LOAN AND SECURITY
by and between
SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX
000 000xx Xxxxxx XX
TOTAL CREDIT AMOUNT:
Date: As of September 4, 2001
Committed Revolving Line:
Repayment Period: 12 months
Repayment Period: 24 months
Interest Rate: Prime + 150
Interest Rate: Prime + 150
Revolving Maturity Date: 12 months from the date of the first Credit
Extension, but in no event later than November 5, 2002
Maturity: October 1, 2003
Commitment Termination Date:
November 5, 2001
Loan Fee: $25,000, paid on
acceptance of term sheet
The terms and information set forth on this
cover page are a part of the attached Loan and Security Agreement, dated as of
the date first written above (this “Agreement”), entered into by and between
Silicon Valley Bank (“Bank”) and the borrower (“Borrower”) set forth above. The terms and conditions of this Agreement
agreed to between Bank and Borrower are as follows:
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of
September 4, 2001, between SILICON VALLEY BANK ("Bank") and
CLICK2LEARN, INC. ("Borrower"), provides the terms on which Bank will
lend to Borrower and Borrower will repay Bank.
The parties agree as follows:
AND OTHER TERMS
Accounting terms not defined in this
Agreement will 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. This Agreement shall be construed to impart
upon Bank a duty to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
will pay Bank the unpaid principal amount of all Credit Extensions and interest
on the unpaid principal amount of the Credit Extensions.
2.1.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
Bank will make Advances under the Committed Revolving Line not exceeding at any
time outstanding (i) the lesser of (x) the Committed Revolving Line or
(y) the Borrowing Base minus the outstanding principal amount of the Term
Loan, minus (ii) the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit).
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. Pacific time on the Business Day the
Advance is to be made. Borrower must
promptly confirm the notification by delivering to Bank the Payment/Advance
Form attached as Exhibit B. Bank will
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 believes is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to that reliance.
(c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
of Credit. Subject to the terms and conditions of this
Agreement, Bank will issue or have issued Letters of Credit for Borrower’s
account as part of the Committed Revolving Line not exceeding (i) the
lesser of (x) the Committed Revolving Line or (y) the Borrowing Base
minus the outstanding principal amount of the Term Loan, minus (ii) the
outstanding principal balance of the Advances.
Each Letter of Credit will expire no later than 180 days after the
Revolving Maturity Date provided Borrower’s Letter of Credit reimbursement
obligation is secured by cash on terms acceptable to Bank at any time after the
Revolving Maturity Date if the term of this Agreement is not extended by Bank.
2.1.3 Term Loan.
will make a Term Loan available to Borrower subject to the terms and conditions
of this Agreement.
(b) Not later than the request for the Term Loan, Borrower will deliver to Bank an invoice or
other documentation deemed reasonable by Bank reflecting the costs related to
the software and services related to such software, in each case to be
purchased with the proceeds of the Term Loan.
2.2 Overadvances. If Borrower’s Obligations under Sections 2.1.1 and
2.1.2 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. If
Borrower’s Obligations under Section 2.1.1, 2.1.2 and 2.1.3 exceed the Borrowing Base,
Borrower must immediately pay in cash to Bank the excess.
(i) Advances under the Committed
Revolving Line accrue interest on the outstanding principal balance at a per
annum rate one and one-half percent (1.50%) above the Prime Rate.
(ii) The Term Loan accrues interest at one
and one-half percent (1.50%) above the Prime Rate.
(iii) After an Event of Default, Obligations
accrue interest at 5 percent above the rate formula effective immediately
before the Event of Default. The
interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360 day year for
the actual number of days elapsed.
(i) Interest on the Committed Revolving Line is payable on
the first day of each month.
(ii) Borrower will pay 24 equal installments of principal of
$41,666.67 plus interest on the
Term Loan (the "Term Loan Payment").
Each Term Loan Payment is payable on the first day of each month during
the term of the loan. Borrower's final
Term Loan Payment, due on October 1,
2003, will include all outstanding Term Loan principal and accrued
(iii) Bank may debit any of Borrower’s deposit accounts including
Account Number 3300312783 for principal and interest payments or
any amounts Borrower owes Bank. Bank
will notify Borrower when it debits Borrower's accounts. These debits are not a set-off.
(iv) Payments received after 12:00 noon Pacific 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
2.4 Fees. Borrower will pay to Bank:
(a) Committed Line of Credit Fee. A fully earned, non–refundable fee
payable monthly in arrears on the payment date for the Committed Line of Credit
and equal to one quarter of one percent (.25%) per annum of the portion of the
Committed Line of Credit for the month then ended not outstanding as either
Advances or Letters of Credit, based on the average unused amount during such
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Closing Date when due.
3 CONDITIONS OF LOANS
Precedent to Initial Credit Extension. Bank’s obligation to make the initial Credit Extension for each Facility is subject to the condition
precedent that it receive the agreements, documents and fees it requires for
Precedent to all Credit Extensions.
