceedings pending or, to the knowledge of Borrower's Responsible Officers,
threatened by or against Borrower or any Subsidiary in which an adverse decision
could reasonably be expected to cause a Material Adverse Change.

      5.4   NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial


                                       5




condition and Borrower's consolidated results of operations as of the date of
such financial statements. There has not been any material deterioration in
Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank.

      5.5   SOLVENCY. Borrower is able to pay its debts (including trade debts)
as they mature.

      5.6   REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.

      5.7   SUBSIDIARIES. Borrower does not own any stock, partnership interest
or other equity securities except for Permitted Investments.

      5.8   FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
contains any untrue statement of a material fact when made or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading when made.

      6     AFFIRMATIVE COVENANTS

      Until Borrower satisfies all obligations under this Agreement and Bank has
no obligation to lend hereunder, Borrower shall do all of the following:

      6.1   GOVERNMENT COMPLIANCE. Borrower shall maintain its and all
Subsidiaries' legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to cause a material adverse effect on
Borrower's business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change.

      6.2   FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

            (a) Borrower shall deliver to Bank: (i) as soon as available, but no
later than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than forty-five (45)
days after the last day of each quarter, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
the previous quarter certified by a Responsible Officer and in a form acceptable
to Bank; (iii) as soon as available, but no later than one hundred twenty (120)
days after the last day of Borrower's fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iv) within five (5) days
of filing, copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission; (iv) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that is reasonably


                                       6



likely to result in damages or costs awarded against Borrower or any Subsidiary
of One Hundred Thousand Dollars ($100,000.00) or more; and (v) budgets, sales
projections, operating plans or other financial information reasonably requested
by Bank.

            (b) Within thirty (30) days after the last day of each month (during
any month in which Borrower has outstanding Advances or is seeking an Advance),
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of EXHIBIT C, with aged listings of accounts
receivable (by invoice date).

            (c) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D.

            (d) Within forty-five (45) days after the last day of each fiscal
quarter, Borrower shall deliver to Bank with the quarterly financial statements
a Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT
D.

            (e) Within one hundred twenty (120) days after the last day of
Borrower's fiscal year, Borrower shall deliver to Bank with the audit annual
financial statements a Compliance Certificate signed by a Responsible Officer in
the form of EXHIBIT D.

            (f) Borrower shall allow Bank to audit Borrower's Collateral at
Borrower's expense. Such audits shall be conducted no more often than once every
six (6) months unless an Event of Default has occurred and is continuing.
Borrower shall provide Bank with reasonable access to all its records and
financial information so that the next such audit (the "Initial Audit") of
Borrower's Collateral shall be completed by Bank prior to the initial Advance
under the Committed Revolving Line.

      6.3   TAXES. Borrower shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith,
with adequate reserves maintained in accordance with GAAP) and will deliver to
Bank, on demand, appropriate certificates attesting to such payments.

      6.4   INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, standard for Borrower's industry, and as Bank
may reasonably request in Bank's reasonable discretion. Insurance policies shall
be in a form, with companies, and in amounts that are reasonably satisfactory to
Bank. All property policies shall have a lender's loss payable endorsement
showing Bank as an additional loss payee and all liability policies shall show
the Bank as an additional insured and all policies shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Borrower shall have the option of applying the proceeds of any
casualty policy up to $250,000.00, in the aggregate, toward the replacement or
repair of destroyed or damaged property; provided that (i) any such replaced or
repaired property (a) shall be of equal or like value as the replaced or
repaired Collateral and (b) shall be deemed Collateral in which Bank has been
granted a first priority security interest and (ii) after the occurrence and
during the continuation of an Event of Default all proceeds payable under such
casualty policy shall, at the option of the Bank, be payable to Bank on account
of the Obligations.

      6.5   PRIMARY ACCOUNTS. Borrower shall maintain its primary depository and
operating accounts and securities accounts with Bank, and a majority of the
Borrower's cash or securities in excess of that amount used for Borrower's
operations shall be maintained or administered through the Bank. Borrower shall
identify to Bank, in writing, any bank or securities account opened by Borrower
with any institution other than Bank. In addition, for each such account that
the Borrower at any time opens or maintains, Borrower shall, at the Bank's
request and option, pursuant to an agreement in form and substance acceptable to
the Bank, cause the depositary bank or securities intermediary to agree that
such account is the collateral of the Bank pursuant to the terms hereunder. The
provisions of this paragraph shall not apply to deposit accounts exclusively
used for payroll, payroll taxes and other employee wage


                                       7



and benefit payments to or for the benefit of the Borrower's employees.

      6.6   FINANCIAL COVENANTS.

      Borrower shall maintain at all times, to be tested as of the last day of
each month, unless otherwise noted:

            (a) ADJUSTED QUICK RATIO. A ratio of Quick Assets to Current
      Liabilities minus Deferred Maintenance Revenue of at least 1.50 to 1.0.

            (b) TANGIBLE NET WORTH. A Tangible Net Worth of (i) at the end of
      each month, which month is not also the end of a fiscal quarter, at least
      $7,000,000.00 and (ii) at the end of each fiscal quarter, at least
      $10,000,000.00.

            (c) EBITDA. Borrower shall not suffer quarterly EBITDA losses for
      two (2) consecutive quarters.

      6.7   FURTHER ASSURANCES. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's security interest in the Collateral or to effect the purposes of this
Agreement.

      7     NEGATIVE COVENANTS

      Until Borrower satisfies all obligations under this Agreement and Bank has
no obligation to lend hereunder, Borrower shall not do any of the following
without the Bank's prior written consent:

      7.1   DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) of worn-out or obsolete Equipment or (iv)
transfers of Equipment which are the subject of a sale/leaseback transaction
otherwise permitted hereunder (subject to the limitations and restrictions for
all such transactions set forth herein).

      7.2   CHANGES IN BUSINESS, MANAGEMENT OR BUSINESS LOCATIONS. Engage in or
permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or have a material change in its
management. Borrower shall not, without at least thirty (30) days prior written
notice to Bank: (i) relocate its chief executive office, or add any new offices
or business locations (unless such new offices or business locations contain
less than Twenty- Five Thousand Dollars ($25,000.00) in Borrower's assets or
property), or (ii) change its jurisdiction of organization, or (iii) change its
organizational structure or type, or (iv) change its legal name, or (v) change
any organizational number (if any) assigned by its jurisdiction of organization.

      7.3   MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person.

      7.4   INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

      7.5   ENCUMBRANCE. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.

      7.6   DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or
own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any


                                       8




dividends or make any distribution or payment or redeem, retire or purchase any
capital stock.

      7.7   TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter or permit
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person. Notwithstanding the foregoing,
Borrower may make loans and other advances to its Subsidiaries up to an
aggregate outstanding amount of $500,000 at any time.

      7.8   SUBORDINATED DEBT. Make or permit any payment on any Subordinated
Debt, except under the terms of the Subordinated Debt, or amend any provision in
any document relating to the Subordinated Debt, without Bank's prior written
consent.

