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EXHIBIT 10.11
[SILICON VALLEY BANK LOGO]
LOAN AND SECURITY AGREEMENT
BORROWER: THE LIGHTSPAN PARTNERSHIP, INC.
ADDRESS: 00000 XXXXXX XXXXX XXXXX
XXX XXXXX, XXXXXXXXXX 00000
DATE: FEBRUARY 25, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and the borrower(s) named
above (jointly and severally, the "Borrower"), whose chief executive office is
located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") shall for all purposes be deemed to be a part of
this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain items used in this Agreement are set forth in Section 8
below.)
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in
amounts determined by Silicon in its sole discretion, up to the amounts (the
"Credit Limit") shown on the Schedule, provided no Default or Event if Default
has occurred and is continuing.
1.2 INTEREST. All Loans and all other monetary Obligations * shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the
same rate as the other Loans. Silicon may, in its discretion, charge interest
to Borrower's Deposit Accounts maintained with Silicon. Regardless of the
amount of Obligations that may be outstanding from time to time, Borrower shall
pay Silicon minimum monthly interest during the term of this Agreement in the
amount set forth on the Schedule (the "Minimum Monthly Interest").
* (OTHER THAN INTEREST NOT YET DUE AND PAYABLE)
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other * Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
* MONETARY
1.4 FEES. Borrower shall pay Silicon the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 LETTERS OF CREDIT. [Not Applicable]
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to Silicon a security interest
in all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitations,
all of Borrower's Deposit Accounts, and all money, and all property now or at
any time in the future in Silicon's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing (all of the foregoing,
together with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively, as
the "Collateral"). *
* NOTWITHSTANDING THE FOREGOING, THE "COLLATERAL" SHALL NOT INCLUDE THOSE
ITEMS SET FORTH ON EXHIBIT B HERETO.
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3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower.
The execution, delivery and performance by Borrower of this Agreement, and all
other documents contemplated hereby (i) have been duly and validly authorized,
(ii) are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, of Borrower's by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or
its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Silicon at least 30
days prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on the
Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Silicon now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims
of others. None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or
impair Borrower's right to remove any Collateral from the leased premises.
Whenever any Collateral is located upon premises in which any third party has
an interest (whether as owner, mortgagee, beneficiary under a deed of trust,
lien or otherwise), Borrower shall, whenever requested by Silicon, use its best
efforts to cause such third party to execute and deliver to Silicon, in form
acceptable to Silicon, such waivers and subordinations as Silicon shall
specify, so as to ensure that Silicon's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the collateral now or in the future may be
located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records *, comprising an
accounting system in accordance with generally accepted accounting principles.
* IN ALL MATERIAL RESPECTS
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated *. Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no material adverse change in the financial condition or
business of Borrower. Borrower is now and will continue to be solvent.
* IN ALL MATERIAL RESPECTS
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely
pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owned by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligations to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notified Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or
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takes any other steps required to keep the contested taxes from becoming a lien
upon any of the Collateral. Borrower is unaware of any claims or adjustments
proposed for any of Borrower's prior tax years which could result in additional
taxes becoming due and payable by Borrower. Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency. Borrower shall, at all times,
utilize the services of an outside payroll service providing for the automatic
deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or
before any governmental agency (or any basis therefor know to Borrower) which
may result, either separately or in the aggregate, in any material adverse
change in the financial condition or business of Borrower, or in any material
impairment in the ability of Borrower to carry on its business in substantially
the same manner as it is now being conducted. Borrower will promptly inform
Silicon in writing of any claim, proceeding, litigation or investigation in the
future threatened or instituted by or against Borrower involving any single
claim of $50,000 or more, or involving $100,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of service in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Silicon transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on Silicon's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit Silicon's security interest and
other rights in all of Borrower's Receivables, nor shall Silicon's failure to
advance or lend against a specific Receivable affect or limit Silicon's
security interest and other rights therein. Loan requests received after 2:30
PM will not be considered by Silicon until the next Business Day. Together
with each such schedule and assignment, or later if requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Receivables, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Silicon an aged accounts receivable
trial balance in such form and at such intervals as Silicon shall request. In
addition, Borrower shall deliver to Silicon the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which shall
be with recourse. Borrower shall also provide Silicon with copies of all credit
memos within two days after the date issued.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has
occurred. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for Silicon, and Borrower shall immediately deliver all such payments and
proceeds to Silicon in their original form, duly endorsed in blank, to be
applied to the Obligations in such order as Silicon shall determine. Silicon
may, in its discretion, require that all proceeds of Collateral be de-
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posited by Borrower into a lockbox account, or such other "blocked account" as
Silicon may specify, pursuant to a blocked account agreement in such form as
Silicon may specify. Silicon or its designee may, at any time, notify Account
Debtors that the Receivables have been assigned to Silicon.
4.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred. Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon. Nothing in this
Section limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with the Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location
and condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 VERIFICATION. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the
name of Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring
in the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance
to Silicon, so that Silicon is satisfied that such insurance is, at all times,
in full force and effect. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no
Default or Event of Default has occurred and is continuing, Silicon shall
release to Borrower insurance proceeds with respect to Equipment totaling less
than $100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but
is not obligated to, obtain the same at Borrower's expense. Borrower shall
promptly deliver to Silicon copies of all reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.