Bank’s obligations to make each Credit Extension for any Facility, including the initial Credit Extension for that Facility, is
subject to the following:
(a) timely receipt of any Payment/Advance
(b) the representations and warranties in
Section 5 must 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 may 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.
3.3 Additional Conditions Precedent to Credit
Extensions Under the Committed
Revolving Line. In
addition to the requirements of Sections 3.1 and 3.2 above, Bank’s obligation to make any Credit Extension, including the
initial Credit Extension, under
the Committed Revolving Line is subject to the following:
(a) Borrower shall have either
(i) established its primary banking relationship with Bank, which
relationship shall include Borrower maintaining account balances in any bank or
investment accounts at or through Bank representing at least 95% of all account
balances of Borrower at all financial institutions, including Bank, or
(ii) provided to Bank documentation in form and substance satisfactory to
Bank evidencing Bank’s fully perfected security interest in, and control of,
Borrower’s bank and investment accounts representing at least 95% of all
account balances of Borrower at all financial institutions, including Bank; and
(b) All conditions precedent to the
initial Credit Extension under the Committed Revolving Line other than as
required under Section 3.2(a) shall have been met not later than the Commitment
4 CREATION OF SECURITY INTEREST
4.1 Grant of
Security Interest. Borrower
grants Bank a continuing security interest in all presently existing and later
acquired Collateral to secure all Obligations and performance of each of
Borrower’s duties under the Loan Documents.
Borrower shall also execute a separate negative pledge agreement with
respect to Intellectual Property in form and substance satisfactory to
Bank. Except for Permitted Liens, any
security interest will be a first priority security interest in the Collateral. During an Event of Default or an event which
with notice or the passage of time would become an Event of Default, Bank may
place a "hold" on any deposit account pledged as Collateral. If the Agreement is terminated, Bank’s lien
and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants
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.
The execution, delivery and
performance of the Loan Documents have been duly authorized, and do not
conflict with Borrower's formations 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.
and Intellectual Property. Borrower
has good title to the Collateral and the Intellectual Property, free of Liens
except Permitted Liens. The Eligible
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. Borrower has no notice of any actual or
imminent Insolvency Proceeding of any account debtor whose accounts are an
Eligible Account in any Borrowing Base Certificate. All Inventory is in all material respects of good and marketable
quality, free from material defects. Borrower is the sole owner of the
Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business and except for software components
or content licensed from third parties.
Each issued Patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and, except as set forth on Schedule I, no claim has been made that any
part of the Intellectual Property violates the rights of any third party.
5.3 Litigation. Except as shown in Schedule I, there are
no actions or proceedings pending or, to Borrower's knowledge, 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 condition and Borrower's
consolidated results of operations.
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. The fair salable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; Borrower is not left with unreasonably small capital after the
transactions in this Agreement; and Borrower is able to pay its debts
(including trade debts) as they mature.
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 with the Federal Fair Labor Standards Act. Borrower has not violated any laws,
ordinances or rules, the violation of which could 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.
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
5.7 Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities except for Permitted
representation, warranty or other statement of Borrower in any certificate or
written statement given to Bank contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results).
5.9 Disclosure Schedule. The Schedule to Loan and Security Agreement
attached hereto as Schedule II and incorporated by this reference is true,
correct and complete.
Borrower will do all of the
will maintain its and all Subsidiaries' corporate existence and good standing
in its jurisdiction of incorporation and maintain qualification in each
jurisdiction in which the failure to so qualify could have a material adverse
effect on Borrower’s business or operations.
Borrower will 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
cause a Material Adverse Change.
Statements, Reports, Certificates.
will deliver to Bank: (i) as soon as
available, but no later than 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, in a form acceptable to Bank and certified by a Responsible
Officer; (ii) as soon as available, but no later than 120 days after the end of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinionon the financial statements from an
independent certified public accounting firm acceptable to Bank; (iii) within 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 could result in damages or costs to
Borrower or any Subsidiary of $100,000 or more; (v) prompt notice of any
material change in the composition of the Intellectual Property, including any
knowledge of an event that materially adversely affects the value of the
Intellectual Property; and (vi) budgets, sales projections, operating plans or
other financial information Bank requests.
(b) Within 30 days after the last day of each month, Borrower will deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in the form
of Exhibit C with aged listings of accounts receivable and accounts payable.
(c) Within 30 days after the last day of each month, Borrower will deliver to
Bank with the monthly financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Accounts at
Borrower's expense; such audits will be conducted semi-annually or as often as
deemed appropriate by Bank in its sole discretion.
Returns. Borrower will
keep all Inventory in good and marketable condition, free from material
defects. Returns and allowances between
Borrower and its account debtors will follow Borrower’s customary practices as
they exist at the Closing Date.
Borrower must promptly notify Bank of all returns, recoveries, disputes
and claims that involve more than $50,000.
6.4 Taxes. Borrower will make, and cause each
Subsidiary to make, timely payment of all material federal, state, and local
taxes or assessments and will deliver to Bank, on demand, appropriate certificates
attesting to the payment.