      7.9   COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.

      8     EVENTS OF DEFAULT

      Any one of the following is an Event of Default:

      8.1   PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension shall be
made during the cure period);

      8.2   COVENANT DEFAULT. Borrower does not perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between Borrower and Bank and as to any default
under a term, condition or covenant that can be cured, has not cured the default
within ten (10) days after it occurs, or if the default cannot be cured within
ten (10) days or cannot be cured after Borrower's attempts in the ten (10) day
period, and the default may be cured within a reasonable time, then Borrower
shall have additional time, (of not more than thirty (30) days) to attempt to
cure the default. Grace periods provided under this section shall not apply,
among other things, to financial covenants or any other covenants that are
required to be satisfied, completed or tested by a date certain. During the
additional period the failure to cure the default is not an Event of Default
(but no Credit Extensions shall be made during the cure period);

      8.3   MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;

      8.4   ATTACHMENT. (i) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) the
service of process upon the Borrower seeking to attach, by trustee or similar
process any funds of the Borrower in excess of $100,000 in the aggregate on
deposit with the Bank; (iii) Borrower is enjoined, restrained, or prevented by
court order from conducting a material part of its business; (iv) a judgment or
other claim becomes a Lien on a material portion of Borrower's assets; or (v) a
notice of lien, levy, or assessment is filed against any of Borrower's assets by
any government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower (but no Credit Extensions shall be made during the cure
period);

      8.5   INSOLVENCY, ADMINISTRATION, WINDING UP. (i) Borrower becomes
insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency
Proceeding is begun against Borrower and not dismissed or stayed within
forty-five (45) days (but no Credit Extensions shall be made before any
Insolvency Proceeding is dismissed);


                                       9




      8.6   OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that is reasonably likely to result in a Material Adverse Change;

      8.7   JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment);

      8.8   MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement now or later in
any warranty or representation in this Agreement or in any writing delivered to
Bank or to induce Bank to enter this Agreement or any Loan Document.

      8.9   EXIM AGREEMENT. An Event of Default under the Exim Agreement or any
other agreement or instrument executed in connection therewith.

      9     BANK'S RIGHTS AND REMEDIES

      9.1   RIGHTS AND REMEDIES. When an Event of Default occurs and continues
Bank may, without prior notice or demand, do any or all of the following:

            (a) Declare all Obligations (including, without limitation, all
      obligations under the EXIM Agreement) immediately due and payable (but if
      an Event of Default described in Section 8.5 occurs all Obligations are
      immediately due and payable without any action by Bank);

            (b) Stop advancing money or extending credit for Borrower's benefit
      under this Agreement or under any other agreement between Borrower and
      Bank;

            (c) Settle or adjust disputes and claims directly with account
      debtors for amounts, on terms and in any order that Bank considers
      advisable;

            (d) Make any payments and do any acts it considers reasonably
      necessary to protect its security interest in the Collateral. Borrower
      shall assemble the Collateral if Bank requests and make it available as
      Bank designates. Subject to the rights of third parties, prohibitions or
      limitations in agreements with third parties, and applicable law, Bank may
      enter premises where the Collateral is located, take and maintain
      possession of any part of the Collateral, and pay, purchase, contest, or
      compromise any Lien which appears to be prior or superior to its security
      interest and pay all expenses incurred. Subject to the rights of third
      parties, prohibitions or limitations in agreements with third parties, and
      applicable law, Borrower grants Bank a license to enter and occupy any of
      its premises, without charge, to exercise any of Bank's rights or
      remedies;

            (e) Apply to the Obligations any (i) balances and deposits of
      Borrower it holds, or (ii) any amount held by Bank owing to or for the
      credit or the account of Borrower;

            (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
      for sale, advertise for sale, and sell the Collateral in accordance with
      the Code or other applicable law. Subject to the rights of third parties,
      prohibitions or limitations in agreements with third parties, and
      applicable law, Bank is granted a non-exclusive, royalty-free license or
      other right to use, without charge, Borrower's labels, patents,
      copyrights, mask works, rights of use of any name, trade secrets, trade
      names, trademarks, service marks, and advertising matter, or any similar
      property as it pertains to the Collateral, in completing production of,
      advertising for sale, and selling any Collateral and, in connection with
      Bank's exercise of its rights under this Section, Borrower's rights under
      all licenses and all franchise agreements inure to Bank's benefit, subject
      to the rights of third parties, prohibitions or limitations in agreements
      with third parties, and applicable law; and


                                       10




            (g) Otherwise dispose of the Collateral according to the Code.

      9.2   POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank its power of attorney to sign Borrower's
name on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred until
all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.

      9.3   ACCOUNTS COLLECTION. In the event that an Event of Default occurs
and is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
Account. After Borrower is notified that Bank has demanded that all such funds
be paid directly to Bank following an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.

      9.4   BANK EXPENSES. All Bank Expenses are immediately due and payable,
and shall bear interest at the then applicable rate and be secured by the
Collateral. No payments by Bank shall be deemed an agreement to make similar
payments in the future or Bank's waiver of any Event of Default.

      9.5   BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Except for the foregoing, Borrower bears all risk of loss, damage
or destruction of the Collateral.

      9.6   REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.

      9.7   DEMAND WAIVER. Except as otherwise expressly set forth herein or as
required by applicable law, Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.

      10    NOTICES

      All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.

            If to Borrower:   APPLIX, INC.
                              289-291 Turnpike Road


                                       11



                              Westboro, Massachusetts   01581
                              Attn: Chief Financial Officer
                              FAX: (508) 366-9313

            with a copy to:   Hale and Dorr LLP
                              60 State Street
                              Boston, Massachusetts 02109
                              Attn: Patrick J. Rondeau, Esquire
                              FAX: (617) 526-5000

            If to Bank:       Silicon Valley Bank
                              One Newton Executive Park, Suite 200
                              2221 Washington Street
                              Newton, Massachusetts  02462
                              Attn: Mr. Jonathan Gray, Senior Vice President
                              Fax:  (617) 969-4395

            with a copy to:   Riemer & Braunstein LLP
                              Three Center Plaza
                              Boston, Massachusetts 02108
                              Attn: David A. Ephraim, Esquire
                              FAX: (617) 880-3456

      11    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

      Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

      12    GENERAL PROVISIONS

      12.1  SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
the right, without the consent of or prior notice to Borrower, to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank's obligations, rights and benefits under this Agreement, the
Loan Documents or any related agreement.

      12.2  INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower contemplated by the Loan
Documents (including reasonable attorneys' fees and expenses), except in each
case for losses caused by Bank's

                                       12



gross negligence or willful misconduct.

      12.3  RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY
GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

      12.4  TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.

      12.5  SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

      12.6  AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.

      12.7  COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.

      12.8  SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

      12.9  CONFIDENTIALITY. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers reasonably necessary in exercising remedies under this Agreement.
Confidential information does not include information that either: (a) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.

      13    DEFINITIONS

      13.1  DEFINITIONS.

      "ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.

                                       13




      "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.

      "AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.

      "BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings) with respect to Borrower.

      "BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

      "BORROWING BASE" is 75.0% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate.

      "BORROWING BASE CERTIFICATE" is set forth on Exhibit C hereto.

      "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.

      "CLOSING DATE" is the date of this Agreement.

      "CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.

      "COLLATERAL" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on EXHIBIT A.

      "COMMITTED REVOLVING LINE" is Two Million Five Hundred Thousand Dollars
($2,500,000.00).

      "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

      "CREDIT EXTENSION" is each Advance, Letter of Credit, FX Forward Contract,
or any other extension of credit by Bank for Borrower's benefit.

