Exhibit 10.2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of July 23,
2004, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at One Newton Executive Park, Suite
200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under
the name "Silicon Valley East" ("Bank") and SKILLSOFT CORPORATION, a Delaware
corporation ("SkillSoft"), SMARTCERTIFY DIRECT INC., a Florida corporation
("SmartCertify"), and XXXXX00X0.XXX, INC., a Massachusetts corporation ("Books")
(SkillSoft, SmartCertify, and Books are hereinafter jointly, severally and
collectively referred to as "Borrower") provides the terms on which Bank shall
lend to Borrower and Borrower shall repay Bank. In consideration of the mutual
covenants contained herein and benefits to be derived herefrom, the parties
agree as follows::
WHEREAS, each Borrower has requested that Bank establish the loan
arrangement as set forth herein; and
WHEREAS, each Borrower requests that as a convenience to that Borrower,
such loans as may be made hereunder shall be directed to the Agent which will,
in turn, distribute the proceeds thereof to the respective Borrower;
NOW THEREFORE, as an additional inducement for Bank to establish the loan
arrangement and to direct such loans as may be made hereunder to the Agent, as
described above, each Borrower covenants and agrees as follows:
1 ACCOUNTING AND OTHER TERMS
1.1 ACCOUNTING AND OTHER TERMS. Accounting terms not defined in this
Agreement shall be construed following GAAP. Calculations and determinations
must be made following GAAP. The term "financial statements" includes the notes
and schedules. The terms "including" and "includes" always mean "including (or
includes) without limitation," in this or any Loan Document. Capitalized terms
in this Agreement shall have the meanings set forth in Article 13. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meaning provided by the Code, to the extent such terms are defined therein.
1.2 DESIGNATION OF AGENT. Each Borrower hereby designates Skillsoft
(hereinafter, the "Agent") as the agent of that Borrower to discharge the duties
and responsibilities of Agent as provided herein.
1.3 OPERATION OF BORROWING. Except as otherwise provided in this
Article, loans and advances hereunder shall be requested solely by Agent as
agent for each Borrower. Each Borrower shall be directly indebted to Bank for
each advance distributed to Agent, together with all accrued interest thereon,
as if that amount had been advanced directly by Bank to such Borrower. Bank
shall have no responsibility to inquire as to the distribution of loans and
advances made by Bank through Agent as described herein.
1.4 CONTINUATION OF AUTHORITY OF AGENT. The authority of Agent to
request loans on behalf of, and to bind, the Borrowers, shall continue unless
and until Bank actually receives written notice of the termination of such
authority.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) Availability. Bank shall make Advances not exceeding the
Revolving Line minus (i) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit), minus (ii)
the FX Reserve, and minus (iii) the aggregate outstanding Advances hereunder
(including any Cash Management Services). Amounts borrowed under this Section
may be repaid and reborrowed during the term of this Agreement.
(b) Borrowing Procedure. To obtain an Advance, Borrower must
notify Bank (which notice shall be irrevocable) by facsimile or telephone by
3:00 p.m. Eastern time on the Business Day the Advance is to be made. If such
notification is by telephone, Borrower must promptly confirm the notification
by delivering to Bank a completed Payment/Advance Form in the form attached
as EXHIBIT B. Bank shall credit Advances to Borrower's deposit account. Bank
may make Advances under this Agreement based on instructions from a
Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due. Bank may
rely on any telephone notice given by a person whom Bank believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss
Bank suffers due to such reliance, except as a direct result of the gross
negligence or willful misconduct by Bank.
(c) Interest Rate. The principal amounts outstanding under
the Revolving Line shall accrue interest at a per annum rate equal to the
Prime Rate, which interest shall be payable monthly.
(d) Termination; Repayment. The Revolving Line terminates on
the Revolving Line Maturity Date, when the principal amount of all Advances,
the unpaid interest thereon, and all other Obligations relating to the
Revolving Line shall be immediately due and payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
(a) Bank shall issue or have issued Letters of Credit for
Borrower's account not exceeding the Revolving Line minus (i) the outstanding
principal balance of any Advances (including any Cash Management Services),
minus (ii) the amount of all Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus an amount equal to any Letter of Credit
Reserves. The face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not
exceed Seventeen Million Five Hundred Thousand Dollars ($17,500,000.00). Each
Letter of Credit may have an expiry date after the Revolving Maturity Date
provided Borrower's Letter of Credit reimbursement obligation shall be
secured by cash on terms acceptable to Bank on and after (i) the Maturity
Date of the Revolving Line, or (ii) the occurrence of an Event of Default
hereunder. All Letters of Credit shall be in form and substance acceptable to
Bank in its sole discretion, and shall be subject to the terms and conditions
of Bank's standard Application and Letter of Credit Agreement ("Letter of
Credit Application"). Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.