6.5 Insurance. Borrower will keep its
business and the Collateral and other assets insured for risks and in amounts,
as Bank requests. Insurance policies
will be in a form, with companies, and in amounts that are satisfactory to
Bank. All property policies will have a
lender's loss payable endorsement showing Bank as a loss payee and all
liability policies will show the Bank as an additional insured and provide that
the insurer must give Bank at least 20 days notice before canceling its
policy. At Bank's request, Borrower
will deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any
policy will, at Bank’s option, be payable to Bank on account of the
Accounts. Except as set out in Section 3.3 above,
Borrower will maintain its primary banking relationship with Bank, which
relationship shall include Borrower maintaining account balances in any
accounts at or through Bank representing at least 95% of all account balances
of Borrower at all financial institutions, including Bank; provided, however,
that notwithstanding Section 3.3 above, Borrower shall have met the banking
relationship standard otherwise required under this Section 6.6 as to bank and
investment accounts on or before November 5, 2001.
Borrower will maintain as of the last day of each month, unless otherwise noted:
(a) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at least 1.75 to 1.0.
(b) Tangible Net Worth. A Tangible Net Worth plus Subordinated Debt
of at least fourteen million dollars ($14,000,000) plus 50% of any additional
equity and/or Subordinated Debt injected after the Closing Date.
Borrower will have a maximum net loss in any fiscal quarter
of not more than $3,250,000.
6.8 Registration of Intellectual
Property Rights. Borrower will file and diligently pursue the
prosecution of applications to register with the United States Copyright Office
(i) any software material to the business of Borrower it has, develops or
acquires, within 30 days of the Closing Date, and additional software rights
developed or acquired, including significant revisions, additions or
improvements to the software or revisions, additions or improvements which
significantly improve the functionality of the software, after the Closing Date
within 30 days following the first sale
or licensing to any third party of the software or any product based on or
containing any such software. Borrower
will promptly notify Bank upon Borrower’s filing of any application or
registration of any Intellectual Property rights with the United States Patent
and Trademark Office.
(i) protect, defend and maintain the validity and enforceability of the
Intellectual Property that is material to the business of the Borrower; (ii)
promptly advise Bank in writing of material infringements of the Intellectual
Property that is material to the business of the Borrower; and (iii) not
allow any Intellectual Property that is material to the business of the
Borrower to be abandoned, forfeited or dedicated to the public without Bank’s
Assurances. Borrower will execute any further
instruments and take further action as Bank requests to perfect or continue
Bank's security interest in the Collateral or to effect the purposes of this
Agreement, and Borrower hereby consents to Bank’s filing of any financing
statements, amendments, continuation statements or the like (with or without
Borrower’s signature) as contemplated by this Agreement.
Borrower will not do any of the following without the
Bank’s written consent, which will not be unreasonably withheld:
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, other than a Transfer
(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; or (iii) of worn–out or
in Business, Ownership, 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 change in its ownership of
greater than 50% or have a material change in its management. Borrower will not, without at least 30 days
prior written notice to Bank, relocate its principal executive office, add any
new offices or business locations or change the place of its incorporation.
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.
A Subsidiary may merge or consolidate into another Subsidiary or into
7.4 Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
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
Bank’s first priority security interest in the Collateral to change. Create, incur, or allow any Lien on any of
its Intellectual Property, except for (i) the rights of licensors and
licensees described in this Agreement or Schedule I attached hereto and
(ii) subparagraph (a) of the definition of Permitted Liens set forth
hereinafter; Borrower shall execute a separate negative pledge agreement with
respect to such Intellectual Property in form and substance satisfactory to
Distributions. (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
dividends or make any distribution or payment or redeem, retire or purchase any
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, on terms less favorable to Borrower
than would be obtained in an arm's length transaction with a non-affiliated
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. Undertake as one of its important activities extending
credit to purchase or carry margin stock, or use the proceeds of any Advance
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 tohave a material adverse effect on
Borrower’s business or operations or cause a Material Adverse Change, or permit
any of its Subsidiaries to do so.
7.10 Use of Proceeds.
Use the proceeds of the Line other than for operating capital purposes
or use the proceeds of the Term Loan other than for payment of the invoices and
other costs described in Section 2.1.3(b) above. In no event will Borrower use the proceeds of either Facility to
hold or carry margin stock within the meaning of under Regulations T and U of
the Federal Reserve Board of Governors.
