Document:

exv10w8

 

Exhibit 10.8

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), is made and entered into as of
May 6, 2001 by and between BLACKBOARD INC., a Delaware corporation (the
“Company”), and Stephen Hoffman (the “Employee”).

RECITALS

	A.	 	The Company desires to retain Employee to provide the services
hereinafter set forth.
	 
	B.	 	Employee is willing to provide such services to the Company on the terms
and conditions hereinafter set forth.
	 
	C.	 	The Company and the Employee will enter into a Shareholders’ Agreement in
the event that the Employee is granted option to purchase any stock of the
Employer.

AGREEMENT

In consideration of the promises and the terms and conditions set forth in this
Agreement, the parties agree as follows:

	1.	 	Employment and Term. The Company agrees to employ the Employee and the
Employee agrees to work for the Company, subject to the terms and
conditions below, for a term of two (2) years, from the date hereof, which
shall automatically renew unless either party notifies the other of an
intent to terminate this Agreement.
	 
	2.	 	Compensation; Benefits. Subject to the terms and conditions of this
Agreement, the Company shall pay to the Employee a base salary as set
forth on Schedule A, attached hereto and made a part hereof, payable in
accordance with the Company’s regular payroll policies. In addition to
this base salary, the Employee shall be entitled to the benefits and
bonuses described on Schedule A, subject to the terms and conditions
described therein. In addition, the Employee shall be entitled to receive
such other benefits including, but not limited to, vacation, holidays and
sick leave, as the Company generally provides, to its senior executives
holding similar positions as that of the Employee. Notwithstanding the
foregoing, the Company reserves the right to adopt, amend or discontinue
any employee benefit plan or policy in accordance with then-applicable law
	 
	3.	 	Business Expenses. The Company shall reimburse the Employee during the
term of this Agreement for travel, entertainment and other expenses
reasonably incurred by the Employee on behalf of the Company pursuant to
the Company’s expense reimbursement policy for its employees.
	 
	4.	 	Title; Duties. The Employee shall be initially employed as President and
Chief Operating Officer. The Employee shall diligently and
conscientiously devote his full time and attention and his best efforts to
discharge the duties assigned to him by the

 

 

	 	 	Company. The Employee shall perform such duties and have such direct
reports as may be assigned to him from time to time by the Board of
Directors or the Chief Executive Officer. As of execution, the Employee’s
direct reports shall be the Senior Vice President of Sales, the Senior
Vice President of Marketing, the Vice President of Operations, the
General Manager of Course and Portal Solutions, the General Manager of
Commerce and Access Solutions, the General Manager of International, and
the Vice President of Marketing. The Chief Financial Officer of the
Company shall report directly to both the Employee and the Chief
Executive Officer.
	 
	5.	 	Right to Contract; Conflict of Interest. The Employee hereby represents
and warrants to the Company that (i) he has full right and authority to
enter into this Agreement and to perform his obligations hereunder, and
(ii) the execution and delivery of this Agreement by the Employee and the
performance of the Employee’s obligations hereunder will not conflict with
or breach any agreement, order or decree to which the Employee is a party
or by which he is bound. During the term of this Agreement, the Employee
shall not directly or indirectly consult, advise, be retained or employed
by, or in any manner perform any service with any other business or entity
in any line of business, regardless of whether such line of business is
competitive with the Company’s business, without first obtaining consent
in writing from the Company.
	 
	6.	 	Intentionally Omitted
	 
	7.	 	Termination by the Company.
	 
	(a)	 	The Company shall have the right to terminate this Agreement with or
without cause at any time during the term of this Agreement by giving
written notice to the Employee. The termination shall become effective on
the date specified in the notice, which termination date shall not be a
date prior to the date ten (10) days following the date of the notice of
termination itself. In the event that the Employee is terminated for
Cause (as defined below), the Company shall pay the Employee the salary
due him under this Agreement through the day on which such termination is
effective. In the event that the Employee is terminated without cause,
the Company shall, subject to the provisions of this Agreement:
	 
	 	 	(i)  pay to the Employee within thirty (30) days of termination of
employment a lump sum cash payment equal to his annual base salary, plus
annual bonus, expense reimbursements and fringe benefits, set forth on
Schedule A; and
	 
	 	 	(ii)  maintain and provide for a period of (A) twelve (12) months from
the date of termination or (B) the date of the Employee’s full-time
employment by another employer (provided that the Employee is entitled
under the terms of such employment to benefits substantially similar to
those made available to the Employee by the Company), at no cost to the
Employee, the Employee’s continued participation in all group insurance,
life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements in which the Employee was
entitled to participate immediately prior to the date of termination
(other than stock option plans of the Employer), provided that in the

 

 

	 	 	event that the Employee’s participation in any plan, program or
arrangement as provided in this subparagraph (ii) is barred or during
such period any such plan, program or arrangement is discontinued or the
benefits thereunder are materially reduced, the Employer shall arrange to
provide the Employee with benefits substantially similar to those which
the Employee was entitled to receive under such plans, programs and
arrangements immediately prior to the Employee’s date of termination.
	 
	(b)	 	For purposes of this Section 7. “Cause” shall mean (i) a material breach
by the Employee of any fiduciary duty owed to the Employer or any material
covenant or condition under this Agreement which shall be continuing and
uncured for fifteen (15) days after written notice thereof has been given
to the Employee by the Company; (ii) a material neglect of duty by the
Employee; (iii) the commission by the Employee of any act or omission
constituting gross negligence, dishonesty, fraud, immoral or disreputable
conduct which is, or is likely to be, harmful to the Company or its
reputation; (iv) violation by the Employee of any material federal, state
or local law, rule regulation or ordinance (other than misdemeanor traffic
violations); (v) material violation by the Employee of the Company’s
policies as set forth in the Company’s personnel handbook, if one has been
adopted, or announced by Company management from time to time; (vi)
violation of the Company’s drug and alcohol policy as set forth in the
Company’s personnel handbook, if one has been adopted, or announced by
Company management from time to time; or (vii) the performance by the
Employee of any act or omission demonstrating an intentional or reckless
disregard of the interests of the Company.
	 
	(c)	 	In the event the Employee disputes in writing any termination for Cause
(after the Employee receives the grounds for termination from the
Company’s Board of Directors pursuant to Section 1(a) of the Stock
Restriction Agreement), the Company shall pay the Employee full salary
(including any earned bonuses or fringe benefits) for a period of no more
than three (3) months while the Company and the Employee attempt to
resolve such dispute in good faith.
	 
	8.	 	Termination by Death or Disability of the Employee.
	 
	(a)	 	In the event of the Employee’s death during the term of this Agreement,
all obligations of the parties hereunder shall terminate immediately, and
the Company shall pay to the Employee’s legal representatives the salary
(and any earned bonuses) due the Employee through the day on which his
death shall have occurred.
	 
	(b)	 	If the Employee is unable to perform his duties hereunder due to mental,
physical or other disability for a period of one hundred twenty (120)
consecutive business days, as determined by the Company, or for one
hundred twenty (120) business days in any period of twelve (12)
consecutive months, this Agreement may be terminated by the Company, at
its option, by written notice to the Employee, effective on the
termination date specified in such notice, provided such termination date
shall not be a date prior to the date of the notice of termination itself.
In this case, the Company will pay the Employee the salary (and any
earned bonuses) due him through the day on which such termination is
effective.

 

 

	(c)	 	The Company shall pay Employee the difference between the amount to be
paid under any disability insurance policy for the twelve (12) months
following termination and the amount of Employee’s salary due under the
termination provision of Section 7 (a) (i).
	 
	9.	 	Termination by the Employee.
	 
	(a)	 	The Employee may terminate this Agreement at any time, with or without
Good Reason (as defined below), by giving written notice to the Company.
Any such termination, if without Good Reason, shall become effective on
the date specified in such notice, provided that the Company may elect to
have such termination become effective on a date after, but not more than,
fourteen (14) days after the date of the notice. If such termination is
with Good Reason, (i) it shall become effective on the date thirty (30)
days after the date of such notice, provided the Company has failed to
cure the Good Reason specified in the notice; and (ii) the Company shall
pay to the Employee his annual base salary, as of the date of termination
(plus any bonuses, insurances and fringe benefits, except as may be
outlined in any Stock Option Agreement) for twelve (12) months from the
date of termination, payable in either one lump sum or in accordance with
normal payroll practices, at Employee’s option, through the end of the
Non-Complete Period (as defined in Section 11 below).
	 
	(b)	 	After the date of any such termination, the Employee shall be entitled to
the salary due him through the day on which such termination becomes
effective.
	 
	(c)	 	In the event the Employee terminates this Agreement without Good Reason,
or the Company terminates this Agreement with Cause, in either case within
one year after the commencement of the Employee’s employment with the
Company, the Employee shall refund to the Company all amounts, if any,
paid him by the Company as moving expenses (including temporary housing
and incidental expenses). The Employee agrees that any amounts owing to
the Company as moving expenses under this Section 9 may be deducted from
any salary or bonuses owed to him by the Company, consistent with
applicable law.
	 
	(d)	 	For purposes of this Section 9, “Good Reason” shall mean (i) a material
failure by the Company to perform its obligations under this Agreement;
(ii) a Constructive Termination (as defined below) of the Employee; (iii)
a Change in Control (as defined in this Section 9(d)) , or (iv) failure of
the Company to offer the Employee the position of Chief Executive Officer
by May 6, 2003. “Change in Control” shall mean “ (a) a sale or transfer
of more than 50% of the total number of shares of the outstanding common
and preferred stock of the Company to a single unrelated entity or group
of affiliated entities (not related to the Company) in one or a series of
closely related transactions or (b) a merger or consolidation in which the
Company is not the surviving entity or in which the shareholders in the
Company prior to the merger or consolidation own less than 50% of the
shares of outstanding common and preferred stock of the Company.
	 
	(e)	 	For purposes of this Section 9. “Constructive Termination” shall mean any
(i) diminution of the Employee’s salary, or (ii) material adverse
modification of or diminution in the

 

 

	 	 	Employee’s duties or material diminution in the Employee’s authority,
title or office, or the assignment of any duties to the Employee
inconsistent with or demeaning of those set forth above, or (ii) material
reduction in the Employee’s benefits under any employee benefit plan or
program in which he participates as an employee, other than any reduction
which is a result of a reduction of benefits applicable to all employee
participants, or relocation of the Employee outside of the Washington,
D.C. metropolitan area without the Employee’s consent.
	 
	10.	 	Intentionally Omitted.
	 
	11.	 	Non-competition.
	 
	(a)	 	Subject to the Company making the applicable payments pursuant to
Sections 7, 8 or 9, he Employee agrees that, during his employment
hereunder, and for a period of one (1) year (the “Non-Compete Period”)
after the later of (i) the effective date of termination of this
Agreement, or (ii) the date of entry by a court of competent jurisdiction
of a final judgment enforcing this covenant, he will not, in any
geographic area where the Company regularly engages in its Business (as
defined below) or maintains sales or service representatives or employees:
	 
	 	 	(i) compete with the Company, or any subsidiary or affiliate of the
Company;
	 
	 	 	(ii) interfere with or disrupt, or attempt to interfere with or disrupt,
the relationship contractual or otherwise, between the Company, or any
subsidiary or affiliate of the Company, and any customer, supplier or
employee of the Company, or any such subsidiary or affiliate;
	 
	 	 	(iii) assist a competitor of the Company by providing consulting or
other advisory services to that competitor; or
	 
	 	 	(iv) offer employment to any current employee of the Company or solicit
(directly or indirectly, individually or in connection with any new
employer or other business partner) any current employee of the Company
to accept employment elsewhere.
	 
	(b)	 	The following terms, as used in this Section 11 shall have the meanings
set forth below:
	 
	 	 	(i) The Company’s “Business” means the e-education infrastructure
industry, including in particular online course, community and
administrative software, delivery and product development.
	 
	 	 	(ii) The term “compete” means to engage in competition, directly or
indirectly, individually or through a family member or other person
acting on the Employee’s behalf, as an employee, officer, director,
proprietor, partner or stockholder or other security holder (other than
of a corporation listed on a national securities exchange or the
securities of which are regularly traded in the over-the-counter market,
provided that the Employee at no time owns in excess of 5% of the
outstanding securities of such

 

 

	 	 	corporation entitled to vote for the election of directors) of any firm,
corporation or entity of any nature whatsoever.
	 
	 	 	(iii) The term “affiliate” means any person, firm or corporation,
directly or indirectly through one or more intermediaries, controlling,
controlled by or under common control with the Company.
	 
	(c)	 	The Employee further acknowledges that this Section 11 is an independent
covenant within this Agreement, and that this covenant shall survive any
termination of Agreement and shall be treated as an independent covenant
for the purposes of enforcement. With respect to this covenant, the
Employee hereby acknowledges receipt of Ten Dollars ($10.00) and other
good and valuable consideration stated herein including the consideration
of his continued employment by the Company.
	 
	(d)	 	The Employee shall, during the term of this Agreement and thereafter,
notify any prospective employer of the terms and conditions of this
Agreement regarding nondisclosure and non-competition.
	 
	12.	 	Confidentiality and Non-Disclosure.
	 
	(a)	 	The Employee shall hold in strict confidence and shall not, either during
the term of this Agreement or after the termination hereof, disclose,
directly or indirectly, to any third party, person, firm, corporation or
other entity, irrespective of whether such person or entity is a
competitor of the Company or is engaged in a business similar to that of
the Company, any trade secrets or other proprietary or confidential
information of the Company or any subsidiary or affiliate (as defined in
Section 11) of the Company obtained by the Employee from or through his
employment hereunder. The Employee hereby acknowledges and agrees that
all proprietary information referred to in this Section 12 shall be deemed
trade secrets of the Company and of its subsidiaries and affiliates, as
defined in Section 11. Employee further acknowledges that the Company’s
products and titles consist of copyrighted material, and Employee shall
exercise his best efforts to prevent the use of such copyrighted material
by any person or entity which has not prior thereto been authorized to use
such information by the Company.
	 
	(b)	 	The Employee further hereby agrees and acknowledges that any disclosure
of any proprietary information prohibited herein, or any breach of the
provisions of Sections 4 or 10 of this Agreement, may result in
irreparable injury and damage to the Company which will not be adequately
compensable in monetary damages, that the Company will have no adequate
remedy at law therefor, and that the Company may obtain such preliminary,
temporary or permanent mandatory or restraining injunctions, orders or
decrees as may be necessary to protect the company against, or on account
of, any breach by the Employee of the provisions contained in Sections 5,
11 or 12 .
	 
	(c)	 	The Employee further agrees that, upon termination of this Agreement,
whether voluntary or involuntary or with or without cause, the Employee
shall notify any new employer, partner, associate or any other firm or
corporation with whom the Employee

 

 

	 	 	shall become associated in any capacity whatsoever of the provisions of
this Section 12, and that the Company may give such notice to such firm,
corporation or other person.
	 
	(d)	 	Notwithstanding the foregoing limitations, the Employee shall not be
required to keep confidential pursuant to this Section 12 any confidential
or proprietary information that: (i) is known or available through other
lawful sources, not bound by a confidentiality agreement with the
Employee, (ii) is or becomes publicly known or generally known in the
industry through no fault of the Employee or his agents or (iii) is
required to be disclosed pursuant to any statutes, laws, rules,
regulations, ordinances, codes, directives, writs, injunctions, decrees,
judgments, and orders of any governmental body (provided the Company is
given reasonable prior notice).
	 
	13.	 	Assignment and Disclosure of Inventions.
	 
	(a)	 	From and after the date the Employee first became employed with the
Company, the Employee hereby agrees to promptly disclose in confidence to
the Company all inventions, improvements, designs, original works of
authorship, formulas, processes, compositions of matter, computer software
programs, databases, mask works, and trade secrets (“inventions”), whether
or not patentable, copyrightable or protectible as trade secrets, that are
made or conceived or first reduced to practice or created by the Employee,
either alone or jointly with others, during the period of the Employee’s
employment, whether or not in the course of the Employee’s employment.
	 
	(b)	 	The Employee hereby acknowledges that copyrightable works prepared by the
Employee within the scope of the Employee’s employment are “works for
hire” under the Copyright Act and that the Company will be considered the
author thereof. The Employee hereby agrees that all Inventions that (i)
are developed using equipment, supplies, facilities or trade secrets of
the Company, (ii) result from work performed by the Employee for the
Company, (iii) relate to the Company’s business or current or anticipated
research and development, will be the sole and exclusive property of the
Company and are hereby assigned by the Employee to the Company.
	 
	14.	 	Severability. The Company and the Employee recognize that the laws and
public policies of the state law applicable to this Agreement is subject
to varying interpretations and change. It is the intention of the Company
and of the Employee that the provisions of this Agreement shall be
enforced to the fullest extent permissible under the laws and public
policies of such state, but that the unenforceability (to the modification
to conform to such laws or public policies) of any provision or provisions
hereof shall not render unenforceable, or impair, the remainder of this
Agreement. Accordingly, if any provisions of this Agreement shall be
determined to be invalid or unenforceable, either in whole or in part,
this Agreement shall be deemed amended to delete or modify, as necessary,
the offending provision or provisions and to alter the balance of this
Agreement in order to render it valid and enforceable.
	 
	15.	 	Assignment. Neither the rights nor obligations under this Agreement may
be assigned by either party, in whole or in part, by operation of law or
otherwise, except that it shall be

 

 

	 	 	binding upon and inure to the benefit of any successor of the Company and
its subsidiaries and affiliates, whether by merger, reorganization or
otherwise, or any purchaser of all or substantially all of the assets of
the Company.
	 
	16.	 	Notices. Any notice expressly provided for under this Agreement shall
be in writing, shall be given either manually or by mail and shall be
deemed sufficiently given when actually received by the party to be
notified or when mailed, if mailed by certified or registered mail,
postage prepaid, addressed to such party at their addresses as set forth
below. Either party may, by notice to the other party, given in the
manner provided for herein, change their address or receiving such
notices.
	 
	(a)	 	If to the Company, to:

       Blackboard Inc.

       1899 L Street N.W., Fifth Floor

       Washington, D.C. 20036

       Attn: General Counsel

	(b)	 	If to the Employee, to:

       Stephen Hoffman

       1204 Marinaview Drive

       Arnold, MD 21012

	17.	 	Governing Law. This Agreement shall be executed, construed and performed
in accordance with the laws of the State of Delaware without reference to
conflict of laws principles. The parties agree that the venue for any
dispute hereunder will be the state or federal courts sitting in the
District of Columbia or the Commonwealth of Virginia and the parties
hereby agree to the exclusive jurisdiction thereof.
	 
	18.	 	Headings. The section headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
	 
	19.	 	Entire Agreement; Amendments. This Agreement, together with any stock
option contracts between the Company and Employee, constitutes and
embodies the entire agreement between the parties in connection with the
subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings in connection with such subject matter. No
covenant or condition not expressed in this Agreement shall affect or be
effective to interpret, change or restrict this Agreement. In the event
of a conflict or inconsistency between the terms of this Agreement and the
Company’s policies regarding employees, the terms of this Agreement shall
supersede the conflicting or inconsistent Company policies. No change,
termination or attempted waiver of any of the provisions of this Agreement
shall be binding unless in writing signed by the Employee and on behalf of
the Company by an officer thereunto duly authorized by the Company’s Board
of Directors. No modification, waiver, termination, rescission, discharge
or cancellation of this Agreement shall affect the right of any party to
enforce any other provision or to exercise any right or remedy in the event of
any other default.

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

	 
	BLACKBOARD INC., a Delaware corporation

	 

	By: /s/ Michael L. Chasen

	             Name: Michael L. Chasen

	 

	             Title: Chief Executive Officer

	 

	Stephen Hoffman:

	 

	/s/ Stephen Hoffman

 

 

SCHEDULE A

The Employee is currently being paid $275,000 in annual salary; however
the Compensation Committee reserves the right to increase the Employee’s
salary from time to time, in accordance with the Company’s regular
management employee payroll and incentive policies.

The Employee shall receive (a) a $5,000 signing bonus, (b) a performance
bonus of $125,000, guaranteed during the first tweleve (12) months of
employment, based on the goals determined by the Company and Employee
within 60 days of the execution of this Agreement, and (c) for each year
thereafter, an annual bonus equal to up to 50% of Employee’s then current
salary, each payable in stock and/or cash, at the discretion of the
Compensation Committee of the Company’s Board of Directors.

The Employee’s expenses for parking at or near the Company’s DC office
shall be paid by the Company

At the discretion of the Compensation Committee of the Company’s Board of
Directors, the Employee will be eligible for an increase in compensation,
annual bonuses (paid in stock and/or cash) and other benefits in
accordance with the Company’s regular management employee payroll and
incentive policies. In addition, the Employee’s annual salary shall be
increased to $325,000 within ninety (90) days after the Company’s filing
of an S-1 registration document with the Securities and Exchange
Commission.

Employee shall receive vacation, health and insurance benefits equal to
that provided other senior executive management, which benefits may be
changed from time to time by the Company. The Company shall also pay for
supplemental disability and supplemental catastrophic injury or illness
insurance equal to that provided by Employee’s most recent prior
employer, together with long-term care insurance approximately equivalent
in initial year premium to the difference between the Company’s cost for
the supplemental insurances and the cost to Employee’s prior employer to
provide such supplemental insurances.exv10w9

 

EXHIBIT 10.9

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

by and between

BLACKBOARD INC., a Delaware corporation, and its Subsidiaries

as the BORROWERS

and

SILICON VALLEY BANK, a California chartered bank,

as the LENDER

REVOLVING LINE OF CREDIT: $8,000,000

EQUIPMENT FINANCING FACILITY: $3,000,000

Effective as of October 5, 2001

 

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

     THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”)
dated as of November 30, 2001, but effective as of October 5, 2001, by and
among SILICON VALLEY BANK, a California chartered bank, doing business in
Virginia as “Silicon Valley East”, having an address of 3003 Tasman Drive,
Santa Clara, California 95054 and a loan production office at 11600 Sunrise
Valley Drive, Suite 400, Reston, Virginia 20191 (“Bank”) and (i) BLACKBOARD
INC., a Delaware corporation, having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (“Company”), (ii) BLACKBOARD ACQUISITION COMPANY, LLC, a
Delaware limited liability company having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (“Blackboard Acquisition”), (iii) BLACKBOARD CAMPUSWIDE,
INC., a Delaware corporation, (iv) BLACKBOARD ICOLLEGE, INC., a Delaware
corporation having an address at 1899 L Street, N..W., Washington, D.C. 20036,
(v) AT&T CAMPUSWIDE ACCESS SOLUTIONS, INC., a Delaware corporation having an
address at 1899 L Street, N.W., Washington, D.C. 20036 and (vi) AT&T CAMPUSWIDE
ACCESS SOLUTIONS OF TEXAS, INC., a Texas corporation having an address at 1899
L Street, N.W., Washington, D.C. 20036 (each a “Borrower” and collectively,
“Borrowers”) provides the terms on which Bank will lend to Borrowers and
Borrowers will repay Bank.

RECITALS.

     The Company and Bank have entered into the Original Loan Agreement,
pursuant to which Bank made certain loans to the Company. The Company and Bank
have agreed to amend and restate the Original Loan Agreement in its entirety
pursuant to this Agreement.

     NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereof
acknowledged, the Borrowers and Bank agree that the Original Loan Agreement is
amended and restated in its entirety, as follows:

1 ACCOUNTING AND OTHER TERMS 

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

upon Bank a duty to act reasonably at all times.

2 LOAN AND TERMS OF PAYMENT

     2.1 Revolving Advances.

          (a) Bank will make Advances not exceeding the lesser of (i) the Committed
Revolving Line or (ii) the Borrowing Base, minus the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) and
minus any amounts utilized for Cash Management Services. Amounts borrowed
under this Section 2.1 may be repaid and reborrowed during the term of this
Agreement. All Advances shall be evidenced by the Revolving Promissory Note to
be executed and delivered by Borrowers to Bank on the Closing Date and shall be
repaid in accordance with the terms of the Revolving Promissory Note.

          (b) To obtain an Advance, the Company must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. The Company must promptly confirm the notification by delivering to Bank
the Payment/Advance Form attached as EXHIBIT B. Bank will credit
Advances to any Borrower’s deposit account. Bank may make Advances under this
Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet
Obligations which have become due. Bank may rely on any

 

 

telephone notice given by a person whom Bank reasonably
believes is a Responsible Officer or designee. Borrowers will jointly and
severally indemnify Bank for any loss Bank suffers due to that reliance.

          (c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.

     2.2 Letters of Credit. Bank will issue or have issued Letters of
Credit for one or more of Borrowers’ accounts not exceeding of the lesser the
Committed Revolving Line or the Borrowing Base, minus the outstanding principal
balance of the Advances and minus any amounts utilized for Cash Management
Services, but the face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit) may not exceed Two Million Dollars
($2,000,000). Each Letter of Credit will expire no later than one hundred
eighty (180) days after the Revolving Maturity Date, provided Borrowers’ Letter
of Credit reimbursement obligations are secured by cash on terms acceptable to
Bank at any time after the Revolving Maturity Date if the term of this
Agreement is not extended by Bank. Bank will release the Collateral if the
only unpaid Obligations outstanding are Letters of Credit secured by cash
pursuant to the preceding sentence, no Event of Default then exists and all
other Obligations have been repaid in full.

     2.3 Cash Management Services Sublimit.

     Borrowers may use up to Five Hundred Thousand Dollars ($500,000) for
Bank’s Cash Management Services (the “Cash Management Services Sublimit”),
which may include merchant services, direct deposit of payroll, business credit
cards, and check cashing services identified in various cash management
services agreements related to such services (the “Cash Management Services”).
Such aggregate amounts utilized under the Cash Management Services Sublimit
will at all times reduce the amount otherwise available to be borrowed under
the Committed Revolving Line and when combined with amount of all outstanding
Advances under the Committed Revolving Line and the face amount of all Letters
of Credit (including drawn, but unreimbursed Letters of Credit) may not exceed
the lesser of the Committed Revolving Line or the Borrowing Base. Any amounts
Bank pays on behalf of any Borrower or any amounts that are not paid by
Borrowers for any Cash Management Services will be treated as Advances under
the Committed Revolving Line and will accrue interest at the rate for Advances.

     2.4 Equipment Advances.

     (a)  Subject to the terms and conditions of this Agreement, Bank agrees to
lend to Borrowers, from time to time prior to the Commitment Termination Date,
equipment advances (each an “Equipment Advance” and collectively the “Equipment
Advances”) in an aggregate amount not to exceed the Committed Equipment Line,
less all Equipment Advances made under the Original Loan Agreement. As of the
Closing Date, the outstanding principal balance of all Equipment Advances made
by Bank under the Original Loan Agreement or otherwise (the “Outstanding
Equipment Advances”) is $994,475.69 and the Outstanding Equipment Advances
remain payable in accordance with each Loan Supplement delivered to Bank at the
time of each such Equipment Advance, including such Final Payment terms as are
set forth in such Loan Supplements with respect to the Outstanding Equipment
Advances. Attached hereto as Schedule 2.4 is a list of all Outstanding
Equipment Advances and the repayment terms (including Final Payments)
applicable thereto. When repaid, the Equipment Advances may not be reborrowed.
The proceeds of the Equipment Advances will be used solely to reimburse
Borrowers for the purchase of Eligible Equipment or the purchase or license of
Other Equipment (to the extent permitted in this Agreement), purchased within
ninety (90) days of the Equipment Advance. Bank’s obligation to lend hereunder
shall terminate on the earlier of (i) the occurrence and continuance of an
Event of Default (as defined herein) of which the Company has been given notice
if required under this Agreement, or (ii) the Commitment Termination Date. For
purposes of this Section, the minimum amount of each Equipment Advance is
Twenty Five Thousand Dollars ($25,000) and the maximum number of Equipment
Advances that will be made is eight (8).