(b) The obligation of Borrower to immediately reimburse Bank
for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement and such Letters of Credit, and such Letter of Credit
Application. Borrower shall indemnify, defend, protect, and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with
any Letters of Credit, except for any loss, cost, expense or liability
arising from Bank's gross negligence or willful misconduct.
(c) Borrower may request that Bank issue a Letter of Credit
payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand
as an Advance to Borrower of the equivalent of the amount thereof (plus fees
and charges in connection therewith such as wire, cable, SWIFT or similar
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for transfer to
the country of which it is the currency.
(d) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve (the
"Letter of Credit Reserve") under the Revolving Line for letters of credit
against fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such letter of credit. The amount of such
reserve may be amended by Bank from time to time to account for fluctuations
in the exchange rate. The availability of funds under the Revolving Line
shall be reduced by the amount of such reserve for as long as such letter of
credit remains outstanding.
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2.1.3 FOREIGN EXCHANGE SUBLIMIT. The Borrower may enter into foreign
exchange forward contracts with the Bank up to a maximum amount of One Million
Dollars ($1,000,000.00) under which Borrower commits to purchase from or sell to
Bank a set amount of foreign currency more than one (1) business day after the
contract date (the "FX Forward Contract"). Bank shall subtract 10% of each
outstanding FX Forward Contract (the "F/X Reserve") from the foreign exchange
sublimit. The total FX Forward Contracts at any one time may not exceed 10 times
the amount of the FX Reserve. Bank may terminate the FX Forward Contracts if an
Event of Default occurs. The Obligations of Borrower relating to this section
may not exceed the Revolving Line minus (i) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), minus
(ii) the FX Reserve, and minus (iii) the aggregate outstanding Advances
hereunder (including any Cash Management Services).
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to Seventeen
Million Five Hundred Thousand Dollars ($17,500,000.00) for the Bank's Cash
Management Services (the "Cash Management Services Sublimit"), which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in the various cash management services agreements
related to such Cash Management Services (the "Cash Management Services"). Such
aggregate amounts utilized under the Cash Management Services Sublimit shall at
all times reduce the amount otherwise available for Credit Extensions under the
Revolving Line. Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.
2.1.5 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if, there has been
a Material Adverse Change or there has been any material adverse deviation by
Borrower from the most recent business plan of Borrower presented to and
accepted by Bank prior to the execution of this Agreement.
2.2 INTEREST RATE.
(a) Default Rate. After an Event of Default, Obligations
shall bear interest at four percent (4.0%) above the rate effective
immediately before the Event of Default.
(b) Adjustment to Interest Rate. The applicable interest
rate hereunder shall increase or decrease when the Prime Rate changes.
(c) 360-Day Year. Interest is computed on the basis of a 360
day year for the actual number of days elapsed.
(d) Debit of Accounts. Bank may debit any of Borrower's
deposit accounts, including Account Number __________, for principal and
interest payments when due, or any other amounts Borrower owes Bank, when
due. Bank shall promptly notify Borrower after it debits Borrower's accounts.
These debits shall not constitute a set-off.
(e) Payments. Interest is payable monthly on the first
calendar day of each month. Payments received after 12:00 noon Eastern time
are considered received at the opening of business on the next Business Day.
When a payment is due on a day that is not a Business Day, the payment is due
the next Business Day and additional fees or interest, as applicable, shall
continue to accrue.
