Document:

QuickLinks
 -- Click here to rapidly navigate through this document
  

 
 

Exhibit 10.11    
  

Silicon Valley Bank  

 
  Loan and Security Agreement    
  

	Borrower:	Click2learn, Inc.
	Address:	110-110th Avenue NE

Bellevue, WA 98004
	

Date:	

December 6, 2002

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON VALLEY BANK ("Silicon"),
whose address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above (jointly and severally, the "Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 8 below.) 

As
set forth in the Amendment to Loan Documents of even date between Silicon and the Borrower, this Loan and Security Agreement amends and restates in its entirety the Loan and Security Agreement
dated September 4, 2001 between Silicon and Borrower (except as otherwise provided for in the Amendment to Loan Documents). 

1.    LOANS.  

        1.1    Loans.    Silicon will
make loans to
Borrower (the "Loans"), in amounts* determined by Silicon in its good faith business judgment**, up to
the amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of Reserves for accrued interest and such other
Reserves as Silicon deems proper from time to time in its good faith business judgment. 

        *of (i) the Term Loan as set forth in the Schedule and (ii) as requested by Borrower pursuant to Section 1.5 and  

        **in accordance with the terms of this Agreement  

        1.2    Interest.    All Loans
and all other
monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Interest shall be payable monthly, on the last day of
the month. *may, in Silicon's discretion, be charged to Borrower's loan account, and the same shall thereafter bear interest at the same rate as the
other Loans. Silicon may, in its discretion, charge interest to Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of Obligations that may be outstanding from time to time,
Borrower shall pay Silicon minimum monthly interest during the term of this Agreement in the amount set forth on the Schedule (the "Minimum Monthly Interest"). 

        *If not paid when due, interest  

        1.3    Overadvances.    If at
any time or for
any reason the total of all outstanding Loans and all other monetary Obligations exceeds the Credit Limit (an "Overadvance"), Borrower shall immediately pay the amount of the excess to Silicon,
without notice or demand. Without limiting Borrower's obligation to repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount of any
Overadvance, on demand, at the Default Rate. 

-1-

 

        1.4    Fees.    Borrower shall pay Silicon the fees shown on the
Schedule, which are in addition to all interest and other sums payable to Silicon and are not refundable. 

        1.5    Loan Requests.    To obtain a Loan, Borrower shall make a
request to Silicon by facsimile or telephone. Loan requests received after 12:00 Noon will not be considered by Silicon until the next Business Day. Silicon may rely on any telephone request for a
Loan given by a person whom Silicon believes is an authorized representative of Borrower, and Borrower will indemnify Silicon for any loss Silicon suffers as a result of that reliance. 

        1.6    Letters of Credit.    At the request of Borrower, Silicon may,
in its good faith business judgment, issue or arrange for the issuance of letters of credit for the account of Borrower, in each case in form and substance satisfactory to Silicon in its sole
discretion (collectively, "Letters of Credit"). The aggregate face amount of all Letters of Credit from time to time outstanding shall not exceed the amount shown on the Schedule (the "Letter of
Credit Sublimit"), and shall be reserved against Loans which would otherwise be available hereunder, and in the event at any time there are insufficient Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount at all times equal to such deficiency, which shall be held as Collateral for all purposes of this Agreement. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of Letters of Credit, together with such additional fee as Silicon's letter of credit department shall charge in connection
with the issuance of the Letters of Credit. Any payment by Silicon under or in connection with a Letter of Credit shall constitute a Loan hereunder on the date such payment is made. Each Letter of
Credit shall have an expiry date no later than thirty days prior to the Maturity Date. Borrower hereby agrees to indemnify and hold Silicon harmless from any loss, cost, expense, or liability,
including payments made by Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising out of or in connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit guarantied by Silicon and opened for Borrower's account or by Silicon's interpretations of any Letter of Credit issued by Silicon
for Borrower's account, and Borrower understands and agrees that Silicon shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower's
instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto. Borrower understands that Letters of Credit may require Silicon to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower against such issuing bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect to any loss, cost,
expense, or liability incurred by Silicon under any Letter of Credit as a result of Silicon's indemnification of any such issuing bank. The provisions of this Loan Agreement, as it pertains to Letters
of Credit, and any other Loan Documents relating to Letters of Credit are cumulative. 

2.    SECURITY INTEREST.    To secure the payment and performance of all of the Obligations when due, Borrower hereby grants to
Silicon a security interest in all of the following (collectively, the "Collateral"): all right, title and interest of Borrower in and to all of the following, whether now owned or hereafter arising
or acquired and wherever located: all Accounts; all Inventory; all Equipment; all Deposit Accounts; all General Intangibles (including without limitation all Intellectual Property); all Investment
Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for,
additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all
of the above, and all Borrower's books relating to any and all of the above. 

3.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

        In
order to induce Silicon to enter into this Agreement and to make Loans, Borrower represents and warrants to Silicon as follows, and Borrower covenants that the following
representations will 

-2-

 

continue to be true, and that Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and until all Obligations have been paid and performed in
full: 

        3.1    Corporate Existence and Authority.    Borrower is and will
continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Borrower is and will continue to be qualified and licensed to do business
in all jurisdictions in which any failure to do so would result in a Material Adverse Change. The execution, delivery and performance by Borrower of this Agreement, and all other documents
contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors' rights generally), and (iii) do not violate Borrower's articles or certificate of
incorporation, or Borrower's by-laws, or any law or any material agreement or instrument which is binding upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or instrument which is binding upon Borrower or its property. 

        3.2    Name; Trade Names and Styles.    The name of Borrower set forth
in the heading to this Agreement is its correct name. Listed in the Representations are all prior names of Borrower and all of Borrower's present and prior trade names. Borrower shall give Silicon
30 days' prior written notice before changing its name or doing business under any other name. Borrower has complied, and will in the future comply, in all material respects, with all laws
relating to the conduct of business under a fictitious business name, except where the failure to so comply would not reasonably be expected to result in a Material Adverse Change. 

        3.3    Place of Business; Location of Collateral.    The address set
forth in the heading to this Agreement is Borrower's chief executive office. In addition, Borrower has places of business and Collateral is located only at the locations set forth in the
Representations. Borrower will give Silicon at least 30 days prior written notice before opening any additional place of business, changing its chief executive office, or moving any of the
Collateral to a location other than Borrower's Address or one of the locations set forth in the Representations, except that Borrower may maintain sales offices in the ordinary course of business at
which not more than a total of $10,000 fair market value of Equipment is located. 

        3.4    Title to Collateral; Perfection; Permitted Liens.    

        (a)  Borrower
is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased to
Borrower.* The Collateral now is and will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. Silicon now has, and will continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims of others. 

        *Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of
business.

        (b)  Borrower
has set forth in the Representations all of Borrower's Deposit Accounts, and Borrower will give Silicon five Business Days advance written notice before
establishing any new Deposit Accounts and will cause the institution where any such new Deposit Account is maintained to execute and deliver to Silicon a control agreement in form sufficient to
perfect Silicon's security interest in the Deposit Account and otherwise satisfactory to Silicon in its good faith business judgment. Nothing herein limits any requirements which may be set forth in
the Schedule as to where Deposit Accounts will be maintained. 

-3-

 

        (c)  In
the event that Borrower shall at any time after the date hereof have any commercial tort claims against others, which it is asserting or intends to assert, and in
which the potential recovery exceeds $100,000, Borrower shall promptly notify Silicon thereof in writing and provide Silicon with such information regarding the same as Silicon shall request (unless
providing such information would waive the Borrower's attorney-client privilege). Such notification to Silicon shall constitute a grant of a security interest in the commercial tort claim and all
proceeds thereof to Silicon, and Borrower shall execute and deliver all such documents and take all such actions as Silicon shall request in connection therewith. 

