Exhibit 10.13
LOAN AGREEMENT
Dated as of December 1, 2000
Pursuant to this Loan Agreement (this "Agreement"), LEARNCOM, INC., an
Illinois corporation (the "Borrower"), whose chief executive offices are located
at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and THE ▇▇▇▇▇▇ CAPITAL
COLLATERALIZED BRIDGE FUND, L.P., a Delaware limited partnership (the "Lender"),
with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
agree as follows:
SECTION 1 LOAN
SECTION 1.1 LOAN. Subject to the terms and conditions of this Agreement,
the Lender agrees to lend to the Borrower, and the Borrower agrees to borrow
from the Lender, the sum of up to One Million and 00/100 Dollars ($1,000,000.00)
(the "Loan") in four equal draws of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) or in such other amounts as the Borrower and the Lender
shall mutually agree. Lender's commitment to lend under the Loan shall expire
ninety (90) days from the date hereof. Subject to the foregoing, Borrower shall
provide at least five Business Days' prior written notice to Lender of the date
on which a draw under the Loan shall occur.
SECTION 1.2 NOTE. The Loan shall be evidenced by a promissory note (the
"Note"), substantially in the form of the note set forth in EXHIBIT A, dated the
date hereof, payable to the order of the Lender, and in the original principal
amount of the Loan.
SECTION 1.3 FEES. Borrower shall pay ▇▇▇▇▇▇ Capital Management Fund, LLC
("DCM") a commitment fee of $50,000.00 (the "Commitment Fee"), a documentation
fee of $15,000.00 (the "Documentation Fee") and a guarantee consideration fee of
$15,000.00 (the "Consideration Fee") payable on the date of the closing of the
Loan. The Commitment Fee, the Documentation Fee and the Consideration Fee are in
addition to all interest and other sums payable to Lender and is deemed fully
earned on the date hereof and non-refundable. Borrower also agrees to pay DCM a
success fee of $20,000.00 (the "Success Fee") on the Maturity Date (as defined
herein). Lender acknowledges receipt of $10,000.00 from Borrower to be applied
against Lender's legal fees incurred in connection herewith.
SECTION 1.4 PAYMENT OF LOAN. The outstanding principal amount of the Loan
and all accrued and unpaid interest and other charges and fees due hereunder
shall be payable in full on June 1, 2001 or such earlier date as the Loan shall
be accelerated and become due and payable pursuant to Section 7.2 (the "Maturity
Date"). Borrower agrees that in any action or proceeding instituted to collect
or enforce collection of the Loan, the entries recorded on the books and records
of the Lender shall be prima facie evidence of the unpaid principal balance of
the Loan.
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SECTION 2 INTEREST
SECTION 2.1 INTEREST. The unpaid principal amount of the Loan outstanding
from time to time shall bear interest at the rate of sixteen percent (16%) per
annum. Accrued interest on the Loan shall be due and payable on the first
Business Day (as defiend herein) of each calendar month (to and including the
Maturity Date) commencing January 2, 2001. If for any reason there remains
outstanding and unpaid any principal due on the Loan after the Maturity Date, a
late fee equal to 2% of the outstanding and unpaid principal (the "Late Fee")
will become due and payable and will be added to the principal amount of the
Loan. Interest after the Maturity Date shall accrue on the unpaid principal
(including the Late Fee), accrued interest, fees and other amounts due hereunder
or under related documents, both before and after the entry of any judgment,
until paid in full, at a rate (the "Default Rate") equal to the lesser of
twenty-four percent (24%) per annum or the maximum rate permitted by applicable
law.
SECTION 2.2 BASIS OF COMPUTATION. Interest shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days, including
the date a drawing on the Loan is funded and excluding the date such drawing on
the Loan or any portion thereof is paid or prepaid.
SECTION 3 PAYMENTS AND PREPAYMENTS
SECTION 3.1 PAYMENTS. All payments and prepayments of principal, interest
and fees on the Loan shall be deemed earned and shall be made on or before the
day when due (or, if such day is not a Business Day, on the next succeeding
Business Day) to Lender at its address set forth in the preamble above.
