Exhibit 10.13
FIRST AMENDMENT TO CREDIT
AGREEMENT AND WAIVER
THIS FIRST AMENDMENT TO CREDIT
AGREEMENT AND WAIVER (this “ Amendment ”), dated
as of October 21, 2005, is entered into by and among the
Lenders signatory hereto, WELLS FARGO FOOTHILL, INC. , a
California corporation, in its capacity as Agent for the Lenders
and Bank Product Providers (in such capacity, “ Agent
”), and SUMTOTAL SYSTEMS, INC. , a Delaware
corporation (“ Borrower ”). Terms used herein
without definition shall have the meanings ascribed to them in the
Credit Agreement defined below.
RECITALS
A. The Lenders, Agent and Borrower
have previously entered into that certain Credit Agreement dated as
of October 4, 2005 (as amended, modified and supplemented from
time to time, the “ Credit Agreement ”),
pursuant to which the Lenders have made certain loans and financial
accommodations available to Borrower.
B. Pursuant to
Section 5.20 of the Credit Agreement, Borrower shall
deliver to Agent certain additional documents, opinions, assurances
and confirmations as are reasonably necessary, or as Agent may
reasonably request, in connection with the pledge on the Closing
Date of the ownership interests in the first-tier Unrestricted
Subsidiaries of Borrower (that are not Immaterial Foreign
Subsidiaries), including with respect to the pledge of 65% of the
voting capital stock its Subsidiary SumTotal Systems Netherlands
BV, a besloten vennootschap organized under the laws of the
Netherlands (“ SumTotal BV ”). In connection
with such pledge of voting capital stock of SumTotal BV, an
amendment to the Credit Agreement is required to evidence the
acknowledgment and agreement of the Lenders to the “parallel
debt” covenant to be set forth in the Dutch Law Security
Agreement (as defined below).
C. Pursuant to
Section 5.22 of the Credit Agreement, Borrower shall
deliver to Agent, on or prior to the date that is 30 days after the
Closing Date, a Source Code Escrow Agreement, duly executed by
Borrower, Agent and an escrow agent reasonably satisfactory to
Agent, with respect to the source and object code for each version
or versions of each item of computer software programs or other
technology of Borrower and its Restricted Subsidiaries constituting
the Required Library. Borrower has informed Agent that it is unable
to deliver such Source Code Escrow Agreement prior to
November 3, 2005, and that it may be necessary to conclude
documentation with multiple escrow agents although Borrower
presently intends to transfer and maintain all of its source code
escrows (including the various source code escrows for its
licenses) with one agent.
D. Pursuant to
Section 5.23(b) of the Credit Agreement, Borrower shall
deliver a Collateral Access Agreement for 226 North 5th Street,
Columbus, Ohio 43215 on or prior to the date that is 30 days after
the Closing Date. Borrower and Agent’s counsel have informed
Agent that Borrower cannot comply with this requirement because of
the unwillingness of the owner of such property to enter into a
Collateral Access Agreement in satisfactory form.
E. Pursuant to
Section 5.25 of the Credit Agreement, on or prior to
the date that is 30 days after the Closing Date, Borrower shall
deliver to Agent evidence that all patents, trademarks and
copyrights registered in the names of Communication Strategies,
Inc. (“ CSI ”), Docent, Inc. and
1.
Click2learn, Inc. have been re-registered in the
name of Borrower in the United States Patent and Trademark Office,
or the United States Copyright Office, as the case may be. Borrower
has informed Agent that it cannot comply in all respects with this
requirement prior to November 3, 2005, as to several
trademarks and copyrights currently registered in the name of
Asymetrix Corporation (a predecessor in interest to Click2learn,
Inc.) and United States Copyright TX 2-767-505 (the “ CSI
Copyright ”) currently registered in the name of CSI that
have not been yet been re-registered in the name of
Borrower.
F. Pursuant to
Section 5.27 of the Credit Agreement, Borrower shall
deliver to Agent, on or prior to the date that is 30 days after the
Closing Date, original share certificates, together with stock
powers in blank, with respect to its Subsidiaries SumTotal Systems
ANZ Pty. Ltd. (“ SumTotal Australia ”) and
Pathlore Software Pty., Ltd. (“ Pathlore Australia
”). Borrower has informed Agent that the share certificates
of Pathlore Australia and SumTotal Australia were lost and cannot
be reissued in favor of the Borrower prior to November 3,
2005.