     (b)  To obtain an Equipment Advance, the Company will deliver to Bank a
completed supplement in substantially the form attached as EXHIBIT E
(“Loan Supplement”), copies of invoices for

2

 

the Financed Equipment, together
with a UCC Financing Statement, if requested by Bank, covering the Equipment
described on the Loan Supplement, and such additional information as Bank may
request at least five (5) Business Days before the proposed funding date (the
“Funding Date”). On each Funding Date, Bank will specify in the Loan
Supplement for each Equipment Advance, the Basic Rate, the Loan Factor, and the
Payment Dates (as defined in Section 2.6(b)). If Borrowers satisfy the
conditions of each Equipment Advance specified herein, Bank will disburse such
Equipment Advance by internal transfer to the Company’s deposit account with
Bank. Each Equipment Advance may not exceed one hundred percent (100%) of the
Original Stated Cost.

     2.5 Overadvances. If Borrowers’ Obligations under Sections 2.1,
2.2 and 2.3 exceed the lesser of either (i) the Committed Revolving Line or
(ii) the Borrowing Base, Borrowers must immediately pay in cash to Bank the
excess.

     2.6 Interest Rate; Payments.

          (a) Interest on the Committed Revolving Line is payable on the fifth (5th)
day of each month. Advances under the Committed Revolving Line accrue interest
on the outstanding principal balance in accordance with the Revolving
Promissory Note.

          (b) Borrowers will repay the Equipment Advances on the terms provided in
the Loan Supplement. Borrowers will make payments monthly in advance of
principal and accrued interest for each Equipment Advance (collectively,
“Scheduled Payments”), on the first Business Day of the month following the
Funding Date (or commencing on the Funding Date if the Funding Date is the
first Business Day of the month) with respect to such Equipment Advance and
continuing thereafter during the Repayment Period on the first Business Day of
each calendar month (each a “Payment Date”), in an amount equal to the Loan
Factor multiplied by the Loan Amount for such Equipment Advance as of such
Payment Date. All unpaid principal and accrued interest is due and payable in
full on the last Payment Date with respect to such Equipment Advance. Payments
received after 12:00 noon Eastern time are considered received at the opening
of business on the next Business Day. An Equipment Advance may only be
prepaid in accordance with Sections 2.6 (e) and 2.6 (g).

          (c) Interest Rate. Borrowers will pay interest on the Payment Dates (as
described above) at the per annum rate of interest equal to the Basic Rate
determined by Bank as of the Funding Date for each Equipment Advance in
accordance with the definition of the Basic Rate. Any amounts outstanding
during the continuance of an Event of Default shall bear interest at a per
annum rate equal to the Basic Rate, plus five percent (5%).

          (d) Interim Payment. In addition to the Scheduled Payments, on the Funding
Date for each Equipment Advance (unless the Funding Date is the first Business
Day of the month), Borrowers shall pay to Bank, the projected interest to
accrue from the Funding Date to the first Payment Date, at the Bank’s Prime
Rate, plus two percent (2.0%) per annum.

          (e) Final Payment. On the maturity date of each Outstanding Equipment
Advance, Borrowers will pay, in addition to the unpaid principal and accrued
interest and other amounts due on such date with respect to such Outstanding
Equipment Advance, an amount equal to the Final Payment set forth in
Schedule 2.4.

          (f) Prepayment Upon an Event of Loss. If any Financed Equipment is
subject to an Event of Loss and Borrowers are required to or elect to prepay
the Equipment Advance with respect to such Financed Equipment pursuant to
Section 6.9, then such Equipment Advance shall be prepaid to the extent and in
the manner provided in such section.

          (g) Mandatory Prepayment Upon an Acceleration. If the Equipment Advances
are accelerated following the occurrence of an Event of Default (other than
following an Event of Loss), then Borrowers will immediately pay to Bank (i)
all unpaid Scheduled Payments (including principal and
interest, including the default rate interest for any period where
applicable) with respect to each Equipment Advance, (ii) all remaining
Scheduled Payments (including principal and interest unpaid,

3

 

including the
default rate interest), (iii) and with respect to any Outstanding Equipment
Advance, the applicable Final Payment with respect thereto, and (v) all other
sums, if any, that shall have become due and payable with respect to any
Equipment Advance.

          (h) Permitted Prepayment of Loans. Borrowers shall have the option to
prepay all, but not less than all, of the Equipment Advances advanced by Bank
under this Agreement, provided Borrowers (i) provide written notice to
Bank of its election to prepay the Equipment Advances at least fifteen (15)
days prior to such prepayment, and (ii) pay, on the date of the prepayment (A)
all unpaid Scheduled Payments (including principal and interest) with respect
to each Equipment Advance; (B) all remaining Scheduled Payments (including
principal and interest); (C) all unpaid accrued interest to the date of the
prepayment; (D) the Final Payment for any Outstanding Equipment Advance; (E)
for any prepayment within twelve months of the Closing Date, a prepayment fee
in the amount of one and one half percent (1.5%) of the amount prepaid, for any
prepayment in the second twelve (12) month period after the Closing Date, a
prepayment fee in the amount of one percent (1.0%) of the amount prepaid, and
for any prepayment thereafter, a prepayment fee in the amount of one half of
one percent (.5%) of the amount prepaid, and (F) all other sums, if any, that
shall have become due and payable hereunder with respect to this Agreement.

          (i) Default Interest. After an Event of Default, Obligations accrue
interest at five percent (5%) above the rate set forth in the Revolving
Promissory Note effective immediately before the Event of Default. The
interest rate increases or decreases when the Prime Rate changes. Interest is
computed on a 360-day year for the actual number of days elapsed.

     2.7 Fees. Borrowers will pay to Bank:

          (a) Facility Fee. A fully earned, nonrefundable facility fee for
the Committed Revolving Line of Twenty Five Thousand Dollars ($25,000) and the
Committed Equipment Line of Five Thousand Dollars ($5,000) due on the Closing
Date; and

          (b) Bank Expenses. All Bank Expenses (including reasonable
attorneys’ fees not to exceed $10,000 in connection with the preparation and
negotiation of the Loan Documents) and expenses for documentation and
negotiation of this Agreement) incurred through and after the Closing Date when
due.

     2.8 Request to Debit Accounts. Bank may debit any Borrower’s
deposit accounts including Account Number 3300167291 for principal and interest
payments when due or any amounts any Borrower owes Bank when due. Bank will
notify the Company when it debits a Borrower’s account. These debits are not
a set-off. Payments received after 12:00 noon Eastern time are considered
received at the opening of business on the next Business Day. When a payment
is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest accrue.

3 CONDITIONS OF LOANS

     3.1 Conditions Precedent to Initial Credit Extension. Bank’s
obligation to make the initial Credit Extension is subject to the condition
precedent that it receive the agreements, documents and fees it requires.

     3.2 Conditions Precedent to all Credit Extensions. Bank’s
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

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

          (b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing,
or result from the Credit Extension. Each Credit Extension

4

 

is Borrowers’
representation and warranty on that date that the representations and
warranties in Section 5 remain true.

4 CREATION OF SECURITY INTEREST

     4.1 Grant of Security Interest. Each Borrower grants Bank a
continuing security interest in all presently existing and later acquired
Collateral to secure all Obligations and performance of each Borrower’s duties
under the Loan Documents. Except for Permitted Liens, any security interest
will be a first priority security interest in the Collateral. Upon an Event of
Default or an event which with the giving of notice or passage of time would
constitute an Event of Default, Bank may place a “hold” on any deposit account
pledged as Collateral. If the Agreement is terminated, Bank’s lien and
security interest in the Collateral will continue until Borrowers fully satisfy
their Obligations.

5 REPRESENTATIONS AND WARRANTIES

     Each Borrower represents and warrants as follows:

     5.1 Due Organization and Authorization. Each Borrower is a
Registered Organization duly existing and in good standing in its state of
formation and qualified and licensed to do business in, and in good standing
in, any state in which the conduct of its business or its ownership of property
requires that it be qualified, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change. The execution,
delivery and performance of the Loan Documents have been duly authorized, and
do not conflict with any Borrower’s formation documents, nor constitute an
event of default under any material agreement by which any Borrower is bound.
Borrowers have not been given notice of the existence of any default under any
agreement to which or by which any Borrower is bound in which the default could
cause a Material Adverse Change.

     5.2 Collateral. Each Borrower has good title to the Collateral,
free of Liens, except Permitted Liens. The Eligible Accounts are bona fide,
existing obligations, and the service or property has been performed or
delivered to the account debtor in accordance with the contract or other
agreement governing the relationship between the parties, or delivered to its
agent for immediate shipment to and unconditional acceptance by the account
debtor. No Borrower has notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects. Each Borrower is the sole
owner of, or has the right to use, the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. Each Patent which has been issued is valid and enforceable and to
the best of each Borrower’s knowledge, each Patent that has been applied for
and is pending if issued will be valid and enforceable when issued and no part
of the Intellectual Property has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Intellectual
Property violates the rights of any third party except to the extent such claim
could not reasonably be expected to cause a Material Adverse Change.

     5.3 Litigation. There are no actions or proceedings pending or, to
any Borrower’s knowledge, threatened by or against any Borrower or any
Subsidiary in which an adverse decision could cause a Material Adverse Change.

     5.4 No Material Adverse Change in Financial Statements. All
consolidated financial statements for Borrowers and any Subsidiary delivered to
Bank fairly present in all material respects Borrowers’ consolidated financial
condition and Borrowers’ consolidated results of operations. There has not
been any material deterioration in Borrowers’ consolidated financial condition
since the date of the most recent financial statements submitted to Bank.

5

 

     5.5 Solvency. The Borrowers, on a consolidated basis, are not left
with unreasonably small capital after the transactions in this Agreement; and
the Borrowers, on a consolidated basis, are able to pay their debts (including
trade debts) as they mature.

     5.6 Regulatory Compliance. No Borrower is an “investment company”
or a company “controlled” by an “investment company” under the Investment
Company Act. No Borrower is engaged as one of its important activities in
extending credit for margin stock (under Regulations T and U of the Federal
Reserve Board of Governors). All Borrowers have complied in all material
respects with the Federal Fair Labor Standards Act. No Borrower has violated
any laws, ordinances or rules, the violation of which could cause a Material
Adverse Change. None of any Borrower’s or any Subsidiary’s properties or
assets has been used by any Borrower or any Subsidiary or, to the best of each
Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Each
Borrower and each Subsidiary has timely filed all required tax returns and
paid, or made adequate provision to pay, all material taxes, except those being
contested in good faith with adequate reserves under GAAP. Each Borrower and
each Subsidiary has obtained all consents, approvals and authorizations of,
made all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.

     5.7 Subsidiaries. No Borrower owns any stock, partnership interest
or other equity securities, except for the Company’s ownership of Blackboard
Tennessee, LLC, Bb Acquisition Corporation, Bb Management LLC, Blackboard
International Holdings, Inc., Blackboard International B.V., and for Permitted
Investments.

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

     6 AFFIRMATIVE COVENANTS

     Borrowers will do all of the following:

     6.1 Government Compliance. Each Borrower will maintain its and all
Subsidiaries’ corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a material adverse effect on any Borrower’s
business or operations. Each Borrower will comply, and have each Subsidiary
comply, with all laws, ordinances and regulations to which it is subject,
noncompliance with which could have a material adverse effect on any Borrower’s
business or operations or cause a Material Adverse Change.

     6.2 Financial Statements, Reports, Certificates.

     The Company will deliver to Bank: (i) as soon as available, but no later
than thirty (30) days after the last day of each month, a Company prepared
consolidated balance sheet and income statement covering Company’s consolidated
operations during the period, in a form acceptable to Bank and certified by a
Responsible Officer; (ii) as soon as available, but no later than one hundred
twenty (120) days after the end of Company’s fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with
an unqualified opinion on the financial statements from an independent
certified public accounting firm acceptable to Bank; (iii) within ten (10) days
of filing, copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8K filed with the Securities and Exchange
Commission; (iv) a prompt report of any legal actions pending or threatened
against any Borrower or any Subsidiary that could result in damages or costs to
any Borrower or any Subsidiary of Fifty Thousand Dollars ($50,000.00) or more;
(v) prompt notice of any material change in the composition of the Intellectual
Property, including any subsequent ownership right of any Borrower in or to any
Copyright,

6

 

Patent or Trademark not shown in any intellectual property security agreement
between any Borrower and Bank or knowledge of an event that materially
adversely affects the value of the Intellectual Property; and (vi) previously
prepared budgets, sales projections operating plans, and other financial
information Bank reasonably requests from time to time.

     Within thirty (30) days after the last day of each month, the Company will
deliver to Bank a consolidated Borrowing Base Certificate signed by a
Responsible Officer in the form of EXHIBIT C, and an aged listings of
accounts receivable for each Borrower.

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

     Bank has the right to audit Borrowers’ Accounts at Borrowers’ expense at
any time that Advances or Letters of Credit are outstanding, but the audits
will be conducted no more often than once every twelve (12) months unless an
Event of Default has occurred and is continuing.

     6.3 Inventory; Returns. Each Borrower will keep all Inventory in
good and marketable condition, free from material defects. Returns and
allowances between any Borrower and its account debtors will follow each
Borrower’s customary practices as they exist at the Closing Date. Borrowers
must promptly notify Bank of all returns, recoveries, disputes and claims that
involve more than One Hundred Thousand Dollars ($100,000.00), provided,
however, that the Company shall not be obligated to upgrade or maintain items
of Inventory that have become obsolete.

     6.4 Taxes. Each Borrower will make, and cause each Subsidiary to
make, timely payment of all material federal, state, and local taxes or
assessments and will deliver to Bank, on demand, appropriate certificates
attesting to the payment, other than those taxes being contested in good faith
with adequate reserves under GAAP. Borrowers further agree that all unpaid and
delinquent sales taxes will be paid in full on or before December 31, 2001 and
the Company will provide Bank with evidence of such payment.

     6.5 Insurance. Each Borrower will keep its business and the
Collateral insured for risks and in amounts, in accordance with the customs and
practices of similarly situated companies. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank. All
property policies will have a lender’s loss payable endorsement showing Bank as
a loss payee and all liability policies will show the Bank as an additional
insured and provide that the insurer must give Bank at least twenty (20) days
notice before canceling its policy. At Bank’s request, each Borrower will
deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy will, at Bank’s option, be payable to Bank on
account of the Obligations.

     6.6 Primary Accounts. Each Borrower will maintain its primary
operating accounts with Bank.

     6.7 Financial Covenants.

     The Company, on a consolidated basis, will maintain as of the last day of
each month, unless otherwise noted:

     (a)  Quick Ratio. A ratio of Quick Assets to Current Liabilities
plus long term Indebtedness in favor of Bank, less deferred revenue, at least
1.5 to 1.0.

     (b)  Minimum Revenue. Minimum Revenue, based on the most recent
quarterly financial statement delivered to Bank pursuant to Section 6.2 of this
Agreement of not less than the following amounts for the following periods:

	 	 	 	$11,400,000 for the quarter ending September 30, 2001;

7

 

	 	 	 	$12,700,000 for the quarter ending December 31, 2001;
	 
	 	 	 	$13,400,000 for the quarter ending March 31, 2002;
	 
	 	 	 	$14,700,000 for the quarter ending June 30, 2002;
	 
	 	 	 	$16,200,000 for the quarter ending September 30, 2002; and
	 
	 	 	 	$16,900,000 for the quarter ending December 31, 2002.

          (c) Profitability. Commencing with the Company’s fourth quarter
of fiscal year 2002 and for each quarter thereafter, the Company will have on a
consolidated basis a minimum net profit of $1.

     6.8 Intellectual Property Rights. Borrowers will: (i) protect,
defend and maintain the validity and enforceability of the Intellectual
Property; (ii) promptly advise Bank in writing of material infringements of the
Intellectual Property; and (iii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public in a manner inconsistent with
the Company’s strategic business plan without Bank’s written consent (all of
the preceding (i), (ii) and (iii) being called “Intellectual Property Rights”).

     6.9 Loss, Destruction or Damage.

     Borrowers will bear the risk of the Financed Equipment being lost, stolen,
destroyed, or damaged. If during the term of this Agreement any item of
Financed Equipment is lost, stolen, destroyed, damaged beyond repair, rendered
permanently unfit for use, or seized by a governmental authority for any reason
for a period equal to at least the remainder of the term of this Agreement (an
“Event of Loss”), then in each case, Borrowers:

          (a) prior to the occurrence of an Event of Default, at Borrowers’ option,
will (i) pay to Bank on account of the Obligations all accrued interest to the
date of the prepayment, plus all outstanding principal, plus the Final Payment;
or (ii) repair or replace any Financed Equipment subject to an Event of Loss
provided the repaired or replaced Financed Equipment is of equal or like value
to the Financed Equipment subject to an Event of Loss and provided further that
Bank has a first priority perfected security interest in such repaired or
replaced Financed Equipment.

          (b) during the continuance of an Event of Default, on or before the
Payment Date after such Event of Loss for each such item of Financed Equipment
subject to such Event of Loss, Borrowers will, at Bank’s option, pay to Bank an
amount equal to the sum of: (i) all accrued and unpaid Scheduled Payments
(with respect to such Equipment Advance related to the Event of Loss) due prior
to the next such Payment Date, (ii) all Regularly Scheduled Payments (including
principal and interest), (iii) the Final Payment plus (iv) all other sums, if
any, that shall have become due and payable, including interest at the Default
Rate with respect to any past due amounts.

          (c) On the date of receipt by Bank of the amount specified above with
respect to each such item of Financed Equipment subject to an Event of Loss,
this Agreement shall terminate as to such Financed Equipment. If any proceeds
of insurance or awards received from governmental authorities are in excess of
the amount owed under this Section, Bank shall promptly remit to Borrowers the
amount in excess of the amount owed to Bank.

     6.10 Further Assurances. Borrowers will execute any further
instruments and take further action as Bank requests to perfect or continue
Bank’s security interest in the Collateral or to effect the purposes of this
Agreement.

7 NEGATIVE COVENANTS

     Borrowers will not do any of the following without the Bank’s written
consent, which will not be unreasonably withheld:

     7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively a “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property,

8

 

including without limitation, Transfers to a Subsidiary which is not a
party to this Agreement, other than a Transfer (i) of Inventory in the ordinary
course of business; (ii) of exclusive or non-exclusive licenses and similar
arrangements for the use of the property of any Borrower or its Subsidiaries in
the ordinary course of business; (iii) of worn-out or obsolete Equipment, or
(iv) which is a Permitted Investment.

     7.2 Changes in Business, Ownership, Management or Business
Locations. Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by any Borrower or
reasonably related thereto or have a material change in its ownership (other
than the sale of any Borrower’s equity securities in a public offering or to
venture capital investors approved by Bank) or management. Borrowers will not,
without at least thirty (30) days prior written notice to Bank, relocate its
principal executive office or add any new offices outside of its current
location or add any new business locations.

     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may be merged into
another Subsidiary and/or into another Borrower.

     7.4 Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

     7.5 Encumbrance. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale
of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit Bank’s first priority security interest in the
Collateral to change.

     7.6 Investments; Distributions. (i) Directly or indirectly acquire
or own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock, except for repurchases of stock from former employees or
directors of any Borrower under the terms of applicable repurchase agreements
in an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000.00)
in the aggregate in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases.

     7.7 Transactions with Affiliates. Directly or indirectly enter or
permit any material transaction with any Affiliate, except (i) transactions
that are in the ordinary course of a Borrower’s business, on terms less
favorable to any Borrower than would be obtained in an arm’s length transaction
with a non-affiliated Person, and (ii) transactions under agreements existing
as of the date hereof with investors or members of any Borrower’s senior
management that such Borrower is legally obligated to perform.

     7.8 Subordinated Debt. Make or permit any payment on any
Subordinated Debt, except under the terms of the Subordinated Debt, or amend
any provision in any document relating to the Subordinated Debt, without Bank’s
prior written consent.

     7.9 Compliance. Undertake as one of its important activities
extending credit to purchase or carry margin stock, or use the proceeds of any
Advance for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in
ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or
violate any other law or regulation, if the violation could have a material
adverse effect on Borrower’s business or operations or cause a Material Adverse
Change, or permit any of its Subsidiaries to do so.

9

 

8 EVENTS OF DEFAULT

     Any one of the following is an Event of Default:

     8.1 Payment Default. Borrowers fail to pay any of the Obligations
within three (3) Business Days after their due date. During the additional
period the failure to cure the default is not an Event of Default (but no
Credit Extensions will be made during the cure period);

     8.2 Covenant Default. Borrowers fail to perform any obligation in
Section 6 or violate any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between any Borrower and Bank and as to any
default under a term, condition or covenant that can be cured, has not cured
the default within ten (10) Business Days after it occurs, or if the default
cannot be cured within ten (10) Business Days or cannot be cured after
Borrowers’ attempt in the ten (10) Business Day period, and the default may be
cured within a reasonable time, then Borrowers have an additional time, (of not
more than thirty (30) days) to attempt to cure the default. During the
additional period the failure to cure the default is not an Event of Default
(but no Credit Extensions will be made during the cure period);

     8.3 Material Adverse Change. (i) A material impairment in the
perfection or priority of the Bank’s security interest in the Collateral or in
the value of such Collateral which is not covered by adequate insurance occurs;
(ii) a material adverse change in the business, operations, or condition
(financial or otherwise) of the Borrowers (when taken as a group) occurs; or
(iii) a material impairment of the prospect of repayment of any portion of the
Obligations occurs;

     8.4 Attachment. (i) Any material portion of any Borrower’s assets
is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten (10) days;
(ii) any Borrower is enjoined, restrained, or prevented by court order from
conducting a material part of its business; (iii) a judgment or other claim
becomes a Lien on a material portion of any Borrower’s assets; or (iv) a notice
of lien, levy, or assessment is filed against any Borrower’s assets by any
government agency and not paid within ten (10) days after such Borrower
receives notice. These are not Events of Default if stayed or if a bond is
posted pending contest by Borrower (but no Credit Extension will be made during
the cure period);

     8.5 Insolvency. (i) Borrowers, on a consolidated basis, become
insolvent; (ii) any Borrower begins an Insolvency Proceeding; or (iii) an
Insolvency Proceeding is begun against any Borrower and not dismissed or stayed
within forty five (45) days (but no Credit Extensions will be made before any
Insolvency Proceeding is dismissed);

     8.6 Misrepresentations. If any Borrower or any Person acting for
any Borrower makes any material misrepresentation or material misstatement now
or later in any warranty or representation in this Agreement or in any
communication delivered to Bank or to induce Bank to enter this Agreement or
any Loan Document.

9 BANK’S RIGHTS AND REMEDIES

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

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

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

10

 

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

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

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

          (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge, each
Borrower’s labels, Patents, Copyrights, rights of use of any name, trade
secrets, trade names, Trademarks, service marks, and advertising matter, or any
similar property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, each Borrower’s rights under all
licenses and all franchise agreements inure to Bank’s benefit; and

          (g) Dispose of the Collateral according to the Code.

          9.2 Power of Attorney. When an Event of Default occurs and
continues, each Borrower irrevocably appoints Bank as its lawful attorney to:
(i) endorse each Borrower’s name on any checks or other forms of payment or
security; (ii) sign each Borrower’s name on any invoice or bill of lading for
any Account or drafts against account debtors, (iii) make, settle, and adjust
all claims under each Borrower’s insurance policies; (iv) settle and adjust
disputes and claims about the Accounts directly with account debtors, for
amounts and on terms Bank determines reasonable; and (v) transfer the
Collateral into the name of Bank or a third party as the Code permits. Bank
may exercise the power of attorney to sign each Borrower’s name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank’s
appointment as each Borrower’s attorney in fact, and all of Bank’s rights and
powers, coupled with an interest, are irrevocable until all Obligations have
been fully repaid and performed and Bank’s obligation to provide Credit
Extensions terminates.

          9.3 Accounts Collection. When an Event of Default occurs and
continues and notice thereof has been given by Bank to the Company if required
under this Agreement, Bank may notify any Person owing any Borrower money of
Bank’s security interest in the funds and verify the amount of the Account.
Each Borrower must collect all payments in trust for Bank and, if requested by
Bank, immediately deliver the payments to Bank in the form received from the
account debtor, with proper endorsements for deposit.

          9.4 Bank Expenses. If any Borrower fails to pay any amount or
furnish any required proof of payment to third persons Bank may make all or
part of the payment or obtain insurance policies required in Section 6.5, and
take any action under the policies Bank deems prudent. Any amounts paid by
Bank are Bank Expenses and immediately due and payable, bearing interest at the
then applicable rate and secured by the Collateral. No payments by Bank are
deemed an agreement to make similar payments in the future or Bank’s waiver of
any Event of Default.

          9.5 Bank’s Liability for Collateral. If Bank complies with
reasonable banking practices, it is not liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c)
any diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other person. Borrowers bear all risk of
loss, damage or destruction of the Collateral.

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          9.6 Remedies Cumulative. Bank’s rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank
has all rights and remedies provided under the Code, by law, or in equity.
Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of
any Event of Default is not a continuing waiver. Bank’s delay is not a waiver,
election, or acquiescence. No waiver is effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.

          9.7 Demand Waiver. Each Borrower waives demand, notice of default
or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guaranties held by Bank
on which any Borrower is liable.

10 NOTICES

     All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile at the addresses listed at the beginning of this
Agreement. A party may change its notice address by giving the other party
written notice.

11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER

     Virginia law governs the Loan Documents without regard to principles of
conflicts of law. Borrowers and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in the Commonwealth of Virginia provided,
however, that if for any reason the Bank can not avail itself of the courts of
the Commonwealth of Virginia, the Borrowers and Bank each submit to the
jurisdiction of the State and Federal Courts in Santa Clara County, California.

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

12 GENERAL PROVISIONS 

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

     12.2 Indemnification. Borrowers will indemnify, defend and hold
harmless Bank and its officers, employees and agents against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b)
all losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrowers (including reasonable
attorneys’ fees and expenses), except for losses caused by Bank’s gross
negligence or willful misconduct.

     12.3 Time of Essence. Time is of the essence for the performance
of all Obligations in this Agreement.

     12.4 Severability of Provision. Each provision of this Agreement
is severable from every other provision in determining the enforceability of
any provision.

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     12.5 Amendments in Writing, Integration. All amendments to this
Agreement must be in writing signed by both Bank and Borrowers. This Agreement
and the Loan Documents represent the entire agreement about this subject
matter, and supersedes prior or contemporaneous negotiations or agreements,
including, without limitation, the Original Loan Agreement. All prior or
contemporaneous agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this Agreement and
the Loan Documents merge into this Agreement and the Loan Documents.

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

     12.7 Survival. All covenants, representations and warranties made
in this Agreement continue in full force while any Obligations remain
outstanding. The obligation of Borrowers in Section 12.2 to indemnify Bank
will survive until all statutes of limitations for actions that may be brought
against Bank have run.

     12.8 Confidentiality. In handling any confidential information,
Bank will exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (i) to
Bank’s subsidiaries or affiliates in connection with their present or
prospective business relations with Borrowers; (ii) to prospective transferees
or purchasers of any interest in the Loans, provided, however that prior to any
Event of Default, Borrowers shall have the right to approve any such
prospective transferees or purchasers, which approval shall not be unreasonably
withheld or conditioned; (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank’s examination or audit;
and (v) as Bank considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Bank’s possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.

     12.9 Attorneys’ Fees, Costs and Expenses. In any action or
proceeding between any Borrower and Bank arising out of the Loan Documents, the
prevailing party will be entitled to recover its reasonable attorneys’ fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled, whether or not a lawsuit is filed.

13 DEFINITIONS

          13.1 Definitions.

          “Accounts” are all existing and later arising accounts, contract rights,
and other obligations owed any Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by any Borrower and Borrower’s Books relating to any of
the foregoing.