"Business Day" shall mean any day on which American National Bank and Trust
Company of Chicago is open for business in Chicago, Illinois. All payments of
the obligations hereunder shall be made in immediately available funds to the
Lender by 2:00 p.m. (Chicago time) on the date when due.
SECTION 3.2 PREPAYMENT. Borrower may prepay the outstanding principal
amount of the Loan in full, but not in part, at any time. If the Loan is prepaid
or accelerated prior to the scheduled Maturity Date, Borrower shall pay on the
date of prepayment or acceleration the entire outstanding principal amount of
the Loan plus an amount equal to the interest that would otherwise have been
payable pursuant to Section 2.1 if the Loan had remained outstanding until the
scheduled Maturity Date and all other fees and expenses due hereunder.
SECTION 4 REPRESENTATIONS AND WARRANTIES
To induce the Lender to make the Loan, the Borrower represents and warrants
to the Lender as of the date hereof that:
SECTION 4.1 ORGANIZATION. The Borrower is an Illinois corporation existing
and in good standing under the laws of the State of Illinois, the Borrower is
duly qualified, in good standing and authorized to do business in the State of
Illinois and in each jurisdiction where,
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because of the nature of its activities or properties, the failure to be so
qualified would have a material adverse effect on the financial condition,
continued operations or property of the Borrower. The Borrower has the corporate
power and authority to own its properties and to carry on its business as now
being conducted.
SECTION 4.2 AUTHORIZATION; NO CONFLICT. The borrowing hereunder, the
execution and delivery of the Note and the performance by the Borrower of its
obligations under this Agreement, the Note and any other related documents are
within the Borrower's corporate powers, have been authorized by all necessary
corporate action, and do not and will not contravene or conflict with any
provision of law or of the articles of incorporation of the Borrower, the
by-laws of the Borrower or of any other material agreement binding upon the
Borrower.
SECTION 4.3 TAXES. Borrower has filed or caused to be filed all federal,
state and local tax returns which, to the knowledge of the Borrower, are
required to be filed, and have paid or have caused to be paid all taxes as shown
on such returns or on any assessment received by them, to the extent that such
taxes have become due (except for current taxes not delinquent and taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves have been provided on the books of the Borrower, and as to which no
foreclosure, distraint, sale or similar proceedings have been commenced).
SECTION 4.4 LIENS. None of the assets of the Borrower are subject to any
mortgage, pledge, title retention lien, or other lien, encumbrance or security
interest, except for liens relating to current taxes not delinquent or taxes
being contested in good faith and by appropriate proceedings and liens and
encumbrances listed on Schedule 4.4.
SECTION 4.5 LITIGATION AND CONTINGENT LIABILITIES. To Borrower's knowledge,
no litigation (including derivative actions), arbitration proceedings or
governmental proceedings are pending or threatened against the Borrower or its
subsidiaries which would (singly or in the aggregate), if adversely determined,
have a material and adverse effect on the financial condition, continued
operations or prospects of the Borrower or its subsidiaries.
SECTION 4.6 COMPLIANCE WITH LAWS. The Borrower and its subsidiaries are in
compliance with all applicable statutes, judicial or administrative orders,
licenses, permits and governmental rules and regulations applicable to them,
including (without limitation) environmental laws, the noncompliance with such
laws is reasonably likely to have a material and adverse effect on the financial
condition, operations or property of the Borrower or its subsidiaries.
SECTION 4.7 VALIDITY AND BINDING NATURE. This Agreement is, and the Note
and the related documents to which the Borrower is a party, when duly executed
and delivered will be, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency or other laws affecting
creditor's rights and remedies.
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SECTION 4.8 SUBSIDIARIES. The Borrower's subsidiaries and parent are listed
in Schedule 4.8 hereto.
SECTION 4.9 INFORMATION. All information heretofore or contemporaneously
herewith furnished by the Borrower to the Lender in writing for the purposes of
or in connection with this Agreement or any transaction contemplated hereby is
true and accurate in every material respect on the date as of which such
information is dated and certified; and none of such information is or will be
incomplete by omitting to state any material fact necessary to make such
information not misleading.