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5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records *. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $500 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records ** (except that Borrower
does not waive any attorney-client privilege).
* RELATING TO THE COLLATERAL
** TO SILICON OR OTHERWISE IN CONNECTION WITH LITIGATION INVOLVING FRAUDULENT
CONDUCT RELATING TO THE BORROWER
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity *; (ii)
acquire any assets, except in the ordinary course of business **; (iii) enter
into any other transaction outside the ordinary course of business ***; (iv)
sell or transfer any Collateral, except for the sale of finished Inventory in
the ordinary course of Borrower's business, and except for the sale of obsolete
or unneeded Equipment in the ordinary course of business ****; (v) store any
Inventory or other Collateral with any warehouseman or other third party *****;
(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or
other contingent basis; (vii) make any loans of any money or other assets +;
(viii) incur any debts, outside the ordinary course of business, which would
have a material, adverse effect on Borrower or on the prospect of repayment of
the Obligations; (ix) guarantee or otherwise become liable with respect to the
obligations of another party or entity; (x) pay or declare any dividends on
Borrower's stock (except for dividends payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower's stock ++; (xii) make any change in Borrower's capital structure
which would have a material adverse effect on Borrower or on the prospect of
repayment of the Obligations; or (xiii); or (xiv) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
* , EXCEPT THAT THE BORROWER MAY MERGE OR CONSOLIDATE WITH ANOTHER
CORPORATION IF THE BORROWER IS THE SURVIVING CORPORATION IN THE MERGER AND THE
AGGREGATE VALUE OF THE ASSETS ACQUIRED IN THE MERGER DO NOT EXCEED THE LESSER OF
$3,000,000 OR 10% OF BORROWER'S TANGIBLE NET WORTH (AS DEFINED IN THE SCHEDULE)
AS OF THE END OF THE MONTH PRIOR TO THE EFFECTIVE DATE OF THE MERGER, AND THE
ASSETS OF THE CORPORATION ACQUIRED IN THE MERGER ARE NOT SUBJECT TO ANY LIENS OR
ENCUMBRANCES, EXCEPT PERMITTED LIENS, AND PROVIDED THAT OTHERWISE THE CONSENT OF
SILICON SHALL NOT BE UNREASONABLY WITHHELD
** FOR AN AGGREGATE PURCHASE PRICE NOT TO EXCEED THE LESSER OF $3,000,000 OR
10% OF BORROWER'S TANGIBLE NET WORTH (AS DEFINED IN THE SCHEDULE) AS OF THE END
OF THE MONTH PRIOR TO THE EFFECTIVE DATE OF THE ACQUISITION AND THE ASSETS SO
ACQUIRED ARE NOT SUBJECT TO ANY LIENS OR ENCUMBRANCES, EXCEPT PERMITTED LIENS,
AND PROVIDED THAT OTHERWISE THE CONSENT OF SILICON SHALL NOT UNREASONABLY
WITHHELD
*** AS CONTEMPLATED BY THE CURRENT BUSINESS PLAN OF BORROWER AS DELIVERED TO
SILICON
**** OR THE LICENSING OR SALE OF ITEMS OF INTELLECTUAL PROPERTY IN THE
ORDINARY COURSE OF THE BUSINESS OF BORROWER CONSISTENT WITH PAST PRACTICES OF
BORROWER
***** OTHER THAN AS IDENTIFIED ON SCHEDULE 5.5 HERETO AND OTHER THAN AS
BORROWER FROM TIME TO TIME NOTIFIES SILICON 30 DAYS IN ADVANCE OF THE PLACEMENT
OF ANY COLLATERAL AT ANY OTHER LOCATION, PROVIDED THAT IN NO EVENT SHALL
BORROWER LOCATE ANY COLLATERAL OUTSIDE OF CALIFORNIA WITHOUT THE EXPRESS WRITTEN
CONSENT OF SILICON
+ EXCEPT FOR LOANS TO EMPLOYEES OF BORROWER IN AN AGGREGATE AMOUNT NOT TO
EXCEED $250,000 AT ANY ONE TIME OUTSTANDING
++ EXCEPT FOR REPURCHASES OF COMMON STOCK OF BORROWER FROM EMPLOYEES OF THE
BORROWER UPON EXERCISE OF THE REPURCHASE OPTION SET FORTH IN THE STOCK OPTION
AGREEMENTS GOVERNED BY THE 1993 STOCK OPTION PLAN OF THE BORROWER AS IN EFFECT
AS OF THE DATE HEREOF
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent
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that Silicon may deem them reasonably necessary in order to prosecute or defend
any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence * without notice, effective immediately. If this
Agreement is terminated by Borrower or by Silicon under this Section 6.2,
Borrower shall pay to Silicon a termination fee in an amount equal to the
greater of (i) an amount equal to all interest due and payable during the six
months immediately preceding the effective date of termination, or (ii) an
amount equal to the Minimum Monthly Interest multiplied by the number of full
or partial months from the effective date of termination to the Maturity Date,
or (iii) an amount equal to the average monthly interest accrued during the six
months immediately preceding the effective date of termination, multiplied by
the number of full or partial months from the effective date of termination to
the Maturity Date. The termination fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
* AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, PROVIDED THAT AN
EVENT OF DEFAULT ARISING FROM THE BREACH OF A FINANCIAL COVENANT BY THE
BORROWER AS OF THE END OF ONE PERIOD IS NOT CURED BY THE BORROWER'S COMPLIANCE
WITH SUCH FINANCIAL COVENANT IN A SUBSEQUENT PERIOD.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether
or not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or
on any earlier effective date of termination, there are any outstanding Letters
of Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an
amount equal to the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith, to secure
all of the Obligations relating to said Letters of Credit, pursuant to
Silicon's then standard form cash pledge agreement. Notwithstanding any
termination of this Agreement, all of Silicon's security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that, without limiting the fact that Loans are
subject to the discretion of Silicon, Silicon may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of Silicon, nor shall any such
termination relieve Borrower of any Obligation to Silicon, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Silicon shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Silicon's
security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or, delivered to Silicon by Borrower or
any of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit*; or (d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured; or (e)
Borrower shall fail to perform any other non-monetary obligation, which failure
is not cured within 5 Business Days after the date due; or (f) Any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within 10
days after the occurrence of the same; or (g) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured
within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or (h) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a material adverse effect on