          “Advance” or “Advances” is a loan advance (or advances) under the
Committed Revolving Line.

          “Affiliate” of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

          “Basic Rate” is nine percent (9.0%) per annum, provided that all
Outstanding Equipment Advances shall continue to accrue interest at the current
rate of interest thereto as set forth on Schedule 2.4.

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          “Bank Expenses” are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

          “Borrower’s Books” are all Borrowers’ books and records including ledgers,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

          “Borrowing Base” is eighty percent (80%) of Eligible Accounts, as
determined by Bank from the Company’s most recent consolidated Borrowing Base
Certificate.

          “Borrowing Base Certificate” is EXHIBIT C.

          “Business Day” is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.

          “Cash Management Services” are defined in Section 2.3.

          “Closing Date” is the date of this Agreement.

          “Code” is the Virginia Uniform Commercial Code.

          “Collateral” is the property described on EXHIBIT A.

          “Commitment Termination Date” is October 5, 2002.

          “Committed Equipment Line” is a Credit Extension of up to Three Million
Dollars ($3,000,000).

          “Committed Revolving Line” is a Credit Extension of up to Eight Million
Dollars ($8,000,000).

          “Contingent Obligation” is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designed to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

          “Copyrights” are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.

          “Credit Extension” is each Advance, Equipment Advance, Letter of Credit or
any other extension of credit by Bank for any Borrower’s benefit.

          “Current Assets” are amounts that under GAAP should be included on that
date as current assets on the Company’s consolidated balance sheet.

          “Current Liabilities” are the aggregate amount of Borrowers’ Total
Liabilities which mature within one (1) year.

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          “Eligible Accounts” are Accounts in the ordinary course of a Borrower’s
business that meet all Borrowers’ representations and warranties in Section
5.2; but Bank may change eligibility standards by giving the Company
thirty (30) days prior written notice. Unless Bank agrees otherwise in
writing, Eligible Accounts will not include:

               (a) Accounts that the account debtor has not paid within ninety (90) days
of invoice date;

               (b) Accounts for an account debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

               (c) Credit balances over ninety (90) days from invoice date;

               (d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrowers exceed twenty-five percent (25%) of all Accounts;

               (e) Accounts for which the account debtor does not have its principal
place of business in the United States in excess of Five Hundred Thousand
Dollars ($500,000) in the aggregate;

               (f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality, other than
state or local educational institutions or their affiliates or governing
bodies;

               (g) Accounts for which any Borrower owes the account debtor, but only up
to the amount owed (sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts);

               (h) Accounts for demonstration or promotional equipment, or in which goods
are consigned, sales guaranteed, sale or return, sale on approval, bill and
hold, or other terms if account debtor’s payment may be conditional;

               (i) Accounts for which the account debtor is any Borrower’s Affiliate,
officer, employee, or agent;

               (j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business; and

               (k) Accounts for which Bank reasonably determines collection to be
doubtful.

          “Eligible Equipment” is general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, and, subject to the
limitations set forth below, Other Equipment that complies with all of
Borrowers’ representations and warranties to Bank and which is acceptable to
Bank in all respects. All Equipment financed with the proceeds of Equipment
Advances shall be new, provided that Bank, in its sole discretion, may finance
used equipment.

          “Equipment” is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which any Borrower has any interest.

          “Equipment Advance” is defined in Section 2.4.

          “Equipment Term Note” means that certain Equipment Term Note of even date
herewith in the principal amount of Three Million Dollars ($3,000,000) from
Borrowers in favor of Bank, together with all renewals, amendments,
modifications and substitutions therefore.

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          “ERISA” is the Employment Retirement Income Security Act of 1974, and its
regulations.

          “Financed Equipment” is defined in the Loan Supplement.

          “Final Payment” is a payment (in addition to and not in substitution for
the regular monthly payments of principal plus accrued interest) due on the
Maturity Date of each Outstanding Equipment Advance, equal to the original
amount of each Outstanding Equipment Advance multiplied by five percent (5.0%).

          “Funding Date” is any date on which an Equipment Advance is made to or on
account of any Borrower.

          “GAAP” is generally accepted accounting principles.

          “Indebtedness” is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

          “Insolvency Proceeding” is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

          “Intellectual Property” is:

               (a) Copyrights, Trademarks and Patents including amendments, renewals,
extensions, and all licenses or other rights to use and all license fees and
royalties from the use thereof;

               (b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created,
acquired or held;

               (c) All design rights which may be available to any Borrower now or later
created, acquired or held;

               (d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above; and

               (e) All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.

          “Inventory” is present and future inventory in which any Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of any Borrower, including inventory temporarily out of its
custody or possession or in transit and including returns on any accounts or
other proceeds (including insurance proceeds) from the sale or disposition of
any of the foregoing and any documents of title.

          “Investment” is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

          “Letter-of-credit right” means a right to payment or performance under a
letter of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.

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          “Lien” is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

          “Loan Amount” is the aggregate amount of the Equipment Advance.

          “Loan Documents” are, collectively, this Agreement, the Revolving
Promissory Note, the Equipment Term Note, any note, or notes or guaranties
executed by any Borrower, and any other present or future agreement between any
Borrower and/or for the benefit of Bank in connection with this Agreement, all
as amended, extended or restated.

          “Loan Factor” is the percentage which results from amortizing the
Equipment Advance over the Repayment Period, using the Basic Rate as the
interest rate.

          “Loan Supplement” is attached as EXHIBIT C.

          “Material Adverse Change” has been defined in Section 8.3 hereof.

          “Maturity Date” is, with respect to each Equipment Advance, the last day
of the Repayment Period for such Equipment Advance, or if earlier, the date of
acceleration of such Equipment Advance by Bank following an Event of Default.

          “Obligations” are debts, principal, interest, Bank Expenses and other
amounts any Borrower owes Bank now or later, including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of any
Borrower assigned to Bank.

          “Original Loan Agreement” means that certain Loan and Security Agreement
dated June 30, 2000 by and between the Company and Bank, as thereafter amended
from time to time prior to the Closing Date.

          “Original Stated Cost” is (i), the original cost to Borrowers of the item
of new Equipment net of any and all freight, installation, tax or (ii) the
fair market value assigned to such item of used Equipment by mutual agreement
of Borrowers and Bank at the time of making of the Equipment Advance.

          “Other Equipment” is leasehold improvements, intangible property such as
computer software and software licenses, equipment specifically designed or
manufactured for a Borrower, other intangible property, limited use property
and other similar property. Unless otherwise agreed to by Bank, not more than
thirty five percent (35%) of the Committed Equipment Line shall consist of
Other Equipment.

          “Patents” are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations in part of the same.

          “Permitted Indebtedness” is:

               (a) Borrowers’ indebtedness to Bank under this Agreement or the Loan
Documents;

               (b) Indebtedness existing on the Closing Date and shown on the Schedule;

               (c) Subordinated Debt;

               (d) Indebtedness to trade creditors incurred in the ordinary course of
business;

               (e) Indebtedness secured by Permitted Liens;

               (f) Indebtedness of any Borrower to any other Borrower or Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of any
Borrower (provided that the primary obligations are not prohibited hereby), and
Indebtedness of any Subsidiary to any other Borrower or Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of any
other Borrower or Subsidiary (provided that the primary obligations are not
prohibited hereby);

17

 

               (g) Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate
outstanding at any time; and

               (h) Extensions, refinancings, modifications, amendments and restatements
of any items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon any Borrower or its Subsidiary, as the
case may be.

          “Permitted Investments” are:

               (a) Investments shown on the Schedule and existing on the Closing Date;

               (b) marketable direct obligations issued or unconditionally guaranteed by
the United States or its agency or any State maturing within one (1) year from
its acquisition, (ii) commercial paper maturing no more than one (1) year after
its creation and having the highest rating from either Standard & Poor’s
Corporation or Moody’s Investors Service, Inc., and (iii) Bank’s certificates
of deposit issued maturing no more than one (1) year after issue, and (iv) any
Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved by Bank;

               (c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of a
Borrower’s business;

               (d) Investments accepted in connection with Transfers permitted by Section
7.1;

               (e) Investments of Borrower in or to other Subsidiaries or a Borrower and
Investments by any Borrower in Subsidiaries not to exceed One Hundred Thousand
Dollars ($100,000) in the aggregate in any fiscal year;

               (f) Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the purchase of
equity securities of a Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by such Borrower’s Board of Directors;
and

               (g) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business.

          “Permitted Liens” are:

               (a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;

               (b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrowers maintain adequate reserves on their books, if they have no priority
over any of Bank’s security interests;

               (c) Purchase money Liens (i) on Equipment acquired or held by a Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;

               (d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of any Borrower’s business, if the leases, subleases, licenses
and sublicenses permit granting Bank a security interest;

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               (e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

               (f) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 8.4 or 8.7;

               (g) Liens in favor of other financial institutions arising in connection
with any Borrower’s deposit accounts held at such institutions, provided that
Bank has a perfected security interest in the amounts held in such deposit
accounts; and

               (h) Other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a material adverse
effect on Borrowers and its Subsidiaries taken as a whole.

          “Person” is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

          “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is
not Bank’s lowest rate.

          “Quick Assets” is, on any date, the Borrowers’ consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of less than twelve (12) months determined according to GAAP.

          “Registered Organization” an organization organized solely under the law
of a single state or the United States and as to which the state or the United
States must maintain a public record showing the organization to have been
organized.

          “Repayment Period,” as to the Equipment Advances, is thirty six (36)
months for Eligible Equipment and twenty four (24) months for Other Equipment.

          “Responsible Officer” is each of the Chief Executive Officer, the
President, the Chief Financial Officer, General Counsel and Vice President of
Finance.

          “Revolving Maturity Date” is October 4, 2002.

          “Revolving Promissory Note” means that certain Revolving Promissory Note
of even date herewith in the maximum principal amount of Eight Million Dollars
($8,000,000) from Borrowers in favor of Bank, together with all renewals,
amendments, modifications and substitutions, therefore.

          “Schedule” is the attached schedule.

          “Subordinated Debt” is debt incurred by any Borrower subordinated to
Borrowers’ indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.

          “Subsidiary” is for any Person, joint venture, or any other business
entity of which more than fifty percent (50%) of the voting stock or other
equity interests is owned or controlled, directly or indirectly, by the Person
or one or more Affiliates of the Person and “Subsidiaries” means collectively
all of such subsidiaries.

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          “Supporting Obligation” means a Letter-of-credit right, secondary
obligation or obligation of a secondary obligor or that supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument or investment property.

          “Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on the Company’s consolidated balance sheet,
including all Indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.

          “Trademarks” are trademark and service mark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of any Borrower connected with the trademarks.

[SIGNATURES ARE ON THE FOLLOWING PAGE]

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BORROWERS:

BLACKBOARD INC.

	 	 	 
	By:	 	/s/ Peter Q.
Repetti
	 	 	

	 	 	Name:  Peter
Q. Repetti
	 	 	
Title:  CFO
	 	 	 
	BLACKBOARD ACQUISITION COMPANY, LLC
	 	 	 
	By:	 	/s/ Michael L. Chasen
	 	 	

	 	 	
Name:  Michael L. Chasen
	 	 	
Title:  President & CEO
	 	 	 
	BLACKBOARD CAMPUSWIDE, INC.
	 	 	 
	By:	 	/s/ Michael L. Chasen
	 	 	

	 	 	
Name:  Michael L. Chasen
	 	 	
Title:  President & CEO
	 	 	 
	BLACKBOARD ICOLLEGE, INC.
	 	 	 
	By:	 	/s/ Michael L. Chasen
	 	 	

	 	 	
Name:  Michael L. Chasen
	 	 	
Title:  President & CEO
	 	 	 
	AT&;T CAMPUSWIDE ACCESS SOLUTIONS, INC.
	 	 	 
	By:	 	/s/ Michael L. Chasen
	 	 	

	 	 	
Name:  Michael L. Chasen
	 	 	
Title:  President & CEO
	 	 	 
	AT&;T CAMPUSWIDE ACCESS SOLUTIONS OF TEXAS, INC.
	 	 	 
	By:	 	/s/ Michael L. Chasen
	 	 	

	 	 	
Name:  Michael L. Chasen
	 	 	
Title:  President & CEO

21

 

	 	 	 
	BANK:
	 	 	 
	SILICON VALLEY BANK
	 	 	 
	By:	 	/s/ Shawn E. Goodman
	 	 	

	 	 	
Name:  Shawn E. Goodman
	 	 	
Title:  VP
	 	 	 
	SILICON VALLEY BANK
	 	 	 
	By:	 	 
	 	 	

	 	 	
Name:
	 	 	
Title:

22

 

EXHIBIT A

DESCRIPTION OF COLLATERAL

     The Collateral consists of all of each Borrower’s right, title and
interest in and to the following:

     All goods and equipment as defined in the Uniform Commercial Code now
owned or hereafter acquired, including, without limitation, all machinery,
fixtures, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located;

     All Inventory as defined in the Uniform Commercial Code and includes, now
owned or hereafter acquired, including, without limitation, all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products including such inventory as is temporarily out of
Borrower’s custody or possession or in transit and including any returns upon
any accounts or other Proceeds, , resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of the above;

     All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

     All Accounts as defined in the Uniform Commercial Code and includes now
existing and hereafter arising accounts, contract rights, royalties, license
rights and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods, the licensing of technology or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefore, as well as all
merchandise returned to or reclaimed by Borrower;

     All Letter-Of-Credit Rights (whether or not the letter of credit is
evidenced by a writing);

     All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower’s Books relating to the foregoing;

     All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any
of the foregoing; and

     All Supporting Obligations and all of the Borrower’s Books relating to
the foregoing and any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and Proceeds thereof.

 

 

EXHIBIT B

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.

	 	 	 	 	 
	TO: CENTRAL CLIENT SERVICE DIVISION	 	
DATE:	 	 
	 	 	 	 	

	FAX#: (781) 431-9906	 	
TIME:	 	 
	 	 	 	 	

	 	 	 	 	 	 	 
	FROM:	 	 	 	 	 	 
	 	 	

	 	 	
CLIENT NAME (BORROWER)	 	 	 	 
	 	 	 	 	 	 	 
	REQUESTED BY:	 	 	 	 	 	 
	 	 	

	 	 	
AUTHORIZED SIGNER’S NAME	 	 	 	 
	 	 	 	 	 	 	 
	AUTHORIZED SIGNATURE:	 	 	 	 	 	 
	 	 	

	 	 	 	 	 	 	 
	PHONE NUMBER:	 	 	 	 	 	 
	 	 	

	 	 	 	 	 	 	 
	FROM ACCOUNT #	 	

	 	TO ACCOUNT #
	 

	 	 	 	 	 
	REQUESTED TRANSACTION TYPE	 	REQUEST DOLLAR AMOUNT
	
	 	

	PRINCIPAL INCREASE (ADVANCE)	 	 	
$	 
	 	 	 	

	 
	PRINCIPAL PAYMENT (ONLY)	 	 	
$	 
	 	 	 	

	 
	INTEREST PAYMENT (ONLY)	 	 	
$	 
	 	 	 	

	 
	PRINCIPAL AND INTEREST (PAYMENT)	 	 	
$	 
	 	 	 	

	 

OTHER INSTRUCTIONS:

All Borrowers’ representations and warranties in the Loan and Security Agreement are true,
correct and complete in all material respects on the date of the telephone request for and
Advance confirmed by this Borrowing Certificate; but those representations and warranties
expressly referring to another date shall be true, correct and complete in all material
respects as of that date.

BANK USE ONLY

TELEPHONE REQUEST:

The following person is authorized to request the loan payment transfer/loan advance on the
advance designated account and is known to me.

	 	 	 
	
	 	

	Authorized Requester	 	
Phone #
	 	 	 
	
	 	

	Received By (Bank)	 	
Phone #
	 	 	 
	

	Authorized Signature (Bank)

2

 

EXHIBIT C

BORROWING BASE CERTIFICATE

	 	 	 	 	 	 	 
	Borrowers:	 	
BLACKBOARD INC. AND AFFILIATES
	 	Lender:
	 	Silicon Valley Bank
	Commitment Amount:	 	
$8,000,000	 	 	 	 

	 	 	 	 	 
	ACCOUNTS RECEIVABLE	 	 
	1.
	 	Accounts Receivable Book Value as of	
$	 
	 	 	 	 	

	2.
	 	Additions (please explain on reverse)	
$	 
	 	 	 	 	

	3.
	 	TOTAL ACCOUNTS RECEIVABLE	
$	 
	 	 	 	 	

	ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)	 	 
	4.
	 	Amounts over 90 days from invoice date	
$	 
	 	 	 	 	

	5.
	 	Balance of 50% over 90 day accounts	
$	 
	 	 	 	 	

	6.
	 	Credit balances over 90 days	
$	 
	 	 	 	 	

	7.
	 	Concentration Limits	
$	 
	 	 	 	 	

	8.
	 	Foreign Accounts (over $500,000)	
$	 
	 	 	 	 	

	9.
	 	Governmental Accounts	
$	 
	 	 	 	 	

	10.
	 	Contra Accounts	
$	 
	 	 	 	 	

	11.
	 	Promotion or Demo Accounts	
$	 
	 	 	 	 	

	12.
	 	Intercompany/Employee Accounts	
$	 
	 	 	 	 	

	13.
	 	Other (please explain on reverse)	
$	 
	 	 	 	 	

	14.
	 	TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS	
$	 
	 	 	 	 	

	15.
	 	Eligible Accounts (#3 minus #14)	
$	 
	 	 	 	 	

	16.
	 	LOAN VALUE OF ACCOUNTS (80% of #15)	
$	 
	 	 	 	 	

	BALANCES	 	 
	17.
	 	Commitment Amount	$	
8,000,000
	 	 	 	 	

	18.
	 	Total Funds Available [Lesser of #17 or #16]	
$	 
	 	 	 	 	

	19.
	 	Present balance owing on Line of Credit	
$	 
	 	 	 	 	

	20.
	 	Outstanding under Sublimits	
$	 
	 	 	 	 	

	21.
	 	RESERVE POSITION (#18 minus #19 and #20)	
$	 
	 	 	 	 	

 

 

The undersigned represents and
warrants that this is true,
complete and correct, and that
the information in this
Borrowing Base Certificate
complies with the
representations and warranties
in the Loan and Security
Agreement between the
undersigned and Silicon Valley
Bank.

COMMENTS:

	 	 	 
	By:	 	 
	 	 	

	 	 	
    Authorized Signer

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

TO: SILICON VALLEY BANK

FROM: BLACKBOARD INC. AND ITS SUBSIDIARIES

     The undersigned authorized officer of Blackboard Inc. certifies that under
the terms and conditions of the Loan and Security Agreement among Borrowers and
Bank (the “Agreement”), (i) Borrowers are in complete compliance for the period
ending with all required covenants except as noted below and
(ii) all representations and warranties in the Agreement are true and correct
in all material respects on this date. Attached are the required documents
supporting the certification. The Officer certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) consistently
applied from one period to the next except as explained in an accompanying
letter or footnotes. The Officer acknowledges that no borrowings may be
requested at any time or date of determination that Borrowers are not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	
	 	
	 	

	Monthly financial statements	 	
Monthly within 30 days
	 	Yes
	 	No
	Annual (CPA Audited)	 	
FYE within 120 days
	 	Yes
	 	No
	A/R Agings and Borrowing Base Certificate	 	
Monthly within 30 days
	 	Yes
	 	No

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	
	 	
	 	
	 	

	Maintain on a Monthly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Minimum Quick Ratio
	 	 	1.50:1.0	 	 	 	    :1.0	 	 	Yes	 	No
	Maintain on a Quarterly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Minimum Revenue:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	9/30/01
	 	$	11,400,000	 	 	$	 	 	 	Yes	 	No
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	 	 	12/31/01
	 	$	12,700,000	 	 	$	 	 	 	Yes	 	No
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	 	 	3/31/02
	 	$	13,400,000	 	 	$	 	 	 	Yes	 	No
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	 	 	6/30/02
	 	$	14,700,000	 	 	$	 	 	 	Yes	 	No
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	 	 	9/30/02
	 	$	16,200,000	 	 	$	 	 	 	Yes	 	No
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	 	 	12/31/02
	 	$	16,900,000	 	 	$	 	 	 	Yes	 	No
	 
	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 
	Profitability     12/31/02 and thereafter	 	$	 	 	 	$	 	 	 	Yes	 	No
	 
	 	 	
	 	 	 	
	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 
	Comments Regarding Exceptions: See Attached.	 	BANK USE ONLY
	 	 	 	 	 	 	 
	Sincerely,	 	Received by:
	 	 	 	 	Authorized Signer	 	 
	Signature	 	
Date:	 	 	 	 
	 	 	 	 	 	 	 
	Title	 	
Verified	 	 	 	 
	 	 	 	 	Authorized Signer	 	 
	 	 	 	 	 	 	 
	Date	 	
Date:	 	 	 	 
	 	 	
Compliance Status:
	 	Yes            No
	 	 

 

 

EXHIBIT E

FORM OF LOAN AGREEMENT SUPPLEMENT

LOAN AGREEMENT SUPPLEMENT No. [ ]

LOAN AGREEMENT SUPPLEMENT No. [ ], dated       , 200     (“Supplement”),
to the Loan and Security Agreement dated as of        , 2001 (the “Loan
Agreement) by and among the undersigned (“Borrowers”), and Silicon Valley Bank
(“Bank”).

Capitalized terms used herein but not otherwise defined herein are used with
the respective meanings given to such terms in the Loan Agreement.

To secure the prompt payment by Borrowers of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrowers of all
the terms contained in the Loan Agreement, Borrowers grant Bank, a first
priority security interest in each item of equipment and other property
described in Annex A hereto, which equipment and other property shall be deemed
to be additional Financed Equipment and Collateral. The Loan Agreement is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.

Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto.

The proceeds of the Loan should be transferred to Company’s account with Bank
set forth below:

	 	 	 
	Bank Name:	 	
Silicon Valley Bank
	Account No.:	 	 

Borrowers hereby certify that (a) the foregoing information is true and correct
and authorizes Bank to endorse in its respective books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth in the Loan Terms
Schedule; (b) the representations and warranties made by Borrowers in the Loan
Agreement are true and correct on the date hereof and will be true and correct
on such Funding Date. No Event of Default has occurred and is continuing under
the Loan Agreement. This Supplement may be executed by Borrowers and Bank in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

     This Supplement is delivered as of this day and year first above written.

 

SILICON VALLEY BANK

	 	 	 	 	 	 	 
	By:	 	 	 	By:	 	 
	 	

	 	 	

	 	
Name:
	 	 	Name:
	 	 	
 

	 	 	 	

	 	
Title:
	 	 	Title:
	 	 	
 

	 	 	 	 

Annex A - Description of Financed Equipment

Annex B - Loan Terms Schedule

 

 

Annex A to Exhibit E

The Financed Equipment being financed with the Equipment Advance which this
Loan Agreement Supplement is being executed is listed below. Upon the funding
of such Equipment Advance, this schedule automatically shall be deemed to be a
part of the Collateral.

	 	 	 	 	 	 	 	 	 
	Description of Equipment:	 	
Make
	 	Model
	 	Serial #
	 	Invoice #

 

 

Annex B to Exhibit E

LOAN TERMS SCHEDULE #________

Loan Funding Date:           , 200     

Original Loan Amount: $           

Basic Rate: 9.00%

Loan Factor:            %

Scheduled Payment Dates and Amounts*:

	 	 	 	One (1) payment of $             due            

            payment of $           
due monthly in advance from             through            .

Maturity Date:            

	 	 	 	 	 
	Payment No.	 	Payment Date
	
	 	

	1
	2
	3
	4
	...
	35
	[36]
	...
	*

	*	 	/ The amount of each Scheduled Payment will change as the Loan Amount
changes.

 

 

SCHEDULE 2.4

Outstanding Equipment Advances:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Final Payment
	Note Numbers	 	Original Loan Amount:	 	Basic Rate:	 	Maturity Date:	 	Percentage:
	
	 	
	 	
	 	
	 	

	1100068718
	 	$	151,962.34	 	 	Prime +1% Floating	 	March 14, 2002	 	 	N/A	 
	1100087850
	 	$	1,000,241.20	 	 	9.38 (Fixed)	 	August 1, 2003	 	 	5	%
	1100092258
	 	$	528,921.47	 	 	8.88% (Fixed)	 	November 1, 2003	 	 	5	%

2

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this “Agreement”) is entered into as of January 11, 2002, by and among (i)
SILICON VALLEY BANK, a California chartered bank, doing business in Virginia as
“Silicon Valley East” (“Bank”) with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at 11600 Sunrise Valley Drive, Suite 400, Reston, Virginia 20191, (ii)
BLACKBOARD INC., a Delaware corporation, having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (“Company”), (ii) BLACKBOARD ACQUISITION COMPANY,
LLC, a Delaware limited liability company having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (“Blackboard Acquisition”), (iii) BLACKBOARD
CAMPUSWIDE, INC., a Delaware corporation, (iv) BLACKBOARD ICOLLEGE, INC., a
Delaware corporation having an address at 1899 L Street, N..W., Washington,
D.C. 20036, (v) AT&T CAMPUSWIDE ACCESS SOLUTIONS, INC., a Delaware corporation
having an address at 1899 L Street, N.W., Washington, D.C. 20036, (vi) AT&T
CAMPUSWIDE ACCESS SOLUTIONS OF TEXAS, INC., a Texas corporation having an
address at 1899 L Street, N.W., Washington, D.C. 20036 (each an “Original
Borrower” and collectively, the “Original Borrowers”), and Bb ACQUISITION
CORP., a Delaware corporation, having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (the “New Borrower” and together with the Original
Borrowers, each a “Borrower” and collectively, the “Borrowers”).

RECITALS.

     A.     The Original Borrowers and Bank have entered into that certain Amended
and Restated Loan and Security Agreement dated November 30, 2001, but effective
as of October 5,

 

 

2001 (the “Loan Agreement”), pursuant to which Bank has agreed to
establish a revolving line of credit in the maximum principal amount of Eight
Million Dollars ($8,000,000) to be used by the Original Borrowers for working
capital needs and general corporate purposes and an equipment line of credit in
the maximum principal amount of Three Million Dollars ($3,000,000) to be used
by the Original Borrowers for the purchase of equipment all as more fully
described in the Loan Agreement.

     B.     The Original Borrowers have requested that Bank consent to the purchase
of certain assets by New Borrower pursuant to that certain Asset Purchase
Agreement dated December 28, 2001 between the Company and the New Borrower, as
purchaser and George Washington University, as seller (the “Asset Purchase
Agreement”) and that the Bank consent to the execution and delivery by the
Company of a Subordinated Promissory Note in the original principal amount of
Three Million Dollars (3,000,000) dated January 11, 2002 in favor of George
Washington University as partial consideration for the assets purchased
pursuant to the Asset Purchase Agreement (the “Subordinated Note”), which
Subordinated Note shall be subordinate to the Obligations under terms which
shall be satisfactory to Bank and its counsel in their sole discretion, and
Bank has agreed to consent to the Asset Purchase Agreement and the Subordinated
Note pursuant to that certain Consent from Bank to the Company dated January
11, 2002, on the condition, among others, that Borrowers execute and deliver
this Agreement to cause New Borrower to join as a joint and several co-maker on
the Obligations, encumber substantially all of its assets to secure the
Obligations, free and clear of all Liens, and be added as a party to each of
the Loan Documents, including, but not limited to, the Loan Agreement.

2

 

     C.     All capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement. This Agreement shall
be construed to impart upon Bank a duty to act reasonably at all times.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrowers and Bank do hereby agree as follows:

     1.     Recitals. The parties hereto acknowledge and agree that the
above Recitals are true and correct in all material respects and that the same
are incorporated herein and made a part hereof by reference.