SECTION 4.10 ADVERSE CONTRACTS. The Borrower is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any limited liability company restriction, as applicable, nor is it subject
to any judgment, decree or order of any court or governmental body, which could
reasonably be expected to have a material and adverse effect on the business,
assets, liabilities, financial condition or operations of the Borrower or on the
ability of the Borrower to perform its obligations under this Agreement or the
Note. The Borrower has not, nor with reasonable diligence should have had,
knowledge of or notice that it is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
such agreement, instrument, restriction, judgment, decree or order.
SECTION 4.11 REGULATION U. The Borrower is not engaged principally in, nor
is one of the Borrower's important activities, the business of extending credit
for the purpose of purchasing or carrying "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereinafter in effect.
SECTION 4.12 FINANCIAL STATEMENTS. The Borrower's audited financial
statements as at December 31, 1999 and its unaudited financial statements as at
September 30, 2000, copies of which have been furnished to the Lender, have been
prepared in conformity with generally accepted accounting principles applied on
a basis consistent with that of the preceding fiscal year, and fairly present in
all material respects the financial condition of the Borrower and any subsidiary
as at such dates and the results of their operations for the respective periods
then ended. Since September 30, 2000, no material, adverse change in the
business, properties, assets, operations or conditions of the Borrower has
occurred. There is no known contingent liability of the Borrower which is known
to be in an amount in excess of $10,000.00 which is not reflected in such
financial statements.
SECTION 4.13 COMPENSATION PLANS. 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.
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SECTION 5 COVENANTS
Until all obligations of the Borrower hereunder and under the Note are paid
and fulfilled in full, the Borrower agrees that it shall comply with the
following covenants, unless the Lender consents otherwise in writing:
SECTION 5.1 CORPORATE EXISTENCE, MERGERS, ETC. The Borrower, its parent and
its subsidiaries shall preserve and maintain their corporate existence, rights,
franchises, licenses and privileges, and will not liquidate, dissolve, or merge,
or consolidate with or into any other entity, or sell, lease, transfer or
otherwise dispose of all or a substantial part of their assets. Borrower shall
not amend, replace or otherwise modify its articles of incorporation or bylaws
without the written consent of Lender.
SECTION 5.2 REPORTS, CERTIFICATES AND OTHER INFORMATION. The Borrower shall
furnish to the Lender:
(a) INTERIM REPORTS. Within 30 days after the end of each calendar month
of the Borrower, a copy of internally-prepared consolidated financial
statements of the Borrower and its subsidiaries, consisting of (i) a
balance sheet as at the close of such calendar month and (ii) a statement
of earnings for such calendar month and for the period from the beginning
of such fiscal year to the close of such calendar month, together with a
certificate executed by an authorized officer of the Borrower certifying
its compliance with the financial covenants specified in Section 5.9.
(b) NOTICE OF DEFAULT. Borrower shall notify Lender promptly of the
occurrence of any unmatured Event of Default, Event of Default, adverse
litigation or material adverse change in its financial condition.
(c) OTHER INFORMATION. From time to time, such other information,
concerning the business, operations, affairs and/or financial affairs of
the Borrower or its subsidiaries as the Lender may reasonably request
including, but not limited to, budgets, sales projections, operating plans
and other financial information..
SECTION 5.3 INSPECTION. The Borrower, at its expense, shall permit the
Lender and its agents at any time during normal business hours to inspect its
properties and the properties of its subsidiaries and to inspect and make copies
of their books and records.
SECTION 5.4 INDEBTEDNESS, LIENS AND TAXES. The Borrower shall:
(a) INDEBTEDNESS. Except with respect to the financing and acquisition of
CRM Films, L.P. and VideoLearning Systems, Inc., as disclosed in Schedule
5.4(a), Schedule 5.4(g), Schedule 5.5, Schedule 5.10 and Schedule 7(f), not
incur, permit to remain outstanding, assume or in any way become committed
to incur indebtedness for borrowed money, except (i) indebtedness incurred
hereunder and (ii) indebtedness existing on the date of this Agreement as
shown on Schedule 5.4(a) and (iii) indebtedness incurred in the
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ordinary course of business, provided that indebtedness permitted under
this clause (iii) shall not exceed $100,000 in the aggregate at any time.
