REVOLVING LOAN AND SECURITY AGREEMENT 1
1. DEFINITIONS 1
1.1 SPECIAL DEFINITIONS 1
1.2 OTHER DEFINED TERMS 3
2. LINE OF CREDIT/INTEREST RATES/CHARGES 3
2.1. LINE OF CREDIT 3
2.1.1 INTEREST 3
2.1.2 CHARGES 4
2.1.3 VOLUNTARY PREPAYMENT 4
2.2 PAYMENTS 4
2.2.1 PRINCIPAL 4
2.2.2 IN EXCESS OF LINE OF CREDIT 4
2.2.3 INTEREST AND OTHER CHARGES 4
2.2.4 ACCURACY OF STATEMENTS 4
3. LINE OF CREDIT - ADDITIONAL PROVISIONS 4
3.1 PROCEDURES FOR ADVANCES 4
3.2 EACH ADVANCE 4
3.3 INELIGIBLE ACCOUNTS 5
3.4 REIMBURSEMENT FOR CHARGES 6
3.5 COLLECTIONS 6
3.6. APPLICATION OF REMITTANCES AND CREDITS 7
3.7 COLLECTION DAYS 7
3.8 POWER OF ATTORNEY 7
3.9 CONTINUING REQUIREMENTS 8
3.10 RIGHTS OF IBM CREDIT 9
3.11 RELEASE 9
3.12 ADDITIONAL REQUIREMENTS 9
3.13 AUDIT 9
4. SECURITY - COLLATERAL 9
4.1 GRANT 9
4.2 INSTRUMENTS 11
5. CONDITIONS PRECEDENT 11
5.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT 11
6. WARRANTIES, REPRESENTATIONS, AND COVENANTS 12
6.1 AFFIRMATIVE WARRANTIES, REPRESENTATIONS AND COVENANTS 12
6.2 NEGATIVE COVENANTS 15
7. DEFAULT 16
7.1 DEFINITION 16
7.2 RIGHTS OF IBM CREDIT 18
7.3 CUSTOMER 18
7.4 WAIVER 19
8. MISCELLANEOUS 19
8.1 TERMINATION 19
8.2 COLLECTION 19
8.3 DEMAND, ETC 19
8.4 ADDITIONAL OBLIGATIONS 20
8.5 INDEMNIFICATION BY CUSTOMER 20
8.6 INDEMNIFICATION BY IBM. 20
8.7 ALTERATIONS/WAIVER 20
8.8 NOTICES 20
8.9 SEVERABILITY 20
8.10 ONE LOAN 21
8.11 ADDITIONAL COLLATERAL 21
8.12 INITIAL PUBLIC OFFERINGS 21
8.13 OFFSETS 21
8.14 LIMITATION OF LIABILITY 21
8.15 TIME 21
8.16 ENTIRE AGREEMENT 21
8.17 PARAGRAPH TITLES 21
8.18 BINDING EFFECT 21
8.19 CONDITIONS TO EFFECTIVENESS 21
8.20 SUBMISSION BY CUSTOMER 21
8.21 JURY TRIAL 22
REVOLVING LOAN AND SECURITY AGREEMENT
REVOLVING LOAN AND SECURITY AGREEMENT ("Agreement") by and between IBM CREDIT
CORPORATION, with a place of business at 0000 Xxxxxxxxx Xxxxxxx Xxxxx 000, Xxx
Xxxxx, XX 00000, a Delaware corporation ("IBM Credit") and NETOBJECTS, INC.,
with a place of business at 000 Xxxxxxxxx Xxxxx, Xxxxxxx, XX 00000, a Delaware
corporation ("Customer").
1. DEFINITIONS
1.1 SPECIAL DEFINITIONS. The following terms shall have the following
respective meanings in this Agreement:
"Advance": any loan or advance made by IBM Credit to or for the account
of Customer pursuant to this Agreement.
"Accounts": as defined in the UCC.
"Advance Date": for a specific Advance, the Business Day on which IBM
Credit makes an Advance under this Agreement.
"Available Credit": at any time, (1) the Line of Credit less (2) the
Outstanding Advances at such time.
"Bloomberg": the on-line service provided by Bloomberg Financial
Services.
"Business Day": any day other than a Saturday, Sunday, other day on
which commercial banks in New York, NY are authorized or required by law to
close or other day on which IBM Credit is closed.
"Common Stock": the Customer's common stock.
"Closing Date": the date upon which all conditions precedent to the
effectiveness of this Agreement are performed to the satisfaction of IBM Credit
or waived in writing by IBM Credit.
"Collateral": as defined in Section 4.1.
"Copyrights": as defined in Section 4.1(C)(iii).
"Default": either (1) an Event of Default, or (2) any event or condition
which, but for the requirement that notice be given or time lapse or both, would
be an Event of Default.
"Delinquency Fee Rate": as defined in Attachment A.
"Effective Date of Termination": as defined in Section 8.1.
"Eligible Accounts": as defined in Section 3.3.
"Event of Default": as defined in Section 7.1.
"Guarantor": the guarantors as set forth in Attachment B.
"IBM": International Business Machines Corporation.
"IBM Indemnification": the agreement between IBM and IBM Credit whereby
IBM has indemnified IBM Credit for all losses incurred by IBM Credit under this
Agreement.
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"Initial Public Offering"; the sale of the Customer's common stock in a
bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933.
"Intercreditor Agreement"; an agreement, in form and substance
satisfactory to IBM Credit, whereby another Person having a Lien on any of the
Collateral subordinates its rights in such Collateral to IBM Credit.
"LIBOR": as of the date of determination, the thirty-day average of the
one-month (01M) London Interbank Offered Rate as published in Bloomberg for the
previous calendar month.
"Lien": any lien, claim, charge, pledge, security interest, deed of
trust, mortgage, other encumbrance or other arrangement having the practical
effect of the foregoing, including the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Line of Credit": as defined in Section 2.1.
"Material Adverse Effect": a material adverse effect (1) on the
business, operations, results of operations, assets, or financial condition of
Customer, (2) on the aggregate value of the Collateral or the aggregate amount
which IBM Credit would be likely to receive (after giving consideration to
reasonably likely delays in payment and reasonable cost of enforcement) in the
liquidation of such Collateral to recover the Obligations in full, or (3) on the
rights and remedies of IBM Credit under this Agreement.
"Note": the Convertible Revolving Credit Note executed by Customer
substantially in the form annexed hereto as Attachment D.
"Obligations": all covenants, agreements, warranties, duties,
representations, loans, advances, liabilities and indebtedness of any kind and
nature whatsoever now or hereafter arising, owing, due or payable from Customer
to IBM Credit or whether primary or secondary, joint or several, direct,
contingent, fixed or otherwise, secured, unsecured or arising under this
Agreement, the Other Agreements or any agreements previously, now or hereafter
executed by Customer and delivered to IBM Credit, or by oral agreement or
operation of law and whether or not evidenced by instruments of indebtedness.
Obligations shall include, without limitation, any third party claims against
Customer satisfied or acquired by IBM Credit.
"Other Agreements": all security agreements, mortgages, leases,
instruments, documents, guarantees, schedules of assignment, contracts and other
agreements previously, now or hereafter executed by Customer and delivered to
IBM Credit or delivered by or on behalf of Customer to a third party and
assigned to IBM Credit by operation of law or otherwise.
"Outstanding Advances": at the time of determination, the unpaid
principal amount of all Advances made by IBM Credit.
"Patents": as defined in Section 4.1(C)(i).
"Periodic Rate": the Revolver Financing Charge or Delinquency Fee
Rate, as the case may be, multiplied by the quotient of the number of days
elapsed in the applicable billing period divided by 360.
"Permitted Liens": as defined in Attachment B.
"Permitted Prior Liens": as defined in Attachment B.
"Person": any individual, association, firm, corporation, governmental
body, agency or instrumentality whatsoever.
"Policies": as defined in Section 6.1 (T).
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"Revolver Financing Charge": as defined in Attachment A.
"Trademarks": as defined in Section 4.1(C)(ii).
"UCC": the Uniform Commercial Code in effect from time to time in the
State of New York.
"Venture": Venture Banking Group, a division of Cupertino National
Bank.
"Warrant of Distress for Rent or Taxes": a remedy, whether at common
law or by statute, for the collection of rent or taxes in arrears which permits
the landlord or applicable taxing authority, as the case may be, to go upon
Customer's premises and seize anything there as security for the rent or taxes
in arrears, and hold it without sale until the rental or taxes are paid.
1.2 OTHER DEFINED TERMS. Terms not otherwise defined in this Agreement which
are defined in the UCC shall have the meanings assigned to them therein.
2. LINE OF CREDIT/INTEREST RATES/CHARGES
2.1. LINE OF CREDIT. Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that is
the earlier of (i) the date on which this Agreement is terminated pursuant to
Section 8.1 and (ii) the date on which IBM Credit terminates the Credit Line
pursuant to Section 7.2, IBM Credit agrees to extend to the Customer a line of
credit (the "Line of Credit") in the amount set forth in Attachment A pursuant
to which IBM Credit will make to the Customer, from time to time, Advances in an
aggregate amount at any one time outstanding not to exceed the Line of Credit.
Notwithstanding any other term or provision of this Agreement, IBM Credit may,
at any time and from time to time, in its sole discretion (x) temporarily
increase the amount of the Line of Credit above the amount set forth in
Attachment A and decrease the amount of the Line of Credit back to the amount of
the Line of Credit set forth in Attachment A, in each case upon written notice
to the Customer and (y) make Advances pursuant to this Agreement upon the
request of Customer in an aggregate amount at any one time outstanding in excess
of the Line of Credit.
2.1.1 INTEREST. (A) Subject to paragraph (B) below, each Advance shall accrue
interest at a rate per annum equal to the lesser of (i) the Revolver Financing
Charge and (ii) the highest rate from time to time permitted by applicable law.
Amounts received from Customer in excess of such highest rate from time to time
permitted by applicable law shall be considered reductions to principal to the
extent of such excess.
(B) If any amount owed under this Agreement is not paid when due (whether at
maturity, by acceleration or otherwise), the unpaid amount will bear interest
from and including its due date to and including the date IBM Credit receives
payment. Such interest will accrue at a rate per annum equal to the lesser of
(i) the Delinquency Fee Rate and (ii) the highest rate from time to time
permitted by applicable law.
Amounts received from Customer in excess of such highest rate from time to time
permitted by applicable law shall be considered reductions to principal to the
extent of such excess.
(C) The Revolver Financing Charge and the Delinquency Fee Rate are computed
on the basis of a 360-day year for the actual number of days elapsed. The
Revolver Financing Charge for each billing period shall be calculated by
multiplying the Periodic Rate for the billing period by the Average Daily
Balance (as hereinafter defined) of the Advances outstanding during said period
which were not past-due. The Delinquency Fee Rate for each billing period shall
be calculated by multiplying the applicable Periodic Rate for the billing period
by the applicable Average Daily Balance of the Advances outstanding during said
period which were past-due. The "Average Daily Balance" of the outstanding
Advances shall be equal to the sum of the principal balances of the Advances as
of each day during the billing period, divided by the number of days in the
billing period.
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2.1.2 CHARGES. Customer hereby agrees to pay to IBM Credit the charges set
forth in the "Other Charges" section of Attachment A to this Agreement. Customer
hereby acknowledges that any such charges are not interest but that such
charges, if unpaid, will constitute part of the principal from time to time
outstanding.
2.1.3 VOLUNTARY PREPAYMENT. Customer may at any time prepay in whole or in
part all amounts owed under this Agreement. IBM Credit may, in its sole
discretion, apply payments first to pay interest and other amounts owing under
this Agreement and then to pay the principal amount owed by the Customer. IBM
Credit may, but shall not be obligated to, apply principal payments to the
oldest (earliest) Advances first.
2.2 PAYMENTS.
2.2.1 PRINCIPAL. Customer shall pay in full all unpaid principal of each
Advance upon the earilier of the Effective Date of Termination and the
expiration of the Agreement.
2.2.2 IN EXCESS OF LINE OF CREDIT. Customer shall, on any Business Day on
which the aggregate outstanding principal amount of all Advances (including
amounts committed to, but not yet funded, by IBM Credit) exceeds the then
applicable Line of Credit, make a mandatory prepayment of the outstanding
principal amount of Advances in an amount at least equal to such excess.
2.2.3 INTEREST AND OTHER CHARGES. Interest and Other Charges owed under this
Agreement, and any charges hereafter agreed to by the parties are payable
monthly on receipt of IBM Credit's xxxx or statement or IBM Credit may, in its
sole discretion, add interest and Other Charges to Customer's outstanding loan
balance.
2.2.4 ACCURACY OF STATEMENTS. Each statement of account rendered by IBM Credit
to Customer and relating to the Obligations shall be presumed to be correct and
accurate and shall constitute an account stated that is fully binding upon
Customer unless, within ten (10) Business Days after the statement is received
by Customer, Customer shall give to IBM Credit written objection specifying the
error or errors, if any, contained in that statement. Customer shall be deemed
to have received such statement three (3) Business Days from the date IBM Credit
mails such statement by United States first- class mail, postage prepaid, and
properly addressed to Customer.
3. LINE OF CREDIT - ADDITIONAL PROVISIONS
3.1 PROCEDURES FOR ADVANCES. Customer shall deliver to IBM Credit a written
request ("Request for Advance") for each Advance. Customer may deliver a Request
for Advance via facsimile transmission. The Request for Advance shall specify
(i) the requested Advance Date and (ii) the amount of the requested Advance and
shall be substantially in the form annexed hereto as Attachment J or in some
other form agreed to by IBM Credit. Customer, after giving effect to the
repayment of any Outstanding Advances to be made on an Advance Date, shall not
request an Advance in excess of the Available Credit on such date.
3.2 EACH ADVANCE. The submission by Customer of a Request for Advance and the
receipt by the Customer of the proceeds of any Advance on an Advance Date shall
be deemed to be a representation and warranty by the Customer that, as of and on
such Advance Date, the following statements set forth in (A) through (C) are
true:
(A) The representations and warranties contained in this Agreement and in
each Other Agreement are true and correct as though made on and as of such
Advance Date;
(B) No event has occurred and is continuing, or would result from such
Advance or the application of the proceeds thereof, which could reasonably be
expected to have a Material Adverse Effect;
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(C) Both before and after giving effect to the making of such Advance, the
Outstanding Advances do not exceed the Line of Credit; and
(D) No Default or Event of Default exists at the time the Request for
Advance is made.