     2.     Grant of Security Interest. New Borrower hereby assigns,
pledges and grants to Bank, and agrees that Bank shall have a perfected and
continuing first lien security interest in all of the collateral described in
Exhibit A attached hereto (the “Collateral”). The Bank’s lien on the
assets of New Borrower granted under this paragraph shall be subject only to
the Permitted Liens. New Borrower individually represents and warrants to Bank
that its principal place of business and the addresses where the Collateral is
kept is as set forth in the introductory paragraph to this Agreement.

     3.     Assumption of Obligations. New Borrower promises and agrees to
perform each and all of the covenants, agreements and obligations in the Loan
Documents to be performed by the Original Borrowers, at the times, in the
manner and in all respects as provided therein, and to be bound by each and all
of the terms and provisions of the Loan Agreement as though the Loan Agreement
had originally been jointly and severally made by the Original Borrowers and
the New Borrower. All of the Borrowers shall remain liable for the performance
of each and all

3

 

of the covenants, agreements and obligations in the Loan
Documents to be performed by the Borrowers. All references in the Financing
Agreement and in any of the Loan Documents to the “Borrower” and/or “Borrowers”
shall hereafter be deemed to include the New Borrower.

     4.     Representations and Warranties. New Borrower hereby issues,
makes, ratifies and confirms the representations, warranties and covenants, as
applicable to it, contained in the Loan Documents as of the date hereof, and
further represents, warrants and covenants to Bank as follows:

          (a) Good Standing. New Borrower (a) is a corporation duly
organized, existing, in good standing and a Registered Organization under the
laws of the State of Delaware, (b) has the corporate power to own its property
and to carry on its business as now being conducted, and (c) is duly qualified
to do business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership of its property requires that it be so
qualified.

          (b) Power and Authority. New Borrower has full power and authority
to execute and deliver this Agreement and each of the other Loan Documents
executed and delivered by it, to make the borrowing hereunder, and to incur the
Obligations, all of which have been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders or of any public
authority is required as a condition to the validity or enforceability of this
Agreement or any of the other Loan Documents executed and delivered by New
Borrower.

          (c) Binding Agreements. This Agreement and each of the other Loan
Documents executed and delivered by New Borrower have been properly executed by
New Borrower, constitute valid and legally binding obligations of New Borrower,
and are fully enforceable against New Borrower in accordance with their
respective terms.

4

 

          (d) Litigation. There are no actions or proceedings pending or, to
New Borrower’s knowledge, threatened by or against New Borrower before any
court or administrative agency in which any adverse decision could have a
Material Adverse Effect or a Material Adverse Effect on New Borrower’s interest
or Bank’s security interest in the Collateral.

          (e) No Conflicting Agreements. There is (a) no charter, by-law, or
preference stock provision of New Borrower and no provision of any existing
mortgage, indenture, contract or material agreement binding on New Borrower or
affecting its property, and (b) to the knowledge of New Borrower no provision
of law or order of court binding upon New Borrower, which would conflict with
or in any way prevent the execution, delivery, or performance of the terms of
this Agreement or of any of the other Loan Documents executed and delivered by
New Borrower or which would be violated as a result of such execution, delivery
or performance.

     5.     Solvency. The Borrowers represent that the Borrowers, on a
consolidated basis, are not left with unreasonably small capital after the
transactions in this Agreement; and the Borrowers, on a consolidated basis, are
able to pay their debts (including trade debts) as they mature.

     6.     Qualification to Do Business in the District of Columbia.
Borrowers agree that they will take all necessary steps to qualify Bb
Acquisition Corp. to do business in the
District of Columbia and that they will provide Bank with evidence
satisfactory to the Bank and its counsel of such qualification to do business
in the District of Columbia within thirty (30) days of the date of this
Agreement. Failure to provide the Bank with such evidence of Bb Acquisition
Corp.’s qualification to do business in the District of Columbia shall
constitute an Event of Default for purposes of the Loan Documents.

5

 

     7.     Conditions Precedent. This Agreement shall become effective on
the date the Bank receives the following documents, each of which shall be
satisfactory in form and substance to the Bank:

          (a) The Third Amended and Restated Revolving Promissory Note (the
“Replacement Revolving Note”) issued and delivered by the Borrowers in the form
of EXHIBIT B attached hereto and incorporated herein by reference,
payable to the order of the Bank in the maximum principal amount of Eight
Million Dollars ($8,000,000);

          (b) The Third Amended and Restated Equipment Term Note (the “Replacement
Equipment Note”) issued and delivered by the Borrowers in the form of
EXHIBIT C attached hereto and incorporated herein by reference, payable
to the order of the Bank in the maximum principal amount of Three Million
Dollars ($3,000,000);

          (c) All documents and instruments (including, without limitation, UCC-1
financing statements and UCC-3 termination statements) required to be filed,
registered or recorded in order to create, in favor of Bank, a perfected first
Lien in the Collateral (subject only to the Permitted Liens), in form and in
sufficient number for filing, registration, and recording in each office in
each jurisdiction in which such filings, registrations and recordations are
required, along with such evidence as Bank may deem satisfactory that all
necessary filing fees and all
recording and other similar fees, and all taxes and other expenses related
to such filings, registrations and recordings will be or have been paid in
full;

          (d) A certificate dated as of the date hereof by the Secretary or
Assistant Secretary of New Borrower covering:

6

 

               (i) true and complete copies of New Borrower’s corporate charter and
bylaws and all amendments thereto;

               (ii) true and complete copies of the resolutions of New Borrower’s Board
of Directors authorizing (i) the execution, delivery and performance of the
Loan Documents, (ii) the borrowings by New Borrower under the Loan Agreement
and (iii) the granting of the Liens contemplated by this Agreement and any of
the Loan Documents to which New Borrower is a party; and

               (iii) the incumbency, authority and signatures of the officers of New
Borrower authorized to sign this Agreement and the other Loan Documents to
which New Borrower is a party;

          (e) Such other information, instruments, opinions, documents, certificates
and reports as the Bank may deem necessary.

     8.     Replacement Revolving Note. The Borrowers shall execute and
deliver to the Bank on the date hereof the Replacement Revolving Note in
substitution for and not satisfaction of, the issued and outstanding Revolving
Promissory Note, and the Replacement Revolving Note shall be the “Revolving
Promissory Note” for all purposes of the Loan Documents. The Note being
substituted pursuant to this Agreement shall be marked “Replaced” and promptly
returned to the Original Borrowers after the execution and delivery of the
Replacement
Revolving Note to the Bank. The Borrowers agree that the
execution and delivery of the Replacement Revolving Note is not intended to and
shall not cause or result in a novation with respect to the issued and
outstanding Revolving Promissory Note, provided, however, that the terms of the
Replacement

7

 

Revolving Note are intended to supercede and replace all terms of
the issued and outstanding Revolving Promissory Note.

     9.     Replacement Equipment Term Note. The Borrowers shall execute
and deliver to the Bank on the date hereof the Replacement Equipment Note in
substitution for and not satisfaction of, the issued and outstanding Equipment
Term Note, and the Replacement Equipment Note shall be the “Equipment Term
Note” for all purposes of the Loan Documents. The Note being substituted
pursuant to this Agreement shall be marked “Replaced” and promptly returned to
the Original Borrowers after the execution and delivery of the Replacement
Equipment Note to the Bank. The Borrowers agree that the execution and
delivery of the Replacement Equipment Note is not intended to and shall not
cause or result in a novation with respect to the issued and outstanding
Equipment Term Note, provided, however, that the terms of the Replacement
Equipment Note are intended to supercede and replace all terms of the issued
and outstanding Equipment Term Note.

     10.     Cross Default to other Indebtedness and Subordinated Note.
Notwithstanding anything provided in the Loan Documents to the contrary,
Borrowers and Bank acknowledge and agree that (i) the occurrence of a default
or event of default under any Indebtedness of the Borrowers to any other Person
other than Indebtedness incurred in the ordinary course of business, or (ii)
the occurrence of an “Event of Default” (as such term is defined in the
Subordinated Note) under the Subordinated Note, shall constitute an Event of
Default under the terms of the Loan Documents and Bank shall have the
right to exercise all of its default rights and remedies provided for under the
Loan Documents, provided, that Bank acknowledges that the Company shall have
the right to withhold payments under the Subordinated Note as provided

8

 

for
under the terms of the Subordinated Note for good faith claims of damages or
indemnification under Article 10 of the Asset Purchase Agreement in the amount
of such claims and that such withholding of payments under the Subordinated
Note shall not constitute an Event of Default for purposes of the Loan
Documents provided there is no dispute between the Company and George
Washington University as to whether payments on the Subordinated Note are
properly being withheld pursuant to the terms of the Subordinated Note and
Article 10 of the Asset Purchase Agreement.

     11.     Counterparts. This Agreement may be executed in any number of
duplicate originals or counterparts, each of which duplicate original or
counterpart shall be deemed to be an original and all taken together shall
constitute one and the same instrument.

     12.     Loan Documents; Governing Law; Etc. This Agreement is one of
the Loan Documents defined in the Loan Agreement and shall be governed and
construed in accordance with the laws of the Commonwealth of Virginia. The
headings and captions in this Agreement are for the convenience of the parties
only and are not a part of this Agreement.

     13.     Acknowledgments. The Borrowers hereby confirm to the Bank the
enforceability and validity of each of the Loan Documents. In addition, the
Borrowers hereby agree that the execution and delivery of this Agreement and
the terms and provisions, covenants or agreements contained in this Agreement
shall not in any manner release, impair, lessen, modify, waive or otherwise
limit the liability and obligations of the Borrowers under the terms of
any of the Loan Documents, except as otherwise specifically set forth in
this Agreement. Each Person included in the term “Borrower” hereby issues,
remakes, ratifies and confirms the representations, warranties and covenants
contained in the Loan Documents on and as of the date hereof, both

9

 

before and
after giving effect to this Agreement except as may be modified by the
provisions of this Agreement, and that no Event of Default or Default has
occurred and is continuing or exists or would occur or exist after giving
effect to this Agreement. Nothing in this Agreement shall be deemed to waive
any defaults existing under any of the Loan Documents as of the date hereof.

     14.     Modifications. This Agreement may not be supplemented,
changed, waived, discharged, terminated, modified or amended, except by written
instrument executed by the parties.

     15.     Right of Contribution. Without implying any limitation on the
joint and several nature of the Obligations, the Bank agrees that,
notwithstanding any other provision of this Agreement, the Persons included in
the term “Borrowers,” may create reasonable inter-company indebtedness between
or among the Borrowers with respect to the allocation of the benefits and
proceeds of the Credit Extensions under this Agreement. The Borrowers agree
among themselves, and the Bank consents to that agreement, that each Borrower
shall have rights of contribution from all of the other Borrowers to the extent
such Borrower incurs Obligations in excess of the proceeds of the Credit

Extensions received by, or allocated to purposes for the direct benefit of,
such Borrower. All such indebtedness and rights shall be, and are hereby
agreed by the Borrowers to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless the Bank
agrees in writing otherwise, shall not be
exercised or repaid in whole or in part until all of the Obligations have
been indefeasibly paid in full in cash. The Borrowers agree that all of such
inter-company indebtedness and rights of contribution are part of the
Collateral and secure the Obligations. Each Borrower hereby waives all rights
of counterclaim, recoupment and offset between or among themselves arising on

10

 

account of that indebtedness and otherwise. Each Borrower shall not evidence
the inter-company indebtedness or rights of contribution by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any Lien or security. Notwithstanding anything contained in this
Agreement to the contrary, the amount covered by each Borrower under the
Obligations shall be limited to an aggregate amount (after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Borrower in respect of the Obligations) which, together
with other amounts owing by such Borrowers to the Bank under the Obligations,
is equal to the largest amount that would not be subject to avoidance under any
Insolvency Proceeding or any applicable provisions of any applicable,
comparable state or other laws.

          (a) Each Person included in the term “Borrower” hereby represents and
warrants to the Bank that each of them will derive benefits, directly and
indirectly, from each Advance, both in their separate capacity and as a member
of the integrated group to which each such Person belongs and because the
successful operation of the integrated group is dependent upon the continued
successful performance of the functions of the integrated group as a whole,
because (i) the terms of the consolidated financing provided under this
Agreement are more favorable than would otherwise would be obtainable by such
Persons individually, and (ii) the additional administrative and other costs
and reduced flexibility associated with individual
financing arrangements which would otherwise be required if obtainable would
substantially reduce the value to such Persons of the financing.

          (b) Within ten (10) days following any request of the Bank so to do, each
Person included in the term “Borrower” will furnish the Bank and such other
persons as the Bank

11

 

may direct with a written certificate, duly acknowledged
stating in detail whether or not any credits, offsets or defenses exist with
respect to this Section 15.

     16.     Consistent Changes. The Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

[Signatures begin on following page]

12

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

	 	 	 	 	 	 	 
	WITNESS:	 	SILICON VALLEY BANK	 	 
	 	 	 	 	 
	/s/ Chris York	 	By:	 	/s/ Shawn E. Goodman	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Shawn E. Goodman	 	 
	 	 	 	 	Title:  VP	 	 
	 	 	 	 	 	 	 
	WITNESS:	 	SILICON VALLEY BANK	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Maggie Garcia	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Maggie Garcia	 	 
	 	 	 	 	Title:  Loan
Admin. Team Leader	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD INC.	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Peter Q. Repetti	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Peter Q. Repetti	 	 
	 	 	 	 	Title:  CFO	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ACQUISITION	 	 
	 	 	COMPANY, LLC	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew H. Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Andrew H. Rosen	 	 
	 	 	 	 	Title:  Vice
President & Secretary	 	 
	 	 	 	 	 	 	 

13

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACBOARD CAMPUSWIDE, INC.	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew H. Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Andrew H. Rosen	 	 
	 	 	 	 	Title:  Vice President & Secretary	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ICOLLEGE, INC.	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew H. Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Andrew H. Rosen	 	 
	 	 	 	 	Title:  Vice President & Secretary	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	AT&T CAMPUSWIDE ACCESS	 	 
	 	 	SOLUTIONS, INC.	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	
By:
	 	/s/ Andrew H. Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Andrew H. Rosen	 	 
	 	 	 	 	Title:  Vice President & Secretary	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	AT&T CAMPUSWIDE ACCESS	 	 
	 	 	SOLUTIONS OF TEXAS, INC.	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew H. Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Andrew H. Rosen	 	 
	 	 	 	 	Title:  Vice President & Secretary	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	Bb ACQUISITION CORP.	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Peter Q. Repetti	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Peter
Q. Repetti	 	 
	 	 	 	 	Title:  President	 	 
	 	 	 	 	 	 	 

14

 

EXHIBIT A

DESCRIPTION OF COLLATERAL

The Collateral consists of all of each Borrower’s right, title and interest in
and to the following:

     All goods and equipment as defined in the Uniform Commercial Code now
owned or hereafter acquired, including, without limitation, all machinery,
fixtures, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located;

     All Inventory as defined in the Uniform Commercial Code and includes, now
owned or hereafter acquired, including, without limitation, all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products including such inventory as is temporarily out of
Borrower’s custody or possession or in transit and including any returns upon
any accounts or other Proceeds, , resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of the above;

     All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

     All Accounts as defined in the Uniform Commercial Code and includes now
existing and hereafter arising accounts, contract rights, royalties, license
rights and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods, the licensing of technology or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefore, as well as all
merchandise returned to or reclaimed by Borrower;

     All Letter-Of-Credit Rights (whether or not the letter of credit is
evidenced by a writing);

     All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower’s Books relating to the foregoing;

     All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of

15

 

semiconductor chips, now owned or hereafter acquired; all claims for damages by
way of any past, present and future infringement of any of the foregoing; and

     All Supporting Obligations and all of the Borrower’s Books relating to
the foregoing and any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and Proceeds thereof.

16

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

     THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this “Agreement”) is effective as of October 4, 2002, by and among SILICON
VALLEY BANK, a California chartered bank, doing business in Virginia as
“Silicon Valley East” (“Bank”) with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at 11600 Sunrise Valley Drive, Suite 400, Reston, Virginia 20191, and
BLACKBOARD INC., a Delaware corporation, having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (“Company”), BLACKBOARD ACQUISITION COMPANY, LLC,
a Delaware limited liability company having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (“Blackboard Acquisition”), BLACKBOARD CAMPUSWIDE, INC.,
a Delaware corporation, BLACKBOARD ICOLLEGE, INC., a Delaware corporation
having an address at 1899 L Street, N..W., Washington, D.C. 20036, BLACKBOARD
CAMPUSWIDE OF TEXAS, INC. (formerly known as AT&T Campuswide of Texas, Inc.), a
Texas corporation having an address at 1899 L Street, N.W., Washington, D.C.
20036 (collectively, the “Original Borrowers”) and BB ACQUISITION CORP., a
Delaware corporation, having an address at 1899 L Street, N.W., Washington,
D.C. 20036 (each a “Borrower” and collectively, the “Borrowers”).

RECITALS.

     A.     The Borrowers and Bank are all parties to that certain Amended and
Restated Loan and Security Agreement dated November 30, 2001, but effective as
of October 5, 2001 (the “Loan Agreement”), pursuant to which Bank has agreed to
establish a revolving line of credit in the maximum principal amount of Eight
Million Dollars ($8,000,000) to be used by the

 

 

Borrowers for working capital
needs and general corporate purposes and an equipment line of
credit in the maximum principal amount of Three Million Dollars
($3,000,000) to be used by the Borrowers for the purchase of equipment all as
more fully described in the Loan Agreement.

     B.     The Borrowers have requested that Bank amend certain provisions of the
Loan Agreement and Bank has agreed on the condition, among others, that
Borrowers execute and deliver this Agreement.

     C.     All capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement. This Agreement shall
be construed to impart upon Bank a duty to act reasonably at all times.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrowers and Bank do hereby agree as follows:

     1.     Recitals. The parties hereto acknowledge and agree that the
above Recitals are true and correct in all material respects and that the same
are incorporated herein and made a part hereof by reference.

     2.     Definitions. From and after the date hereof, the definitions of
Commitment Termination Date and Revolving Maturity Date set forth in Section
13.1 of the Loan Agreement are amended and restated in their entirety as
follows:

     “Commitment Termination Date” is February 17, 2003.

     “Revolving Maturity Date” is February 17, 2003.

2

 

     3.     Financial Covenants. Sections 6.7(b) and (c) of the Loan
Agreement are amended and restated in their entirety as follows:

		
	 	     (a) Minimum Revenue. Minimum Revenue, based on the most
recent quarterly financial statement delivered to Bank pursuant to
Section 6.2 of this Agreement of not less than the following amounts for
the following periods:

	 	 	 	$16,500,000 for the quarter ending September 30, 2002; and

$16,700,000 for the quarter ending December 31, 2002.

		
	 	     (b) Profitability. Commencing with the last fiscal quarter
of fiscal year 2002 and for each quarter thereafter, the Company will on
a consolidated basis have a positive EBITDA. For purposes hereof,
“EBITDA” means as to the Borrowers and their Subsidiaries for any period
of determination thereof, the sum of (a) the net profit (or loss)
determined in accordance with generally accepted accounting principles
consistently applied, plus (b) interest expense and income tax provisions
for such period, plus (c) depreciation and amortization of assets for
such period.

     3.     Fees. In consideration of Bank’s agreement to enter into this
Agreement, Borrowers will pay Bank at the time of execution of this Agreement,
a fully earned, non-refundable fee of Seven Thousand Dollars ($7,000).

     4.     Conditions Precedent. This Agreement shall become effective on
the date the Bank receives the following documents, each of which shall be
satisfactory in form and substance to the Bank:

          (a) The Fourth Amended and Restated Revolving Promissory Note (the
“Replacement Revolving Note”) issued and delivered by the Borrowers in the form
of EXHIBIT B attached hereto and incorporated herein by reference,
payable to the order of the Bank in the maximum principal amount of Eight
Million Dollars ($8,000,000);

3

 

          (b) proof that Borrowers have paid all fees, costs and expenses to Bank in
connection with this Agreement, including but not limited to the fee described
in Section 3 and all the Bank’s reasonable attorneys fees and expenses; and

          (c) Such other information, instruments, opinions, documents, certificates
and reports as the Bank may reasonably request.

     5.     Replacement Revolving Note. The Borrowers shall execute and
deliver to the Bank on the date hereof the Replacement Revolving Note in
substitution for and not satisfaction of, the issued and outstanding Revolving
Promissory Note, and the Replacement Revolving Note shall be the “Revolving
Promissory Note” for all purposes of the Loan Documents. The Note being
substituted pursuant to this Agreement shall be marked “Replaced” and promptly
returned to the Borrowers after the execution and delivery of the Replacement
Revolving Note to the Bank. The Borrowers agree that the execution and
delivery of the Replacement Revolving Note is not intended to and shall not
cause or result in a novation with respect to the issued and outstanding
Revolving Promissory Note, provided, however, that the terms of the Replacement
Revolving Note are intended to supercede and replace all terms of the issued
and outstanding Revolving Promissory Note.

     6.     Compliance Certificate. Exhibit D of the Loan Agreement
is hereby replaced in its entirety with Exhibit D attached hereto.

     7.     Counterparts. This Agreement may be executed in any number of
duplicate originals or counterparts, each of which duplicate original or
counterpart shall be deemed to be an original and all taken together shall
constitute one and the same instrument.

4

 

     8.     Loan Documents; Governing Law; Etc. This Agreement is one of
the Loan Documents defined in the Loan Agreement and shall be governed and
construed in accordance with the laws of the Commonwealth of Virginia. The
headings and captions in this Agreement are for the convenience of the parties
only and are not a part of this Agreement.

     9.     Acknowledgments. The Borrowers hereby confirm to the Bank the
enforceability and validity of each of the Loan Documents. In addition, the
Borrowers hereby
agree that the execution and delivery of this Agreement and the terms and
provisions, covenants or agreements contained in this Agreement shall not in
any manner release, impair, lessen, modify, waive or otherwise limit the
liability and obligations of the Borrowers under the terms of any of the Loan
Documents, except as otherwise specifically set forth in this Agreement. Each
Person included in the term “Borrower” hereby issues, remakes, ratifies and
confirms the representations, warranties and covenants contained in the Loan
Documents on and as of the date hereof, both before and after giving effect to
this Agreement except as may be modified by the provisions of this Agreement,
and that no Event of Default or Default has occurred and is continuing or
exists or would occur or exist after giving effect to this Agreement. Nothing
in this Agreement shall be deemed to waive any defaults existing under any of
the Loan Documents as of the date hereof.

     10.     Modifications. This Agreement may not be supplemented,
changed, waived, discharged, terminated, modified or amended, except by written
instrument executed by the parties.

     11.     Consistent Changes. The Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

5

 

[Signatures begin on following page]

6

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

	 	 	 	 	 	 	 
	WITNESS:	 	
SILICON VALLEY BANK
	 	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Shawn E. Goodman	(SEAL)
	 	 	 	 	
	 
	 	 	 	 	Name:	Shawn E. Goodman
	 	 	 	 	Title:	VP

	 	 	 	 	 	 	 
	WITNESS:	 	
SILICON VALLEY BANK
	 	 	 	 	 	 	 
	
	 	
By:
	 	 	 	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD INC.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/
Michael L. Chasen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Michael L. Chasen	 
	 	 	 	 	Title:   Chief Executive Officer	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD ACQUISITION
	 	 	
COMPANY, LLC
	 	 	
By: Blackboard Inc., its Member
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/
Michael L. Chasen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Michael L. Chasen	 
	 	 	 	 	Title:   Chief Executive Officer	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD CAMPUSWIDE, INC.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Andrew Rosen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen	 
	 	 	 	 	Title:   President	 

7

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD ICOLLEGE, INC.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Andrew Rosen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen
	 	 	 	 	Title:   President

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD CAMPUSWIDE
	 	 	
OF TEXAS, INC.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Andrew Rosen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen
	 	 	 	 	Title:   President

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BB ACQUISITION CORP.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Andrew Rosen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen	 
	 	 	 	 	Title:   President	 

8

 

EXHIBIT D

COMPLIANCE CERTIFICATE

TO: SILICON VALLEY BANK

FROM: BLACKBOARD INC. AND ITS SUBSIDIARIES

     The undersigned authorized officer of Blackboard Inc. certifies that
under the terms and conditions of the Loan and Security Agreement among
Borrowers and Bank (the “Agreement”), (i) Borrowers are in complete
compliance for the period ending _______ with all required
covenants except as noted below and (ii) all representations and warranties
in the Agreement are true and correct in all material respects on this
date. Attached are the required documents supporting the certification.
The Officer certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) consistently applied from one period
to the next except as explained in an accompanying letter or footnotes.
The Officer acknowledges that no borrowings may be requested at any time or
date of determination that Borrowers are not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered.

     Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	
	 	
	 	

	Monthly financial statements
	 	Monthly within 30 days	 	Yes	 	No
	Annual (CPA Audited)
	 	FYE within 120 days	 	Yes	 	No
	A/R Agings and Borrowing Base Certificate
	 	Monthly within 30 days	 	Yes	 	No

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	
	 	
	 	
	 	

	 	 	Maintain on a Monthly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Minimum Quick Ratio
	 	 	1.50:1.0	 	 	 	____:1.0	 	 	Yes	 	No
	Maintain on a Quarterly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Minimum Revenue:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	9/30/02
	 	$	16,500,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	 	 	 	12/31/02
	 	$	16,700,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	Positive
EBITDA

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	12/31/02 and thereafter
	 	$	 	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	
	 	 	 	
	 	 	 

	 	 	 	 	 	 	 	 	 
	Comments Regarding Exceptions:
See Attached.	 	
BANK USE ONLY	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Sincerely,	 	
Received by:	 	 	 	 	 	 
	 	 	 	 	Authorized Signer	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Signature	 	
Date:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Title	 	
Verified	 	 	 	 	 	 
	 	 	 	 	Authorized Signer	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Date	 	
Date:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
Compliance Status:
	 	 	Yes	 
	 	No

9

 

THIRD AMENDMENT TO AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

     THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this “Agreement”) is effective as of February 17, 2003, by and among SILICON
VALLEY BANK, a California chartered bank, doing business in Virginia as
“Silicon Valley East” (“Bank”) with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at 11600 Sunrise Valley Drive, Suite 400, Reston, Virginia 20191, and
BLACKBOARD INC., a Delaware corporation, having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (“Company”), BLACKBOARD ACQUISITION COMPANY, LLC,
a Delaware limited liability company having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (“Blackboard Acquisition”), BLACKBOARD CAMPUSWIDE, INC.,
a Delaware corporation, BLACKBOARD ICOLLEGE, INC., a Delaware corporation
having an address at 1899 L Street, N..W., Washington, D.C. 20036, BLACKBOARD
CAMPUSWIDE OF TEXAS, INC. (formerly known as AT&T Campuswide of Texas, Inc.), a
Texas corporation having an address at 1899 L Street, N.W., Washington, D.C.
20036 (collectively, the “Original Borrowers”) and BB ACQUISITION CORP., a
Delaware corporation, having an address at 1899 L Street, N.W., Washington,
D.C. 20036 (each a “Borrower” and collectively, the “Borrowers”).

RECITALS.

     A.     The Borrowers and Bank are all parties to that certain Amended and
Restated Loan and Security Agreement dated November 30, 2001, but effective as
of October 5, 2001, as amended by that certain First Amendment to Amended and
Restated Loan and Security Agreement dated as of January 11, 2002, among
Borrowers and Bank and that certain Second

 

 

Amendment to Amended and Restated Loan and Security Agreement dated as of
October 4, 2002, among Borrowers and Bank (as the same may be amended from time
to time, the “Loan Agreement”), pursuant to which Bank has agreed to establish
a revolving line of credit in the maximum principal amount of Eight Million
Dollars ($8,000,000) to be used by the Borrowers for working capital needs and
general corporate purposes and an equipment line of credit in the maximum
principal amount of Three Million Dollars ($3,000,000) to be used by the
Borrowers for the purchase of equipment all as more fully described in the Loan
Agreement.