As long as the Loan remains outstanding, the Borrower hereby covenants not
to incur any additional indebtedness from American National Bank and Trust
Company of Chicago under that certain Loan and Security Agreement dated as
of March 23, 1999 or under any other credit facility without the prior
written consent of the Lender.
(b) LIENS. Not create, suffer or permit to exist any lien or encumbrance
of any kind or nature upon any of its assets, now or hereafter owned or
acquired, or acquire or agree to acquire any property or assets of any
character under any conditional sale agreement or other title retention
agreement, but this subsection shall not be deemed to apply to: (i) liens
of landlords, contractors, laborers or materialmen, tax liens, or liens
securing performance or appeal bonds or other similar liens or charges
arising out of the Borrower's business, provided that tax liens are removed
before related taxes become delinquent and such other liens are promptly
removed, in either case unless contested in good faith and by appropriate
proceedings, and as to which adequate reserves shall have been established;
(ii) liens (A) incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, (B) to secure performance of statutory
obligations, leases or contracts (other than for borrowed money) entered
into in the ordinary course of business or (C) to secure obligations on
surety or appeal bonds approved by Lender; (iii) easements, restrictions,
conditions, zoning restrictions, rights-of-way, licenses and other similar
charges and encumbrances and other minor defects or irregularities of title
which do not, individually or in the aggregate, materially and adversely
affect the rights or remedies of the Lender under this Agreement or any of
the documents or instruments contemplated by or executed and delivered to
the Lender in connection herewith; and (iv) liens listed on Schedule 5.4(b)
hereto.
(c) TAXES. Pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any
properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for labor, materials and supplies when due,
except that no such tax, assessment, charge, levy or claim need be paid
which is being contested in good faith by appropriate proceedings and as to
which adequate reserves shall have been established, and as to which no
foreclosure, distraint, sale or similar proceedings have commenced.
(d) GUARANTIES. Except with respect to the financing and acquisition of
CRM Films, L.P. and VideoLearning Systems, Inc., as disclosed in Schedule
5.4(a), Schedule 5.4(g), Schedule 5.5, Schedule 5.10 and Schedule 7(f), not
assume, guarantee, indorse or otherwise become or be responsible in any
manner (whether by agreement to purchase any obligations, stock, assets,
goods or services, or to supply or advance any funds, assets, goods or
services, or otherwise) with respect to the obligation of any other person
or entity, except by the indorsement of negotiable instruments for deposit
or collection in the ordinary course of business.
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SECTION 5.5 CAPITAL STRUCTURE AND DISTRIBUTIONS; BUSINESS. Except as
identified on Schedule 5.5, Borrower shall not (i) purchase or redeem, or
obligate itself to purchase or redeem, any capital stock of the Borrower of any
class, issued and outstanding from time to time, or (ii) declare or pay any
dividends or distributions on the outstanding capital stock of the Borrower.
Except with respect to the financing and acquisition of CRM Films, L.P. and
VideoLearning Systems, Inc., as disclosed in Schedule 5.4(a), Schedule 5.4(g),
Schedule 5.5, Schedule 5.10 and Schedule 7(f), Borrower shall not make any
material change in its capital structure or in its business objectives, purposes
or operations.
SECTION 5.6 MAINTENANCE OF PROPERTIES. The Borrower and each subsidiary
shall maintain, or cause to be maintained, in good repair, working order and
condition, all their properties (whether owned or held under lease) to the
extent used or useful for the conduct of the Borrower's and each subsidiary's
business or operations, and from time to time make or cause to be made all
needed and appropriate additions, betterments, repairs, renewals, replacements
and improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
SECTION 5.7 INSURANCE. The Borrower and each subsidiary shall maintain
insurance in such amounts and against such risks as are usually carried by
similar businesses conducting similar operations in similar areas.
SECTION 5.8 USE OF PROCEEDS. All proceeds of the Loan shall be used solely
for lawful business purposes. The proceeds from the Loan will be used as
follows: (a) $250,000 is to be used as a down payment with regard to the
acquisition of CRM Films, L.P.; (b) $170,000 will be used to pay interest and
transaction fees on the Loan; (c) $150,000 is to be used with regard to the
acquisition of VideoLearning Systems, Inc.; (d) $230,000 will be used for
e-learning product development; and (e) $200,000 will be used for working
capital. 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."