      "CURRENT ASSETS" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.

      "CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, which shall include, without
limitation, all obligations and liabilities of Borrower to Bank.

                                       14




      "DEFERRED MAINTENANCE REVENUE" is all amounts received in advance of
performance under maintenance contracts and not yet recognized as revenue.

      "EBITDA" means earnings before interest, taxes, depreciation and
amortization in accordance with GAAP.

      "ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5.2;
but Bank may change eligibility standards by giving Borrower thirty (30) days
prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts
shall not include:

            (a) Accounts that the account debtor has not paid within ninety (90)
      days of invoice date;

            (b) Accounts for an account debtor, fifty percent (50%) or more of
      whose Accounts have not been paid within ninety (90) days of invoice date;

            (c) Credit balances over ninety (90) days from invoice date;

            (d) Accounts for an account debtor, including Affiliates, whose
      total obligations to Borrower exceed twenty-five (25%) of all Accounts,
      for the amounts that exceed that percentage, unless Bank approves in
      writing;

            (e) Accounts for which the account debtor does not have its
      principal place of business in the United States;

            (f) Accounts for which the account debtor is a federal, state or
      local government entity or any department, agency, or instrumentality
      thereof;

            (g) Accounts for which Borrower owes the account debtor, but only up
      to the amount owed (sometimes called "contra" accounts, accounts payable,
      customer deposits or credit accounts);

            (h) Accounts for demonstration or promotional equipment, or in which
      goods are consigned, sales guaranteed, sale or return, sale on approval,
      bill and hold, or other terms if account debtor's payment may be
      conditional;

            (i) Accounts for which the account debtor is Borrower's Affiliate,
      officer, employee, or agent;

            (j) Accounts in which the account debtor disputes liability or makes
      any claim and Bank believes there may be a basis for dispute (but only up
      to the disputed or claimed amount), or if the Account Debtor is subject to
      an Insolvency Proceeding, or becomes insolvent, or goes out of business;

            (k) Accounts for which Bank reasonably determines after inquiry and
      consultation with Borrower collection to be doubtful.

      "EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

      "ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.

      "EXCLUDED TAX" means a Tax imposed by a jurisdiction on the net income of
Bank because Bank has a connection with that jurisdiction but not a Tax: (i)
calculated by reference to the gross amount of a payment under the Obligations
(without the allowance of a deduction); or (ii) imposed because Bank is taken to
be connected with that jurisdiction solely because it is party to a document
constituting the Obligations or a transaction contemplated by the Obligations.


                                       15




      "EXIM AGREEMENT" is that certain Export-Import Bank Loan and Security
Agreement of even date herewith by and between the Borrower and the Bank and all
documents, instruments and agreements executed in conjunction therewith, each as
may be amended from time to time.

      "FX FORWARD CONTRACT" is defined in Section 2.1.3.

      "FX RESERVE" is defined in Section 2.1.3.

      "GAAP" is generally accepted accounting principles.

      "GOVERNMENT AGENCY" means any government or any governmental,
semi-governmental or judicial entity or authority. It also includes any
self-regulatory organisation established under statute or any stock exchange.

      "INDEBTEDNESS" is present and future (a) indebtedness for borrowed money
or the deferred price of property or services, such as reimbursement and other
obligations for surety bonds and letters of credit, (b) obligations evidenced by
notes, bonds, debentures or similar instruments, (c) capital lease obligations
and (d) Contingent Obligations.

      "INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law of
any State, country or jurisdiction, including assignments for the benefit of
creditors, compositions, administrations, winding up, receivership, liquidation
dissolution, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

      "INTELLECTUAL PROPERTY" is any and all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished; any
and all trade secrets, and any and all intellectual property rights in computer
software and computer software products; any and all design rights which may be
available to Borrower; all mask work or similar rights available for the
protection of semiconductor chips; all patents, patent applications and like
protections; any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections; all
licenses or other rights to use any of the foregoing; or any claims for damages
by way of any past, present and future infringement of any of the foregoing.

      "INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

      "INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

      "LETTER OF CREDIT" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.

      "LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2.

      "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

      "LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

      "MATERIAL ADVERSE CHANGE " is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; (ii) a material adverse change in the business, operations, or


                                       16




condition (financial or otherwise) of the Borrower; (iii) a material impairment
of the prospect of repayment of any portion of the Obligations ;or (iv) Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.

      "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, including, without
limitation, all Obligations under the Exim Agreement, and including interest
accruing after Insolvency Proceedings begin.

      "PAYMENT DATE" is the first day of each calendar month.

      "PERMITTED INDEBTEDNESS" is:

            (a) Borrower's indebtedness to Bank under this Agreement or the Loan
      Documents;

            (b) Indebtedness existing on the Closing Date and shown on the
      Schedule;

            (c) Subordinated Debt;

            (d) Indebtedness to trade creditors incurred in the ordinary course
      of business;

            (e) Indebtedness incurred for the purchase, lease, or other
      financing (including a sale/leaseback transaction) of Equipment not to
      exceed $1,000,000.00 in the aggregate during the term hereof, which
      Indebtedness may be secured in accordance with subsection (c) of the
      definition of Permitted Liens;

            (f) Indebtedness secured by Permitted Liens other than subsection
      (c) thereof;

            (g) Other Indebtedness not otherwise permitted by Section (a)- (f)
      above not exceeding $100,000 in the aggregate outstanding at any time; and

            (h) Extensions, refinancings, modifications, amendments and
      restatements of any items of Permitted Indebtedness (a) through (f) above,
      provided that the principal amount thereof is not increased or the terms
      thereof are not modified to impose more burdensome terms upon Borrower or
      its Subsidiary, as the case may be.

      "PERMITTED INVESTMENTS" are:

            (a) Investments shown on the Investments Schedule and existing on
      the Closing Date;

            (b) Loans or advances to Borrower's employees as determined by
      Borrower's management up to an aggregate outstanding amount of $100,000 at
      any time or loans or advances to its Subsidiaries up to an aggregate
      outstanding amount of $500,000 at any time; and

            (c) (i) marketable direct obligations issued or unconditionally
      guaranteed by the United States or its agency or any state maturing within
      1 year from its acquisition, (ii) commercial paper maturing no more than 1
      year after its creation and having the highest rating from either Standard
      & Poor's Corporation or Moody's Investors Service, Inc., (iii) Bank's
      certificates of deposit issued maturing no more than 1 year after issue;
      and (iv) any other investments administered through the Bank.

      "PERMITTED LIENS" are:

            (a) Liens existing on the Closing Date and shown on the Schedule or
      arising under this


                                       17




      Agreement or other Loan Documents;

            (b) Liens for taxes, fees, assessments or other government charges
      or levies, either not delinquent or being contested in good faith and for
      which Borrower maintains adequate reserves on its Books, if they have no
      priority over any of Bank's security interests;

            (c) Purchase money Liens (i) on Equipment acquired or held by
      Borrower incurred for financing the acquisition of the Equipment, or (ii)
      existing on equipment when acquired, if the Lien is confined to the
      property and improvements and the proceeds of the equipment;

            (d) Carriers', warehousemen's, mechanics', materialmen's repairmen's
      or other like liens arising in the ordinary course of business which are
      not overdue for a period of more than ninety (90) days or which are being
      contested in good faith by appropriate proceedings;

            (e) Leases or subleases and non-exclusive licenses or sublicenses
      granted by Borrower in the ordinary course of Borrower's business, if the
      leases, subleases, licenses and sublicenses permit granting Bank a
      security interest;

            (f) Liens incurred in the extension, renewal or refinancing of the
      indebtedness secured by Liens described in (a) through (e), but any
      extension, renewal or replacement Lien must be limited to the property
      encumbered by the existing Lien and the principal amount of the
      indebtedness may not increase.