     B.     The Borrowers have requested that Bank amend certain provisions of the
Loan Agreement and Bank has agreed on the condition, among others, that
Borrowers execute and deliver this Agreement.

     C.     All capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement. This Agreement shall
be construed to impart upon Bank a duty to act reasonably at all times.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrowers and Bank do hereby agree as follows:

     1.     Recitals. The parties hereto acknowledge and agree that the above
Recitals are true and correct in all material respects and that the same are
incorporated herein and made a part hereof by reference.

2

 

     2.     Definitions. From and after the date hereof, the definition of
Revolving Maturity Date set forth in Section 13.1 of the Loan Agreement is
amended and restated in its entirety as follows:

          “Revolving Maturity Date” is April 5, 2003.

     3.     Conditions Precedent. This Agreement shall become effective on the date
the Bank receives the following documents, each of which shall be satisfactory
in form and substance to the Bank:

          (a) proof that Borrowers have paid all fees, costs and expenses to Bank in
connection with this Agreement, including but not limited to all the Bank’s
reasonable attorneys fees and expenses; and

          (b) Such other information, instruments, opinions, documents, certificates
and reports as the Bank may reasonably request.

     4.     Counterparts. This Agreement may be executed in any number of duplicate
originals or counterparts, each of which duplicate original or counterpart
shall be deemed to be an original and all taken together shall constitute one
and the same instrument.

     5.     Loan Documents; Governing Law; Etc. This Agreement is one of the Loan
Documents defined in the Loan Agreement and shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. The headings and
captions in this Agreement are for the convenience of the parties only and are
not a part of this Agreement.

     6.     Acknowledgments. The Borrowers hereby confirm to the Bank the
enforceability and validity of each of the Loan Documents. In addition, the
Borrowers hereby agree that the

3

 

execution and delivery of this Agreement and
the terms and provisions, covenants or agreements contained in this Agreement
shall not in any manner release, impair, lessen, modify, waive or otherwise
limit the liability and obligations of the Borrowers under the terms of any of
the Loan Documents, except as otherwise specifically set forth in this
Agreement. Each Person included
in the term “Borrower” hereby issues, remakes, ratifies and confirms the
representations, warranties and covenants contained in the Loan Documents on
and as of the date hereof, both before and after giving effect to this
Agreement except as may be modified by the provisions of this Agreement, and
that no Event of Default or Default has occurred and is continuing or exists or
would occur or exist after giving effect to this Agreement. Nothing in this
Agreement shall be deemed to waive any defaults existing under any of the Loan
Documents as of the date hereof.

     7.     Modifications. This Agreement may not be supplemented, changed, waived,
discharged, terminated, modified or amended, except by written instrument
executed by the parties.

     8.     Consistent Changes. The Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

[Signatures begin on following page]

4

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

	 	 	 	 	 	 	 
	WITNESS:	 	
SILICON VALLEY BANK
	 	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Megan Scheffel	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name:	Megan Scheffel
	 	 	 	 	Title:	VP

	 	 	 	 	 	 	 
	WITNESS:	 	
SILICON VALLEY BANK
	 	 	 	 	 	 	 
	
	 	
By:
	 	 	 	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD INC.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Michael L. Chasen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Michael L. Chasen	 
	 	 	 	 	Title: Chief Executive Officer	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD ACQUISITION
	 	 	
COMPANY, LLC
	 	 	
By: Blackboard Inc., its Member
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Michael L. Chasen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Michael L. Chasen	 
	 	 	 	 	Title:   Chief Executive Officer	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD CAMPUSWIDE, INC.
	/s/ [signature illegible]	 	 	 	 	 	 
	
	 	
By:
	 	/s/ Andrew Rosen	(SEAL)
	 	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen	 
	 	 	 	 	Title:   President	 

5

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ICOLLEGE, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew Rosen	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen
	 	 	 	 	Title:   President

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BLACKBOARD CAMPUSWIDE
	 	 	
OF TEXAS, INC.
	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew Rosen	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen
	 	 	 	 	Title:   President

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	
BB ACQUISITION CORP.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew Rosen	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name: Andrew Rosen
	 	 	 	 	Title:   President	 

6

 

FOURTH AMENDMENT TO AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

     THIS FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this “Agreement”) is effective as of May 28, 2003, by and among SILICON VALLEY
BANK, a California chartered bank, doing business in Virginia as “Silicon
Valley East” (“Bank”) with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at 11600 Sunrise Valley Drive, Suite 400, Reston, Virginia 20191, and
BLACKBOARD INC., a Delaware corporation, having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (“Company”), BLACKBOARD ACQUISITION COMPANY, LLC,
a Delaware limited liability company having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (“Blackboard Acquisition”), BLACKBOARD CAMPUSWIDE, INC.,
a Delaware corporation, , having an address at 1899 L Street, N.W., Washington,
D.C. 20036, BLACKBOARD ICOLLEGE, INC., a Delaware corporation having an address
at 1899 L Street, N.W., Washington, D.C. 20036, BLACKBOARD CAMPUSWIDE OF TEXAS,
INC. (formerly known as AT&T Campuswide of Texas, Inc.), a Texas corporation
having an address at 1899 L Street, N.W., Washington, D.C. 20036 (collectively,
the “Original Borrowers”) and BB ACQUISITION CORP., a Delaware corporation,
having an address at 1899 L Street, N.W., Washington, D.C. 20036 (each a
“Borrower” and collectively, the “Borrowers”).

RECITALS.

     A.     The Borrowers and Bank are all parties to that certain Amended and
Restated Loan and Security Agreement dated November 30, 2001, but effective as
of October 5, 2001, as amended by that certain First Amendment to Amended and
Restated Loan and Security Agreement dated as of January 11, 2002, among Borrowers and Bank, that
certain Second

 

 

Amendment to Amended and Restated Loan and Security Agreement
dated as of October 4, 2002, among Borrowers and Bank and that certain Third
Amendment to Amended and Restated Loan and Security Agreement dated as of
February 17, 2003, among Borrowers and Bank (as the same may be amended from
time to time, the “Loan Agreement”), pursuant to which Bank has agreed to
establish a revolving line of credit in the maximum principal amount of Eight
Million Dollars ($8,000,000) to be used by Borrowers for working capital needs
and general corporate purposes and an equipment line of credit in the maximum
principal amount of Three Million Dollars ($3,000,000) to be used by the
Borrowers for the purchase of equipment all as more fully described in the Loan
Agreement.

     B.     Borrowers have requested that Bank provide a supplemental committed
equipment line of credit and modify certain provisions of the Loan Agreement,
and Bank has agreed to the foregoing on the condition, among others, that this
Agreement be executed and delivered by Borrowers to Bank.

     C.     All capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrowers and Bank do hereby agree as follows:

     1.     Recitals. The parties hereto acknowledge and agree that the above
Recitals are true and correct in all material respects and that the same are
incorporated herein and made a part hereof by reference.

2

 

     2.     Definitions.

          (a) From and after the date hereof the following definitions shall be
added to Section 13.1 of the Loan Agreement:

		
	 	     “Committed Supplemental Equipment Line” means a Credit
Extension of up to One Million Five Hundred Thousand Million
Dollars ($1,500,000).

		
	 	     “Supplemental Closing Date” means May 28, 2003.

		
	 	     “Supplemental Commitment Termination Date” means February 28,
2004.

		
	 	     “Supplemental Equipment Advance” or “Supplemental Equipment
Advances” has the meaning set forth in Section 2.4(c).

		
	 	     “Supplemental Equipment Term Note” means that certain
Supplemental Equipment Term Note dated May 28, 2003 in the
principal amount of One Million Five Hundred Thousand Dollars
($1,500,000) from Borrowers in favor of Bank, together with all
renewals, amendments, modifications and substitutions therefor.

          (b) From and after the date hereof, the definitions of “Basic Rate”,
“Credit Extension”, “Eligible Accounts”, “Loan Documents”, “Loan Factor”,
“Permitted Indebtedness”, “Permitted Investments”, “Repayment Period” and
“Revolving Maturity Date” set forth in Section 13.1 of the Loan Agreement are
amended and restated in their entirety as follows:

		
	 	     “Basic Rate” is (i) with respect to Equipment Advances, nine
percent (9.0%) per annum and (ii) with respect to Supplemental
Equipment Advances, seven and one half-percent (7.5%) per annum,
provided that all Outstanding Equipment Advances shall continue to
accrue interest at the current rate of interest thereto as set
forth on Schedule 2.4.

		
	 	     “Credit Extension” is each Advance, Equipment Advance,
Supplemental Equipment Advance, Letter of Credit or any other
extension of credit by Bank for any Borrower’s benefit.

		
	 	     “Eligible Accounts” are Accounts in the ordinary course of a
Borrower’s business that meet all Borrowers’ representations and
warranties in Section 5.2; but Bank may change eligibility
standards in its good faith business judgment by

3

 

		
	 	giving the Company
sixty (60) days prior written notice. Unless Bank agrees otherwise
in writing, Eligible Accounts will not include:

		
	 	          (a) Accounts that the account debtor has not paid within
ninety (90) days of invoice date;

		
	 	          (b) Accounts for an account debtor, fifty percent (50%) or
more of whose Accounts have not been paid within ninety (90) days
of invoice date;

		
	 	          (c) Credit balances over ninety (90) days from invoice date;

		
	 	          (d) Accounts for an account debtor, including Affiliates,
whose total obligations to Borrowers exceed twenty-five percent
(25%) of all Accounts;

		
	 	          (e) Accounts in excess of Seven Hundred Fifty Thousand Dollars
($750,000) in the aggregate for all account debtors for which the
account debtors do not have their principal places of business in
the United States and which are billed out of the United States
office of a Borrower;

		
	 	          (f) Accounts for which the account debtor is a federal, state
or local government entity or any department, agency, or
instrumentality, other than state or local educational institutions
or their affiliates or governing bodies;

		
	 	          (g) Accounts for which any Borrower owes the account debtor,
but only up to the amount owed (sometimes called “contra” accounts,
accounts payable, customer deposits or credit accounts);

		
	 	          (h) Accounts for demonstration or promotional equipment, or in
which goods are consigned, sales guaranteed, sale or return, sale
on approval, bill and hold, or other terms if account debtor’s
payment may be conditional;

		
	 	          (i) Accounts for which the account debtor is any Borrower’s
Affiliate, officer, employee, or agent;

		
	 	          (j) Accounts in which the account debtor disputes liability or
makes any claim and Bank believes there may be a basis for dispute
(but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes
insolvent, or goes out of business; and

		
	 	          (k) Accounts for which Bank reasonably determines collection
to be doubtful.

4

 

		
	 	     “Loan Documents” are, collectively, this Agreement, the
Revolving Promissory Note, the Equipment Term Note, the
Supplemental Equipment Term Note, any note, or notes or guaranties
executed by any Borrower and any other present or future agreement between any Borrower and/or for
the benefit of Bank in connection with this Agreement, all as
amended, extended or restated.

		
	 	     “Loan Factor” is the percentage which results from amortizing
the Equipment Advance or Supplemental Equipment Advance over the
Repayment Period, using the applicable Basic Rate as the interest
rate.

		
	 	     “Permitted Indebtedness” is:

		
	 	          (a) Borrowers’ indebtedness to Bank under this Agreement or
the Loan Documents;

		
	 	          (b) Indebtedness existing on the Closing Date and shown on the
Schedule;

		
	 	          (c) Subordinated Debt;

		
	 	          (d) Indebtedness to trade creditors incurred in the ordinary
course of business;

		
	 	          (e) Indebtedness secured by Permitted Liens;

		
	 	          (f) Indebtedness of any Borrower to any other Borrower and
Contingent Obligations of any Borrower with respect to obligations
of any other Borrower (provided that the primary obligations are
not prohibited hereby);

		
	 	          (g) Indebtedness between any Subsidiary and any Borrower,
including Contingent Obligations of any Borrower with respect to
obligations of any Subsidiary (provided that the primary
obligations are not prohibited hereby) in an aggregate amount not
to exceed at any time Twelve Million Dollars ($12,000,000) (the
“Intercompany Indebtedness Cap”), provided, however, that for
purposes of calculating the Intercompany Indebtedness Cap, any
Investments made by Borrower in any Subsidiary, where the Borrower
making such Investment receives equity in such Subsidiary in an
amount having a value reasonably equivalent to the amount of the
Investment shall be excluded from the calculation of the
Intercompany Indebtedness Cap;

		
	 	          (h) Other Indebtedness not otherwise permitted by Section 7.4
not exceeding Two Hundred Fifty Thousand Dollars ($250,000.00) in
the aggregate outstanding at any time; and

5

 

		
	 	          (i) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f)
above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon any Borrower
or its Subsidiary, as the case may be.

		
	 	     “Permitted Investments” are:

		
	 	          (a) Investments shown on the Schedule and existing on the
Closing Date;

		
	 	          (b) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing
within one (1) year from its acquisition, (ii) commercial paper
maturing no more than one (1) year after its creation and having
the highest rating from either Standard & Poor’s Corporation or
Moody’s Investors Service, Inc., and (iii) Bank’s certificates of
deposit issued maturing no more than one (1) year after issue, and
(iv) any Investments permitted by Borrower’s investment policy, as
amended from time to time, provided that such investment policy
(and any such amendment thereto) has been approved by Bank;

		
	 	          (c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of a Borrower’s business;

		
	 	          (d) Investments accepted in connection with Transfers
permitted by Section 7.1;

		
	 	          (e) Investments of Borrower in or to other Subsidiaries or a
Borrower and Investments by any Borrower in Subsidiaries not to
exceed Ten Million Dollars ($10,000,000) in the aggregate in any
fiscal year;

		
	 	          (f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the
ordinary course of business, and (ii) loans to employees, officers
or directors relating to the purchase of equity securities of a
Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by such Borrower’s Board of Directors;

		
	 	          (g) Investments by Blackboard International BV in a joint
venture entity in China (the “China JV”) with Cernet Corporation, a
China corporation, whereby Blackboard International BV will make
certain capital and technology contributions to the China JV, and
will establish a separate China limited liability company through
which it will license technology to the China JV; and

6

 

		
	 	          (h) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other disputes
with, customers or suppliers arising in the ordinary course of
business.

		
	 	     “Repayment Period” as to the Equipment Advances and/or
Supplemental Equipment Advances, is thirty six (36) months for
Eligible Equipment and twenty four (24) months for Other Equipment.

		
	 	     “Revolving Maturity Date” is April 4, 2004.

     3.     The Additional Equipment Line. The following provisions are added to
the Loan Agreement immediately after Section 2.4 (b) as Sections 2.4 (c) and
2.4(d):

          (c) Subject to the terms and conditions of this Agreement, Bank
agrees to lend to Borrowers, from time to time prior to the Supplemental
Commitment Termination Date, equipment advances (each an “Supplemental
Equipment Advance” and collectively the “Supplemental Equipment
Advances”) in an aggregate amount not to exceed the Committed
Supplemental Equipment Line. When repaid, the Supplemental Equipment
Advances may not be reborrowed. The proceeds of the Supplemental
Equipment Advances will be used solely to reimburse Borrowers for the
purchase of Eligible Equipment or the purchase or license of Other
Equipment (to the extent permitted in this Agreement), purchased within
ninety (90) days of the Supplemental Equipment Advance. Notwithstanding
the foregoing, the initial Supplemental Equipment Advance may be used to
reimburse Borrowers for the purchase of Eligible Equipment or the
purchase or license of Other Equipment (to the extent permitted in this
Agreement), purchased at any time after January 1, 2003,
provided such
Supplemental Equipment Advance is made no later than forty-five (45) days
after the Supplemental Closing Date and Borrowers provide Bank with
accompanying invoices for the Eligible Equipment or Other Equipment for
which reimbursement is being sought. Bank’s obligation to lend hereunder
shall terminate on the earlier of (i) the occurrence and continuance of
an Event of Default of which the Company has been given notice if
required under this Agreement, or (ii) the Supplemental Commitment
Termination Date. For purposes of this Section, the minimum amount of
each Equipment Advance is Twenty Five Thousand Dollars ($25,000) and the
maximum number of Equipment Advances that will be made is eight (8).

          (d) To obtain a Supplemental Equipment Advance, the Company will
deliver to Bank a completed Loan Supplement, copies of invoices for the
Financed Equipment, together with a UCC Financing Statement, if requested
by Bank, covering the Equipment described on the Loan Supplement, and
such additional information as Bank may request at least five (5)
Business Days before the proposed Funding Date. On each Funding Date,
Bank will specify in the Loan Supplement for each Supplemental Equipment

7

 

		
	 	Advance, the Basic Rate, the Loan Factor, and the Payment Dates. If
Borrowers satisfy the conditions of each Supplemental Equipment Advance
specified herein, Bank will disburse such Supplemental Equipment Advance by internal transfer to
the Company’s deposit account with Bank. Each Supplemental Equipment
Advance may not exceed one hundred percent (100%) of the Original Stated
Cost.
	 

     4.     Interest Rate; Payments. Sections 2.6(b), (c), (d), (e), (g) and (h) of
the Loan Agreement are amended and restated in their entirety as follows:

          2.6 Interest Rate; Payments.

		
	 	         (b) Borrowers will repay the Equipment Advances and/or Supplemental
Equipment Advances on the terms provided in the applicable Loan
Supplement. Borrowers will make payments monthly in advance of principal
and accrued interest for each Equipment Advance or Supplemental Equipment
Advance (collectively, “Scheduled Payments”), on the first Business Day
of the month following the Funding Date (or commencing on the Funding
Date if the Funding Date is the first Business Day of the month) with
respect to such Equipment Advance or Supplemental Equipment Advance and
continuing thereafter during the Repayment Period on the first Business
Day of each calendar month (each a “Payment Date”), in an amount equal to
the Loan Factor multiplied by the Loan Amount for such Equipment Advance
or Supplemental Equipment Advance as of such Payment Date. All unpaid
principal and accrued interest is due and payable in full on the last
Payment Date with respect to such Equipment Advance or Supplemental
Equipment Advance. Payments received after 12:00 noon Eastern time are
considered received at the opening of business on the next Business Day.
An Equipment Advance or Supplemental Equipment Advance may only be
prepaid in accordance with Sections 2.6 (e) and 2.6 (g).

		
	 	         (c) Interest Rate. Borrowers will pay interest on the Payment Dates
(as described above) at the per annum rate of interest equal to the
applicable Basic Rate determined by Bank as of the Funding Date for each
Equipment Advance or Supplemental Equipment Advance in accordance with
the definition of the Basic Rate. Any amounts outstanding during the
continuance of an Event of Default shall bear interest at a per annum
rate equal to the Basic Rate, plus four percent (4%).

		
	 	         (d) Interim Payment. In addition to the Scheduled Payments, on the
Funding Date for each Equipment Advance or Supplemental Equipment Advance
(unless the Funding Date is the first Business Day of the month),
Borrowers shall pay to Bank, the projected interest to accrue from the
Funding Date to the first Payment Date, at the Bank’s Prime Rate, plus
two percent (2.0%) per annum.

		
	 	         (e) Final Payment. On the maturity date of each Outstanding
Equipment Advance, Borrowers will pay, in addition to the unpaid
principal and accrued

8

 

		
	 	interest and other amounts due on such date with
respect to such Outstanding Equipment Advance, an amount equal to the
Final Payment set forth in Schedule 2.4.

		
	 	     (g) Mandatory Prepayment Upon an Acceleration. If the Equipment
Advances and/or Supplemental Equipment Advances are accelerated following
the occurrence of an Event of Default (other than following an Event of
Loss), then Borrowers will immediately pay to Bank (i) all unpaid
Scheduled Payments (including principal and interest, including the
default rate interest for any period where applicable) with respect to
each Equipment Advance and/or Supplemental Equipment Advance, (ii) all
remaining Scheduled Payments (including principal and interest unpaid,
including the default rate interest), (iii) and with respect to any
Outstanding Equipment Advance, the applicable Final Payment with respect
thereto, and (v) all other sums, if any, that shall have become due and
payable with respect to any Equipment Advance or Supplemental Equipment
Advance.

		
	 	     (h) Permitted Prepayment of Loans.

		
	 	          (i) Borrowers shall have the option to prepay all, but
not less than all, of the Equipment Advances advanced by Bank
under this Agreement, provided Borrowers (i) provide written
notice to Bank of their election to prepay the Equipment
Advances at least fifteen (15) days prior to such prepayment,
and (ii) pay, on the date of the prepayment (A) all unpaid
Scheduled Payments (including principal and interest) with
respect to each Equipment Advance; (B) all remaining
Scheduled Payments (including principal and interest); (C)
all unpaid accrued interest to the date of the prepayment;
(D) the Final Payment for any Outstanding Equipment Advance;
(E) for any prepayment within twelve months of the Closing
Date, a prepayment fee in the amount of one and one half
percent (1.5%) of the amount prepaid, for any prepayment in
the second twelve (12) month period after the Closing Date, a
prepayment fee in the amount of one percent (1.0%) of the
amount prepaid, and for any prepayment thereafter, a
prepayment fee in the amount of one half of one percent (.5%)
of the amount prepaid, and (F) all other sums, if any, that
shall have become due and payable hereunder with respect to
this Agreement.

		
	 	          (ii) Borrowers shall have the option to prepay any
Supplemental Equipment Advance advanced by Bank under the
terms of this Agreement, provided Borrowers (i) provide
written notice to Bank of their election to prepay such
Supplemental Equipment Advance at least fifteen (15) days
prior to such prepayment, and (ii) pay, on the date of the
prepayment, (A) all unpaid Scheduled Payments (including
principal and interest) with respect to the Supplemental
Equipment Advance; (B) all unpaid accrued interest with
respect to the Supplemental Equipment Advance to the date of
the prepayment; and (C) for any prepayment within twelve
months of the Supplemental Closing Date, a prepayment fee in
the

9

 

		
	 	amount of one and one half percent (1.5%) of the amount
prepaid, for any prepayment in the second twelve (12) month
period after the Supplemental Closing Date, a prepayment fee
in the amount of one percent (1.0%) of the amount prepaid, and for any prepayment thereafter, a
prepayment fee in the amount of one half of one percent (.5%)
of the amount prepaid.

     5.     Subsidiaries. Section 5.7 of the Loan Agreement is amended and restated
in its entirety as follows:

     
      5.7 Subsidiaries. No Borrower owns any stock, partnership interest
or other equity securities, except for any Borrower’s or such Borrower’s
Subsidiary’s ownership of another Borrower or Blackboard Japan KK and for
Permitted Investments.

     6.     Financial Statements, Reports. Section 6.2(iv) of the Loan Agreement is
amended and restated in its entirety as follows:

             (iv) a prompt report of any legal actions pending or threatened
against any Borrower or any Subsidiary that could result in damages or
costs to any Borrower or any Subsidiary of Two Hundred Fifty Thousand
Dollars ($250,000.00) or more;

     7.     Financial Covenants. Sections 6.7(a) and (b) of the Loan Agreement are
amended and restated in their entirety as follows:

             
(a) Quick Ratio. A ratio of Quick Assets to Current liabilities,
plus long term Indebtedness in favor of Bank, less deferred revenue and
current portion of Indebtedness in favor of Prometheus of at least the
following amounts for the following periods:

	 	 	 
	March 31, 2003	 	
1.50:1.00
	 	 	 
	April 30, 2003 – June 30, 2003	 	
1.40:1.00
	 	 	 
	July 31, 2003 and thereafter	 	
1.50:1.00

             
(b) Minimum Revenue. Minimum Revenue, based on the most recent
quarterly financial statement delivered to Bank pursuant to Section 6.2
of this Agreement of not less than the following amounts for the
following periods:

	 
	$15,600,000 for the quarter ending March 31, 2003;
	$17,700,000 for the quarter ending June 30, 2003;
	$19,200,000 for the quarter ending September 30, 2003;
	$20,400,000 for the quarter ending December 31, 2003; and
	$20,400,000 for the quarter ending March 31, 2004.

10

 

     8.     Financial Statements, Reports, Certificates. The last paragraph in
Section 6.2 is amended and restated in its entirety as follows:

		
	 	     Bank has the right during normal business hours to audit Borrowers’
Accounts at Borrowers’ expense, not to exceed Ten Thousand Dollars
($10,000) per audit, at any time that Advances or Letters of Credit are
outstanding, but the audits will be conducted no more often than once
every twelve (12) months unless an Event of Default has occurred and is
continuing in which event Bank has the right to audit Borrowers’ Accounts
at Bank’s discretion.

     9.     Transactions with Affiliates. Section 7.7 of the Loan Agreement is
amended and restated in its entirety as follows:

		
	 	     7.7 Transactions with Affiliates. Directly or indirectly enter or
permit any material transaction with any Affiliate, except to the extent
not otherwise prohibited by this Agreement (i) transactions that are in
the ordinary course of a Borrower’s business, on terms less favorable to
any Borrower than would be obtained in an arm’s length transaction with a
non-affiliated Person, and (ii) transactions under agreements existing as
of the date hereof with investors or members of any Borrower’s senior
management that such Borrower is legally obligated to perform.

     10.     Borrowing Base. Exhibit C to the Loan Agreement is hereby replaced in its entirety with Exhibit C attached hereto.

     11.     Compliance Certificate. Exhibit D to the Loan Agreement is hereby replaced in its entirety with Exhibit D attached hereto.

     12.     Loan Agreement Supplement. Exhibit E to the Loan Agreement is hereby replaced in its entirety with Exhibit E attached hereto.

     13.     Facility Fee. Borrowers shall pay to Bank on the date hereof a loan fee
on the Supplemental Committed Equipment Line in the amount of Three Thousand
Seven Hundred Fifty Dollars ($3,750) (the “Supplemental Equipment Line Fee”)
and a loan fee on the Committed Revolving Line in the amount of Twenty Two
Thousand Seven Hundred Fifty

11

 

Dollars ($22,750) (the “Committed Revolving Line
Fee”). The Supplemental Equipment Line Fee and the Committed Equipment Line Fee are considered earned when paid
and are not refundable.

     14.     Conditions Precedent. This Agreement shall become effective on the date
the Bank receives the following documents, each of which shall be satisfactory
in form and substance to the Bank:

          (a) The Supplemental Equipment Term Note issued and delivered by the
Borrowers in the form of EXHIBIT A attached hereto and incorporated herein by
reference, payable to the order of the Bank in the maximum principal amount of
One Million Five Hundred Thousand Dollars ($1,500,000);

          (b) The Fifth Amended and Restated Revolving Promissory Note (the
“Replacement Revolving Note”) issued and delivered by the Borrowers in the form
of EXHIBIT B attached hereto and incorporated herein by reference, payable to
the order of the Bank in the maximum principal amount of Eight Million Dollars
($8,000,000);

          (c) Proof that Borrowers have paid all fees, costs and expenses to Bank in
connection with this Agreement, including but not limited to all the Bank’s
reasonable attorneys fees and expenses;

          (d) A side letter agreement in the form attached hereto as Exhibit C; and

          (e) Such other information, instruments, opinions, documents, certificates
and reports as the Bank may reasonably request.

     15.     Replacement Revolving Note. The Borrowers shall execute and deliver to
the Bank on the date hereof the Replacement Revolving Note in substitution for
and not satisfaction

12

 

of, the issued and outstanding Revolving Promissory Note,
and the Replacement Revolving Note shall be the “Revolving Promissory Note” for all purposes of the Loan
Documents. The Note being substituted pursuant to this Agreement shall be
marked “Replaced” and promptly returned to the Borrowers after the execution
and delivery of the Replacement Revolving Note to the Bank. The Borrowers
agree that the execution and delivery of the Replacement Revolving Note is not
intended to and shall not cause or result in a novation with respect to the
issued and outstanding Revolving Promissory Note, provided, however, that the
terms of the Replacement Revolving Note are intended to supercede and replace
all terms of the issued and outstanding Revolving Promissory Note.

