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Exhibit 10.1
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FIFTH AMENDMENT TO LOAN DOCUMENTS
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AMENDMENT dated as of October 4, 1996 (the "AMENDMENT") by and among
SOFTKEY INC., a Minnesota corporation ("SOFTKEY"), MINNESOTA EDUCATIONAL
COMPUTING CORPORATION (MECC), a Minnesota corporation ("MECC"), SOFTKEY
MULTIMEDIA INC., a Massachusetts corporation ("MULTIMEDIA"), and THE LEARNING
COMPANY, a Delaware corporation, each referred to hereinafter as a "BORROWER"
and, collectively, as the "BORROWERS", and FLEET NATIONAL BANK, as successor in
interest to Fleet Bank of Massachusetts, N.A. (together with its successors, the
"BANK").
PRELIMINARY STATEMENT
1. SoftKey and its corporate affiliates SchoolCo Inc., a Minnesota
corporation ("SCHOOLCO"), Multimedia and The Learning Company, each a
wholly-owned subsidiary of SoftKey International Inc., a Delaware Corporation
(the "GUARANTOR") (SoftKey and such affiliates being collectively referred to
herein as the "ORIGINAL BORROWERS"), are parties with the Bank to a Credit
Agreement dated as of September 30, 1994, as previously amended by a letter
amendment dated as of December 5, 1994, a Second Amendment to Loan Documents
dated as of May 17, 1995, a Third Amendment to Loan Documents dated as of
December 22, 1995, and a Fourth Amendment to Loan Documents dated as of February
28, 1996 (as so amended and as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), pursuant to which
the Bank agreed to make Revolving Line of Credit Loans to SoftKey and the other
Original Borrowers up to a maximum aggregate principal amount of $50,000,000.
Unless otherwise defined herein, capitalized terms used herein shall have the
same respective meanings as set forth in the Credit Agreement.
2. Pursuant to a certain plan of reorganization and merger, SchoolCo has
merged with and into MECC. As a consequence, MECC is the legal successor to
SchoolCo and a wholly-owned subsidiary of the Guarantor.
3. The Bank and the Borrowers wish to amend and waive compliance with
certain provisions of the Credit Agreement and the other Loan Documents on the
terms set forth herein, including, without limitation, by confirming that MECC
has become a co-Borrower with SoftKey, Multimedia and The Learning Company under
the Credit Agreement and the other Loan Documents.
NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
I. Section Amendments to Credit Agreement.
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A. Section 1.1 is hereby amended by deleting the date "June 30,
1997" appearing in the fourth line thereof and substituting in lieu thereof the
date "June 30, 1998".
A. Section 1.5 is hereby amended by deleting the date "July 1, 1997"
appearing in the third line thereof and substituting in lieu thereof the date
"July 1, 1998".
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A. Section 3.2 is hereby amended by amending and restating the last
sentence thereof to read as follows:
"In order to secure the obligations of the Guarantor under the Guaranty,
the Guarantor shall enter into an amended and restated pledge agreement in
the form previously agreed upon by the Guarantor and the Bank (the "SECOND
AMENDED AND RESTATED PLEDGE AGREEMENT"), pursuant to which the Guarantor
shall pledge to the Bank all the outstanding shares of capital stock of
SoftKey and the New Subsidiaries."
A. Section 6.12(a) is hereby amended by deleting the period at the
end of the first sentence thereof and substituting the following in lieu
thereof:
"; PROVIDED, HOWEVER, that the aforesaid list, description and other
information relating to the intellectual property and products of MECC
shall be provided to the Bank on or before October 4, 1996."
A. Section 6.12(b) is hereby amended by deleting the period at the
end of the first sentence thereof and substituting the following in lieu
thereof:
"; PROVIDED, HOWEVER, that in the case of MECC such action shall be taken
on or before October 4, 1996."
A. Section 6.12(b) is hereby further amended by deleting the phrase
"SCHEDULE B" and substituting in lieu thereof the phrase "SCHEDULE A".
