Document:

Exhibit 10.1

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

This AMENDED AND RESTATED LOAN AND

SECURITY AGREEMENT

(this “Agreement”) dated as of June 13, 2002, between SILICON VALLEY BANK, a

California chartered bank, with its principal place of business at

3003 Tasman Drive, Santa Clara, California 95054 and with a loan

production office located at One Newton Executive Park, Suite 200, 2221

Washington Street, Newton, Massachusetts 

02462, doing business under the name “Silicon Valley East” (“Bank”) and ART

TECHNOLOGY GROUP, INC., a Delaware corporation with its principal

place of business at 25 First Street, Cambridge, Massachusetts 02141

(“Borrower”), provides the terms on which Bank shall lend to Borrower and

Borrower shall repay Bank. The parties agree as follows:

 

1.             ACCOUNTING AND OTHER TERMS

 

Accounting terms

not defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made

following GAAP.  The term “financial

statements” includes the notes and schedules. 

The terms “including” and “includes” always mean “including (or

includes) without limitation,” in this or any Loan Document.  Capitalized terms in this Agreement shall

have the meanings set forth in Section 13.

 

2.             LOAN AND TERMS OF PAYMENT

 

2.1           Promise to Pay.  Borrower

hereby unconditionally promises to pay Bank the unpaid principal amount of all

Credit Extensions and interest on the unpaid principal amount of the Credit

Extensions as and when due in accordance with this Agreement.

 

2.1.1        Revolving Advances.

 

(a)           Availability.  Bank shall make Advances not exceeding (i)

the Committed Revolving Line or the Borrowing Base, whichever is less, minus

(ii) the amount of all outstanding Letters of Credit (including drawn but

unreimbursed Letters of Credit), minus (iii) the FX Reserve, and minus (iv) the

aggregate outstanding Advances hereunder (including any Cash Management

Services).  Amounts borrowed under this

Section may be repaid and reborrowed during the term of this Agreement.

 

(b)           Borrowing Procedure.  To obtain an Advance, Borrower must notify

Bank by facsimile or telephone by 3:00 p.m. Eastern time on the Business Day

the Advance is to be made.  If such

notification is by telephone, Borrower must promptly confirm the notification

by delivering to Bank a completed Payment/Advance Form in the form attached as Exhibit B.  Bank shall credit Advances to Borrower’s

deposit account.  Bank may make Advances

under this Agreement based on instructions from a Responsible Officer or his or

her designee or without instructions if the Advances are necessary to meet

Obligations which have become due.  Bank

may rely on any telephone notice given by a person whom Bank believes is a

Responsible Officer or designee. Borrower shall indemnify Bank for any loss

Bank suffers due to such reliance.

 

(c)           Termination.  The Committed Revolving Line terminates on

the Revolving Maturity Date, when the principal amount of all Advances and the

unpaid interest thereon, shall be immediately payable.

 

2.1.2        Letters of Credit.

 

(a)           Bank shall issue or have issued

Letters of Credit for Borrower’s account not exceeding (i) the lesser of the

Committed Revolving Line or the Borrowing Base minus (ii) the outstanding

principal balance of any Advances (including any Cash Management Services), minus

(iii) the amount of all Letters of Credit (including drawn but unreimbursed

Letters of Credit), plus an amount equal to any Letter of Credit Reserves.  The face amount of outstanding Letters of

Credit (including drawn but unreimbursed Letters of Credit and any Letter of

Credit Reserve) issued under this Agreement may not exceed $15,000,000.00.  Each Letter of Credit shall have an expiry

date  no later than 364 days after the

Revolving Maturity Date provided Borrower’s Letter of Credit reimbursement 

 

 

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obligation shall

be secured by cash on terms reasonably acceptable to Bank on and after (i) the

Revolving Maturity Date if the term of this Agreement is not extended by Bank,

or (ii) the occurrence of an Event of Default hereunder.  All 

Letters of Credit shall be, in form and substance, acceptable to Bank in

its sole discretion and shall be subject to the terms and conditions of Bank’s

form of standard Application and Letter of Credit Agreement.  Borrower agrees to execute any further

documentation in connection with the Letters of Credit as Bank may reasonably

request.

 

(b)           The obligation of Borrower to

immediately reimburse Bank for drawings made under Letters of Credit shall be

absolute, unconditional and irrevocable, and shall be performed strictly in

accordance with the terms of this Agreement and such Letters of Credit, under

all circumstances whatsoever.  Borrower

shall indemnify, defend, protect,  and

hold Bank harmless from any loss, cost, expense or liability, including,

without limitation, reasonable attorneys’ fees, arising out of or in connection

with any Letters of Credit.

 

(c)           Borrower may request that Bank issue

a Letter of Credit payable in a currency other than United States

Dollars.  If a demand for payment is

made under any such Letter of Credit, Bank shall treat such demand as an

Advance to Borrower of the equivalent of the amount thereof (plus cable

charges) in United States currency at the then prevailing rate of exchange

in San Francisco, California, for sales of that other currency for cable

transfer to the country of which it is the currency.

 

(d)           Upon the issuance of any letter of

credit payable in a currency other than United States Dollars, Bank shall

create a reserve (the “Letter of Credit Reserve”) under the Committed Revolving

Line for letters of credit against fluctuations in currency exchange rates, in

an amount equal to ten percent (10%) of the face amount of such letter of

credit.  The amount of such reserve may

be amended by Bank from time to time to account for fluctuations in the

exchange rate.  The availability of

funds under the Committed Revolving Line shall be reduced by the amount of such

reserve for so long as such letter of credit remains outstanding.

 

2.1.3        ­Foreign Exchange Sublimit. If there

is availability under the Committed Revolving Line and the Borrowing Base, then

Borrower may enter into foreign exchange forward contracts and options with the

Bank under which Borrower commits to purchase from or sell to Bank a set amount

of foreign currency more than one business day after the contract date (the “FX

Forward Contract”).  Bank shall subtract

10% of each outstanding FX Forward Contract from the foreign exchange sublimit

which is a maximum of $15,000,000.00 (the “FX Reserve”).  The total FX Forward Contracts at any one

time may not exceed 10 times the amount of the FX Reserve.  Bank may terminate the FX Forward Contracts

if an Event of Default occurs.

 

2.1.4        ­Cash Management Services Sublimit.  Borrower may use up to $15,000,000.00 for

the Bank’s Cash Management Services, which may include merchant services,

direct deposit of payroll, business credit card, and check cashing services

identified in the various cash management services agreements related to such

services Cash Management Services Agreement (the “Cash Management

Services”).  Such aggregate  amounts utilized under the Cash Management

Services Sublimit shall at all times reduce the amount otherwise available for

Credit Extensions under the Committed Revolving Line.  Any amounts Bank pays on behalf of Borrower or any amounts that

are not paid by Borrower for any Cash Management Services will be treated as

Advances under the Committed Revolving Line and will accrue interest at the

interest rate applicable to Advances.

 

2.2           ­Overadvances.  If Borrower’s Obligations under Section

2.1.1, 2.1.2 and 2.1.3 exceed the lesser of either (i) the Committed Revolving

Line or (ii) the Borrowing Base, Borrower must immediately pay in cash to Bank

the excess.

 

2.3           ­Interest Rate; Payments.

 

(a)           ­Interest Rate. The principal

amounts outstanding under the Committed Revolving Line shall accrue interest at

a per annum rate equal to the Bank’s Prime Rate.  After an Event of Default, Obligations shall bear interest at

four percent (4.0%) above the rate effective immediately before the Event of

Default.  The applicable interest rate

hereunder shall increase or decrease when the Prime Rate changes. Interest is

computed on the basis of a 360 day year for the actual number of days elapsed.

 

 

2

 

 

(b)           ­Payments.  Interest is payable on the first  of

each month.  Bank may debit any of

Borrower’s deposit accounts including Account Number 330070667 for principal

and interest payments or any amounts Borrower owes Bank. Bank shall promptly

notify Borrower when it debits Borrower’s accounts.  These debits are not a set-off. 

Payments received after 12:00 noon Eastern time are considered received

at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the

payment is due the next Business Day and additional fees or interest, as

applicable, shall continue to accrue.

 

2.4           ­Fees.  Borrower

shall pay to Bank:

 

(a)           ­Facility Fee.  A fully earned, non–refundable

facility fee of $37,500.00 due on the Closing Date; and

 

(b)           ­Letter of Credit Fee.  The Borrower shall pay the Bank’s customary

fees and expenses for the issuance of Letters of Credit, including, without

limitation, a Letter of Credit Fee of One Percent (1.0%) per annum of the face

amount of each Letter of Credit issued, upon the issuance or renewal of such

Letter of Credit by the Bank; and

 

(c)           ­Bank Expenses.  All Bank Expenses (including reasonable

attorneys’ fees and expenses incurred through and after the Closing Date) when

due.

 

2.5           ­Good Faith Deposit.  Borrower has paid to Bank a good faith

deposit of $15,000.00 to initiate Bank’s due diligence review process.  Any portion of the good faith deposit not

utilized to pay expenses will be applied to the Facility Fee.

 

3.             ­CONDITIONS OF LOANS

 

3.1           ­Conditions Precedent to Initial Credit Extension.  The obligation of Bank to make

the initial Credit Extension is subject to the condition precedent that Bank

shall have received, in form and substance satisfactory to Bank, the following:

 

(a)           this Agreement;

 

(b)           a certificate of the Secretary of

Borrower with respect to articles, bylaws, incumbency and resolutions

authorizing the execution and delivery of this Agreement;

 

(c)           subordination agreements by certain

Persons;

 

(d)           landlord’s waiver;

 

(e)           a legal opinion of Borrower’s

counsel, in form and substance acceptable to Bank;

 

(f)            confirmation of guaranties by the

Guarantors;

 

(g)           Collateral/security documentation

regarding UK assets;

 

(h)           financing statements;

 

(i)            Account Control Agreement/

Investment Account Control Agreement;

 

(j)            the completion of the Initial Audit;

 

(k)           insurance certificate;

 

(l)            payment of the fees and Bank

Expenses then due specified in Section 2.4 hereof;

 

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(m)          Certificate of Foreign Qualification

(if applicable);

 

(n)           Certificate of Good Standing/Legal

Existence; and

 

(o)           such other documents, and completion

of such other matters, as Bank may reasonably deem necessary or appropriate.

 

3.2           ­Conditions Precedent to all Credit Extensions.  Bank’s obligations to make each

Credit Extension, including the initial Credit Extension, is subject to the

following:

 

(a)           timely receipt of any Payment/Advance

Form; and

 

(b)           the representations and warranties in

Section 5 shall be materially true on the date of the Payment/Advance Form and

on the effective date of each Credit Extension and no Event of Default shall

have occurred and be continuing, or result from the Credit Extension. Each Credit

Extension is Borrower’s representation and warranty on that date that the

representations and warranties in Section 5 remain true.

 

4.             ­CREATION OF SECURITY INTEREST

 

4.1           ­Grant of Security Interest.  Borrower hereby grants Bank, to secure the

payment and performance in full of all of the Obligations and the performance

of each of Borrower’s duties under the Loan Documents, a continuing security

interest in, and pledges and assigns to the Bank, the Collateral, wherever

located, whether now owned or hereafter acquired, and all proceeds and products

thereof.  Borrower warrants and

represents that the security interest granted herein shall be a first priority

security interest in the Collateral. 

Bank may place a “hold” on any deposit account pledged as Collateral.

 

Except as disclosed on

the Schedule, Borrower is not a party to, nor is bound by, any license or other

agreement with respect to which the Borrower is the licensee that prohibits or

otherwise restricts Borrower from granting a security interest in Borrower’s

interest in such license or agreement or any other property.  Without prior consent from Bank, Borrower

shall not enter into, or become bound by, any such license or agreement that is

reasonably likely to have a material impact on Borrower’s business or financial

condition.  Borrower shall take such

steps as Bank reasonably requests to obtain the consent of, or waiver by, any

person whose consent or waiver is necessary for all such licenses or contract

rights to be deemed “Collateral” and for Bank to have a security interest in it

that might otherwise be restricted or prohibited by law or by the terms of any

such license or agreement, whether now existing or entered into in the future.

 

Borrower agrees that any

disposition of the Collateral in violation of this Agreement, by either the

Borrower or any other Person, shall be deemed to violate the rights of the Bank

under the Code, provided, however, Borrower may dispose of certain Collateral

in accordance with Section 7.1. If the Agreement is terminated, Bank’s lien and

security interest in the Collateral shall continue until Borrower fully

satisfies its Obligations.  If Borrower

shall at any time, acquire a commercial tort claim that may result in proceeds

to Borrower, Borrower shall (unless prohibited by law)  promptly notify Bank in a writing signed by

Borrower of the brief details thereof and grant to Bank in such writing a

security interest therein and in the proceeds thereof, all upon the terms of

this Agreement, with such writing to be in form and substance satisfactory to

Bank.

 

5.             ­REPRESENTATIONS AND WARRANTIES

 

Borrower

represents and warrants as follows:

 

5.1           ­Due Organization and Authorization.  Borrower and each Subsidiary is duly

existing and in good standing in its state of formation and qualified and

licensed to do business in, and in good standing in, any state in which the

conduct of its business or its ownership of property requires that it be

qualified except where the failure to do so could not reasonably be expected to

cause a Material Adverse Change.  In

connection with this Agreement, 

 

 

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the Borrower

delivered to the Bank a certificate signed by the Borrower and entitled

“Perfection Certificate”.  The Borrower

represents and warrants to the Bank that as of the date of this Agreement: (a)

the Borrower’s exact legal name is that indicated on the Perfection Certificate

and on the signature page hereof; and (b) the Borrower is an organization of

the type, and is organized in the jurisdiction, set forth in the Perfection

Certificate; and (c) the Perfection Certificate accurately sets forth the

Borrower’s organizational identification number or accurately states that the

Borrower has none; and (d) the Perfection Certificate accurately sets forth the

Borrower’s place of business, or, if more than one, its chief executive office

as well as the Borrower’s mailing address if different, and (e) all other

information set forth on the Perfection Certificate pertaining to the Borrower

is accurate and complete.  If the

Borrower does not now have an organizational identification number, but later

obtains it, Borrower shall forthwith notify the Bank or such organizational

identification number.

 

The execution,

delivery and performance of the Loan Documents have been duly authorized, and

do not conflict with Borrower’s organizational documents, nor constitute an

event of default under any material agreement by which Borrower is bound.  Borrower is not in default under any

agreement to which or by which it is bound in which the default could

reasonably be expected to cause a Material Adverse Change.

 

5.2           ­Collateral. 