      "PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

      "PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.

      "QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.

      "RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.

      "REVOLVING MATURITY DATE" is one day prior to the one year anniversary of
the Closing Date.

      "SCHEDULE" is any attached schedule of exceptions.

      "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.

      "SUBSIDIARY" is any Person, joint venture, or any other business entity of
which more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by Borrower.

      "TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (i) any amounts attributable to (a)
goodwill, (b) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, minus (ii) Total Liabilities, plus (iii) Subordinated
Debt.

      "TAX" includes any tax, levy, impost, deduction, charge, rate, duty,
compulsory loan or withholding which is levied or imposed by a Government
Agency, and any related interest, penalty, charge, fee or other amount.


                                       18




      "TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted to be paid
by Bank, but excluding all Subordinated Debt.


                                       19





      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.


BORROWER:

APPLIX, INC.


By        /s/ Alan Goldsworthy
          ----------------------------------------
Name:     CEO
          ----------------------------------------
Title:    12/5/01
          ----------------------------------------



BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST


By        /s/ R. Bryan Jadot
          ---------------------------------------
Name:     R. Bryan Jadot
          ---------------------------------------
Title:    Vice President
          ---------------------------------------


SILICON VALLEY BANK


By        /s/  Maggie Garcia
          ---------------------------------------
Name:     Maggie Garcia
          ---------------------------------------
Title:    Loan Admin.  Team Leader
          ---------------------------------------
         (Signed in Santa Clara County, California)



                                       20




                                    SCHEDULE

                          LOAN AND SECURITY AGREEMENT
                                 BY AND BETWEEN
                            APPLIX, INC. ("Applix")
                                      AND
                              SILICON VALLEY BANK

                                December 5, 2001

SECTION 5.3
LITIGATION

      1.    OneSource Information Services, Inc., ("OneSource") has alleged that
            Applix is liable to OneSource for the payment of license fees in the
            approximate amount of $42,000. Applix has disputed such liability.
            OneSource and Applix are in the process of settling this dispute.

      2.    Mehta Corporation ("Mehta") has alleged that Applix has infringed on
            a trademark or trade name of Mehta. Applix has disputed such
            liability.

      3.    Computer Associates ("CA") has filed a complaint against Applix with
            respect to a contract between CA and Applix. Applix has denied the
            allegations set forth in the complaint. Applix and CA are in the
            process of settling the dispute.

      4.    Parallax Capital Partners LLC ("Parallax") has alleged that Applix
            is liable to Parallax for amounts related to the sale of assets by
            Applix to Parallax. Applix has disputed such liability. Applix and
            Parallax have reached a settlement of this dispute.

      5.    The Massachusetts Department of Revenue ("DOR") has alleged that
            certain tax credits claimed by Applix, in the approximate amount of
            $90,000, should be disallowed. Applix has disputed such
            disallowance. Applix and DOR are in the process of settling this
            dispute.

      6.    United Information Technologies, Inc. ("UIT") has alleged that
            Applix is liable for amounts due under an agreement between UIT and
            Applix. Applix has disputed such liability.

SECTION 13.1
PERMITTED INDEBTEDNESS

      1.    Letter of Credit, dated July 31, 2001, issued by Citizens Bank to
            secure a commercial lease under which Applix is lessee; Payments by
            Citizens Bank to the lessor under the Letter of Credit are secured
            by $1,050,000 account with Citizens Bank (see Permitted Liens and
            Permitted Investments).




      2.    Payment obligations outstanding with respect to acquisition of
            Dynamic Decisions Pty Ltd (27 monthly payments aggregating
            $10,610,000, contingent upon continued employment of certain
            individuals by Dynamic Decisions Pry Ltd).


      3.    Intercompany payables to the following subsidiaries of Applix in the
            corresponding amounts (as of 10/31/01): Applix Netherlands,
            $120,000; Applix UK, $599,238; Applix Germany, $554,479; Applix
            Switzerland, $343,611; Applix Australia, $253,773.

SECTION 13.1
PERMITTED INVESTMENTS

      1.    342,466 shares of Series B Preferred Stock of Turbo Linux.

      2.    190,000 shares of common stock of Real-Time International, Inc.

      3.    Notes Receivable in the approximate aggregate amount of $1,120,000
            pursuant to the executive stock purchase loan program of Applix. As
            previously agreed by Silicon Valley Bank, Applix plans to make
            future advances, up to an additional $500,000, under this executive
            stock purchase loan program and to take additional notes receivable
            in return for such advances.

      4.    Money market account (marketable securities) with Citizens Bank in
            the approximate amount of $1,050,000 to secure Letter of Credit (see
            Permitted Liens and Permitted Indebtedness).

      5.    Intercompany receivables based on advances made to the following
            subsidiaries of Applix in the corresponding amounts (as of
            10/31/01): Applix Netherlands, $120,000; Applix UK, $581,912; Applix
            Germany, $554,480; Applix Switzerland, $355,730; Applix Australia,
            $233,103.

SECTION 13.1
PERMITTED LIENS

      1.    Letter of Credit, dated July 31, 2001, issued by Citizens Bank to
            secure a commercial lease under which Applix is lessee; Payments by
            Citizens Bank to the lessor under the Letter of Credit are secured
            by $1,050,000 in cash on deposit with Citizens Bank (see Permitted
            Indebtedness and Permitted Investments).




                                    EXHIBIT A

      The Collateral consists of all right, title and interest of Borrower in
and to the following:

      All goods, equipment, inventory, contract rights or rights to payment of
money, franchise agreements, general intangibles (including payment
intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

      All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

      Notwithstanding the foregoing, the Collateral does not include in any
event:

Any and all copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished; any and all trade secrets, and any and all
intellectual property rights in computer software and computer software
products; any and all design rights which may be available to Borrower; all mask
work or similar rights available for the protection of semiconductor chips; all
patents, patent applications and like protections; any trademark and servicemark
rights, whether registered or not, applications to register and registrations of
the same and like protections; all licenses or other rights to use any of the
foregoing; or any claims for damages by way of any past, present and future
infringement of any of the foregoing. Notwithstanding the foregoing, the
Collateral shall include all accounts, license and royalty fees and other
revenues, proceeds, or income arising out of or relating to any of the foregoing
intellectual property. To the extent a court of competent jurisdiction holds
that a security interest in any Intellectual Property is necessary to have a
security interest in any accounts, license and royalty fees and other revenues,
proceeds, or income arising out of or relating to any of the foregoing
Intellectual Property, then the Collateral shall, effective as of the Closing
Date, include the Intellectual Property, to the extent necessary to permit
perfection of the Bank's security interest in such accounts, license and royalty
fees and other revenues, proceeds, or income arising out of or relating to any
of the Intellectual Property and to the extent such inclusion is not violative
of, prohibited by or would trigger an adverse consequence under any material
agreement relating to such Intellectual Property or applicable law.