8 EVENTS OF DEFAULT
Any one of the following is an
Event of Default:
Default. Borrower fails to pay any of the
Obligations within 3 business days after its due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extensions will be
made during the cure period);
Default. Borrower does not perform any obligation
in Section 6 or violates any covenant in Article 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 10 days after it occurs, or if the default cannot be cured
within 10 days or cannot be cured after Borrower’s attempts in the 10 day
period, and the default may be cured within a reasonable time, then Borrower
has an additional time, (of not more than 30 days) to attempt to cure the
default. During the additional period the
failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
8.3 Material Adverse Change.
(i) A material
impairment in the perfection or priority of Bank’s security interest in the
Collateral or in the value of such Collateral or in the value of Intellectual Property that is material to the business of the
Borrower (including but not limited to creation of any Lien thereon other than a Permitted
Lien) other than normal depreciationwhich
is not covered by adequate insurance occurs; or (ii) Bank determines, based
upon information available to it and in its reasonable judgment, that there is
a reasonable likelihood that Borrower will fail to comply with one or more of
the financial covenants in Section 6 during the next succeeding financial
(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 10 days; (ii)
Borrower is enjoined, restrained, or prevented by court order from conducting a
material part of its business; (iii) a judgment or other claim becomes a Lien
on a material portion of Borrower's assets; or (iv) a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within 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 will
be made during the cure period);
8.5 Insolvency. (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 30 days (but no Credit Extensions
will be made before any Insolvency Proceeding is dismissed);
8.6 Other Agreements. If there is a default in any agreement
between Borrower and a third party that gives the third party
the right to accelerate any Indebtedness exceeding $100,000 or that could cause
a Material Adverse Change;
8.7 Judgments. If a money judgment(s) in the aggregate of
at least $50,000 not covered by insurance is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions
will be made before the judgment is stayed or satisfied);
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 communication delivered
to Bank or to induce Bank to enter this Agreement or any Loan Document.
RIGHTS AND REMEDIES
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 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
(d) Make any payments and do any acts it
considers necessary or reasonable to protect its security interest in the
Collateral. Borrower will assemble the
Collateral if Bank requests and make it available as Bank designates. 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. Borrower grants Bank a license to enter and
occupy any of its premises, without charge, to exercise any of Bank's rights or
(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
(g) Dispose of the Collateral according
to the Code.
of Attorney. When an Event of Default occurs and
continues, Borrower irrevocably appoints Bank as its lawful attorney 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
xxxx of lading for any Account or drafts against account debtors, (iii) make,
settle, and adjust all claims under Borrower's insurance policies;
(iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the 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. Bank’s 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.
Collection. When an Event of Default occurs and
continues, Bank may notify any Person owing Borrower money of Bank's security
interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust
for Bank and, if requested by Bank, immediately deliver the payments to Bank in
the form received from the account debtor, with proper endorsements for
Expenses. If Borrower fails to pay any amount or
furnish any required proof of payment to third persons Bank may make all or
part of the payment or obtain insurance policies required in Section 6.5,
and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses
and immediately due and payable, bearing interest at the then applicable rate
and secured by the Collateral. No
payments by Bank are deemed an agreement to make similar payments in the future
or Bank’s waiver of any Event of Default.
Liability for Collateral. If Bank complies with reasonable banking
practices, it is not 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.
Borrower bears all risk of loss, damage or destruction of the
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 is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
Waiver. 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 guaranties held by Bank
on which Borrower is liable.
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 at the beginning of this Agreement. A Party may change its notice address by giving the other Party
OF LAW , VENUE AND JURY TRIAL WAIVER
California 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 Santa Xxxxx County, California.
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
12 GENERAL PROVISIONS
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 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 will indemnify, defend and hold harmless Bank
and its officers, employees and agents 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
(including reasonable attorneys’ fees and expenses), except for losses caused
by Bank's gross negligence or willful misconduct.
of Essence. Time is of the essence for the performance
of all Obligations in this Agreement.
of Provision. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
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
supersedes prior or contemporaneous negotiations or agreements. All prior or contemporaneous 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.
12.6 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, are one
12.7 Survival. All covenants, representations and warranties made in
this Agreement continue in full force while
any Obligations remain outstanding.
The obligations of Borrower in Section 12.2 to indemnify Bank will
survive until all statutes of limitations for actions that may be brought
against Bank have run.
12.8 Confidentiality. In handling any confidential information,
Bank will 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 present or
prospective business relations with Borrower; (ii) to prospective transferees
or purchasers of any interest in the Loans; (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 appropriate 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.
Fees, Costs and Expenses. In any action
or proceeding between Borrower and Bank arising out of the Loan Documents, the
prevailing party will be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled, whether or not a lawsuit is filed.
"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.
"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
"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).
"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% of Eligible Accounts, as
determined by Bank from Borrower’s most recent Borrowing Base Certificate.
"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
"Code" is the California Uniform
"Collateral" is the property described
on Exhibit A.
“Commitment Termination Date” is November 5,
"Committed Revolving Line"
is a Credit Extension of up to $4,000,000.
"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.
"Copyrights" are all copyright rights,
applications or registrations and like protections in each work or authorship
or derivative work, whether published or not (whether or not it is a trade
secret) now or later existing, created, acquired or held.
"Credit Extension" is each Advance,
Letter of Credit, Term Loan, or any other extension of credit by Bank for
"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.