3.3 INELIGIBLE ACCOUNTS. IBM Credit and Customer agree that IBM Credit shall
have the sole right to determine eligibility of Accounts from an Account debtor
(the "Eligible Accounts") for purposes of determining the value of the
Collateral; however, without limiting such right, the following Accounts will be
deemed to be not Eligible Accounts for purposes of determining such value:
(A) Accounts created from the sale of goods and services on non-standard
terms and/or that allow for payment to be made later than thirty (30) days from
the date of sale;
(B) Accounts unpaid more than ninety (90) days from date of invoice;
(C) Accounts payable by an Account debtor if fifty percent (50%) or more of
the outstanding balance of all Accounts payable by such Account debtor remains
unpaid for more than ninety (90) days from the date of invoice;
(D) Accounts payable by an Account debtor that is an officer, employee,
agent, parent, guarantor, subsidiary, stockholder or affiliate of Customer or
is related to or has common shareholders, officers or directors with Customer,
other than IBM;
(E) Accounts arising from consignment sales;
(F) Accounts with respect to which the payment by the Account debtor is or
may be conditional;
(G) Accounts payable by any Account debtor that (i) is not a commercial or
institutional entity, or (ii) is not a resident of the United States;
(H) Accounts payable by any Account debtor to which Customer is or may
become liable for goods sold or services rendered by such Account debtor to
Customer;
(I) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(J) Accounts arising from the sale or lease of goods that have been used
for demonstration purposes or loaned by the Customer to another party;
(K) Accounts which are progress payment accounts;
(L) Accounts payable by any Account debtor that is, or Customer knows will
become, subject to proceedings under United States Bankruptcy Law or other law
for the relief of debtors;
(M) Accounts which are not payable in US dollars;
(N) Accounts payable by any Account debtor that is a remarketer of computer
hardware and software products and whose purchases of such products from
Customer have been financed by another person, other than IBM Credit, who pays
the proceeds of such financing directly to Customer on behalf of such debtor
("Third Party Financer") unless (i) such Third Party Financer does not have a
separate financing relationship with Customer or (ii) such Third Party
Financer has a separate financing relationship with Customer and has waived its
right to set off its obligations to Customer;
(O) Accounts arising from the sale or lease of goods which are billed in
advance of shipment by Customer;
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(P) Accounts as to which IBM Credit does not have a valid, perfected, first
priority security interest;
(Q) Accounts with respect to which Customer has permitted or agreed to any
extension, compromise or settlement, or made any change or modification of any
kind or nature, including, but not limited to, any change or modification to the
terms relating thereto;
(R) Accounts which do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices
and purchase orders relating thereto;
(S) Accounts which are discounted for the full payment term specified in
Customer's terms and conditions with its Account debtors, or for any longer
period of time;
(T) Accounts on cash on delivery (COD) terms;
(U) Accounts arising from maintenance or service contracts which are billed
in advance of full performance of service;
(V) Accounts arising from bartered transactions;
(W) Accounts arising from incentive payments, rebates, discounts, credits,
and refunds from a supplier; and
(X) Any and all other Accounts which IBM Credit deems, in its reasonable
discretion, to be ineligible.
3.4 REIMBURSEMENT FOR CHARGES. Customer agrees to reimburse IBM Credit for
all charges paid by IBM Credit with respect to collection of checks and other
items of payment, all fees relating to the use and maintenance of a lockbox
account and with respect to remittances of proceeds of the loans hereunder.
3.5 COLLECTIONS. By no later than January 31, 1998, Customer shall establish
and maintain a lockbox (the "Lockbox"), at the address set forth in Attachment A
with the financial institution listed in Attachment A (the "Bank") pursuant to
an agreement between Customer and Bank in form and substance satisfactory to IBM
Credit. Customer shall also establish and maintain a deposit account which shall
contain only proceeds of Customer's Accounts (the "Special Account") with the
Bank. By no later than January 31, 1998, Customer shall enter into and maintain
a contingent blocked account agreement with the Bank for the benefit of IBM
Credit in form and substance satisfactory to IBM Credit pursuant to which, among
other things, such Bank shall agree that, upon notice from IBM Credit,
disbursements from the Special Account shall be made only as IBM Credit shall
direct. Customer shall not change the financial institution with which the
Special Account is established until a similar contingent blocked account for a
new Special Account has been executed by IBM Credit, Customer and such new
financial institution.
(B) Customer shall instruct all Account debtors to remit payments directly
to the Lockbox. In addition, Customer shall have such instruction printed in
conspicuous type on all invoices. Customer further agrees that it shall not
deposit or permit any deposits of funds other than remittances paid in respect
of the Account into the Special Account or permit any commingling of funds with
such remittances in the Lockbox or Special Account.
(C) IBM Credit may at its option notify any Account debtor or debtors of the
assignment of Accounts, and directly collect the same. All payments received by
Customer from its Account debtors, whether in the form of money, checks, notes,
drafts, or other things of value or items of payment shall be received by
Customer solely as agent for IBM Credit. Customer shall properly endorse and
deposit into the Special Account, on the day of receipt thereof, all original
checks, drafts, acceptances, notes and other evidences of, or properties
constituting payment of, or on account of, Accounts, including all cash.
Customer shall make entries on its books and records in a form satisfactory to
IBM Credit and shall keep a separate account on its record book of all
collections received thereon. Until deposited in the Special Account, Customer
shall keep all remittances received in respect of Accounts separate and apart
from Customer's
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funds so that they are capable of identification as the proceeds of Accounts in
which IBM Credit has a security interest. .
3.6. APPLICATION OF REMITTANCES AND CREDITS. Customer shall apply all
remittances against the aggregate of Customer's outstanding Accounts no later
than the end of the Business Day on which such remittances are deposited into
the Special Account. Customer also agrees to apply each remittance against its
respective Account no later than three (3) Business Days from the date such
remittance is deposited into the Special Account. In Addition, Customer shall
promptly apply any credits owing in respect to any Account when due.
3.7 COLLECTION DAYS. All amounts received by IBM Credit in respect of any
Account may be credited by IBM Credit to the repayment of the Obligations under
this Agreement or, in IBM Credit's sole and absolute direction, may be disbursed
to Customer. The crediting of amounts received by IBM Credit in respect of such
Obligations shall in all cases be subject to the final collection thereof.
3.8 POWER OF ATTORNEY. Customer hereby irrevocably appoints IBM Credit (and
any person designated by it) as Customer's true and lawful attorney-in-fact with
full power to at any time, in good faith and in compliance with commercially
reasonable standards, in the sole and absolute discretion of IBM Credit:
(A) sign the name of Customer on any document or instrument that IBM Credit
shall deem necessary or appropriate to perfect and maintain perfected the
security interest in the Collateral contemplated under this Agreement and the
Other Agreements;
(B) endorse the name of Customer upon any of the items of payments or
proceeds and deposit the same in the account of IBM Credit for application to
the Obligation; and
upon the occurrence and during the continuance of an Event of Default as defined
in Section 7.1 hereof:
(C) demand payment, enforce payment and otherwise exercise all Customer's
rights and remedies with respect to the collection of any Accounts;
(D) settle, adjust, compromise, extend or renew any Accounts;
(E) settle, adjust or compromise any legal proceedings brought to collect
any Accounts;
(F) sell or assign any Accounts upon such terms, for such amounts and at
such time or times as IBM Credit may deem advisable;
(G) discharge and release any Accounts;
(H) prepare, file and sign Customer's name on any proof of claim or similar
document against any Account debtor;
(I) prepare, file and sign Customer's name on any notice of lien, claim of
mechanic's lien, assignment or satisfaction of lien or mechanic's lien, or
similar document in connection with any Accounts;
(J) endorse the name of Customer upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar document or
agreement relating to any Account or goods pertaining thereto;
(K) endorse the name of Customer upon any of the items of payment or
proceeds and deposit the same in the account of IBM Credit for application to
the Obligations;
(L) sign the name of Customer to requests for verification of Accounts and
notices thereof to Account debtors;
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(M) sign the name of Customer on any document or instrument that IBM Credit
shall deem necessary or appropriate to perfect and maintain perfected the
security interest in the Collateral contemplated under this Agreement and the
Other Agreements;
(N) make, settle and adjust claims under the Policies and endorse Customer's
name on any check, draft, instrument or other item of payment of the proceeds of
the Policies; and
(O) take control in any manner of any item of payment or proceeds and for
such purpose to notify the postal authorities to change the address for delivery
of mail addressed to Customer to such address as IBM Credit may designate.
The power of attorney granted by this Section 3.8 is for value and coupled with
an interest and is irrevocable until the later of the payment in full of the
Obligations and the termination of this Agreement.
3.9 CONTINUING REQUIREMENTS. Customer shall:
(A) from time to time, if required by IBM Credit, immediately upon their
creation, deliver to IBM Credit copies of all invoices, delivery evidences and
other documents relating to each Account;
(B) within three (3) Business Days after Customer's learning thereof, inform
IBM Credit in writing of any rejection of goods or services by any Account
debtor, delays in delivery of goods or performance of services, non-performance
of contracts and of any assertion of any claim, offset or counterclaim by any
Account debtor;
(C) other than in the ordinary course of business as generally conducted by
Cutsomer over a period of time, not permit or agree to any extension, compromise
or settlement or make any change or modification of any kind or nature with
respect to any account, including any of the terms relating thereto;
(D) within three (3) Business Days after Customer's learning thereof,
furnish to and inform IBM Credit in writing of all adverse information relating
to the financial condition of any Account debtor if such information could
reasonably be expected to have a Material Adverse Effect;
(E) keep all goods rejected or returned by any Account debtor and all goods
repossessed or stopped in transit by Customer from any Account debtor segregated
from other property of Customer, holding the same in trust and as trustee for
IBM Credit until Customer applies a credit against such Account debtor's
outstanding obligations to Customer or sells such goods in the ordinary course
of business, whichever occurs first;
(F) stamp or otherwise xxxx chattel paper and instruments now owned or
hereafter acquired by it to show that the same are subject to IBM Credit's
security interest and immediately thereafter deliver or cause such chattel
paper and instruments to be delivered to IBM Credit or any agent designated by
IBM Credit with appropriate endorsements and assignments to vest title and
possession in IBM Credit;
(G) provide to IBM Credit a detailed aging report of its Accounts, which
shall include its accounts receivable ledger and its on-line aging of Accounts
and any other report listing other Collateral that IBM Credit may reasonably
request, in a format acceptable to IBM Credit, no later than the fifteenth
(15th) day of each month and containing information as of the close of business
on the last day of the preceding month.
3.10 RIGHTS OF IBM CREDIT. IBM Credit may, without notice to Customer and at
any time or times hereafter:
(A) verify with Account debtors or others the validity, amount or any other
matter relating to any Account by mail, telephone or other means in the name of
Customer or IBM Credit; and
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(B) take control in any manner of any cash or non-cash items of payment or
proceeds of Accounts and of any rejected, returned, repossessed or stopped in
transit goods relating to Accounts.
3.11 RELEASE. Customer releases IBM Credit from any and all claims and causes
of action which Customer may now or hereafter have for any loss or damage to it
claimed to be caused by or arising from:
(A) any failure of IBM Credit to protect, enforce or collect, in whole or in
part, any Account;
(B) IBM Credit's notification to any Account debtors thereon of IBM Credit's
security interest in any of the Accounts;
(C) IBM Credit's directing any Account debtor to pay any sum owing to
Customer directly to IBM Credit; and
(D) any other act or omission to act on the part of IBM Credit, its
officers, agents or employees, except for its gross negligence or willful
misconduct.
IBM Credit shall have no obligation to preserve rights to Accounts against prior
parties.
3.12 ADDITIONAL REQUIREMENTS. Customer agrees to comply with the requirements
set forth in Attachment A to this Agreement.
3.13 AUDIT. Customer shall at all times permit IBM Credit (or any person
designated by it) upon reasonable notice demand, during Customer's usual
business hours, to have access to audit, examine and check the Collateral,
Customer's other assets and any and all of Customer's books, records, files and
business procedures and practices, and permit the copying of the same and the
making of abstracts therefrom.
4. SECURITY - COLLATERAL
4.1 GRANT. To secure Customer's payment and performance of the Obligations and
to secure Customer's prompt, full and faithful performance and observance of all
of the provisions under this Agreement and the Other Agreements, Customer hereby
grants IBM Credit a security interest in all of Customer's right, title and
interest in and to the following, whether now owned or hereafter acquired or
existing and wherever located:
(A) all inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(B) all accounts, contract rights, chattel paper, instruments, deposit
accounts, general intangibles and other obligations of any kind, and all rights
now or hereafter existing in and to all mortgages, security agreements, leases
or other contracts securing or otherwise relating to any of the same;
(C) all intellectual property and trade secrets, including, without
limitation,
(i) all patents, patent applications and patentable inventions and (1)
the inventions and improvements described and claimed therein (2) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms
for which the same may be granted; (3) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to xxx for past, present and future
infringement; and (4) any other rights and benefits relating to said patents,
applications and inventions including any rights as a licensor or licensee of
said patents, applications and inventions (the "Patents");
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(ii) all trademarks, trademark registrations, trademark applications,
service marks, service xxxx registrations and service xxxx applications, trade
names, tradestyles, and the goodwill underlying those trademarks and service
marks and (1) any similar marks or amendments, modifications and renewals
thereof and the goodwill represented by those and any legal equivalent in a
foreign country for the full term or terms for which the same may be granted;
(2) all rights to income, royalties, profits, damages and other rights relating
to said trademarks and service marks including the right to xxx for past,
present or future infringement; and (3) any other rights and benefits relating
to said trademarks and service marks including any rights as a licensor or
licensee of said trademark and service xxxx (the "Trademarks");
(iii) all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, source codes and object codes,
computer software, technical knowledge and processes, formal or informal
licensing arrangements, and all property embodying or incorporating such
copyrights and (1) any similar rights or amendments, modifications and renewals
thereof and any legal equivalent in a foreign country for the full term or terms
for which the same may be granted; (2) all rights to income, royalties, profits,
damages and other rights relating to said copyrights including the right to xxx
for past, present and future infringement; and (3) any other rights and benefits
relating to said copyrights (the "Copyrights");
(D) all substitutions and replacements for all of the foregoing;
(E) all books and records pertaining to any of the foregoing: and
(F) all proceeds of all of the foregoing and, to the extent not otherwise
included, all payments under insurance or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
Customer covenants and agrees with IBM Credit that: (a) the security interest
granted under this Agreement is in addition to any other security interest from
time to time held by IBM Credit; (b) IBM Credit may realize upon all or part of
any Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (c) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of
Customer to IBM Credit pursuant to this Agreement and the Other Agreements.