Borrower has good title to the Collateral, free of Liens

except Permitted Liens.  Borrower has no

other deposit account, other than the deposit accounts with Bank and deposit

accounts described in the Perfection Certificate delivered to the Bank in

connection herewith.  The Accounts are

bona fide, existing obligations, and the service or property has been performed

or delivered to the account debtor or its agent for immediate shipment to and

unconditional acceptance by the account debtor. The Collateral is not in the

possession of any third party bailee (such as a warehouse).  In the event that Borrower, after the date

hereof, intends to store or otherwise deliver any portion of the Collateral to

a bailee, then Borrower will first receive the written consent of Bank and such

bailee must acknowledge in writing that the bailee is holding such Collateral

for the benefit of Bank.  Borrower has no

knowledge of any actual or imminent Insolvency Proceeding of any account debtor

whose accounts are an Eligible Account in any Borrowing Base Certificate.  All Inventory is in all material respects of

good and marketable quality, free from obvious defects.  Borrower is the sole owner of the

Intellectual Property, except for non-exclusive licenses granted to its

customers in the ordinary course of business. 

Each Patent is valid and enforceable and no part of the Intellectual

Property has been judged invalid or unenforceable, in whole or in part, and no

claim has been made that any part of the Intellectual Property violates the

rights of any third party except to the extent such claim could not reasonably

be expected to cause a Material Adverse Change.

 

5.3           ­Litigation. 

Except as shown in the Schedule, as of the date of this

Agreement there are no actions or proceedings pending or, to the knowledge of

Borrower’s Responsible Officers, threatened by or against Borrower or any

Subsidiary in which an adverse decision could reasonably be expected to cause a

Material Adverse Change.

 

5.4           ­No Material Deviation  in Financial Statements.  All consolidated financial statements for Borrower and any

Subsidiary delivered to Bank fairly present in all material respects Borrower’s

consolidated financial condition and Borrower’s consolidated results of

operations.  There has not been any

material deterioration in Borrower’s consolidated financial condition since the

date of the most recent financial statements submitted to Bank.

 

5.5           ­Solvency. 

Borrower is able to pay its debts (including trade debts) as

they mature.

 

5.6           ­Regulatory Compliance.  Borrower is not an “investment company” or a

company “controlled” by an “investment company” under the Investment Company

Act.  Borrower is not engaged as one of

its important activities in extending credit for margin stock (under

Regulations T and U of the Federal Reserve Board of Governors).  Borrower has complied in all material

respects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws, ordinances or rules, the

violation of which could reasonably be expected to cause a Material Adverse

Change.  None of Borrower’s or any Subsidiary’s

properties or assets has been used by Borrower or any Subsidiary or, to the

best of Borrower’s knowledge, by previous Persons, in disposing, producing,

storing, treating, or transporting any hazardous substance other than

legally.  Borrower and each Subsidiary

has timely filed all required tax returns and paid, or made adequate provision

to pay, all material taxes, except those being contested in good faith with

adequate reserves under GAAP.  Borrower

and each Subsidiary has obtained all consents, 

 

 

5

 

approvals and

authorizations of, made all declarations or filings with, and given all notices

to, all government authorities that are necessary to continue its business as

currently conducted except where the failure to make such declarations, notices

or filings would  not reasonably be

expected to cause a Material Adverse Change.

 

5.7           ­Subsidiaries. 

Borrower does not own any stock, partnership interest or

other equity securities except for Permitted Investments.

 

5.8           ­Full Disclosure.  No written representation, warranty or other

statement of Borrower in any certificate or written statement given to Bank

contains any untrue statement of a material fact or omits to state a material

fact necessary to make the statements contained in the certificates or

statements not misleading.

 

6.             ­AFFIRMATIVE COVENANTS

 

Borrower shall do

all of the following:

 

6.1           ­Government Compliance.  Borrower shall maintain its and all

Subsidiaries’ legal existence and good standing in its jurisdiction of

formation and maintain qualification in each jurisdiction in which the failure

to so qualify would reasonably be expected to have a material adverse effect on

Borrower’s business or operations. 

Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances

and regulations to which it is subject, noncompliance with which could have a

material adverse effect on Borrower’s business or operations or be expected to

cause a Material Adverse Change.

 

6.2           ­Financial Statements, Reports, Certificates.

 

(a)           Borrower shall deliver to Bank:  (i) as soon as available, but no later than

thirty (30) days after the last day of each month, a company prepared

consolidated balance sheet and income statement covering Borrower’s

consolidated operations during the period certified by a Responsible Officer

and in a form acceptable to Bank;  (ii)

as soon as available, but no later than forty-five (45) days after the last day

of each of Borrower’s fiscal quarters, a company prepared consolidated balance

sheet and income statement covering Borrower’s consolidated operations during

the period certified by a Responsible Officer and in a form acceptable to Bank;

(iii) as soon as available, but no later than one hundred twenty (120) days

after the last day of Borrower’s fiscal year, audited consolidated financial

statements prepared under GAAP, consistently applied, together with an

unqualified opinion on the financial statements from an independent certified

public accounting firm reasonably acceptable to Bank; (iv) a prompt report of

any legal actions pending or threatened against Borrower or any Subsidiary that

could result in damages or costs to Borrower or any Subsidiary of One Hundred

Thousand Dollars ($100,000.00) or more; (v) prompt notice of any material

change in the composition of the Intellectual Property, including any

subsequent ownership right of Borrower in or to any Copyright, Patent or

Trademark not shown in any intellectual property security agreement between

Borrower and Bank or knowledge of an event that materially adversely affects

the value of the Intellectual Property; and (vi) budgets, sales projections,

operating plans or other financial information reasonably requested by Bank.

 

(b)           Within thirty (30) days after the

last day of each month, Borrower shall deliver to Bank a Borrowing Base

Certificate signed by a Responsible Officer in the form of Exhibit C, with aged

listings of accounts receivable (by invoice date).

 

(c)           Within thirty (30) days after the

last day of each month and also forty-five (45) days after the last day of each

of Borrower’s fiscal quarters, Borrower shall deliver to Bank with the monthly

and quarterly financial statements a Compliance Certificate signed by a

Responsible Officer in the form of Exhibit D.

 

(d)           Borrower shall allow Bank to audit

Borrower’s Accounts at Borrower’s expense. 

Such audits shall be conducted no more often than once every twelve (12)

months unless an Event of Default has occurred and is continuing.  In addition, prior to Bank making any Credit

Extensions hereunder, Bank shall have received a satisfactory audit of the

Borrower’s Accounts (the “Initial Audit”).

 

 

6

 

 

6.3           ­Inventory; Returns.  Borrower shall keep all Inventory in good and

marketable condition, free from material defects.  Returns and allowances between Borrower and its account debtors

shall follow Borrower’s customary practices as they exist at the Closing

Date.  Borrower must promptly notify

Bank of all returns, recoveries, disputes and claims that involve more than

Fifty Thousand Dollars ($50,000.00).

 

6.4           ­Taxes. 

Borrower shall make, and cause each Subsidiary to make,

timely payment of all material federal, state, and local taxes or assessments

(other than taxes and assessments which Borrower is contesting in good faith,

with adequate reserves maintained in accordance with GAAP) and shall deliver to

Bank, on demand, appropriate certificates attesting to such payments.

 

6.5           ­Insurance. 

Borrower shall keep its business and the Collateral insured

for risks and in amounts,  standard for

Borrower’s industry, and as Bank may reasonably request in Bank’s reasonable

discretion.  Insurance policies shall be

in a form, with companies, and in amounts that are satisfactory to Bank.  All property policies shall have a lender’s

loss payable endorsement showing Bank as an additional  loss payee and all liability policies shall

show the Bank as an additional insured and 

all policies shall provide that the insurer must give Bank at least

thirty (30) days notice before canceling its policy.  At Bank’s request, Borrower shall deliver certified copies of

policies and evidence of all premium payments. Proceeds payable under any

policy shall, at Bank’s option, be payable to Bank on account of the

Obligations. Notwithstanding the foregoing, so long as no Event of Default has

occurred and is continuing, Borrower shall have the option of applying the

proceeds of any casualty policy  up to

$300,000.00, in the aggregate, toward the replacement or repair of destroyed or

damaged property; provided that (i) any such replaced or repaired property (a)

shall be of equal or like value as the replaced or repaired Collateral and (b)

shall be deemed Collateral in which Bank has been granted a first priority

security interest and (ii) after the occurrence and during the continuation of

an Event of Default all proceeds payable under such casualty policy shall, at

the option of the Bank, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance as

required under Section 6.5 or to pay any amount or furnish any required proof

of payment to third persons and the Bank, Bank may make all or part of such

payment or obtain such insurance policies required in Section 6.5, and take any

action under the policies Bank deems prudent.

 

6.6           ­Primary Accounts.  In order to permit the Bank to monitor the

Borrower’s financial performance and condition, Borrower shall maintain its

primary domestic depository and operating accounts with Bank.   Borrower shall maintain at least $18,000,000

in unrestricted cash (subject to the proviso below) with Bank at all times

during the term of this Agreement, provided, however, Borrower may use up to

$3,000,000 of such amount to secure letters of credit.  Borrower shall identify to Bank, in writing,

of any bank or securities account opened by Borrower with any institution other

than Bank.  In addition, for each such

account that the Borrower at any time opens or maintains, Borrower shall, at

the Bank’s request and option, pursuant to an agreement in form and substance

acceptable to the Bank, cause the depositary bank or securities intermediary to

agree that such account is the collateral of the Bank pursuant to the terms

hereunder.  The provisions of this

paragraph shall not apply to deposit accounts exclusively used for payroll,

payroll taxes and other employee wage and benefit payments to or for the

benefit of the Borrower’s employees.

 

6.7           ­Financial Covenants.

 

(a)           Liquidity Coverage.   Borrower shall have at all times, to be tested  as of the last day of each month,

unrestricted and unencumbered cash equal to or greater than the product of (A)

all Obligations (including the stated amount of any issued but undrawn Letters

of Credit) hereunder multiplied  by (B) two (2.0).

 

(b)           Profitability.  Borrower shall have quarterly net

losses of not more than (i) $40,000,000.00  for the quarter ending December 31, 2001

(excluding all non-cash write off of deferred tax assets); (ii) $7,000,000.00  for

the quarter ending March 31, 2002; (iii) $6,000,000.00  for the quarter ending June

30, 2002; (iv) $3,000,000.00  for the quarter ending September 30, 2002;

and (v) $2,000,000.00 for each quarter  thereafter.

 

 

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6.8           ­Intellectual Property.  Borrower shall comply with all

terms and conditions of the IP Security Agreement.

 

6.9           ­Further Assurances.  Borrower shall execute any further instruments and

take further action as Bank reasonably requests to perfect or continue Bank’s

security interest in the Collateral or to effect the purposes of this

Agreement.

 

7.             ­NEGATIVE COVENANTS

 

Borrower shall not

do any of the following without the Bank’s prior written consent, which consent

shall not be unreasonably withheld:

 

7.1           ­Dispositions. 

Convey, sell, lease, transfer or otherwise dispose of

(collectively a “Transfer”), or permit any of its Subsidiaries to Transfer, all

or any part of its business or property, except for Transfers (i) of Inventory

in the ordinary course of business; (ii) of non-exclusive licenses and similar

arrangements for the use of the property of Borrower or its Subsidiaries in the

ordinary course of business; or (iii) of worn–out or obsolete Equipment.

 

7.2           ­Changes in Business, Ownership, Management or

Business Locations. 

Engage in or permit any of its Subsidiaries to engage in any business

other than the businesses currently engaged in by Borrower or  have

a material change in its ownership or management.  Borrower shall not, without at least thirty (30) days prior

written notice to Bank: (i) relocate its chief executive office, or add any new

offices or business locations (unless such new offices or business locations

contain less than Five Thousand Dollars ($5,000.00) in Borrower’s assets or

property), or (ii) change its jurisdiction of organization, or (iii) change its

organizational structure or type, or (iv) change its legal name, or (v) change

any organizational number (if any) assigned by its jurisdiction of

organization.

 

7.3           ­Mergers or Acquisitions.  Merge or consolidate, or permit any of its

Subsidiaries to merge or consolidate, with any other Person, or acquire, or

permit any of its Subsidiaries to acquire, all or substantially all of the

capital stock or property of another Person, except where (i) such transactions

do not in the aggregate exceed $3,000,000.00; (ii) no Event of Default has occurred

and is continuing or would exist after giving effect to the transactions; and

(iii) the Borrower is the surviving legal entity.   A Subsidiary may merge or consolidate into another Subsidiary or

into Borrower.

 

7.4           ­Indebtedness.  Create, incur, assume, or be liable for any

Indebtedness, or permit any Subsidiary to do so, other than Permitted

Indebtedness.

 

7.5           ­Encumbrance.  Create, incur, or allow any Lien on any of

its property, or assign or convey any right to receive income, including the

sale of any Accounts, or permit any of its Subsidiaries to do so, except for

Permitted Liens, or permit any Collateral not to be subject to the first

priority security interest granted herein. 

The Collateral may also be subject to Permitted Liens.

 

7.6           ­Distributions; Investments.  (i)  Directly or indirectly acquire or own any

Person, or make any Investment in any Person, other than Permitted Investments

or permit any of its Subsidiaries to do so; (ii) make  infusions of capital by Borrower 

into Borrower’s Subsidiaries in amounts exceeding  $5,000,000 in any calendar year; (iii) allow

any of Borrower’s Subsidiaries collectively with Borrower to make infusions of

capital into Borrower’s Subsidiaries in amounts exceeding $10,000,000 in the

aggregate in any calendar year (provided such infusions of capital are not

prohibited by Section 7.6(ii) above); or (iv) pay any dividends or make any

distribution or payment or redeem, retire or purchase any capital stock.

 

7.7           ­Transactions with Affiliates.  Directly or indirectly enter or permit any

material transaction with any Affiliate, except transactions that are in the

ordinary course of Borrower’s business, upon fair and reasonable terms that are

no less favorable to Borrower than would be obtained in an arm’s length transaction

with a non-affiliated Person.

 

 

8

 

 

7.8           ­Subordinated Debt.  Make or permit any payment on any

Subordinated Debt, except under the terms of the Subordinated Debt, or amend

any provision in any document relating to the Subordinated Debt.

 

7.9           ­Compliance.   Become

an “investment company” or a company controlled by an “investment company”,

under the Investment Company Act of 1940 or undertake as one of its important

activities extending credit to purchase or carry margin stock, or use the

proceeds of any Credit Extension for that purpose; fail to meet the minimum

funding requirements of ERISA, permit a Reportable Event or Prohibited

Transaction, as defined in ERISA, to occur; fail to comply with the Federal

Fair Labor Standards Act or violate any other law or regulation, if the

violation could reasonably be expected to  have a material adverse effect on

Borrower’s business or operations or would reasonably be expected to  cause

a Material Adverse Change, or permit any of its Subsidiaries to do so.