G. Pursuant to clause (a) of
Section 6.12 of the Credit Agreement, Borrower and its
Restricted Subsidiaries shall not have cash, Cash Equivalents and
other Permitted Investments (other than in the Cash Management
Accounts) in Deposit Accounts or Securities Accounts in an
aggregate amount in excess of $100,000 at any one time unless
Borrower or its Restricted Subsidiary, as applicable, and the
applicable securities intermediary or bank have entered into
Control Agreements or similar agreements governing such cash, Cash
Equivalents and other Permitted Investments in order to perfect
(and further establish) the Agent’s Liens therein;
provided that , such clause (a) shall not apply with
regard to any Deposit Accounts maintained with the Huntington
National Bank so long as within 30 days of the Closing Date the
Agent has received confirmation that any funds held in such Deposit
Accounts shall be swept on a daily basis to a Deposit Account
maintained with Wells Fargo Bank, N.A. As a result of operational
delays, Borrower has informed Agent that it is unable to obtain the
confirmation from Huntington National Bank required by the
foregoing proviso prior to November 3, 2005 and that Borrower
has an aggregate amount of cash in excess of $100,000 in an account
maintained with Huntington National Bank where Huntington National
Bank has not entered into a Control Agreement or similar agreement
governing such cash.
H. Borrower, Lenders and Agent have
agreed to amend the Credit Agreement to (i) alter the
definition of EBITDA to include an add-back for stock-based
compensation; (ii) evidence the acknowledgment and agreement
of the Lenders to such “parallel debt” covenant,
(iii) allow for an additional 90 days in order for Borrower to
comply with Section 5.22(a) , (iv) allow for an
additional 30 days in order for Borrower to comply with
Section 5.25 with respect to the trademarks and
copyrights of Asymetrix Corporation and the CSI Copyright as
described in Recital E above, (v) allow for an
additional 45 days in order for Borrower to comply with
Section 5.27 with respect to SumTotal Australia and
Pathlore Australia, and (vi) allow for certain balances to
remain in the Huntington National Bank Deposit Accounts in excess
of that which is described in Recital G above, as herein
provided, in order for Borrower to comply with
Section 6.12 .
I. Lenders and Agent have agreed to
waive the requirement that Borrower deliver to Agent a Collateral
Access Agreement with respect to 226 North 5th Street, Columbus,
Ohio 43215, as herein provided.
J. Borrower is entering into this
Amendment with the understanding and agreement that, except as
specifically provided herein, none of the Lender Group’s
rights or remedies as set forth in the Credit Agreement or any
other Loan Document is being waived or modified by the terms of
this Amendment.
2.
AGREEMENT
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants herein contained, and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as
follows:
1. Amendments to Credit
Agreement . Subject to and upon the conditions hereof, the
Credit Agreement is hereby amended, effective as of the date of
satisfaction of the conditions set forth in Section 3 ,
as follows:
(a) Section 5.22 of the
Credit Agreement is hereby amended to replace the “30”
in clause (a) with “90.”
(b) Section 5.25 of the
Credit Agreement is hereby amended by adding the following new text
at the end of existing Section 5.25 :
; provided that as to
trademarks and copyrights registered in the name of Asymetrix
Corporation (a predecessor in interest to Click2learn, Inc.) and
United States Copyright TX 2-767-505 registered in the name of
Communications Strategies, Inc., Borrower may deliver such evidence
on or prior to the date that is 60 days after the Closing
Date
(c) Section 5.27 of the
Credit Agreement is hereby amended to replace the “30 with
“75.”
(d) Section 6.12 of the
Credit Agreement is hereby deleted in its entirety and replaced
with the following:
6.12 Investments
. Except for Permitted
Investments, directly or indirectly, make or acquire any Investment
or incur any liabilities (including contingent obligations) for or
in connection with any Investment; provided , however
, that (a) Borrower and its Restricted Subsidiaries shall not
have cash, Cash Equivalents and other Permitted Investments (other
than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts in an aggregate amount in excess of $100,000 at
any one time unless Borrower or its Restricted Subsidiary, as
applicable, and the applicable securities intermediary or bank have
entered into Control Agreements or similar agreements governing
such cash, Cash Equivalents and other Permitted Investments in
order to perfect (and further establish) the Agent’s Liens
therein; provided that , until March 1, 2006 this
clause (a) shall not apply with regard to any Deposit Accounts
maintained with the Huntington National Bank so long as
(i) from Closing Date until December 15, 2005, the
aggregate of the Borrower’s and its Restricted
Subsidiaries’ balances in Deposit Accounts maintained with
Huntington National Bank shall not exceed $5,020,000 at any one
time, (ii) from December 16, 2005 until January 15,
2006, the aggregate of the Borrower’s and its Restricted
Subsidiaries’ balances in Deposit Accounts maintained with
Huntington National Bank shall not exceed $700,000 at any one time,
and (iii) from January 16, 2006 through February 28,
2006, the aggregate of the Borrower’s and its
Restricted
3.
Subsidiaries’ balances in
Deposit Accounts maintained with Huntington National Bank shall not
exceed $250,000 at any one time, and (b) no Unrestricted
Subsidiary shall have cash, Cash Equivalents in Deposit Accounts or
Securities Accounts in aggregate amount in excess of $1,000,000 at
any one time unless such cash, Ca