A. Section 6.13(a) is hereby amended by deleting the period
following the date "January 1, 1996" and substituting the following in lieu
thereof:
"; PROVIDED, HOWEVER, that in the case of MECC such action shall be taken
on or before October 4, 1996."
A. Section 7.8 is hereby amended by deleting the word "and" from the
phrase "and (e)" and by deleting the period following the phrase "SCHEDULE A"
and substituting the following in lieu thereof:
"; and (f) subject to the conditions set forth below, payments, not to
exceed $30,000,000 in the aggregate, for the purpose of repurchasing the
Borrower's 5 1/2% Senior Convertible Notes due 2000 (the "SENIOR
CONVERTIBLE NOTES"); PROVIDED, HOWEVER, that (i) any such payments shall be
made only during the fiscal quarters ending October 5, 1996 and January 4,
1997, (ii) the amount of such payments made during the fiscal quarter
ending October 5, 1996 shall not exceed $10,000,000 in the aggregate, (iii)
the amount of such payments made during the fiscal quarter ending January
4, 1997 shall not exceed $20,000,000 in the aggregate, and (iv) in the
event the Borrower makes any such payment during either of the
aforementioned fiscal quarters, it shall at the end of the immediately
succeeding fiscal quarter maintain cash in an amount equal to at least
$50,000,000 plus the aggregate amount of the then outstanding Extensions of
Credit."
A. Section 7.13 is hereby amended by adding the following sentence
at the end thereof:
"For purposes of this Section 7.13, any gains resulting from the repurchase
of Senior Convertible Notes or other Indebtedness of the Borrower shall not
be taken into account for purposes of calculating Adjusted Net Income."
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A. Sections 7.14 and 7.15 are hereby amended and restated in their
entirety as follows:
"7.14 LEVERAGE RATIO. In the case of the fiscal quarter ending on January
4, 1997 and each fiscal quarter thereafter, the Borrowers will not permit
the Leverage Ratio to be greater than 3.75 to 1 for the four fiscal
quarters ending with such quarter; PROVIDED, HOWEVER, in the event that the
Tribune Notes are during such fiscal quarter exchanged for preferred stock
(unless the Borrowers furnish evidence reasonably satisfactory to the Bank
in the form of a legal opinion, accountants' letter or otherwise to the
effect that such preferred stock would not be treated as stockholders'
equity but as indebtedness under GAAP or applicable law) in accordance with
the terms thereof, the maximum Leverage Ratio shall be immediately
readjusted to 3.0 to 1.
"7.15 INTEREST COVERAGE RATIO. The Borrowers will not permit the Interest
Coverage Ratio to be less than (a) 3.0 to 1 for the fiscal quarter ending
July 6, 1996, (b) 3.5 to 1 for the fiscal quarter ending October 5, 1996
and (c) in the case of the fiscal quarter ending January 4, 1997 and each
fiscal quarter thereafter, 3.5 to 1 for the four fiscal quarters ending
with such quarter."
A. Section 9 is hereby amended by amending and restating the
definitions of "Borrowers", "Leverage Ratio", "New Subsidiaries" and "Security
Instruments" as follows:
""BORROWERS" shall mean SoftKey and each of the New Subsidiaries."
""LEVERAGE RATIO" means, for any period, the ratio of Funded
Indebtedness less cash in excess of $10 million to Operating Cash
Flow."
""NEW SUBSIDIARIES" shall mean MECC, The Learning Company and
Multimedia."
""SECURITY INSTRUMENTS" shall mean, collectively, the security
agreements executed by SoftKey and the New Subsidiaries, including
without limitation the New Subsidiary Security Agreements, and each
other instrument or agreement that purports to secure the Obligations
of the Borrowers to the Bank."
A. Section 9 is hereby further amended by adding the following
definition of "Senior Convertible Notes":
""SENIOR CONVERTIBLE NOTES" shall have the meaning set forth in
Section 7.8."
A. Section 10.15 is hereby amended by deleting from the first
sentence thereof the phrase "SchoolCo and each New Subsidiary" and substituting
in lieu thereof the phrase "Each New Subsidiary".