Borrower's business or financial condition; or (i) Dissolution, termination of
existence, insolvency or business failure of Borrower, or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower under any reorganization,
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7
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (j) the commencement of any proceeding against Borrower or any guarantor of
any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all
of the Obligations, or any attempt to do any of the foregoing, or commencement
of proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligation other
than as permitted in the applicable subordination agreement, or if any Person
who has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (n) there shall be a change in the
record or beneficial ownership of an aggregate of more than ** of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of Silicon***; or (o) Borrower
shall generally not pay its debts as they become due, or Borrower shall
conceal, remove or transfer any part of its property, with intent to hinder,
delay or defraud its creditors, or make or suffer any transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or (p) there shall be a material adverse change in Borrower's
business or financial condition; or (q) Silicon may cease making any Loans
hereunder during any of the above cure periods, and thereafter if an Event of
Default has occurred.
* AND SUCH CONDITION SHALL CONTINUE TO EXIST FOR 3 DAYS, PROVIDED THAT IF THE
AMOUNT OF TOTAL LOANS AND OTHER OBLIGATIONS OUTSTANDING AT ANY TIME EXCEED
THE MAXIMUM DOLLAR AMOUNT COMPONENT OF THE CREDIT LIMIT (AS OPPOSED TO
EXCEEDING THE PERCENTAGE OF ELIGIBLE ACCOUNTS COMPONENT OF THE CREDIT LIMIT),
THEN SUCH 3 DAY PERIOD SHALL NOT BE APPLICABLE
** 30%
***, OTHER THAN ANY OF THE FOREGOING ARISING IN CONNECTION WITH AN EQUITY
INVESTMENT BY OR A TRANSFER AMONG EXISTING SHAREHOLDERS AS OF THE DATE
HEREOF
7.2 REMEDIES. Upon the occurrence*, and at any time thereafter, Silicon,
at its option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (a)
Cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other document or agreement; (b) Accelerate and declare all or
any part of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of
the Collateral wherever it may be found, and for that purpose Borrower hereby
authorizes Silicon without judicial process to enter onto any of Borrower's
premises without interference to search for, take possession of, keep, store, or
remove any of the Collateral, and remain on the premises or cause a custodian to
remain on the premises in exclusive control thereof, without charge for so long
as Silicon deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Silicon seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) and demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's premises, vehicles, hoists,
lifts, cranes, equipment and all other property without charge; (f) Sell, lease
or otherwise dispose of any of the Collateral, in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. Silicon shall have the right to conduct such disposition on
Borrower's premises without charge, for such time or times as Silicon deems
reasonable, or on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition. Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
shall not relieve Borrower of any liability Borrower may have if any Collateral
is defective as to title or physical condition or otherwise at the time of sale:
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables
and the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be
added to and become part of the Obligations, shall be due on demand, and shall
bear interest at a rate equal to the highest interest rate applicable to any of
the Obligations. Without limiting any of Silicon's rights and remedies, from
and after the occurrence of any Event of Default, the interest rate applicable
to the Obligations shall be increased by an additional four percent per annum.
*AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, PROVIDED THAT AN EVENT
OF DEFAULT ARISING FROM THE BREACH OF A FINANCIAL COVENANT BY THE BORROWER AS
OF THE END OF ONE PERIOD IS NOT CURED BY THE BORROWER'S COMPLIANCE WITH SUCH
FINANCIAL COVENANT IN A SUBSEQUENT PERIOD.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect
to any sale of any sale of any of the Collateral, Silicon may (but is not
obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same. Silicon shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence *, without limiting Silicon's
other rights and remedies, Borrower grants to Silicon an irrevocable power of
attorney coupled with an interest, authorizing and permitting Silicon (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise, but
Silicon agrees to exercise the following powers in a commercially reasonable
manner: (a) Execute on behalf of Borrower any documents that Silicon may, in its
sole discretion, deem advisable in order to perfect and maintain Silicon's
security interest in the Collateral, or in order to exercise a right of Borrower
or Silicon, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements; (b) Execute
on behalf of Borrower any document exercising, transferring or assigning any
option to purchase, sell or otherwise dispose of or to lease (as lessor or
lessee) any real or personal property which is part of Silicon's Collateral or
in which Silicon has an interest; (c) Execute on behalf of Borrower, any
invoices relating to any Receivable, any draft against any Account Debtor and
any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice
of Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanics's, materialman's or other lien; (d) Take control in
any manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into Silicon's possession; (e) Endorse all
checks and other forms of remittances received by Silicon; (f) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (g) Grant extensions of time to pay,
compromise claims and settle Receivables and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both; (i) Settle and adjust, and give releases
of, any insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give Silicon the same rights
of access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other present or future agreements. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and attorneys' fees incurred by Silicon with respect to the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall Silicon's rights under
the foregoing power of attorney or any of Silicon's other rights under this
Agreement be deemed to indicate that Silicon is in control of the business,
management or properties of Borrower.