 

8.             ­EVENTS OF DEFAULT

 

Any one of the

following is an Event of Default:

 

8.1           ­Payment Default.  Borrower fails to pay any of the Obligations

within three (3) Business Days after their due date. During the additional

period the failure to cure the default is not an Event of Default (but no

Credit Extension shall be made during the cure period);

 

8.2           Covenant Default.  Borrower does not perform any obligation in

Section 6 or violates any covenant in Section 7 or does not perform or observe

any other material term, condition or covenant in this Agreement, any Loan

Documents, or in any agreement between Borrower and Bank and as to any default

under a term, condition or covenant that can be cured, has not cured the default

within ten (10) days after it occurs, or if the default cannot be cured within

ten (10) days or cannot be cured after Borrower’s attempts in the ten (10) day

period, and the default may be cured within a reasonable time, then Borrower

shall have additional time, (of not more than thirty (30) days) to attempt to

cure the default.  Grace periods

provided under this section shall not apply, among other things, to financial

covenants or any other covenants that are required to be satisfied, completed

or tested by a date certain.  During the

additional period the failure to cure the default is not an Event of Default

(but no Credit Extensions shall be made during the cure period);

 

8.3           Material Adverse Change.  A Material Adverse Change occurs;

 

8.4           Attachment.  (i) Any material portion of Borrower’s assets is attached, seized,

levied on, or comes into possession of a trustee or receiver and the

attachment, seizure or levy is not removed in ten (10) days; (ii) the service of

process upon the Borrower seeking to attach, by trustee or similar process any

funds of the Borrower on deposit with the Bank; (iii) Borrower is enjoined,

restrained, or prevented by court order from conducting a material part of its

business; (iv) a judgment or other claim becomes a Lien on a material portion

of Borrower’s assets; or (v) a notice of lien, levy, or assessment is filed

against any of Borrower’s assets by any government agency and not paid within

ten (10) days after Borrower receives notice. 

These are not Events of Default if stayed or if a bond is posted pending

contest by Borrower (but no Credit Extensions shall be made during the cure

period);

 

8.5           Insolvency.  (i) Borrower becomes insolvent; (ii) Borrower begins an

Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against

Borrower and not dismissed or stayed within forty-five (45) days (but no Credit

Extensions shall be made before any Insolvency Proceeding is dismissed);

 

8.6           Other Agreements.  If there is a default in any agreement to

which Borrower is a party with a third party or parties resulting in a right by

such third party or parties, whether or not exercised, to accelerate the

maturity of any Indebtedness in an amount in excess of One Hundred Thousand

Dollars ($100,000) or that could result in a 

Material Adverse Change;

 

8.7           Judgments.  If a judgment or judgments for the payment

of money in an amount, individually or in the aggregate, of at least Two

Hundred Thousand Dollars ($200,000) shall be rendered against Borrower and

shall remain unsatisfied and unstayed for a period of ten (10) days (provided

that no Credit Extensions will be made prior to the satisfaction or stay of

such judgment);

 

 

9

 

 

8.8           Misrepresentations.  If Borrower or any Person acting for

Borrower makes any material misrepresentation or material misstatement now or

later in any warranty or representation in this Agreement or in any writing

delivered to Bank or to induce Bank to enter this Agreement or any Loan

Document.

 

8.9           Guaranty. 

(i) Any guaranty of any Obligations terminates or ceases for any

reason to be in full force; or (ii) any Guarantor does not perform any

obligation under any guaranty of the Obligations; or (iii) any material

misrepresentation or material misstatement exists now or later in any warranty

or representation in any guaranty of the Obligations or in any certificate

delivered to Bank in connection with the guaranty; or (iv) any circumstance

described in Section 7, or Sections 8.4, 8.5 or 8.7 occurs to any Guarantor, or

(v) the death, liquidation, winding up, termination of existence, or insolvency

of any Guarantor.

 

 

9.             BANK’S RIGHTS AND REMEDIES

 

9.1           Rights and Remedies.  When an Event of Default occurs and

continues Bank may, without notice or demand, do any or all of the following:

 

(a)           Declare all Obligations  immediately due and payable (but if an Event

of Default described in Section 8.5 occurs all Obligations are immediately due

and payable without any action by Bank);

 

(b)           Stop advancing money or extending

credit for Borrower’s benefit under this Agreement or under any other agreement

between Borrower and Bank;

 

(c)           Settle or adjust disputes and claims

directly with account debtors for amounts, on terms and in any order that Bank

considers advisable;

 

(d)           Make any payments and do any acts it

considers necessary or reasonable to protect its security interest in the

Collateral.  Borrower shall assemble the

Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral

is located, take and maintain possession of any part of the Collateral, and

pay, purchase, contest, or compromise any Lien which appears to be prior or

superior to its security interest and pay all expenses incurred. Borrower

grants Bank a license to enter and occupy any of its premises, without charge,

to exercise any of Bank’s rights or remedies;

 

(e)           Apply to the Obligations any (i)

balances and deposits of Borrower it holds, or (ii) any amount held by Bank

owing to or for the credit or the account of Borrower;

 

(f)            Ship, reclaim, recover, store,

finish, maintain, repair, prepare for sale, advertise for sale, and sell the

Collateral.  Bank is granted a

non-exclusive, royalty-free license or other right to use, without charge, Borrower’s

labels, patents, copyrights, mask works, rights of use of any name, trade

secrets, trade names, trademarks, service marks, and advertising matter, or any

similar property as it pertains to the Collateral, in completing production of,

advertising for sale, and selling any Collateral and, in connection with Bank’s

exercise of its rights under this Section, Borrower’s rights under all licenses

and all franchise agreements inure to Bank’s benefit; and

 

(g)           Dispose of the Collateral according

to the Code.

 

9.2           Power of Attorney.  Borrower hereby irrevocably appoints Bank as

its lawful attorney-in-fact, to be effective upon the occurrence and during the

continuance of an Event of Default, to: 

(i) endorse Borrower’s name on any checks or other forms of payment or

security; (ii) sign Borrower’s name on any invoice or bill of lading for any

Account or drafts against account debtors; (iii) settle and adjust disputes and

claims about the Accounts directly with account debtors, for amounts and on

terms Bank determines reasonable; (iv) make, settle, and adjust all claims

under Borrower’s insurance policies; and (v) transfer the Collateral into the

name of Bank or a 

 

 

10

 

 

third party as the

Code permits.  Borrower hereby appoints

Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents

necessary to perfect or continue the perfection of any security interest

regardless of whether an Event of Default has occurred until all Obligations

have been satisfied in full and Bank is under no further obligation to make

Credit Extensions hereunder.  Bank’s

foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights

and powers, coupled with an interest, are irrevocable until all Obligations

have been fully repaid and performed and Bank’s obligation to provide Credit

Extensions terminates.

 

9.3           Accounts Collection.  In the event that an Event of Default occurs

and is continuing, Bank may notify any Person owing Borrower money of Bank’s

security interest in the funds and verify and/or collect the amount of the

Account.  After the occurrence of an

Event of Default, any amounts received by Borrower shall be held in trust by

Borrower for Bank, and, if requested by Bank, Borrower shall immediately

deliver such receipts to Bank in the form received from the account debtor,

with proper endorsements for deposit.

 

9.4           Bank Expenses.  Any amounts paid by Bank as provided herein

are Bank Expenses and are immediately due and payable, and shall bear interest

at the then applicable rate and be secured by the Collateral.  No payments by Bank shall be deemed an

agreement to make similar payments in the future or Bank’s waiver of any Event

of Default.

 

9.5           Bank’s Liability for Collateral.  So long as the Bank complies with reasonable

banking practices regarding the safekeeping of collateral, the Bank shall not

be liable or responsible for: (a) the safekeeping of the Collateral; (b) any

loss or damage to the Collateral; (c) any diminution in the value of the

Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or

other person.  Borrower bears all risk

of loss, damage or destruction of the Collateral.

 

9.6           Remedies Cumulative.  Bank’s rights and remedies under this

Agreement, the Loan Documents, and all other agreements are cumulative.  Bank has all rights and remedies provided

under the Code, by law, or in equity. Bank’s exercise of one right or remedy is

not an election, and Bank’s waiver of any Event of Default is not a continuing

waiver. Bank’s delay is not a waiver, election, or acquiescence. No waiver

hereunder shall be effective unless signed by Bank and then is only effective

for the specific instance and purpose for which it was given.

 

9.7           Demand Waiver.  Borrower waives demand, notice of default or

dishonor, notice of payment and nonpayment, notice of any default, nonpayment

at maturity, release, compromise, settlement, extension, or renewal of

accounts, documents, instruments, chattel paper, and guarantees held by Bank on

which Borrower is liable.

 

10.           NOTICES

 

All notices or

demands by any party to this Agreement or any other related agreement must be

in writing and be personally delivered or sent by an overnight delivery

service, by certified mail, postage prepaid, return receipt requested, or by

telefacsimile at the addresses listed below. 

Either Bank or Borrower  may

change its notice address by giving the other written notice.

 

If to Borrower:      Art Technology Group, Inc.

25 First Street

Cambridge,

Massachusetts 02141

Attn: Mr. Gabriel

Parmese

FAX: (617)

386-1105

 

with a copy to:      Art Technology Group, Inc.

25 First Street

Cambridge,

Massachusetts 02141

Attn: Office of

the General Counsel

FAX: (617)

386-1105

 

11

 

If to Bank:              Silicon

Valley Bank

One Newton Executive Park, Suite 200

2221 Washington Street

Newton, Massachusetts 

02462

Attn: Mr. Jonathan Gray

Fax:  (617) 969-4395

 

with a copy to:      Riemer

& Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attn: David A. Ephraim, Esquire

FAX: (617)

880-3456

 

 

11.           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

Massachusetts law

governs the Loan Documents without regard to principles of conflicts of

law.  Borrower and Bank each submit to

the exclusive jurisdiction of the State and Federal courts in Massachusetts;

provided, however, that if for any reason Bank cannot avail itself of such

courts in the Commonwealth of Massachusetts, Borrower accepts jurisdiction of

the courts and venue in Santa Clara County, California.  NOTWITHSTANDING THE FOREGOING,  THE BANK SHALL HAVE THE RIGHT TO BRING ANY

ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY

OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO

REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINST THE

BORROWER OR ITS PROPERTY.

 

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF

ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE

LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT,

BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR

BOTH PARTIES TO ENTER INTO THIS AGREEMENT. 

EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

12.           GENERAL PROVISIONS

 

12.1         Successors and Assigns.  This Agreement binds and is for the benefit

of the successors and permitted assigns of each party.  Borrower may not assign this Agreement or

any rights or Obligations under it without Bank’s prior written consent which

may be granted or withheld in Bank’s discretion.  Bank has the right, without the consent of or notice to Borrower,

to sell, transfer, negotiate, or grant participation in all or any part of, or

any interest in, Bank’s obligations, rights and benefits under this Agreement,

the Loan Documents or any related agreement.

 

12.2         Ratifications.

 

(a)           Ratification of Intellectual Property Security

Agreement.  Borrower

hereby ratifies, confirms and reaffirms, all and singular, the terms and

conditions of a certain Intellectual Property Security Agreement dated as of

December 29, 2000 (the “IP Security Agreement”) between Borrower and Bank, and

acknowledges, confirms and agrees that except as set forth on the Schedule

hereto, the IP Security Agreement (i) remains in full force and effect, (ii)  contains an accurate and complete

listing of all Intellectual Property Collateral as defined in the IP Security

Agreement and (iii) secures the Obligations.

 

(b)           Ratification of Perfection Certificate.  Borrower hereby ratifies, confirms and

reaffirms, all and singular, the terms and disclosures contained in a certain

Perfection Certificate dated ___________ and attached hereto as Exhibit E

between Borrower and Bank, and acknowledges, confirms and agrees that except 

 

 

12

 

 

as set forth on the

Schedule hereto, the disclosures and information Borrower provided to Bank in

the Perfection Certificate has not changed, as of the date hereof.

 

12.3         Indemnification.  Borrower hereby indemnifies, defends and

holds the Bank and its officers, employees and agents harmless against:  (a) all obligations, demands, claims, and

liabilities asserted by any other party in connection with the transactions

contemplated by the Loan Documents; and (b) all losses or Bank Expenses

incurred, or paid by Bank from, following, or consequential to transactions

between Bank and Borrower (including reasonable attorneys’ fees and expenses),

except for losses in whole or in part caused by Bank’s gross negligence or

willful misconduct.

 

12.4         Right of Set-Off.  In consideration of Bank’s agreement to

enter into this Agreement,  Borrower and

any guarantor hereby grant to Bank, a lien, security interest and right of

setoff as security for all Obligations to Bank, whether now existing or hereafter

arising upon and against all deposits, credits, collateral and property, now or

hereafter in the possession, custody, safekeeping or control of Bank or any

entity under the control of the Bank or in transit to any of them.  At any time after the occurrence and during

the continuance of an Event of Default, without demand or notice, Bank may set

off the same or any part thereof and apply the same to any liability or

obligation of Borrower and any guarantor even though unmatured and regardless

of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO

EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH

SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT

TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR,

ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.5         Time of Essence.  Time is of the essence for the performance

of all Obligations in this Agreement.

 

12.6         Severability of Provision.  Each provision of this Agreement is

severable from every other provision in determining the enforceability of any

provision.

 

12.7         Amended and Restated Agreement.  This Agreement shall amend and restate in

its entirety a certain Loan and Security Agreement dated as of December 29, 2000

between Borrower and Bank, as amended by a certain Loan Modification Agreement

dated as of March 30, 2001, as further amended by a certain Second Loan

Modification Agreement dated as of June 29, 2001, as further amended by a

certain Third Loan Modification Agreement dated June 23, 2001.

 

12.8         Amendments in Writing; Integration.  All amendments to this Agreement must be in

writing signed by both Bank and Borrower. 

This Agreement and the Loan Documents represent the entire agreement

about this subject matter, and supersede prior negotiations or agreements.  All prior agreements, understandings,

representations, warranties, and negotiations between the parties about the

subject matter of this Agreement and the Loan Documents merge into this

Agreement and the Loan Documents.

 

12.9         Counterparts.  This Agreement may be executed in any number of counterparts and

by different parties on separate counterparts, each of which, when executed and

delivered, are an original, and all taken together, constitute one Agreement.

 

12.10       Survival.  All covenants, representations and warranties made in this

Agreement continue in full force while 

any Obligations remain outstanding. 

The obligation of Borrower in Section 12.2 to indemnify Bank shall

survive until the statute of limitations with respect to such claim or cause of

action shall have run.

 

12.11       Confidentiality.  In handling any confidential information,

Bank shall exercise the same degree of care that it exercises for its own

proprietary information, but disclosure of information may be made: (i) to

Bank’s subsidiaries or affiliates in connection with their business with

Borrower; (ii) to prospective transferees or purchasers of any interest in the

Credit Extensions (provided, however, Bank shall use commercially reasonable

efforts in obtaining such prospective transferee’s or purchaser’s agreement to

the terms of this provision); (iii) as 

 

 

13

 

required by law,

regulation, subpoena, or other order, (iv) as required in connection with

Bank’s examination or audit; and (v) as Bank considers appropriate in

exercising remedies under this Agreement. 

Confidential information does not include information that either: (a)

is in the public domain or in Bank’s possession when disclosed to Bank, or

becomes part of the public domain after disclosure to Bank; or (b) is disclosed

to Bank by a third party, if Bank does not know that the third party is

prohibited from disclosing the information.