A. The Credit Agreement is hereby further amended by replacing the
Schedule appearing as "Schedule B -- Designated Software Products" with the
Schedule appended hereto as SCHEDULE A.
I. Section Amendments to Other Loan Documents.
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A. (a) The definition of "Secured Obligations" in Section 1 of the
Security Agreement dated as of September 30, 1994 between SoftKey and the Bank
(the "SOFTKEY SECURITY AGREEMENT") is hereby amended by deleting the phrase
"SchoolCo Inc.
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" and substituting in lieu thereof the phrase "Minnesota Educational Computing
Corporation (MECC)".
(b) The SoftKey Security Agreement is hereby further amended by
making such other changes thereto as may be necessary or appropriate to reflect
the amendment to the definition of "Secured Obligations" set forth in Section
2.1(a) hereof.
(c) Section 1 of the SoftKey Security Agreement is hereby further
amended by adding the following new definition:
""INVESTMENT PROPERTY" means all "investment property" (as
defined in the Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts from time to time), whether now owned or hereafter acquired
by the Company."
(d) Section 3(a) of the SoftKey Security Agreement is hereby
amended by inserting the following new item (iii-a) between existing items (iii)
and (iv) in the list of Collateral set forth therein:
"(iii-a) Investment Property;".
A. (a) The definition of "Borrowers" in Section 1 of the Amended
and Restated Security Agreement dated as of February 28, 1996 between The
Learning Company and the Bank (the "LEARNING COMPANY SECURITY AGREEMENT") is
hereby amended and restated in its entirety as follows:
""BORROWERS" means the Company, SoftKey, Minnesota Educational
Computing Corporation (MECC) and SoftKey Multimedia Inc., together with the
respective successors of the foregoing corporations and any other
corporation or entity that shall in the future become a "Borrower" for
purposes of the Credit Agreement."
(b) The Learning Company Security Agreement is hereby further
amended by making such other changes thereto as may be necessary or appropriate
to reflect the amendment to the definition of "Borrowers" set forth in Section
2.2(a) hereof.
(c) Section 1 of the Learning Company Security Agreement is
hereby further amended by adding the following new definition:
""INVESTMENT PROPERTY" means all "investment property" (as
defined in the Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts from time to time), whether now owned or hereafter acquired
by the Company."
(d) Section 3 of the Learning Company Security Agreement is
hereby amended by inserting the following new item (iii-a) between existing
items (iii) and (iv) in the list of Collateral set forth therein:
"(iii-a) Investment Property;".
A. (a) The definition of "Borrowers" in the Security Agreement
dated as of February 28, 1996 between Multimedia and the Bank (the "MULTIMEDIA
SECURITY AGREEMENT") is hereby amended and restated in its entirety as follows:
""BORROWERS" means the Company, SoftKey, Minnesota Educational
Computing Corporation and The Learning Company, together with the
respective successors of the foregoing corporations and any other
corporation or entity that shall in the future become a "Borrower" for
purposes of the Credit Agreement."
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(b) The Multimedia Security Agreement is hereby further amended
by making such other changes thereto as may be necessary or appropriate to
reflect the amendment to the definition of "Borrowers" set forth in Section
2.3(a) hereof.
(c) Section 1 of the Multimedia Security Agreement is hereby
further amended by adding the following new definition:
""INVESTMENT PROPERTY" means all "investment property" (as
defined in the Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts from time to time), whether now owned or hereafter acquired
by the Company."
(d) Section 3 of the Multimedia Security Agreement is hereby
amended by inserting the following new item (iii-a) between existing items (iii)
and (iv) in the list of Collateral set forth therein:
"(iii-a) Investment Property;".