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9
* AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, PROVIDED, THAT AN EVENT OF
DEFAULT ARISING FROM THE BREACH OF A FINANCIAL COVENANT BY THE BORROWER AS OF
THE END OF ONE PERIOD IS NOT CURED BY THE BORROWER'S COMPLIANCE WITH SUCH
FINANCIAL COVENANT IN A SUBSEQUENT PERIOD.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Eligible Inventory" [NOT APPLICABLE].
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
xxxxxxxx, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom the
Borrower has any dispute (whether or not relating to the particular Receivable),
(v) the Receivable must not be owing from an Affiliate of Borrower, (vi) the
Receivable must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Receivable must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to Silicon's satisfaction, with the United States Assignment of Claims Act),
(viii) the Receivable must not be owing from an Account Debtor located outside
the United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
eligible Receivables outstanding. In addition, if more than 50% of the
Receivables owing from an Account Debtor are outstanding more than 90 days from
their invoice date (without regard to unapplied credits) or are otherwise not
eligible Receivables, then all Receivables owing from that Account Debtor will
be deemed ineligible for borrowing. Silicon may, from time to time, in its
discretion, revise the Minimum Eligibility Requirements, upon written notice to
the Borrower.
*20
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance), credit insurance, liability insurance, property insurance and
other insurance(, tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit), and all materials and supplies of every kind, nature and description
which are or might be used or consumed in Borrower's business or used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, merchandise or other personal property, and all
warehouse receipts, documents of title and other documents representing any of
the foregoing.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods*. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
*; (ix) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, IF THE JUDGMENT IT
SECURES IS FULLY COVERED BY INSURANCE AND HAS BEEN DISCHARGED OR EXECUTION
THEREOF EFFECTIVELY STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 30 DAYS OF
THE ENTRY THEREOF; AND (X) EASEMENTS, RIGHTS OF WAY, SERVITUDES OR ZONING OR
BUILDING RESTRICTIONS AND OTHER MINOR ENCUMBRANCES ON REAL PROPERTY AND
IRREGULARITIES IN THE TITLE TO SUCH PROPERTY WHICH DO NOT IN THE AGGREGATE
MATERIALLY IMPAIR THE USE OR VALUE OF SUCH PROPERTY OR RISK THE LOSS OR
FORFEITURE OF TITLE THERETO
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
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11
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, document and all other forms
of obligation in any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicted, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon
(including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by silicon on account of the Obligations Business Days
after receipt by Silicon of immediately available funds and, for purposes of
the foregoing, any such funds received after 2:30 PM on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 Application of Payments. All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to
the Obligations, in such order and manner as Silicon shall determine in its
sole discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon or charge them to
Borrower's Loan account, in which event they will bear interest at the same
rate applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by
the parties in connection herewith.
9.8 Waivers. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims, de-
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12
mands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by Borrower or any other party through the ordinary negligence of
Silicon, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Silicon, but nothing herein shall
relieve Silicon from liability for its own gross negligence or willful
misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower, enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim;
examine, audit, copy, and inspect any of the Collateral or any of Borrower's
books and records; protect, obtain possession of, lease, dispose of, or
otherwise enforce Silicon's security interest in, the Collateral; and otherwise
represent Silicon in any litigation relating to Borrower. In satisfying
Borrower's obligation hereunder to reimburse Silicon for attorneys fees,
Borrower may, for convenience, issue checks directly to Silicon's attorneys,
Levy, Small & Xxxxxx, but Borrower acknowledges and agrees that Levy, Small &
Xxxxxx is representing only Silicon and not Borrower in connection with this
Agreement. If either Silicon or Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Silicon, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of
an action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon
which such claim or cause of action, or any part thereof, is based, and the
service of a summons and complaint on an officer of Silicon, or on any other
person authorized to accept service on behalf of Silicon, within thirty (30)
days thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or
cause of action. The one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of Silicon in its sole
discretion. This provision shall survive any termination of this Loan Agreement
or any other present or future agreement.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any
rule of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Xxxxx County;
(ii) consents to the jurisdiction and venue of any such court and consents to
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13
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH SILICON OR
BORROWER IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
Borrower:
THE LIGHTSPAN PARTNERSHIP, INC.
By /s/ XXXX XXXXX
--------------------------------
President or Vice President
By [SIGNATURE ILLEGIBLE]
--------------------------------
Secretary of Ass't Secretary
Silicon:
SILICON VALLEY BANK
By
--------------------------------
Title
-----------------------------
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14
[SILICON VALLEY BANK LOGO]
AMENDMENT TO LOAN DOCUMENTS
BORROWER: THE LIGHTSPAN PARTNERSHIP, INC.