 

13.           DEFINITIONS

 

13.1         Definitions.

 

“Accounts”

are all existing and later arising accounts, contract rights, and  other 

obligations owed Borrower in connection with its sale or lease of goods

(including licensing software and other technology) or provision of services,  all

credit insurance, guaranties, other security and  all merchandise returned or reclaimed by Borrower and Borrower’s

Books relating to any of the foregoing, as such definition may be amended from

time to time according to the Code.

 

“Advance”

or “Advances”

is a loan advance (or advances) under the Committed Revolving Line.

 

“Affiliate”

of a Person is a Person that owns or controls directly or indirectly the

Person, any Person that controls or is controlled by or is under common control

with the Person, and each of that Person’s senior executive officers,

directors, partners and, for any Person that is a limited liability company,

that Person’s managers and members.

 

“Bank

Expenses” are all audit fees and expenses and reasonable costs or

expenses (including reasonable attorneys’ fees and expenses) for preparing,

negotiating, administering, defending and enforcing the Loan Documents

(including appeals or Insolvency Proceedings).

 

“Borrower’s

Books” are all Borrower’s books and records including ledgers,

records regarding Borrower’s assets or liabilities, the Collateral, business

operations or financial condition and all computer programs or discs or any

equipment containing the information.

 

“Borrowing

Base” is 80.0% of Eligible Accounts, as determined by Bank from

Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank

may lower the percentage of the Borrowing Base after performing an audit of

Borrower’s Accounts.

 

“Business Day”

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

 

“Closing Date”

is the date of this Agreement.

 

“Code”

is the Uniform Commercial Code as adopted in Massachusetts, as amended and as

may be amended and in effect from time to time.

 

“Collateral”

is any and all properties, rights and assets of the Borrower granted by the

Borrower to Bank or arising under the Code, now, or in the future, in which the

Borrower obtains an interest, or the power to transfer rights, including,

without limitation, the property described on Exhibit A.

 

“Committed

Revolving Line” is an Advance or Advances of up to Fifteen Million

Dollars ($15,000,000.00).

 

“Contingent

Obligation” is, for any Person, any direct or indirect liability,

contingent or not, of that Person for (i) any indebtedness, lease, dividend,

letter of credit or other obligation of another such as an obligation directly

or indirectly guaranteed, endorsed, co–made, discounted or sold with

recourse by that Person, or for which that Person is directly or indirectly

liable; (ii) any obligations for undrawn letters of credit for the account of

that Person; and (iii) all obligations from any interest rate, currency or

commodity swap agreement, interest rate cap or 

 

14

 

collar agreement, or

other agreement or arrangement designated to protect a Person against

fluctuation in interest rates, currency exchange rates or commodity

prices;  but “Contingent Obligation”

does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the

stated or determined amount of the primary obligation for which the Contingent

Obligation is made or, if not determinable, the maximum reasonably anticipated

liability for it determined by the Person in good faith; but the amount may not

exceed the maximum of the obligations under the guarantee or other support

arrangement.

 

“Copyrights” are all copyright rights, applications or

registrations and like protections in each work or authorship or derivative

work, whether published or not (whether or not it is a trade secret) now or

later existing, created, acquired or held.

 

“Credit

Extension” is each Advance, Letter of Credit, FX Forward Contract,

or any other extension of credit by Bank for Borrower’s benefit.

 

“Eligible

Accounts” are billed Accounts in the ordinary course of Borrower’s

business that meet all Borrower’s representations and warranties in Section

5.2; but Bank may change eligibility standards by giving Borrower thirty

(30) days prior written notice.  Unless

Bank agrees otherwise in writing, Eligible Accounts shall not include:

 

(a)           Accounts that the account debtor has

not paid within ninety (90) days of invoice date;

 

(b)           Accounts for an account debtor, fifty

percent (50%) or more of whose Accounts have not been paid within ninety (90)

days of invoice date;

 

(c)           Credit balances over ninety (90) days

from invoice date;

 

(d)           Accounts for an account debtor,

including Affiliates, whose total obligations to Borrower exceed twenty-five

(25%) of all Accounts, for the amounts that exceed that percentage, unless Bank

approves in writing;

 

(e)           Accounts for which the account debtor

does not have its principal place of business in the United States except for

Eligible Foreign Accounts;

 

(f)            Accounts for which the account

debtor is a federal, state or local government entity or any department,

agency, or instrumentality thereof;

 

(g)           Accounts for which Borrower owes the

account debtor, but only up to the amount owed (sometimes called “contra”

accounts, accounts payable, customer deposits or credit accounts);

 

(h)           Accounts for demonstration or

promotional equipment, or in which goods are consigned, sales guaranteed, sale

or return, sale on approval, bill and hold, or other terms if account debtor’s

payment may be conditional;

 

(i)            Accounts for which the account

debtor is Borrower’s Affiliate, officer, employee, or agent;

 

(j)            Accounts in which the account debtor

disputes liability or makes any claim and Bank believes there may be a basis

for dispute (but only up to the disputed or claimed amount), or if the Account

Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes

out of business;

 

(k)           Accounts for which Bank reasonably

determines after inquiry and consultation with Borrower collection to be

doubtful.

 

15

 

“Eligible

Foreign Accounts” are Accounts for which the Account Debtor has a

place of business in the United Kingdom and are:  (1) covered by credit insurance satisfactory to Bank, less

any deductible; or (2) supported by letter(s) of credit acceptable to

Bank; or (3) that Bank approves in writing.

 

“Equipment”

is all present and future machinery, equipment, tenant improvements, furniture,

fixtures, vehicles, tools, parts and attachments in which Borrower has any

interest.

 

“ERISA”

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

 

“FX Forward Contract” is defined in Section 2.1.3.

 

“FX Reserve” is defined in Section 2.1.3.

 

“GAAP”

is generally accepted accounting principles.

 

“Guarantor” is any present or future guarantor of

the Obligations, including Art Technology Group (Europe) Limited.

 

“Indebtedness”

is (a) indebtedness for borrowed money or the deferred price of property or

services, such as reimbursement and other obligations for surety bonds and

letters of credit, (b) obligations evidenced by notes, bonds, debentures or

similar instruments, (c) capital lease obligations and (d) Contingent

Obligations.

 

“Insolvency

Proceeding” is any proceeding by or against any Person under the

United States Bankruptcy Code, or any other bankruptcy or insolvency law,

including assignments for the benefit of creditors, compositions, extensions

generally with its creditors, or proceedings seeking reorganization,

arrangement, or other relief.

 

“Intellectual

Property”

is:

 

(a)           Copyrights, Trademarks, Patents, and

Mask Works including amendments, renewals, extensions   and

all licenses or other rights to use and all license fees and royalties from the

use;

 

(b)           Any trade secrets and any

Intellectual Property rights in computer software and computer software

products now or later existing, created, acquired or held;

 

(c)           All design rights which may be

available to Borrower now or later created, acquired or held;

 

(d)           Any claims for damages (past, present

or future) for infringement of any of the rights above, with the right, but not

the obligation, to sue and collect damages for use or infringement of the

intellectual property rights above.

 

All proceeds and products

of the foregoing, including all insurance, indemnity or warranty payments.

 

“Inventory”

is present and future inventory in which Borrower has any interest, including

merchandise, raw materials, parts, supplies, packing and shipping materials,

work in process and finished products intended for sale or lease or to be

furnished under a contract of service, of every kind and description now or

later owned by or in the custody or possession, actual or constructive, of

Borrower, including inventory temporarily out of its custody or possession or

in transit and including returns on any accounts or other proceeds (including

insurance proceeds) from the sale or disposition of any of the foregoing and

any documents of title.

 

“Investment”

is any beneficial ownership of (including stock, partnership interest or other

securities) any Person, or any loan, advance or capital contribution to any

Person.

 

“IP Security

Agreement” has the meaning set forth in Section 12.2(a)

 

16

 

“Letter of Credit” means a letter of credit or similar

undertaking issued by Bank pursuant to Section 2.1.2.

 

“Letter of

Credit Reserve” has the meaning set forth in Section 2.1.2.

 

“Lien”

is a mortgage, lien, deed of trust, charge, pledge, security interest or other

encumbrance.

 

“Loan Amount”

in respect of each Equipment Advance is the original principal amount of such

Equipment Advance.

 

“Loan

Documents” are, collectively, this Agreement, any note, or notes or

guaranties executed by Borrower or Guarantor, and any other present or future

agreement between Borrower and/or for the benefit of Bank in connection with

this Agreement, all as amended, extended or restated.

 

“Material Adverse Change “ is: (i) A material impairment in the

perfection or priority of Bank’s security interest in the Collateral or in the

value of such Collateral other than normal depreciation which is not covered by

adequate insurance; (ii) a material adverse change in the business, operations,

or condition (financial or otherwise) of the Borrower; (iii)  a

material impairment of the prospect of repayment of any portion of the

Obligations; or (iv) Bank determines, based upon information available to it

and in its reasonable judgment, that there is a reasonable likelihood that

Borrower shall fail to comply with one or more of the financial covenants in

Section 6 during the next succeeding financial reporting period.

 

“Mask Works” are all mask works or similar rights

available for the protection of semiconductor chips, now owned or later

acquired.

 

“Obligations”

are debts, principal, interest, Bank Expenses and other amounts Borrower owes

Bank now or later, including letters of credit, cash management services, and

foreign exchange contracts, if any, and including interest accruing after

Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower

assigned to Bank.

 

“Patents” are patents, patent applications and like

protections, including improvements, divisions, continuations, renewals,

reissues, extensions and continuations–in–part of the same.

 

“Permitted

Indebtedness” is:

 

(a)           Borrower’s indebtedness to Bank under

this Agreement or the Loan Documents;

 

(b)           Indebtedness existing on the Closing

Date and shown on the Schedule;

 

(c)           Subordinated Debt;

 

(d)           Indebtedness to trade creditors  incurred

in the ordinary course of business;

 

(e)           Overdraft facilities at banks not

located in the United States, provided, however, the credit availability for

all such facilities shall not to exceed US$1,000,000.00 in the aggregate;

 

(f)            Indebtedness secured by Permitted

Liens; and

 

(g)           Extensions, refinancings, modifications,

amendments and restatements of any items of Permitted Indebtedness (a) through

(f) above, provided that the principal amount thereof is not increased or the

terms thereof are not modified to impose more burdensome terms upon Borrower or

its Subsidiary, as the case may be.

 

17

 

“Permitted

Investments” are those investments outlined on Borrower’s board of

director’s approved investment guidelines attached hereto as Exhibit F.

 

“Permitted

Liens” are:

 

(a)           Liens existing on the Closing Date

and shown on the Schedule or arising under this Agreement or other Loan

Documents;

 

(b)           Liens for taxes, fees, assessments or

other government charges or levies, either not delinquent or being contested in

good faith and for which Borrower maintains adequate reserves on its Books, if

they have no priority over any of Bank’s security interests;

 

 

(c)           Leases or subleases and non-exclusive

licenses or sublicenses granted in the ordinary course of Borrower’s business, if

the leases, subleases, licenses and sublicenses permit granting Bank a

security interest;

 

(d)           Liens incurred in the extension,

renewal or refinancing of the indebtedness secured by Liens described in (a)

through (c), but any extension, renewal or replacement Lien must be

limited to the property encumbered by the existing Lien and the principal

amount of the indebtedness may not increase.

 

“Person”

is any individual, sole proprietorship, partnership, limited liability company,

joint venture, company, trust, unincorporated organization, association,

corporation, institution, public benefit corporation, firm, joint stock

company, estate, entity or government agency.

 

“Prime Rate”

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

rate.

 

“Responsible

Officer”

is each of the Chief Executive Officer, President, Chief Financial Officer and

Controller of Borrower.

 

“Revolving

Maturity Date” is December 27, 2002.

 

“Schedule”

is any attached schedule of exceptions attached hereto.

 

“Subordinated

Debt” is debt incurred by Borrower subordinated to Borrower’s debt

to Bank (pursuant to a subordination agreement entered into between the Bank,

the Borrower and the subordinated creditor), on terms acceptable to Bank.

 

“Subsidiary”

of any Person, corporation, partnership, limited liability company, joint

venture, or any other business entity of which more than 50% of the voting

stock or other equity interests is owned or controlled, directly or indirectly,

by the Person or one or more Affiliates of the Person.

 

“Trademarks” are trademark and service mark rights,

registered or not, applications to register and registrations and like

protections, and the entire goodwill of the business of Assignor connected with

the trademarks.

 

18

 

IN WITNESS

WHEREOF, the parties hereto have caused this Agreement to be executed as a

sealed instrument

under the laws of the

Commonwealth of Massachusetts as of the date first above written.

 

BORROWER:

 

ART TECHNOLOGY GROUP, INC.

 

 

	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  

 

 

BANK:

 

SILICON VALLEY BANK,

d/b/a

SILICON VALLEY EAST

 

 

	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  

 

 

SILICON VALLEY BANK

 

 

	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  
	

   

  	

  (Signed in Santa

  Clara County, California)

   

  	

   

  

 

695927.5

 

19

 

EXHIBIT A

 

 

The Collateral

consists of all of Borrower’s right, title and interest in and to the

following:

 

All goods,

equipment, inventory, contract rights or rights to payment of money, leases,

license agreements, franchise agreements, general intangibles (including

payment intangibles), accounts (including health-care receivables), documents,

instruments (including any promissory notes), chattel paper (whether tangible

or electronic), cash, deposit accounts, fixtures, letters of credit rights

(whether or not the letter of credit is evidenced by a writing), commercial

tort claims, securities, and all other investment property, supporting

obligations, and financial assets, whether now owned or hereafter acquired,

wherever located; and

 

Any copyright

rights, copyright applications, copyright registrations and like protections in

each work of authorship and derivative work, whether published or unpublished,

now owned or later acquired; any patents, trademarks, service marks and

applications therefor; trade styles, trade names, any trade secret rights,

including any rights to unpatented inventions, know–how, operating

manuals, license rights and agreements and confidential information, now owned

or hereafter acquired; or any claims for damages by way of any past, present

and future infringement of any of the foregoing; and

 

All Borrower’s

books relating to the foregoing and any and all claims, rights and interests in

any of the above and all substitutions for, additions, attachments,

accessories, accessions and improvements to and replacements, products,

proceeds and insurance proceeds of any or all of the foregoing.

 

20

 

 EXHIBIT B

 

Loan Payment/Advance Request Form

Deadline for

same day processing is 3:00 E.S.T.

Fax To:  (617) 969–5965                                                                                        Date:

                                                      

 

LOAN PAYMENT:

Sample documents

Client Name (Borrower)

 

From Account #                                                                                             To Account #                                                       

                                          (Deposit

Account #)                                                                                            (Loan Account #)

 

Principal $                                                        

and/or Interest $                                                                                  

 

All Borrower’s

representation and warranties in the Loan and Security Agreement are true,

correct and complete in all material respects to on the date of the telephone

transfer request for and advance, but those representations and warranties

expressly referring to another date shall be true, correct and complete in all

material respects as of the date:

 

Authorized Signature:                                                                                                  Phone Number:                                          

 Loan Advance:

Complete Outgoing Wire Request

section below if all or a portion of the funds from this loan advance are for

an outgoing wire.