        (d)  None
of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Borrower is not and will not become
a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral* and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to remove any Collateral from the leased premises. Whenever any Collateral is located upon premises in which any third party
has an interest, Borrower shall, whenever requested by Silicon, use its best efforts to cause such third party to execute and deliver to Silicon, in form acceptable to Silicon, such waivers and
subordinations as Silicon shall specify in its good faith business judgment. Borrower will keep in full force and effect, and will comply with all material terms of, any lease of real property where
any of the Collateral now or in the future may be located. 

        *, other than Permitted Liens and other than if Borrower has provided Silicon with a landlord waiver and subordination as provided for
below,

        3.5    Maintenance of Collateral.    Borrower will maintain the
Collateral in good working condition (ordinary wear and tear excepted), and Borrower will not use the Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral. 

        3.6    Books and Records.    Borrower has maintained and will maintain
at Borrower's Address complete and accurate books and records, comprising an accounting system in accordance with GAAP. 

        3.7    Financial Condition, Statements and Reports.    All financial
statements now or in the future delivered to Silicon have been, and will be, prepared in conformity with GAAP and now and in the future will fairly present the results of operations and financial
condition of Borrower, in accordance with GAAP, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Silicon and the date hereof, there has
been no Material Adverse Change. 

        3.8    Tax Returns and Payments; Pension Contributions.    Borrower
has timely filed, and will timely file, all required tax returns and reports, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however, defer payment of any contested taxes, provided that Borrower (i) in good faith contests Borrower's obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement of, and any material development in, the proceedings,
and (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed
for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all
present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental agency. 

-4-

 

        3.9    Compliance with Law.    Borrower has, to the best of its
knowledge, complied, and will comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations applicable to Borrower, including, but not limited to,
those relating to Borrower's ownership of real or personal property, the conduct and licensing of Borrower's business, and all environmental matters. 

        3.10    Litigation.    *is
no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower's knowledge) threatened against or affecting Borrower in any court or before any governmental agency (or any
basis therefor known to Borrower) which could reasonably be expected to result, either separately or in the aggregate, in any Material Adverse Change. Borrower will promptly inform Silicon in writing
of any claim, proceeding, litigation or investigation in the future threatened or instituted against Borrower involving any single claim of $50,000 or more, or involving $100,000 or more in the
aggregate. 

        *Except as disclosed to Silicon in the Borrower's Representations and Warranties dated October 30, 2002, there  

        3.11    Use of Proceeds.    All
proceeds of
all Loans shall be used solely for lawful business purposes. Borrower is not purchasing or carrying any "margin stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock." 

4.    ACCOUNTS.  

        4.1    Representations Relating to
Accounts.    Borrower represents and warrants to Silicon as follows: Each Account with respect to which Loans are requested by Borrower shall, on the date each Loan
is requested and made, (i) represent an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery, and acceptance of goods or the rendition of
services, or the non-exclusive licensing of Intellectual Property, in the ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility Requirements set forth in
Section 8 below. 

        4.2    Representations Relating to Documents and Legal
Compliance.    Borrower represents and warrants to Silicon as follows: All statements made and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Accounts are and shall be true and correct and all such invoices, instruments and other documents and all of Borrower's books and records are and shall be genuine
and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each Account shall comply in all material respects with all applicable laws and governmental
rules and regulations. To the best of Borrower's knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Accounts are and shall be genuine, and all
such documents, instruments and agreements are and shall be legally enforceable in accordance with their terms. 

        4.3    Schedules and Documents relating to Accounts.    Borrower shall
deliver to Silicon transaction reports and schedules of collections, as provided in the Schedule, on Silicon's standard forms; provided, however, that Borrower's failure to execute and deliver the
same shall not affect or limit Silicon's security interest and other rights in all of Borrower's Accounts, nor shall Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon, Borrower shall furnish Silicon with copies (or, at Silicon's request, originals) of all contracts, orders, invoices, and
other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts,
and Borrower warrants the genuineness of all of the foregoing. Borrower shall also furnish to Silicon an aged accounts receivable trial balance as provided in the Schedule. In addition, Borrower shall
deliver to Silicon, on its request, the originals of all instruments, chattel paper, security 

-5-

 

agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos. 

        4.4    Collection of Accounts.    Borrower shall have the right to
collect all Accounts, unless and until a Default or an Event of Default has occurred and is continuing. Whether or not an Event of Default has occurred and is continuing, Borrower shall hold all
payments on, and proceeds of, Accounts in trust for Silicon, and Borrower shall immediately deliver all such payments and proceeds to Silicon in their original form, duly endorsed, to be applied to
the Obligations in such order as Silicon shall determine. Silicon* require that all proceeds of Collateral be deposited by Borrower into a lockbox
account, or such other "blocked account" as Silicon may specify, pursuant to a blocked account agreement in such form as Silicon may specify in its good faith business judgment. 

        *will  

        4.5.    Remittance of Proceeds.    All
proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to Silicon in the original form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as Silicon shall determine; provided that, if no Default or Event of Default has occurred and is continuing, Borrower shall
not be obligated to remit to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower's other funds or property, but will hold such
proceeds separate and apart from such other funds and property and in an express trust for Silicon. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in
this Agreement. 

        4.6    Disputes.    Borrower shall notify Silicon promptly of all
disputes or claims relating to Accounts. Borrower shall not forgive (completely or partially), compromise or settle any Account for less than payment in full, or agree to do any of the foregoing,
except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, and in arm's length transactions,
which are reported to Silicon on the regular reports provided to Silicon; (ii) no Default or Event of Default has occurred and is continuing; and (iii) taking into account all such
discounts, settlements and forgiveness, the total outstanding Loans will not exceed the Credit Limit. 

        4.7    Returns.    Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly determine the reason for such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Silicon,
and immediately notify Silicon of the return of the Inventory. 

        4.8    Verification.    Silicon may, from time to time, verify
directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, by means of mail, telephone or otherwise, either in the name of Borrower or Silicon or
such other name as Silicon may choose. 

        4.9    No Liability.    Silicon shall not be responsible or liable for
any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind
occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Silicon be
deemed to be responsible for any of Borrower's obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Silicon from liability for its own gross
negligence or willful misconduct. 

-6-

 

5.    ADDITIONAL DUTIES OF BORROWER.  

        5.1    Financial and Other
Covenants.    Borrower shall at all times comply with the financial and other covenants set forth in the Schedule. 

        5.2    Insurance.    Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as Silicon may reasonably require and that are
customary and in accordance with standard practices for
Borrower's industry and locations, and Borrower shall provide evidence of such insurance to Silicon. All such insurance policies shall name Silicon as an additional loss payee, and shall contain a
lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its good faith business judgment, except that, provided no Default or Event of Default has occurred and is continuing, Silicon shall release to Borrower insurance proceeds
with respect to Equipment totaling less than $100,000, which shall be utilized by Borrower for the replacement of the Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so used. If Borrower fails to provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Silicon copies of all material reports made to insurance companies. 

        5.3    Reports.    Borrower, at its expense, shall provide Silicon
with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, sales projections, operating plans and other financial documentation),
as Silicon shall from time to time specify in its good faith business judgment. 