DATE: DECEMBER 31, 1997
THIS AMENDMENT TO LOAN DOCUMENTS is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above ("Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated February 25, 1997 (the "Loan Agreement"), as follows, effective as of the
date hereof. (Capitalized terms used but not defined in this Amendment, shall
have the meanings set forth in the Loan Agreement.)
1. MODIFIED CREDIT LIMIT. That portion of the Schedule to Loan and
Security Agreement entitled "CREDIT LIMIT (Section 1.1)" is hereby amended to
read as follows:
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i)
$10,000,000 at any one time outstanding; or (ii)
(A) 70% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above).
LETTER OF CREDIT
SUBLIMIT
(Section 1.5): $500,000
2. MODIFIED MATURITY DATE. That portion of the Schedule to Loan and
Security Agreement entitled "MATURITY DATE (section 6.1)" is hereby amended to
read as follows:
4. MATURITY DATE
(Section 6.1): FEBRUARY 25, 1999, subject to automatic
renewal as provided in Section 6.1 above,
and early termination as provided in Section
6.2 above.
3. MODIFIED NOTICE OF TERMINATION. Section 6.1 of the Loan Agreement is
hereby amended to read as follows:
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date");
provided that the Maturity Date shall automatically be extended, and
this Agreement shall automatically and continuously renew, for
successive additional terms of one year each, unless one party gives
written notice to
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15
SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
-------------------------------------------------------------------------------
the other, not less than thirty days prior to the next Maturity Date,
that such party elects to terminate this Agreement effective on the
next Maturity Date.
4. LETTERS OF CREDIT PROVISION. Section 1.5 of the Loan Agreement is
hereby amended to read as follows:
1.5 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its
sole discretion, issue or arrange for the issuance of letters of
credit for the account of Borrower, in each case in form and substance
satisfactory to Silicon in its sole discretion (collectively, "Letters
of Credit"). The aggregate face amount of all outstanding Letters of
Credit from time to time shall not exceed the amount shown on the
Schedule (the "Letter of Credit Sublimit"), and shall be reserved
against Loans which would otherwise be available hereunder. Borrower
shall pay all bank charges (including charges of Silicon) for the
issuance of Letters of Credit, together with such additional fee as
Silicon's letter of credit department shall charge in connection with
the issuance of the Letters of Credit. Any payment by Silicon under or
in connection with a Letter of Credit shall constitute a Loan
hereunder on the date such payment is made. Each Letter of Credit
shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold
Silicon harmless from any loss, cost, expense, or liability, including
payments made by Silicon, expenses, and reasonable attorneys' fees
incurred by Silicon arising out of or in connection with any Letters
of Credit. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guaranteed by
Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for
Borrower's account, and Borrower understands and agrees that Silicon
shall not be liable for any error, negligence, or mistake, whether of
omission or commission, in following Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments,
or supplements thereto. Borrower understands that Letters of Credit
may require Silicon to indemnify the issuing bank for certain costs or
liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless
with respect to any loss, cost, expense, or liability incurred by
Silicon under any Letter of Credit as a result of Silicon's
indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other present
or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.
5. FEE. Borrower shall concurrently pay to Silicon a facility fee in the
amount of $50,000, which shall be in addition to all interest and all other fees
payable to Silicon and shall be non-refundable, and may be charged to Borrower's
loan account with Silicon.
6. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon that
all representations and warranties set forth in the Loan Agreement, as amended
hereby, are true and correct.
7. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and Borrower, and the
other written documents and agreements between Silicon and Borrower set forth in
full all of the representations and agreements of the parties with respect to
the subject matter hereof and
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16
SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS
-------------------------------------------------------------------------------
supersede all prior discussions, representations, agreements and understandings
between the parties with respect to the subject hereof. Except as herein
expressly amended, all of the terms and provisions of the Loan Agreement, and
all other documents and agreements between Silicon and Borrower shall continue
in full force and effect and the same are hereby ratified and confirmed.
BORROWER: SILICON:
THE LIGHTSPAN PARTNERSHIP, SILICON VALLEY BANK
INC.
BY /s/ [SIGNATURE ILLEGIBLE] BY /s/ [SIGNATURE ILLEGIBLE]
--------------------------------- ---------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ [SIGNATURE ILLEGIBLE] TITLE Vice President
--------------------------------- ------------------------------
SECRETARY OR ASS'T SECRETARY
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17
[SILICON VALLEY BANK LETTERHEAD]
LOAN COMMITMENT
December 30, 1997
Xx. Xxxxxxxx Xxxx,
Vice President,
Finance and Administration
The Lightspan Partnership, Inc.
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000
Dear Xxxxxxxx:
We are pleased to advise you that Silicon Valley Bank, Commercial Finance
Division ("Silicon") has approved your request for the renewal of the current
credit facilities with The Lightspan Partnership, Inc. (the "Company"), subject
to the terms and conditions set forth below. These terms may differ from our
current Loan Agreement and we have underlined the changes for your convenience.
Capitalized terms used in this Commitment, which are not defined in this
Commitment, have the meanings set forth as in the Loan and Security Agreement.