                                       21

EX-10.17

                                                                  EXHIBIT 10.17

                   NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT

      This NON-RECOURSE RECEIVABLES PURCHASE AGREEMENT (the "Agreement"), dated
as of December 31, 2001, is between SILICON VALLEY BANK ("Buyer") having a place
of business at 3003 Tasman Drive, Santa Clara, California 95054 and APPLIX, INC.
("Seller"), a Massachusetts corporation with its chief executive office at
289-291 Turnpike Road, Westboro, Massachusetts 01581.

1.    DEFINITIONS. When used herein, the following terms have the following
      meanings.

      1.1   "ACCOUNT DEBTOR" has the meaning set forth in the Massachusetts
Uniform Commercial Code and shall include any person liable on any Purchased
Receivable, including without limitation, any guarantor of the Purchased
Receivable and any issuer of a letter of credit or banker's acceptance.

      1.2   "ADJUSTMENTS" means all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Purchased Receivable.

      1.3   "ADMINISTRATIVE FEE" means for any Purchase the percentage of the
Total Purchased Receivables Amount set forth in the Schedule for such Purchase.

      1.4   "BUSINESS DAY" means any day other than a Saturday, Sunday, or other
day on which banks in California or Massachusetts are required or authorized by
law to close.

      1.5   "DISCOUNT RATE" means for any Purchase the "Discount Rate" set forth
in the Schedule for such Purchase.

      1.6   "DUE DATE" means for any Purchase the "Due Date" set forth in the
Schedule for such Purchase.

      1.7   "EVENT OF DEFAULT" has the meaning set forth in SECTION 10 hereof.

      1.8   "INSOLVENCY EVENT" means, with respect to any Account Debtor, (a)
the commencement of a case, action or proceeding with respect to such Account
Debtor before any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, (b) such Account Debtor is generally not paying its debts
when due, or (c) the making or commencement of any general assignment for the
benefit of creditors, composition, marshaling of assets for creditors, or other
similar arrangement in respect of the creditors generally or any substantial
portion of the creditors of such Account Debtor.

      1.9   "INVOICE AMOUNT" means for any Purchase, the "Invoice Amount" set
forth in the Schedule for such Purchase.

      1.10  "LATE PAYMENT SETTLEMENT FEE" has the meaning set forth in
Section 2.2.

      1.11  "LATE PAYMENT SETTLEMENT PERIOD" has the meaning set forth in
Section 2.2.

      1.12  "OPEN AMOUNT" means the portion of any Purchased Receivable which
has been pre-paid to the Seller.

      1.13  "PAYMENT IN FULL" means for any Purchase that Buyer has received
payments on account of the Purchased Receivables under such Purchase equal to
the Total Purchased Receivables Amount for such Purchase.

      1.14  "PRIME RATE" means per annum rate of interest from time to time
announced and made effective by Buyer as its Prime Rate (which rate may or may
not be the lowest rate available from Buyer at any given time).

      1.15  "PURCHASE" means the purchase by Buyer from Seller of one or more
Purchased Receivables on a



Purchase Date as listed in the Schedule applicable to such Purchase.

      1.16  "PURCHASE DATE" means for any Purchase the date set forth as the
"Purchase Date" in the Schedule for such Purchase.

      1.17  "PURCHASE PRICE" means for any Purchase the "Purchase Price" set
forth on the Schedule for such Purchase.

      1.18  "PURCHASED RECEIVABLES" means for any Purchase all those Receivables
arising out of the invoices and other agreements identified on the Schedule for
such Purchase.

      1.19  "PURCHASED RECEIVABLE AMOUNT" means for any Purchased Receivable,
the"Invoice Amount" set forth with respect to such Purchased Receivable on the
applicable Schedule minus the Open Amount.

      1.20  "RECEIVABLES" means accounts, receivables, chattel paper,
instruments, contract rights, documents, general intangibles, letters of credit,
drafts, bankers acceptances, and other rights to payment, and all proceeds
thereof.

      1.21  "RELATED PROPERTY" has the meaning as set forth in SECTION 9 hereof.

      1.22  "REPURCHASE AMOUNT" has the meaning set forth in SECTION 4.2 hereof.

      1.23  "SCHEDULE" means for each Purchase a schedule executed by the
parties in substantially the form of EXHIBIT A hereto identifying the Purchased
Receivables subject to such Purchase and setting forth financial and other
details relating to such Purchase, all as contemplated by EXHIBIT A.

      1.24  "SETTLEMENT DATE" has the meaning set forth in SECTION 3.2 hereof.

      1.25  "TOTAL PURCHASED RECEIVABLES AMOUNT" means for any Purchase the
total of the Purchased Receivable Amounts for all Purchased Receivables subject
to such Purchase as set forth on the applicable Schedule.

2.    PURCHASE AND SALE OF RECEIVABLES.

      2.1   SALE AND PURCHASE. Subject to the terms and conditions of this
Agreement, with respect to each Purchase, effective on each applicable Purchase
Date, Seller agrees to sell to Buyer and Buyer agrees to buy from Seller all
right, title, and interest (but none of the obligations with respect to) of the
Seller to the payment of all sums owing or to be owing from the Account Debtors
under each Purchased Receivable to the extent of the Purchased Receivable Amount
for such Purchased Receivable.

      Each purchase and sale hereunder shall be in the sole discretion of Buyer
and Seller. In any event, Buyer will not (i) purchase any Receivables in excess
of an aggregate outstanding amount exceeding Two Million and 00/100 Dollars
($2,000,000.00), or (ii) purchase any Receivables under this Agreement after
September 28, 2002. The purchase of each Purchased Receivable may be evidenced
by an assignment in a form reasonably acceptable to Buyer.

      2.2   PURCHASE PRICE AND RELATED MATTERS. With respect to each Purchase:

            (A) PAYMENT OF PURCHASE PRICE. On the Purchase Date, the Purchase
      Price, less the Administrative Fee and legal fees (that are due and
      payable by Seller, if any), shall be paid by Buyer to Seller.

            (B) LATE PAYMENT SETTLEMENT FEE. If, for any reason, Payment in Full
      does not occur on or before the Due Date, then, upon the first to occur of
      Payment in Full, 90 days after the Due Date or the filing of a bankruptcy
      proceeding by or against the applicable Account Debtor that failed to pay
      in full by the Due Date, and in addition to any other obligations of
      Seller hereunder, Seller shall pay to Buyer an




      amount which is equal to (i) the product of the Discount Rate and the
      average daily balance of the Total Purchased Receivables Amount
      outstanding during the period from the Due Date until the first to occur
      of Payment in Full, 90 days after the Due Date or the filing of a
      bankruptcy proceeding by or against the applicable Account Debtor that
      failed to pay in full by the Due Date (the "Late Payment Settlement
      Period") multiplied by (ii) a fraction the numerator of which is the
      number of days in the Late Payment Settlement Period and the denominator
      of which is 360 ("Late Payment Settlement Fee").

      2.3   FACILITY FEE. A fully earned, non-refundable facility fee of Five
Thousand Dollars ($5,000.00) is due to the Buyer from the Seller upon execution
of this Agreement.

