EXHIBIT 10.45
LOAN AGREEMENT
Dated as of June 29, 1998
by and among
SAND HILL CAPITAL, LLC
as lender
and
EDUCATIONAL INDUSTRIAL SALES INCORPORATED
a California corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
as borrower
TOTAL CREDIT AMOUNT: $1,020,000
Maturity Date: January 15, 1999
Interest Rate: 12 percent
Facility Fee: $15,000
Warrants:
Number of shares: 30% Coverage
Class of stock: Common
Initial exercise price: $27.21 per share
The terms and information set forth on this cover page are a part of
the attached Loan Agreement, dated as of the date first written above (this
"Agreement"), entered into by and among Sand Hill Capital, LLC ("Sand Hill") and
the borrower ("Borrower") set forth above. The terms and conditions of the
Agreement agreed to between Lender and Borrower are as follows:
LOAN AGREEMENT
The undersigned EDUCATIONAL INDUSTRIAL SALES INCORPORATED
("Borrower"), for value received, hereby promises to pay to SAND HILL CAPITAL
LLC ("Sand Hill") at such place as Sand Hill may specify, in lawful money of the
United States of America, (i) the principal amount of $1,020,000 or, if lower,
(ii) the principal amount of all outstanding advances ("Advances") that Sand
Hill makes hereunder, plus interest on the principal amount hereof from time to
time outstanding at a rate equal to the rate per annum specified on the cover
page. Interest shall be payable on the first day of each month, beginning the
month following the date of this Agreement and continuing through the Maturity
Date specified on the cover page. The entire principal balance and all accrued
interest shall be immediately due and payable on the Maturity Date.
1. Advance Requests; Payments. Borrower may request an Advance from time
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to time at any time after Borrower's receipt of not less than $1,000,000 from
the sale or issuance of its equity securities after the date hereof on terms
reasonably acceptable to Sand Hill (the "Wedbush Transaction"), upon one
business day's prior notice to Sand Hill, provided the representations contained
in this Agreement are true on such date and Borrower is in compliance with the
terms of this Agreement. All Advances made by Sand Hill to Borrower pursuant to
this Agreement shall be recorded by Sand Hill on the books and records of Sand
Hill. The failure of Sand Hill to record any Advance or any prepayment or
payment made on account of the principal balance hereof shall not limit or
otherwise affect the obligation of Borrower under this Agreement to pay the
principal, interest and other amounts due and payable under this Agreement.
Amounts repaid hereunder may be reborrowed through the Maturity Date.
All payments on this Agreement shall be applied first to fees and
expenses, then to interest and then to principal. Any principal or interest
payments on this Agreement outstanding after the occurrence and during the
continuance of a default under this Agreement shall bear interest at a rate
equal to Five Percent above the rate otherwise applicable under this Agreement.
2. Secured Agreement. To secure repayment of all obligations evidenced by
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this Agreement and performance of all of Borrower's obligations hereunder,
Borrower grants Sand Hill a security interest in the property described in
Exhibit A attached hereto (the "Collateral"). Borrower shall take such actions
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as Sand Hill requests from time to time to perfect or continue the security
interest granted hereunder. Borrower shall not dispose of or encumber all or any
substantial part of the Collateral without Sand Hill's prior written consent,
other than inventory in the ordinary course of business.
3. Representations and Warranties. Borrower represents to Sand Hill as
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follows: (a) Except for Borrower's failure to comply with the leverage covenant
contained in Section V.9(b) of that certain letter agreement dated as of June
16, 1997, as amended by that certain letter agreement dated March 1, 1998, each
between borrower and Xxxxx Fargo Bank (the "Xxxxx Agreement"), and for any
default arising thereunder by virtue of restrictions contained in such agreement
on the security interest to be granted in the Collateral to Sand Hill, Borrower
is not in default under any agreement under which Borrower owes any money, or
any agreement, the violation or termination of which could have a material
adverse effect on Borrower, (b) Borrower has taken all action necessary to
authorize the execution, delivery and performance of this Agreement; (c) except
for purchase money security interests on particular items of equipment and
inventory and for a blanket lien under the Xxxxx Agreement, there are no liens,
security interests or other encumbrances on the Collateral; (d) the execution
and performance of this Agreement do not conflict with, or constitute a default
under, any agreement to which Borrower is party or by which Borrower is bound,
other than the Xxxxx Agreement; (e) the
information provided to Sand Hill on or prior to the date of this Agreement is
true and correct in all material respects; (f) all financial statements and
information provided to Sand Hill fairly present Borrower's financial condition,
and there has not been a material adverse change in the financial or other
condition of Borrower since the date of the most recent of the financial
statements submitted to Sand Hill; (g) Borrower is in compliance with all laws
and orders applicable to it; (h) except as otherwise noted above, the Xxxxx
Agreement is in full force and effect in the form attached hereto, there are no
defaults under the Xxxxx Agreement, and $6,398,205.86 is outstanding under the
Xxxxx Agreement as of June 24, 1998; and (i) no representation or other
statement made by Borrower to Sand Hill contains any untrue statement of a
material fact or omits to state a material fact necessary to make any statements
made to Sand Hill not misleading.