        5.4    Access to Collateral, Books and Records.    At reasonable
times, and on one Business Day's notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower's books and records. Silicon shall take
reasonable steps to keep confidential all information obtained in any such inspection or audit, but Silicon shall have the right to disclose any such information to its auditors, regulatory agencies,
and attorneys, and pursuant to any subpoena or other legal process. The foregoing inspections and audits shall be at Borrower's expense and the charge therefor shall be $700 per person per day (or
such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower and Silicon schedule
an audit more than 10 days in advance, and Borrower seeks to reschedules the audit with less than 10 days written notice to Silicon, then (without limiting any of Silicon's rights or
remedies), Borrower shall pay Silicon a cancellation fee of $1,000 plus any out-of-pocket expenses incurred by Silicon, to compensate Silicon for the anticipated costs and
expenses of the cancellation. 

        5.5    Negative Covenants.    Except as may be permitted in the
Schedule, Borrower shall not, without Silicon's prior written consent (which shall be a matter of its good faith business judgment), do any of the following: (i) merge or consolidate with
another corporation or entity; (ii) acquire any assets, except in the ordinary course of business; (iii) enter into any other transaction outside the ordinary course of business;
(iv) sell or transfer any Collateral, except for the sale of finished Inventory in the ordinary course of Borrower's business, and except for the sale of obsolete or unneeded Equipment in the
ordinary course of business; (v) store any Inventory or other Collateral with any warehouseman or other third party*; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any loans of any money or other assets; (viii) incur any debts,
outside the ordinary course of business, which would result in a Material Adverse Change; (ix) guarantee or otherwise become liable with respect to the obligations of another party or
entity**; (x) pay or declare any dividends on Borrower's stock (except for dividends payable solely in stock of Borrower); (xi) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make any change in Borrower's capital structure which would result in a Material Adverse Change; or
(xiii) engage, directly or indirectly, in any business other than the businesses currently engaged in by 

-7-

 

Borrower or reasonably related thereto; or (xiv) dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of
Default would occur as a result of such transaction. 

        *except that Borrower may store Inventory at Interact, Inc. and/or OptiDisc Solutions, LLC (without the need of a bailee agreement) provided the Inventory
stored at such facilities shall not exceed $125,000 in the aggregate

        **other than Borrower's existing guaranty of the lease obligations of its UK subsidiary, Click2learn Limited  

        5.6    Litigation Cooperation.    Should any
third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or relating to Borrower, Borrower shall, without expense to Silicon, make available Borrower and its
officers, employees and agents and Borrower's books and records, to the extent that Silicon may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding. 

        5.7    Further Assurances.    Borrower agrees, at its expense, on
request by Silicon, to execute all documents and take all actions, as Silicon, may, in its good faith business judgment, deem necessary or useful in order to perfect and maintain Silicon's perfected
first-priority security interest in the Collateral (subject to Permitted Liens), and in order to fully consummate the transactions contemplated by this Agreement. 

6.    TERM.  

        6.1    Maturity Date.    This
Agreement shall
continue in effect until the maturity date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3 below. 

        6.2    Early Termination.    This Agreement may be terminated prior to
the Maturity Date as follows: (i) by Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence
and during the continuance of an Event of Default, without notice, effective immediately. If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to
Silicon a termination fee in an amount equal to* of the Maximum Credit Limit, provided that no termination fee shall be charged if the credit facility
hereunder is replaced with a new facility from another division of Silicon Valley Bank. The termination fee shall be due and payable on the effective date of termination and thereafter shall bear
interest at a rate equal to the highest rate applicable to any of the Obligations. 

        *one percent (1.0%)  

        6.3    Payment of Obligations.    On the
Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without limiting the generality of the foregoing, if on the Maturity Date, or on any earlier effective date of termination, there are
any outstanding Letters of Credit issued by Silicon or issued by another institution based upon an application, guarantee, indemnity or similar agreement on the part of Silicon, then on such date
Borrower shall provide to Silicon cash collateral in an amount equal to 105% of the face amount of all such Letters of Credit plus all interest, fees and cost due or to become due in connection
therewith (as estimated by Silicon in its good faith business judgment), to secure all of the Obligations relating to said Letters of Credit, pursuant to Silicon's then standard form cash pledge
agreement. Notwithstanding any termination of this Agreement, all of Silicon's security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full
force and effect until all Obligations have been paid and performed in full; provided that Silicon may, in its sole discretion, refuse to make any further Loans after termination. No termination shall
in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve Borrower of any 

-8-

 

Obligation to Silicon, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations and termination of this Agreement, Silicon shall
promptly terminate its financing statements with respect to the Borrower and deliver to Borrower such other documents as may be required to fully terminate Silicon's security interests. 

7.    EVENTS OF DEFAULT AND REMEDIES.  

        7.1    Events of Default.    The occurrence of
any of the following events shall constitute an "Event of Default" under this Agreement, and Borrower shall give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any of Borrower's officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect
when made or deemed to be made; or (b) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule, or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured, or shall fail to permit Silicon to conduct an inspection or audit as specified in Section 5.4 hereof; or
(e) Borrower shall fail to perform any other non-monetary Obligation, which failure is not cured within five Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or
(g) any default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or (h) Borrower breaches any material contract or obligation, which has resulted or may reasonably be expected to result in a Material Adverse Change; or (i) Dissolution,
termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or
in the future in effect; or (j) the commencement of any proceeding against Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or (l) revocation or termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement
of proceedings by or against any such third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (n) there shall be a change in the record or beneficial ownership of an aggregate of more than* of the
outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof, without the prior written
consent of Silicon; or (o) Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse Change
shall occur; or (q) Silicon, acting in good faith and in a commercially reasonable manner, deems itself insecure because of the occurrence of an event prior to the effective date hereof of
which Silicon had no knowledge on the effective date or because of the occurrence of an event on or subsequent to the effective date. Silicon may cease making any Loans 

-9-

 

hereunder during any of the above cure periods, and thereafter if an Event of Default has occurred and is continuing. 

        *50%  

        7.2    Remedies.    Upon the
occurrence and
during the continuance of any Event of Default, Silicon, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the
following: (a) Cease making Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document; (b) Accelerate and declare all or any part of the Obligations
to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes Silicon without judicial process to enter onto any of Borrower's premises without interference to
search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for
so long as Silicon deems it necessary, in its good faith business judgment, in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that
should Silicon seek to take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any
statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and
(iii) any requirement that Silicon retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the
Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower, and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Silicon shall have the right to use Borrower's premises, vehicles,
hoists, lifts, cranes, and other Equipment and all other property without charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Silicon obtains
possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Silicon shall have the right to conduct such disposition on Borrower's premises
without charge, for such time or times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and the Collateral need not be located at the place of disposition. Silicon may directly or
through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of
Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof,
and, in Silicon's good faith business judgment, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; (h) Offset against any sums in
any of Borrower's general, special or other Deposit Accounts with Silicon against any or all of the Obligations; and (i) Demand and receive possession of any of Borrower's federal and state
income tax returns and the books and records utilized in the preparation thereof or referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities and obligations incurred by Silicon
with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of
the Obligations. Without limiting any of Silicon's rights and remedies, from and after the occurrence and 

-10-

 

during the continuance of any Event of Default, the interest rate applicable to the Obligations shall be increased by an additional four percent per annum (the "Default Rate"). 

        7.3    Standards for Determining Commercial
Reasonableness.    Borrower and Silicon agree that a sale or other disposition (collectively, "sale") of any Collateral which complies with the following standards
will conclusively be deemed to be commercially reasonable: (i) Notice of the sale is given to Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale
is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in
general, non-specific terms; (iii) The sale is conducted at a place designated by Silicon, with or without the Collateral being present; (iv) The sale commences at any time
between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier's check or wire transfer is required; (vi) With respect to any sale of any of the
Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same. Silicon shall be free to employ
other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable. 