"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 30 days prior written notice. Unless Bank agrees otherwise in writing,
Eligible Accounts will not include:
(a) Accounts that the account debtor has
not paid within 90 days of invoice date;
(b) Accounts for an account debtor, 50%
or more of whose Accounts have not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from
(d) Accounts for an account debtor,
including Affiliates, whose total obligations to Borrower exceed 25% of all
Accounts, for the amounts that exceed that percentage, unless Bank approves in
(e) Accounts for which the account debtor
does not have its principal place of business in the United States except for
Eligible Foreign Accounts;
(f) Accounts for which the account
debtor is a federal, state or local government entity or any department,
agency, or instrumentality except for (i) Accounts of the United States if
the payee has assigned its payment rights to Bank and the assignment has been
acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727) or
(ii) Accounts of such other federal, state or local government entity or
any department, agency, or instrumentality if the payee has assigned its payment
rights to Bank and the assignment has been acknowledged under the relevant
statute or regulation. Notwithstanding
the foregoing, Bank shall have no obligation to pursue such consents; provided,
however, that Accounts for which the account debtor is a federal, state or
local government entity or any department, agency, or instrumentality which in
the aggregate do not exceed $500,000 at any one time included in the Borrowing
Base shall be deemed Eligible Accounts even if such Accounts do not otherwise
meet the acknowledgment requirements by the account debtor of this subpart (f);
(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
for demonstration or promotional equipment, or in which goods are consigned,
sales guaranteed, sale or return, sale on approval, xxxx 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 collection to be doubtful.
Foreign Accounts" are Accounts for which the account debtor
does not have its principal place of business in the United States but
are: (1) covered by credit
insurance satisfactory to Bank, less any deductible; or (2) supported by
letter(s) of credit acceptable to Bank; or (3) that Bank approves in
"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.
“Event of Default”
is defined in Section 8 of this Agreement.
is the Committed Revolving Line and/or the Term Loan as the context requires.
"GAAP" is generally accepted accounting
"Indebtedness” is (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, including assignments for the benefit
of creditors, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
(a) Copyrights, Trademarks, Patents, and
Mask Works including amendments, renewals, extensions, and all licenses or
other rights to use and all license fees and royalties from the use;
(b) Any trade secrets and any
Intellectual Property Rights in computer software and computer software
products now or later existing, created, acquired or held;
(c) All design rights which may be available
to Borrower now or later created, acquired or held;
(d) Any claims for damages (past, present
or future) for infringement of any of the rights above, with the right, but not
the obligation, to xxx and collect damages for use or infringement of the intellectual
property rights above;
(e) All proceeds and products of the
foregoing, including all insurance, indemnity or warranty payments.
"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”
is a stand-by or commercial letter of credit issued by Bank for the account of
"Lien" is a mortgage, lien, deed of
trust, charge, pledge, security interest or other encumbrance.
Documents" are, collectively, this Agreement, any note, or
notes or guaranties executed by Borrower or any 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.
is 150 basis points.
Works" are all mask works or similar rights available for
the protection of semiconductor chips, now owned or later acquired.
“Material Adverse Change” is defined
in Section 8.3.
Date" is the Revolving Maturity Date or the maturity date
of the Term Loan, as applicable.
"Obligations" are debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, including letters of credit and foreign exchange contracts, if any, and
including interest accruing after Insolvency Proceedings begin and debts,
liabilities, or obligations of Borrower assigned to Bank.
are patents, patent applications
and like protections, including improvements, divisions, continuations,
renewals, reissues, extensions and continuations–in–part of the
(a) Borrower’s indebtedness to Bank under
this Agreement or the Loan Documents;
(b) Indebtedness existing on the Closing
Date and shown on Schedule I;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors
incurred in the ordinary course of business; and
secured by Permitted Liens.
"Permitted Investments” are:
(a) Investments shown on Schedule I and
existing on the Closing Date; and
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 Xxxxx'x Investors Service, Inc., (iii) Bank’s certificates of
deposit issued maturing no more than 1 year after issue, and (iv) any
Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved by Bank; and
consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of Borrower.
"Permitted Liens" are:
(a) Liens existing on the Closing Date
and shown on Schedule I or arising under this Agreement or other Loan
(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 or its Subsidiaries 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) Leases or subleases and licenses or
sublicenses granted by Borrower in the ordinary course of its business, if the
leases, subleases, licenses and sublicenses permit (or do not prohibit)
granting Bank a security interest;
(e) Liens incurred in the extension,
renewal or refinancing of the indebtedness secured by Liens described in (a)
through (c), 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.
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 less than 12 months
determined according to GAAP.
"Responsible Officer" is each of the
Chief Executive Officer, the President, the Chief Financial Officer and the
Controller of Borrower.
"Revolving Maturity Date" is twelve (12) months from the date of
the first Credit Extension under the Committed Revolving Line, but in no event
later than November 5, 2002.
"Schedule" is any attached schedule of
exceptions or disclosures.