A. TERMS OF FINANCING.
The terms of the financing ("Financing") are as follows:
1. BORROWER. The "Borrower" will be The Lightspan Partnership, Inc.
2. LOANS. Silicon will make loans to the borrower, in amounts
determined by Silicon in its sole discretion, up to the lesser of $10,000,000 or
70% of the amount of the Borrower's eligible receivables, which shall exclude
all accounts aged beyond 120 days from original invoice date. Further,
ineligible accounts shall include, credit balances over 120 days, all contra
accounts, cross-agings at 50% on past due accounts, concentration accounts in
excess of 25% to total receivables, foreign accounts and all other categories of
accounts which Silicon, in its sole judgment, shall deem ineligible for
borrowing.
Note: Advance rates are predicated upon satisfactory levels of
dilution as determined on an on-going basis.
18
3. LETTERS OF CREDIT. Silicon, in its sole discretion, will, upon the
request of the Borrower, from time to time during the term of the Loan
Agreement, issue letters of credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time outstanding not to exceed
$500,000, provided that, on the date a Letter of Credit is to be issued,
Borrower has available to its Loans in an amount equal to or greater than the
face amount of the Letter of Credit to be issued. Further, all such Letters of
Credit issued under this facility must mature no later than 30 days prior to
maturity date of this loan facility or will be otherwise cash secured. Fees for
the Letters of Credit shall be as charged by Silicon's International Department
or Letter of Credit Department at the time the Letters of Credit are issued. The
Loans available to the Borrower under the Loan Agreement at any time shall be
reduced by the face amount of all Letters of Credit outstanding at such time.
4. INTEREST. All Loans and all other monetary Obligations shall bear
interest at a rate equal to the "Prime Rate" in effect form time to time, plus
1.5% per annum. Interest shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. "Prime Rate" means the rate announced from
time to time by Silicon as its "prime rate." The Prime Rate is a base rate upon
which other rates charged by Silicon are based, and it is not necessarily the
best rate available at Silicon. Interest shall be payable and charged as set
forth in the Loan Agreement, and is subject to increase with respect to
Overadvances and following an Event of Default, as set forth in the Loan
Agreement.
5. LOAN FEE. Concurrently with your execution of this Commitment Letter,
Borrower shall pay Silicon a loan fee (the "Loan Fee") of $50,000 (1/2% of the
Commitment Amount. This fee will not be refundable.
6. UNUSED LINE FEE. .25 of 1% per annum, payable monthly.
7. TERM. The term of the Loan Agreement shall be for a term ending
February 25, 1999. The term will automatically renew under Section 6.1 of the
Loan Agreement. An Early Termination Fee will be charged under Section 6.2 of
the Loan Agreement. This fee is not applicable if the loan is transferred to
another lending unit within Silicon Valley Bank.
8. COLLATERAL. All obligations of the Borrower are to be secured by a
first-priority perfected security interest in all corporate assets of Borrower
including but not limited to, all of Borrower's present and future accounts,
contract rights, chattel paper, instruments, general intangibles (including
without limitation copyrights, patents, patent
2
19
applications, trademarks and other intellectual property), inventory,
documents, equipment, and all other personal property and fixtures of the
Borrower, subject to Permitted Liens (as defined in the Loan Agreement).
9. FINANCIAL COVENANTS. The Loan Agreement will contain the following
financing covenants.
Minimum Tangible Net Worth including subordinated debt, if any, of not
less than $1,250,000.
For purposes of calculation of Tangible Net Worth, outstanding notes or
accounts receivable due from related parties, officers, employees or
stockholders, or goodwill, if any, shall be deemed intangible and deducted from
Tangible Net Worth. Notes payable subordinated to SVB, if any, shall be
included in the calculation of Tangible Net Worth.
10. LOAN DOCUMENTS. The Borrower shall deliver to Silicon all such
documentation evidencing and securing the Loans as Silicon shall specify
(collectively, the "Loan Documents"), all in form and content satisfactory to
Silicon and its counsel, including but not limited to the Loan Agreement and/or
Amendments, and such additional corporate resolutions, certificates of good
standing, certificates of incumbency, representations, warranties, certified
copies of by-laws and articles of incorporation, and other certificates,
consents and documentation as Silicon shall specify.
B. CONDITIONS TO BE SATISFIED.
The obligation of Silicon to make the Loans is subject to the following
additional conditions to be satisfied at or prior to the signing of the Loan
Documents and the initial funding of the Loans (the "Closing"):
1. AUDIT. Silicon shall have made and completed its audit update, as
necessary, and completed its investigations with respect to the Borrower
(including credit inquiries of Borrowers customers and vendors), and the
financial condition, business, operations, and prospects of the Borrower shall
be satisfactory to Silicon at the time of Closing.
2. REPORTING. All reporting mechanisms and controls shall be
satisfactory to Silicon in its discretion.
3. UCC SEARCHES. Silicon shall receive Uniform Commercial Code searches
in all applicable jurisdictions showing financing statements with respect to
the Borrower in favor of Silicon to be of record and no other financing
statements or liens of record, except for Permitted Liens.
3
20
4. NO MATERIAL ADVERSE CHANGE. No material adverse change in the
properties, financial conditions, operations, business or prospects of the
Borrower shall occur and the results of Silicon's update audit and
investigation conducted at the time of the Closing shall be satisfactory to
Silicon.
5. NO MATERIAL LITIGATION. No litigation or proceeding shall be
pending or threatened which relates to the Financing or which may materially
and adversely affect the financial condition, business, operations or prospects
of the Borrower.