        7.4    Power of Attorney.    Upon the occurrence and during the
continuance of any Event of Default, without limiting Silicon's other rights and remedies, Borrower grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower's expense, to do any or all of the following, in Borrower's name or
otherwise, but Silicon agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower any documents that
Silicon may, in its good faith business judgment, deem advisable in order to perfect and maintain Silicon's security interest in the Collateral, or in order to exercise a right of Borrower or Silicon,
or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any Account,
any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien; (c) Take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral that may come into Silicon's possession; (d) Endorse all checks and other forms of remittances received by
Silicon; (e) Pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (f) Grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases
and other documents in connection therewith; (g) Pay any sums required on account of Borrower's taxes or to secure the release of any liens therefor, or both; (h) Settle and adjust, and
give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (i) Instruct any third party having custody or control of any books or records belonging
to, or relating to, Borrower to give Silicon the same rights of access and other rights with respect thereto as Silicon has under this Agreement; and (j) Take any action or pay any sum required
of Borrower pursuant to this Agreement and any other Loan Documents. Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred
by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall Silicon's rights under the foregoing power of attorney or any of Silicon's other rights under this Agreement be deemed to indicate that Silicon
is in control of the business, management or properties of Borrower. 

        7.5    Application of Proceeds.    All proceeds realized as the result
of any sale of the Collateral shall be applied by Silicon first to the reasonable costs, expenses, liabilities, obligations and attorneys' fees 

-11-

 

incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon
shall determine in its sole discretion. Any surplus shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Silicon shall have the option, exercisable
at any time, in its good faith business judgment, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by
Silicon of the cash therefor. 

        7.6    Remedies Cumulative.    In addition to the rights and remedies
set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the California Uniform Commercial Code and under all other applicable laws, and under
any other instrument or agreement now or in the future entered into between Silicon and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise
by Silicon of one or more of its rights
or remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Silicon to exercise any rights or
remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed. 

8.    DEFINITIONS.    As used in this Agreement, the following terms have the following meanings: 

        "Account Debtor" means the obligor on an Account. 

        "Accounts" means all present and future "accounts" as defined in the California Uniform Commercial Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower. 

        "Affiliate" means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any
parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person. 

        "Business Day" means a day on which Silicon is open for business. 

        "Code" means the Uniform Commercial Code as adopted and in effect in the State of California from time to time. 

        "Collateral" has the meaning set forth in Section 2 above. 

        "continuing" and "during the continuance of" when used with reference to a Default or
Event of Default means that the Default or Event of Default has occurred and has not been either waived in writing by Silicon or cured within any applicable cure period. 

        "Default" means any event which with notice or passage of time or both, would constitute an Event of Default. 

        "Default Rate" has the meaning set forth in Section 7.2 above. 

        "Deposit Accounts" means all present and future "deposit accounts" as defined in the California Uniform Commercial Code in effect on the
date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit. 

        "Eligible Inventory" [Not Applicable] 

        "Eligible Accounts" means Accounts and General Intangibles arising in the ordinary course of Borrower's business from the sale of goods or
the rendition of services, or the non-exclusive licensing of Intellectual Property, which Silicon, in its good faith business judgment, shall deem eligible for borrowing. Without limiting
the fact that the determination of which Accounts are eligible for 

-12-

 

borrowing is a matter of Silicon's good faith business judgment, the following (the "Minimum Eligibility Requirements") are the minimum requirements
for a Account to be an Eligible Account: (i) the Account must not be outstanding for more than 90 days from its invoice date (the "Eligibility
Period"), (ii) the Account must not represent progress billings, or be due under a fulfillment or requirements contract with the Account Debtor, (iii) the Account
must not be subject to any contingencies (including Accounts arising from sales on consignment, guaranteed sale or other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Account must not be owing from an Account Debtor with whom Borrower has any dispute (whether or not relating to the particular Account), (v) the Account must not be owing from
an Affiliate of Borrower, (vi) the Account must not be owing from an Account Debtor which is subject to any insolvency or bankruptcy proceeding, or whose financial condition is not acceptable
to Silicon, or which, fails or goes out of a material portion of its business, (vii) the Account must not be owing from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to Silicon's satisfaction, with the United States Assignment of Claims Act), (viii) the Account must not be owing from an Account Debtor located outside the
United States or Canada (unless pre-approved by Silicon in its discretion in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA insured satisfactory to Silicon),
(ix) the Account must not be owing from an Account Debtor to whom Borrower is or may be liable for goods purchased from such Account Debtor or otherwise (but, in such case, the Account will be
deemed not eligible only to the extent of any amounts owed by Borrower to such Account Debtor).* Accounts owing from one Account Debtor will not be
deemed Eligible Accounts to the extent they exceed 25% of the total Accounts outstanding. In addition, if more than 50% of the Accounts owing from an Account Debtor are outstanding for a period longer
than their Eligibility Period (without regard to unapplied credits) or are otherwise not eligible Accounts, then all Accounts owing from that Account Debtor will be deemed ineligible for borrowing.
Silicon may, from time to time, in its good faith business judgment, revise the Minimum Eligibility Requirements, upon written notice to Borrower. 

        *Without limiting the generality of the foregoing, Eligible Accounts will also not include the following: (a) as of any date, the deferred revenue invoices
with respect to Borrower's technical support and/or maintenance services, as shown in the Borrower's monthly general ledgers of Borrower's deferred revenue accounts, for the immediately preceding
three month period, (b) Accounts for which the Account Debtor has prepaid all or any portion of the Account; provided, however, if the Account Debtor has prepaid only a portion of the Account,
only that portion prepaid will be deemed ineligible under this subclause (b), (c) Unbilled Accounts (defined as Accounts with respect to which the invoice
and other necessary billing documentation have not been submitted to the applicable Account Debtor in connection with a completed (or contracted) sale of goods, rendition of services or licensing of
software but which otherwise qualify as Eligible Accounts for purposes of this Agreement, and (d) Accounts of any Account Debtor who is a reseller of Borrower's goods and/or services to the
extent of any potential offsets by such Account Debtor.

        "Equipment" means all present and future "equipment" as defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of
the foregoing. 

        "Event of Default" means any of the events set forth in Section 7.1 of this Agreement. 

        "GAAP" means generally accepted accounting principles consistently applied. 

        "General Intangibles" means all present and future "general intangibles" as defined in the California Uniform Commercial Code in effect on
the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights, goodwill,
franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to 

-13-

 

purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man,
property damage, and business interruption insurance), payments of insurance and rights to payment of any kind. 

        "good faith business judgment" means honesty in fact and good faith (as defined in Section 1201 of the Code) in the exercise of
Silicon's business judgment. 

        "including" means including (but not limited to). 

        "Intellectual Property" means all present and future (a) copyrights, copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, (b) trade secret rights, including all rights to unpatented
inventions and know-how, and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications
and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same;
(e) trademarks, servicemarks, trade styles, and trade names, whether or not any of the
foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by any
such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all claims for damages by way of past, present and
future infringement of any of the rights included above; (j) all licenses or other rights to use any property or rights of a type described above. 

        "Inventory" means all present and future "inventory" as defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returned goods and any documents of title representing
any of the above. 

        "Investment Property" means all present and future investment property, securities, stocks, bonds, debentures, debt securities,
partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any
securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated. 

        "Loan Documents" means, collectively, this Agreement, the Representations, and all other present and future documents, instruments and
agreements between Silicon and Borrower, including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor. 

        "Material Adverse Change" means any of the following: (i) a material adverse change in the business, operations, or financial or
other condition of the Borrower, or (ii) a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) a material impairment of the value or priority of
Silicon's security interests in the Collateral. 