      2.4   NATURE OF TRANSACTION. It is the intent of the parties hereto that
each purchase and sale of Receivables hereunder is and shall be a true sale of
such Receivables for all purposes and not a financing arrangement. Each such
sale shall be, subject to the terms hereof, absolute and irrevocable, providing
Buyer with the full risks and benefits of ownership of the Purchased Receivables
(such that the Purchased Receivables would not be property of the Seller's
estate in the event of the Seller's bankruptcy). The parties agree that
appropriate UCC financing statements have been or shall promptly be filed to
reflect that Seller is the seller and Buyer is the purchaser of Receivables
hereunder.

3.    COLLECTIONS, CHARGES AND REMITTANCES.

      3.1   APPLICATION OF PAYMENTS. All payments in respect of any Purchased
Receivable, whether received from an Account Debtor or any other source and
whether received by Seller or Buyer, shall be the property of Buyer and Seller
shall have no ownership interest therein.

      3.2   COLLECTION BY SELLER. In order to facilitate the collection of the
Purchased Receivables in the ordinary course of business, Seller agrees to act
as Buyer's agent for collection. Accordingly, Buyer hereby appoints the Seller
its attorney-in-fact to ask for, demand, take, collect, sue for and receive all
payments made in respect of the Purchased Receivables and to enforce all rights
and remedies thereunder and designates Seller as Buyer's assignee for
collection; PROVIDED that such appointment of Seller as such attorney-in-fact or
assignee for collection may be revoked by Buyer at any time. Seller, as such
attorney-in-fact, shall use due diligence and commercially reasonable lawful
efforts in accordance with its usual policies and practices to collect all
amounts owed by the Account Debtors on each Purchased Receivable when the same
become due. In the enforcement or the collection of Purchased Receivables,
Seller shall commence any legal proceedings only in its own name as an assignee
for collection or on behalf of Buyer or, with Buyer's prior written consent, in
Buyer's name. Seller shall have no obligation to commence any such legal
proceedings unless Buyer has agreed to pay the legal fees and other expenses to
be incurred in such proceedings on a basis which is acceptable to Seller. In no
event shall Seller take any action which would make Buyer a party to any
litigation or arbitration proceeding without Buyer's prior written consent.
Until Buyer has received Payment in Full as to any Purchase, Seller shall (i)
hold in trust for Buyer and turn over to Buyer forthwith upon receipt all
payments made to Seller by Account Debtors with respect to the Purchased
Receivables subject to such Purchase and (ii) turn over to Buyer forthwith on
receipt all instruments, chattel paper and other proceeds of the Purchased
Receivables; PROVIDED that unless an Event of Default has occurred and is
continuing, Seller may remit amounts received by Seller and due to Buyer on a
monthly basis no later than the last business day of each month (each a
"Settlement Date") after the Purchase Date, commencing on the last business day
of the month after the Purchase Date. On each Settlement Date, Seller shall
deliver to Buyer a report, in form and substance acceptable to Buyer, of the
account activity (including dates and amounts of payments) and changes in
account status for each Purchased Receivable.

      3.3   NO OBLIGATION TO TAKE ACTION. Buyer shall have no obligation to
perform any of Seller's obligations under any Purchased Receivables or to take
any action or commence any proceedings to realize upon any Purchased Receivables
(including without limitation any defaulted Purchased Receivables), or to
enforce any of its rights or remedies with respect thereto.




4.    NON-RECOURSE; REPURCHASE OBLIGATIONS.

      4.1   NON-RECOURSE. Except as otherwise set forth in this Agreement,
Buyer's acquisition of Purchased Receivables from Seller hereunder shall be
without recourse against Seller.

      4.2   SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer on
demand, the full face amount, or any unpaid portion, of any Purchased
Receivable: (A) with respect to which there has been any breach of warranty or
representation set forth in SECTION 6 hereof (except for breaches of warranty or
representations which are permitted to be, and have been, cured pursuant to
SECTION 7 hereof) or any breach of any covenant contained in this Agreement; or
(B) with respect to which the Account Debtor asserts any discount, allowance,
return, dispute, counterclaim, offset, defense, right of recoupment, right of
return, warranty claim, or short payment (except for (i) such matters as are
permitted to be, and have been, cured pursuant to SECTION 7 hereof or (ii) such
matters with respect to which Seller provides evidence satisfactory to Buyer
that such assertion was not made in good faith. (collectively, the "Repurchase
Amount"). Upon such payment, the respective Purchased Receivables shall be
deemed property of and owned solely by the Seller (and shall not be deemed to be
a Purchased Receivable hereunder).

      4.3   SELLER'S PAYMENT OF THE AMOUNTS DUE BUYER. All amounts due from
Seller to Buyer shall be paid by Seller to Buyer in immediately available funds
by fedwire to Buyer's address for notices.

5.    POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer and its
successors and assigns as Seller's true and lawful attorney-in-fact, and hereby
authorizes Buyer: (a) to sell, assign, transfer, pledge, compromise, or
discharge the whole or any part of the Purchased Receivables; (b) to demand,
collect, receive, sue, and give releases to any Account Debtor for the monies
due or which may become due upon or with respect to the Purchased Receivables
and to compromise, prosecute, or defend any action, claim, case or proceeding
relating to the Purchased Receivables, including the filing of a claim or the
voting of such claims in any bankruptcy case, all in Buyer's name or Seller's
name, as Buyer may choose; (c) to prepare, file and sign Seller's name on any
notice, claim, assignment, demand, draft, or notice of or satisfaction of lien
or mechanics' lien or similar document with respect to Purchased Receivables;
(d) to notify all Account Debtors with respect to the Purchased Receivables to
pay Buyer directly; (e) to receive, open, and dispose of all mail addressed to
Seller for the purpose of collecting the Purchased Receivables; (f) to endorse
Seller's name on any checks or other forms of payment on the Purchased
Receivables; (g) to execute on behalf of Seller any and all instruments,
documents, financing statements and the like to perfect Buyer's interests in the
Purchased Receivables; and (h) to do all acts and things necessary or expedient,
in furtherance of any such purposes.

6.    REPRESENTATIONS, WARRANTIES AND COVENANTS.

      6.1   RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To induce
Buyer to purchase the Purchased Receivables and to render its services to
Seller, and with full knowledge that the truth and accuracy of the following are
being relied upon by the Buyer in determining whether to accept receivables as
Purchased Receivables, Seller represents, warrants, covenants and agrees, with
respect to each Purchased Receivable, that, as of the date of the applicable
Purchase pertaining to such Purchased Receivable:

            (A) Seller is the absolute owner of each of the Purchased
      Receivables and has full legal right to sell, transfer and assign such
      receivables;

            (B) The correct amount of each Purchased Receivable is as set forth
      on the applicable Schedule and is not in dispute;

            (C) The payment of each Purchased Receivable is not contingent upon
      the fulfillment of any obligation or contract, and any and all obligations
      required of the Seller have been fulfilled as of the applicable Purchase
      Date;

            (D) Such Purchased Receivable is based on an actual sale and
      delivery of goods and/or services actually rendered, is due no later than
      the applicable Due Date and is owing to Seller, is not past




      due or in default, has not been previously sold, assigned, transferred, or
      pledged, and is free of any and all liens, security interests and
      encumbrances other than liens, security interests or encumbrances in favor
      of Buyer or any other division or affiliate of Silicon Valley Bank;

            (E) There are no defenses, offsets, or counterclaims against such
      Purchased Receivable, and no agreement has been made under which the
      Account Debtor may claim any deduction or discount, except as otherwise
      stated on the applicable Schedule;

            (F) Seller and, to Seller's knowledge, each Account Debtor set forth
      on the applicable Schedule with respect to such Purchased Receivable, is
      not insolvent as that term is defined in the United States Bankruptcy Code
      and the Massachusetts Uniform Commercial Code, and no such Account Debtor,
      to the knowledge of Seller, has filed or had filed against it a voluntary
      or involuntary petition for relief under the United States Bankruptcy
      Code; and

            (G) No Account Debtor set forth on the applicable Schedule with
      respect to such Purchased Receivable has objected to the payment for, or
      the quality or the quantity of the subject matter of, the Purchased
      Receivable, and, to the best of Seller's knowledge, each such Account
      Debtor is liable for the amount set forth on such Schedule.