 

From Account #                                                                                             To Account #                                                       

                (Loan

Account #)                                                                                                      (Deposit Account #)

 

Amount of Advance

$                                  

 

All Borrower’s

representation and warranties in the Loan and Security Agreement are true,

correct and complete in all material respects to on the date of the telephone

transfer request for and advance, but those representations and warranties

expressly referring to another date shall be true, correct and complete in all

material respects as of the date:

 

Authorized

Signature:                                                                                    Phone Number:                                                    

Outgoing

Wire Request

Complete only if all or a portion of

funds from the loan advance above are to be wired.

Deadline for same

day processing is 3:00pm, E.S.T.

 

Beneficiary Name:                                                                            Amount of Wire: $                                                               

Beneficiary Bank:                                                                             Account Number:                                                                

City and Sate:                                                    

Beneficiary Bank Transit

(ABA) #: __ __ __ __ __ __ __ ­­­__     

Beneficiary Bank Code (Swift, Sort, Chip, etc.):

   

                                                                                                        (For

International Wire Only)

 

Intermediary Bank:

                                                                          Transit (ABA) #:                                                                  

For Further Credit

to:                                                                                                                                                                       

Special

Instruction:                                                                                                                                                                          

By signing below, I (we)

acknowledge and agree that my (our) funds transfer request shall be processed

in accordance with and subject to the terms and conditions set forth in the

agreements(s) covering funds transfer service(s), which agreements(s) were

previously received and executed by me (us).

 

Authorized

Signature:                                     2nd Signature (If Required):                                                                 

Print Name/Title:                                                              Print Name/Title:                                                                  

Telephone #                                                      Telephone #                                                                                      

 

21

 

EXHIBIT C

BORROWING BASE CERTIFICATE

____________________________________________________________________________________________

 

Borrower:    Art Technology Group, Inc.                                      Lender:   Silicon Valley Bank

 

Commitment Amount:     $15,000,000.00

____________________________________________________________________________________________

 

 

	

  ACCOUNTS RECEIVABLE

  	

   

  	

   

  	

   

  
	

  1.

  	

   

  	

  Accounts Receivable Book Value as of

  ____________________

  	

   

  	

  $

  	

   

  	

   

  
	

  2.

  	

   

  	

  Additions (please explain on reverse)

  	

   

  	

  $

  	

   

  	

   

  
	

  3.

  	

   

  	

  TOTAL ACCOUNTS RECEIVABLE

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

  	

   

  	

   

  	

   

  
	

  4.

  	

   

  	

  Amounts over 90 days due

  	

   

  	

  $

  	

   

  	

   

  
	

  5.

  	

   

  	

  Balance of 50% over 90 day accounts

  	

   

  	

  $

  	

   

  	

   

  
	

  6.

  	

   

  	

  Credit balances over 90 days

  	

   

  	

  $

  	

   

  	

   

  
	

  7.

  	

   

  	

  Concentration Limits

  	

   

  	

  $

  	

   

  	

   

  
	

  8.

  	

   

  	

  Foreign Accounts (except Acceptable Foreign

  Accounts)

  	

   

  	

  $

  	

   

  	

   

  
	

  9.

  	

   

  	

  Governmental Accounts

  	

   

  	

  $

  	

   

  	

   

  
	

  10.

  	

   

  	

  Contra Accounts

  	

   

  	

  $

  	

   

  	

   

  
	

  11.

  	

   

  	

  Promotion or Demo Accounts

  	

   

  	

  $

  	

   

  	

   

  
	

  12.

  	

   

  	

  Intercompany/Employee Accounts

  	

   

  	

  $

  	

   

  	

   

  
	

  13.

  	

   

  	

  Other (please explain on reverse)

  	

   

  	

  $

  	

   

  	

   

  
	

  14.

  	

   

  	

  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	

   

  	

  $

  	

   

  	

   

  
	

  15.

  	

   

  	

  Eligible Accounts (#3 minus #14)

  	

   

  	

  $

  	

   

  	

   

  
	

  16.

  	

   

  	

  LOAN VALUE OF ACCOUNTS (80% of #15)

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  BALANCES

  	

   

  	

   

  	

   

  
	

  17.

  	

   

  	

  Maximum Loan Amount

  	

   

  	

  $

  	

   

  	

   

  
	

  18.

  	

   

  	

  Total Funds Available (Lesser of #17 or #16)

  	

   

  	

  $

  	

   

  	

   

  
	

  19.

  	

   

  	

  Present balance owing on Line of Credit

  	

   

  	

  $

  	

   

  	

   

  
	

  20.

  	

   

  	

  Outstanding under Sublimits

  	

   

  	

  $

  	

   

  	

   

  
	

  21.

  	

   

  	

  RESERVE POSITION (#18 minus #19 and #20)

  	

   

  	

  $

  	

   

  	

   

  

 

The undersigned represents and

warrants that this is true, complete and correct, and that the information in

this Borrowing Base Certificate complies with the representations and

warranties in the Amended and Restated Loan and Security Agreement between the

undersigned and Silicon Valley Bank.

 

	

  BANK USE ONLY

  
	

   

  
	

  Received by:

  _______________________

  
	

  authorized signer

  
	

   

  
	

  Date:

  _____________________________

  
	

   

  
	

  Verified:

  __________________________

  
	

  authorized signer

  
	

   

  
	

  Date:

  _____________________________

  
	

  Compliance

  Status:      Yes       No

  
	

  3

  

COMMENTS:

 

By:

___________________________

Authorized Signer

 

22

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

TO:             SILICON VALLEY BANK

 

FROM:       ART TECHNOLOGY GROUP, INC.

 

The undersigned

authorized officer of ART TECHNOLOGY GROUP, INC. certifies that under the terms

and conditions of the Amended and Restated Loan and Security Agreement between

Borrower and Bank (the “Agreement”), (i) Borrower is in complete

compliance for the period ending _______________ with all required covenants

except as noted below and (ii) all representations and warranties in the

Agreement are true and correct in all material respects on this date.  Attached are the required documents

supporting the certification.  The

Officer certifies that these are prepared in accordance with Generally Accepted

Accounting Principles (GAAP) consistently applied from one period to the next

except as explained in an accompanying letter or footnotes.  The Officer acknowledges that no borrowings

may be requested at any time or date of determination that Borrower is not in

compliance with any of the terms of the Agreement, and that compliance is

determined not just at the date this certificate is delivered.

 

Please indicate compliance status by

circling Yes/No under “Complies” column.

 

	

  Reporting

  Covenant

  	

   

  	

  Required

  	

   

  	

   

  	

   

  	

  Complies

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Monthly

  financial statements with CC

  	

   

  	

  Monthly within 30 days

  	

   

  	

   

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Quarterly

  financial statements with CC

  	

   

  	

  Quarterly within 45 days

  	

   

  	

   

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Annual (CPA

  Audited)

  	

   

  	

  FYE within 120 days

  	

   

  	

   

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  BBC A/R Agings

  	

   

  	

  Monthly within 30 days

  	

   

  	

   

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Financial Covenant

  	

   

  	

  Required

  	

   

  	

  Actual

  	

   

  	

  Complies

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Maintain on a

  Monthly Basis:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Minimum

  Liquidity

  	

   

  	

  $*

  	

   

  	

  $_____

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Maintain on a

  Quarterly Basis:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Profitability:

  	

   

  	

  $**

  	

   

  	

  $_____

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  

 

 

*See Section

6.7(a) of the Agreement

**See Section

6.7(b) of the Agreement

	

  BANK USE ONLY

  
	

   

  
	

  Received by:

  _______________________

  
	

  authorized signer

  
	

   

  
	

  Date:

  _____________________________

  
	

   

  
	

  Verified:

  __________________________

  
	

  authorized signer

  
	

   

  
	

  Date: _____________________________

  
	

  Compliance

  Status:      Yes       No

  
	

  3

  

Comments Regarding Exceptions: 

See Attached.

 

Sincerely,

 

_____________________________

Signature

 

_____________________________

Title

 

_____________________________

Date

695927.1

 

 

23

 

 

INTELLECTUAL PROPERTY SECURITY

AGREEMENT

 

 

This Intellectual

Property Security Agreement (this “IP Agreement”) is made as of the June 13,

2002 by and between ART TECHNOLOGY GROUP, INC., a Delaware corporation with its

principal place of business at 25 First Street, Cambridge, Massachusetts

02141(“Grantor”), and SILICON VALLEY BANK, a California banking corporation

(“Lender”).

 

RECITALS

 

A.            Lender has agreed to make advances

of money and to extend certain financial accommodations to Grantor (the

“Loan”), pursuant to a certain Loan and Security Agreement of even date

herewith between Grantor and Lender, as amended from time to time (as amended,

the “Loan Agreement”).  The Loan is

secured pursuant to the terms of the Loan Agreement.  Lender is willing to enter into certain financial accommodations

with Borrower, but only upon the condition, among others, that Grantor shall

grant to Lender a security interest in certain Copyrights, Trademarks, Patents,

and Mask Works to secure the obligations of Grantor under the Loan

Agreement.  Defined terms used but not

defined herein shall have the same meanings as in the Loan Agreement.

 

B.            Pursuant to the terms of the Loan

Agreement, Grantor has granted to Lender a security interest in all of

Grantor’s right title and interest, whether presently existing or hereafter

acquired in, to and under all of the Collateral (as defined therein).

 

NOW, THEREFORE, for good and valuable consideration,

receipt of which is hereby acknowledged and intending to be legally bound, as

collateral security for the prompt and complete payment when due of Grantor’s

Indebtedness (as defined below), Grantor hereby represents, warrants, covenants

and agrees as follows:

 

14.           ­Grant of Security Interest.

As collateral security for the prompt and complete payment and performance of

all of Grantor’s present or future indebtedness, obligations and liabilities to

Lender (hereinafter, the “Indebtedness”), including, without limitation, under

the Loan Agreement, Grantor hereby grants a security interest in all of

Grantor’s right, title and interest in, to and under its intellectual property

collateral (all of which shall collectively be called the “Intellectual

Property Collateral”), including, without limitation, the following:

 

(a)           Any and all copyright rights,

copyright applications, copyright registrations and like protections in each

work or authorship and derivative work thereof, whether published or

unpublished and whether or not the same also constitutes a trade secret, now or

hereafter existing, created, acquired or held, including without limitation

those set forth on EXHIBIT A attached hereto

(collectively, the “Copyrights”);

 

(b)           Any and all trade secrets, and any

and all intellectual property rights in computer software and computer software

products now or hereafter existing, created, acquired or held;

 

(c)           Any and all design rights which may

be available to Grantor now or hereafter existing, created, acquired or held;

 

(d)           All patents, patent applications and

like protections including, without limitation, improvements, divisions,

continuations, renewals, reissues, extensions and continuations-in-part of the

same, including without limitation the patents and patent applications set

forth on EXHIBIT B attached hereto (collectively, the “Patents”);

 

(e)           Any trademark and servicemark rights,

whether registered or not, applications to register and registrations of the

same and like protections, and the entire goodwill of the business of Grantor

connected with and symbolized by such trademarks, including without limitation

those set forth on EXHIBIT C attached hereto

(collectively, the “Trademarks”);

 

 

(f)            All mask works or similar rights

available for the protection of semiconductor chips, now owned or hereafter

acquired, including, without limitation those set forth on EXHIBIT D attached

hereto (collectively, the  “Mask

Works”);

 

(g)           Any and all claims for damages by way

of past, present and future infringements of any of the rights included above,

with the right, but not the obligation, to sue for and collect such damages for

said use or infringement of the intellectual property rights identified above;

 

(h)           All licenses or other rights to use

any of the Copyrights, Patents, Trademarks, or Mask Works and all license fees

and royalties arising from such use to the extent permitted by such license or

rights, including, without limitation those set forth on EXHIBIT E attached

hereto; and

 

(i)            All amendments, extensions, renewals

and extensions of any of the Copyrights, Trademarks, Patents, or Mask Works;

and

 

(j)            All proceeds and products of the

foregoing, including without limitation all payments under insurance or any

indemnity or warranty payable in respect of any of the foregoing.

 

2.             ­Authorization and Request.  Grantor authorizes and requests that the

Register of Copyrights and the Commissioner of Patents and Trademarks record

this IP Agreement.

 

3.             ­Covenants and Warranties.  Grantor represents, warrants, covenants and

agrees as follows:

 

(a)           Grantor is now the sole owner of the

Intellectual Property Collateral, except for non-exclusive licenses granted by

Grantor to its customers in the ordinary course of business.

 

(b)           Performance of this IP Agreement does

not conflict with or result in a breach of any IP Agreement to which Grantor is

bound, except to the extent that certain intellectual property agreements

prohibit the assignment of the rights thereunder to a third party without the

licensor’s or other party’s consent and this IP Agreement constitutes a security

interest.

 

(c)           During the term of this IP Agreement,

Grantor will not transfer or otherwise encumber any interest in the

Intellectual Property Collateral, except for non-exclusive licenses granted by

Grantor in the ordinary course of business or as set forth in this IP

Agreement;

 

(d)           To its knowledge, each of the Patents

is valid and enforceable, and no part of the Intellectual Property Collateral

has been judged invalid or unenforceable, in whole or in part, and no claim has

been made that any part of the Intellectual Property Collateral violates the

rights of any third party;

 

(e)           Grantor shall promptly advise Lender

of any material adverse change in the composition of the Collateral, including

but not limited to any subsequent ownership right of the Grantor in or to any

Trademark, Patent, Copyright, or Mask Work specified in this IP Agreement;

 

(f)            Grantor shall (i) protect, defend

and maintain the validity and enforceability of the Trademarks, Patents,

Copyrights, and Mask Works, (ii) use its best efforts to detect infringements

of the Trademarks, Patents, Copyrights, and Mask Works and promptly advise

Lender in writing of material infringements detected and (iii) not allow any

Trademarks, Patents, Copyrights, or Mask Works to be abandoned, forfeited or

dedicated to the public without the written consent of Lender, which shall not

be unreasonably withheld, unless Grantor determines that reasonable business

practices suggest that abandonment is appropriate.

 

2

 

(g)           Grantor shall promptly register the

most recent version of any of Grantor’s Copyrights, if not so already

registered, and shall, from time to time, execute and file such other

instruments, and take such further actions as Lender may reasonably request

from time to time to perfect or continue the perfection of Lender’s interest in

the Intellectual Property Collateral;

 

(h)           This IP Agreement creates, and in the

case of after acquired Intellectual Property Collateral, this IP Agreement will

create at the time Grantor first has rights in such after acquired Intellectual

Property Collateral, in favor of Lender a valid and perfected first priority

security interest in the Intellectual Property Collateral in the United States

securing the payment and performance of the obligations evidenced by the Loan

Agreement upon making the filings referred to in clause (i) below;

 

(i)            To its knowledge, except for, and

upon, the filing with the United States Patent and Trademark office with

respect to the Patents and Trademarks and the Register of Copyrights  with respect to the Copyrights and Mask

Works necessary to perfect the security interests created hereunder and except

as has been already made or obtained, no authorization, approval or other

action by, and no notice to or filing with, any U.S. governmental authority or

U.S. regulatory body is required either (i) for the grant by Grantor of the

security interest granted hereby or for the execution, delivery or performance

of this IP Agreement by Grantor in the U.S. or (ii) for the perfection in the

United States or the exercise by Lender of its rights and remedies thereunder;

 

(j)            All information heretofore, herein

or hereafter supplied to Lender by or on behalf of Grantor with respect to the

Intellectual Property Collateral is accurate and complete in all material

respects.