        "Obligations" means all present and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and
indebtedness at any time owing by Borrower to Silicon, whether evidenced by this Agreement or any note or other instrument or document, or otherwise, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any
participation by Silicon in Borrower's debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, 

-14-

 

attorney's fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, termination fees, minimum interest charges and any other sums
chargeable to Borrower under this Agreement or under any other Loan Documents. 

        "Other Property" means the following as defined in the California Uniform Commercial Code in effect on the date hereof with such additions
to such term as may hereafter be made, and all rights relating thereto: all present and future "commercial tort claims" (including without limitation any commercial tort claims identified in the
Representations), "documents", "instruments", "promissory notes", "chattel paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm products" and "money"; and
all other goods and personal property of every kind, tangible and intangible, whether or not governed by the California Uniform Commercial Code. 

        "Permitted Liens" means the following: (i) purchase money security interests in specific items of Equipment; (ii) leases of
specific items of Equipment; (iii) liens for taxes not yet payable; (iv) additional security interests and liens consented to in writing by Silicon, which consent may be withheld in its
good faith business judgment; (v) security interests being terminated substantially concurrently with this Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing obligations which are not delinquent; (vii) liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by liens of the type described above in clauses (i) or (ii) above, provided that any extension, renewal or replacement lien is limited to the property
encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase; (viii) Liens in favor of customs and revenue authorities
which secure payment of customs duties in connection with the importation of goods. Silicon will have the right to require, as a condition to its consent under subparagraph (iv) above, that the
holder of the additional security interest or lien sign an intercreditor agreement on Silicon's then standard form, acknowledge that the security interest is subordinate to the security interest in
favor of Silicon, and agree not to take any action to enforce its subordinate security interest so long as any Obligations remain outstanding, and that Borrower agree that any uncured default in any
obligation secured by the subordinate security interest shall also constitute an Event of Default under this Agreement. 

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any other entity. 

        "Representations" means the written Representations and Warranties provided by Borrower to Silicon referred to in the Schedule. 

        "Reserves" means, as of any date of determination, such amounts as Silicon may from time to time establish and revise in its good faith
business judgment, reducing the amount of Loans, Letters of Credit and other financial accommodations which would otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as determined by Silicon in its good faith business judgment, do or may adversely affect (i) the Collateral or
any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of
Borrower or any Guarantor, or (iii) the security interests and other rights of Silicon in the Collateral (including the enforceability, perfection and priority thereof); or (b) to
reflect Silicon's good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to
Silicon is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Silicon determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of Default. 

        Other Terms.    All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such
terms in accordance with GAAP, consistently applied. All other terms 

-15-

 

contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein. 

9.    GENERAL PROVISIONS.  

        9.1    Interest Computation.    In computing
interest on the Obligations, all checks, wire transfers and other items of payment received by Silicon (including proceeds of Accounts and payment of the Obligations in full) shall be deemed applied
by Silicon on account of the Obligations three Business Days after receipt by Silicon of immediately available funds, and, for purposes of the foregoing, any such funds received after 12:00 Noon on
any day shall be deemed received on the next Business Day. Silicon shall not, however, be required to credit Borrower's account for the amount of any item of payment which is unsatisfactory to Silicon
in its good faith business judgment, and Silicon may charge Borrower's loan account for the amount of any item of payment which is returned to Silicon unpaid. 

        9.2    Application of Payments.    All payments with respect to the
Obligations may be applied, and in Silicon's good faith business judgment reversed and re-applied, to the Obligations, in such order and manner as Silicon shall determine in its good faith
business judgment. 

        9.3    Charges to Accounts.    Silicon may, in its discretion, require
that Borrower pay monetary Obligations in cash to Silicon, or charge them to Borrower's Loan account, in which event they will bear interest at the same rate applicable to the Loans. Silicon may also,
in its discretion, charge any monetary Obligations to Borrower's Deposit Accounts maintained with Silicon. 

        9.4    Monthly Accountings.    Silicon shall provide Borrower monthly
with an account of advances, charges, expenses and payments made pursuant to this Agreement. Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for
reverses and reapplications of payments made and corrections of errors discovered by Silicon), unless Borrower notifies Silicon in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions. 

        9.5    Notices.    All notices to be given under this Agreement shall
be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed to Silicon or Borrower
at the addresses shown in the heading to this Agreement, or at any other address designated in writing by one party to the other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit Manager. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the
expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, with postage prepaid. 

        9.6    Severability.    Should any provision of this Agreement be held
by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect. 

        9.7    Integration.    This Agreement and such other written
agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Silicon and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements
between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith. 

        9.8    Waivers; Indemnity.    The failure of Silicon at any time or
times to require Borrower to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not 

-16-

 

similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an authorized officer of Silicon and delivered to Borrower. Borrower waives the benefit of all statutes of limitations relating to any of the Obligations or this Agreement or
any other Loan Document, and Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or
renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Silicon on which Borrower is or may in any way be liable, and notice of any action
taken by Silicon, unless expressly required by this Agreement. Borrower hereby agrees to indemnify Silicon and its affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including reasonable
attorneys' fees), of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any relationship or agreement between Silicon and Borrower, or any other
matter, relating to Borrower or the Obligations; provided that this indemnity shall not extend to damages proximately caused by the indemnitee's own gross negligence or willful misconduct.
Notwithstanding any provision in this Agreement to the contrary, the indemnity agreement set forth in this Section shall survive any termination of this Agreement and shall for all purposes continue
in full force and effect. 

        9.9    No Liability for Ordinary Negligence.    Neither Silicon, nor
any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon shall be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Silicon, or any of its directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing Silicon, but nothing herein shall relieve Silicon from liability for its own gross negligence or willful misconduct. 

        9.10    Amendment.    The terms and provisions of this Agreement may
not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of Silicon. 

        9.11    Time of Essence.    Time is of the essence in the performance
by Borrower of each and every obligation under this Agreement. 

        9.12    Attorneys Fees and Costs.    Borrower shall reimburse Silicon
for all reasonable attorneys' fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in connection with, or relating
to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys' fees and costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement; obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute
actions against, or defend actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or
prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Silicon's security interest in, the Collateral; and otherwise represent Silicon in any litigation relating to Borrower. In satisfying Borrower's
obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas, but Borrower acknowledges and
agrees that Levy, Small & Lallas is representing only Silicon and not Borrower in connection with this Agreement. If either Silicon or Borrower files any lawsuit against the other predicated on
a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys' fees, including (but not limited to) reasonable attorneys' fees and
costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. All attorneys' fees and costs to which Silicon may be entitled pursuant to this Paragraph 

-17-

 

shall immediately become part of Borrower's Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. 

        9.13    Benefit of Agreement.    The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and Silicon; provided, however, that Borrower may not assign
or transfer any of its rights under this Agreement without the prior written consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations. 

        9.14    Joint and Several Liability.    If Borrower consists of more
than one Person, their liability shall be joint and several, and the compromise of any claim with, or the release of, any Borrower shall not constitute a compromise with, or a release of, any other
Borrower. 

        9.15    Limitation of Actions.    Any claim or cause of action by
Borrower against Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Loan Agreement, or any other Loan Document, or any other
transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of
a complaint within one year after the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or on any other person authorized to accept service on behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such one-year period is a
reasonable and sufficient time for Borrower to investigate and act upon any such claim or cause of action. The one-year period provided herein shall not be waived, tolled, or extended
except by the written consent of Silicon in its sole discretion. This provision shall survive any termination of this Loan Agreement or any other Loan Document. 

        9.16    Paragraph Headings; Construction.    Paragraph headings are
only used in this Agreement for convenience. Borrower and Silicon acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not
be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly against Silicon or Borrower under any rule of construction or otherwise. 