SECTION 5.9 FINANCIAL COVENANTS.
(a) Debt Service Coverage Ratio. Borrower shall not permit the Debt
Service Coverage Ratio to be less than 1.25:1.00 on the last day of each
month through and including the date of termination of this Agreement.
(b) Borrower shall attain at least 80% of each of the projections set
forth in Schedule 5.9(d). Borrower shall test such projections monthly
beginning on the last day of the month following Closing and on the last
day of each month through and including the date of termination of this
Agreement.
SECTION 5.10 INVESTMENTS AND LOANS. Except with respect to the financing
and acquisition of CRM Films, L.P. and VideoLearning Systems, Inc., as disclosed
in Schedule
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5.4(a), Schedule 5.4(g), Schedule 5.5, Schedule 5.10 and Schedule 7(f), the
Borrower shall not make any loan, advance, extension of credit or capital
contribution to, or purchase or otherwise acquire for a consideration, evidences
of indebtedness, capital stock or other securities of any legal entity.
Notwithstanding the foregoing, the Borrower may:
(a) purchase or otherwise acquire and own short-term money market items;
(b) extend credit upon customary terms to their customers in the ordinary
course of their business; and
(c) extend credit to officers and employees in accordance with policies in
effect on the date of this Agreement of which the Lender has been advised
in writing and in the form of reasonable advances for travel and
entertainment expenses.
SECTION 5.11 KEY MAN LIFE INSURANCE. Keep and maintain at all times a key
man life insurance policy on ▇▇▇▇▇ ▇▇▇▇▇▇ in an amount not less than $1,000,000,
with Prudential Life Insurance.
SECTION 6 CONDITIONS OF LENDING
The obligation of the Lender to make the Loans is subject to the following
conditions precedent:
SECTION 6.1 DOCUMENTATION. The Lender shall have received all of the
following, each duly executed and dated the date of the Loan, in form and
substance satisfactory to the Lender and its counsel, at the expense of the
Borrower, and in such number of signed counterparts as the Lender may request
(except for the Note, of which only the original shall be signed):
(a) NOTE. The Note in the form attached hereto as EXHIBIT A, with
appropriate insertions;
(b) RESOLUTION. A copy of a resolution of the board of directors of the
Borrower unanimously authorizing or ratifying the execution, delivery and
performance, respectively, of this Agreement, the Note and the other
documents provided for in this Agreement, certified by the secretary of the
Borrower;
(c) LEGAL OPINION. A legal opinion from counsel to the Borrower, in the
form attached hereto as EXHIBIT B;
(d) ORGANIZATIONAL DOCUMENTS. Certificate of Good Standing for Borrower,
certified by the Illinois Secretary of State; a copy of the Articles of
Incorporation, certified by the Illinois Secretary of State and the
Secretary of Borrower; a copy of Borrower's By-Laws certified by the
Secretary of Borrower, including all amendments thereto; and an
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incumbency certificate certified by the Secretary of Borrower showing
specimen signatures for all officers of Borrower executing any documents
evidencing, securing or related to the Loan;
(e) WARRANT; A warrant executed by the parent of the Borrower in favor of
the Lender to purchase 15,000,000 shares of common stock of the parent of
the Borrower in the form of EXHIBIT C hereto;
(f) SECURITY AGREEMENT. A Security Agreement in the form of EXHIBIT D
hereto executed by Borrower and the documents required to be delivered to
Lender thereunder;
(g) DEBT AND LIEN SUBORDINATION AGREEMENT. A Debt and Lien Subordination
Agreement between Lender and American National Bank and Trust Company of
Chicago in form and substance acceptable to Lender;
(h) SOLVENCY CERTIFICATE. A solvency certificate in form and substance
acceptable to Lender executed by the Borrower's chief financial officer;
(i) EVIDENCE OF INSURANCE. Evidence of property, liability and business
insurance in form and substance acceptable to Lender;
(j) FINANCING STATEMENTS. Financing statements regarding all Collateral
(as defined in the Security Agreement), duly executed by the Borrower as
debtor in a form acceptable to Lender and filed in any and all offices and
jurisdictions deemed appropriate by Lender in Lender's sole discretion;
(k) UCC. Uniform Commercial Code, tax lien, bankruptcy and judgment
searches concerning Borrower from all offices and jurisdictions deemed
appropriate by Lender in Lender's sole discretion; and
(l) ASSIGNMENT OF KEY MAN INSURANCE. An assignment of Key Man Life
Insurance Policies maintained by the Borrower pursuant to an Assignment of
Life Insurance in form and substance acceptable to Lender.