 

(k)           Grantor shall not enter into any

agreement that would materially impair or conflict with Grantor’s obligations

hereunder without Lender’s prior written consent, which consent shall not be

unreasonably withheld.  Grantor shall

not permit the inclusion in any material contract to which it becomes a party

of any provisions that could or might in any way prevent the creation of a

security interest in Grantor’s rights and interest in any property included

within the definition of the Intellectual property Collateral acquired under

such contracts, except that certain contracts may contain anti-assignment

provisions that could in effect prohibit the creation of a security interest in

such contracts.

 

(l)            Upon any executive officer of

Grantor obtaining actual knowledge thereof, Grantor will promptly notify Lender

in writing of any event that materially adversely affects the value of any

material Intellectual Property Collateral, the ability of Grantor to dispose of

any material Intellectual Property Collateral of the rights and remedies of

Lender in relation thereto, including the levy of any legal process against any

of the Intellectual Property Collateral.

 

4.             ­Lender’s Rights.  Lender shall have the right, but not the

obligation, to take, at Grantor’s sole expense, any actions that Grantor is

required under this IP Agreement to take but which Grantor fails to take, after

fifteen (15) days’ notice to Grantor. 

Grantor shall reimburse and indemnify Lender for all reasonable costs

and reasonable expenses incurred in the reasonable exercise of its rights under

this section 4.

 

5.             ­Inspection Rights.  Grantor hereby grants to Lender and its

employees, representatives and agents the right to visit, during reasonable

hours upon prior reasonable written notice to Grantor, any of Grantor’s plants

and facilities that manufacture, install or store products (or that have done

so during the prior six-month period) that are sold utilizing any of the

Intellectual Property Collateral, and to inspect the products and quality

control records relating thereto upon reasonable written notice to Grantor and

as often as may be reasonably requested, but not more than once in every six

(6) months; provided, however, nothing herein shall entitle Lender access to

Grantor’s trade secrets and other proprietary information.

 

3

 

6.             ­Further Assurances; Attorney in

Fact.

 

(a)           On a continuing basis, Grantor will,

subject to any prior licenses, encumbrances and restrictions and prospective

licenses, make, execute, acknowledge and deliver, and file and record in the

proper filing and recording places in the United States, all such instruments,

including appropriate financing and continuation statements and collateral

agreements and filings with the United States Patent and Trademarks Office and

the Register of Copyrights, and take all such action as may reasonably be

deemed necessary or advisable, or as requested by Lender, to perfect Lender’s

security interest in all Copyrights, Patents, Trademarks, and Mask Works and

otherwise to carry out the intent and purposes of this IP Agreement, or for

assuring and confirming to Lender the grant or perfection of a security

interest in all Intellectual Property Collateral.

 

(b)           Grantor hereby irrevocably appoints

Lender as Grantor’s attorney-in-fact, with full authority in the place and

stead of Grantor and in the name of Grantor, Lender or otherwise, from time to

time in Lender’s discretion, upon Grantor’s failure or inability to do so, to

take any action and to execute any instrument which Lender may deem necessary

or advisable to accomplish the purposes of this IP Agreement, including:

 

(i)            To modify, in its sole discretion,

this IP Agreement without first obtaining Grantor’s approval of or signature to

such modification by amending Exhibit A, Exhibit B, Exhibit C, and Exhibit D

hereof, as appropriate, to include reference to any right, title or interest in

any Copyrights, Patents, Trademarks or Mask Works acquired by Grantor after the

execution hereof or to delete any reference to any right, title or interest in

any Copyrights, Patents, Trademarks, or Mask Works in which Grantor no longer

has or claims any right, title or interest; and

 

(ii)           To file, in its sole discretion, one

or more financing or continuation statements and amendments thereto, relative

to any of the Intellectual Property Collateral without the signature of Grantor

where permitted by law.

 

7.             ­Events of Default.  The occurrence of any of the following shall

constitute an Event of Default under this IP Agreement:

 

(a)           An Event of Default occurs under the

Loan Agreement; or any document from Grantor to Lender; or

 

(b)           Grantor breaches any warranty or

agreement made by Grantor in this IP Agreement.

 

8.             ­Remedies.  Upon the occurrence and continuance of an

Event of Default, Lender shall have the right to exercise all the remedies of a

secured party under the Massachusetts Uniform Commercial Code, including

without limitation the right to require Grantor to assemble the Intellectual

Property Collateral and any tangible property in which Lender has a security

interest and to make it available to Lender at a place designated by

Lender.  Lender shall have a

nonexclusive, royalty free license to use the Copyrights, Patents, Trademarks,

and Mask Works to the extent reasonably necessary to permit Lender to exercise

its rights and remedies upon the occurrence of an Event of Default.  Grantor will pay any expenses (including

reasonable attorney’s fees) incurred by Lender in connection with the exercise

of any of Lender’s rights hereunder, including without limitation any expense

incurred in disposing of the Intellectual Property Collateral.  All of Lender’s rights and remedies with

respect to the Intellectual Property Collateral shall be cumulative.

 

9.             ­Indemnity.  Grantor agrees to defend, indemnify and hold

harmless Lender and its officers, employees, and agents against:  (a) all obligations, demands, claims, and

liabilities claimed or asserted by any other party in connection with the

transactions contemplated by this IP Agreement, and (b) all losses or expenses

in any way suffered, incurred, or paid by Lender as a result of or in any way

arising out of, following or consequential to transactions between Lender and

Grantor, whether under this IP Agreement or otherwise (including without 

 

4

 

limitation,

reasonable attorneys fees and reasonable expenses), except for losses arising

from or out of Lender’s gross negligence or willful misconduct.

 

10.           ­Reassignment.  At such time as Grantor shall completely

satisfy all of the obligations secured hereunder, Lender shall execute and

deliver to Grantor all deeds, assignments, and other instruments as may be necessary

or proper to reinvest in Grantor full title to the property assigned hereunder,

subject to any disposition thereof which may have been made by Lender pursuant

hereto.

 

11.           ­Course of Dealing.  No course of dealing, nor any failure to

exercise, nor any delay in exercising any right, power or privilege hereunder

shall operate as a waiver thereof.

 

12.           ­Attorneys’ Fees.  If any action relating to this IP Agreement

is brought by either party hereto against the other party, the prevailing party

shall be entitled to recover reasonable attorneys fees, costs and

disbursements.

 

13.           ­Amendments.  This IP Agreement may be amended only by a

written instrument signed by both parties hereto.

 

14.           ­Counterparts.  This IP Agreement may be executed in two or

more counterparts, each of which shall be deemed an original but all of which

together shall constitute the same instrument.

 

15.           ­Law and Jurisdiction.  This IP Agreement shall be governed by and

construed in accordance with the laws of the Commonwealth of Massachusetts.  GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION

WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY

STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF

MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND, AGAINST IT WHICH

ARISES OUT OF OR BY REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR

ANY REASON LENDER CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF

MASSACHUSETTS, GRANTOR ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA

COUNTY, CALIFORNIA.

 

GRANTOR AND LENDER

EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE

OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE

TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,

BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY RECOGNIZES AND AGREES THAT THE

FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS

AGREEMENT.  EACH PARTY REPRESENTS AND

WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT

KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION

WITH LEGAL COUNSEL.

 

16.           ­Confidentiality.  In handling any confidential information,

Lender shall exercise the same degree of care that it exercises for its own

proprietary information, but disclosure of information may be made: (i) to

Lender’s subsidiaries or affiliates in connection with their present or

prospective business relations with Borrower; (ii) to prospective transferees

or purchasers of any interest in the Loans; (iii) as required by law,

regulation, subpoena, or other order, (iv) as required in connection with

Lender’s examination or audit; and (v) as Lender considers appropriate in

exercising remedies under this Agreement. 

Confidential information does not include information that either: (a)

is in the public domain or in Lender’s possession when disclosed to Lender, or

becomes part of the public domain after disclosure to Lender; or (b) is disclosed

to Lender by a third party, if Lender does not know that the third party is

prohibited from disclosing the information.

 

5

 

EXECUTED as a sealed instrument under the laws of

the Commonwealth of Massachusetts on the day and year first written above.

 

	

  Address

  of Grantor:

  	

   

  	

  GRANTOR:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  ART

  TECHNOLOGY GROUP, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  

 

6

 

Exhibit “A”

attached to that certain Intellectual Property Security Agreement dated June

13, 2002

 

EXHIBIT “A”

 

COPYRIGHTS

 

SCHEDULE A -

ISSUED COPYRIGHTS

 

	

  COPYRIGHT

  	

   

  	

  REGISTRATION

  	

   

  	

  DATE OF

  
	

  DESCRIPTION

  	

   

  	

  NUMBER_

  	

   

  	

  ISSUANCE

  

 

 

NONE

 

 

 

SCHEDULE B -

PENDING COPYRIGHT APPLICATIONS

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  FIRST DATE

  
	

  COPYRIGHT

  	

   

  	

  APPLICATION

  	

   

  	

  DATE OF

  	

   

  	

  DATE OF

  	

   

  	

  OF PUBLIC

  
	

  DESCRIPTION

  	

   

  	

  NUMBER

  	

   

  	

  FILING

  	

   

  	

  CREATION

  	

   

  	

  DISTRIBUTION

  

 

 

 

SEE EXHIBIT C-1

 

 

 

SCHEDULE C -

UNREGISTERED COPYRIGHTS (Where No Copyright Application is Pending)

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  DATE AND

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  RECORDATION

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  NUMBER OF IP

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  AGREEMENT WITH

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  OWNER OR

  ORIGINAL

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  GRANTOR IF

  	

   

  	

  ORIGINAL AUTHOR

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  AUTHOR OR OWNER

  	

   

  	

  OR OWNER OF

  
	

  FIRST DATE

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  OF COPYRIGHT

  	

   

  	

  COPYRIGHT IS

  
	

  COPYRIGHT

  	

   

  	

  DATE OF

  	

   

  	

  OF

  	

   

  	

  IS DIFFERENT

  	

   

  	

  DIFFERENT ROM

  
	

  DESCRIPTION

  	

   

  	

  CREATION

  	

   

  	

  DISTRIBUTION

  	

   

  	

  FROM GRANTOR

  	

   

  	

  GRANTOR____

  

 

ALL DYNAMO

VERSIONS

 

7

 

Exhibit “B”

attached to that certain Intellectual Property Security Agreement dated June

13, 2002.

 

EXHIBIT “B”

 

PATENTS

 

PATENT

DESCRIPTION     DOCKET

NO.       COUNTRY            SERIAL NO.                          FILING DATE       STATUS

 

NONE GRANTED

 

 

8

 

 

 

 

Exhibit “C”

attached to that certain Intellectual Property Security Agreement dated June

13, 2002

 

EXHIBIT “C”

 

TRADEMARKS

 

 

TRADEMARK

DESCRIPTION     COUNTRY            SERIAL NO.                          REG. NO                                STATUS

 

SEE ATTACHED

EXHIBIT C-1

 

 

9

 

 

 

 

Exhibit “D”

attached to that certain Intellectual Property Security Agreement dated June

13, 2002

 

EXHIBIT “D”

 

MASK WORKS

 

MASK WORK

DESCRIPTION     COUNTRY            SERIAL NO.                          REG. NO                                STATUS

 

NONE

 

 

 

 

10

 

Exhibit “E”

attached to that certain Intellectual Property Security Agreement dated June

13, 2002

 

EXHIBIT “E”

 

LICENSES

 

NONE

 

 

 

 

11

 

Service

Marks and Trademarks Ownded by Art Technology Group, Inc.

as of

June 2002

 

EXHIBIT C-1 TO IP

SECURITY AGREEMENT

	

  Mark

  	

   

  	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing Date

  	

   

  	

  Goods

  	

   

  	

  Status

  
	

  ART TECHNOLOGY GROUP

  	

   

  	

  South Africa

  	

   

  	

  99/07311

  	

   

  	

  04/30/99

  	

   

  	

  Scientific, nautical,

  surveying, electric, photographic, cinematographic, optical, weighing,

  measuring, signaling, checking(supervision), life-saving and teaching

  apparatus and instruments; apparatus for recording, transmission or reproduction

  of sound or images; magnetic data carriers, recording discs; automatic

  vending machines and mechanisms for coin-operated apparatus; cash registers,

  calculating machines, data processing equipment and computer, including

  computer programs of all kinds including but not limited to computer programs

  for use in creating and administering online advertising and for creating and

  developing customer profiles; global network computer programs and computer

  programs for use in enhancing the capability of global network servers;

  computer programs for personalizing information to potential customers;

  computer programs for use in building, customizing, and managing online store

  fronts; computer programs for use in creating and enhancing information sites

  and developing applications used in globally interconnected computer networks

  and in developing database-driven applications

  	

   

  	

  Under examination

  
	

  ART TECHNOLOGY GROUP

  	

   

  	

  United States

  	

   

  	

  75/521744

  	

   

  	

  07/20/98

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating and

  developing customer profiles; computer programs for use in enhancing the

  capability of global network servers; computer programs for personalizing

  information to potential customers; computer programs for use in building,

  customizing, and managing online store fronts; computer programs for use in

  creating and enhancing information sites and developing applications used in

  globally interconnected computer networks and in developing database-driven

  applications

  	

   

  	

  Awaiting acceptance of

  Statement of Use by 10/23/02

  
	

  ATG

  	

   

  	

  Japan

  	

   

  	

  11-42669

  	

   

  	

  05/13/99

  	

   

  	

  Memory media storing

  global network computer programs and computer programs for use in enhancing

  the capability of global network servers

  	

   

  	

  Approved for

  registration

  
	

  ATG

  	

   

  	

  South Africa

  	

   

  	

  99/07312

  	

   

  	

  04/30/99

  	

   

  	

  Scientific, nautical,

  surveying, electric, photographic, cinematographic, optical, weighing,

  measuring, signalling, checking (supervision), life-saving and teaching

  apparatus and instruments; apparatus for recording, transmission or

  reproduction of sound or images; magnetic data carriers, recording discs;

  automatic vending machines and mechanisms for coin-operated apparatus; cash

  registers, calculating machines, data processing equipment and computers,

  computer programs of all kinds including but not limited to global network

  computer programs and computer programs for use in enhancing the capability

  of global network servers

  	

   

  	

  Published

  

 

1

 

	

  Mark

  	

   

  	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing Date

  	

   

  	

  Goods

  	

   

  	

  Status

  
	

  DYNAMO

  	

   

  	

  Norway

  	