4.2 INSTRUMENTS. Customer shall execute and deliver, or cause to be executed
and delivered, to IBM Credit at such time or times as IBM Credit may request,
all financing statements, continuation statements, security agreements,
assignments, certificates, certificates of title, applications for vehicle
titles, affidavits, reports, notices, schedules of accounts, and other
documents, instruments, agreements and other papers, and take any other action,
that IBM Credit may deem desirable to create, confirm, perfect or maintain
perfected IBM Credit's security interest in the Collateral. Customer shall make
appropriate entries on its books and records disclosing IBM Credit's security
interest in the Collateral.
5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT. The
effectiveness of this Agreement is subject to the satisfaction of, or waiver by
IBM Credit of, IBM Credit's receipt of the following and each of the following
being in full force and effect:
(A) this Agreement executed and delivered by Customer and IBM Credit;
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(B) the Note executed and delivered by Customer;
(C) (i) copies of the resolutions of the Board of Directors of Customer
certified by the secretary or assistant secretary of Customer authorizing the
execution, delivery and performance of this Agreement and each Other Agreement
executed and delivered in connection herewith, (ii) a certificate of the
secretary or an assistant secretary of Customer in form and substance
satisfactory to IBM Credit, certifying the names and true signatures of the
officers of Customer authorized to sign this Agreement and the Other Agreements
and (iii) copies of the articles of incorporation and by-laws of Customer
certified by the secretary or assistant secretary of Customer;
(D) certificates dated as of a recent date from the Secretary of State or
other appropriate authority evidencing the good standing of Customer in the
jurisdiction of its organization and in each other jurisdiction where the
ownership or lease of its property or the conduct of its business requires it to
qualify to do business;
(E) copies of all approvals and consents from any Person in each case in
form and substance satisfactory to IBM Credit, which are required to enable
Customer to authorize, or required in connection with, (i) the execution,
delivery or performance of this Agreement and each of the Other Agreements and
(ii) the legality, validity, binding effect or enforceability of this Agreement
and each of the Other Agreements;
(F) a lockbox agreement executed by Customer and its Bank, in form and
substance satisfactory to IBM Credit;
(G) a favorable opinion of counsel for Customer, in form and substance
satisfactory to IBM Credit;
(H) the Trademark Security Agreement executed and delivered by Customer
substantially in the form annexed hereto as Attachment E;
(I) the Copyright Security Agreement executed and delivered by Customer
substantially in the form annexed hereto as Attachment F;
(J) the Patent Security Agreement executed and delivered by Customer;
substantially in the form annexed hereto as Attachment G;
(K) UCC-1 Financing Statements for each jurisdiction requested by IBM Credit
executed by Customer;
(L) an Acknowledgment of Payment and Termination Agreement executed by
Venture Banking Group, a division of Cupertino National Bank ("Venture"), in
form and substance satisfactory to IBM Credit;
(M) UCC-3 Termination Statements from Venture terminating any and all
security interest which it may have in any of the Collateral and any other
documentation required to terminate Venture's security interest in any and all
of the Patents, Trademarks and Copyrights;
(N) the Warrant Agreement executed and delivered by Customer substantially
in the form annexed hereto as Attachment H;
(O) the First Amendment to the Registration Rights Agreement executed and
delivered by Customer, substantially in the form annexed hereto as Attachment I;
(P) a list of :
(i) all creditors possessing a security interest or Lien on accounts
receivable which creditors shall be required to terminate their UCC filings:
and
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(ii) all creditors possessing a security interest or Lien on any of
the Collateral which is superior to IBM Credit's security interest in such
Collateral; such creditors will be required to execute an Intercreditor
Agreement ;
(Q) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as IBM Credit shall have reasonably
requested, including, but not limited to those specified in Attachment A.
6. WARRANTIES, REPRESENTATIONS, AND COVENANTS
6.1 AFFIRMATIVE WARRANTIES, REPRESENTATIONS AND COVENANTS. Except as otherwise
specifically provided in any of the Other Agreements or in Schedule A to this
Agreement and attached hereto, Customer warrants and represents to and covenants
with IBM Credit that:
(A) Each Account is based on an actual and bona fide sale and delivery of
goods or rendition of services, made or performed by Customer, in the ordinary
course of its business; the Account debtors have accepted such goods or
services, owe and are obligated to pay the full amounts stated in the invoices
according to their terms, without any dispute, offset, defense or counterclaim
known to Customer and have the ostensible authority to contract; and there are
no proceedings or actions known to Customer which are pending or threatened
against any Account debtor that might result in any material adverse change in
such Account debtor's financial condition;
(B) Customer has and shall at all times have good and valid title to all
Collateral free and clear of all liens, security interests, encumbrances and
claims of any Person, except for Permitted Liens;
(C) Upon the filing of the UCC financing statements, the Copyright Security
Agreement, the Trademark Security Agreement and the Patent Security Agreement
with appropriate agencies, IBM Credit's security interest in the Collateral is
and shall, upon payoff of the borrowings from Venture, at all times constitute a
perfected security interest in the Collateral which security interest is not and
shall at no time become subordinate or junior to the security interest, lien,
encumbrance or claim of any other Person except for Permitted Prior Liens;
(D) Customer is and shall at all times during the term of this Agreement be
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation set forth in the preamble to this
Agreement and in Attachment B and qualified and licensed to do business in each
state, county, or parish in which the nature of its business or property
requires it to be qualified or licensed;
(E) Customer has the right and is duly authorized to enter into this
Agreement and the Other Agreements and the execution, delivery and performance
of this Agreement and the Other Agreements by the Customer do not and will not
violate Customer's certificate of incorporation or by-laws, any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to Customer or any provisions of any
indenture, agreement, document, instrument or undertaking to which Customer is
now or hereafter becomes a party or by which it is, may be or hereafter becomes
bound;
(F) all financial statements and information relating to Customer which have
been or may hereafter be delivered by Customer to IBM Credit are true and
correct and have been, and upon delivery will be, prepared in accordance with
generally accepted accounting principles and there has been no material adverse
change in the financial or business condition of Customer since the submission
of any such financial information to IBM Credit;
(H) Customer has registered the Copyright for "NetObjects Fusion" with the
U.S, Copyright office and Customer will use its best efforts to register all
future works of authorship that may be the subject matter of a copyright;
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(I) there are, and shall be, no actions or proceedings pending or threatened
against Customer and no change or development involving a prospective change,
which in any such case, has had or could reasonably be expected to have a
material adverse effect on (i) Customer's business (financial or otherwise),
(ii) the value of the Collateral or the amount which IBM Credit would be likely
to receive in the liquidation of such Collateral, (iii) the Customer's ability
to perform its Obligations, or (iv) the rights and remedies of IBM Credit under
this Agreement or the Other Agreements;
(J) Customer shall maintain all of its properties (business and otherwise)
in good condition and repair and pay and discharge all costs of repair and
maintenance thereof and all rental and mortgage payments and related charges
pertaining thereto;
(K) Customer will use commercially reasonable efforts to collect all
Accounts owed;
(L) Customer has duly filed and shall hereafter duly file all federal,
state, local and other governmental tax returns which it is required by law to
file;
(M) all taxes, levies, assessments and governmental charges of any nature
which are or may become due by Customer have been and will be fully paid when
due and Customer shall promptly pay when due all such tax liabilities which may
hereafter accrue;
(N) Customer shall maintain a system of accounting in accordance with
generally accepted accounting principles and ledger and account records which
contain such information as may be reasonably requested by IBM Credit;
(O) Customer shall deliver to IBM Credit:
(i) within ninety (90) days after the end of each of Customer's fiscal
years (except that for fiscal year 1998 Customer shall deliver to IBM Credit
within one hundred twenty (120) days after the end of such fiscal year), a
reasonably detailed balance sheet and a reasonably detailed profit and loss
statement covering Customer's operations for such fiscal year, prepared in
accordance with generally accepted accounting principles, audited by an
independent certified public accountant satisfactory to IBM Credit and
containing an opinion of such public accountant in form and substance
satisfactory to IBM Credit,
(ii) within forty-five (45) days after the end of each of Customer's
first three fiscal quarters, Customer shall deliver to IBM Credit a reasonably
detailed balance sheet as of the last day of such quarter and profit and loss
statement covering Customer's operations for such quarter (subject to normal
year-end audit adjustments) prepared in accordance with generally accepted
accounting principles,
(iii) within fifteen (15) days after the end of each calendar month, a
collateral management report substantially in the form of Attachment C and as of
the last day of such calendar month,
(iv) within sixty (60) days after the end of Customer's fiscal year,
and as reasonably requested by IBM Credit from time to time, pro forma income
statement, balance sheet and cash flow statement for the next twelve (12) months
or through the then current fiscal year and the following fiscal year,
(v) within sixty (60) days after the end of Customer's fiscal year, and
as reasonably requested by IBM Credit from time to time, a business narrative
that at a minimum should include an explanation of how Customer plans to
accomplish significant changes in revenue, gross profit margin, expenses,
operating profit margin and net profit. The Customer's business strategy,
anticipated business climate, and the headcount that will produce the projected
financial results shall also be included, and
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(vi) promptly upon the request therefor by IBM Credit, any other report
requested by IBM Credit relating to the Collateral or the financial condition
of Customer. Each report, statement, or document delivered or caused to be
delivered to IBM Credit under this Subsection 6.1 (O) shall be accompanied by
the certificate of an authorized officer of Customer to the effect that to the
best of such officer's knowledge, after due diligence, the same is complete and
correct and thoroughly and accurately presents the financial condition of
Customer and that there exists on the date of delivery of said certificate no
condition or event which constitutes a Default or Event of Default under this
Agreement or any of the Other Agreements;
(P) Customer shall deliver to IBM Credit by January 31, 1997 a guaranty
executed by Perseus U.S. Investors, L.L.C. ("Perseus") whereby Perseus
guarantees 7.5% of the Obligations.
(Q) Customer shall promptly supply IBM Credit with such other information
concerning its affairs as IBM Credit from time to time hereafter may reasonably
request.
(R) The address of the principal place of business and chief executive
office of Customer is as set forth in Attachment B to this Agreement. The books
and records of Customer, and all of its chattel paper and records of Accounts,
are maintained at such location. There is no location in which Customer has any
assets, equipment or inventory (except for vehicles and inventory in transit for
processing) other than those locations identified in Attachment B. There is no
location in which Customer has a place of business other than those locations
identified in Attachment B pursuant to the preceding sentence and those other
locations identified in Attachment B. Attachment B also contains a complete
list of the legal names and addresses of each warehouse at which Customer's
inventory is stored. All receipts received by Customer from any warehouseman
shall state that the goods covered shall be delivered only to Customer. Customer
agrees to notify IBM Credit in writing prior to the effective date of any change
in the information listed in Attachment B and will use its best efforts to give
at least 30 days prior notice of such change but in no case shall such notice be
less than five (5) days prior notice of such change.
(S) Customer agrees that it shall give IBM Credit thirty (30) days advance
notice prior to any change in Customer's identity, name or form of ownership and
will use its best efforts to give IBM Credit prompt notice of a change in
management but in no event less than five (5) days prior notice.
(T) Customer, at its sole expense, shall keep and maintain insurance (with
companies mutually acceptable to IBM Credit and Customer) with respect to its
properties and business against such casualties, contingencies and liabilities
(including, without limitation, business interruption insurance) and of such
types and in such amounts as are customary in the industries in which Customer
is engaged, and will furnish to IBM Credit an annual certification from the
respective insurers (or their respective agents) of the extent of all insurance
maintained by the Customer in accordance with this Section 6.1(S). Each of the
insurance policies ("Policies") shall contain an endorsement, in a form
satisfactory to IBM Credit, showing loss payable to IBM Credit; upon receipt of
proceeds by IBM Credit the same shall be applied on account of Obligations.
Customer agrees to instruct each insurer to give IBM Credit, by endorsement upon
the Policy issued by it or by independent instruments furnished to IBM Credit,
at least ten (10) days' written notice before any Policy shall be altered or
canceled and that no act or default of Customer or any other person shall affect
the right of IBM Credit to recover under the Policies. Customer hereby directs
all insurers under the Policies to pay all proceeds directly to IBM Credit.
Without limiting the generality of the foregoing, Customer shall keep and
maintain, at its sole expense, the Collateral insured for an amount not less
than the amount set forth in writing by IBM Credit from time to time against all
loss or damage under an "all risk" Policy with companies mutually acceptable to
IBM Credit and Customer, with a lender's loss payable endorsement or mortgagee
clause in form and substance reasonably satisfactory to IBM Credit designating
that any loss payable thereunder with respect to such Collateral shall be
payable to IBM Credit. If Customer fails to pay any cost, charges or premiums,
or if Customer fails to insure the Collateral, IBM Credit may pay such costs,
charges or premiums. Any amounts paid by IBM Credit hereunder shall be
considered an additional debt owed by Customer to IBM Credit and are due and
payable immediately upon receipt of an invoice by IBM Credit.
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(U) Customer shall advise IBM Credit of the commencement or institution of
legal proceedings filed against the Customer subsequent to the execution of this
Agreement before any court, administrative board or tribunal which, in the event
of an adverse decision to Customer, could have a material adverse effect on the
Customer's condition (financial or otherwise), operations, properties or
prospects or the Customer's ability to perform its Obligations or the rights and
remedies of IBM Credit under this Agreement and the Other Agreements.
(V) Customer acknowledges and agrees that Customer shall comply with the
financial covenants and other covenants set forth in the attachments, exhibits
and other addenda incorporated herein and made a part of this Agreement.
(W) Customer agrees that IBM Credit reserves the right to, on a quarterly
basis, adjust the financial covenant pertaining to Net Profit after Tax or add a
financial covenant.
(X) At any time and from time to time, upon the request of IBM Credit, and
at the sole expense of Customer, Customer will promptly and duly execute and
deliver such further instruments and documents and take such further action as
IBM Credit may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction with
respect to the security interests granted herein and the payment of any and all
recording taxes and filing fees in connection therewith and the execution or
filing of any instrument statement, document or agreement required under any
statute with respect to the security interest granted to IBM Credit in any of
Customer's intellectual property.