(m) MISCELLANEOUS. Such other documents and certificates as the Lender may
request.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
(a) REPRESENTATIONS AND WARRANTIES. At the date of each draw under the
Loan and on the date of funding such draw the Borrower's representations and
warranties set forth herein shall be true and correct as at such date with the
same effect as though those representations and warranties had been made on and
as at such date.
(b) NO DEFAULT. At the time of each draw under the Loan, and immediately
after giving effect to such draw, the Borrower shall be in compliance with all
the terms and provisions
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set forth herein on its part to be observed or performed, and no Event of
Default or unmatured Event of Default shall have occurred and be continuing at
the time of such draw, or would result from the making of such draw.
Each request for a draw under the Loan shall be an automatic warranty and
representation by Borrower to Lender that the conditions in this Section 6.2
have been satisfied.
SECTION 7 DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. Each of the following occurrences is hereby
defined as an "Event of Default":
(a) NONPAYMENT. The Borrower shall fail to make any payment of principal,
interest or other amounts payable hereunder or under the Note when due and
payable; or
(b) DEFAULT UNDER RELATED DOCUMENTS. Any default shall occur or continue
under the Note or any instrument, document or agreement delivered to Lender
in connection herewith and such default or event of default continues
unremedied for a period of thirty (30) days or any such instrument,
document, note or agreement shall not be, or shall cease to be, enforceable
in accordance with its terms; or
(c) WARRANTIES. Any representation, warranty, schedule, certificate,
financial statement, report, notice or other writing furnished by or on
behalf of the Borrower to the Lender is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified; or
(d) NONCOMPLIANCE WITH THIS AGREEMENT. The Borrower or any of its
subsidiaries shall fail to comply with any provision hereof, which failure
does not otherwise constitute an Event of Default, and such failure shall
continue for thirty (30) days after notice thereof to the Borrower by the
Lender or any other holder of the Note; or
(e) OTHER DEBT. Any other indebtedness for money borrowed in excess of
$25,000, for which Borrower or any subsidiary of Borrower is liable,
whether as principal obligor, guarantor, or otherwise, whether to Lender or
any other person, is not paid at its stated maturity or is declared or
otherwise becomes due and payable prior to its stated maturity; or
(f) MERGERS, RESTRUCTURE, CHANGE OF OWNERSHIP. Borrower shall merge into,
consolidate with or into, or sell, assign, lease or otherwise dispose of
(whether in one transaction or a series of transactions) all or
substantially all of its assets to (whether now owned or hereafter
acquired) any person or entity; or, except with respect to the financing
and acquisition of CRM Films, L.P. and VideoLearning Systems, Inc., as
disclosed in Schedule 5.4(a), Schedule 5.4(g), Schedule 5.5, Schedule 5.10
and Schedule 7(f), Borrower shall sell, issue, or agree to sell or issue,
any capital stock or options of Borrower, or purchase capital stock or
options, except under such circumstances as will,
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in the opinion of Lender, not result in a material adverse change in the
financial or business condition of Borrower; or
(g) CHANGE IN CONTROL. Any person or entity presently not in control of
the Borrower shall obtain control directly or indirectly of the Borrower,
whether by purchase or gift of capital shares or assets, by contract, or
otherwise; or
(h) ERISA. Any reportable event shall occur under the Employee Retirement
Income Security Act of 1974, as amended, in respect of any employee benefit
plan maintained for employees of the Borrower; or
(i) LITIGATION. Any suit, action or other proceeding (judicial or
administrative) shall be commenced against the Borrower, or with respect to
any assets of the Borrower, which is reasonably likely to have a material
and adverse effect on the future operations of the Borrower and such
proceeding continues undismissed for thirty days after the commencement
thereof; or a final judgment or settlement in excess of $25,000 in excess
of insurance shall be entered in, or agreed to in respect of, any such
suit, action or proceeding; or
(j) BANKRUPTCY, ETC. Any bankruptcy, insolvency, reorganization,
arrangement, readjustment, liquidation, dissolution, or similar proceeding,
domestic or foreign, is instituted by or, if not dismissed within 45 days
of being instituted, against the Borrower or any subsidiary, or the
Borrower or any subsidiary shall take any step toward, or to authorize, or
in furtherance of, such a proceeding; or
(k) INSOLVENCY. The Borrower or any subsidiary shall become insolvent,
generally shall fail or be unable to pay its debts as they mature, shall
admit in writing its inability to pay its debts as they mature, shall make
a general assignment for the benefit of its creditors, shall enter into any
composition or similar agreement, or shall suspend the transaction of all
or a substantial portion of its usual business.