   

  	

  1999/04426

  	

   

  	

  05/04/99

  	

   

  	

  Computer programs for

  use in developing applications used in globally interconnected computer

  networks and in developing database-driven globally interconnected computer

  networks

  	

   

  	

  Suspended pending

  resolution of Dinamo Norge’s Dinamo

  
	

  DYNAMO

  	

   

  	

  South Africa

  	

   

  	

  99/07313

  	

   

  	

  04/30/99

  	

   

  	

  Scientific, nautical,

  surveying, electric, photographic, cinematographic, optical, weighing,

  measuring, signalling, checking (supervision), life-saving and teaching

  apparatus and instruments; apparatus for recording, transmission or

  reproduction of sound or images; magnetic data carriers, recording discs;

  automatic vending machines and mechanisms for coin-operated apparatus; cash

  registers, calculating machines, data processing equipment and computers,

  computer programs of all kinds including but not limited to global network

  computer programs and computer programs for use in enhancing the capability

  of global network servers

  	

   

  	

  Under examination

  
	

  MISCELLANEOUS DESIGN  (dot in box)

  	

   

  	

  South Africa

  	

   

  	

  99/10391

  	

   

  	

  06/11/99

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating and

  developing customer profiles; global network computer programs and computer

  programs for enhancing the capability of global network servers; computer

  programs for personalizing information to potential customers; computer

  programs for use in building, customizing, and managing online store fronts;

  computer programs for use in creating and enhancing information sites and

  developing applications used in globally interconnected computer networks and

  in developing database-driven applications

  	

   

  	

  Under examination

  

 

2

 

	

  Mark

  	

   

  	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing Date

  	

   

  	

  Goods

  	

   

  	

  Status

  
	

  AD STATION

  	

   

  	

  United States

  	

   

  	

  2252984

  	

   

  	

  06/15/99

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating

  customer profiles

  	

   

  	

  Section 8 Affidavit due

  06/15/05

  
	

  ART TECHNOLOGY GROUP

  	

   

  	

  European Community

  	

   

  	

  926873

  	

   

  	

  01/17/00

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating and

  developing customer profiles; global network computer programs and computer

  programs for use in enhancing the capability of global network servers;

  computer programs for personalising information to potential customers;

  computer programs for use in building, customising and managing online store

  fronts; computer programs for use in creating and enhancing information sites

  and developing applications used in globally interconnected computer networks

  and in developing database driven applications

  	

   

  	

  Renewal due 09/10/08

  
	

  ART TECHNOLOGY GROUP

  	

   

  	

  Japan

  	

   

  	

  4398974

  	

   

  	

  07/14/00

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating and

  developing customer profiles; global network computer programs and programs

  for use in enhancing the capability of global network servers; computer

  programs for personalizing information to potential customers; computer

  programs for use in creating and enhancing information sites and developing

  applications used in globally interconnected computer networks and in

  developing database-driven applications; applied electronic machines and

  instruments, electrical communication machines and apparatus, toys for

  television games for home use, records

  	

   

  	

  Renewal due 07/14/10

  
	

  ART TECHNOLOGY GROUP

  	

   

  	

  Norway

  	

   

  	

  207761

  	

   

  	

  04/05/01

  	

   

  	

  Scientific, nautical,

  surveying, electric, photographic, cinematographic, optical, weighing,

  measuring, signaling, checking(supervision), life-saving and teaching

  apparatus and instruments; apparatus for recording, transmission or

  reproduction of sound or images; magnetic data carriers, recording discs;

  automatic vending machines and mechanisms for coin-operated apparatus; cash

  registers, calculating machines, data processing equipment and computer,

  including computer programs of all kinds including but not limited to

  computer programs for use in creating and administering online advertising

  and for creating and developing customer profiles; global network computer

  programs and computer programs for use in enhancing the capability of global

  network servers; computer programs for personalizing information to potential

  customers; computer programs for use in building, customizing, and managing

  online store fronts; computer programs for use in creating and enhancing

  information sites and developing applications used in globally interconnected

  computer networks and in developing database-driven applications

  	

   

  	

  Renewal due 04/05/11

  
	

  ATG

  	

   

  	

  European Community

  	

   

  	

  1158021

  	

   

  	

  07/17/00

  	

   

  	

  Global network computer

  programs and computer programs for use in enhancing the capability of global

  network servers

  	

   

  	

  Renewal due 04/30/09

  
																	

 

3

 

	

  Mark

  	

   

  	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing Date

  	

   

  	

  Goods

  	

   

  	

  Status

  
	

  ATG

  	

   

  	

  Norway

  	

   

  	

  200299

  	

   

  	

  11/15/99

  	

   

  	

  Global network computer

  programs and computer programs for use in enhancing the capability of global

  network servers

  	

   

  	

  Renewal due 11/15/09

  
	

  ATG

  	

   

  	

  United States

  	

   

  	

  2243125

  	

   

  	

  05/04/99

  	

   

  	

  Global network computer

  programs and computer programs for use in enhancing the capability of global

  network servers

  	

   

  	

  Section 8 Affidavit

  05/04/05

  
	

  DYNAMO

  	

   

  	

  European Community

  	

   

  	

  927137

  	

   

  	

  01/26/01

  	

   

  	

  Computer programs for

  use in developing applications used in globally interconnected computer

  networks and in developing data-base-driven applications; computer programs

  for use in creating and enhancing information sites in globally

  interconnected computer networks

  	

   

  	

  Renewal due 09/10/08

  
	

  DYNAMO

  	

   

  	

  United States

  	

   

  	

  2155205

  	

   

  	

  05/05/98

  	

   

  	

  Computer programs for

  use in developing applications used in globally interconnected computer

  networks and in developing database-driven applications; computer programs

  for use in creating and enhancing information sites in globally

  interconnected computer networks

  	

   

  	

  Section 8 Affidavit

  05/05/04

  
	

  MISCELLANEOUS DESIGN  (dot in box)

  	

   

  	

  European Community

  	

   

  	

  1210566

  	

   

  	

  09/12/00

  	

   

  	

  Computer programs for

  use in creating and administering on line advertising and for creating and

  developing customer profiles; global network computer programs and computer

  programs for enhancing the capability of global networks servers; computer

  programs for personalising information to potential customers; computer

  programs for use in building, customising and managing on-line store fronts;

  computer programs for use in creating and enhancing information sites and

  developing applications used in globally interconnected computer networks and

  in developing database-driven applications

  	

   

  	

  Renewal due 06/11/09

  
	

  MISCELLANEOUS DESIGN  (dot in box)

  	

   

  	

  Norway

  	

   

  	

  199900

  	

   

  	

  10/14/99

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating and

  developing customer profiles; global network computer programs and computer

  programs for enhancing the capability of global networks servers; computer

  programs for personalizing information to potential customers; computer

  programs for use in building, customizing and managing on-line store fronts;

  computer programs for use in creating and enhancing information sites and

  developing applications used in globally interconnected computer networks and

  in developing database-driven applications

  	

   

  	

  Renewal due 10/14/09

  
	

  MISCELLANEOUS DESIGN  (dot in box)

  	

   

  	

  Switzerland

  	

   

  	

  438379

  	

   

  	

  06/14/99

  	

   

  	

  Computer programs for

  use in creating and administering on line advertising and for creating and

  developing customer profiles; global network computer programs and computer

  programs for enhancing the capability of global networks servers; computer

  programs for personalising information to potential customers; computer

  programs for use in building, customising and managing on-line store fronts;

  computer programs for use in creating and enhancing information sites and

  developing applications used in globally interconnected computer networks and

  in developing database-driven applications

  	

   

  	

  Renewal due 06/14/09

  
																

 

4

 

	

  Mark

  	

   

  	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing Date

  	

   

  	

  Goods

  	

   

  	

  Status

  
	

  MISCELLANEOUS DESIGN  (dot in box)

  	

   

  	

  United States

  	

   

  	

  2485731

  	

   

  	

  09/04/01

  	

   

  	

  Computer programs for

  use in creating and administering online advertising and for creating and developing

  customer profiles; computer programs for use in enhancing the capability of

  global network servers; computer programs for personalizing information to

  potential customers; computer programs for use in building, customizing, and

  managing online store fronts; computer programs for use in creating and

  enhancing information sites and developing applications used in globally

  interconnected computer networks and in developing database-driven

  applications

  	

   

  	

  Section 8 Affidavit due

  09/04/07

  
	

  PROFILE STATION

  	

   

  	

  United States

  	

   

  	

  2238533

  	

   

  	

  04/13/99

  	

   

  	

  Computer programs for

  developing customer profiles and for personalizing information to potential

  customers

  	

   

  	

  Section 8 Affidavit due

  04/13/05

  
	

  RETAIL STATION

  	

   

  	

  United States

  	

   

  	

  2238537

  	

   

  	

  04/13/99

  	

   

  	

  Computer programs for

  use in building, customizing, and managing online store fronts

  	

   

  	

  Section 8 Affidavit due

  04/13/05

  
																

 

5

 

	

  Mark

  	

   

  	

  Country

  	

   

  	

  Serial No.

  	

   

  	

  Filing Date

  	

   

  	

  Goods

  	

   

  	

  Status

  
	

  DYNAMO

  	

   

  	

  Japan

  	

   

  	

  11-42670

  	

   

  	

  05/13/99

  	

   

  	

  Magnetic memory media

  storing computer programs for use in developing applications used in globally

  interconnected computer networks and in developing database-driven

  applications; magnetic memory media storing computer programs for use in

  creating and enhancing information sites in globally interconnected computer

  networks

  	

   

  	

  Abandoned per L.

  Handman 08/01/01

  
	

  PERSONALIZATION CONTROL CENTER

  	

   

  	

  United States

  	

   

  	

  75/548301

  	

   

  	

  09/04/98

  	

   

  	

  Computer programs for

  use in building, customizing, and managing online store fronts; computer

  programs for use in creating and administering online advertising and for

  creating customer profiles; computer programs for developing customer

  profiles and for personalizing to potential customers

  	

   

  	

  Abandoned per L.

  Handman 12/23/01

  
	

  PERSONALIZATION SYSTEM

  	

   

  	

  United States

  	

   

  	

  75/548043

  	

   

  	

  09/04/98

  	

   

  	

  Computer programs for

  use in building, customizing, and managing online store fronts; computer

  programs for use in creating and administering online advertising and for

  creating customer profiles; computer programs for developing customer

  profiles and for personalizing to potential customers

  	

   

  	

  Abandoned per D. Brown

  01/12/99

  
	

  RELATIONSHIP COMMERCE

  	

   

  	

  United States

  	

   

  	

  75/403997

  	

   

  	

  12/11/97

  	

   

  	

  Computer programs for

  use in building, customizing, and managing online store fronts; computer programs

  for use in creating and administering online advertising and for creating

  customer profiles; computer programs for developing customer profiles and for

  personalizing information to potential customers

  	

   

  	

  Abandoned per L.

  Handman 08/16/00

  
													

 

6EXHIBIT 10(a)

 

EMPLOYMENT AGREEMENT

 

THIS

EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of this 1st

day of June, 2000, by and between First Security Federal Savings Bank

(hereinafter referred to as the “Association” whether in mutual or stock form),

and Julian E. Kulas (the “Employee”).

 

WHEREAS,

the Employee is currently serving as the President and Chief Executive Officer

of the Association; and

 

WHEREAS,

the Association has converted to the capital stock form as a subsidiary of

First SecurityFed Financial, Inc. (the “Holding Company”); and

 

WHEREAS,

the board of directors of the Association (“Board of Directors”) recognizes

that, as is the case with publicly held corporations generally, the possibility

of a change in control of the Holding Company and/or the Association may exist

and that such possibility, and the uncertainty and questions which it may raise

among management, may result in the departure or distraction of key management

personnel to the detriment of the Association, the Holding Company and their

respective stockholders; and

 

WHEREAS,

the Board of Directors believes it is in the best interests of the Association

to enter into this Agreement with the Employee in order to assure continuity of

management of the Association and to reinforce and encourage the continued

attention and dedication of the Employee to his assigned duties without

distraction in the face of potentially disruptive circumstances arising from

the possibility of a change in control of the Holding Company or the

Association, although no such change is now contemplated; and

 

WHEREAS,

the Board of Directors has approved and authorized the execution of this

Agreement with the Employee to take effect as stated in Section 2 hereof;

 

NOW,

THEREFORE, in consideration of the foregoing and of the respective covenants

and agreements of the parties herein, it is AGREED as follows:

 

1.                                       Definitions.

 

(a)           The

term “Change in Control” means (1) an event of a nature that (i) results in a

change in control of the Association or the Holding Company within the meaning

of the Home Owners’ Loan Act of 1933 and 12 C.F.R. Part 574 as in effect on the

date hereof; or (ii) would be required to be reported in response to Item I of

the current report on Form 8-K, as in effect on the date hereof, pursuant to

Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange

Act”); (2) any person (as the term is used in Sections 13(d) and 14(d) of the

Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3

under the Exchange Act), directly or indirectly of securities of the

Association or the Holding Company representing 20% or more of the

Association’s or the Holding Company’s outstanding securities; (3) individuals

who are members of the board of directors of the Association or the Holding

Company on the

 

 

date hereof (the “Incumbent Board”) cease for any reason to constitute

at least a majority thereof, provided that any person becoming a director

subsequent to the date hereof whose election was approved by a vote of at least

three-quarters of the directors comprising the Incumbent Board, or whose

nomination for election by the Holding Company’s stockholders was approved by

the nominating committee serving under an Incumbent Board, shall be considered

a member of the Incumbent Board; or (4) a plan of reorganization, merger

consolidation, sale of all or substantially all of the assets of the

Association or the Holding Company or a similar transaction in which the

Association or the Holding Company is not the resulting entity.  The term “change in control “ shall not

include an acquisition of securities by an employee benefit plan of the

Association or the Holding Company or the acquisition of securities of the

Association by the Holding Company. In the application of 12 C.F.R. Part 574 to

a determination of a Change in Control, determinations to be made by the OTS or

its Director under such regulations shall be made by the Board of Directors.

 

(b)           The

term “Commencement Date” means June 1, 2000.

 

(c)           The

term “Date of Termination” means the earlier of (1) the date upon which the

Association gives notice to the Employee of the termination of his employment

with, the Association or (2) the date upon which the Employee ceases to serve

as an Employee of the Association.

 

(d)           The

term “Involuntarily Termination” means termination of the employment of

Employee without his express written consent, and shall include a material

diminution of or interference with the Employee’s duties, responsibilities and

benefits as President and Chief Executive Officer of the Association, including

(without limitation) any of the following actions unless consented to in

writing by the Employee: (1) a change in the principal workplace of the

Employee to a location outside of a 30 mile radius from the Association’s

headquarters office as of the date hereof; (2) a material reduction in the

number or seniority of other Association personnel reporting to the Employee or

a material reduction in the frequency with which, or in the nature of the

matters with respect to which such personnel are to report to the Employee,

other than as part of a Association- or Holding Company-wide reduction in

staff; (3) a material adverse change in the Employee’s salary, perquisites,

benefits, contingent benefits or vacation, other than as part of an overall

program applied uniformly and with equitable effect to all members of the

senior management of the Association or the Holding Company; (4) a material

permanent increase in the required hours of work or the workload of the

Employee; and (5) a material demotion of the Employee. The term “Involuntary

Termination” does not include Termination for Cause or termination of

employment due to retirement, death, disability or suspension or temporary or

permanent prohibition from participation in the conduct of the Association’s

affairs under Section 8 of the Federal Deposit Insurance Act (“FDIA”).