6. INSURANCE. Silicon shall receive proof of fire and extended
coverage insurance on all collateral, and liability insurance, and all
insurance policies shall be in such amounts, against such risks, and in such
companies as are acceptable to Silicon. Silicon shall be named as a lender loss
payee on all said policies, in form satisfactory to Silicon.
7. REPRESENTATIONS TRUE; NO DEFAULT. All representations and
warranties of the Borrower to Silicon shall be true and correct on the date of
Closing, and on the date of Closing no default or event which, with notice or
passage of time or both, would constitute a default or event of default, shall
exist under any of the Loan Documents.
8. NO BREACH, BANKRUPTCY OR INSOLVENCY. Neither this Commitment nor
the contemplated financing arrangements will constitute a breach of any
agreement to which the Borrower is a party; no insolvency or business failure
of the Borrower shall occur, no receiver, trustee or custodian for all or any
part of the property of the Borrower shall have been appointed, the Borrower
shall not have made any assignment for the benefit of creditors, and no
proceeding by or against the Borrower shall have been commenced under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction.
9. OPINION OF COUNSEL. Silicon, at its option, shall receive an
opinion covering such matters and in such form as it shall specify, from
counsel to the Borrower, which counsel shall be acceptable to Silicon.
10. FURTHER ASSURANCE. At the time of closing, the Borrower shall
execute and deliver such documents and do such other acts and things as Silicon
may specify in order to fully effect the purposes of the agreements and the
completion of the financing arrangements described in this Commitment. All
proceedings, agreements and instruments relating to the making of the Loans and
all other transactions herein contemplated shall be satisfactory to Silicon and
to its counsel. Silicon's counsel is to be satisfied with respect to the
legality, validity, binding effect and enforceability of all instruments,
agreements, and documents relating to the Loans and all transactions
contemplated hereby.
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21
C. GENERAL
1. SILICON INFORMATION. All information obtained by Silicon during the
course of its review and investigation of this transaction is the sole property
of Silicon and is not subject to review or analysis by others unless the prior
written consent of Silicon has been obtained.
2. NO ASSIGNMENT. This Commitment is not assignable by operation of law
or otherwise without Silicon's prior written consent.
3. NO RELIANCE BY THIRD PARTIES. This Commitment is not to be relied upon
by any third party.
4. NEW INFORMATION. By acceptance of this Commitment Borrower
acknowledges that as a result of further investigation and analysis by Silicon
and its counsel, information of which it is not now aware may be revealed and/or
certain other impediments to closing may come to its attention, and as a result
Silicon may require that the transaction be restructured or otherwise modified.
As the lender, Silicon is the sole judge of what is an impediment and whether
the impediment is so serious as to preclude closing.
5. INDEMNITY FOR INVESTIGATIONS. The Borrower shall cooperate with
Silicon and its personnel in all of their investigations and actions in
connection herewith and shall indemnify Silicon against any liability or loss
(including without limitation reasonable attorneys fees and costs) which may
result, either directly or indirectly, from its investigations and actions in
connection herewith, unless resulting from Silicon's own gross negligence or
willful misconduct.
6. INDEMNIFICATION AGAINST BROKERAGE. The Borrower shall indemnify
Silicon against any and all claims for brokerage commission or finders fees, and
reasonable attorneys' fees and costs in connection therewith, asserted against
Silicon in connection with the Loans and based upon any conduct or agreement of
the Borrower.
7. INTEGRATION. The terms and conditions of this Commitment are the final
written expression of the parties and all prior discussions, negotiations and
agreements are merged herein and the same may be modified only in a writing duly
executed by the parties.
8. TIME OF ESSENCE. Time is of the essence of this Commitment. All times
herein specified are in each case firm and shall not be extended without
Silicon's prior written approval.
9. MUTUAL WAIVER OF JURY TRIAL. The Borrower and Silicon each hereby wive
the right to trial by jury in any action or proceeding based upon, arising out
of, or in any way relating to, this Commitment or any other present or future
instrument or
22
agreement between Silicon and the Borrower, or any conduct, acts or omissions
of Silicon or the Borrower or with any of their directors, officers, employees,
agents, attorneys or any other persons affiliated with Silicon or the Borrower,
in all of the foregoing cases, whether sounding in contract or tort or
otherwise.
10. COSTS AND EXPENSES. The Borrower shall pay for all search fees,
filing fees, audit fees and all other costs and expenses (collectively,
"Costs"), including without limitation reasonable attorney's fees incurred by
Silicon relating to the Negotiation and preparation of this Commitment and the
other Loan Documents and the disbursement of the Loans, and all other costs and
expenses incurred by Silicon in connection with the Loans, whether or not the
foregoing exceed the Deposit provided for below.
11. COMMITMENT ACCEPTANCE; DEPOSIT. This Commitment must be accepted by
delivery to Silicon no later than 5:00 p.m. on JANUARY 15, 1998 of a signed
copy of this Commitment accepting its terms. Otherwise, this Commitment shall
expire and be of no further force or effect.
12. COMMITMENT EXPIRATION. In the event the Loan transaction is not
consummated by JANUARY 31, 1998, for any reason, this Commitment shall expire
and be of no further force or effect.
We look forward to working with you on this transaction.