I. Section Conditions of Effectiveness.
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This Amendment shall be deemed effective as of October 4, 1996 (the
"EFFECTIVE DATE"), provided that the Bank shall have received the following on
or before such date:
1. two copies of this Amendment executed by each Borrower;
1. the Third Amendment to Guaranty in the form enclosed duly
executed by the Guarantor;
1. an amended and restated promissory note in the form
enclosed duly executed by each Borrower (the "AMENDED NOTE");
1. an amended and restated pledge agreement in the form
enclosed herewith (the "SECOND AMENDED AND RESTATED PLEDGE AGREEMENT") duly
executed by the Guarantor, together with stock certificates representing all the
outstanding shares of capital stock of SoftKey, The Learning Company, Multimedia
and MECC, together with appropriate stock powers executed in blank;
1. the amended and restated security agreement in the form
enclosed herewith (the "MECC SECURITY AGREEMENT") duly executed by MECC,
pursuant to which MECC grants to the Bank a security interest in all its assets,
together with such UCC financing statements as the Bank may request duly
executed by MECC;
1. a certificate of the Secretary or Assistant Secretary of
each of SoftKey, The Learning Company and Multimedia as to resolutions of the
Board of Directors of each such corporation authorizing this Amendment and the
Amended Note;
1. a certificate of the Secretary or Assistant Secretary of
MECC certifying as to (i) the charter and by-laws of MECC; (ii) resolutions of
the Board of Directors of MECC authorizing the transactions and the execution of
the documents contemplated hereby; and (iii) the incumbency and specimen
signatures of the officers of MECC authorized to execute and deliver this
Amendment, the Amended Note, the MECC Security Agreement and any other Loan
Documents;
1. a Certificate of the Secretary or Assistant Secretary of
the Guarantor as to resolutions of the Board of Directors of the Guarantor
authorizing the Second Amended and Restated Pledge Agreement and the the Third
Amendment to Guaranty;
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1. opinions of counsel to each of the Borrowers and the
Guarantor in form and substance reasonably acceptable to the Bank; and
1. a certificate of the chief financial officer of SoftKey
to the effect that the acquisition of MECC has been consummated substantially in
accordance with the acquisition terms and conditions previously disclosed to the
Bank and attaching true and complete copies of the operative acquisition
documents.
I. Section Special Covenants And Representations With Regard To The Addition
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Of Mecc As A Co-Borrower.
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A. MECC does hereby assume and agree to perform all of the
obligations of SchoolCo, its corporate predecessor, of whatever kind under and
pursuant to the Credit Agreement and the other Loan Documents to which SchoolCo
was a party. Each of MECC, The Learning Company and Multimedia (the "NEW
SUBSIDIARIES") hereby agrees, jointly and severally with SoftKey, to be bound by
the terms and conditions of the Credit Agreement and shall, for all purposes
thereof, be a "Borrower" thereunder as of the Effective Date.
A. Each of the New Subsidiaries, jointly and severally with
SoftKey, hereby represents, warrants and covenants to the Bank that, after
giving effect to this Amendment and to the transactions contemplated hereby:
1. The execution, delivery and performance by such
New Subsidiary of this Amendment, the Amended Note and the Security
Instruments to which it is a party will directly and indirectly inure to
the benefit of such New Subsidiary, are in pursuit of its business purposes
as an integral part of the business conducted and proposed to be conducted
by SoftKey together with such New Subsidiary and are reasonably necessary
and convenient in connection with the conduct of the business conducted and
proposed to be conducted by it. By virtue of the foregoing, among other
things, each New Subsidiary is receiving at least reasonably equivalent
consideration from the Bank for its obligations undertaken under this
Amendment, the Amended Note and the Security Instruments to which it is a
party.
1. After giving effect to the transactions
contemplated by this Amendment, each New Subsidiary has, and will have
access to, adequate capital for the conduct of its business and the ability
to pay its debts from time to time incurred in connection therewith as such
debts mature.
1. Each New Subsidiary has and, after giving
effect to the transactions contemplated hereby, will have assets having a
fair saleable value in excess of the amount required to pay its probable
liability on its existing debts as they become absolute and matured.
The foregoing representations and warranties shall constitute representations
and warranties of the New Subsidiaries under the Credit Agreement. Each of such
representations and warranties shall survive and not be waived by the execution
and delivery of this Amendment.