2.3 FEES. Borrower shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable
commitment fee of Fifty Thousand Dollars ($50,000.00) due and payable on the
Closing Date; and
(b) Letter of Credit Fee. The Borrower shall pay the Bank's
customary fees and expenses for the issuance or renewal of Letters of Credit,
including, without limitation, a Letter of Credit Fee of three-quarters of
one percent (0.75%) per annum of the face amount of each Letter of Credit
issued, upon the issuance or renewal of such Letter of Credit by the Bank;
and
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(c) Unused Revolving Line Facility Fee. In addition to the
foregoing, as compensation for the Bank's maintenance of sufficient funds
available for such purpose, the Bank shall have earned a fee (the "Unused
Revolving Line Facility Fee"), which fee shall be paid quarterly, in arrears,
on a calendar year basis, in an amount equal to one-eighth of one percent
(0.125%) per annum of the average unused portion of the Revolving Line, as
determined by the Bank. For purposes hereof, any Letter of Credit Reserve and
any F/X Reserve held or in place for any calendar year shall constitute a
utilization of the Revolving Line. The Borrower shall not be entitled to any
credit, rebate or repayment of any Unused Revolving Line Facility Fee
previously earned by the Bank pursuant to this Section notwithstanding any
termination of the within Agreement, or suspension or termination of the
Bank's obligation to make loans and advances hereunder; and
(d) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses) incurred through and after the Closing Date,
when due.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The Bank's
obligation to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation, subject
to the condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect
to articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) Negative Pledge Agreement covering Intellectual
Property;
(d) Perfection Certificates by Borrower and Skillsoft
Finance Limited;
(e) landlord's waiver;
(f) a legal opinion of Borrower's counsel (authority and
enforceability), in form and substance acceptable to Bank;
(g) Unconditional Guaranty by Skillsoft Finance Limited;
(h) Pledge/Security Agreement for depository/investment
accounts by Skillsoft Finance Limited;
(i) Unconditional Guaranty by Skillsoft Plc;
(j) UCC financing statement filing authorization;
(k) Account Control Agreement/ Investment Account Control
Agreement by SkillSoft Finance Limited;
(l) insurance certificates;
(m) payment of the fees and Bank Expenses then due specified
in Section 2.3 hereof;
(n) Certificates of Foreign Qualification (if applicable);
(o) Certificates of Good Standing/Legal Existence; and
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(p) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 shall be
true in all material respects on the date of the Payment/Advance Form and on
the effective date of each Credit Extension and no Event of Default shall
have occurred and be continuing, or result from the Credit Extension. Each
Credit Extension is Borrower's representation and warranty on that date that
the representations and warranties in Section 5 remain true in all material
respects.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a continuing
security interest in, and pledges and assigns to the Bank, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower warrants and represents that the
security interest granted herein shall be a first priority security interest in
the Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any material license or other agreement with respect to which the
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property. Borrower shall not enter into, or become bound by, any
such material license or agreement which is reasonably likely to have a material
impact on Borrower's business or financial condition, unless Borrower provides
Bank with written notice within thirty (30) Business Days after entering into
such agreement. Borrower shall take such steps as Bank requests to obtain the
consent of, or waiver by, any person whose consent or waiver is necessary for
all such licenses or contract rights to be deemed "Collateral" and for Bank to
have a security interest in it that might otherwise be restricted or prohibited
by law or by the terms of any such license or agreement, whether now existing or
entered into in the future
If the Agreement is terminated, Bank's lien and security interest in the
Collateral shall continue until Borrower fully satisfies its Obligations. If
Borrower shall at any time, acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the brief details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to Bank.
4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions in order to perfect or protect Bank's interest or
rights hereunder, including a notice that any disposition of the Collateral, by
either the Borrower or any other Person, shall be deemed to violate the rights
of the Bank under the Code.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower is duly existing and in
good standing in its state of formation and qualified and licensed to do
business in, and in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be qualified except where
the failure to do so could not reasonably be expected to cause a Material
Adverse Change. In connection with this Agreement, the Borrower delivered to the
Bank a certificate signed by the Borrower and entitled "Perfection Certificate".