SECTION 7.2 REMEDIES. Upon the occurrence of any Event of Default set forth
in subsections (a) - (i) of SECTION 7.1 and during the continuance thereof, the
Lender may declare the Note and any other amounts owed to the Lender to be
immediately due and payable, whereupon the Note and any other amounts owed to
the Lender shall forthwith become due and payable. Upon the occurrence of any
Event of Default set forth in subsections (j) - (k) of SECTION 7.1, the Note and
any other amounts owed to the Lender shall be immediately and automatically due
and payable without action of any kind on the part of the Lender or any other
holder of the Note. The Borrower expressly waives presentment, demand, notice or
protest of any kind in connection herewith. The Lender shall promptly give the
Borrower notice of any such declaration pursuant to the first sentence of this
Section 7.2, but failure to do so shall not impair the effectiveness of such
declaration. No delay or omission on the part of the Lender or any holder of the
Note in exercising any power or right hereunder or under the Note shall impair
such right or power or be construed to be a waiver of any Event of Default or
any acquiescence
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therein, nor shall any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof, or the exercise of any
other power or right.
SECTION 8 DEFINITIONS
SECTION 8.1 GENERAL. As used herein:
Debt Service Coverage Ratio shall mean earnings before taxes plus interest
expense, rent expense, depreciation expense and amortization expense, minus any
amount of capital expenditures not financed by long term debt; divided by
contractual principal payments and interest expense (inclusive of indirect
contractual principal payments, interest expense, dividend payments and income
tax payments).
Total Liabilities shall mean all indebtedness and other obligations of the
Borrower which, in accordance with GAAP, are or should be classified as
liabilities on a balance sheet of the Borrower, including capitalized lease
obligations and all contingent liabilities of the Borrower.
GAAP shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or any successor authority) that are
applicable to the circumstances as of the date of determination, consistently
applied.
The term "subsidiary" means any corporation, limited liability company,
partnership, joint venture, trust, or other legal entity of which the Borrower
owns, directly or indirectly, 50% or more of the outstanding voting stock or
interest, or of which the Borrower has effective control, whether by contract or
otherwise.
Except as and unless otherwise specifically provided herein, all accounting
terms in this Agreement shall have the meanings given to them by generally
accepted accounting principles and shall be applied and all reports required by
this Agreement shall be prepared, in a manner consistent with the financial
statements referred to in Section 4.12.
SECTION 9 MISCELLANEOUS
SECTION 9.1 WAIVER OF DEFAULT. The Lender may, by written notice to the
Borrower, at any time and from time to time, waive any Event of Default or
unmatured Event of Default, which shall be for such period and subject to such
conditions as shall be specified in any such notice. In the case of any such
waiver the Lender and the Borrower shall be restored to their former position
and rights hereunder and under the Note, respectively, and any Event of Default
or unmatured Event of Default so waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to or impair any right consequent
thereon or to any subsequent or other Event of Default or unmatured Event of
Default. No amendment, waiver, modification, discharge or change of this
Agreement or any related document or instrument shall be valid unless same is in
writing and signed by the party against which enforcement of same is sought.