6.2 NEGATIVE COVENANTS. Customer agrees with IBM Credit that Customer will
not at any time (without IBM Credit's express prior written consent):
(A) other than in the ordinary course of its business, sell, lease or
otherwise dispose of or transfer any of its assets;
(B) merge or consolidate with another corporation;
(C) acquire any other corporation;
(D) enter into any transaction not in the usual course of its business which
might in any material way adversely affect the ability of Customer to repay the
Obligations;
(E) guarantee or indemnify or otherwise become in any way liable with
respect to the obligations of any person, except by endorsement of instruments
or items of payment for deposit to the general account of Customer or which are
transmitted or turned over to IBM Credit on account of the Obligations;
(F) redeem, retire, purchase or otherwise acquire, directly or indirectly,
any material portion of Customer's capital stock, except for repurchases of
stock from employees and conversion of convertible securities pursuant to
agreements or Customer's certificate of incorporation provided such exception
for repurchases or stock and/or conversion of convertible securities does not
cause Customer to violate any financial covenants contained in this Agreement or
could reasonably be expected to have a Material Adverse Effect;
(G) make any change in Customer's capital structure or in any of its
business objectives, purposes or operations which might in any way materially
adversely affect the ability of Customer to repay the Obligations;
(H) other than in the ordinary course of its business, make any distribution
of Customer's property or assets provided that Customer shall not make any such
distribution in the ordinary course of its business if such distribution shall
cause Customer to violate any financial covenants contained in this Agreement or
could reasonably be expected to have a Material Adverse Effect;
17
(I) incur any debts outside of the ordinary course of Customer's business
except renewals or extensions of existing debts and interest thereon;
(J) make any loans, advances, contributions or payments of money or goods to
any subsidiary, affiliated or parent corporation or to any officer, director or
stockholder of Customer or of any such corporation including, without
limitation, paying any dividend on or making any payment on account of any
capital stock of Customer or indebtedness of Customer to any of the foregoing
(except for compensation for personal services actually rendered in an amount
not to exceed that available on an arms length basis) and advances for expenses
incurred in the ordinary course of Customer's business in accordance with
Customer's standard policies; and
(K) directly or indirectly mortgage, assign, pledge, transfer, create,
incur, assume, permit to exist or otherwise permit any lien or judgment to exist
on any of its property, assets, revenues or goods, whether real, personal or
mixed, whether now owned or hereafter acquired, except for Permitted Liens.
7. DEFAULT
7.1 DEFINITION. Any one or more of the following events shall constitute an
event of default ("Event of Default") by Customer under this Agreement and the
Other Agreements:
(A) Customer or any Guarantor breaches any term, provision, condition or
covenant contained in this Agreement, in any of the Other Agreements or any
guaranty;
(B) Any warranty, representation, statement, report, or certificate made or
delivered by Customer or any of its officers, employees, or agents or by any
Guarantor to IBM Credit is not true and correct;
(C) Customer fails to immediately pay any of the Obligations when due and
payable or declared to be due and payable;
(D) IBM Credit shall determine that it is insecure with respect to any of
the Collateral or the repayment of any part of the Obligations;
(E) Customer attempts to or shall sell, transfer, convey, exchange, assign,
mortgage, pledge, charge, grant a security interest in or otherwise dispose of
or in any way part with the possession of the Collateral, other than in the
ordinary course of business or as otherwise permitted under this Agreement;
(F) Customer removes, other than by sale to the extent allowed under this
Agreement, any part of the Collateral from any of Customer's locations specified
in Attachment B to this Agreement;
(G) Customer abandons the Collateral or any part thereof;
(H) Any judgment is entered against Customer and such judgment is not
satisfied, dismissed, stayed or superseded by bond within thirty (30) days after
the date of entry thereof (and in the event of a stay or supersedeas bond such
judgment is not discharged within 30 days after termination of such stay or
bond);
(I) There issues a Warrant of Distress for Rent or Taxes with respect to any
premises occupied by Customer in or upon which the Collateral, or any part
thereof, may at any time be situated;
(J) Customer suffers or permits the Collateral to be seized or taken in
execution without the consent of IBM Credit;
(K) Customer fails to insure or keep insured the Collateral within the
provisions of this Agreement;
(L) Customer suspends business;
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(M) (i) Customer shall become insolvent or generally fail to pay, or shall
admit its inability or refusal to pay its debts as they become due;
(ii) Customer shall apply for, consent to, or acquiesce in the
appointment of a trustee, receiver or other custodian for Customer or for its
properties, assets, business or undertakings;
(iii) any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, shall be commenced in respect to Customer; or
(iv) Customer shall take any action to authorize, or in the furtherance
of, any of the foregoing;
(N) Any guaranty of any or all of the Customer's Obligations executed by any
Guarantor in favor of IBM Credit shall at any time for any reason cease to be in
full force and effect or shall be declared to be null and void by a court of
competent jurisdiction, or the validity or enforceability thereof shall be
contested or denied by any Guarantor, or any Guarantor shall deny that it, he or
she has any further liability or obligation thereunder or any Guarantor shall
fail to comply with or observe any of the terms, provisions or conditions
contained in said Guaranty;
(O) Any event shall occur or condition shall exist under any agreement or
instrument relating to any debt of the Customer and shall continue after the
applicable grace period, if any, specified in such agreement or instrument if
the effect of such nonpayment, other condition or conditions is to accelerate,
or permit the acceleration of the maturity of such debt, for any reason
whatsoever;
(P) Customer is in default under the terms of any of the Other Agreements;
or
(Q) IBM revokes, cancels or terminates the IBM Indemnification or notifies
IBM Credit of such revocation, cancellation or termination.
7.2 RIGHTS OF IBM CREDIT. Upon the occurrence and during the continuance of
any Event of Default, IBM Credit may:
(A) declare all or any of the Obligations immediately due and payable
together with all court costs and all costs and expenses of repossession and
collection activity, including, but not limited to, reasonable attorney's fees
without presentment, demand, protest, or any other action or obligation of IBM
Credit provided that upon the occurrence of any Event of Default set forth in
Section 7.1(M) all of the Obligations shall automatically become immediately due
and payable together with all such costs and expenses without the necessity of
any notice or other demand;
(B) terminate the Line of Credit;
(C) exercise any or all of the rights accruing to a secured party upon
default by a debtor under the Uniform Commercial Code and any other applicable
laws;
(D) sell, lease or otherwise dispose of the Collateral at public or private
sale;
(E) at its sole election and without demand enter, with or without process
of law, any premises where Collateral might be and, without charge or liability
to IBM Credit therefor, do one or more of the following:
(i) take possession of the Collateral and use or store it in said
premises or remove it to such other place or places as IBM Credit may deem
convenient;
(ii) take possession of all or part of such premises and the Collateral
and place a custodian in the exclusive control thereof until completion of
enforcement, under the UCC or other applicable law, of IBM Credit's security
interest in the Collateral or until IBM Credit's removal of the Collateral to
such other place or places as IBM Credit may deem convenient;
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(iii) remain on such premises and use the same, together with Customer's
materials, supplies, books and records, for the purpose of liquidating or
collecting such Collateral and conducting and preparing for disposition of such
Collateral;
(iv) remove the same to such place or places as IBM Credit may deem
convenient for the purpose of IBM Credit's using the same in connection with IBM
Credit's liquidation and collection of such Collateral and to conduct and
prepare for the disposition of such Collateral (and Customer grants IBM Credit a
security interest in all Customer's contract-related material, supplies, books,
and records for such purpose as those described above); and
(F) convert all or part of the then current Outstanding Advances to shares
of Customer's Series E Preferred Stock as provided in the Note.
7.3 CUSTOMER'S OBLIGATIONS. Upon the occurrence and during the continuance of
an Event of Default, Customer shall, if IBM Credit requests, assemble the
Collateral and make it available to IBM Credit at a place or places to be
designated by IBM Credit. Customer recognizes that if Customer fails to
perform, observe or discharge any of its Obligations under this Agreement or the
Other Agreements no remedy at law will provide adequate relief to IBM Credit;
therefore, Customer agrees that IBM Credit shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages. All of IBM Credit's rights and remedies granted under this
Agreement and Other Agreements are cumulative and non- exclusive.
7.4 WAIVER. Upon the occurrence and during the continuance of an Event of
Default, Customer waives and releases: any and all claims and causes of action
which it may now or ever have against IBM Credit as a result of any possession,
repossession, collection or sale by IBM Credit of any of the Collateral,
notwithstanding the effect of such possession, repossession, collection or sale
upon Customer's business; all rights of redemption from any such sale; and the
benefit of all valuation, appraisal and exemption laws. IBM Credit's only
obligation in respect to its repossession, collection or sale of any Collateral
is to act in a commercially reasonable manner. If IBM Credit seeks to take
possession of any of the Collateral by replevin or other court process Customer
hereby irrevocably waives any bonds, surety and security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession and any demand for possession of the Collateral prior to the
commencement of any suit or action to recover possession thereof.
8. MISCELLANEOUS
8.1 TERMINATION. This Agreement shall expire on the second anniversary of the
date of the execution and delivery by Customer of this Agreement. Unless
earlier terminated, this Agreement may be terminated by Customer at any time by
the giving of written notice of such termination by registered mail or certified
mail addressed to IBM Credit at the address provided for in this Agreement.
Termination shall be effective on the date specified in the written notification
(the "Effective Date of Termination") which date shall be no less than thirty
(30) days from the date the written notification is received by IBM Credit.
Customer shall not be relieved from any Obligations to IBM Credit until such
time as all of the Obligations of Customer shall have been indefeasibly paid in
full. Upon the termination of this Agreement by IBM Credit or Customer, all of
Customer's Obligations incurred under this Agreement shall be immediately due
and payable in their entirety, even if they are not yet due under their terms,
on the Effective Date of Termination. IBM Credit's rights under this Agreement
and IBM Credit's security interest in the Collateral shall continue after
termination of this Agreement until all of Customer's Obligations to IBM Credit
are indefeasibly paid in full. The covenants, warranties and representations of
this Agreement shall survive termination of the Agreement.
8.2 COLLECTION. Customer agrees that checks and other instruments delivered to
IBM Credit on account of Customer's Obligations shall constitute conditional
payment until such items are actually paid to IBM Credit. Customer waives the
right to direct the application of any and all payments hereafter received by
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IBM Credit on account of Customer's Obligations. Customer agrees that IBM Credit
shall have the continuing exclusive right to apply and reapply any such payments
in such manner as IBM Credit may deem advisable notwithstanding any entry by IBM
Credit upon any of its books and records.
8.3 DEMAND, ETC. Customer waives to the extent permitted by law:
(A) demand, protest and all notices of protest, default or dishonor;
(B) all notices of payment and non-payment;
(C) all notices required by law; and
(D) except as otherwise specifically provided for in this Agreement, all
notices of default, non-payment at maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guarantees at any time held by IBM
Credit on which Customer may, in any way, be liable and Customer hereby
ratifies and confirms whatever IBM Credit may do in that regard.
8.4 ADDITIONAL OBLIGATIONS. (A) IBM Credit, without waiving or releasing any
Obligation or Default of Customer, may perform any Obligations of Customer that
Customer shall fail to perform. IBM Credit may, at any time or times hereafter,
but shall be under no obligation so to do, pay, acquire or accept any assignment
of any security interest, lien, encumbrance or claim against the Collateral
asserted by any person. All sums paid by IBM Credit in performing in
satisfaction or on account of the foregoing and any expenses, including
reasonable attorney's fees, court costs, and other charges relating thereto,
shall be a part of the Obligations, payable on demand and secured by the
Collateral.
(B) Following the execution of this Agreement, Customer will use its best
efforts to file a Certificate of Amendment to its Certificate of Incorporation
to increase the number of authorized shares (if such increase is required) of
(i) Series E Preferred Stock to a number sufficient to effect the conversion of
the then current Outstanding Advances to Series E Preferred Stock as provided in
Section 7.2(F) of this Agreement and (ii) Series F Preferred Stock purchasable
upon IBM Credit's exercise of the Warrant.
8.5 INDEMNIFICATION BY CUSTOMER. Customer hereby agrees to indemnify and hold
harmless IBM Credit against all loss or liability relating, directly or
indirectly, to any of the activities of the Customer or its predecessors in
interest, to the execution, delivery or performance of this Agreement or the
Other Agreements or the consummation of the transactions contemplated hereby or
thereby or to any of the Collateral. Notwithstanding the foregoing, Customer
shall not be obligated to indemnify IBM Credit for any loss or liability which
is the direct result of IBM Credit's negligence or willful misconduct. The
indemnity provided herein shall survive this Agreement.
8.6 INDEMNIFICATION BY IBM. Customer acknowledges that IBM Credit relies on the
IBM Indemnification in providing the financial accommodations to Customer
hereunder.
8.7 ALTERATIONS/WAIVER. In the event that IBM Credit at any time or from time
to time dispenses with any one or more of the Obligations specified in this
Agreement or any of the Other Agreements, such dispensation may be revoked by
IBM Credit at any time and shall not be deemed to constitute a waiver of any
such Obligation subsequent thereto. IBM Credit's failure at any time or times
to require strict performance by Customer of any Obligations shall not waive,
affect or diminish any right of IBM Credit thereafter to demand strict
compliance and performance. Any waiver by IBM Credit of any Default by Customer
under this Agreement or any of the Other Agreements shall not waive or affect
any other Default by Customer under this Agreement or any of the Other
Agreements, whether such Default is prior or subsequent to such other Default
and whether of the same or a different type. None of the Obligations of
Customer contained in this Agreement or the Other Agreements and no Default by
Customer shall be deemed waived by IBM Credit unless such waiver is in writing
signed by an authorized representative of IBM Credit and delivered to Customer.
21
8.8 NOTICES. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered (i)
three (3) Business Days after deposit in the United States mails, registered or
certified return receipt with proper postage prepaid, (ii) when sent after
receipt of confirmation or answerback if sent by telecopy, or other similar
facsimile transmission, (iii) one Business Day after being deposited with a
reputable overnight courier with all charges prepaid, or (iv) when delivered, if
hand-delivered by messenger, all of which shall be properly addressed to the
party to be notified and sent to the address or number indicated in Attachment B
or to such other address or number as each party designates to the other in the
manner herein prescribed.