 

(e)           The

terms “Termination for Cause” and “Terminated for Cause” mean termination of

the employment of the Employee because of the Employee’s personal dishonesty,

incompetence, willful misconduct, breach of a fiduciary duty involving personal

profit, intentional failure to perform stated duties, willful violation of any

law, rule, or regulation (other than traffic, violations or similar offenses)

or final cease-and-desist order, or material breach of any provision of this

Agreement. The Employee shall not be deemed to have been Terminated for Cause

unless and until there shall have been delivered to the Employee a copy of a

resolution,

 

2

 

duly adopted by the affirmative vote of not less than a majority of the

entire membership of the Board of Directors of the Association at a meeting of

the Board called and held for such purpose (after reasonable notice to the

Employee and an opportunity for the Employee, together with the Employee’s

counsel, to be heard before the Board), stating that in the good faith opinion

of the Board the Employee has engaged in the conduct described in the preceding

sentence and specifying the particulars thereof in detail.

 

2.             Term.  The term of this Agreement shall be a period

of three years commencing on the Commencement Date, subject to earlier

termination as provided herein. 

Beginning on the first annual anniversary date following the

Commencement Date, and on each annual anniversary date thereafter, the term of

this Agreement shall be extended for a period of one year in addition to the

then–remaining term, provided that (1) the Association has not

given notice to the Employee in writing at least 90 days prior to such renewal

date that the term of this Agreement shall not be extended further; and (2)

prior to such renewal date, the Board of Directors of the Association has

explicitly reviewed and approved the extension. Reference herein to the term of

this Agreement shall refer to both such initial term and such extended terms.

 

3.             Employment.  The Employee is employed as the President

and Chief Executive Officer of the Association.  As President and Chief Executive Officer, Employee shall render

such administrative and management services as are customarily performed by

persons situated in similar executive capacities, and shall have such other

powers and duties of an officer of the Association as the Board of Directors

may prescribe from time to time.

 

4.             Compensation.

 

(a)           Salary.  The Association agrees to pay the Employee

during the term of this Agreement the salary established by the Board of

Directors, which shall be at least the Employee’s salary in effect as of the

Commencement Date.  The amount of the

Employee’s salary shall be reviewed by the Board of Directors, beginning not

later than the first anniversary of the Commencement Date.  Adjustments in salary or other compensation

shall not limit or reduce any other obligation of the Association under this

Agreement.  The Employee’s salary in

effect from time to time during the term of this Agreement shall not thereafter

be reduced.

 

(b)           Discretionary

Bonuses.  The Employee shall be

entitled to participate in an equitable manner with all other executive

officers of the Association in discretionary bonuses as authorized and declared

by the Board of Directors to its executive employees.  No other compensation provided for in this Agreement shall be

deemed a substitute for the Employee’s right to participate in such bonuses

when and as declared by the Board of Directors.

 

(c)           Expenses.  The Employee shall be entitled to receive

prompt reimbursement for all reasonable expenses incurred by the Employee in

performing services under this Agreement in accordance with the policies and

procedures applicable to the executive officers of the Association, provided

that the Employee accounts for such expenses as required under such

policies and procedures.

 

3

 

5.             Benefits.

 

(a)           Participation

in Retirement and Employee Benefit Plans. 

The Employee shall be entitled to participate in all plans relating to

pension, thrift, profit-sharing, group life insurance, medical and dental coverage,

education, cash bonuses, and other retirement or employee benefits or

combinations thereof, in which the Association’s executive officers

participate. In addition, the Employee shall be entitled to be considered for

benefits under all of the stock and stock option related plans adopted for the

benefit of the Association’s executive or other employees.

 

(b)           Fringe

Benefits.  The Employee shall be

eligible to participate in, and receive benefits under, any other fringe

benefit plans which are or may become applicable to the Association’s executive

officers.

 

6.             Vacations;

Leave.  The Employee shall be

entitled to annual paid vacation in accordance with the policies established by

the Association’s Board of Directors for executive employees and to voluntary

leave of absence, with or without pay, from time to time at such times and upon

such conditions as the Board of Directors of the Association may determine in

its discretion.

 

7.             Termination

of Employment.

 

(a)           Involuntary

Termination.  The Board of Directors

may terminate the Employee’s employment at any time, but, except in the case of

Termination for Cause, termination of employment shall not prejudice the

Employee’s right to compensation or other benefits under this Agreement. In the

event of Involuntary Termination other than in connection with or within twelve

(12) months after a Change in Control, (1) the Association shall pay to the

Employee during the remaining term of this Agreement, his salary at the rate in

effect immediately prior to the Date of Termination, payable in such manner and

at such times as such salary would have been payable to the Employee under

Section 2 if the Employee had continued to be employed by the Association, and

(2) the Association shall provide to the Employee during the remaining term of

this Agreement health benefits as maintained by the Association for the benefit

of its executive officers from time to time during the remaining term of the

Agreement.

 

(b)           Termination

for Cause.  In the event of

termination for cause, the Association shall pay the Employee his salary

through the date of termination, and the Association shall have no further

obligation to the Employee under this Agreement.

 

(c)           Voluntary

Termination.  The Employee’s

employment may be voluntarily terminated by the Employee at any time upon 90

days written notice to the Association or upon such shorter period as may be

agreed upon between the Employee and the Board of Directors of the Association.

In the event of such voluntary termination, the Association shall be obligated

to continue to pay the Employee his salary and benefits only through the date

of termination, at the time such payments are due, and the Association shall

have no further obligation to the Employee under this Agreement.

 

(d)           Change

in Control.  In the event of

Involuntary Termination in connection with or within 12 months after a change

in control which occurs at any time while the Employee is employed under this

Agreement, the Association shall, subject to Section 8 of this Agreement,

 

4

 

(1) pay to the Employee in a lump sum in cash within 25 business days

after the Date of Termination an amount equal to 299% of the Employee’s “base

amount” as defined in Section 280G of the Internal Revenue Code of 1986, as

amended (the “Code”); and (2) provide to the Employee during the remaining term

of this Agreement such health benefits as are maintained for executive officers

of the Association from time to time during the remaining term of this Agreement.

 

(e)           Death;

Disability.  In the event of the

death of the Employee while employed under this Agreement and prior to any

termination of employment, the Employee’s estate, or such person as the

Employee may have previously designated in writing, shall be entitled to

receive from the Association the salary of the Employee through the last day of

the calendar month in which the Employee died. 

If the Employee becomes disabled as defined in the Association’s then current

disability plan or if the Employee is otherwise unable to serve in his present

capacity, the Employee shall be entitled to receive group and other disability

income benefits of the type then provided by the Association for executive

officers.  In the event of such

disability, this Agreement shall not be suspended. However, the Association

shall be obligated to pay the Employee compensation pursuant to Sections 4(a)

and (b) hereof only to the extent the Employee’s salary, in the absence of such

disability, would exceed (on an after tax basis) the disability income benefits

received pursuant to this paragraph. In addition, the Association shall have

the right, upon resolution of its Board, to discontinue paying cash

compensation pursuant to Sections 4(a) and (b) beginning six months following a

determination that Employee qualifies for the foregoing disability income

benefits.

 

(f)            Temporary

Suspension or Prohibition.  If the

Employee is suspended and/or temporarily prohibited from participating in the

conduct of the Association’s affairs by a notice served under Section 8(e)(3)

or (g)(1) of the FDIA, 12 U.S.C. § 1818(e)(3) and (g)(1), the Association’s

obligations under this Agreement shall be suspended as of the date of service,

unless stayed by appropriate proceedings. 

If the charges in the notice are dismissed, the Association may in its

discretion (1) pay the Employee all or part of the compensation withheld while

its obligations under this Agreement were suspended and (ii) reinstate in whole

or in part any of its obligations which were suspended.

 

(g)           Permanent

Suspension or Prohibition.  If the

Employee is removed and/or permanently prohibited from participating in the

conduct of the Association’s affairs by an order issued under Section 8(e)(4)

or (g)(1) of the FDIA, 12 U.S.C. § 1818(e)(4) and (g)(1), all obligations of

the Association under this Agreement shall terminate as of the effective date

of the order, but vested rights of the contracting parties shall not be

affected.

 

(h)           Default

of the Association.  If the

Association is in default (as defined in Section 3(x)(1) of the FDIA), all

obligations under this Agreement shall terminate as of the date of default, but

this provision shall not affect any vested rights of the contracting parties.

 

(i)            Termination

by Regulators.  All obligations

under this Agreement shall be terminated, except to the extent determined that

continuation of this Agreement is necessary for the continued operation of the

Association: (1) by the Director of the Office of Thrift Supervision (the

“Director”) or his or her designee, at the time the Federal Deposit Insurance

Corporation or the Resolution Trust Corporation enters into an agreement to

provide assistance

 

5

 

to or on behalf of the Association under the authority contained in

Section 13(c) of the FDIA; or (2) by the Director or his or her designee, at

the time the Director or his or her designee approves a supervisory merger to

resolve problems related to operation of the Association or when the

Association is determined by the Director to be in an unsafe or unsound

condition.  Any rights of the parties

that have already vested, however, shall not be affected by any such action.

 

(j)            Section

563.39(b).  So long as 12 C.F.R. §

563.39(b)(1995) remains in effect and applicable to the Association, in the

event that any of the termination provisions of this Agreement conflict with 12

C.F.R. § 563.39(b)(1995), the latter shall prevail.

 

8.             Certain

Reduction of Payments by the Association.

 

(a)           Notwithstanding

any other provisions of this Agreement, if payments under this Agreement,

together with any other payments received or to be received by the Employee in

connection with a Change in Control would cause any amount to be nondeductible

by the Association or the Holding Company for federal income tax purposes

pursuant to Section 2 80G of the Code, then benefits under this Agreement shall

be reduced (not less than zero) to the extent necessary so as to maximize

payments to the Employee without causing any amount to become nondeductible by

the Association or the Holding Company. 

The Employee shall determine the allocation of such reduction among

payments to the Employee.

 

(b)           Any

payments made to the Employee pursuant to this Agreement, or otherwise, are

subject to and conditioned upon their compliance with 12 U.S.C. 1828(k) and any

regulations promulgated thereunder.

 

(c)           Notwithstanding

any other provisions of this Agreement, payments under Section 7 of this

Agreement shall not exceed three times the Employee’s average annual

compensation based on the most recent five taxable years.

 

9.             No

Mitigation.  The Employee shall not

be required to mitigate the amount of any salary or other payment or benefit

provided for in this Agreement by seeking other employment or otherwise, nor

shall the amount of any payment or benefit provided for in this Agreement be

reduced by any compensation earned by the Employee as the result of employment

by another employer, by retirement benefits after the date of termination or

otherwise.

 

10.           Attorneys

Fees.  In the event the Association

exercises its right of Termination for Cause, but it is determined by a court

of competent jurisdiction or by an arbitrator pursuant to Section 18 that cause

did not exist for such termination, or if in any event it is determined by any

such court or arbitrator that the Association has failed to make timely payment

of any amounts owed to the Employee under this Agreement, the Employee shall be

entitled to reimbursement for all reasonable costs, including attorneys’ fees,

incurred in challenging such termination or collecting such amounts.  Such reimbursement shall be in addition to

all rights to which the Employee is otherwise entitled under this Agreement.

 

11.           No

Assignments.

 

(a)           This

Agreement is personal to each of the parties hereto, and neither party may

assign or delegate any of its rights or obligations hereunder without first

obtaining, the written

 

6

 

consent of the other party; provided, however, that the Association

shall require any successor or assign (whether direct or indirect, by purchase,

merger, consolidation or otherwise) to all or substantially all of the business

and/or assets of the Association, by an assumption agreement in form and

substance satisfactory to the Employee, to expressly assume and agree to

perform this Agreement in the same manner and to the same extent that the

Association would be required to perform it if no such succession or assignment

had taken place. Failure of the Association to obtain such an assumption

agreement prior to the effectiveness of any such succession or assignment shall

be a breach of this Agreement and shall entitle the Employee to compensation

from the Association in the same amount and on the same terms as the

compensation pursuant to Section 7(d) hereof. For purposes of implementing the

provisions of this Section 12(a), the date on which any such succession becomes

effective shall be deemed the Date of Termination.

 

(b)           This

Agreement and all rights of the Employee hereunder shall inure to the benefit

of and be enforceable by the Employee’s personal and legal representatives,

executors, administrators, successors, heirs, distributees, devisees and

legatees. If the Employee should die while any amounts would still be payable

to the Employee hereunder if the Employee had continued to live, all such

amounts, unless otherwise provided herein, shall be paid in accordance with the

terms of this Agreement to the Employee’s devisee, legatee or other designee or

if there is no such designee, to the Employee’s estate.

 

12.           Notice.  For the purposes of this Agreement, notices

and all other communications provided for in the Agreement shall be in writing

and shall be deemed to have been duly given when personally delivered or sent

by certified mail, return receipt requested, postage prepaid, to the

Association at its home office the attention of the Board of Directors with a

copy to the Secretary of the Association, or, if the Employee, to such home or

other address as the Employee has most recently provided in writing to the

Association.

 

13.           Amendments.  No amendments or additions to this Agreement

shall be binding unless in writing and signed by both parties, except as herein

otherwise provided.

 

14.           Paragraph

Headings.  The paragraph headings

used in this Agreement are included solely for convenience and shall not

affect, or be used in connection with, the interpretation of this Agreement.

 

15.           Severability.  The provisions of this Agreement shall be

deemed severable and the invalidity or unenforceability of any provision shall

not affect the validity or enforceability of the other provisions hereof.

 

16.           Governing

Law.  This Agreement shall be

governed by the laws of the United States to the extent applicable and otherwise

by the laws of the State of Illinois.

 

17.           Arbitration.  Any  dispute or controversy arising

under or in connection with this Agreement shall be settled exclusively by

arbitration in accordance with the rules of the American Arbitration

Association then in effect. Judgment may be entered on the arbitrator’s award

in any court having jurisdiction.

 

7

 

IN

WITNESS WHEREOF, the parties have executed this Agreement as of the day and

year first above written.

 

THIS

AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE

PARTIES.

 

	

  ATTEST:

  	

   

  	

   

  	

  FIRST

  SECURITY FEDERAL SAVINGS BANK

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

  Terry

  Gawryk, Secretary

  	

   

  	

   

  	

   

  	

  Paul

  Nadzikewycz

  
	

   

  	

   

  	

   

  	

  Its:

  	

  Chairman

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  EMPLOYEE

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Julian

  E. Kulas

  

 

8

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