"Subordinated Debt" is debt incurred by
Borrower subordinated to Borrower’s indebtedness owed to Bank and which is reflected in a written agreement in
a manner and form acceptable to Bank and approved by Bank in writing.
"Subsidiary" is for 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 the Person or one or more Affiliates of the Person.
"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 such as 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, and (ii) Total
Loan" a loan equal to $1,000,000.
"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
Subordinated Debt allowed to be paid, but excluding all other Subordinated
"Trademarks" are trademark and service xxxx rights,
registered or not, applications to register and registrations and like
protections, and the entire goodwill of the business of Borrower connected with
SILICON VALLEY BANK
The Collateral consists of all of Borrower’s right,
title and interest in and to all personal property including but not limited to
the following, but excluding Borrower’s intellectual property:
All goods and equipment now owned or hereafter
acquired, including, without limitation, all machinery, fixtures, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located and all certificates of title;
All inventory, now owned or hereafter acquired,
including, without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products including
such inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above;
All contract rights and general intangibles(other
than Intellectual Property) now owned or hereafter acquired, including, without
limitation, goodwill, , leases, license agreements, franchise agreements,
blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer discs,
computer tapes, literature, reports, catalogs,
income tax refunds, payments of insurance and rights to payment of any
All now existing and hereafter arising accounts,
contract rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the licensing of
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;
All documents, cash, deposit accounts, securities,
securities entitlements, securities accounts, investment property, financial
assets, letters of credit, letter-of-credit rights, certificates of deposit,
instruments, chattel paper (tangible or electronic), and supporting obligations
now owned or hereafter acquired and Borrower's Books relating to the foregoing;
Books relating to the foregoing and any and all claims, rights and interests in
any of the above and all substitutions for, additions and accessions to and
All proceeds of
any intellectual property of any nature (including but not limited to patents,
trademarks and copyrights), cash or noncash, including but not limited to
whatever is acquired upon the sale, lease, license, exchange, or other
disposition of such property; whatever is collected on, or distributed on
account of, such property; rights arising out of such property; claims arising
out of the loss, nonconformity, or interference with the use of, defects or
infringement of rights in, or damage to, such property; or insurance payable by
reason of the loss or nonconformity of, defects or infringement of rights in,
or damage to, such property.
All proceeds of
any of the foregoing, cash or noncash, including but not limited to whatever is
acquired upon the sale, lease, license, exchange, or other disposition of
collateral; whatever is collected on, or distributed on account of, collateral;
rights arising out of collateral; claims arising out of the loss,
nonconformity, or interference with the use of, defects or infringement of
rights in, or damage to, the collateral; or insurance payable by reason of the
loss or nonconformity of, defects or infringement of rights in, or damage to,
agreed not to create, incur or allow liens on its property except in limited
circumstances. NOTWITHSTANDING ANYTHING ELSE CONTAINED HEREIN, BORROWER HAS
AGREED NOT TO CREATE, INCUR, OR ALLOW ANY LIENS ON ANY OF ITS INTELLECTUAL
PROPERTY RIGHTS, INCLUDING BUT NOT LIMITED TO COPYRIGHT RIGHTS, COPYRIGHT
APPLICATIONS, COPYRIGHT REGISTRATIONS AND LIKE PROTECTIONS IN EACH WORK OF
AUTHORSHIP AND DERIVATIVE WORK THEREOF, WHETHER PUBLISHED OR UNPUBLISHED, NOW
OWNED OR HEREAFTER ACQUIRED; ALL
MASK WORKS OR SIMILAR RIGHTS AVAILABLE FOR THE PROTECTION OF SEMICONDUCTOR
CHIPS, NOW OWNED OR HEREAFTER ACQUIRED; ANY AND ALL TRADE
SECRETS, AND ANY AND ALL INTELLECTUAL PROPERTY RIGHTS IN COMPUTER SOFTWARE AND
COMPUTER SOFTWARE PRODUCTS NOW OR HEREAFTER EXISTING, CREATED, ACQUIRED OR
HELD; ANY AND ALL DESIGN RIGHTS WHICH MAY BE AVAILABLE TO BORROWER NOW OR
HEREAFTER EXISTING, CREATED, ACQUIRED OR HELD; ALL PATENTS, PATENT APPLICATIONS
AND LIKE PROTECTIONS INCLUDING, WITHOUT LIMITATION, IMPROVEMENTS, DIVISIONS,