        9.17    Governing Law; Jurisdiction; Venue.    This Agreement and all
acts and transactions hereunder and all rights and obligations of Silicon and Borrower shall be governed by the laws of the State of California. As a material part of the consideration to Silicon to
enter into this Agreement, Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Silicon's option, be litigated in courts located
within California, and that the exclusive venue therefor shall be Santa Clara County; (ii) consents to the jurisdiction and venue of any such court and consents to service of process in any
such action or proceeding by personal delivery or any other method permitted by law; and (iii) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to
transfer or change the venue of any such action or proceeding. 

        9.18    Mutual Waiver of Jury
Trial.    BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS  

-18-

 

 AFFILIATED WITH SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.  

	Borrower:	 	Silicon:
	 	 	 	 	 
	CLICK2LEARN, INC.	 	SILICON VALLEY BANK
	

 	

 	
 	

 	

 
	By:	/s/  JOHN ATHERLY      
 President or Vice President	 	By	/s/  SCOTT BERGQUIST      

	 	 	 	 	 
	By	/s/  STEVEN ESAU      
 Secretary or Ass't Secretary	 	Title	SVP

-19-

  

Silicon Valley Bank  

 
  Schedule to
  
    Loan and Security Agreement    
  

	Borrower:	 	Click2learn, Inc.
	Address:	 	110-110th Avenue NE

Bellevue, WA 98004
	

Date:	
 	

December 6, 2002

        This Schedule forms an integral part of the Loan and Security Agreement between Silicon Valley Bank and the above-borrower of even date. 

	

	
1. CREDIT LIMIT	
 	

 	
 	

 
	 	(Section 1.1):	 	An amount not to exceed the sum of 1 and 2 below:
	

 	
 	

 	
 	

1.    Revolving Loans.    An amount not to exceed the lesser of: (i) 10,000,000 at any one time outstanding
(the "Maximum Credit Limit"); or (ii) 65% (the "Advance Rate") of the amount of Borrower's Eligible Accounts (as defined in Section 8 above).
	

 	
 	

 	
 	

Silicon may, from time to time, modify the Advance Rate, in its good faith business judgment, upon notice to the Borrower, based on changes in collection experience with respect to Accounts or other issues or factors relating to the Accounts or other
Collateral.
	

 	
 	

 	
 	
plus
	

 	
 	

 	
 	

2.    Term Loan.    An amount equal to the unpaid principal balance from time to time outstanding of the Existing Term Loan (the "Term Loan"). The outstanding
principal amount of the Existing Term Loan as of the date hereof is $400,466.67 (not to exceed $499,999.96). No additional Term Loans will be made, nor can the Term Loan be repaid and
reborrowed.
	

 	
 	

 	
 	

Notwithstanding the foregoing, all Obligations relating to the Term Loan shall be reserved against the Revolving Loans (the "Term Loan Reserve") which would otherwise be available to Borrower as set forth above until all of the following have
occurred: (a) Borrower has achieved two consecutive fiscal quarters of Debt Service Coverage Ratio in excess of 1.5 to 1.0 (commencing with the fiscal quarter ending December 31, 2002 or any fiscal quarter ending thereafter),
(b) Borrower has provided Silicon with the financial statements evidencing Borrower's achievement thereof and Silicon has reviewed and confirmed the same, and (c) no Default or Event of Default has occurred and is continuing
hereunder.
	
 	
 	

 	
 	

 

-20-

 

	

 	
 	

 	
 	

For purposes of the foregoing, "Debt Service Coverage" shall mean the ratio of (a) Borrower's earnings before Borrower's interest, depreciation and other non-cash amortization expenses less unfunded capital expenditures, all determined in
accordance with generally accepted accounting principles, consistently applied, to (b) Borrower's obligations relating to payment of interest and current maturities of principal on Borrower's outstanding long-term indebtedness and capitalized
leases, all determined in accordance with generally accepted accounting principles, consistently applied, calculated upon the average of such items for the specific month for which the Debt Service Coverage is being calculated and the 2 months
immediately preceding such month (for example, the Debt Service Coverage for the month ending November 30, 2002 will be calculated based on the average of Borrower's earnings, interest, depreciation, etc. for the three months of September,
October and November 2002. For the month ending December 31, 2002, Debt Service Coverage will be calculated based on the average of Borrower's earnings, interest, depreciation, etc. for the three months of October, November and
December 2002).
	

 	
 	

 	
 	

As used in this Agreement, "Loans" includes the Revolving Loans and the Term Loan.
	 	
Letter of Credit Sublimit	
 	

 	
 	

 
	 	(Section 1.6):	 	$250,000; provided that the total Letter of Credit Sublimit and the Foreign Exchange Contract Sublimit shall not, at any time, exceed $250,000.
	 	
Cash Management

Services and Reserves:	
 	

Borrower may use up to $250,000 of Loans available hereunder for Silicon's Cash Management Services (as defined below), including, merchant services, business credit card, ACH and other services identified in the cash management services agreement
related to such service (the "Cash Management Services"). Silicon may, in its sole discretion, reserve against Loans which would otherwise be available hereunder such sums as Silicon shall determine in its good faith business judgment in connection
with the Cash Management Services, and Silicon may charge to Borrower's Loan account, any amounts that may become due or owing to Silicon in connection with the Cash Management Services. Borrower agrees to execute and deliver to Silicon all standard
form applications and agreements of Silicon in connection with the Cash Management Services, and, without limiting any of the terms of such applications and agreements, Borrower will pay all standard fees and charges of Silicon in connection with the
Cash Management Services. The Cash Management Services shall terminate on the Maturity Date.
	 	
Foreign Exchange Contract Sublimit:	
 	
$250,000, provided that the total Letter of Credit Sublimit and the Foreign Exchange Contract Sublimit shall not, at any time, exceed $250,000.
	
 	
 	

 	
 	

 

-21-

 

	

 	
 	

Borrower may enter into foreign exchange forward contracts with Silicon, on its standard forms, under which Borrower commits to purchase from or sell to Silicon a set amount of foreign currency more than one business day after the contract date (the
"FX Forward Contracts"); provided that (1) at the time the FX Forward Contract is entered into Borrower has Loans available to it under this Agreement in an amount at least equal to 10% of the amount of the FX Forward Contract; (2) the
total FX Forward Contracts at any one time outstanding may not exceed 10 times the amount of the Foreign Exchange Contract Sublimit set forth above. Silicon shall have the right to withhold, from the Loans otherwise available to Borrower under this
Agreement, a reserve (which shall be in addition to all other reserves) in an amount equal to 10% of the total FX Forward Contracts from time to time outstanding, and in the event at any time there are insufficient Loans available to Borrower for
such reserve, Borrower shall deposit and maintain with Silicon cash collateral in an amount at all times equal to such deficiency, which shall be held as Collateral for all purposes of this Agreement. Silicon may, in its discretion, terminate the FX
Forward Contracts at any time that an Event of Default occurs and is continuing. Borrower shall execute all standard form applications and agreements of Silicon in connection with the FX Forward Contracts, and without limiting any of the terms of
such applications and agreements, Borrower shall pay all standard fees and charges of Silicon in connection with the FX Forward Contracts.
	

	
2. INTEREST.	
 	

 	
 	

 
	 	
Interest Rate (Section 1.2):	
 	

 	
 	

 
	

 	
 	

A rate equal to the "Prime Rate" in effect from time to time, plus 2.25% per annum, provided that the interest rate in effect on any day shall not be less than 7.0%
per annum. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. "Prime Rate" means the rate announced from time to time by Silicon as its "prime rate;" it is a base rate upon which
other rates charged by Silicon are based, and it is not necessarily the best rate available at Silicon. The interest rate applicable to the Obligations shall change on each date there is a change in the Prime Rate.
	 	