     16.     Representations and Warranties. Each Borrower hereby issues, makes,
ratifies and confirms the representations, warranties and covenants, as
applicable to it, contained in the Loan Documents as of the date hereof, and
further represents, warrants and covenants to the Bank as follows:

          (i) Power and Authority. Each Borrower has full power and authority to
execute and deliver this Agreement and each of the other Loan Documents
executed and delivered by it, to make the borrowing hereunder, and to incur the
Obligations, all of which have been duly authorized by all proper and necessary
corporate action. Except for consents which have been obtained, no consent or
approval of stockholders or of any public authority is required as a condition
to the validity or enforceability of this Agreement or any of the other Loan
Documents executed and delivered by any Borrower.

          (ii) Binding Agreements. This Agreement and each of the other Loan
Documents executed and delivered by Borrowers have been properly executed by
each

13

 

Borrower, constitute valid and legally binding obligations of each Borrower, and are
fully enforceable against each Borrower in accordance with their respective
terms.

          (iii) No Conflicting Agreements. There is: (a) no charter, by-law or
preference stock provision of any Borrower and no provision of any existing
mortgage, indenture, contract or material agreement binding on any Borrower or
affecting its property; or (b) to the knowledge of Borrowers, no provision of
law or order of court binding upon any Borrower; which would conflict with or
in any way prevent the execution, delivery, or performance of the terms of this
Agreement or of any of the other Loan Documents executed and delivered by
Borrowers or which would be violated as a result of such execution, delivery or
performance or to the extent any charter or by-law provision requires certain
authorization and/or consent, all of such authorizations and consents have been
duly obtained by all proper and necessary action.

          (iv) Funds in Bank Accounts. All funds now or hereafter deposited into
the Company’s lockbox account and/or any other accounts in Company’s name
maintained with Bank or its Affiliates are immediately upon deposit into such
account or accounts, owned by the Company and subject to Bank’s first priority
lien, and are not subject to any Liens, claims or rights in favor of any other
Person, including, without limitation any Subsidiary or any other Borrower
regardless of which legal entity shows account receivable on its books and
records immediately prior to deposit into Bank.

     17.     Counterparts. This Agreement may be executed in any number of duplicate
originals or counterparts, each of which duplicate original or counterpart
shall be deemed to be an original and all taken together shall constitute one
and the same instrument.

14

 

     18.     Loan Documents; Governing Law; Etc. This Agreement is one of the Loan
Documents defined in the Loan Agreement and shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. The headings and
captions in this Agreement are for the convenience of the parties only and are
not a part of this Agreement.

     19.     Acknowledgments. The Borrowers hereby confirm to the Bank the
enforceability and validity of each of the Loan Documents. In addition, the
Borrowers hereby agree that the execution and delivery of this Agreement and
the terms and provisions, covenants or agreements contained in this Agreement
shall not in any manner release, impair, lessen, modify, waive or otherwise
limit the liability and obligations of the Borrowers under the terms of any of
the Loan Documents, except as otherwise specifically set forth in this
Agreement. Each Person included in the term “Borrower” hereby issues, remakes,
ratifies and confirms the representations, warranties and covenants contained
in the Loan Documents on and as of the date hereof, both before and after
giving effect to this Agreement except as may be modified by the provisions of
this Agreement, and that no Event of Default or Default has occurred and is
continuing or exists or would occur or exist after giving effect to this
Agreement. Nothing in this Agreement shall be deemed to waive any defaults
existing under any of the Loan Documents as of the date hereof.

     20.     Modifications. This Agreement may not be supplemented, changed, waived,
discharged, terminated, modified or amended, except by written instrument
executed by the parties.

     21.     Consistent Changes. The Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

[Signatures begin on following page]

15

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

	 	 	 	 	 	 	 
	WITNESS:	 	SILICON VALLEY BANK
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Chris York	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name:  Chris York	 	 
	 	 	 	 	Title:  Vice President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Peter Repetti	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Peter Repetti
Chief Financial Officer	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ACQUISITION

COMPANY, LLC
	 	 	 	 	 	 	 
	 	 	By: Blackboard Inc., its Member
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Michael L. Chasen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Michael L. Chasen

President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD CAMPUSWIDE, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Andrew Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen

President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ICOLLEGE, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	By:	 	/s/ Michael L. Chasen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Michael L. Chasen

President	 	 

16

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD CAMPUSWIDE
OF TEXAS, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	
By:
	 	/s/ Andrew Rosen	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen

President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BB ACQUISITION CORP.
	 	 	 	 	 	 	 
	/s/ [signature illegible]	 	
By:
	 	/s/ Peter Repetii	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Peter Repetti

President	 	 

17

 

EXHIBIT C

BORROWING BASE CERTIFICATE

	 	 	 
	Borrowers: BLACKBOARD INC. AND AFFILIATES	 	
Lender: Silicon Valley Bank
	 	 	 
	Commitment Amount: $8,000,000	 	 

	 	 	 	 	 	 
	ACCOUNTS RECEIVABLE
	 	 	 	 
	 	1.   Accounts Receivable Book Value as of
	 	$	 	 
	 	 
	 	 	
	 
	 	2.   Additions (please explain on reverse)
	 	$	 	 
	 	 
	 	 	
	 
	 	3.   TOTAL ACCOUNTS RECEIVABLE
	 	$	 	 
	 	 
	 	 	
	 
	ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
	 	 	 	 
	 	4.   Amounts over 90 days from invoice date
	 	$	 	 
	 	 
	 	 	
	 
	 	5.   Balance of 50% over 90 day accounts
	 	$	 	 
	 	 
	 	 	
	 
	 	6.   Credit balances over 90 days
	 	$	 	 
	 	 
	 	 	
	 
	 	7.   Concentration Limits
	 	$	 	 
	 	 
	 	 	
	 
	 	8.   Foreign Accounts (over $750,000 in the aggregate for all debtors)
	 	$	 	 
	 	 
	 	 	
	 
	 	9.   Governmental Accounts
	 	$	 	 
	 	 
	 	 	
	 
	 	10. Contra Accounts
	 	$	 	 
	 	 
	 	 	
	 
	 	11. Promotion or Demo Accounts
	 	$	 	 
	 	 
	 	 	
	 
	 	12. Intercompany/Employee Accounts
	 	$	 	 
	 	 
	 	 	
	 
	 	13. Other (please explain on reverse)
	 	$	 	 
	 	 
	 	 	
	 
	 	14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
	 	$	 	 
	 	 
	 	 	
	 
	 	15. Eligible Accounts (#3 minus #14)
	 	$	 	 
	 	 
	 	 	
	 
	 	16. LOAN VALUE OF ACCOUNTS (80% of #15)
	 	$	 	 
	 	 
	 	 	
	 
	BALANCES
	 	 	 	 
	 	17. Commitment Amount
	 	$	8,000,000	 
	 	 
	 	 	
	 
	 	18. Total Funds Available [Lesser of #17 or #16]
	 	$	 	 
	 	 
	 	 	
	 
	 	19. Present balance owing on Line of Credit
	 	$	 	 
	 	 
	 	 	
	 
	 	20. Outstanding under Sublimits
	 	$	 	 
	 	 
	 	 	
	 
	 	21. RESERVE POSITION (#18 minus #19 and #20)
	 	$	 	 
	 	 
	 	 	
	 

The undersigned represents and
warrants that this is true,
complete and correct, and that
the information in this
Borrowing Base Certificate
complies with the
representations and warranties
in the Loan and Security
Agreement between the
undersigned and Silicon Valley
Bank.

COMMENTS:

	 	 	 
	By:	 	 
	 	 	

Authorized Signer

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

TO: SILICON VALLEY BANK

FROM: BLACKBOARD INC. AND ITS SUBSIDIARIES

     The undersigned authorized officer of Blackboard Inc. certifies that
under the terms and conditions of the Loan and Security Agreement among
Borrowers and Bank (the “Agreement”), (i) Borrowers are in complete
compliance for the period ending _________ with all required
covenants except as noted below and (ii) all representations and warranties
in the Agreement are true and correct in all material respects on this
date. Attached are the required documents supporting the certification.
The Officer certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) consistently applied from one period
to the next except as explained in an accompanying letter or footnotes.
The Officer acknowledges that no borrowings may be requested at any time or
date of determination that Borrowers are not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered.

     Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	
	 	
	 	

	Monthly financial statements
	 	Monthly within 30 days
	 	Yes	 	No
	Annual (CPA Audited)
	 	FYE within 120 days
	 	Yes	 	No
	A/R Agings and Borrowing Base Certificate
	 	Monthly within 30 days
	 	Yes	 	No

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	
	 	
	 	
	 	

	 	 	 	 	Maintain on a Monthly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	             
Minimum Quick Ratio
	 	 	3/31/03 1.5:1.0	 	 	 	____:1.0	 	 	Yes	 	No
	 
	 	 	4/30/03 1.4:1.0	 	 	 	____:1.0	 	 	Yes	 	No
	 
	 	 	5/31/03 1.4:1.0	 	 	 	____:1.0	 	 	Yes	 	No
	 
	 	 	6/30/03 1.4:1.0	 	 	 	____:1.0	 	 	Yes	 	No
	 
	 	7/31/03 and
thereafter 1.51.0	 	 	____:1.0	 	 	Yes	 	No
	Maintain on a Quarterly Basis:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Minimum Revenue:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	3/31/03
	 	$	15,600,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	 	 	6/30/03
	 	$	17,700,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	 	 	9/30/03
	 	$	19,200,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	 	 	12/31/03
	 	$	20,400,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	 	 	3/31/04
	 	$	20,400,000	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 
	Positive EBITDA
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	12/31/02 and thereafter
	 	$	1.00	 	 	$	 	 	 	Yes	 	No
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	Comments Regarding Exceptions: See Attached.	 	BANK USE ONLY
	 	 	 	 	 	 	 
	Sincerely,	 	Received by:
	 	 	 	 	Authorized Signer
	Signature	 	Date:
	 	 	 	 	 	 	 
	Title	 	Verified
	 	 	 	 	Authorized Signer
	Date	 	Date:
	 	 	 	 	 	 	 
	 	 	Compliance Status:	 	Yes	 	No

 

 

EXHIBIT E

FORM OF LOAN AGREEMENT SUPPLEMENT

LOAN AGREEMENT SUPPLEMENT No. [  ]

LOAN AGREEMENT SUPPLEMENT No. [  ], dated       ,
200      (“Supplement”), to the Loan and Security Agreement dated as of October 5,
2001 (the “Loan Agreement) by and among the undersigned (“Borrowers”), and
Silicon Valley Bank (“Bank”).
Capitalized terms used herein but not otherwise defined herein are used with
the respective meanings given to such terms in the Loan Agreement.

To secure the prompt payment by Borrowers of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrowers of all
the terms contained in the Loan Agreement, Borrowers grant Bank, a first
priority security interest in each item of equipment and other property
described in Annex A hereto, which equipment and other property shall be deemed
to be additional Financed Equipment and Collateral. The Loan Agreement is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.

Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto.

The proceeds of the Loan should be transferred to Company’s account with Bank
set forth below:

	 	 	 
	Bank Name:	 	
Silicon Valley Bank
	Account No.:	 	 

Borrowers hereby certify that (a) the foregoing information is true and correct
and authorizes Bank to endorse in its respective books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth in the Loan Terms
Schedule; (b) the representations and warranties made by Borrowers in the Loan
Agreement are true and correct on the date hereof and will be true and correct
on such Funding Date. No Event of Default has occurred and is continuing under
the Loan Agreement. This Supplement may be executed by Borrowers and Bank in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

     This Supplement is delivered as of this day and year first above written.

SILICON VALLEY BANK

	 	 	 	 	 	 	 	 	 	 	 
	By:	 	 	 	 	By:	 	 	 
	 	 	

	 	 	 	

	 	 	
Name:
	

	 	 	 	Name:	

	 	 	
Title:
	

	 	 	 	Title:	

Annex A - Description of Financed Equipment

Annex B - Loan Terms Schedule

 

 

Annex A to Exhibit E

The Financed Equipment being financed with the Equipment Advance or
Supplemental Equipment Advance which this Loan Agreement Supplement is being
executed is listed below. Upon the funding of such Equipment Advance or
Supplemental Equipment Advance, this schedule automatically shall be deemed to
be a part of the Collateral.

	 	 	 	 	 	 	 	 	 	 
	 	Description of Equipment:	 	
Make
	 	Model
	 	Serial #
	 	Invoice #

 

 

Annex B to Exhibit E

LOAN TERMS SCHEDULE #              

Loan Funding Date:        , 200   

Original Loan Amount: $       

Basic Rate:         % (9.00% Equipment Advance / 7.50% Supplemental Equipment
Advance)

Loan Factor:        %

Scheduled Payment Dates and Amounts*:

	 	 	One (1) payment of $        due            

        payment of $        due monthly in advance from         through
       .

Maturity Date:        

	 	 
	Payment No.	Payment Date
	1
	 
	2
	 
	3
	 
	4
	 
	. . .
	 
	35
	 
	[36]
	 
	. . .

*

/         The amount of each Scheduled Payment will change as the Loan Amount changes.

 

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

     THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this “Agreement”) is entered into as of June 27, 2003, by and among
(i) SILICON VALLEY BANK, a California chartered bank, doing business in
Virginia as “Silicon Valley East” (“Bank”) with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at 11600 Sunrise Valley Drive, Suite 400, Reston, Virginia
20191, (ii) BLACKBOARD INC., a Delaware corporation, having an address at 1899
L Street, N.W., Washington, D.C. 20036 (“Company”), (ii) BLACKBOARD ACQUISITION
COMPANY, LLC, a Delaware limited liability company having an address at 1899 L
Street, N.W., Washington, D.C. 20036 (“Blackboard Acquisition”), (iii)
BLACKBOARD CAMPUSWIDE, INC., a Delaware corporation, (iv) BLACKBOARD ICOLLEGE,
INC., a Delaware corporation having an address at 1899 L Street, N..W.,
Washington, D.C. 20036, (v) BLACKBOARD CAMPUSWIDE OF TEXAS, INC., (formerly
known as AT&T Campuswide Access Solutions Of Texas, Inc.), a Texas corporation
having an address at 1899 L Street, N.W., Washington, D.C. 20036, (vi), a Texas
corporation having an address at 1899 L Street, N.W., Washington, D.C. 20036,
BB ACQUISITION CORP., a Delaware corporation, having an address at 1899 L
Street, N.W., Washington, D.C. 20036 (each an “Original Borrower” and
collectively, the “Original Borrowers”), BLACKBOARD INTERNATIONAL B.V., a
Netherlands limited liability company, having an address at 1899 L Street,
N.W., Washington, D.C. 20036, BLACKBOARD INTERNATIONAL L.P., a Bermuda limited
partnership, having an address at 1899 L Street, N.W., Washington, D.C. 20036,
Bb MANAGEMENT LLC, a Delaware limited liability company, having an address at
1899 L
Street, N.W., Washington, D.C. 20036, and BLACKBOARD INTERNATIONAL

 

 

HOLDINGS, INC., a Delaware corporation, having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (each a “New Borrower” and collectively, the “New
Borrowers”, and together with the Existing Borrowers, each a “Borrower” and
collectively, the “Borrowers”).

RECITALS.

     A.     The Existing Borrowers (other than Bb Acquisition Corp.) and Bank are
all parties to that certain Amended and Restated Loan and Security Agreement
dated November 30, 2001, but effective as of October 5, 2001, as amended by
that certain First Amendment to Amended and Restated Loan and Security
Agreement dated as of January 11, 2002 among Existing Borrowers and Bank, that
certain Second Amendment to Amended and Restated Loan and Security Agreement
dated as of October 4, 2002 among Existing Borrowers and Bank, that certain
Third Amendment to Amended and Restated Loan and Security Agreement dated as of
February 17, 2003 among Existing Borrowers and Bank, and that certain Fourth
Amendment to Amended and Restated Loan and Security Agreement (the “Fourth
Amendment”) dated effective as of May 28, 2003 among Existing Borrowers and
Bank (as the same may be amended from time to time, the “Loan Agreement”),
pursuant to which Bank has agreed to establish (i) a revolving line of credit
in the maximum principal amount of Eight Million Dollars ($8,000,000) to be
used by Borrowers for working capital needs and general corporate purposes,
(ii) an equipment line of credit in the maximum principal amount of Three
Million Dollars ($3,000,000) to be used by the Borrowers for the purchase of
equipment, and (iii) an equipment line of credit in the maximum principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000)
(the “Supplemental Equipment Term Loan”) to be used by the Borrowers for
the purchase of equipment, all as more fully described in the Loan Agreement.

2

 

     B.     The Existing Borrowers requested that Bank make the Supplemental
Equipment Term Loan pursuant to, among other Loan Documents, the Fourth
Amendment and Bank agreed on the condition, among others, that Borrowers
execute and deliver this Agreement to cause New Borrowers to join as joint and
several co-makers on the Obligations, encumber substantially all of their
assets to secure the Obligations, free and clear of all Liens, and be added as
parties to each of the Loan Documents, including, but not limited to, the Loan
Agreement.

     C.     All capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrowers and Bank do hereby agree as follows:

     1.     Recitals. The parties hereto acknowledge and agree
that the above Recitals are true and correct in all material respects and that
the same are incorporated herein and made a part hereof by reference.

     2.     Grant of Security Interest. New Borrowers hereby
assign, pledge and grant to Bank, and agree that Bank shall have a perfected
and continuing first lien security interest in all of the collateral described
in Exhibit A attached hereto (the “Collateral”). The Bank’s
lien on the assets of New Borrowers granted under this paragraph shall be
subject only to the Permitted Liens. Each New Borrower individually represents
and warrants to Bank that its principal place
of business and the addresses where the Collateral is kept is as set forth
in the introductory paragraph to this Agreement.

     3.     Assumption of Obligations. Each New Borrower
promises and agrees to perform each and all of the covenants, agreements and
obligations in the Loan Documents to be

3

 

performed by the Existing Borrowers, at
the times, in the manner and in all respects as provided therein, and to be
bound by each and all of the terms and provisions of the Loan Agreement as
though the Loan Agreement had originally been jointly and severally made by the
Existing Borrowers and the New Borrowers. All of the Borrowers shall remain
liable for the performance of each and all of the covenants, agreements and
obligations in the Loan Documents to be performed by the Borrowers. All
references in the Financing Agreement and in any of the Loan Documents to the
“Borrower” and/or “Borrowers” shall hereafter be deemed to include the New
Borrowers.

     4.     Representations and Warranties. Each Borrower
hereby issues, makes, ratifies and confirms the representations, warranties and
covenants, as applicable to it, contained in the Loan Documents as of the date
hereof, and further represents, warrants and covenants to Bank as follows:

          (a) Good Standing. Each Borrower (a) is a corporation,
limited partnership or limited liability company, as applicable, duly
organized, existing, in good standing in the state or country of its
organization, (b) has the corporate, company or partnership, as applicable,
power and authority to own its property and to carry on its business as now
being conducted, and (c) is duly qualified to do business and is in good
standing in each jurisdiction where the failure to be so qualified would likely
result in a Material Adverse Effect.

          (b) Power and Authority. Each Borrower has full power and
authority to execute and deliver this Agreement and each of the other Loan
Documents executed and delivered by it, to make the borrowing hereunder, and to
incur the Obligations, all of which have been duly authorized by all proper and
necessary corporate, company or partnership action, as applicable. No consent
or approval of stockholders, members or partners, as applicable, or of

4

 

any
public authority is required as a condition to the validity or enforceability
of this Agreement or any of the other Loan Documents executed and delivered by
Borrowers.

          (c) Binding Agreements. This Agreement and each of the
other Loan Documents executed and delivered by Borrowers have been properly
executed by each Borrower, constitute valid and legally binding obligations of
each Borrower, and are fully enforceable against each Borrower in accordance
with their respective terms.

          (d) Litigation. There are no actions or proceedings
pending or, to any Borrower’s knowledge, threatened by or against any Borrower
before any court or administrative agency in which any adverse decision could
have a Material Adverse Effect or a Material Adverse Effect on any Borrower’s
interest or Bank’s security interest in the Collateral.

          (e) No Conflicting Agreements. There is (a) no
charter, by-law, articles or certificate of organization, limited partnership
certificate, operating agreement, limited partnership agreement, preference
stock provision or any other governing or organizational document of any
Borrower and no provision of any existing mortgage, indenture, contract or
material agreement binding on any Borrower or affecting its property, and (b)
to the knowledge of any Borrower no provision of law or order of court binding
upon any Borrower, which would conflict with or in any way prevent the
execution, delivery, or performance of the terms of this
Agreement or of any of the other Loan Documents executed and delivered by
any Borrower or which would be violated as a result of such execution, delivery
or performance.

          (f) Funds in Bank Accounts. All funds now or hereafter
deposited into the Company’s lockbox account and/or any other accounts in
Company’s name maintained with Bank or its Affiliates are immediately upon
deposit into such account or accounts, owned by the Company and subject to
Bank’s first priority lien, and are not subject to any Liens, claims or

5

 

rights
in favor of any other Person, including, without limitation any Subsidiary or
any other Borrower regardless of which legal entity shows account receivable on
its books and records immediately prior to deposit into Bank.

     5.     Solvency. The Borrowers represent that the
Borrowers, on a consolidated basis, are not left with unreasonably small
capital after the transactions in this Agreement; and the Borrowers, on a
consolidated basis, are able to pay their debts (including trade debts) as they
mature.

     6.     Definitions. The definition of “Permitted Indebtedness” set forth in
Section 13.1 of the Loan Agreement is amended and restated in its entirety as
follows:

          “Permitted Indebtedness” is:

		
	 	          (a) Borrowers’ indebtedness to Bank under this Agreement or the Loan
Documents;
	 
	 	          (b) Indebtedness existing on the Closing Date and shown on the
Schedule;
	 
	 	          (c) Subordinated Debt;
	 
	 	          (d) Indebtedness to trade creditors incurred in the ordinary course
of business;
	 
	 	          (e) Indebtedness secured by Permitted Liens;
	 
	 	          (f) Indebtedness of any Borrower to any other Borrower (other than
Blackboard Netherlands and Blackboard International) and Contingent
Obligations of any Borrower with respect to obligations of any other
Borrower (other than Blackboard Netherlands or Blackboard International)
(provided that the primary obligations are not prohibited hereby);

6

 

		
	 	          (g) Indebtedness between any Subsidiary and any Borrower, including
Contingent Obligations of any Borrower with respect to obligations of any
Subsidiary (provided that the primary obligations are not prohibited
hereby) in an aggregate amount not to exceed at any time Thirteen Million
Five Hundred Thousand Dollars ($13,500,000) (the “Intercompany
Indebtedness Cap”), provided,
however, that for purposes of calculating the
Intercompany Indebtedness Cap, any Investments made by Borrower in any
Subsidiary, where the Borrower making such Investment receives equity in
such Subsidiary in an amount having a value reasonably equivalent to the
amount of the Investment shall be excluded from the calculation of the
Intercompany Indebtedness Cap;
	 
	 	          (h) Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding Two Hundred Fifty Thousand Dollars ($250,000.00) in the
aggregate outstanding at any time; and
	 
	 	          (i) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (h)
above, provided that
the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon any Borrower or its
Subsidiary, as the case may be.

		
	 	7.     Dispositions. Section 7.1 of the Loan Agreement is
amended and restated in its entirety as follows:
	 
	 	     7.1 Dispositions. Convey, sell, lease, transfer
or otherwise dispose of (collectively a “Transfer”), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property,
including without limitation, Transfers to a Subsidiary which is not a
party to this Agreement, other than a Transfer (i) of Inventory in the
ordinary course of business; (ii) of exclusive or non-exclusive licenses
and similar arrangements for the

7

 

		 
	 	use of the property of any Borrower or
its Subsidiaries in the ordinary course of business; (iii) of worn-out or
obsolete Equipment, or (iv) which is a Permitted Investment.
Notwithstanding the foregoing, Borrowers may make cash Transfers to
Subsidiaries which are not parties this Agreement provided that the
aggregate amount of all such cash Transfers in any fiscal year does not
exceed Two Million Dollars ($2,000,000), and provided further that any
such cash Transfers in excess of Five Hundred Thousand Dollars ($500,000)
in the aggregate have been approved by the Company’s board of directors.
	 	
	 	8.     Conditions Precedent. This Agreement shall become
effective on the date the Bank receives the following documents, each of which
shall be satisfactory in form and substance to the Bank:
		 
	 	          (a) The Sixth Amended and Restated Revolving Promissory Note (the
“Replacement Revolving Promissory Note”) issued and delivered by the Borrowers
in the form of EXHIBIT B attached hereto and incorporated herein by
reference, payable to the order of the Bank in the maximum principal amount of
Eight Million Dollars ($8,000,000);
	 	
	 	          (b) The Fourth Amended and Restated Equipment Term Note (the “Replacement
Equipment Term Note”) issued and delivered by the Borrowers in the form of
EXHIBIT C attached hereto and incorporated herein by
reference, payable to the order of the Bank in the maximum principal amount of
Three Million Dollars ($3,000,000);
	 	
	 	          (c) The Amended and Restated Supplemental Equipment Term Note (the
“Replacement Supplemental Equipment Term Note”) issued and delivered by the
Borrowers in the form of EXHIBIT D attached hereto and
incorporated herein by reference, payable to the

8

 

order of the Bank in the
maximum principal amount of One Million Five Hundred Thousand Dollars
($1,500,000)

          (d) All documents and instruments (including, without limitation, UCC-1
financing statements and UCC-3 termination statements) required to be filed,
registered or recorded in order to create, in favor of Bank, a perfected first
Lien in the Collateral (subject only to the Permitted Liens), in form and in
sufficient number for filing, registration, and recording in each office in
each jurisdiction in which such filings, registrations and recordations are
required, along with such evidence as Bank may deem satisfactory that all
necessary filing fees and all recording and other similar fees, and all taxes
and other expenses related to such filings, registrations and recordings will
be or have been paid in full;

          (e) A certificate dated as of the date hereof by the Secretary or
Assistant Secretary, general partner or members, as applicable, of each New
Borrower covering:

               (i) true and complete copies of each New Borrower’s corporate charter,
bylaws, certificate of limited partnership, limited partnership agreement,
articles or certificate of organization, operating agreement, or other
governing or organizational documents, as applicable, and all amendments
thereto;

               (ii) true and complete copies of the resolutions of each New Borrower’s
Board of Directors, partners or members, as applicable, authorizing (i) the
execution, delivery and performance of the Loan Documents, (ii) the borrowings
by each New Borrower under the Loan Agreement and (iii) the granting of the
Liens contemplated by this Agreement and any of the Loan Documents to which
each New Borrower is a party; and

9

 

               (iii) the incumbency, authority and signatures of the officers, partners
or members, as applicable, of each New Borrower authorized to sign this
Agreement and the other Loan Documents to which such New Borrower is a party;

          (f) Such other information, instruments, opinions, documents, certificates
and reports as the Bank may deem necessary.

     9.     Replacement Revolving Note. The Borrowers shall
execute and deliver to the Bank on the date hereof the Replacement Revolving
Promissory Note in substitution for and not satisfaction of, the issued and
outstanding Revolving Promissory Note, and the Replacement Revolving Promissory
Note shall be the “Revolving Promissory Note” for all purposes of the Loan
Documents. The Note being substituted pursuant to this Agreement shall be
marked “Replaced” and promptly returned to the Existing Borrowers after the
execution and delivery of the Replacement Revolving Promissory Note to the
Bank. The Borrowers agree that the execution and delivery of the Replacement
Revolving Promissory Note is not intended to and
shall not cause or result in a novation with respect to the issued and
outstanding Revolving Promissory Note, provided, however, that the terms of the
Replacement Revolving Promissory Note are intended to supercede and replace all
terms of the issued and outstanding Revolving Promissory Note.