The Borrower represents and warrants to the Bank that: (a) the Borrower's exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; and (b) the Borrower is an organization of the type, and is
organized in the jurisdiction, set forth in the Perfection Certificate; and (c)
the Perfection Certificate accurately sets
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forth the Borrower's organizational identification number or accurately states
that the Borrower has none; and (d) the Perfection Certificate accurately sets
forth the Borrower's place of business, or, if more than one, its chief
executive office as well as the Borrower's mailing address if different, and (e)
all other information set forth on the Perfection Certificate pertaining to the
Borrower is accurate and complete. If the Borrower does not now have an
organizational identification number, but later obtains one, Borrower shall
forthwith notify the Bank of such organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 COLLATERAL. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. Borrower has no deposit account, other than the deposit
accounts with Bank and deposit accounts described in the Perfection Certificate
delivered to the Bank in connection herewith. The Collateral is not in the
possession of any third party bailee (such as a warehouse). Except as hereafter
disclosed to the Bank in writing by Borrower, none of the components of the
Collateral shall be maintained at locations other than as provided in the
Perfection Certificate. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Bank and such bailee
must acknowledge in writing that the bailee is holding such Collateral for the
benefit of Bank.
5.3 LITIGATION. Except as shown on SCHEDULE 5.3 attached hereto, there
are no actions or proceedings pending or, to the knowledge of Borrower's
Responsible Officers or legal counsel, threatened by or against Borrower or any
Subsidiary in which an adverse decision could reasonably be expected to cause a
Material Adverse Change. Listed on Schedule 5.3 is a summary of all outstanding
litigation and agreed upon settlements and cash payments in connection with
same.
5.4 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.5 SOLVENCY. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; and
Borrower is able to pay its debts (including trade debts) as they mature.
5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.
5.7 SUBSIDIARIES. Except as provided in the Perfection Certificates,
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.
5.8 FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
taken together with all such written certificates and written statements given
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary to make the
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statements contained in the certificates or statements not misleading (it being
recognized by Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected or forecasted results).
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE. Borrower shall maintain its and all
Subsidiaries' legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to cause a Material Adverse Change on
Borrower's business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall deliver to Bank: (i) as soon as
available, but no later than forty-five days after the last day of each
quarter a company prepared consolidated balance sheet and income statement
(10-Q) covering Borrower's consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to Bank, (ii) as
soon as available, but no later than forty-five days after the last day of
each quarter, a company prepared consolidating balance sheet and income
statement covering Borrower's consolidating operations during the period
certified by a Responsible Officer and in a form acceptable to Bank, (iii) as
soon as available, but no later than ninety (90) days after the last day of
Borrower's fiscal year, audited consolidated financial statements (10-K)
prepared under GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent certified public
accounting firm reasonably acceptable to Bank; (iv) a prompt report of any
legal actions pending or to Borrower's knowledge threatened against Borrower
or any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of Five Hundred Thousand Dollars ($500,000.00) or more; and (v)
other financial information reasonably requested by Bank.
(b) Borrower shall deliver to Bank with the quarterly and
annual financial statements a Compliance Certificate signed by a Responsible
Officer in the form of EXHIBIT C.
6.3 INTENTIONALLY DELETED.
6.4 TAXES. Borrower shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith,
with adequate reserves maintained in accordance with GAAP) and will deliver to
Bank, on demand, appropriate certificates attesting to such payments.
6.5 INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are
satisfactory to Bank. All property policies shall have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show the Bank as an additional insured and all policies shall provide that
the insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.
6.6 ACCOUNTS. Each Borrower shall maintain an operating account with the
Bank. In addition, the Borrower and Guarantors shall, at all times, maintain
investment accounts with the Bank in an amount of at least Thirty Million
Dollars ($30,000,000.00). In the event, Borrower and Guarantors maintain less
than Thirty Million Dollars ($30,000,000.00) with Bank, for three (3)
consecutive Business Days, Borrower and Guarantors may pay such fees and
expenses as Bank shall determine, in its reasonable discretion based upon the
loss of income resulting from the Borrower's failure to maintain such amounts
(the "Additional Fees"). The failure of Borrower to maintain such amounts shall
not constitute an Event of Default.
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6.7 FINANCIAL COVENANTS.
(a) ADJUSTED QUICK RATIO. Borrower, on a consolidated basis, shall
maintain, as of the last day of each quarter a ratio of Quick Assets to
Current Liabilities of at least: (i) 1.75 to 1.0 as of the quarter ending
July 31, 2004, and (ii) 2.0 to 1.0 as of the quarter ending October 31,
2004 and as of the last day of each quarter thereafter.