Minimum Monthly Interest	
 	

 	
 	

 
	 	(Section 1.2):	 	$8,500 per month.
	

	
3. FEES (Section 1.4):	
 	

 	
 	

 
	 	

Loan Fee:	
 	

With respect to the Revolving Loans: (i) $100,000, payable concurrently herewith, and (ii) $75,000 payable on or before the first anniversary of this Agreement.
	

 	
 	

With respect to the Term Loan: None.
	 	

Collateral Monitoring Fee:	
 	

$1,500, per month, payable in arrears (prorated for any partial month at the beginning and at termination of this Agreement).
	
 	
 	

 	
 	

 

-22-

 

	 	

Unused Line Fee:	
 	

In the event, in any calendar month (or portion thereof at the beginning and end of the term hereof), the average daily principal balance of the Loans outstanding during the month is less than the amount of the Maximum Credit Limit, Borrower shall
pay Silicon an unused line fee in an amount equal to 0.375% per annum on the difference between the amount of the Maximum Credit Limit and the average daily principal balance of the Loans outstanding during the month, computed on the basis of a
360-day year, which unused line fee shall be computed and paid monthly, in arrears, on the first day of the following month.
	

	
4. MATURITY DATE	
 	

 	
 	

 
	 	(Section 6.1):	 	With respect to the Revolving Loans: Two years from the date of this Agreement.
	

 	
 	

With respect to the Term Loan: The outstanding principal balance of the Term Loan shall continue to be repaid by Borrower to Silicon as provided for in the Existing Term Loan Documentation in equal monthly payments of principal, on the first day of
each month and continuing until the earlier of the following dates: (i) October 1, 2003, or (ii) the date the Term Loan has been indefeasibly paid in full, or (iii) the date the Revolving Loans are terminated, or (iv) the
date this Agreement terminates by its terms or is terminated by either party in accordance with its terms. On the earlier to occur of the foregoing dates, the entire unpaid principal balance of the Term Loan, plus all accrued and unpaid interest
thereon, shall be due and payable. Interest on the Term Loan shall be payable monthly as provided in Section 1.2 of this Agreement.
	

	
5. FINANCIAL COVENANTS	
 	

 	
 	

 
	 	(Section 5.1):	 	Borrower shall comply with each of the following covenants. Compliance shall be determined as of the end of each month, except as otherwise specifically provided below:
	 	
Net Loss Covenant:	
 	

As of the end of each month, Borrower shall not incur a loss (after taxes) for the immediately preceding three month period (including the month just ended) in excess of $1,600,000. For example: For the
month ending November 30, 2002, the Borrower shall not incur a loss (after taxes) in excess of $1,600,000 for the three month period consisting of September, October and November 2002.
	 	
Minimum Tangible Net Worth:	
 	

Borrower shall maintain a Tangible Net Worth of not less than the following:
	

 	
 	

For the fiscal quarter ending December 31, 2002: $8,400,000 plus (i) 100% of all consideration received after the date hereof for equity securities and subordinated debt of the Borrower, plus
(ii) 50% of the Borrower's net income in each fiscal quarter ending after the date hereof;
	

 	
 	

For the fiscal quarter ending March 31, 2003: $7,100,000 plus (i) 100% of all consideration received after the date hereof for equity securities and subordinated debt of the Borrower, plus
(ii) 50% of the Borrower's net income in each fiscal quarter ending after the date hereof;
	
 	
 	

 	
 	

 

-23-

 

	

 	
 	

For the fiscal quarter ending June 30, 2003: $6,000,000 plus (i) 100% of all consideration received after the date hereof for equity securities and subordinated debt of the Borrower, plus
(ii) 50% of the Borrower's net income in each fiscal quarter ending after the date hereof;
	

 	
 	

For the fiscal quarter ending September 30, 2003: $5,000,000 plus (i) 100% of all consideration received after the date hereof for equity securities and subordinated debt of the Borrower, plus
(ii) 50% of the Borrower's net income in each fiscal quarter ending after the date hereof; and
	

 	
 	

For the fiscal quarter ending December 31, 2003 and each fiscal quarter ending thereafter: $4,500,000 plus (i) 100% of all consideration received after the date hereof for equity securities and
subordinated debt of the Borrower, plus (ii) 50% of the Borrower's net income in each fiscal quarter ending after the date hereof.
	

 	
 	

Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the month in which such consideration is received, and shall continue
effective thereafter. Increases in the Minimum Tangible Net Worth Covenant based on net income shall be effective on the last day of the fiscal quarter in which said net income is realized, and shall continue effective thereafter. In no event shall
the Minimum Tangible Net Worth Covenant be decreased.
	 	
Definitions.	
 	

For purposes of the foregoing financial covenants, the following term shall have the following meaning:
	

 	
 	

"Current assets", "current liabilities" and "liabilities" shall have the meaning ascribed thereto by GAAP.
	

 	
 	

"Tangible Net Worth" shall mean the excess of total assets over total liabilities, determined in accordance with GAAP, with the following adjustments:
	

 	
 	

 	
 	

(A) there shall be excluded from assets: (i) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (ii) all assets which would be classified as intangible assets under GAAP, including
without limitation goodwill, licenses, patents, trademarks, trade names, copyrights, capitalized software and organizational costs, licenses and franchises
	

 	
 	

 	
 	

(B) there shall be excluded from liabilities: all indebtedness which is subordinated to the Obligations under a subordination agreement in form specified by Silicon or by language in the instrument evidencing the indebtedness which Silicon agrees in
writing is acceptable to Silicon in its good faith business judgment.
	

	
6. REPORTING.	
 	

 	
 	

 
	 	(Section 5.3):	 	Borrower shall provide Silicon with the following:
	

 	
 	

1.	
 	

Weekly transaction reports and schedules of collections, on Silicon's standard form.
	

 	
 	

2.	
 	

Monthly accounts receivable agings, aged by invoice date, within fifteen days after the end of each month.
	
 	
 	

 	
 	

 

-24-

 

	

 	
 	

3.	
 	

Monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, within fifteen days after the end of each month.
	

 	
 	

4.	
 	

Monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, and general ledger, within fifteen days after the end of each month.
	

 	
 	

5.	
 	

Monthly perpetual inventory reports for the Inventory valued on a first-in, first-out basis at the lower of cost or market (in accordance with GAAP) or such other inventory reports as are requested by Silicon in its good faith business judgment, all
within fifteen days after the end of each month.
	

 	
 	

6.	
 	

Monthly unaudited financial statements, as soon as available, and in any event within thirty days after the end of each month.
	

 	
 	

7.	
 	

Monthly Compliance Certificates, within thirty days after the end of each month, in such form as Silicon shall reasonably specify, signed by the Chief Financial Officer of Borrower, certifying that as of the end of such month Borrower was in full
compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Silicon shall reasonably request, including,
without limitation, a statement that at the end of such month there were no held checks.
	

 	
 	

8.	
 	

Quarterly unaudited financial statements, as soon as available, and in any event within forty-five days after the end of each fiscal quarter of Borrower.
	

 	
 	

9.	
 	

Annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower within thirty days prior to the end of each fiscal year of Borrower.
	

 	
 	

10.	
 	

Annual financial statements, as soon as available, and in any event within 120 days following the end of Borrower's fiscal year, certified by, and with an unqualified opinion of, independent certified public accountants acceptable to
Silicon.
	

 	
 	

11.	
 	