     10.     Replacement Equipment Term Note. The Borrowers
shall execute and deliver to the Bank on the date hereof the Replacement
Equipment Term Note in substitution for and not satisfaction of, the issued and
outstanding Equipment Term Note, and the Replacement Equipment Term Note shall
be the “Equipment Term Note” for all purposes of the Loan Documents. The Note
being substituted pursuant to this Agreement shall be marked “Replaced” and
promptly returned to the Existing Borrowers after the execution and delivery of
the

10

 

Replacement Equipment Term Note to the Bank. The Borrowers agree that the
execution and delivery of the Replacement Equipment Term Note is not intended
to and shall not cause or result in a novation with respect to the issued and
outstanding Equipment Term Note, provided, however, that the terms of the
Replacement Equipment Term Note are intended to supercede and replace all terms
of the issued and outstanding Equipment Term Note.

     11.     Replacement Supplemental Equipment Term Note. The
Borrowers shall execute and deliver to the Bank on the date hereof the
Replacement Supplemental Equipment Term Note in substitution for and not
satisfaction of, the issued and outstanding Supplemental Equipment Term Note,
and the Replacement Supplemental Equipment Term Note shall be the “Supplemental
Equipment Term Note” for all purposes of the Loan Documents. The Note being
substituted pursuant to this Agreement shall be marked “Replaced” and promptly
returned to the Existing Borrowers after the execution and delivery of the
Replacement Supplemental
Equipment Term Note to the Bank. The Borrowers agree that the execution
and delivery of the Replacement Supplemental Equipment Term Note is not
intended to and shall not cause or result in a novation with respect to the
issued and outstanding Supplemental Equipment Term Note, provided, however,
that the terms of the Replacement Supplemental Equipment Term Note are intended
to supercede and replace all terms of the issued and outstanding Supplemental
Equipment Term Note.

     12.     Counterparts. This Agreement may be executed in
any number of duplicate originals or counterparts, each of which duplicate
original or counterpart shall be deemed to be an original and all taken
together shall constitute one and the same instrument.

     13.     Loan Documents; Governing Law; Etc. This Agreement
is one of the Loan Documents defined in the Loan Agreement and shall be
governed and construed in accordance

11

 

with the laws of the Commonwealth of
Virginia. The headings and captions in this Agreement are for the convenience
of the parties only and are not a part of this Agreement.

     14.     Acknowledgments. The Borrowers hereby confirm to
the Bank the enforceability and validity of each of the Loan Documents. In
addition, the Borrowers hereby agree that the execution and delivery of this
Agreement and the terms and provisions, covenants or agreements contained in
this Agreement shall not in any manner release, impair, lessen, modify, waive
or otherwise limit the liability and obligations of the Borrowers under the
terms of any of the Loan Documents, except as otherwise specifically set forth
in this Agreement. Each Person included in the term “Borrower” hereby issues,
remakes, ratifies and confirms the representations, warranties and covenants
contained in the Loan Documents on and as of the date hereof, both before and
after giving effect to this Agreement except as may be modified by the
provisions of
this Agreement, and that no Event of Default or Default has occurred and
is continuing or exists or would occur or exist after giving effect to this
Agreement. Nothing in this Agreement shall be deemed to waive any defaults
existing under any of the Loan Documents as of the date hereof.

     15.     Modifications. This Agreement may not be
supplemented, changed, waived, discharged, terminated, modified or amended,
except by written instrument executed by the parties.

     16.     Right of Contribution. Without implying any
limitation on the joint and several nature of the Obligations, the Bank agrees
that, subject to the provisions of this Agreement, the Persons included in the
term “Borrowers,” may create reasonable inter-company indebtedness between or
among the Borrowers with respect to the allocation of the benefits and proceeds
of the Credit Extensions under this Agreement. The Borrowers agree among
themselves, and the Bank consents to that agreement, that each Borrower shall
have rights of contribution from all of

12

 

the other Borrowers to the extent such
Borrower incurs Obligations in excess of the proceeds of the Credit Extensions
received by, or allocated to purposes for the direct benefit of, such Borrower.
All such indebtedness and rights shall be, and are hereby agreed by the
Borrowers to be, subordinate in priority and payment to the indefeasible
repayment in full in cash of the Obligations, and, unless the Bank agrees in
writing otherwise, shall not be exercised or repaid in whole or in part until
all of the Obligations have been indefeasibly paid in full in cash. The
Borrowers agree that all of such inter-company indebtedness and rights of
contribution are part of the Collateral and secure the Obligations. Each
Borrower hereby waives all rights of counterclaim, recoupment and offset
between or among themselves arising on account of that indebtedness and
otherwise. Each Borrower shall not evidence the inter-company indebtedness
or rights of contribution by note or other instrument, and shall not
secure such indebtedness or rights of contribution with any Lien or security.
Notwithstanding anything contained in this Agreement to the contrary, the
amount covered by each Borrower under the Obligations shall be limited to an
aggregate amount (after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf of any other
Borrower in respect of the Obligations) which, together with other amounts
owing by such Borrowers to the Bank under the Obligations, is equal to the
largest amount that would not be subject to avoidance under any Insolvency
Proceeding or any applicable provisions of any applicable, comparable state or
other laws.

          (a) Each Person included in the term “Borrower” hereby represents and
warrants to the Bank that each of them will derive benefits, directly and
indirectly, from each Advance, both in their separate capacity and as a member
of the integrated group to which each such Person belongs and because the
successful operation of the integrated group is dependent

13

 

upon the continued
successful performance of the functions of the integrated group as a whole,
because (i) the terms of the consolidated financing provided under this
Agreement are more favorable than would otherwise would be obtainable by such
Persons individually, and (ii) the additional administrative and other costs
and reduced flexibility associated with individual financing arrangements which
would otherwise be required if obtainable would substantially reduce the value
to such Persons of the financing.

          (b) Within ten (10) days following any request of the Bank so to do, each
Person included in the term “Borrower” will furnish the Bank and such other
persons as the Bank
may direct with a written certificate, duly acknowledged stating in detail
whether or not any credits, offsets or defenses exist with respect to this
Section 16.

     17.     Consistent Changes. The Loan Documents are hereby
amended wherever necessary to reflect the changes described above.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

14

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

	 	 	 	 	 	 	 
	WITNESS:	 	SILICON VALLEY BANK
		 	 	 	 	 	 
	/s/ Megan Scheffel	 	
By:
	 	/s/ Chris York 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Name: Chris York	
	 	 	 	 	Title: Vice President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Michael L. Chasen	 	 
	 	 	 	 	Chief Executive Officer	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ACQUISITION
	 	 	COMPANY, LLC
	 	 	By:     Blackboard Inc., its Member
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Michael L. Chasen	 	 
	 	 	 	 	President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD CAMPUSWIDE, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD ICOLLEGE, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Michael L. Chasen	 	 
	 	 	 	 	President	 	 

15

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD CAMPUSWIDE OF TEXAS, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	President	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BB ACQUISITION CORP.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	Secretary	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD INTERNATIONAL B.V.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	Sole Director	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD INTERNATIONAL L.P.
	 	 	
By:
	 	Bb Management LLC, its general partner	 	 
	 	 	
By:
	 	Blackboard International Holdings, Inc.,	 	 
	 	 	 	 	its sole member	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	Director	 	 
	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	Bb MANAGEMENT LLC
	 	 	
By:
	 	Blackboard International Holdings, Inc., its	 	 
	 	 	 	 	sole member	 	 
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	Director	 	 

16

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	BLACKBOARD INTERNATIONAL HOLDINGS, INC.
	 	 	 	 	 	 	 
	/s/ [signature illegible] 	 	
By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
	 	 	 	
	 	 
	 	 	 	 	Andrew Rosen	 	 
	 	 	 	 	Director	 	 

17

 

EXHIBIT A

DESCRIPTION OF COLLATERAL

The Collateral consists of all of each Borrower’s right, title and interest in
and to the following:

     All goods and equipment as defined in the Uniform Commercial Code now
owned or hereafter acquired, including, without limitation, all machinery,
fixtures, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located;

     All Inventory as defined in the Uniform Commercial Code and includes, now
owned or hereafter acquired, including, without limitation, all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products including such inventory as is temporarily out of
Borrower’s custody or possession or in transit and including any returns upon
any accounts or other Proceeds, , resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of the above;

     All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

     All Accounts as defined in the Uniform Commercial Code and includes now
existing and hereafter arising accounts, contract rights, royalties, license
rights and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods, the licensing of technology or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefore, as well as all
merchandise returned to or reclaimed by Borrower;

     All Letter-Of-Credit Rights (whether or not the letter of credit is
evidenced by a writing);

     All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower’s Books relating to the foregoing;

     All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of

18

 

semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any
of the foregoing; and

     All Supporting Obligations and all of the Borrower’s Books relating to
the foregoing and any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and Proceeds thereof.

19

 

SIXTH AMENDMENT TO AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

     THIS SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this “Agreement”) is entered into as of July
       , 2003, by and among SILICON
VALLEY BANK, a California chartered bank, doing business in Virginia as
“Silicon Valley East” (“Bank”) with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at 11600 Sunrise Valley Drive, Suite 400, Reston, Virginia 20191, (ii)
BLACKBOARD INC., a Delaware corporation, having an address at 1899 L Street,
N.W., Washington, D.C. 20036 (“Company”), BLACKBOARD ACQUISITION COMPANY, LLC,
a Delaware limited liability company having an address at 1899 L Street, N.W.,
Washington, D.C. 20036 (“Blackboard Acquisition”), BLACKBOARD CAMPUSWIDE, INC.,
a Delaware corporation, BLACKBOARD ICOLLEGE, INC., a Delaware corporation
having an address at 1899 L Street, N..W., Washington, D.C. 20036, BLACKBOARD
CAMPUSWIDE OF TEXAS, INC., (formerly known as AT&T Campuswide Access Solutions
Of Texas, Inc.), a Texas corporation having an address at 1899 L Street, N.W.,
Washington, D.C. 20036, and BB ACQUISITION CORP., a Delaware corporation,
having an address at 1899 L Street, N.W., Washington, D.C. 20036 (each a
“Borrower” and collectively, the “Borrowers”).

RECITALS.

     A.     The Borrowers (other than Bb Acquisition Corp) and Bank are all parties
to that certain Amended and Restated Loan and Security Agreement dated November
30, 2001, but effective as of October 5, 2001, as amended by that certain First
Amendment to Amended and Restated Loan and Security Agreement
dated as of
January 11, 2002 among Borrowers and Bank, that certain Second Amendment to
Amended and Restated Loan and Security Agreement

 

 

dated as of October 4, 2002
among Borrowers and Bank, that certain Third Amendment to Amended and Restated
Loan and Security Agreement dated as of February 17, 2003 among Borrowers and
Bank, that certain Fourth Amendment to Amended and Restated Loan and Security
Agreement dated effective as of May 28, 2003 among Borrowers and Bank, and that
certain Fifth Amendment to Amended and Restated Loan and Security Agreement
dated as of June 30, 2003 among Borrowers, Blackboard International, B.V., a
corporation organized under the laws of the Netherlands (“Blackboard
Netherlands”), Blackboard International L.P., a limited partnership organized
under the laws of Bermuda (“Blackboard Bermuda”), Bb Management LLC, a Delaware
limited liability company (“Bb Management”) and Blackboard International
Holdings, Inc., a Delaware corporation (“Blackboard International Holdings”)
and Bank (as the same may be amended from time to time, the “Loan Agreement”),
pursuant to which Bank has agreed to establish (i) a revolving line of credit
in the maximum principal amount of Eight Million Dollars ($8,000,000) to be
used by Borrowers for working capital needs and general corporate purposes,
(ii) an equipment line of credit in the maximum principal amount of Three
Million Dollars ($3,000,000) to be used by the Borrowers for the purchase of
equipment, and (iii) an equipment line of credit in the maximum principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000) to be used by
the Borrowers for the purchase of equipment, all as more fully described in the
Loan Agreement.

     B.     The Borrowers requested that Bank release Blackboard Netherlands,
Blackboard Bermuda, Bb Management and Blackboard International Holdings as
co-borrowers under the Notes and the Loan Documents and Bank has agreed on the
condition, among others, that Borrowers execute and deliver this Agreement.

2

 

     C.          All capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrowers and Bank do hereby agree as follows:

     1.          Recitals. The parties hereto acknowledge and agree that the above
Recitals are true and correct in all material respects and that the same are
incorporated herein and made a part hereof by reference.

     2.     Definitions. Subclause (e) of the definition of “Eligible Accounts”
set forth in Section 13.1 of the Loan Agreement is hereby amended and restated
in its entirety as follows:

		
	 	     (e)     Accounts for which the account debtors do not have their
principal places of business in the United States;

     3.          Release of Certain Borrowers. Bank hereby agrees that Blackboard
Netherlands, Blackboard Bermuda, Blackboard International Holdings and Bb
Management are, effective as of the date hereof, hereby fully and completely
released from any and all prior, present and future liability for repayment of
the Obligations and any and all Liens on any Collateral owned by Blackboard
Netherlands, Blackboard Bermuda, Blackboard International Holdings and Bb
Management is, effective as of the date hereof, hereby released.

     4.     Subsidiaries. Section 5.7 of the Loan Agreement is hereby amended and
restated in its entirety as follows:

		
	 	     5.7      Subsidiaries.
No Borrower owns any stock, partnership interest
or other equity securities, except for the Company’s and its
Subsidiaries’ ownership of Blackboard Tennessee, LLC, Bb Acquisition
Corporation, Bb Management LLC, Blackboard International Holdings, Inc.,
Blackboard International L.P., Blackboard International B.V., Blackboard
Japan KK and for Permitted Investments.

3

 

     5.          Borrowing Base. Exhibit C to the Loan Agreement is hereby replaced in
its entirety with EXHIBIT C attached hereto.

     6.          Conditions Precedent. This Agreement shall become effective on the
date the Bank receives the following documents, each of which shall be
satisfactory in form and substance to the Bank:

               (a)     The Seventh Amended and Restated Revolving Promissory Note (the
“Replacement Revolving Promissory Note”) issued and delivered by the Borrowers
in the form of EXHIBIT A attached hereto and incorporated herein by reference,
payable to the order of the Bank in the maximum principal amount of Eight
Million Dollars ($8,000,000);

               (b)     The Fifth Amended and Restated Equipment Term Note (the “Replacement
Equipment Term Note”) issued and delivered by the Borrowers in the form of
EXHIBIT B attached hereto and incorporated herein by reference, payable to the
order of the Bank in the maximum principal amount of Three Million Dollars
($3,000,000);

               (c)     The Second Amended and Restated Supplemental Equipment Term Note (the
“Replacement Supplemental Equipment Term Note”) issued and delivered by the
Borrowers in the form of EXHIBIT D attached hereto and incorporated herein by
reference, payable to the order of the Bank in the maximum principal amount of
One Million Five Hundred Thousand Dollars ($1,500,000);

               (d)     Such other information, instruments, opinions, documents, certificates
and reports as the Bank may deem necessary.

     7.     Replacement Revolving Note. The Borrowers shall execute and deliver to
the Bank on the date hereof the Replacement Revolving Promissory Note in
substitution for and not satisfaction of, the issued and outstanding Revolving
Promissory Note, and the Replacement

4

 

Revolving Promissory Note shall be the “Revolving Promissory Note” for all purposes of the Loan Documents. The Note
being substituted pursuant to this Agreement shall be marked “Replaced” and
promptly returned to the Existing Borrowers after the execution and delivery of
the Replacement Revolving Promissory Note to the Bank. The Borrowers agree
that the execution and delivery of the Replacement Revolving Promissory Note is
not intended to and shall not cause or result in a novation with respect to the
issued and outstanding Revolving Promissory Note, provided, however, that the
terms of the Replacement Revolving Promissory Note are intended to supercede
and replace all terms of the issued and outstanding Revolving Promissory Note.

     8.     Replacement Equipment Term Note. The Borrowers shall execute and
deliver to the Bank on the date hereof the Replacement Equipment Term Note in
substitution for and not satisfaction of, the issued and outstanding Equipment
Term Note, and the Replacement Equipment Term Note shall be the “Equipment Term
Note” for all purposes of the Loan Documents. The Note being substituted
pursuant to this Agreement shall be marked “Replaced” and promptly returned to
the Existing Borrowers after the execution and delivery of the Replacement
Equipment Term Note to the Bank. The Borrowers agree that the execution and
delivery of the Replacement Equipment Term Note is not intended to and shall
not cause or result in a novation with respect to the issued and outstanding
Equipment Term Note, provided, however, that the terms of the Replacement
Equipment Term Note are intended to supercede and replace all terms of the
issued and outstanding Equipment Term Note.

     9.          Replacement Supplemental Equipment Term Note. The Borrowers shall
execute and deliver to the Bank on the date hereof the Replacement Supplemental
Equipment Term Note in substitution for and not satisfaction of, the issued and
outstanding Supplemental Equipment

5

 

 Term Note, and the Replacement Supplemental
Equipment Term Note shall be the “Supplemental Equipment Term Note” for all
purposes of the Loan Documents. The Note being substituted pursuant to this
Agreement shall be marked “Replaced” and promptly returned to the Existing
Borrowers after the execution and delivery of the Replacement Supplemental
Equipment Term Note to the Bank. The Borrowers agree that the execution and
delivery of the Replacement Supplemental Equipment Term Note is not intended to
and shall not cause or result in a novation with respect to the issued and
outstanding Supplemental Equipment Term Note, provided, however, that the terms
of the Replacement Supplemental Equipment Term Note are intended to supercede
and replace all terms of the issued and outstanding Supplemental Equipment Term
Note.

     10.     Counterparts. This Agreement may be executed in any number of
duplicate originals or counterparts, each of which duplicate original or
counterpart shall be deemed to be an original and all taken together shall
constitute one and the same instrument.

     11.     Loan Documents; Governing Law; Etc. This Agreement is one of the Loan
Documents defined in the Loan Agreement and shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. The headings and
captions in this Agreement are for the convenience of the parties only and are
not a part of this Agreement.

     12.     Acknowledgments. The Borrowers hereby confirm to the Bank the
enforceability and validity of each of the Loan Documents. In addition, the
Borrowers hereby agree that the execution and delivery of this Agreement and
the terms and provisions, covenants or agreements
contained in this Agreement shall not in any manner release, impair,
lessen, modify, waive or otherwise limit the liability and obligations of the
Borrowers under the terms of any of the Loan Documents, except as otherwise
specifically set forth in this Agreement. Each Person included

6

 

in the term
“Borrower” hereby issues, remakes, ratifies and confirms the representations,
warranties and covenants contained in the Loan Documents on and as of the date
hereof, both before and after giving effect to this Agreement except as may be
modified by the provisions of this Agreement, and that no Event of Default or
Default has occurred and is continuing or exists or would occur or exist after
giving effect to this Agreement. Nothing in this Agreement shall be deemed to
waive any defaults existing under any of the Loan Documents as of the date
hereof.

     13.          Modifications. This Agreement may not be supplemented, changed,
waived, discharged, terminated, modified or amended, except by written
instrument executed by the parties.

     14.          Right of Contribution. Without implying any limitation on the joint
and several nature of the Obligations, the Bank agrees that, subject to the
provisions of this Agreement, the Persons included in the term “Borrowers,” may
create reasonable inter-company indebtedness between or among the Borrowers
with respect to the allocation of the benefits and proceeds of the Credit
Extensions under this Agreement. The Borrowers agree among themselves, and the
Bank consents to that agreement, that each Borrower shall have rights of
contribution from all of the other Borrowers to the extent such Borrower incurs
Obligations in excess of the proceeds of the Credit Extensions received by, or
allocated to purposes for the direct benefit of, such Borrower. All such
indebtedness and rights shall be, and are hereby agreed by the Borrowers to be,
subordinate in priority and payment to the indefeasible repayment in full in
cash of the Obligations, and, unless the Bank agrees in writing otherwise,
shall not be exercised or repaid in
whole or in part until all of the Obligations have been indefeasibly paid
in full in cash. The Borrowers agree that all of such inter-company
indebtedness and rights of contribution are part of the Collateral and secure
the Obligations. Each Borrower hereby waives all rights of

7

 

counterclaim,
recoupment and offset between or among themselves arising on account of that
indebtedness and otherwise. Each Borrower shall not evidence the inter-company
indebtedness or rights of contribution by note or other instrument, and shall
not secure such indebtedness or rights of contribution with any Lien or
security. Notwithstanding anything contained in this Agreement to the
contrary, the amount covered by each Borrower under the Obligations shall be
limited to an aggregate amount (after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Borrower in respect of the Obligations) which, together with other
amounts owing by such Borrowers to the Bank under the Obligations, is equal to
the largest amount that would not be subject to avoidance under any Insolvency
Proceeding or any applicable provisions of any applicable, comparable state or
other laws.

               (a)     Each Person included in the term “Borrower” hereby represents and
warrants to the Bank that each of them will derive benefits, directly and
indirectly, from each Advance, both in their separate capacity and as a member
of the integrated group to which each such Person belongs and because the
successful operation of the integrated group is dependent upon the continued
successful performance of the functions of the integrated group as a whole,
because (i) the terms of the consolidated financing provided under this
Agreement are more favorable than would otherwise would be obtainable by such
Persons individually, and (ii) the additional administrative and other costs
and reduced flexibility associated with individual financing arrangements which
would otherwise be required if obtainable would substantially reduce the value
to such Persons of the financing.

               (b)     Within ten (10) days following any request of the Bank so to do, each
Person included in the term “Borrower” will furnish the Bank and such other
persons as the Bank

8

 

may direct with a written certificate, duly acknowledged
stating in detail whether or not any credits, offsets or defenses exist with
respect to this Section 16.

     15.     Consistent Changes. The Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

9

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

	 	 	 	 	 	 	 
	WITNESS:

	 	SILICON VALLEY BANK	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Megan Scheffel
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Name: Megan Scheffel	 	 
	

	 	 	 	Title: VP	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD INC.	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Michael L. Chasen
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ACQUISITION	 	 
	

	 	COMPANY, LLC	 	 
	

	 	By:
	 	Blackboard Inc., its Member	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Michael L. Chasen
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE, INC.	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Andrew Rosen
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ICOLLEGE, INC.	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Michael L. Chasen
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 

10

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE OF TEXAS, INC.	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Andrew Rosen
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BB ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Peter Q. Repetti
	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Peter Q. Repetti	 	 
	

	 	 	 	President	 	 

11

 

EXHIBIT C

BORROWING BASE CERTIFICATE

	 	 	 	 	 	 	 
	Borrowers:   BLACKBOARD INC. AND AFFILIATES
	 	Lender:   Silicon Valley Bank
	Commitment Amount:   
$8,000,000	 	 	 	 

	 	 	 	 	 
	ACCOUNTS RECEIVABLE	 	 
	1.
	 	Accounts Receivable Book Value as of	
$	 
	 	 	 	 	

	2.
	 	Additions (please explain on reverse)	
$	 
	 	 	 	 	

	3.
	 	TOTAL ACCOUNTS RECEIVABLE	
$	 
	 	 	 	 	

	ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)	 	 
	4.
	 	Amounts over 90 days from invoice date	
$	 
	 	 	 	 	

	5.
	 	Balance of 50% over 90 day accounts	
$	 
	 	 	 	 	

	6.
	 	Credit balances over 90 days	
$	 
	 	 	 	 	

	7.
	 	Concentration Limits	
$	 
	 	 	 	 	

	8.
	 	Foreign Accounts	
$	 
	 	 	 	 	

	9.
	 	Governmental Accounts	
$	 
	 	 	 	 	

	10.
	 	Contra Accounts	
$	 
	 	 	 	 	

	11.
	 	Promotion or Demo Accounts	
$	 
	 	 	 	 	

	12.
	 	Intercompany/Employee Accounts	
$	 
	 	 	 	 	

	13.
	 	Other (please explain on reverse)	
$	 
	 	 	 	 	

	14.
	 	TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS	
$	 
	 	 	 	 	

	15.
	 	Eligible Accounts (#3 minus #14)	
$	 
	 	 	 	 	

	16.
	 	LOAN VALUE OF ACCOUNTS (80% of #15)	
$	 
	 	 	 	 	

	BALANCES	 	 
	17.
	 	Commitment Amount	$	
8,000,000
	 	 	 	 	

	18.
	 	Total Funds Available [Lesser of #17 or #16]	
$	 
	 	 	 	 	

	19.
	 	Present balance owing on Line of Credit	
$	 
	 	 	 	 	

	20.
	 	Outstanding under Sublimits	
$	 
	 	 	 	 	

	21.
	 	RESERVE POSITION (#18 minus #19 and #20)	
$	 
	 	 	 	 	

The undersigned represents and
warrants that this is true,
complete and correct, and that
the information in this
Borrowing Base Certificate
complies with the
representations and warranties
in the Loan and Security
Agreement between the
undersigned and Silicon Valley
Bank.

COMMENTS:

	 	 	 
	By:

	 	

	

	 	Authorized Signer

12

 

IMPORTANT NOTICE

     THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS
THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.

SEVENTH AMENDED AND RESTATED REVOLVING PROMISSORY NOTE

	 	 	 
	$8,000,000

	 	Reston, Virginia
	

	 	July 30, 2003

     FOR VALUE RECEIVED, the undersigned, BLACKBOARD INC., a Delaware
corporation (the “Company”), BLACKBOARD ACQUISITION COMPANY, LLC, a Delaware
limited liability company, BLACKBOARD CAMPUSWIDE, INC., a Delaware corporation,
BLACKBOARD ICOLLEGE, INC., a Delaware corporation, BLACKBOARD CAMPUSWIDE OF
TEXAS, INC. (formerly known as AT&T Campuswide Access Solutions of Texas,
Inc.), a Texas corporation, and BB ACQUISITION CORP., a Delaware corporation
(each a “Borrower” and collectively, the “Borrowers”) jointly and severally
promise to pay to the order of SILICON VALLEY BANK, a California-chartered bank
doing business in Virginia as “Silicon Valley East” (“Bank”) at such place as
the holder hereof may designate, in lawful money of the United States of
America, the aggregate unpaid principal amount of all advances (“Advances”)
made by Bank to Borrowers in accordance with the terms and conditions of the
Amended and Restated Loan and Security Agreement dated November 30, 2001, but
effective as of October 5, 2001 by and among the Borrowers (other than Bb
Acquisition Corp.) and Bank (as amended from time to time, the “Loan
Agreement”), up to a maximum principal amount of Eight Million Dollars
($8,000,000) (“Principal Sum”), or so much thereof as may be advanced or
readvanced and remains unpaid. Borrowers shall also pay interest on the
aggregate unpaid principal amount of such Advances, as follows:

     As of the date hereof, the unpaid Principal Sum shall bear interest at the
variable rate of interest, per annum, most recently announced by Bank as its
“prime rate,” whether or not such announced rate is the lowest rate available
from Bank (the “Prime Rate”). If in any calendar quarter hereafter, the
Borrowers on a consolidated basis fail to have a net profit, interest on the
outstanding Principal Sum shall commencing as of the first day of such calendar
quarter accrue at a variable per annum rate of one half of one percent (0.5%)
above the Prime Rate, until such calendar quarter end as the Borrowers have
positive cash flow from operations derived from the Borrowers’ consolidated
Statement of Cash Flows for the prior single calendar quarter. For purposes of
determining positive cash flow, the proceeds from any equity offering or any
indebtedness of any Borrower shall be excluded. The rate of interest charged
under this Note shall change immediately and contemporaneously with any change
in the Prime Rate.

     Notwithstanding the foregoing, at no time shall the Prime Rate be a rate
per annum which is less than four percent (4.0%).