4. Covenants. (a) Borrower will provide Sand Hill: monthly company-
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prepared financial statements within 30 days after the end of each month; and
such other financial reports and other information as Sand Hill may reasonably
request from time to time.
(b) Borrower will maintain insurance on the Collateral that includes
a lender's loss payable endorsement in favor of Sand Hill as an additional loss
payee. Borrower will maintain insurance in a form acceptable to Sand Hill
relating to the Collateral and Borrower's business in amounts and of a type that
are customary to businesses similar to Borrower's.
(c) Borrower will maintain its corporate existence and good standing
and will maintain in force all licenses and agreements, the loss of which could
have a material adverse effect on Borrower's business. Borrower will comply with
all laws and orders, the violation of which could have a material adverse effect
on Borrower's business.
(d) Borrower will not incur additional indebtedness for borrowed
money, or make any investments (unless Sand Hill has a second priority security
interest in the assets acquired or investments made), or make any distributions
on account of any equity interest held in Borrower, or redeem any equity
interest in Borrower, or repay any subordinated debt, without Sand Hill's prior
written consent. Except for the security interests in favor of Xxxxx Fargo Bank
(including any financial institution or lender that refinances the credit
facility related to the Xxxxx Agreement) and Colorado Business Leasing
Incorporated, Borrower will cause all security interests granted in its personal
property to be terminated within forty-five (45) days of the date of this
Agreement.
5. Fees and Expenses. Borrower shall pay Sand Hill the Facility Fee
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specified on the cover page hereof on the date of this Agreement, and shall
reimburse Sand Hill for all costs and expenses, including reasonable attorneys
fees incurred in the preparation of this Agreement and the other documents
executed in connection with this Agreement. Borrower shall also deliver a
warrant to purchase stock to Sand Hill in a form acceptable to Sand Hill.
Borrower shall indemnify Sand Hill for any losses or claims incurred in
connection with this Agreement or the transactions contemplated hereby. Borrower
shall pay all costs that Sand Hill incurs in enforcing this Agreement or
exercising any rights with respect to the Collateral, including without
limitation reasonable attorneys fees and expenses.
6. Events of Default; Remedies. Borrower's failure (i) to pay all or any
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part of the principal or interest hereunder on the date due and payable, (ii) to
comply with any agreement or covenant set forth in this Agreement, (iii) to
comply with the terms of the Xxxxx Agreement or any
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material contract to which Borrower is a party or any agreement pursuant to
which Borrower has incurred indebtedness, or (iv) to comply with any law to
which Borrower is subject which noncompliance has a material adverse effect on
the Borrower, or the occurrence of a material adverse change in the financial or
other condition of Borrower, or the exercise by Xxxxx Fargo Bank of any remedies
available under the Xxxxx Agreement, including without limitation the
institution of any foreclosure proceedings involving any Collateral, shall
constitute a default under this Agreement. Upon the occurrence of a default
under (i) above, or under (ii) through (iv) above and Borrower's failure to cure
any default that is capable of being cured within ten (10) days after written
notice from Sand Hill, all unpaid principal, accrued interest and other amounts
owing hereunder shall, at the option of Sand Hill, be immediately due and
payable, and Sand Hill may exercise all of the rights of a secured party under
the California Uniform Commercial Code. Sand Hill shall have a right to dispose
of the Collateral in any commercially reasonable manner, and shall have a
royalty-free license to use any name, trademark, advertising matter or any
property of a similar nature to complete production of, advertisement for, and
disposition of any Collateral. Sand Hill shall have a license to enter into,
occupy and use Borrower's premises and the Collateral without charge to exercise
any of Sand Hill's rights or remedies under this Agreement.
7. Waivers; Indemnity. Borrower waives presentment and demand for
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payment, notice of dishonor, protest and notice of protest of this Agreement,
and shall pay all costs of collection when incurred, including reasonable
attorneys' fees, costs and expenses. Borrower shall indemnify and hold Sand Hill
harmless from any claim, obligation or liability (including without limitation
reasonable attorneys fees and expenses) arising out of this Agreement or the
transactions contemplated hereby.
8. Miscellaneous. This Agreement cannot be amended orally. All prior
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agreements are superseded by this Agreement. Borrower may not assign any
obligation hereunder without Sand Hill's consent. Sand Hill may assign or grant
a participation of other interest in this Agreement without Borrower's consent.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which shall constitute one instrument.
9. JURY WAIVER. SAND HILL AND BORROWER EACH WAIVES ANY RIGHTS TO A JURY
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TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN.
EDUCATIONAL INDUSTRIAL SALES
INCORPORATED
By: /s/ XXXXXX XXXXXX
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Title: Chairman
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SAND HILL CAPITAL, LLC
By: /s/ XXXXXX X. XXXXX
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Title:
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EXHIBIT A
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The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing:
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, investment
property, securities accounts, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions, know-
how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.