8.9 SEVERABILITY. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement.
8.10 ONE LOAN. All loans and advances heretofore, now or hereafter made by IBM
Credit to Customer under this Agreement or the Other Agreements shall constitute
one loan secured by IBM Credit's security interests in the Collateral and by all
other security interests, liens and encumbrances previously, presently or in the
future granted by Customer to IBM Credit or any assignor of IBM Credit.
8.11 ADDITIONAL COLLATERAL. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and other property of Customer
in possession of IBM Credit at any time or times hereafter are hereby pledged by
Customer to IBM Credit as security for the payment of Customer's Obligations and
may be held by IBM Credit (without interest to Customer) until Customer's
Obligations are paid in full or applied by IBM Credit on account of Customer's
Obligations. IBM Credit may release to Customer such portions of such monies,
reserves and proceeds as IBM Credit may from time to time determine, in its sole
discretion.
8.12 INITIAL PUBLIC OFFERINGS. In the event that Customer offers shares of the
Customer's stock for sale to the public, upon the effective date of the Initial
Public Offering (i) all Outstanding Advances shall become due and payable and
(ii) no further advances shall be extended to Customer.
8.13 OFFSETS. Customer hereby waives any right of set-off it may have against
IBM Credit.
8.14 LIMITATION OF LIABILITY. IBM Credit shall not have any liability with
respect to any special, indirect or consequential damages suffered by Customer
in connection with this Agreement, any other Agreement or any claims in any
manner related thereto.
8.15 TIME. Time shall be of the essence hereof.
8.16 ENTIRE AGREEMENT. This Agreement, together with the Other Agreements and
any other documents to be delivered pursuant hereto and thereto, constitutes the
entire Agreement between the Customer and IBM Credit pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, with respect to the subject matter
hereof.
8.17 PARAGRAPH TITLES. The Section titles used in this Agreement and the Other
Agreements are for convenience only and do not define or limit the contents of
any Section.
8.18 BINDING EFFECT. This Agreement and the Other Agreements shall be binding
upon and inure to the benefit of IBM Credit and Customer and their respective
successors and assigns but Customer shall have no right to assign this Agreement
or any of the Other Agreements without the prior written consent of IBM Credit.
22
8.19 CONDITIONS TO EFFECTIVENESS. In addition to those conditions set forth in
Section 5.1, the effectiveness of this Agreement shall be conditioned upon the
receipt by IBM Credit of the instruments and other documents specified in
Attachment A to this Agreement .
8.20 SUBMISSION BY CUSTOMER. This Agreement and the Other Agreements are
submitted by Customer to IBM Credit (for IBM Credit's acceptance or rejection
thereof) at IBM Credit's place of business specified in Attachment B of this
Agreement, as an offer by Customer to borrow monies from IBM Credit and shall
not be binding upon IBM Credit or become effective until and unless accepted in
writing by IBM Credit at its said place of business. If so accepted, this
Agreement and the Other Agreements shall be deemed to have been made at IBM
Credit's said place of business. This Agreement and the Other Agreements and
all transactions pursuant thereto shall be governed and controlled as to
interpretation, enforcement, validity, construction, effect and in all other
respects (including, but not limited to, the legality of the interest charged to
Customer pursuant thereto) by the laws, statutes and decisions of the state of
IBM Credit's said place of business. Customer, in order to induce IBM Credit to
accept this Agreement and the Other Agreements, agrees that all actions or
proceedings arising directly or indirectly in connection with this Agreement or
the Other Agreements may be litigated, at IBM Credit's sole discretion and
election, in courts having situs within the state where IBM Credit's aforesaid
place of business is located. Customer hereby consents and submits to the
jurisdiction of any local, state or federal court located within such state.
Customer hereby waives any right it may have to transfer or change the venue of
any litigation brought against it by IBM Credit in accordance with this
paragraph.
8.21 JURY TRIAL. CUSTOMER AND IBM CREDIT HEREBY IRREVOCABLY WAIVE THEIR RIGHT
TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING IN WHICH IBM CREDIT
AND CUSTOMER ARE PARTIES.
IN WITNESS WHEREOF, the duly authorized representatives of Customer have
executed and delivered this Agreement as of the date set forth below.
Date: _______________________________
NetObjects, Inc.
By: _________________________________
Print Name:__________________________
Title:_______________________________
ATTEST: _______________________________ (Secretary)
ACCEPTED this_________day of___________________, 19__, at IBM Credit's place of
business specified at the beginning of this Agreement.
IBM Credit Corporation
By: _______________________
Print Name: __________________
Title: _______________________
23
SECRETARY'S CERTIFICATE
(Revolving Loan and Security Agreement)
On I, _______________, do hereby certify that I am the duly elected and
acting Secretary of _____________________, a __________ corporation, and as such
I am the keeper of the corporate records and seal of said corporation; that the
following is a true and correct copy of resolutions duly adopted and ratified by
action of the board of directors of said corporation on ______________________,
19__ as ratified and approved by the stockholders of said corporation by action
of said stockholders on ___________________, 19__, all in accordance with its
by-laws and articles of incorporation and the laws of its jurisdiction of
incorporation; and that the same have not been modified, repealed, rescinded or
withdrawn, are in full force and effect and do not contravene any provisions of
said corporation's articles of incorporation or by-laws:
RESOLVED, that the President, each Vice-President, the Secretary, the
Treasurer and each other officer and each agent of this Corporation, or any
one or more of them, be and they are hereby authorized and empowered on
behalf of this corporation: to obtain from IBM Credit Corporation ("IBM
Credit") loans in such amounts and on such terms and conditions as such
officers deem proper; to execute notes and other evidences of this
corporation's indebtedness with respect thereto; to enter into financing and
other agreements with IBM Credit relating to the terms and conditions upon
which any such loans may be obtained and the security to be furnished by
this corporation therefore; from time to time to modify, supplement or amend
any such agreements, any such terms or conditions and any such security;
from time to time to pledge, assign, guaranty, mortgage, consign, grant
security interest in and otherwise transfer to IBM Credit as collateral
security for any and all debts and obligations of this corporation to IBM
Credit, whenever and however arising, any and all accounts and other forms
of obligations, receivables, choses in action, inventory, warehouse receipts,
machinery, equipment, land, buildings and other real, personal or fixed
property, tangible or intangible, now or hereafter belonging to or acquired
by this corporation; for said purposes to execute and deliver any and all
assignments, schedules, transfers, endorsements, contracts, debentures,
guarantees, agreements, designations, consignments, deeds of trust,
mortgages, instruments of pledge or other instruments in respect thereof and
to make remittances and payments in respect thereof by checks, drafts or
otherwise; and to do and perform all other acts and things deemed by such
officer or agent necessary, convenient or proper to carry out any of the
foregoing; hereby ratifying, approving and confirming all that any said
officers and agents have done or may do in the premises.
(Revolving Loan and Security Agreement)
I do further certify that the following are the names and specimen signatures of
the officers and agents of said corporation so empowered and authorized, namely:
PRESIDENT:
___________________________________ (Print Name)
___________________________________ (Signature)
VICE-PRESIDENT:
___________________________________ (Print Name)
___________________________________ (Signature)
SECRETARY: ________________________
24
___________________________________ (Print Name)
___________________________________ (Signature)
TREASURER:
___________________________________ (Print Name)
___________________________________ (Signature)
AGENT:
___________________________________ (Print Name)
___________________________________ (Signature)
Witness my hand and seal of said corporation this _____ day of
____________________, 19___. (Attach corporate seal here)
___________________________________ (Secretary of said corporation)
25
[RFC Letterhead]
NetObjects, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Ref: Revolving Loan and Security Agreement by and between
NetObjects, Inc. ("Customer") and IBM Credit Corporation ("IBM
Credit") and dated December 23, 1997 (the "Agreement")
Dear Xx. Xxxxxxx:
IBM Credit hereby waives the requirement, specified in Section 6.1(P)
of the Agreement, that the Customer shall cause a guaranty to be executed by
Perseus U.S. Investors, L.L.C. ("Perseus") whereby Perseus guarantees 7.5% of
the Obligations.
Please sign below indicating your acceptance and agreement with this
waiver.
IBM CREDIT CORPORATION
By: _______________________
Title: ______________________
Agreed and Accepted:
NETOBJECTS, INC.
By: ________________________
Title: _______________________
Date: _______________________
ATTACHMENT D
TO
REVOLVING LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
IBM CREDIT CORPORATION AND NETOBJECTS, INC.
DATED: DECEMBER __, 1997
CONVERTIBLE REVOLVING CREDIT NOTE
$15,000,000.00 White Plains, New York
December __, 1997
FOR VALUE RECEIVED, NETOBJECTS, INC., a Delaware corporation (the Company),
HEREBY PROMISES to pay to the order of IBM Credit Corporation (IBM Credit),
at its office at 0000 Xxxxxxxxx Xxxxxxx Xxxxx 000, Xxx Xxxxx, XX 00000 on the
maturity dates set forth in the Loan Agreement (as defined below), the
aggregate unpaid principal amount of all outstanding borrowings by the
Company from IBM Credit pursuant to Section 2 of the Revolving Loan and
Security Agreement (the "Loan Agreement") dated as of December __, 1997,
between the Company and IBM Credit, all in lawful money of the United States
of America in immediately available funds, together with interest thereon, in
like money, at such office, calculated in accordance with Section 2.1.1 of
the Agreement.
Principal and interest on the aggregate unpaid principal amount of all
outstanding borrowings by the Company from IBM Credit pursuant to Section 2
of the Loan Agreement may be prepaid without penalty by the Company at any
time.
The Company hereby waives diligence, presentment, demand, protest and notice
of any kind whatsoever. The nonexercise by IBM Credit of any of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
All borrowings evidenced by this Note and all payments of the principal
hereof and interest hereon on the respective dates thereof shall be endorsed
by IBM Credit on the schedule attached hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof;
PROVIDED, HOWEVER, that any failure to endorse such information on such
schedule or continuation thereof shall not in any manner affect the
obligation of the Company to make payments of principal and interest in
accordance with the terms of this Note.
This Note is the Revolving Credit Note referred to in the Loan Agreement
which, among other things, contains provisions relating to non-payment of
principal or interest, notice, events of default, acceleration of the
maturity hereof upon the happening of certain events all upon the terms and
conditions therein specified. The provisions of the Agreement relating to
this Note are incorporated herein by reference. Any capitalized terms used
but not defined herein shall have
1
the meaning ascribed to it in the Loan Agreement. This Note shall be
governed by and construed in all respects in accordance with the internal
laws of the State of New York without regard to the conflict of law
principles of such State.
CONVERSION UPON DEFAULT. IBM Credit shall have the right, at the option of
IBM Credit, at any time, in whole or in part, upon an Event of Default, to
convert, subject to the terms and provisions hereof, the unpaid balance of
this Note or any portion thereof into fully paid and nonassessable shares of
the Company's Series E Preferred Stock ("Preferred Stock"), at the amount
thereof per share of Preferred Stock equal to the then current Conversion
Price (as defined below). IBM Credit may exercise its Conversion Rights (as
defined below) by delivering to the Company at least ten (10) days in advance
of the proposed conversion a written notice (a Conversion Notice) of its
election to convert this Note on the date and subject to the conditions set
forth in such Conversion Notice.
On the date specified, or determined as provided, in a Conversion Notice, the
Company shall deliver or cause to be delivered to, or upon the written order
of, IBM Credit (i) certificates representing the number of fully paid and
unassessable shares of Preferred Stock into which this Note, or such portion
thereof, is to be converted, registered in the name or names specified in the
Conversion Notice in accordance with the provisions hereof, (ii) in the case
of a partial conversion of this Note, a replacement Convertible Promissory
Note with the same terms as this Note but in an amount equal to the
unconverted portion of this Note, and (iii) if applicable, the securities,
evidences of indebtedness, assets, options or rights (or, in the case of a
partial conversion, a proportionate amount thereof) required to be delivered
to IBM Credit on conversion of this Note by Section (c) hereof.
IBM Credit shall have conversion rights as follows (the Conversion Rights):
(a) RIGHT TO CONVERT. This Note shall be convertible, at the option of IBM
Credit, at any time, in whole or in part, into such number of fully paid and
nonassessable shares of Preferred Stock (upon an Event of Default) as is
determined by dividing the portion of the unpaid balance of this Note to be
so applied by the per share amount equal to the lesser of (i) $1.1131258 and
(ii) the price determined by an independent party mutually satisfactory to
IBM Credit and the Company to be the fair market value price for a share of
Preferred Stock at the time of such conversion determined without regard to
the consequences of the default, in particular the effects of foreclosure on
the Collateral (the "Conversion Price"); provided, however, that the
Conversion Price shall not be less than $1.1131258 per share unless the Event
of Default is caused by the Company's non-payment of any amounts due under
the Note or, any action of the Company that materially impedes payment of the
Note to IBM Credit and such Event of Default is not cured within the earlier
of (i) twenty (20) days after written notice of the Event of Default is given
to the Company and (2) twenty-five (25) days from the date the Event of
Default occurred.
(b) CONVERSION PRICE ADJUSTMENTS. The Conversion Price shall be subject to
adjustment from time to time as follows:
2
(i) In the event the Company should at any time or from time to time after
the issuance of this Note fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Preferred Stock or the
determination of holders of Preferred Stock entitled to receive a dividend or
other distribution payable in additional shares of Preferred Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Preferred Stock
(hereinafter referred to as Stock Equivalents) without payment of any
consideration by such holder for the additional shares of Preferred Stock or
the Stock Equivalents (including the additional shares of Preferred Stock
issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Conversion Price shall be appropriately decreased
so that the number of shares of Preferred Stock issuable upon conversion of
this Note shall be increased in proportion to such increase of outstanding
shares.
(ii) If the number of shares of Preferred Stock outstanding at any time after
the issuance of this Note is decreased by a combination of the outstanding
shares of Preferred Stock then, following the record date of such
combination, the Conversion Price shall be appropriately increased so that
the number of shares of Preferred Stock issuable upon conversion of this Note
shall be decreased in proportion to such decrease in outstanding shares.
(c) RECAPITALIZATIONS; CERTAIN OTHER TRANSACTIONS. If at any time or from
time to time there shall be a recapitalization of the Preferred Stock (other
than a subdivision or combination provided for above), provision shall be
made so that IBM Credit shall thereafter be entitled to receive upon
conversion of this Note the number of shares of stock or other securities or
property of the Company or otherwise to which a holder of Preferred Stock
deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Note with respect to the rights of
IBM Credit after the recapitalization to the end that the provisions hereof
(including adjustment of the Conversion Price then in effect and the number
of shares purchasable upon conversion of this Note) shall be applicable after
that event as nearly equivalent as may be practicable.