      6.2   ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition to
the foregoing warranties, representations and covenants, to induce Buyer to buy
the Purchased Receivables, Seller hereby represents, warrants, covenants and
agrees that:

            (A) Seller will not assign, transfer, sell, or grant, or permit any
      lien or security interest in any interest the Seller may have in any
      Purchased Receivables to or in favor of any other party, without Buyer's
      prior written consent.

            (B) The Seller's name, form of organization, chief executive office,
      and the place where the records concerning all Purchased Receivables are
      kept is set forth at the beginning of this Agreement or, if located at any
      additional location, as set forth on a schedule attached to this
      Agreement, and Seller will give Buyer at least 10 days prior written
      notice if such name, organization, chief executive office or records
      concerning Purchased Receivables is changed or added and shall execute any
      documents necessary to perfect Buyer's interest in the Purchased
      Receivables.

            (C) Seller shall (i) pay all of its normal gross payroll for
      employees, and all federal and state taxes, as and when due, including
      without limitation all payroll and withholding taxes and state sales
      taxes; (ii) deliver at any time and from time to time at Buyer's request,
      evidence satisfactory to Buyer that all such amounts have been paid to the
      proper taxing authorities.

            (D) Seller has not filed a voluntary petition for relief under the
      United States Bankruptcy Code or had filed against it an involuntary
      petition for relief and is not contemplating or anticipating any such
      filing.

            (E) If Payment in Full of any Purchased Receivable has not occurred
      by the applicable Due Date, then Seller shall within 10 days of such date
      provide a written report to Buyer setting forth the reasons for such delay
      in payment.

            (F) So long as any Purchased Receivable is outstanding, Seller shall
      deliver to Buyer: (i) as soon as available, but no later than thirty (30)
      days after the last day of each month, a company prepared consolidated
      balance sheet and income statement covering Seller's consolidated
      operations during the period in a form acceptable to Buyer, along with an
      aged listing of all accounts receivable and accounts payable (by invoice
      date); (ii) as soon as available, but no later than forty-five (45) days
      after the last day of each quarter, a company prepared consolidated
      balance sheet and income statement covering Seller's consolidated
      operations during the previous quarter in a form acceptable to Seller;
      (iii) as soon as available, but no later than one hundred twenty (120)
      days after the last day of Seller's fiscal year, audited




      consolidated financial statements prepared under GAAP, consistently
      applied, together with an unqualified opinion on the financial statements
      from an independent certified public accounting firm reasonably acceptable
      to Seller; (iv) within five (5) days of filing, copies of all statements,
      reports and notices made available to Seller's security holders or to any
      holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
      filed with the Securities and Exchange Commission.

7.    ADJUSTMENTS. In the event any Adjustment or dispute is asserted by any
Account Debtor, Seller shall promptly advise Buyer and Seller shall, subject to
the Buyer's approval, resolve such disputes and advise Buyer of any Adjustments
and promptly remit to Buyer the difference between the Invoice Amount on the
Purchase Date and the Invoice Amount after such Adjustment. Unless Buyer has
otherwise elected to exercise its rights under Section 4.2 hereof, Buyer shall
remain the absolute owner of any Purchased Receivable which is subject to
Adjustment, and, until the amount of such adjustment (as set forth above) is
paid by Seller to Buyer, any rejected, returned, or recovered personal property,
with the right to take possession thereof at any time, and if such possession is
not taken by Buyer, Seller is to resell it for Buyer's account at Seller's
expense with the proceeds made payable to Buyer. While Seller retains possession
of said returned goods and such goods are the property of Buyer, Seller shall
segregate said goods and mark them "property of Silicon Valley Bank."

8.    INDEMNIFICATION.

      (A)   Seller hereby agrees that in the event any Account Debtor is
released from all or any part of its payment obligations with respect to any
Purchased Receivable by reason of: (1) any act or omission of Seller not
permitted by this Agreement or consented to in writing by Buyer; or (2) the
operation of any of the provisions of the documentation pertaining to such
Purchased Receivables, which result in the termination of the Account Debtor's
obligation to pay all of any part of the Purchased Receivables, then, upon the
happening of any such event, Seller shall thereafter pay to Buyer on the date
when the Account Debtor would otherwise have paid the Purchased Receivable to
Buyer an amount equal to the lesser of (a) the amount of the Purchased
Receivable not payable by the Account Debtor as a result of such event and (b)
the unpaid portion of the Purchased Receivable Amount for such Purchased
Receivable.

      (B)   Seller hereby agrees to pay, and to indemnify and hold harmless
Buyer from and against, any taxes which may at any time be asserted in respect
of this transaction or the subject matter thereof (including, without
limitation, any sales, occupational, excise, gross receipts, general
corporation, personal property, privilege or license taxes, but not including
taxes imposed upon the Buyer with respect to its income arising out of this
transaction) and costs, expenses and reasonable counsel fees in defending
against the same, whether arising by reason of the acts to be performed by
Seller hereunder or imposed against Buyer, Seller, the property involved or
otherwise; PROVIDED that with respect to any of the foregoing for which Seller
shall be liable, Seller shall receive reasonably prompt notice from Buyer of
this assertion of any such taxes on Buyer of which Buyer has notice.

9.    ADDITIONAL RIGHTS. To secure the prompt payment and performance to Buyer
of all of the Purchased Receivables and the obligations of Seller hereunder,
Seller hereby grants to Buyer a continuing lien upon and security interest in
all of Seller's now existing or hereafter arising rights and interest in the
following, whether now owned or existing or hereafter created, acquired, or
arising, and wherever located (the "Related Property"): (A) Seller's rights to
any returned or rejected goods in respect of the Purchased Receivables, with
respect to which Buyer has all the rights of any unpaid seller, including the
rights of replevin, claim and delivery, reclamation, and stoppage in transit;
(B) All books and records pertaining to the Purchased Receivables or the
foregoing goods; and (C) All proceeds of the foregoing, whether due to voluntary
or involuntary disposition, including insurance proceeds. Notwithstanding the
foregoing, the Related Property shall not include, in any event, any license
agreements or other intellectual property of Seller. Seller is not authorized to
sell, assign, transfer or otherwise convey any interest in any Related Property
without Buyer's prior written consent. Seller agrees to sign UCC financing
statements, in a form acceptable to Buyer, and any other instruments and
documents requested by Buyer to evidence, perfect, or protect the interests of
Buyer in the Purchased Receivables and the Related Property. Seller agrees to
deliver to Buyer the originals of all instruments, chattel paper and documents
evidencing or related to Purchased Receivables and Related Property.