(b) MINIMUM QUARTERLY PROFITABILITY (NET INCOME). Net Income of
Borrower, on a consolidated basis, of at least: (i) Zero Dollars ($0.00)
as of the quarter ending July 31, 2004, (ii) Two Million Dollars
($2,000,000.00) as of the quarter ending October 31, 2004, (iii) Six
Million Five Hundred Thousand Dollars ($6,500,000.00) as of the quarter
ending January 31, 2005, and (iv) as of the quarter ending April 30, 2005,
and as of the last day of each quarter thereafter, the greater of: (a)
fifty percent (50.0%) of the projected net income on the operating plan
dated ___________, as submitted to the Bank, and (b) Two Million Dollars
($2,000,000.00).
6.8 FURTHER ASSURANCES. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's security interest in the Collateral or to effect the purposes of this
Agreement.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without the Bank's prior
written consent which shall not be unreasonably withheld.
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto,
or have a material change in its ownership (other than by the sale of Borrower's
equity securities in a public offering), or management such that any two (2) of
the four (4) individuals: Xxxxxxx Xxxxx, Xxxxxx XxXxxxxx, Xxxxxx X. Nine, and
Xxxx Xxxxxxxx are not longer actively involved in the management of the company
and replacements, reasonably satisfactory to the Bank are not made within sixty
(60) days thereof. Borrower shall not: (i) relocate its chief executive office,
or (ii) change its jurisdiction of organization, or (iii) change its
organizational structure or type, or (iv) change its legal name, or (v) change
any organizational number (if any) assigned by its jurisdiction of organization,
unless Borrower provides Bank with written notice with fifteen (15) days
thereafter.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. Notwithstanding the foregoing,
Bank's consent shall not be required for acquisitions by the Borrower of all or
substantially all of the capital stock or assets of another Person, provided the
total cash consideration paid for such acquisitions (including indebtedness
assumed) is not more than Ten Million Dollars ($10,000,000.00), in the
aggregate, during any fiscal year, provided further that: (i) no Event of
Default has occurred and is continuing or would exist after giving effect to the
transactions, and (ii) the Borrower is the surviving legal entity. A Subsidiary
may merge or consolidate into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.
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7.6 DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or
own any Person (except as provided in Section 7.3 hereof), or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so; or (ii) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
Notwithstanding the foregoing, for any twelve (12) month period, the aggregate
net cash outlay by the Borrower to its Affiliates (other than by a Borrower to
another Borrower) shall not exceed Ten Million Dollars ($10,000,000.00).
7.8 SUBORDINATED DEBT. Make or permit any payment on any Subordinated
Debt, except under the terms of the Subordinated Debt, or amend any provision in
any document relating to the Subordinated Debt, without Bank's prior written
consent.
7.9 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) Business Days after their due date. During such three (3) Business Day
period the failure to cure the default shall not constitute an Event of Default
(but no Credit Extension shall be made during such period);
8.2 COVENANT DEFAULT. (i) Borrower fails or neglects to perform any
obligation in Section 6 or violates any covenant in Section 7; or (ii) Borrower
fails or neglects to perform, keep, or observe any other material term,
provision, condition, covenant or agreement contained in this Agreement, any
Loan Documents, or in any present or future agreement between Borrower and Bank
and as to any default under such other material term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods provided
under this section shall not apply, among other things, to financial covenants
or any other covenants that are required to be satisfied, completed or tested by
a date certain;
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is seized
or comes into possession of a trustee or receiver and such action is not removed
in ten (10) days; (ii) any material portion of Borrower's assets is attached or
levied on and the attachment, or levy is not removed in thirty (30) days (iii)
the service of process upon the Borrower seeking to attach, by trustee or
similar process, any funds of the Borrower on deposit with the Bank, or any
entity under control of Bank (including a subsidiary); (iv) Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business; (v) a judgment or other claim becomes a Lien on a material
portion of Borrower's assets; or (vi) a notice of lien, levy, or assessment is
filed against any of Borrower's assets by any government agency and not paid
within ten (10) days after Borrower receives notice. These are not Events of
Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions shall be made during the cure period);
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8.5 INSOLVENCY. (i) Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (ii) Borrower begins
an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in the acceleration
of the maturity of any Indebtedness in an amount in excess of Five Hundred
Thousand Dollars ($500,000) or that could result in a Material Adverse Change;
8.7 JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Five Hundred Thousand
Dollars ($500,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of twenty (20) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment);
8.8 MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement now or later in
any warranty or representation in this Agreement or in any writing delivered to
Bank or to induce Bank to enter this Agreement or any Loan Document;
8.9 GUARANTY. (i) Any guaranty of any Obligations terminates or ceases
for any reason to be in full force; or (ii) any Guarantor does not perform any
obligation or covenant under any guaranty of the Obligations; or (iii) any