(d) NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of
all the provisions of this Note and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of IBM
Credit against impairment.
(e) NO FRACTIONAL SHARES; CERTIFICATE AS TO ADJUSTMENTS. No fractional
shares shall be issued upon conversion of this Note, and the number of shares
of Preferred Stock to be issued shall be rounded to the nearest whole share.
Upon the occurrence of each adjustment or readjustment of the Conversion
Price pursuant to the terms hereof, the Company shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to IBM Credit a certificate setting forth such adjustment or
readjustment and showing in detail the facts
3
upon which such adjustment or readjustment is based. The Company shall, upon
the written request at any time of IBM Credit, furnish or cause to be
furnished to IBM Credit a like certificate setting forth (A) such adjustments
and readjustments, (B) the Conversion Price at the time in effect, and (C)
the number of shares of Preferred Stock and the amount, if any, of other
property which at the time would be received upon the conversion of this
Note.
(f) NOTICES OF RECORD DATE. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, the Company
shall mail to IBM Credit, at least 10 days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right; and the amount and
character of such dividend, distribution or right.
(g) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Preferred Stock , solely for the purpose of effecting the conversion of this
Note, such number of its shares of Preferred Stock as shall from time to time
be sufficient to effect the conversion of this Note and such number of shares
of Stock into which the Preferred Stock is convertible; and if at any time
the number of authorized but unissued shares of Preferred Stock shall not be
sufficient to effect the conversion of this Note, in addition to such other
remedies as shall be available to IBM Credit, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Preferred Stock and Common
Stock to such number of shares as shall be sufficient for such purposes.
(h) TAXES. The Company will pay all taxes and other governmental charges
that may be imposed in respect of the issue or delivery of shares of
Preferred Stock upon conversion of this Note.
4
IN WITNESS WHEREOF, this Convertible Revolving Credit Note has been duly
executed on behalf of the Company on and as of the day and year first above
mentioned.
NETOBJECTS, INC.
by:___________________________
Name:
Title:
NETOBJECTS, INC.
by: ___________________________
Name:
Title:
[Corporate Seal]
Attest:
by: ______________________
Name:
Title:
5
ATTACHMENT E
to the Revolving Loan and Security Agreement dated December __, 1997 by and
between IBM Credit Corporation and NetObjects, Inc.
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, NetObjects, Inc. (NetObjects) owns the Trademark Collateral (as
defined below) listed on Schedule A annexed hereto;
WHEREAS, NetObjects and IBM Credit Corporation (IBM Credit) are parties
to a Revolving Loan and Security Agreement dated as of December __, 1997 (as the
same may be amended and in effect from time to time, the "Loan Agreement"),
providing, subject to its terms and conditions, for extensions of credit to be
made by IBM Credit (through the making of loans and advances) to NetObjects.
WHEREAS, pursuant to the terms of the Loan Agreement, NetObjects has
granted to IBM Credit a security interest in substantially all the assets of
NetObjects including all right, title and interest of NetObjects in, to and
under all NetObjects Trademark Collateral, whether presently existing or
hereafter arising or acquired, and all products and proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof for the full term of the Trademark Collateral, to secure
the payment of all amounts owing by NetObjects under the Loan Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT OF SECURITY INTEREST. NetObjects does hereby grant to IBM Credit a
continuing security interest in all of NetObjects right, title and interest in,
to and under the following (all of the following items or types of property
being herein collectively referred to as the Trademark Collateral), whether
presently existing or hereafter arising or acquired and wherever located:
each trademark, trademark registration, trademark
application, service xxxx, service xxxx registration and service xxxx
application, trade name and tradestyles referred to in Schedule A
annexed hereto, and the goodwill underlying those trademarks and service
marks and (i) any similar marks or amendments, modifications and
renewals thereof and the goodwill represented by those and any legal
equivalent in a foreign country for the full term or terms for which the
same may be granted; (ii) all rights to income, royalties, profits,
damages and other rights relating to said trademarks and service marks
including the right to xxx for past, present or future infringement;
(iii)
1
any other rights and benefits relating to said trademarks and service
marks including any rights as a licensor or licensee of said trademark
and service xxxx; (iv) all books and records pertaining to any of the
foregoing; and (v) all proceeds, substitutions and replacements for all
of the foregoing.
2. PRESERVATION OF COLLATERAL. (a) The Company agrees, at its own expense, to
use reasonable efforts to preserve all Trademark Collateral.
(b) The Company shall not sell or assign (by operation
of law or otherwise) or create or suffer to exist any lien, security
interest, or other charge or incumbrance on or with respect to any
Trademark Collateral to secure the indebtedness of any person, except as
permitted pursuant to the Loan Agreement.
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants
as follows:
(a) The Company is not aware of any proceeding (other
than application proceedings) in the United States Patent and Trademark
office or any state or federal court regarding the Companys claim of
ownership in any Trademark Collateral; and
(b) To the best of the Company's knowledge, the
Company is the sole owner of all right, title and interest in and to all
Trademark Collateral, free and clear of any liens, assignments,
mortgages, security interest, charges or encumbrances excluding any
applicable trademark license agreements and except for Permitted Liens
as defined in the Loan Agreement.
4. FURTHER ASSURANCES. (a) The Company authorizes IBM Credit to record this
Trademark Security Agreement, or an excerpt thereof, in the United States Patent
and Trademark Office and to take all other steps as are reasonably necessary to
perfect the security interest granted herein.
(b) The Company will execute such further documents as
may be reasonably necessary for IBM Credit to perfect the security
interest granted herein.
(c) The Company will furnish to IBM Credit, from time
to time, upon the reasonable request of IBM Credit, summaries in the
form of EXHIBIT A hereto, identifying all Trademark Collateral owned by
the Company.
5. LOAN AGREEMENT. This security interest is granted in conjunction with the
security interests granted to IBM Credit pursuant to the Loan Agreement.
NetObjects and IBM Credit acknowledge and agree that the rights and obligations
of NetObjects and IBM Credit with respect to the Trademark Collateral are as set
forth in the Loan Agreement, the terms and provisions of which are incorporated
by reference herein as if fully set forth herein. To the extent of any
inconsistency between the terms and provisions of the Loan Agreement and the
terms and
2
provisions of this Trademark Security Agreement, the terms and provisions of
the Loan Agreement shall control.
IN WITNESS WHEREOF, NetObjects has caused this Trademark Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of December, 1997.
NETOBJECTS, INC.
By: ______________________________
Name:
Title:
Acknowledged:
IBM CREDIT CORPORATION
By: ________________________
Name:
Title:
3
STATE OF __________________ )
): ss:
COUNTY OF _________________ )
On the ___ day of December, 1997 before me personally came
_____________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
Trademark Security Agreement dated December __, 1997 as
____________________________ of NetObjects, Inc. who being by me duly sworn,
acknowledged to me that he is ______________ _________________________________
of NetObjects, Inc., and that he executed the foregoing instrument in his
authorized capacity and that by his signature on the instrument the entity upon
behalf of which he acted executed the instrument.
______________________________
Notary Public
Notary Public, State of California
[SEAL]
4
SCHEDULE A
TO
TRADEMARK SECURITY AGREEMENT
TRADEMARK STATUS REPORT
(NOVEMBER 18, 1997)
U.S. APPLICATIONS
Xxxx: NETOBJECTS
Filing Date: December 1 1, 1 99 5
Appl. No.: 75/030,214
Class: 42
Our File: 35392.9
Status: Abandoned
Xxxx: NETOBJECTS
Filing Date: December 1 1, 1 995
Appl. No.: 75/030,215
Class: 9
Our File: 35392.8
Status: Statement of Use filed and accepted.
Xxxx: SITEPRODUCER
Filing Date: April 3, 1996
Appl. No.: 75/083,235
Class: 9
Our File: 35392.4
Status: Notice of Allowance issued; SOU/2nd
EXT. due March 11, 1998.
Xxxx: SITEPUBLISHER
Filing Date: April 3, 1 996
Appl. No.: 75/083,268
Class: 9
Our File: 35392.5
Status: Notice of Allowance issued; SOU/2nd
EXT. due February 25, 1998.
Xxxx: NETOBJECTS FUSION
Filing Date: June 1 7, 1 996
Appl. No.: 75/120,255
Class: 9
Our File: 35392.14
Status: Xxxxxxx Corp's request for extension
to oppose granted until December 10,
1997; settlement agreement forwarded
to NetObjects for signature.
Xxxx: SITESTUDIO
5
Filing Date: July 1 5, 1 996
Appl. No.: 75/134,405
Class: 9
Our File: 35392.17
Status: Notice of Allowance issued; SOU/2nd
EXT. due February 25, 1998.
Xxxx: SITESTYLES
Filing Date: July 15, 1996
Appl. No: 75/134,406
Class: 9
Our File: 35392.21
Status: Notice of Allowance issued; Statement
of Use filed.
Xxxx: STYLEOBJECT
Filing Date: July 15, 1996
Appl. No.: 75/134,407
Class: 9
Our File: 35392.20
Status: Notice of Allowance issued; SOU/EXT.
due December 10. 1997.
Xxxx: WEBDRAW
Filing Date: July 15, 1996
Appl. No.: 75/134,408
Class: 9
Our File: 35392.19
Status: Notice of Allowance issued; SOU/EXT.
due December 3, 1997.
Xxxx: PUBLISHSET
Filing Date: July 15, 1996
Appl. No.: 75/134,409
Class: 9
Our File: 35392.18
Status: Notice of Allowance issued; SOU/EXT.
due December 10, 1997.
Xxxx: FUSION
Filing Date: July 15,1996
Appl. No.: 75/134,410
Class: 9
Our File: 35392.15
Status: Abandoned
Xxxx: SITEPARTS
Filing Date: July 15,1996
Appl. N o.: 75/134,411
Class: 9
Our File: 35392.16
Status: Notice of Allowance issued; SOU/2nd
EXT. due February 25' 1998.
Xxxx: PAGEDRAW
6
Regis. Date: November 18, 0000
Xxxxx. X o.: 2,114,827
Class: 9
Our File: 35392.22
Status: Statement of Use filed and accepted.
Xxxx: SITEARCHITECT
Filing Date: July 23,1996
Appl. No.: 75/138,375
Class: 9
Our File: 35392.24
Status: Abandoned.
Xxxx: AUTOSITES
Filing Date: July 23,1996
Appl No.: 75/138,376
Class: 9
Our File: 35392.23
Status: Published.
Xxxx: WEBREACH
Filing Date: October 25,1996
Appl. No.: 75/187,632
Class: 41
Our File: 35392.47
Status: Response to Office Action filed on
October 14, 1997.
Xxxx: THE WEB NEEDS YOU
Filing Date: July 25,1997
Appl. No.: 75/330,441
Class: 9
Our File: 35392.62
Status: Priority foreign filing due
January 25. 1998
FOREIGN APPLICATIONS
CANADA
Xxxx: NETOBJECTS
Appl. No: 81,394
Filing Date: June 5, 1 996
Class: 9
Our File: 35392.10
Status: Response to Office Action filed
Xxxx: SlTEPRODUCER
Appl. No. 824700
Filing Date: September 30, 1 996
Class: 9
Our File: 35392.41
Status: Provide certified copy of U.S.
registration by March 29, 1998.
Xxxx: SITEPUBLISHER
7
Appl. No.: 824701
Filing Date: September 30, 1996
Class: 9
Our File: 35392.42
Status: Provide certified copy of U.S.
registration by March 29, 1998.
Xxxx: NETOBJECTS FUSION
Appl. No.: 831623
Filing Date: December 13, 1996
Class: 9
Our File: 35392.52
Status: Response to Office Action filed.
EUROPEAN COMMUNITY
Xxxx: NETOBJECTS
Appl. No.: 297465
Filing Date: June 5, 1 996
Class: 9 and 42
Our File: 35392. 11
Status: Pending
Xxxx: SITEPRODUCER
Appl. No.: 390856
Filing Date: October 1, 1996
Class: 9
Our File: 35392.43
Status: Pending.
Xxxx: SITEPUBLISHER
1 Appl. No.: 390815
Filing Date: October 1, 1996
Class: 9
Our File: 35392.44
Status: Pending.
Xxxx: NETOBJECTS FUSION
Appl. No.: 432922
Filing Date: December 13, 1996
Class: 9
Our File: 35392.51
Status: Pending
JAPAN
Xxxx: NETOBJECTS
Appl. No.: 8-58668
Filing Date: May 31, 1 996
Class: 1
Our File: 35392,12
Status: Approved for registration;
registration fee paid.
Xxxx: NETOBJECTS
8
Appl. No: 8-58669
Filing Date: May 31, 1996
Class: 42
Our File: 35392.13
Status: Pending
Xxxx: SITEPRODUCER
Appl. No.: 8-110598
Filing Date: October 2, 1996
Class: 9
Our File: 35392.45
Status: Pending
Xxxx: SITEPUBLISHER
Appl. No.: 8-110599
Filing Date: October 2, 1996
Class: 9
Our File: 35392.46
Status: Pending
Xxxx: NETOBJECTS FUSION
Appl. No.: 8-124666
Filing Date: November 7, 1996
Class: 9
Our File: 35392.50
Status: Pending.
TAIWAN
Xxxx: NETOBJECTS
Appl. No.: 85-056072
Filing Date: November 5, 1 996
Class: 9
Our File: 35392.48
Status: Published.
Xxxx: NETOBJECTS FUSION
Appl. No.: 85-056073
Filing Date: November 5, 1996
Class: 9
Our File. 35392.49
Status: Response to Office Action filed.
9
ATTACHMENT F
to the Revolving Loan and Security Agreement dated December __, 1997 by and
between IBM Credit Corporation and NetObjects, Inc.