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SECTION 9.2 NOTICES. All notices and communications under this Agreement
shall be in writing and shall be given by (a) hand-delivery, (b) first class
mail (postage prepaid), or (c) reputable overnight commercial courier (charges
prepaid) to the addresses set forth below. Notice shall be deemed to have been
given and received: (i) if by hand delivery, upon delivery; (ii) if by mail,
five (5) calendar days after the date first deposited in the United States mail;
and (iii) if by overnight courier, on the date scheduled for delivery. A party
may change its address for notice by giving written notice to the other party as
specified herein:
IF TO LENDER:
------------
The ▇▇▇▇▇▇ Capital Collateralized Bridge Fund, L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
WITH A COPY TO:
--------------
Ungaretti & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
IF TO BORROWER:
--------------
LearnCom, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
WITH A COPY TO:
--------------
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
SECTION 9.3 NONWAIVER; CUMULATIVE REMEDIES. No failure to exercise, and no
delay in exercising, on the part of the Lender of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies of the Lender
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 9.4 SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of the Note and the making of
the Loan.
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SECTION 9.5 SUCCESSORS. This Agreement shall, upon execution and delivery
by the Borrower, and acceptance by the Lender in Chicago, Illinois, become
effective and shall be binding upon and inure to the benefit of the Borrower,
the Lender and their respective successors and assigns, except that the Borrower
may not transfer or assign any of its rights or interest hereunder without the
prior written consent of the Lender.
SECTION 9.6 CAPTIONS. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. References herein to Sections, Schedules, Exhibits or provisions without
reference to the document in which they are contained are references to this
Agreement.
SECTION 9.7 SINGULAR AND PLURAL. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and vice versa, and
the use of one gender shall also denote the others where appropriate.
SECTION 9.8 COUNTERPARTS. This Agreement may be executed by the parties on
any number of separate counterparts, and by each party on separate counterparts;
each counterpart shall be deemed an original instrument; and all of the
counterparts taken together shall be deemed to constitute one and the same
instrument.
SECTION 9.9 EXPENSES. Borrower shall pay all reasonable costs, expenses
and fees (including appraisals, audits, field examinations, environmental site
assessments, lien and judgment searches and reasonable counsel fees and
expenses) incurred by Lender (i) in connection with the preparation, execution,
and delivery hereof and of the other Loan documents and the making of the Loan
hereunder in an amount not to exceed $25,000; (ii) in connection with any
amendment of, or granting of any waiver or consent under, any Loan documents;
(iii) costs of collection in case any Event of Default occurs; (iv) incident to
the enforcement of payment of any obligations of Borrower by any action or
participation in, or in connection with, a case or proceeding under any chapter
of the U.S. Bankruptcy Code, or any successor statute thereto; and (v) in any
dispute between the parties, whether incurred before or after the Loan is paid
in full, provided the Lender is successful in such dispute.
SECTION 9.10 CONSTRUCTION. This Agreement, the Note and any document or
instrument executed in connection herewith shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of Illinois,
and shall be deemed to have been executed in the State of Illinois.
SECTION 9.11 SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. TO
INDUCE THE LENDER TO MAKE THE LOAN, AS EVIDENCED BY THE NOTE AND THIS AGREEMENT,
THE BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO THE LENDER'S SOLE AND ABSOLUTE
ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE NOTE OR ANY DOCUMENT
EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN CHICAGO, ILLINOIS. THE BORROWER HEREBY
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CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID CITY AND STATE. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR
OTHER PROCEEDING BROUGHT AGAINST THE BORROWER BY THE LENDER IN ACCORDANCE WITH
THIS SECTION, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORM.
SECTION 9.12 LAWFUL INTEREST RATE. Anything contained in this Agreement or
in the Note to the contrary notwithstanding, in no event shall Borrower be
required to pay interest and/or charges in excess of the maximum permitted by
applicable law. Any provision of this Agreement or of the Note requiring any
such payment shall be void and unenforceable. Any amount which may be paid in
respect of the Loan as interest in excess of the maximum permitted by applicable
law shall be credited as a reduction in the unpaid principal balance of the Loan
and/or refunded to Borrower at Lender's election.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
LEARNCOM, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------
Its: President and CEO
THE ▇▇▇▇▇▇ CAPITAL COLLATERALIZED BRIDGE
FUND, L.P.
By: DCM Bridge LLC, a Delaware limited liability
company, its general partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
Its: Managing Member
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