I. Section Confirmation Of Representations, Absence Of Default.
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Each Borrower (including without limitation the New Subsidiaries) hereby
confirms that the representations set forth in the Loan Documents (including
without limitation those set forth in Section 6.9 of the Credit Agreement as to
use of proceeds), as amended by this Amendment, are true and correct as of the
date hereof, subject to the exceptions
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and further disclosures set forth in SCHEDULE B hereto. Each Borrower hereby
confirms that, except as set forth in Section 6 hereof or in SCHEDULE B hereto,
no Event of Default has occurred and is continuing under the Credit Agreement.
I. Section Waiver of Certain Existing Defaults.
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The Bank and the Borrowers acknowledge and agree that certain Events of
Default (the "EXISTING DEFAULTS") have occurred and currently exist with respect
to the financial covenants set forth in Section 7.12, Section 7.14 and Section
7.15 of the Credit Agreement as in effect prior to the effectiveness of this
Amendment. The Bank hereby waives, effective upon the Effective Date, the
Existing Defaults, PROVIDED that this waiver shall in no event be deemed to
constitute a waiver with respect to any fiscal period other than the fiscal
period ended April 6, 1996 or with respect to any covenants other than the
financial covenants identified in this Section 6.
I. Section Reference to and Effect on the Credit Agreement and the other Loan
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Documents.
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A. Upon the Effective Date, each reference in the
Credit Agreement to "this Credit Agreement", "hereunder", "hereof", "herein", or
words of like import referring to the Credit Agreement, and each reference in
the Amended Note and each of the other Loan Documents to "the Credit Agreement",
"thereunder", "thereof", "therein", or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby.
A. Upon the Effective Date, each reference in the
Credit Agreement and the other Loan Documents to the "Borrowers" shall mean and
be a reference to the "Borrowers" or to "each Borrower" as the context may
require, and shall reflect the addition of the MECC as a co-borrower on a joint
and several basis under the Credit Agreement and the other Loan Documents.
A. Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed. Except for the original promissory note and the amended and restated
promissory notes dated as of December 22, 1995 and February 28, 1996, each of
which is superseded by the Amended Note and has been, or will be, marked
"cancelled" and returned to SoftKey, each of the other Loan Documents, as
amended hereby, is in full force and effect and is hereby ratified and
confirmed. Each Borrower (and the Guarantor by its execution of the Third
Amendment to Guaranty) agrees that, as of the date hereof, it has no defenses
against the obligations represented by the Credit Agreement, the Amended Note,
the Guaranty or the other Loan Documents.
A. The amendments and waivers set forth herein (i) do
not constitute a waiver or modification of any term, condition or covenant of
the Credit Agreement, the Amended Note, any other Loan Documents or any of the
instruments or documents referred to by the foregoing documents, other than as
expressly set forth herein, and (ii) shall not prejudice any rights which the
Bank may now or hereafter have under or in connection with the Credit Agreement,
the Amended Note, the other Loan Documents or any of the instruments or
documents referred to therein.
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I. Section Cost and Expenses.
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Each Borrower agrees, jointly and severally, to pay on demand all costs and
expenses of the Bank in connection with the preparation, reproduction, execution
and delivery of this Amendment and any other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
▇▇▇▇▇▇▇▇ & Worcester LLP, special counsel for the Bank with respect thereto.
I. Section Governing Law.
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THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
I. Section Counterparts.
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This Amendment may be signed in one or more counterparts each of which
shall constitute an original and all of which, when taken together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be
executed under seal by their respective officers thereunto duly authorized as of
the date first above written.
SOFTKEY INC.
By:
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Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
MINNESOTA EDUCATIONAL
COMPUTING CORPORATION (MECC)
By:
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Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
THE LEARNING COMPANY
By:
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Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
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SOFTKEY MULTIMEDIA INC.
By:
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Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
FLEET NATIONAL BANK, as successor in
interest to Fleet Bank of
Massachusetts, N.A.
By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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SCHEDULE A
SCHEDULE A -- Designated Software Products
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(Section 6.12 of the Credit Agreement)
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SCHEDULE B
Exceptions and Qualifications to Representations
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(Section 5 of this Amendment)
[If none, please initial:___________]