Sincerely yours, ACCEPTED:
The Lightspan Partnership, Inc.
/s/ XXXXX X. XXXXX BY: /s/ [Signature Illegible]
------------------------ ---------------------------
Xxxxx X. Xxxxx TITLE: VP FINANCE
Vice President -------------------------
23
[SILICON VALLEY BANK LOGO]
LIMITED WAIVER AND
AMENDMENT TO LOAN DOCUMENTS
BORROWER: THE LIGHTSPAN PARTNERSHIP, INC.
DATE: MARCH 31, 1998
THIS LIMITED WAIVER AND AMENDMENT TO LOAN DOCUMENTS is entered into
between SILICON VALLEY BANK ("Silicon") and the borrower named above
("Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated February 25, 1997, as amended from time to time (as amended, the "Loan
Agreement"), as follows, effective as of the date hereof. (Capitalized terms
used but not defined in this Amendment, shall have the meanings set forth in
the Loan Agreement.)
1. WAIVER OF DEFAULTS. Silicon and Borrower agree that the Borrower's
existing default under the Loan Agreement due to the Borrower's failure to
comply with the Tangible Net Worth Financial Covenant set forth in Section 5 of
the Schedule to Loan and Security Agreement entitled "5. FINANCIAL COVENANTS
(Section 5.1)" for the periods ending January 31, 1998 and February 28, 1998 is
hereby waived. It is understood by the parties hereto, however, that such
waiver does not constitute a waiver of any other provision or term of the Loan
Agreement or any related document, nor an agreement to waive in the future
these covenants or any other provision or term of the Loan Agreement or any
related document.
2. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
3. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and Borrower, and
the other written documents and agreements between Silicon and Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, and all other documents and agreements
between Silicon
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24
Silicon Valley Bank Limited Waiver and Amendment to Loan Documents
--------------------------------------------------------------------------------
and Borrower shall continue in full force and effect and the same are hereby
ratified and confirmed.
BORROWER: SILICON:
THE LIGHTSPAN PARTNERSHIP, SILICON VALLEY BANK
INC.
BY /s/ XXXX X. XXXXXX BY /s/ [SIG. ILLEGIBLE]
---------------------------- -----------------------
PRESIDENT OR VICE PRESIDENT TITLE VICE PRESIDENT
---------------------
BY [SIG. ILLEGIBLE]
----------------------------
SECRETARY OR ASS'T SECRETARY
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25
SILICON VALLEY BANK
AMENDMENT TO LOAN DOCUMENTS
BORROWER: THE LIGHTSPAN PARTNERSHIP, INC.
DATE: MARCH 26, 1999
THIS AMENDMENT TO LOAN DOCUMENTS is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above ("Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated February 25, 1997 (the "Loan Agreement"), as follows, effective as of the
date hereof. (Capitalized terms used but not defined in this Amendment, shall
have the meanings set forth in the Loan Agreement).
1. MODIFICATION TO SECTION 6.1. Section 6.1 of the Loan Agreement is
hereby amended in its entirety to read as follows, which amendment shall be
deemed effective as of February 25, 1999:
"6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date")."
2. MODIFICATION TO MATURITY DATE. Section 4 of the Schedule to Loan and
Security Agreement, entitled "MATURITY DATE (Section 6.1)", is hereby amended
in its entirety to read as follows, which amendment shall be deemed effective
as of February 25, 1999:
"4. MATURITY DATE
(Section 6.1): APRIL 25, 2000, subject to early
termination as provided in Section 6.2
above."
3. MODIFICATION TO CREDIT LINK. That portion of the Schedule to Loan and
Security Agreement entitled "CREDIT LIMIT (Section 1.1)" is hereby amended to
read as follows:
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i)
$10,000,000 at any one time outstanding; or (ii)
75% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above).
LETTER OF CREDIT
SUBLIMIT
(Section 1.5): $500,000
4. MODIFICATION TO FINANCIAL COVENANTS. Borrower shall not be required
to comply with the covenants set forth under Section 5 of the Schedule to Loan
and Security Agreement, entitled "FINANCIAL COVENANTS (Section 5.1)", for the
months of February, March and
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26
April 1999, but shall comply therewith for all months thereafter. Borrower
agrees that its revenue for each of February, March and April 1999 shall equal
or exceed $1,100,000, and that its revenue for the quarter ending April 30,
1999 shall equal or exceed $5,000,000. Borrower also agrees that it shall not
incur a loss (after taxes) for the quarter ending April 30, 1999 in excess of
$7,000,000.
5. FEE. Borrower shall concurrently pay to Silicon a facility fee in the
amount of $100,000, which shall be in addition to all interest and all other
fees payable to Silicon and shall be non-refundable.
6. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
7. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and Borrower, and
the other written documents and agreements between Silicon and Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended, all of the terms and
provisions of the Loan Agreement, and all other documents and agreements
between Silicon and Borrower shall continue in full force and effect and the
same are hereby ratified and confirmed.
BORROWER: SILICON:
THE LIGHTSPAN PARTNERSHIP, INC. SILICON VALLEY BANK
BY: /s/ [SIGNATURE ILLEGIBLE] BY: /s/ XXXXX XXXXX
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PRESIDENT OR VICE PRESIDENT XXXXX XXXXX, VICE PRESIDENT
BY:
------------------------------
SECRETARY OR ASS'T SECRETARY
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