CONTINUATIONS, RENEWALS, REISSUES, EXTENSIONS AND CONTINUATIONS-IN-PART OF THE
SAME, INCLUDING WITHOUT LIMITATION THE PATENTS AND PATENT APPLICATIONS; ANY
TRADEMARK AND SERVICEMARK RIGHTS, WHETHER REGISTERED OR NOT, APPLICATIONS TO
REGISTER AND REGISTRATIONS OF THE SAME AND LIKE PROTECTIONS, AND THE ENTIRE
GOODWILL OF THE BUSINESS OF BORROWER CONNECTED WITH AND SYMBOLIZED BY SUCH
TRADEMARKS, INCLUDING WITHOUT LIMITATION; ANY AND ALL CLAIMS FOR DAMAGES BY WAY
OF PAST, PRESENT AND FUTURE INFRINGEMENTS OF ANY OF THE RIGHTS INCLUDED ABOVE,
WITH THE RIGHT, BUT NOT THE OBLIGATION, TO XXX FOR AND COLLECT SUCH DAMAGES FOR
SAID USE OR INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS IDENTIFIED ABOVE;
ALL LICENSES OR OTHER RIGHTS TO USE ANY OF THE COPYRIGHTS, PATENTS, TRADEMARKS
OR MASK WORKS, AND ALL LICENSE FEES AND ROYALTIES ARISING FROM SUCH USE TO THE
EXTENT PERMITTED BY SUCH LICENSE OR RIGHTS; AND ALL AMENDMENTS, EXTENSIONS,
RENEWALS AND EXTENSIONS OF ANY OF THE COPYRIGHTS, TRADEMARKS, PATENTS, OR MASK WORKS; ANDALL PROCEEDS AND
PRODUCTS OF THE FOREGOING, INCLUDING WITHOUT LIMITATION ALL PAYMENTS UNDER
INSURANCE OR ANY INDEMNITY OR WARRANTY PAYABLE IN RESPECT OF ANY OF THE
Borrower and Bank
are parties to that certain Negative Pledge Agreement, whereby Borrower, in
connection with Bank’s loan or loans to Borrower, has agreed, among other
things, not to sell, transfer, assign, mortgage, pledge, lease, grant a
security interest in or encumber any of its Intellectual Property without
Bank’s prior written consent.
BANK USE ONLY
Although Borrower believes that it does not infringe this patent and
that the patent is invalid, and although Borrower intends to defend this action
vigorously, the results of litigation can never be predicted with
certainty. An adverse outcome in this
litigation could have a material adverse effect on Borrower’s business,
operating results and financial condition.
Moreover, the costs of defending the action, regardless of outcome,
could be time-consuming, distract management personnel and have a negative
effect on Borrower’s business.
of Licensors and/or Licensees with Respect to Intellectual Property:
Licensees have rights to use software granted in
the ordinary course of business. As
required under the terms of the Loan and Security Agreement, none of the
licenses are exclusive licenses.
Licensors own all rights in learning content resold
by Borrower pursuant to reseller agreements with content publishers.
Certain components of Borrowers software products
are licensed from third parties as follows:
Third Party Code
Assistant, TB Publisher
InstallShield in autopackager feature
Third Party Code in Aspen/Ingenium
items such as date boxes, calendar views, etc
Reports reporting engine
Mail—interface to email systems
“Permitted Indebtedness” Existing on Closing Date:
Equipment Leases with Banc Boston Leasing as
described in UCC filings filed in Washington and Massachusetts which are
limited to specific equipment and were in effect prior to the date of this
Limited — UK subsidiary, Europe headquarters.
Canada Limited — Development office located in Halifax.
Technologies, Incorporated — No employees or operations.
Strategies, Inc. — Fluctuating number of employees, but on average, around
20. Company provides temporary workers
to other companies. Borrower owns 100%
of this entity.
Corporation — No employees or operations.
Systems, Inc. — No employees or operations.
SARL — No employees or operations.
GmbH — No employees or operations.
Japan KK — Japan joint venture with Softbank, Borrower owns approximately 35%
of this entity.
securities in cash management account, but only to the extent permitted under
the Loan and Security Agreement.
TO LOAN AND SECURITY AGREEMENT – ADDITIONAL DISCLOSURES
The exact correct corporate name of Borrower is
(attach a copy of the formation documents, e.g., articles, partnership
agreement): Click2learn, Inc.
Borrower’s State of formation: Delaware
Borrower has operated under only the following
other names (if none, so state):
xxxxx0xxxxx.xxx, inc., Asymetrix Learning Systems, Inc., Asymetrix
All other address at which the Borrower does
business are as follows (attach additional sheets if necessary and include all
110 – 110xx
Xxxxxxxx, XX 00000
Onx Xxxxxxxxxx Xxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Xxxxxxxxx, XX 00000
400 Xxxxxxx Xxx
Xxx Xxxx, XX 00000
100 Xxxxxxxxxx, Xxx.
Xxxxxxx, XX 00000
1300 Xxxxxx, Xxx. 000
Xxxx Xxxxx, XX 00000
Piece parts storage and manufacturing is done at:
Xxxxxxxx Xxxxx Xxxx
goods are stored and fulfilled from:
packaged goods are stored and fulfilled from:
0XX Xxxxxx Xxxxxxx
1Title to goods at this location remains in Borrower
until the goods are shipped.