Monthly schedules listing, by Account Debtor, Borrower's deferred revenue accounts, within 15 days after the end of each month.
	

 	
 	

12.	
 	

Monthly general ledgers of Borrower's deferred revenue accounts, within 15 days after the end of each month.
	

	
7. BORROWER INFORMATION:	
 	

 	
 	

 
	

 	
 	

Borrower represents and warrants that the information set forth in the Representations and Warranties of the Borrower dated October 30, 2002, previously submitted to Silicon (the "Representations") is true and correct as of the date
hereof.
	
 	
 	

 	
 	

 

-25-

 

	
8. ADDITIONAL PROVISIONS	
 	

 	
 	

 
	

 	
 	
(1)	
 	
Banking Relationship.    Borrower shall at all times maintain its primary banking relationship with Silicon, including, without limitation, its primary operating and
investment accounts. As to any Deposit Accounts and investment accounts maintained with another institution, Borrower shall cause such institution, within 30 days after the date of this Agreement, to enter into a control agreement in form
acceptable to Silicon in its good faith business judgment in order to perfect Silicon's first-priority security interest in said Deposit Accounts and investment accounts.
	

 	
 	
(2)	
 	
Subordination of Inside Debt.    All present and future indebtedness of Borrower to its officers, directors and shareholders (collectively, "Insiders") ("Inside Debt")
shall, at all times, be subordinated to the Obligations pursuant to a subordination agreement on Silicon's standard form. Borrower represents and warrants that there is no Inside Debt presently outstanding, except for the following: NONE. Prior to
incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to Silicon a subordination agreement on Silicon's standard form. For purposes of this Agreement, Inside Debt will
not include salaries, commissions, bonuses or other compensation, vacation accruals, expense reimbursements or severance pay payable by Borrower, in the ordinary course of its business (as historically conducted by Borrower and as currently
conducted), to any Insider solely in such Insider's capacity as an officer, director, manager of employee of Borrower.
	

 	
 	
(3)	
 	
Warrants.    Borrower shall provide Silicon with seven-year warrants to purchase that number of shares as is equal to $200,000 divided by the Exercise Price of common
stock of the Borrower, at an Exercise Price equal to the greater of (i) $0.55 per share or (ii) the average closing price per share of the common stock for the 15 trading days immediately preceding the Issue Date of the Warrant, on terms
acceptable to Silicon, as set forth in the Warrant to Purchase Stock and related documents being executed concurrently with this Agreement. Said warrants shall be deemed fully earned on the date hereof, shall be in addition to all interest and other
fees, and shall be non-refundable.
	

 	
 	
(4)	
 	
Inactive Subsidiaries.    Borrower represents and warrants to Silicon that Intelliprep Technologies, Incorporated, Meliora Systems, Inc. and Aimtech Corporation is
each a wholly owned subsidiary of Borrower that is, and will remain throughout the term of this Agreement, inactive, with assets having an aggregate value of less than $5,000 for all such subsidiaries on a combined basis. Borrower covenants and
agrees that while this Agreement is in effect, Borrower shall not transfer any assets or Collateral to Intelliprep Technologies, Incorporated, Meliora Systems, Inc. or Aimtech Corporation. Borrower may elect at any time to merge any of such
subsidiaries into itself provided Borrower has obtained Silicon's prior written consent as provided for in this Agreement.
	

 	
 	
(5)	
 	
Communication Strategies, Inc.    Borrower represents and warrants that Communication Strategies, Inc. is a wholly owned subsidiary of Borrower, but the same
does not, and will not, during the term of this Agreement, have assets with a value of over $500,000. Borrower covenants and agrees that while this Agreement is in effect, Borrower shall not transfer any assets or Collateral to Communication
Strategies, Inc.
	
 	
 	

 	
 	

 

-26-

 

	

 	
 	

 	
 	

 

	Borrower:	 	Silicon:
	 	 	 	 	 
	CLICK2LEARN, INC.	 	SILICON VALLEY BANK
	

 	

 	
 	

 	

 
	By:	/s/  JOHN ATHERLY      
 President or Vice President	 	By:	/s/  SCOTT BERGQUIST      

	 	 	 	 	 
	By:	/s/  STEVEN ESAU      
 Secretary or Ass't Secretary	 	Title:	SVP

-27-

QuickLinks

Exhibit 10.11

Loan and Security Agreement

Schedule to Loan and Security AgreementQuickLinks
 -- Click here to rapidly navigate through this document
  

 
 

Exhibit 10.12    
  

Silicon Valley Bank  

 
  Amendment to Loan Documents    
  

	Borrower:	 	Click2learn, Inc.
	

Date:	
 	

December 6, 2002

        THIS AMENDMENT TO LOAN DOCUMENTS is entered into between SILICON VALLEY BANK ("Silicon") and the
borrower named above (the "Borrower"), with reference to the various loan and security agreements and other documents, instruments and agreements between them, including but not
limited to that certain Loan and Security Agreement dated September 4, 2001 (as amended, if at all, the "Existing Loan Agreement"; the Existing Loan Agreement and all related documents,
instruments and agreements may be referred to collectively herein as the "Existing Loan Documents"). 

        The
Parties agree to amend the Existing Loan Documents, as follows: 

        1.    Present Loan Balance.    Borrower acknowledges that the present
unpaid principal balance of the Borrower's indebtedness, liabilities and obligations to Silicon under the Existing Loan Documents, including interest accrued through December 6, 2002 is
$400,466.67 (the "Present Loan Balance"), and that said sum is due and owing without any defense, offset, or counterclaim of any kind. 

        2.    Amendment to Existing Loan Documents.    The Existing Loan
Documents are hereby amended in their entirety to read as set forth in the Loan and Security Agreement, and related documents, being executed concurrently (collectively, the "New Loan Documents"). The
Borrower acknowledges that the Present Loan Balance shall be the opening balance of the Loans pursuant to the New Loan Documents as of the date hereof, and shall, for all purposes, be deemed to be
Loans made by Silicon to the Borrower pursuant to the New Loan Documents. Notwithstanding the execution of the New Loan Documents, the following Existing Loan Documents shall continue in full force
and effect and shall continue to secure all present and future indebtedness, liabilities, guarantees and other Obligations (as defined in the New Loan Documents): All  *standard documents of Silicon
entered into by the Borrower in connection with Letters of Credit and/or Foreign Exchange Contracts; all security
agreements, collateral assignments and mortgages, including but not limited to those relating to patents, trademarks, copyrights and other intellectual property; all lockbox agreements and/or blocked
account agreements; and all UCC-1 financing statements and other documents filed with governmental offices which perfect liens or security interests in favor of Silicon. In addition, in
the event the Borrower has previously issued any stock options, stock purchase warrants or securities to Silicon, the same and all documents and agreements relating thereto shall also continue in full
force and effect. 

        *portions of the Existing Loan Documents pertaining to the Equipment Advances (the "Existing Term Loan") (such portions being hereinafter referred to as the
"Existing Term Loan Documentation") not amended pursuant to the New Loan Documents, and all

        3.    General Provisions.    This Amendment and the New Loan Documents
set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede 

-1-

 

all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. 

	Borrower:	 	Silicon:
	 	 	 	 	 
	CLICK2LEARN, INC.	 	SILICON VALLEY BANK
	

 	

 	
 	

 	

 
	By:	/s/  JOHN ATHERLY      
 President or Vice President	 	By:	/s/  SCOTT BERGQUIST      

	 	 	 	 	 
	By:	/s/  STEVEN ESAU      
 Secretary or Ass't Secretary	 	Title:	SVP

-2-

QuickLinks

Exhibit 10.12

Amendment to Loan Documents

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00049-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00049-of-00352.parquet"}]]