material misrepresentation or material misstatement exists now or later in any
warranty or representation in any guaranty of the Obligations or in any
certificate delivered to Bank in connection with the guaranty; or (iv) any
circumstance described in Section 7, or Sections 8.4, 8.5 or 8.7 occurs to any
Guarantor, or (v) the liquidation, winding up, termination of existence, or
insolvency of any Guarantor.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but
if an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between Borrower
and Bank;
(c) Demand that the Borrowers (i) deposit cash with Bank in
an amount equal to the aggregate amount of any Letters of Credit remaining
undrawn, as collateral security for the repayment of any future drawings
under such Letters of Credit, and the Borrower shall forthwith deposit and
pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled
to be paid or payable over the remaining term of any Letters of Credit;
(d) Settle or adjust disputes and claims directly with
account debtors for amounts, on terms and in any order that Bank considers
advisable and notify any Person owing Borrower money of Bank's security
interest in such funds and verify the amount of such account;
(e) Make any payments and do any acts it considers necessary
or reasonable to protect its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise
any of Bank's rights or remedies;
(f) Apply to the Obligations any (i) balances and deposits
of Borrower it holds, or (ii) any amount held by Bank owing to or for the
credit or the account of Borrower;
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(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower's labels, patents, copyrights, mask works, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any similar property as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section,
Borrower's rights under all licenses and all franchise agreements inure to
Bank's benefit;
(h) Place a "hold" on any account maintained with Bank
and/or deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral; and
(i) Exercise all rights and remedies and dispose of the
Collateral according to the Code.
9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or xxxx of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS NOTIFICATION/COLLECTION. In the event that an Event of
Default occurs and is continuing, Bank may notify any Person owing Borrower
money of Bank's security interest in the funds and verify and/or collect the
amount of the Account. After the occurrence of an Event of Default, any amounts
received by Borrower shall be held in trust by Borrower for Bank, and, if
requested by Bank, Borrower shall immediately deliver such receipts to Bank in
the form received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. Any amounts paid by Bank as provided herein shall
constitute Bank Expenses and are immediately due and payable, and shall bear
interest at the then applicable rate and be secured by the Collateral. No
payments by Bank shall be deemed an agreement to make similar payments in the
future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.
9.7 DEMAND WAIVER. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.
10 NOTICES
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All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other party written notice.
If to Borrower: SkillSoft Corporation
SmartCertify Direct, Inc.
Xxxxx00x0.xxx, Inc.
000 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
If to Bank: Silicon Valley Bank
One Newton Executive Park, Suite 200
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Irina Case
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Xxxxx County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.
12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the
Bank and its directors, officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any
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other party in connection with the transactions contemplated by the Loan
Documents, except for losses caused by Bank's gross negligence or willful
misconduct; and (b) all losses or Bank Expenses incurred, or paid by Bank from,
following, or consequential to transactions between Bank and Borrower (including
reasonable attorneys' fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
12.3 RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.
12.4 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.
12.8 SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.
12.9 CONFIDENTIALITY. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.10 BORROWER LIABILITY. Each Borrower hereunder shall be obligated to
repay all Credit Extensions made hereunder, regardless of which Borrower
actually receives said Credit Extension, as if each Borrower hereunder directly
received all Credit Extensions.
12.11 SUBROGATION AND SIMILAR RIGHTS. Notwithstanding any other provision
of this Agreement or other related document, until the payment in full of the
Credit Extensions and termination of this Agreement, each Borrower irrevocably
waives all rights that it may have at law or in equity (including, without
limitation, any law subrogating the Borrower to the rights of Bank under the
Loan Documents) to seek contribution, indemnification or any other form of
reimbursement from any other Borrower, or any other Person now or hereafter
primarily or
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secondarily liable for any of the Obligations, for any payment made by the
Borrower with respect to the Obligations in connection with the Loan Documents
or otherwise and all rights that it might have to benefit from, or to
participate in, any security for the Obligations as a result of any payment made
by the Borrower with respect to the Obligations in connection with the Loan
documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
modified to the extent necessary to comply with this Section. If any payment is
made to a Borrower in contravention of this Section, such Borrower shall hold
such payment in trust for Bank and such payment shall be promptly delivered to
Bank for application to the Obligations, whether matured or unmatured.