Borrower has deposit accounts and/or investment
accounts located only at the following institutions:
Account with Bank
Xxxxxxx Mass Office
Bank of America
Bank of America-Resident and Non-resident Accounts
[All of the Accounts
Listed Below Will Be Replaced By Silicon Valley Bank Accounts Before The
Closing Date or Not Later Than November 5, 2001 in Accordance With §6.6]
Bank of America-Checking
Bank of America-STAM
4496829375-ZBA for payroll
Citi-bank AG - sponsored by Xxxxx Fargo
Acct No. 4113496016 Swift
Llxxxx Xxxx XXX, Xxxxxx
Xxxx Xx. 00000000 Xxxxx
Liens existing on the Closing Date and disclosed to and accepted by Bank
As set forth on Schedule I
Investments existing on the Closing Date and
disclosed to and accepted by Bank in writing:
As set forth on Schedule I
Indebtedness on the Closing Date and disclosed to and consented to by
Bank in writing:
The following is a list of the Borrower’s
copyrights (including copyrights of software) which are registered with the
United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
No currently shipping products are registered.
The following is a list of all software which the
Borrower sells, distributes or licenses to others, which is not
registered with the United States Copyright Office, other than third party
software for which Borrower is a reseller. (Please include versions which are
Ingenium Version 6.1;
ToolBook II Assistant Version 8.1;
ToolBook II Instructor Version 8.1.
Rapid e-Learning Development System (ReDS) Version
(These are the currently shipping versions, on
older versions, some are registered and some are not).
The following is a list of all of the Borrower’s
patents which are registered with the United States Patent Office. (Please
include name of the patent and registration number and attach a copy of the
US 5,530,856 VERIFYING MULTIMEDIA LINKING FOR A MULTIMEDIA
US 5,500,936 MULTI-MEDIA SLIDE PRESENTATION SYSTEM WITH A
MOVEABLE, TRACKED POPUP MENU WITH BUTTON AND TITLE BARS.
The following is a list of all of the Borrower’s
patents which are pending with the United States Patent Office. (Please include name of the patent and a
copy of the application.):
COMPUTER BASED INTERACTIVE LEARNING METHOD AND SYSTEM
The following is a list of all of the Borrower’s
registered trademarks material to its business. (Please include name of the trademark and a copy of the
TOOLBOOK US REG. 1,581,290
TOOLBOOK II US REG
TOOLBOOK II INSTRUCTOR US REG 2,145,733
CLICK2LEARN is not registered—application was
rejected as descriptive. Borrower is
considering re-filing in light of business changes.
INGENIUM is not registered due to change in name to
ASPEN trademark application has been filed with US PTO
Borrower is not subject to litigation which would have a material
adverse effect on the Borrower’s financial condition, except the following
(attach additional comments, if needed):
As set forth on Schedule I
Tax ID Number:
Organizational Number, if any: N/A
FORM OF LANDLORD’S CONSENT
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Loan Services
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in
the following described real property (the “Real Property”): SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL
LEGAL DESCRIPTION, commonly known as ____________________________.
(b) Click2learn, Inc., (“Borrower”), has entered into or will
enter into a Loan and Security Agreement with Silicon Valley Bank (“Bank”)
dated as of September 4, 2001 (as amended and supplemented from time to
time, the “Loan Agreement”). As a condition
to entering into the Loan Agreement, require that the undersigned consent to
the removal by Bank of the equipment, inventory and other assets covered by the
Loan Agreement, whether now owned or hereafter acquired, together with all substitutions,
renewals or replacements of and additions, improvements, and accessions to any
and all of the foregoing, and all proceeds from sales, renewals, releases or
other dispositions thereof (hereinafter collectively called “Borrower’s
Assets”) from the Real Property.
NOW, THEREFORE, the
undersigned consents to the placing of the Borrower’s Assets on the Real
Property, and agrees with Bank as follows:
1. The undersigned waives and releases
each and every right which undersigned now has, under applicable law or by virtue
of the lease for the Real Property now in effect, to levy or distrain upon for
rent, in arrears, in advance or both, or to claim or assert title to the
Borrower’s Assets that is already on said Real Property, or may hereafter be
delivered or installed thereon.
2. The Borrower’s Assets shall be
considered to be personal property and shall not be considered part of the Real
Property regardless of whether or by what means it is or may become attached or
affixed to the Real Property.
3. The undersigned will permit Bank,
or its agent or representative, to enter upon the Real Property for the purpose
of exercising any right they may have under the terms of the Loan Agreement or
otherwise, including, without limitation, the right to remove the Equipment; provided,
however, that if Bank, in removing the Borrower’s Assets damage any
improvements of the undersigned on the Real Property, Bank will, at its
expense, cause same to be repaired.
4. This agreement shall be binding
upon the heirs, successors and assigns of the undersigned and shall inure to
the benefit of each Bank and its respective successors and assigns.
WITNESS WHEREOF, the undersigned has executed this instrument at__________,
Washington day of__________, 2001.
The Real Property referenced in
the CONSENT TO REMOVAL OF PERSONAL
PROPERTY to which this Attachment 1 is attached is more fully described