COPYRIGHT SECURITY AGREEMENT
(COPYRIGHTS, COPYRIGHT APPLICATIONS
AND COPYRIGHT LICENSES)
WHEREAS, NetObjects, Inc. (NetObjects) owns the Copyright Collateral (as
defined below) listed on Schedule A annexed hereto:
WHEREAS, NetObjects and IBM Credit Corporation (IBM Credit) are parties
to a Revolving Loan and Security Agreement dated as of December __, 1997 (as
the same may be amended and in effect from time to time, "the Loan
Agreement"), providing, subject to its terms and conditions, for extensions
of credit to be made by IBM Credit (through the making of loans and advances)
to NetObjects;
WHEREAS, pursuant to the terms of the Loan Agreement, NetObjects has
granted to IBM Credit, a security interest in substantially all the assets of
NetObjects including all right, title and interest of NetObjects in, to and
under all NetObjects Copyright Collateral whether presently existing or
hereafter arising or acquired, and all products and proceeds thereof,
including, without limitation, any and all causes of action which may exist
by reason of infringement thereof for the full term of the Copyright
Collateral, to secure the payment of all amounts owing by NetObjects under
the Loan Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT OF SECURITY INTEREST. NetObjects does hereby grant to IBM Credit a
continuing security interest in all of NetObjects right, title and interest
in, to and under the following (all of the following items or types of
property being herein collectively referred to as the Copyright Collateral),
whether presently existing or hereafter arising or acquired and wherever
located:
each copyright, copyright registration and copyright
applications referred to in Schedule A annexed hereto, including without
limitation, those copyrights for computer programs, computer databases,
flow diagrams, source codes and object codes, computer software,
technical knowledge and processes, formal or informal licensing
arrangements, and all property embodying or incorporating such
copyrights and (i) any similar rights or amendments, modifications and
renewals thereof and any legal equivalent in a foreign country for the
full term or terms for which the same may be granted; (ii) all rights to
income, royalties, profits, damages and other rights relating to said
copyrights including the right to xxx for past, present and future
infringement; (iii) any other rights and benefits relating to said
copyrights; (iv) all books and records
pertaining to any of the foregoing; and (v) all proceeds, substitutions
and replacements for all of the foregoing.
2. PRESERVATION OF COLLATERAL. (a) The Company agrees, at its own expense,
to use reasonable efforts to preserve all Copyright Collateral.
(b) The Company shall not sell or assign (by operation
of law or otherwise) or create or suffer to exist any lien, security
interest, or other charge or encumbrance on or with respect to any
Copyright Collateral to secure the indebtedness of any person, except as
permitted pursuant to the Loan Agreement.
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants as follows:
(a) The Company is not aware of any proceeding (other
than application proceedings) in the United States Copyright Office or
any state or federal court regarding the Companys claim of ownership in
any Copyright Collateral; and
(b) To the best of the Company's knowledge, the
Company is the sole owner of all right, title and interest in and to all
Copyright Collateral, free and clear of any liens, assignments,
mortgages, security interest, charges or encumbrances excluding any
applicable copyright license agreements and except for Permitted Liens
as defined in the Loan Agreement.
4. FURTHER ASSURANCES. (a) The Company authorizes IBM Credit to record
this Copyright Security Agreement, or an excerpt thereof, in the United
States Copyright Office and to take all other steps as are reasonably
necessary to perfect the security interest granted herein.
(b) The Company will execute such further documents as
may be reasonably necessary for IBM Credit to perfect the security
interest granted herein.
(c) The Company will furnish to IBM Credit, from time
to time, upon the reasonable request of IBM Credit, summaries in the
form of EXHIBIT A hereto, identifying all Copyright Collateral owned by
the Company.
5. LOAN AGREEMENT. This security interest is granted in conjunction with
the security interests granted to IBM Credit pursuant to the Loan Agreement.
NetObjects and IBM Credit acknowledge and agree that the rights and
obligations of NetObjects and IBM Credit with respect to the Copyright
Collateral are as set forth in the Loan Agreement, the terms and provisions
of which are incorporated by reference herein as if fully set forth herein.
To the extent of any inconsistency between the terms and provisions of the
Loan Agreement and the terms and provisions of this Copyright Security
Agreement, the terms and provisions of the Loan Agreement shall control.
Copyright - Net Objects 2 12/18/97
IN WITNESS WHEREOF, NetObjects has caused this Copyright Security
Agreement to be duly executed by its officer thereunto duly authorized as of
the ____ day of December, 1997.
NETOBJECTS, INC.
By: ______________________________
Name:
Title:
Acknowledged:
IBM CREDIT CORPORATION
By: ________________________
Name:
Title:
Copyright - Net Objects 3 12/18/97
STATE OF __________________ )
): ss:
COUNTY OF _________________ )
On the ___ day of December, 1997 before me personally came
_____________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
Copyright Security Agreement dated December __, 1997 as
____________________________ of NetObjects, Inc. who being by me duly sworn,
acknowledged to me that he is ______________
_________________________________ of NetObjects, Inc., and that he executed
the foregoing instrument in his authorized capacity and that by his signature
on the instrument the entity upon behalf of which he acted executed the
instrument.
______________________________
Notary Public
Notary Public, State of California
[SEAL]
Copyright - Net Objects 4 12/18/97
SCHEDULE A
to Copyright Security Agreement
COPYRIGHTS
Copyright Effective Date of Registration
Description Registration Number
-----------------------------------------------------------------------
NetObjects Fusion 12/20/96 084980397
COPYRIGHT APPLICATIONS
Copyright Application Application
Description Date Number
-----------------------------------------------------------------------
N/A
Copyright - Net Objects 5 12/18/97
ATTACHMENT G
to the Revolving Loan and Secutity Agreement dated December __, 1997 by and
between IBM Credit Corporation and NetObjects, Inc.
PATENT SECURITY AGREEMENT
(PATENTS, PATENT APPLICATIONS AND PATENT LICENSES)
WHEREAS, NetObjects, Inc. (NetObjects) owns the Patent Collateral (as
defined below) listed on Schedule A annexed hereto;
WHEREAS, NetObjects and IBM Credit Corporation (IBM Credit) are parties
to a Revolving Loan and Security Agreement dated as of December __, 1997 (as
the same may be amended and in effect from time to time, the "Loan
Agreement"), providing, subject to its terms and conditions, for extensions
of credit to be made by IBM Credit (through the making of loans and advances)
to NetObjects;
WHEREAS, pursuant to the terms of the Loan Agreement, NetObjects has
granted to IBM Credit, a security interest in substantially all the assets of
NetObjects including all right, title and interest of NetObjects in, to and
under all NetObjects Patent Collateral whether presently existing or
hereafter arising or acquired, and all products and proceeds thereof,
including, without limitation, any and all causes of action which may exist
by reason of infringement thereof for the full term of the Patent Collateral,
to secure the payment of all amounts owing by NetObjects under the Loan
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT OF SECURITY INTEREST. NetObjects does hereby grant to IBM Credit a
continuing security interest in all of NetObjects right, title and interest
in, to and under the following (all of the following items or types of
property being herein collectively referred to as the Patent Collateral),
whether presently existing or hereafter arising or acquired and wherever
located:
all patents, patent applications and patentable inventions and
(i) the inventions and improvements described and claimed therein;
(ii) any continuation, division, renewal, extension, substitute or reissue
thereof or any legal equivalent in a foreign country for the full term
thereof or the terms for which the same may be granted; (iii) all rights
to income, royalties, profits, awards, damages and other rights relating
to said patents, applications and inventions, including the right to xxx
for past, present and future infringement; (iv) any other rights and
benefits relating to said patents, applications and inventions including
any rights as a licensor or licensee of said patents, applications and
inventions; (v) all books and records pertaining to any of the foregoing;
and (vi) all proceeds, substitutions and replacements for all of the
foregoing.
2. PRESERVATION OF COLLATERAL. (a) The Company agrees, at its own expense,
to use reasonable efforts to preserve all Patent Collateral.
(b) The Company shall not sell or assign (by operation
of law or otherwise) or create or suffer to exist any lien, security
interest, or other charge or encumbrance on or with respect to any
Patent Collateral to secure the indebtedness of any person, except as
permitted pursuant to the Loan Agreement.
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants as follows:
(a) The Company is not aware of any proceeding (other
than application proceedings) in the United States Patent and Trademark
Office or any state or federal court regarding the Companys claim of
ownership in any Patent Collateral; and
(b) To the best of the Company's knowledge, the
Company is the sole owner of all right, title and interest in and to all
Patent Collateral, free and clear of any liens, assignments, mortgages,
security interest, charges or encumbrances excluding any applicable
patent license agreements and except for Permitted Liens as defined in
the Loan Agreement.
4. FURTHER ASSURANCES. (a) The Company authorizes IBM Credit to record
this Patent Security Agreement, or an excerpt thereof, in the United States
Patent and Trademark Office and to take all other steps as are reasonably
necessary to perfect the security interest granted herein.
(b) The Company will execute such further documents as
may be reasonably necessary for IBM Credit to perfect the security
interest granted herein.
(c) The Company will furnish to IBM Credit, from time
to time, upon the reasonable request of IBM Credit, summaries in the
form of EXHIBIT A hereto, identifying all Patent Collateral owned by the
Company.
5. LOAN AGREEMENT. This security interest is granted in conjunction with
the security interests granted to IBM Credit pursuant to the Loan Agreement.
NetObjects and IBM Credit acknowledge and agree that the rights and
obligations of NetObjects and IBM Credit with respect to the Patent
Collateral are as set forth in the Loan Agreement, the terms and provisions
of which are incorporated by reference herein as if fully set forth herein.
To the extent of any inconsistency between the terms and provisions of the
Loan Agreement and the terms and provisions of this Patent Security
Agreement, the terms and provisions of the Loan Agreement shall control.
IN WITNESS WHEREOF, NetObjects has caused this Patent Security Agreement
to be duly executed by its officer thereunto duly authorized as of the ____
day of December, 1997.
NETOBJECTS, INC.
By: ______________________________
Name:
Title:
Acknowledged:
IBM CREDIT CORPORATION
By: ________________________
Name:
Title:
Patent - Net Obj 2 12/22/97
STATE OF __________________ )
): ss:
COUNTY OF _________________ )
On the ___ day of December, 1997 before me personally came
_____________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
Patent Security Agreement dated December __, 1997 as
____________________________ of NetObjects, Inc. who being by me duly sworn,
acknowledged to me that he is ______________
_________________________________ of NetObjects, Inc., and that he executed
the foregoing instrument in his authorized capacity and that by his signature
on the instrument the entity upon behalf of which he acted executed the
instrument.
______________________________
Notary Public
Notary Public, State of California
[SEAL]
Patent - Net Obj 3 12/22/97
EXHIBIT A TO PATENT SECURITY AGREEMENT
NETOBJECTS, INC.
PATENT APPLICATIONS
as of December 19, 1997
--------------------------------------------------------------------------------
XXXXXX & XXXXX DESCRIPTION FILING DATE
DOCKET NO. SERIAL NUMBER
--------------------------------------------------------------------------------
Allowed Computer Icon for a World Wide Web Site Editor 07/29/96
or the Like 29/057,658
--------------------------------------------------------------------------------
Allowed Computer Icon for a World Wide Web Site Editor 07/29/96
or the Like 29/057,657
--------------------------------------------------------------------------------
Pending Computer Icon for a Style Function of a World 07/29/96
Wide Web Site Editor or the Like 29/057,656
--------------------------------------------------------------------------------
Pending Computer Icon for a Function of a World Wide 07/29/96
Web Page Editor or the Like 29/057,655
--------------------------------------------------------------------------------
Pending Computer Icon for a Function of a World Wide 07/29/96
Web Page Editor or the Like 29/057,583
--------------------------------------------------------------------------------
Pending Computer Icon for a Function of a World Wide 07/29/96
Web Page Editor or the Like 29/057,654
--------------------------------------------------------------------------------
Allowed Computer Icon for Representing a Page in a Web 07/29/96
Site for a World Wide Web Page Editor or the 29/057,653
Like
--------------------------------------------------------------------------------
Pending Computer Icon for a Goback Function in a World 07/29/96
Wide Web Page Editor or the Like 29/057,571
--------------------------------------------------------------------------------
Pending Computer Icon for a New Page Function in a 07/29/96
World Wide Web Page Editor or the Like 29/057,660
--------------------------------------------------------------------------------
Pending Computer Icon for a Preview Function in a 07/29/96
World Wide Web Page Editor or the Like 29/057,569
--------------------------------------------------------------------------------
Allowed Computer Icon for a Publish Function of a 07/29/96
World Wide Web Page Editor or the Like 29/057,661
--------------------------------------------------------------------------------
Allowed Computer Icon for an Assets Function of a 07/29/96
World Wide Web Page Editor or the Like 29/057,572
--------------------------------------------------------------------------------
Pending Primary and Secondary Navigator Bars Having a 07/29/96
Connector and Generated by a Computer Program 29/057,567
--------------------------------------------------------------------------------
4
ATTACHMENT I
TO
REVOLVING LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
IBM CREDIT CORPORATION AND NETOBJECTS, INC.
DATED: DECEMBER __, 1997
FIRST AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT is entered into as of
December_, 1997, by and among NetObjects, Inc., a Delaware corporation (the
"Company"), Intemational Business Machines Corporation, a New York corporation
("IBM"), and IBM Credit Corporation, a Delaware corporation ("IBM Credit").
RECITALS:
A. The Company and IBM are parties to a Registration Rights
Agreement dated as of April 11, 1997 (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to take certain actions to register
under the Securities Act of 1933, as amended, certain of the Company's
securities owned by IBM.
B. The Company and IBM Credit have entered into a Revolving Loan and
Security Agreement of even date (the "Loan Agreement"), pursuant to which IBM
Credit will provide financing to the Company. In connection with the Loan
Agreement, the Company has issued to IBM Credit a warrant to purchase 500,000
shares (the "Warrant") of the Company's Series F Preferred Stock (the "Series F
Preferred Stock").
C. The parties hereto desire to amend the Registration Rights
Agreement to provide that IBM Credit shall be entitled to the registration
rights set forth therein.
NOW. THEREFORE, in consideration of the agreement to provide financing
under the Loan Agreement, the issuance of the Warrant and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. AMENDMENT TO REGISTRATION RIGHTS AGREEMENT. The Registration
Rights Agreement is amended as follows:
(a) The definition of "Preferred Stock" in Section 1.01 is
amended to read in its entirety as follows:
" 'Preferred Stock' shall mean the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock."