13 DEFINITIONS
13.1 DEFINITIONS. In this Agreement:
"ACCOUNTS" as accounts as defined under the Code.
"ADDITIONAL FEES" is defined in Section 6.6.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Revolving Line.
"AFFILIATE" is a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person's senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person's
managers and members.
"AGENT" is defined in Section 1.2.
"BANK EXPENSES" are all audit fees and expenses (after the occurrence of
an Event of Default) and reasonable costs or expenses (including reasonable
attorneys' fees and expenses) for preparing, negotiating, defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or storage or any
equipment containing the information.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CASH MANAGEMENT SERVICES" is defined in Section 2.1.4.
"CASH MANAGEMENT SERVICES SUBLIMIT" is defined in Section 2.1.4.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.
"COLLATERAL" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, in the property described on EXHIBIT A.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
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primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
"CREDIT EXTENSION" is each Advance, Letter of Credit, F/X Forward Contract
or any other extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are as defined in accordance with GAAP, plus all
obligations and liabilities of Borrower to Bank (excluding undrawn Letters of
Credit), less Deferred Revenue.
"DEFERRED REVENUE" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"GUARANTOR" is SkillSoft Finance Limited and SkillSoft Plc, or any future
guarantor of the Obligations.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY": is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LETTER OF CREDIT" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
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"MATERIAL ADVERSE CHANGE" is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; (ii) a material adverse change in the business, operations, or
condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iv) when Bank determines, based upon information available to it and in its
reasonable judgment, that there is a substantial likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during
the next succeeding financial reporting period.
"NET INCOME" is defined in accordance with GAAP.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PERFECTION CERTIFICATE" are those certain perfection certificates
delivered to the Bank by each Borrower.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or
the Loan Documents;
(b) Indebtedness existing on the Closing Date and shown on
the Perfection Certificate;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens; and
(f) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (e)
above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome
terms upon Borrower or its Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and
existing on the Closing Date;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any
state maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 1 year after its creation and having the
highest rating from either Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc., (iii) Bank's certificates of deposit issued
maturing no more than 1 year after issue, (iv) any other investments
administered through the Bank; and
(c) transfers of cash or property to one or more Subsidiary
of the Borrower, having a cash or fair market value, in the
aggregate, of no more than [$__________________].
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the
Perfection Certificate or arising under this Agreement or other Loan
Documents;
-16-
(b) Liens for taxes, fees, assessments or other government
charges or levies, either not delinquent or being contested in good
faith and for which Borrower maintains adequate reserves on its
Books, if they have no priority over any of Bank's security
interests;
(c) Purchase money Liens (i) on Equipment acquired or held
by Borrower incurred for financing the acquisition of the Equipment
securing no more than Five Hundred Thousand Dollars ($500,000.00) in
the aggregate amount outstanding, or (ii) existing on equipment when
acquired, if the Lien is confined to the property and improvements
and the proceeds of the equipment;
(d) Leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrower's business,
if the leases, subleases, licenses and sublicenses permit granting
Bank a security interest; and
(e) Liens incurred in the extension, renewal or refinancing
of the indebtedness secured by Liens described in (a) through (d),
but any extension, renewal or replacement Lien must be limited to
the property encumbered by the existing Lien and the principal
amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the aggregate of Borrower's unrestricted
cash, cash equivalents, accounts receivable and investments with maturities of
fewer than 12 months determined according to GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President,
Chief Financial Officer, Corporate Treasurer, and Controller of Borrower.
"REVOLVING LINE" is an Advance or Advances of up to Twenty-Five Million
Dollars ($25,000,000.00).
"REVOLVING LINE MATURITY DATE" is July 22, 2006.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.
"SUBSIDIARY" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than 50% of
the voting stock or other equity interests is owned or controlled, directly or
indirectly, by the Person or one or more Affiliates of the Person.