10.   DEFAULT. The occurrence of any one or more of the following shall
constitute an Event of Default hereunder:

            (A) Seller fails to pay any amount owed to Buyer as and when due;

            (B) There shall be commenced by or against Seller any voluntary or
      involuntary case under the United States Bankruptcy Code, or any
      assignment for the benefit of creditors, or appointment of a receiver or
      custodian for any of its assets;

            (C) Seller shall become insolvent in that its debts are greater than
      the fair value of its assets, or Seller is generally not paying its debts
      as they become due or is left with unreasonably small capital;

            (D) Any involuntary lien, garnishment, attachment or the like is
      issued against or attaches to the Purchased Receivables or any Related
      Property;

            (E) Seller shall breach any covenant, agreement, warranty, or
      representation set forth herein, and the same is not cured (whether
      pursuant to the provisions of Section 6 hereof, if applicable, or
      otherwise) to Buyer's satisfaction within 10 days after Buyer has given
      Seller oral or written notice thereof; provided, that if such breach is
      incapable of being cured it shall constitute an immediate default
      hereunder;

            (F) Seller is not in compliance with, or otherwise is in default
      under, any term of any document, instrument or agreement evidencing a
      debt, obligation or liability of any kind or character of Seller, now or
      hereafter existing, in favor of Buyer or any division or affiliate of
      Silicon Valley Bank, regardless of whether such debt, obligation or
      liability is direct or indirect, primary or secondary, joint, several or
      joint and several, or fixed or contingent, together with any and all
      renewals and extensions of such debts, obligations and liabilities, or any
      part thereof; or

            (G) An event of default shall occur under any guaranty executed by
      any guarantor of the obligations of Seller to Buyer under this Agreement,
      or any material provision of any such guaranty shall for any reason cease
      to be valid or enforceable or any such guaranty shall be repudiated or
      terminated, including by operation of law.

11.   REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, Buyer
has and may exercise all the rights and remedies under this Agreement and under
applicable law, including the rights and remedies of a secured party under the
Massachusetts Uniform Commercial Code.

12.   ACCRUAL OF INTEREST. If any amount owed by Seller to Buyer hereunder is
not paid when due, such amount shall bear interest from such date until paid at
a per annum rate equal to the Prime Rate plus 4.0%.

13.   FEES, COSTS AND EXPENSES. The Seller will pay to Buyer immediately upon
demand all reasonable fees, costs and expenses (including reasonable fees of
attorneys and professionals [excluding full time Bank employees] and their costs
and expenses) that Buyer incurs with any of the following: (a) preparing,
negotiating, and administering this Agreement or any other agreement executed by
Buyer and Seller in connection herewith, including any amendments, waivers or
consents in connection with any of the foregoing, (b) enforcing Buyer's rights
under, or collecting amounts owed by Seller to Buyer in connection with, this
Agreement, including, without limitation, to enforce (i) Seller's agreement to
repurchase as set forth in Section 4.2, (ii) Seller's payment of any amounts
owing by Seller pursuant to Section 7 hereof, or (iii) Seller's payment of any
amounts owing by Seller pursuant to Section 8 hereof, (c) enforcing any other
rights against Seller or any guarantor, (d) protecting or enforcing its title to
the Purchased Receivables or its security interest in the Related Property, and
(e) the representation of Buyer in connection with any bankruptcy case or
insolvency proceeding involving Seller or any guarantor, except to the extent
arising as a result of Buyer's own gross negligence or willful misconduct.

14.   SEVERABILITY, WAIVER, AND CHOICE OF LAW. In the event that any provision
of this Agreement is deemed invalid by reason of law, this Agreement will be


construed as not containing such provision and the remainder of the Agreement
shall remain in full force and effect. If Buyer waives a default it may enforce
a later default. Any consent or waiver under, or amendment of, this Agreement
must be in writing. Nothing contained herein, or any action taken or not taken
by Buyer at any time, shall be construed at any time to be indicative of any
obligation or willingness on the part of Buyer to amend this Agreement or to
grant to Seller any waivers or consents. This Agreement has been transmitted by
Seller to Buyer at Buyer's office in the Commonwealth of Massachusetts and has
been executed and accepted by Buyer in the Commonwealth of Massachusetts. This
Agreement shall be governed by and interpreted in accordance with the internal
laws of the Commonwealth of Massachusetts.

15.   NOTICES. All notices shall be given to Buyer and Seller at the addresses
or faxes set forth on the first page of this Agreement and shall be deemed to
have been delivered and received: (a) if mailed, three calendar days after
deposited in the United States mail, first class, postage pre-paid, (b) one
calendar day after deposit with an overnight mail or messenger service; or (c)
on the same date of confirmed transmission if sent by hand delivery, telecopy,
telefax or telex.

16.   JURY TRIAL. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES
A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND
WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE
NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND
VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.

17.   TITLES AND SECTION HEADINGS. The titles and section headings used herein
are for convenience only and shall not be used in interpreting this Agreement.

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

SELLER:

APPLIX, INC.


By: /s/ Walt Hilger
    -------------------------------------------------
Title:  Vice President, CFO
        ---------------------------------------------


BUYER:

SILICON VALLEY BANK


By: /s/ David Reich
    -------------------------------------------------
Title:  Senior Vice President
        ---------------------------------------------

EX-21.1

                                                                    EXHIBIT 21.1


                         SUBSIDIARIES OF THE REGISTRANT



                                             JURISDICTION OF
NAME OF ENTITY:                              INCORPORATION:
- ---------------                              --------------
                                          
Applix B.V.                                  The Netherlands

Applix Canada, Inc.                          Delaware

Applix Foreign Sales Corporation             Barbados

Veriteam France                              France

Applix GmbH                                  Germany

Veriteam GmbH                                Germany

Applix (UK) Limited                          United Kingdom

Veriteam Limited                             United Kingdom

Applix Securities Corp.                      Massachusetts

Applix Singapore, Inc.                       Delaware

Applix Australia Pty. Ltd.                   Australia

Dynamic Decisions Pty. Limited               Australia

Sinper Corporation                           Florida

Target Systems Corporation                   Massachusetts

Veriteam, Inc.                               Delaware

Applix (Schweiz) AG                          Switzerland

EX-23.1

                                                                    EXHIBIT 23.1

                        CONSENT OF INDEPENDENT AUDITORS

     We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-87882, 33-87776, 33-89382, 333-02340, 333-06303, 333-16963,
333-20853, 333-52603, 333-80861, 333-39462, 333-57670 and 333-63550, and Form
S-3 No. 333-63564) of Applix, Inc. of our report dated January 25, 2002, (except
for Note 16, as to which the date is February 8, 2002) with respect to the
consolidated financial statements and schedule of Applix, Inc. included in this
Annual Report (Form 10-K) for the year ended December 31, 2001.


                                        /s/ Ernst & Young LLP



Boston, Massachusetts
March 29, 2002

EX-23.2

                                                                    EXHIBIT 23.2

                       CONSENT OF INDEPENDENT ACCOUNTANTS
                       ----------------------------------

     We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (File No. 333-63564) and Form S-8 (File Nos. 33-87882,
33-87776, 33-89382, 333-02340, 333-06303, 333-16963, 333-20853, 333-52603,
333-80861, 333-39462, 333-57670, and 333-63550) of Applix, Inc. of our report
dated January 24, 2001 relating to the financial statements, which is included
in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Boston, Massachusetts
March 29, 2002