(b) The definition of "Registration Shares in Section 2.01
(b) is amended to read in its entirety as follows:
"(b) As used in this Agreement, 'REGISTRATION SHARES' shall mean
any shares of Series E Preferred Stock of the Company issued to IBM pursuant to
the Merger Agreement, any shares of Series E Preferred Stock issued to IBM upon
the exercise of the IBM Warrant described in the Merger Agreement, any shares of
Series C Preferred Stock acquired by IBM pursuant to the terms of the Series C
Warrants, any shares of Series F Preferred Stock of the Company issued to IBM
Credit upon the exercise of a warrant dated December __, 1997, any Common Shares
issued to IBM and IBM Credit upon the conversion of shares of Preferred Stock,
and any Common Shares or shares of Preferred Stock acquired by IBM and IBM
Credit as a result of stock splits, stock dividends, stock combinations,
recapitalizations, mergers, reorganizations and any antidilution provision in
any security, document or agreement."
(c) Except as specifically provided in the Registration
Rights Agreement, as amended, or unless the context otherwise requires, the term
"IBM" as used in the Registration Rights Agreement shall also refer to IBM
Credit
1
2. EFFECTIVENESS OF AMENDMENT. This First Amendment to Registration
Rights Agreement shall have no force or effect until the date of effectiveness
of the Loan Agreement. In the event the Loan Agreement shall fail to become
effective for any reason, then the Registration Rights Agreement shall continue
in full force and effect without modification or amendment thereto.
3. REMAINDER OF AGREEMENT. Except as specfically provided herein,
the Registration Rights Agreement shall remain in full force and effect.
4. COUNTERPARTS. This First Amendment to Registration Rights
Agreement may be signed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the panics hereto have executed or caused this First
Amendment to Registration Rights Agreement to be duly executed by their duly
authored representatives as of the date first above written.
NETOBJECTS, INC. INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:___________________________ By:______________________
Name: Name
Title: Title:
IBM CREDIT CORPORATION
By:______________________
Name:
Title:
2
ATTACHMENT A DATED ____________,1997
TO
REVOLVING LOAN AGREEMENT DATED _____________, 1997
Customer's Name: NetObjects, Inc.
1. A/R Revolver Credit Line Fees, Rates and Repayment Terms:
(a) Line of Credit in the amount of Fifteen Million Dollars
($15,000,000.00);
(b) Revolver Financing Charge: Libor Rate plus 1.50%;
(c) Other Charges: 0.20% ($30,000.00) to be paid at the time of execution
of the Agreement.
0.20% ($30,000.00) annual renewal fee which shall be
due on each anniversary of the Agreement.
(d) Delinquency Fee Rate: Libor Rate plus 6.50%.
2. Documentation Requirements:
Takeout Advance Option
Executed Letter of Direction; and
Executed Letter of Notification.
3. Financial Covenants:
Definitions: The following terms shall have the following respective meanings in
this the Revolving Loan Agreement. All amounts shall be determined in
accordance with generally accepted accounting principles (GAAP).
Current shall mean within the on-going twelve month period.
Current Assets shall mean assets that are cash or expected to become cash
within the on-going twelve months.
Current Liabilities shall mean payment obligations resulting from past or
current transactions that require settlement within the on-going twelve month
period. All indebtedness to IBM Credit shall be considered a Current Liability
for purposes of determining compliance with the Financial Covenants.
Current Ratio shall mean Current Assets divided by Current Liabilities.
Long Term shall mean beyond the on-going twelve month period.
Long Term Assets shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible assets,
investments, intangibles and other.
Long Term Debt shall mean payment obligations of indebtedness which mature
more than twelve months from the date of determination, or mature within twelve
months from such date but are renewable or extendible at the option of the
debtor to a date more than twelve months from the date of determination.
1
Net Profit after Tax shall mean Revenue plus all other income, minus all
costs, including applicable taxes.
Revenue shall mean the monetary expression of the aggregate of products or
services transferred by an enterprise to its customers for which said customers
have paid or are obligated to pay, plus other income as allowed.
Subordinated Debt shall mean Customer's indebtedness to third parties as
evidenced by an executed Notes Payable Subordination Agreement in favor of IBM
Credit.
Tangible Net Worth shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses, deferred
charges, research and development expenses, software development costs,
leasehold expenses, trademarks, trade names, copyrights, patents, patent
applications, privileges, franchises, licenses and rights in any thereof, and
other similar intangibles (but not including contract rights) and other current
and non-current assets as identified in Customer's financial statements;
(b) all accounts receivable from employees, officers, directors,
stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
Total Assets shall mean the total of Current Assets and Long Term Assets.
Total Liabilities shall mean the Current Liabilities and Long Term Debt
less Subordinated Debt, resulting from past or current transactions, that
require settlement in the future.
Total Net Worth (the amount of owner's or stockholder's ownership in an
enterprise) is equal to Total Assets minus Total Liabilities.
Working Capital shall mean Current Assets minus Current Liabilities.
Customer will be required to maintain the following financial percentage and
ratios as of the last day of the fiscal period under review by IBM Credit:
a) * Net Profit after Tax, measured on a trailing twelve month basis, not
to be worse than negative twenty million dollars ($-20,000,000.00).
* IBM Credit may modify or add one or more financial covenants by sending a
written notification to Customer accompanied by a revised Attachment A. Any
change in or addition of a financial covenant shall be in effect as of the date
of such revised Attachment A, or as otherwise stated in such Attachment A.
4. Lockbox Information: 5. Special Account Information
Bank Name:_______________________ Bank Name:________________________
2
Address: _________________________ Address: __________________________
_________________________ __________________________
_________________________ __________________________
3
ATTACHMENT B DATED ____________,1997
TO
REVOLVING LOAN AGREEMENT DATED _____________, 1997
1. The address of IBM Credit's place of business where Notices should be
delivered:
Street Address: 0000 Xxxxxxxxx Xxxxxxx Xxxxx 000
--------------------------------
Xxxx, Xxxxx, Xxx code: Xxx Xxxxx, XX 00000
-------------------------
Attention: Remarketer Financingter Manager
-------------------------------------
Telecopy Number: (000) 000-0000
-------------------------------
2. The exact corporate name of Customer as it appears in its certificate of
incorporation is as follows:
NetObjects, Inc.
----------------
3. The address of Customer's principal place of business and chief executive
office:
Street Address: 000 Xxxxxxxxx Xxxxx
------------------------------
County: San Mateo
--------------------------------------
City, State, Zip code: Xxxxxxx Xxxx, XX 00000
-----------------------
Attention:
-------------------------------------
Telecopy Number:
-------------------------------
4. The address of Customer's place of business where Notices should be
delivered:
Street Address: (Same as in Section 3 above)
-----------------------------
County:
---------------------------------------
City, State, Zip code:
------------------------
Attention:
------------------------------------
Telecopy Number:
------------------------------
5. The following is a list of entities affiliated or related to Customer in any
way and a description of such affiliation and/or relationship OR attach
corporate organization chart to Attachment B:
Not Applicable
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
6. The following are all the locations where Customer maintains any inventory,
equipment or other assets:
a) Street Address: 0000 Xxxxx Xxx
-------------------------------------------
County: San Mateo
---------------------------------------------------
City, State, Zip code: Xxxxxxx Xxxx, XX 00000
------------------------------------
Legal Name of Warehouse (if applicable): Xxxxxx Corporation
------------------
b) Street Address: (No Additional Locations)
-------------------------------------------
County:
-----------------------------------------------------
City, State, Zip code:
--------------------------------------
Legal Name of Warehouse (if applicable):
--------------------
7. The following are all the places of business of Customer not identified
above:
1
a) Street Address: None
---------------------------------------------
County:
-----------------------------------------------------
City, State, Zip code:
--------------------------------------
Collateral Located Here (Yes) (No)
------------- --------------
If Yes, identify Collateral
---------------------------------
b) Street Address:
---------------------------------------------
County:
-----------------------------------------------------
City, State, Zip code:
--------------------------------------
Collateral Located Here (Yes) (No)
------------- --------------
If Yes, identify Collateral
---------------------------------
8. For purposes of this Agreement Permitted Liens shall mean:
(a) mechanics', carriers', workmen's, repairmen's or other like liens
arising from or incurred in the ordinary course of business and securing
obligations which are not due or that are being contested in good faith by the
Customer (provided that the Customer has set up adequate reserves therefor),
Liens for taxes that are not due and payable or which may thereafter be paid
without penalty or that are being contested in good faith by the Customer
(provided that the Customer has set up adequate reserves for the payment of such
taxes) and other imperfections of title or encumbrances, if any, which
imperfections of title or other encumbrances do not materially impair the use of
the assets to which they relate in the business of the Customer as presently
conducted;
(b) easements, covenants, rights-of-way and other encumbrances or
restrictions of record;
(c) zoning, building and other similar restrictions; provided that the
same are not violated in any material respect by any improvements of the
Customer or by the use thereof for the conduct of the Customer's business;
and
(d) unrecorded easements, covenants, rights-of-way or other encumbrances or
restrictions, and other Liens which that are not material in character or
amount, none of which unrecorded items or other Liens materially impairs
the use of the property to which they relate in the business of the
Customer as presently conducted.
9. For purposes of this Agreement Permitted Prior Liens shall mean:
(a) Liens to Comdisco pusuant to the following financing statements filed
with California Secretary of State:
Filing Number Filing Date
-----------------------------------------
0000000000 09/17/96
9635560238 12/19/96
9707160548 03/11/97
9730960685 11/04/97
(b) Liens relating to capital leases and pursuant to the following financing
statements filed with California Secretary of State:
Secured Party Filing Number Filing Date
----------------------------------------------------------------
2
AT&T Capital Leasing Services 9607561125 03/13/96
Sanwa Leasing Corporation 9614560235 05/23/96
10. As of the date of this Attachment B, the following Persons have executed and
delivered to IBM Credit the following respective Guaranties:
Name: International Business Machines Type: Indemnification Agreement
Corporation -------------------------
-------------------------------
Name: Type:
------------------------------- -------------------------
Name: Type:
------------------------------- -------------------------
3
ATTACHMENT C DATED ____________,1997
TO
REVOLVING LOAN AGREEMENT DATED _____________, 1997
NETOBJECTS, INC.
COLLATERAL MANAGEMENT REPORT
FOR THE MONTH ENDING ______________
GROSS COLLATERAL VALUE
1. ELIGIBLE A/R
- Gross Receivables $0.00
- Less Ineligibles:
A/R over 90 days 0.00
50% over 90 days 0.00
Other 0.00
-----
ELIGIBLE A/R $0.00
(Attach A/R Aging Report)
Signature _________________________________________ Date ___________
Title _________________________________________
1??
ATTACHMENT J
TO
REVOLVING LOAN AGREEMENT DATED DECEMBER __,1997
Borrowing Certificate Date:________________
A. IBM Credit Approved Credit Facility: $15,000,000.00
B. Current Outstanding Loan Balance including amounts
committed to, but not yet funded, by IBM Credit: ______________
(Principal PLUS Interest)
C. New Cash Advance Request: ______________
D. Total New Outstanding Loan Balance: (B+C)* ______________
Requested by:________________________ Title**:________________________
Net Objects, Inc.
* Line D must be less than line A at all times.
** Borrowing Certificate must be signed be an authorized officer of the
Corporation
SCHEDULE A
TO
REVOLVING LOAN AND SECURITY AGREEMENT
SCHEDULE OF EXCEPTIONS TO REVOLVING LOAN AND
SECURITY AGREEMENT NETOBJECTS, INC.
December_, 1997
This Schedule is prepared pursuant to Section 6 of the Revolving Loan and
Security Agreement, dated as of December__, 1997 (the "Agreement"), by and
between IBM Credit Corporation, a Delaware corporation ("IBM Credit"), and
NetObjects, Inc., a Delaware corporation (the "Company"), and sets forth
exceptions to the representations and warranties of the Company contained in
Section 6.1 of the Agreement. Capitalized terms used but not defined herein
shall have the meaning ascribed to them in the Agreement.
(B) TITLE TO COLLATERAL
(1) The Company's software products include certain software licensed
from third parties for which the Company has paid license fees or pays
ongoing royalties. The Company's software source code includes certain
software programs and code made available to the public free of charge over
the "Internet." All such software may be copyrighted works of third
parties.
(2) Under the License Agreement with IBM dated March 18, 1997, IBM
was granted certain rights with respect to source code of the Company
placed in escrow.
(3) Under the Software License Agreement with AT&T dated September
26, 1996, AT&T has certain rights to use the Company's source code to
prepare Derivative Works in the event of a change of control of the
Company, in the event of the Company's bankruptcy and the like and if the
Company fails to meet certain support obligations.
(4) Rae Technology, Inc. holds 4 pending utility patents and has
granted to the Company a non-exclusive license pursuant to a Patent License
Agreement dated April 10, 1997 to fully utilize such inventions and, when
issued, such patents.
(E) AUTHORIZATION
As soon as possible following the execution of the Agreement, the Company
will file a Certificate of Amendment to its Certificate of Incorporation to
increase the number of authorized shares of Series F Preferred Stock to cover
the 500,000 shares subject to the Warrant.
(F) Financial Statements
(1) A portion of the Company's staffing needs have been and continue
to be met through the utilization of independent contractors. There can be
no assurance that the IRS will not challenge the Company's classification
of these individuals as independent contractors and assess the Company (as
well as its responsible persons as defined for this purpose under the
Internal Revenue code) substantial penalties and additional tax
liabilities, the amount of which cannot be currently estimated by the
Company. No estimate of this potential liability, if any has been made.
(2) The Company is obligated to pay royalties on a quarterly basis
to certain companies whose technology is included in the Company's
products. All royalties due under these agreements may not be recorded on
the Company's interim financial statements.
1
(3) The Company believes it has made adequate allowances for (i)
potential product returns; (ii) stock rotation; (iii) price protection;
(iv) technical support; (v) version 2.0 product upgrades; and (vi)
uncollectible accounts; but such allowances are subject to audit
adjustments.
(4) The Company's unaudited financial statements do not include
footnotes required by GAAP and are subject to year-end audit adjustments.
(5) The Company's unaudited monthly financial statements may not be
fully in compliance with Statement of Position No. 97-2 which is effective
for the year beginning after December 15, 1997 or with Statement of
Financial Accounting Standard No. 123 and are subject to year end audit
adjustments.
(L) TAX RETURNS
The Company has not filed any sales or income tax returns in any
jurisdiction other than California, although the Company may have incurred
liability for such taxes under applicable law.
(M) TAXES
See Section G and Section L for a discussion of potential tax liabilities.
(T) INSURANCE
(1) At present the Company has not obtained any employment practices
liability insurance coverage.
(2) The Company self-insures a portion of the claims made under Its
health insurance program subject to certain stop loss clauses included in
the policy.
2