"UNUSED REVOLVING LINE FACILITY FEE" is defined in Section 2.3(c).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
BORROWER:
SKILLSOFT CORPORATION (as Agent and Borrower)
By /s/ Xxxxxx XxXxxxxx
------------------------------------------
Name: Xxxxxx XxXxxxxx
Title: Executive Vice President, CFO
SMARTCERTIFY DIRECT, INC.
By /s/ Xxxxxx XxXxxxxx
------------------------------------------
Name: Xxxxxx XxXxxxxx
Title: CFO
XXXXX00X0.XXX, INC.
By /s/ Xxxxxx XxXxxxxx
------------------------------------------
Name: Xxxxxx XxXxxxxx
Title: Treasurer
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
SILICON VALLEY BANK
By /s/ Xxxxxxxxx Le
-------------------------------------------
Name: Xxxxxxxxx Le
Title: Operations Supervisor
(Signed in Santa Xxxxx County, California)
SILICON VALLEY BANK
By: /s/ Xxxxxxxxx Xxxxxxxxx
------------------------------------------
Name: Xxxxxxxxx Xxxxxxxxx
Title: Operations Supervisor
(Signed in Santa Xxxxx County, California)
S-1
EXHIBIT A
The Collateral consists of all right, title and interest of Borrower in
and to the following:
All goods, equipment, inventory, contract rights or rights to payment of
money, license agreements, franchise agreements, general intangibles (including
payment intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
The Collateral does not include:
Any copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
Notwithstanding the foregoing, the Collateral shall include all accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing intellectual property. To the extent a court
of competent jurisdiction holds that a security interest in any Intellectual
Property is necessary to have a security interest in any accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating
to any of the foregoing Intellectual Property, then the Collateral shall,
effective as of the Closing Date, include the Intellectual Property, to the
extent necessary to permit perfection of the Bank's security interest in such
accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.
Fax To: (000) 000-0000 Date: _____________________
LOAN PAYMENT:
SkillSoft Corporation, as Agent
From Account #__________________________ To Account #_________________________
(Deposit Account #) (Loan Account #)
Principal $_____________________________ and/or Interest $____________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
AUTHORIZED SIGNATURE: __________________ Phone Number: _____________________
LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account #__________________________ To Account #_________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $_____________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
AUTHORIZED SIGNATURE: __________________ Phone Number: _____________________
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.
Deadline for same day processing is 3:00 pm, E.S.T.
Beneficiary Name: ______________________ Amount of Wire: $____________________
Beneficiary Bank: ______________________ Account Number: _____________________
City and State: ________________________
Beneficiary Bank Transit Beneficiary Bank Code (Swift, Sort,
(ABA) #: _____________________________ Chip, etc.):_______________________
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: _____________________ Transit (ABA) #: ____________________
For Further Credit to: _________________________________________________________
Special Instruction: ___________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature: __________________ 2nd Signature (If Required): ________
Print Name/Title: ______________________ Print Name/Title: ___________________
Telephone # ____________________________ Telephone # _________________________
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SKILLSOFT CORPORATION
SMARTCERTIFY DIRECT INC.
BOOKS 24X7
The undersigned authorized officer of SkillSoft Corporation, SmartCertify
Direct Inc., and Books 24x7 certifies that under the terms and conditions of the
Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending _______________ with
all required covenants except as noted below and (ii) there are no Events of
Default, and all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.
.PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Quarterly financial statements with CC Quarterly within 45 days Yes No
Annual (CPA Audited) with XX XXX within 90 days Yes No
Quarterly Consolidated financial statements Quarterly within 45 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio _____*:1.0 ____:1.0 Yes No
Minimum Net Income $_________* $________ Yes No
* As set forth in Section 6.7 of the Agreement.
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely, Received by: ____________________
SkillSoft Corporation (as Agent and Borrower) AUTHORIZED SIGNER
Date: _______________________
_____________________________
SIGNATURE Verified: _______________________
_____________________________ AUTHORIZED SIGNER
TITLE Date: _______________________
_____________________________
DATE Compliance Status: Yes No
Smartcertify Direct, Inc.
_____________________________
SIGNATURE
_____________________________
TITLE
_____________________________
DATE
Books 24x7
_____________________________
SIGNATURE
_____________________________
TITLE
_____________________________
DATE