 

 

     The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:

          (a) Interest only on the unpaid principal amount shall be due and payable
monthly in arrears, commencing July 5, 2003, and continuing on the same day of
each calendar month thereafter to maturity; and

          (b) Unless sooner paid, the unpaid Principal Sum, together with interest
accrued and unpaid thereon, shall be due and payable in full on the Revolving
Maturity Date.

     The fact that the balance hereunder may be reduced to zero from time to
time pursuant to the Loan Agreement will not affect the continuing validity of
this Note or the Loan Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero. This Note may be prepaid from
time to time, without penalty.

     This Note is the “Replacement Revolving Promissory Note” described in that
certain Sixth Amendment to Amended and Restated Loan and Security Agreement by
and among Borrowers and Bank of even date herewith (the “Sixth Amendment”),
which Sixth Amendment amends the Loan Agreement, and is issued in substitution
of the Revolving Promissory Note described in the Loan Agreement, to which
reference is hereby made for a more complete statement of the terms and
conditions under which the loans and advances evidenced hereby are made. This
Note is governed by and is secured as provided in the Loan Agreement. This Note
amends and restates in its entirety that certain Sixth Amended and Restated
Revolving Promissory Note (“Restated Note”) in the principal amount of Eight
Million Dollars ($8,000,000) dated June 27, 2003 from the Borrowers, Blackboard
International, B.V., Blackboard International L.P., Blackboard International
Holdings, Inc. and Bb Management LLC in favor of Bank. It is expressly agreed
that the indebtedness evidenced by the Restated Note has not been extinguished
or discharged hereby. The Borrowers agree that the execution of this Note is
not intended to and shall not cause or result in a novation with respect to the
Restated Note, provided, however, that the terms of this Note are intended to
supercede and replace all terms of the Restated Note. All capitalized terms
used herein and not otherwise defined shall have the meanings given to such
terms in the Loan Agreement.

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

     Bank is hereby authorized by Borrowers to endorse on Bank’s books and
records each Advance made by Bank under this Note and the amount of each
payment or prepayment of principal of each such Advance received by Bank; it
being understood, however, that failure to

2

 

make any such endorsement (or any
error in notation) shall not affect the joint and several obligations of
Borrowers with respect to Advances made hereunder, and payments of principal
by Borrowers shall be credited to Borrowers notwithstanding the failure to
make a notation (or any errors in notation) thereof on such books and records.

     Until such time as the Bank is not committed to extend further credit to
the Borrowers and all Obligations of the Borrowers to the Bank have been
indefeasibly paid in full in cash, and subject to and not in limitation of the
provisions set forth in the next following paragraph below, no Borrower shall
have any right of subrogation (whether contractual, arising under the
Bankruptcy Code or otherwise), reimbursement or contribution from any Borrower
or any guarantor, nor any right of recourse to its security for any of the
debts and obligations of any Borrower which are the subject of this Note.
Except as otherwise expressly permitted by the Loan Agreement, any and all
present and future debts and obligations of any Borrower to any other Borrower
are hereby subordinated to the full payment and performance of all present and
future debts and obligations to the Bank under this Note and the Loan Agreement
and the Loan Documents, provided, however, notwithstanding anything set forth
in this Note to the contrary, prior to the occurrence of a payment Default, the
Borrowers shall be permitted to make payments (including to any other Borrower)
on account of any of such present and future debts and obligations from time to
time in accordance with the terms thereof.

     Each Borrower further agrees that, if any payment made by any Borrower or
any other person is applied to this Note and is at any time annulled, set
aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any property
hereafter securing this Note is required to be returned by the Bank to any
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, such Borrower, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, such Borrower’s liability hereunder (and any lien, security interest
or other collateral securing such liability) shall be and remain in full force
and effect, as fully as if such payment had never been made, or, if prior
thereto any such lien, security interest or other collateral hereafter securing
such Borrower’s liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender, this Note (and such lien, security
interest or other collateral) shall be reinstated in full force and effect, and
such prior cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of such Borrower in respect of the
amount of such payment (or any lien, security interest or other collateral
securing such obligation).

     The JOINT AND SEVERAL obligations of each Borrower under this Note shall
be absolute, irrevocable and unconditional and shall remain in full force and
effect until the outstanding principal of and interest on this Note and all
other Obligations or amounts due hereunder and under the Loan Agreement and the
Loan Documents shall have been indefeasibly paid in full in cash in accordance
with the terms thereof and this Note shall have been canceled.

     The Borrowers each shall be jointly and severally liable on the payment of
the Obligations as and when due and payable in accordance with the provisions
of this Note, the Loan Agreement and the other Loan Documents. The term
“Borrowers” when used in this Note

3

 

shall include all of the Borrowers,
individually and jointly, and the Bank may (without notice to or consent of any
or all of the Borrowers and with or without consideration) release, compromise,
settle with, proceed against any or all of the Borrowers without
affecting, impairing, lessening or releasing the obligations of the other
Borrower hereunder.

     The occurrence of any one or more of the following events shall constitute
an event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

          (a) The failure of Borrowers to pay to Bank within three (3) Business Days
of when due any and all amounts payable by Borrowers to Bank under the terms of
this Note; or

          (b) The occurrence of an Event of Default (as defined therein) under the
terms and conditions of any of the other Loan Documents.

     Upon the occurrence of an Event of Default, at the option of Bank, all
amounts payable by Borrowers to Bank under the terms of this Note shall
immediately become due and payable by Borrowers to Bank without notice to
Borrowers or any other person, and Bank shall have all of the rights, powers,
and remedies available under the terms of this Note, any of the other Loan
Documents and all applicable laws. Borrowers and all endorsers, guarantors,
and other parties who may now or in the future be primarily or secondarily
liable for the payment of the indebtedness evidenced by this Note hereby
severally waive presentment, protest and demand, notice of protest, notice of
demand and of dishonor and non-payment of this Note and expressly agree that
this Note or any payment hereunder may be extended from time to time without in
any way affecting the joint and several liability of Borrowers, guarantors and
endorsers.

     In the event this Note is not paid when due or any installment due
hereunder is not paid within fifteen (15) days of the date when due, whether by
maturity or acceleration, Borrowers hereby appoint and designate Mary Zinsner,
Esq. or any other individual now or hereafter appointed by Bank, Borrowers’
duly constituted attorney-in-fact to confess judgment pursuant to the
provisions of Section 8.01-432 of the Code of Virginia of 1950, as amended,
against Borrowers for all principal of and interest due and payable under this
Note upon the occurrence of an Event of Default, together with attorneys’ fees
and collection fees as provided herein (to the extent permitted by law), which
judgment shall be confessed in the Clerk’s Office of the Circuit Court of
Fairfax County, Virginia.

     Borrowers jointly and severally promise to pay all costs and expense of
collection of this Note and to pay all reasonable attorneys’ fees incurred in
such collection, whether or not there is a suit or action, or in any suit or
action to collect this Note or in any appeal thereof. Borrowers waive
presentment, demand, protest, notice of protest, notice of dishonor, notice of
nonpayment, and any and all other notices and demands in connection with the
delivery, acceptance, performance default or enforcement of this Note, as well
as any applicable statutes of limitations. No delay by Bank in exercising any
power or right hereunder shall operate as a waiver of any power or right. Time
is of the essence as to all obligations hereunder.

4

 

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

     Each Borrower acknowledges and agrees that this Note shall be governed by
the laws of the Commonwealth of Virginia, excluding conflicts of laws
principles, even though for the convenience and at the request of Borrowers,
this Note may be executed elsewhere.

     BORROWERS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF VIRGINIA IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST THEM WHICH ARISES OUT OF OR BY REASON OF
THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL
ITSELF OF THE COURTS OF VIRGINIA, BORROWERS ACCEPT JURISDICTION OF THE COURTS
AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWERS AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

5

 

     IN WITNESS WHEREOF, Borrowers have caused this Note to be executed under
seal by their duly authorized officers, partners and/or members as of the date
first written above.

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Janis Y. Butler	 	By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ACQUISITION	 	 
	

	 	COMPANY, LLC	 	 
	

	 	 	 	By: Blackboard Inc., its Member	 	 
	 
	 	 	 	 	 	 
	

/s/ Janis Y. Butler	 	By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE, INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Tina Jackson	 	By:
	 	/s/ Andrew Rosen	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ICOLLEGE, INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Janis Y. Butler	 	By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE OF TEXAS, INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Tina Jackson	 	By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 

6

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BB ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 
	

/s/ Tina Jackson	 	By:
	 	/s/ Peter Q. Repetti 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Peter Q. Repetti	 	 
	

	 	 	 	President	 	 

7

 

IMPORTANT NOTICE

     THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS
THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.

FIFTH AMENDED AND RESTATED EQUIPMENT TERM NOTE

	 	 	 
	$3,000,000

	 	Reston, Virginia
	

	 	July 30, 2003

     FOR VALUE RECEIVED, the undersigned, BLACKBOARD INC., a Delaware
corporation (the “Company”), BLACKBOARD ACQUISITION COMPANY, LLC, a Delaware
limited liability company, BLACKBOARD CAMPUSWIDE, INC., a Delaware corporation,
BLACKBOARD ICOLLEGE, INC., a Delaware corporation, BLACKBOARD CAMPUSWIDE OF
TEXAS, INC. (formerly known as AT&T Campuswide Access Solutions of Texas,
Inc.), a Texas corporation, and BB ACQUISITION CORP., a Delaware corporation
(each a “Borrower” and collectively, the “Borrowers”) jointly and severally
promise to pay to the order of SILICON VALLEY BANK, a California-chartered bank
doing business in Virginia as “Silicon Valley East” (“Bank”), at such place as
the holder hereof may designate, in lawful money of the United States of
America, the aggregate unpaid principal amount of all equipment advances
(“Equipment Advances”) made by Bank to Borrowers in accordance with the terms
and conditions of the Amended and Restated Loan and Security Agreement dated
November 30, 2001, but effective as of October 5, 2001 among the Borrowers
(other than Bb Acquisition Corp.) and Bank (as amended from time to time, the
“Loan Agreement”), up to a maximum principal amount of Three Million Dollars
($3,000,000) (“Principal Sum”), or so much thereof as may be advanced and
remains unpaid. Borrowers may request Equipment Advances under this Note from
and until the Commitment Termination Date. The unpaid Principal Sum, together
with interest thereon at the rate or rates provided in the Loan Agreement,
shall be payable as set forth in the Loan Agreement.

     This Note is the “Replacement Equipment Term Note” described in that
certain Sixth Amendment to Amended and Restated Loan and Security Agreement by
and among Borrowers and Bank of even date herewith (the “Sixth Amendment”),
which Sixth Amendment amends the Loan Agreement, and is issued in substitution
of the Equipment Term Note described in the Loan Agreement to which reference
is hereby made for a more complete statement of the terms and conditions under
which the Equipment Advances evidenced hereby are made. This Note is secured
as provided in the Loan Agreement. This Note amends and restates in its
entirety that certain Fourth Amended and Restated Equipment Term Note
(“Restated Note”) in the principal amount of Three Million Dollars ($3,000,000)
dated June 27, 2003, from the Borrowers, Blackboard International B.V.,
Blackboard International L.P., Blackboard International Holdings, Inc. and Bb
Management LLC in favor of Bank. It is expressly agreed that the indebtedness
evidenced by the Restated Note has not been extinguished or discharged hereby.
The Borrowers agree that the execution of this Note is not intended to and
shall not cause or result in a novation with respect to the Restated Note,
provided, however, that the terms of this Note are intended to
supercede and replace all terms of the Restated Note. All capitalized
terms

 

 

used herein and not otherwise defined shall have the meanings given to
such terms in the Loan Agreement.

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

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

     Until such time as the Bank is not committed to extend further credit to
the Borrowers and all Obligations of the Borrowers to the Bank have been
indefeasibly paid in full in cash, and subject to and not in limitation of the
provisions set forth in the next following paragraph below, no Borrower shall
have any right of subrogation (whether contractual, arising under the
Bankruptcy Code or otherwise), reimbursement or contribution from any Borrower
or any guarantor, nor any right of recourse to its security for any of the
debts and obligations of any Borrower which are the subject of this Note.
Except as otherwise expressly permitted by the Loan Agreement, any and all
present and future debts and obligations of any Borrower to any other Borrower
are hereby subordinated to the full payment and performance of all present and
future debts and obligations to the Bank under this Note and the Loan Agreement
and the Loan Documents, provided, however, notwithstanding anything set forth
in this Note to the contrary, prior to the occurrence of a payment Default, the
Borrowers shall be permitted to make payments (including to any other Borrower)
on account of any of such present and future debts and obligations from time to
time in accordance with the terms thereof.

     Each Borrower further agrees that, if any payment made by any Borrower or
any other person is applied to this Note and is at any time annulled, set
aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any property
hereafter securing this Note is required to be returned by the Bank to any
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, such Borrower, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, such Borrower’s liability hereunder (and any lien, security interest
or other collateral securing such liability) shall be and remain in full force
and effect, as fully as if such payment had never been made, or, if prior
thereto any such lien, security interest or other collateral hereafter securing
such Borrower’s liability hereunder shall have been

2

 

released or terminated by virtue of such cancellation or surrender, this
Note (and such lien, security interest or other collateral) shall be reinstated
in full force and effect, and such prior cancellation or surrender shall not
diminish, release, discharge, impair or otherwise affect the obligations of
such Borrower in respect of the amount of such payment (or any lien, security
interest or other collateral securing such obligation).

     The JOINT AND SEVERAL obligations of each Borrower under this Note shall
be absolute, irrevocable and unconditional and shall remain in full force and
effect until the outstanding principal of and interest on this Note and all
other Obligations or amounts due hereunder and under the Loan Agreement and the
Loan Documents shall have been indefeasibly paid in full in cash in accordance
with the terms thereof and this Note shall have been canceled.

     The Borrowers each shall be jointly and severally liable on the payment of
the Obligations as and when due and payable in accordance with the provisions
of this Note, the Loan Agreement and the other Loan Documents. The term
“Borrowers” when used in this Note shall include all of the Borrowers,
individually and jointly, and the Bank may (without notice to or consent of any
or all of the Borrowers and with or without consideration) release, compromise,
settle with, proceed against any or all of the Borrowers without affecting,
impairing, lessening or releasing the obligations of the other Borrower
hereunder.

     The occurrence of any one or more of the following events shall constitute
an event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

          (a) The failure of Borrowers to pay to Bank within three (3) Business Days
of when due any and all amounts payable by Borrowers to Bank under the terms of
this Note; or

          (b) The occurrence of an Event of Default (as defined therein) under the
terms and conditions of any of the other Loan Documents.

     Upon the occurrence of an Event of Default, at the option of Bank, all
amounts payable by Borrowers to Bank under the terms of this Note shall
immediately become due and payable by Borrowers to Bank without notice to
Borrowers or any other person, and Bank shall have all of the rights, powers,
and remedies available under the terms of this Note, any of the other Loan
Documents and all applicable laws. Borrowers and all endorsers, guarantors,
and other parties who may now or in the future be primarily or secondarily
liable for the payment of the indebtedness evidenced by this Note hereby
severally waive presentment, protest and demand, notice of protest, notice of
demand and of dishonor and non-payment of this Note and expressly agree that
this Note or any payment hereunder may be extended from time to time without in
any way affecting the joint and several liability of Borrowers, guarantors and
endorsers.

     In the event this Note is not paid when due or any installment due
hereunder is not paid within fifteen (15) days of the date when due, whether by
maturity or acceleration, Borrowers hereby appoint and designate Mary Zinsner,
Esq. or any other individual now or hereafter appointed by Bank, Borrowers’
duly constituted attorney-in-fact to confess judgment pursuant to

3

 

the provisions of Section 8.01-432 of the Code of Virginia
of 1950, as amended, against Borrowers for all principal of and interest due
and payable under this Note upon the occurrence of an Event of Default,
together with attorneys’ fees and collection fees as provided herein (to the
extent permitted by law), which judgment shall be confessed in the Clerk’s
Office of the Circuit Court of Fairfax County, Virginia.

     Borrowers jointly and severally promise to pay all costs and expense of
collection of this Note and to pay all reasonable attorneys’ fees incurred in
such collection, whether or not there is a suit or action, or in any suit or
action to collect this Note or in any appeal thereof. Borrowers waive
presentment, demand, protest, notice of protest, notice of dishonor, notice of
nonpayment, and any and all other notices and demands in connection with the
delivery, acceptance, performance default or enforcement of this Note, as well
as any applicable statutes of limitations. No delay by Bank in exercising any
power or right hereunder shall operate as a waiver of any power or right. Time
is of the essence as to all obligations hereunder.

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

     Each Borrower acknowledges and agrees that this Note shall be governed by
the laws of the Commonwealth of Virginia, excluding conflicts of laws
principles, even though for the convenience and at the request of Borrowers,
this Note may be executed elsewhere.

     BORROWERS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF VIRGINIA IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST THEM WHICH ARISES OUT OF OR BY REASON OF
THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL
ITSELF OF THE COURTS OF VIRGINIA, BORROWERS ACCEPT JURISDICTION OF THE COURTS
AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWERS AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

4

 

     IN WITNESS WHEREOF, Borrowers have caused this Note to be executed under
seal by their duly authorized officers, partners and/or members as of the date
first written above.

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Janis Y. Butler	 	By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ACQUISITION	 	 
	

	 	COMPANY, LLC	 	 
	

	 	By:	 	Blackboard Inc., its Member	 	 
	 
	 	 	 	 	 	 
	

/s/ Janis Y. Butler	 	By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE, INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Tina Jackson	 	By:
	 	/s/ Andrew Rosen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ICOLLEGE, INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Janis Y. Butler	 	By:
	 	/s/ Michael L. Chasen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE OF TEXAS, INC.	 	 
	 
	 	 	 	 	 	 
	

/s/ Tina Jackson	 	By:
	 	Andrew Rosen 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 

5

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BB ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 
	

/s/ Tina Jackson	 	By:
	 	/s/ Peter Q. Repetti 	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Peter Q. Repetti	 	 
	

	 	 	 	President	 	 

6

 

IMPORTANT NOTICE

     THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS
THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.

SECOND AMENDED AND RESTATED

SUPPLEMENTAL EQUIPMENT TERM NOTE

	 	 	 
	$1,500,000

	 	Reston, Virginia
	

	 	July 30, 2003

     FOR VALUE RECEIVED, the undersigned, BLACKBOARD INC., a Delaware
corporation (the “Company”), BLACKBOARD ACQUISITION COMPANY, LLC, a Delaware
limited liability company, BLACKBOARD CAMPUSWIDE, INC., a Delaware corporation,
BLACKBOARD ICOLLEGE, INC., a Delaware corporation, BLACKBOARD CAMPUSWIDE OF
TEXAS, INC. (formerly known as AT&T Campuswide Access Solutions of Texas,
Inc.), a Texas corporation, BB ACQUISITION CORP., a Delaware corporation (each
a “Borrower” and collectively, the “Borrowers”) jointly and severally promise
to pay to the order of SILICON VALLEY BANK, a California-chartered bank doing
business in Virginia as “Silicon Valley East” (“Bank”), at such place as the
holder hereof may designate, in lawful money of the United States of America,
the aggregate unpaid principal amount of the Supplemental Equipment Advances
made by Bank to Borrowers in accordance with the terms and conditions of the
Amended and Restated Loan and Security Agreement dated November 30, 2001, but
effective as of October 5, 2001 among the Borrowers (other than Bb Acquisition
Corp.) and Bank (as amended from time to time, the “Loan Agreement”), up to a
maximum principal amount of One Million Five Hundred Thousand Dollars
($1,500,000) (“Principal Sum”), or so much thereof as may be advanced and
remains unpaid. Borrowers may request Supplemental Equipment Advances under
this Note, subject to the terms of the Loan Agreement from and until the
Supplemental Commitment Termination Date. The unpaid Principal Sum, together
with interest thereon at the rate or rates provided in the Loan Agreement,
shall be payable as set forth in the Loan Agreement.

     This Note is the “Replacement Supplemental Equipment Term Note” described
in that certain Sixth Amendment to Amended and Restated Loan and Security
Agreement by and among Borrowers and Bank of even date herewith (the “Sixth
Amendment”), which Sixth Amendment amends the Loan Agreement, and is issued in
substitution of the Supplemental Equipment Term Note described in the Loan
Agreement to which reference is hereby made for a more complete statement of
the terms and conditions under which the Supplemental Equipment Advances
evidenced hereby are made. This Note is secured as provided in the Loan
Agreement. This Note amends and restates in its entirety that certain
Supplemental Equipment Term Note (“Restated Note”) in the principal amount of
One Million Five Hundred Thousand Dollars ($1,500,000) dated June 27, 2003 from
the Borrowers, Blackboard International B.V., Blackboard International L.P.,
Blackboard International Holdings, Inc. and Bb Management LLC in favor of Bank.
It is expressly agreed that the indebtedness evidenced by the Restated Note
has not been extinguished or discharged hereby. The Borrowers agree that the execution
of

 

 

this Note is not intended to and shall not cause or result in a novation
with respect to the Restated Note, provided, however, that the terms of this
Note are intended to supercede and replace all terms of the Restated Note. All
capitalized terms used herein and not otherwise defined shall have the meanings
given to such terms in the Loan Agreement.

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

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

     Until such time as the Bank is not committed to extend further credit to
the Borrowers and all Obligations of the Borrowers to the Bank have been
indefeasibly paid in full in cash, and subject to and not in limitation of the
provisions set forth in the next following paragraph below, no Borrower shall
have any right of subrogation (whether contractual, arising under the
Bankruptcy Code or otherwise), reimbursement or contribution from any Borrower
or any guarantor, nor any right of recourse to its security for any of the
debts and obligations of any Borrower which are the subject of this Note.
Except as otherwise expressly permitted by the Loan Agreement, any and all
present and future debts and obligations of any Borrower to any other Borrower
are hereby subordinated to the full payment and performance of all present and
future debts and obligations to the Bank under this Note and the Loan Agreement
and the Loan Documents, provided, however, notwithstanding anything set forth
in this Note to the contrary, prior to the occurrence of a payment Default, the
Borrowers shall be permitted to make payments (including to any other Borrower)
on account of any of such present and future debts and obligations from time to
time in accordance with the terms thereof.

     Each Borrower further agrees that, if any payment made by any Borrower or
any other person is applied to this Note and is at any time annulled, set
aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any property
hereafter securing this Note is required to be returned by the Bank to any
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, such Borrower, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment, such Borrower’s liability
hereunder (and any lien, security interest or other collateral securing such
liability) shall be and remain in full force and effect, as fully as if such
payment had never been made, or, if prior thereto any such lien,

2

 

security interest or other collateral hereafter securing such Borrower’s liability
hereunder shall have been released or terminated by virtue of such cancellation
or surrender, this Note (and such lien, security interest or other collateral)
shall be reinstated in full force and effect, and such prior cancellation or
surrender shall not diminish, release, discharge, impair or otherwise affect
the obligations of such Borrower in respect of the amount of such payment (or
any lien, security interest or other collateral securing such obligation).

     The JOINT AND SEVERAL obligations of each Borrower under this Note shall
be absolute, irrevocable and unconditional and shall remain in full force and
effect until the outstanding principal of and interest on this Note and all
other Obligations or amounts due hereunder and under the Loan Agreement and the
Loan Documents shall have been indefeasibly paid in full in cash in accordance
with the terms thereof and this Note shall have been canceled.

     The Borrowers each shall be jointly and severally liable on the payment of
the Obligations as and when due and payable in accordance with the provisions
of this Note, the Loan Agreement and the other Loan Documents. The term
“Borrowers” when used in this Note shall include all of the Borrowers,
individually and jointly, and the Bank may (without notice to or consent of any
or all of the Borrowers and with or without consideration) release, compromise,
settle with, proceed against any or all of the Borrowers without affecting,
impairing, lessening or releasing the obligations of the other Borrower
hereunder.

     The occurrence of any one or more of the following events shall constitute
an event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

          (a) The failure of Borrowers to pay to Bank within three (3) Business Days
of when due any and all amounts payable by any Borrower to Bank under the terms
of this Note; or

          (b) The occurrence of an Event of Default (as defined therein) under the
terms and conditions of any of the other Loan Documents.

     Upon the occurrence of an Event of Default, at the option of Bank, all
amounts payable by Borrowers to Bank under the terms of this Note shall
immediately become due and payable by Borrowers to Bank without notice to
Borrowers or any other Person, and Bank shall have all of the rights, powers,
and remedies available under the terms of this Note, any of the other Loan
Documents and all applicable laws. Each Borrower and all endorsers,
guarantors, and other parties who may now or in the future be primarily or
secondarily liable for the payment of the indebtedness evidenced by this Note
hereby severally waive presentment, protest and demand, notice of protest,
notice of demand and of dishonor and non-payment of this Note and expressly
agree that this Note or any payment hereunder may be extended from time to time
without in any way affecting the joint and several liability of Borrowers,
guarantors and endorsers.

     In the event this Note is not paid when due or any installment due
hereunder is not paid within fifteen (15) days of the date when due, whether by
maturity or acceleration, Borrowers hereby appoint and designate Mary Zinsner,
Esq. or any other individual now or hereafter appointed by Bank, Borrowers’
duly constituted attorney-in-fact to confess judgment pursuant to the
provisions of Section 8.01-432 of the Code of Virginia of 1950, as amended,
against

3

 

Borrowers for all principal of and interest due and payable under this
Note upon the occurrence of an Event of Default, together with attorneys’ fees
and collection fees as provided herein (to the extent permitted by law), which
judgment shall be confessed in the Clerk’s Office of the Circuit Court of
Fairfax County, Virginia.

     Borrowers jointly and severally promise to pay all costs and expenses of
collection of this Note and to pay all reasonable attorneys’ fees incurred in
such collection, whether or not there is a suit or action, or in any suit or
action to collect this Note or in any appeal thereof. Borrowers waive
presentment, demand, protest, notice of protest, notice of dishonor, notice of
nonpayment, and any and all other notices and demands in connection with the
delivery, acceptance, performance default or enforcement of this Note, as well
as any applicable statutes of limitations. No delay by Bank in exercising any
power or right hereunder shall operate as a waiver of any power or right. Time
is of the essence as to all obligations hereunder.

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

     Each Borrower acknowledges and agrees that this Note shall be governed by
the laws of the Commonwealth of Virginia, excluding conflicts of laws
principles, even though for the convenience and at the request of Borrowers,
this Note may be executed elsewhere.

     BORROWERS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF VIRGINIA IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST THEM WHICH ARISES OUT OF OR BY REASON OF
THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL
ITSELF OF THE COURTS OF VIRGINIA, BORROWERS ACCEPT JURISDICTION OF THE COURTS
AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWERS AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

4

 

     IN WITNESS WHEREOF, Borrowers have caused this Note to be executed under
seal by their duly authorized officers, partners and/or members as of the date
first written above.

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Janis Y. Butler	 	By:	 	/s/ Michael L. Chasen	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ACQUISITION	 	 
	

	 	COMPANY, LLC	 	 
	 
	 	 	 	 	By: Blackboard Inc., its Member	 	 
	 
	 	 	 	 	 	 
	/s/ Janis Y. Butler	 	By:	 	/s/ Michael L. Chasen	 	(SEAL)
	
 
	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Tina Jackson	 	By:	 	/s/ Andrew Rosen	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD ICOLLEGE, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Janis Y. Butler	 	By:	 	/s/ Michael L. Chasen	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Michael L. Chasen	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BLACKBOARD CAMPUSWIDE OF TEXAS, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Tina Jackson	 	By:	 	/s/ Andrew Rosen	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Andrew Rosen	 	 
	

	 	 	 	President	 	 

5

 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:

	 	BB ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 
	/s/ Tina Jackson	 	By:	 	/s/ Peter Q. Repetti	 	(SEAL)
	
 

	 	 	 	
 	 	 
	

	 	 	 	Peter Q. Repetti	 	 
	

	 	 	 	President	 	 

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}]]