Term Loan Facility Agreement - Transceptgate Ltd. and LookSmart Ltd.
LookSmart, Ltd
625 Second Street,
San Francisco,
CA 94107,
USA
15 February 2000
Dear Sirs,
50,000,000 US Dollars
We are pleased to confirm that we, Transceptgate Limited, a company incorporated
in the Isle of Man and having a registered office at Celtic House, Victoria
Street, Douglas, Isle of Man ("Transceptgate") are prepared to make a term loan
facility of up to 50,000,000 US Dollars (the "Facility") available to you (the
"Borrower"), to be used for the sole purpose of subscribing for shares in BT
LookSmart ("BT LookSmart") pursuant to the terms of an agreement between
Transceptgate, the Borrower, Looksmart (Barbados) Inc. ("LOOK") having its
principal place of business at Hastings Business Services Limited, Hastings,
Christ Church, Barbados, BT Looksmart and British Telecommunications Plc dated
15 February 2000 (the "Joint Venture Agreement") upon the following terms:
1. Definitions
In this letter "this Agreement" means this letter as accepted by the
Borrower and LOOK:
"Advance" means an advance of the Facility made or to be made in
accordance with the terms of this Agreement together
with accrued interest thereon;
"Banking Day" means a day on which dealings in deposits of US Dollars
are carried on in the London Interbank Market;
"Default" means any event which, with the giving of notice, lapse
of time, determination of materiality or satisfaction
of any other condition (or any combination of the same)
could constitute an Event of Default;
"Drawdown Notice" means a notice in the form of Schedule 1 or such other
form as Transceptgate and the Borrower may agree;
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"Drawdown Period" means the period from the date of this
Agreement up to and including 31 March 2000;
"Encumbrance" means any mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation,
assignment by way of security, security
interest or other encumbrance of any kind but
does not include liens arising in the
ordinary course of trading by operation of
law and not by way of contract;
"Escrow Agent" means the agent appointed from time to time
pursuant to the terms of the Escrow
Agreement;
"Escrow Agreement" means the agreement pursuant to which the
Borrower deposits in an escrow account the
Advance before the same is utilised for the
purchase of the Shares in a form and
substance satisfactory to Transceptgate;
"Escrow Advance" means an advance released to LOOK from time
to time pursuant to the terms of the Escrow
Agreement;
"Event of Default" means any of the events or circumstances set
out in Schedule 2;
"Indebtedness" means any obligation for the payment or
repayment of money, whether as principal or
as surety and whether present or future,
actual or contingent;
"Prepayment Date" means the last Banking Day of each quarter;
"Loan" means the aggregate principal amount of the
Advance from time to time borrowed and
outstanding under this Agreement of up to
US$50,000,000;
"Share Market Value" means the market value of the Shares subject
to the Share Pledge as determined by the
board of directors of BT LookSmart;
"Share Subscription Date" means any day on which LOOK subscribes for
Shares;
"Loan Conversion means the agreement to be entered into
Agreement" between Transceptgate and the Borrower
pursuant to which the Borrower shall grant to
Transceptgate rights in respect of its shares
and the registration of the same in a form
and substance satisfactory to Transceptgate.
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"Repayment Date" means in respect of the Advance whichever is
the earlier of (i) the date falling 3 years
from the date of the Advance and (ii) the
date on which the Advance becomes repayable
pursuant to Clause 11 provided always that no
Repayment Date shall fall later than 3 years
from the date of the Advance;
"Security Documents" means the Share Pledge, the Loan Conversion
Agreement and the Escrow Agreement;
"Shares" means the shares purchased by LOOK from time
to time in accordance with the terms of the
Joint Venture Agreement in the share capital
of the BT Looksmart;
"Share Pledge" means the instrument pursuant to which the
Borrower pledges in favour of Transceptgate
the Shares, which instrument shall be in a
form and substance satisfactory to
Transceptgate, together with the original
share certificates representing all such
shares and instruments of transfer in respect
of all such shares executed in blank;
"Subsidiary" means:
(a) a subsidiary within the meaning of
Section 736 of the Companies Act 1985 as
amended by Section 144 of the Companies
Act 1989; and
(b) unless the context otherwise requires, a
subsidiary undertaking within the
meaning of Section 21 of the Companies
Act 1989.
"U.S. Dollars", means the lawful currency of the United
"USD" or "Dollars" States of America;
2. Operation of the Facility
2.1 Availability: The Facility may be borrowed in one amount up to the amount
of the Loan on any Banking Day during the Drawdown Period. The Facility
shall be cancelled to the extent not borrowed by the end of the Drawdown
Period.
2.2 Drawdown procedure: To draw the Advance, the Borrower must serve a Drawdown
Notice on Transceptgate which must be received at least 7 days before the
proposed drawdown date. Any such Drawdown Notice shall be effective only on
receipt and shall be irrevocable.
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3. Interest and Charges
3.1 Interest shall accrue on the amount of the Advance from time to time
outstanding at the rate of 20% per annum. Such interest shall accrue from
day to day by reference to a year of 360 days and shall be applied to the
Advance at each twelve-month anniversary of that Advance and on the
Repayment Date of that Advance.
4. Repayment and Prepayment
4.1 Repayment
The Advance shall be repaid, together with all interest accrued thereon and
any other amounts outstanding under this Agreement, on the Repayment Date.
4.2 The Advance may be prepaid (in whole or in part, provided that any such
part must be at least USD 1,000,000) on a Prepayment Date provided that
Transceptgate is given not less than 40 (forty) days' written notice of the
intended prepayment. No amount prepaid may be redrawn.
4.3 Transceptgate may, at any time, including without prejudice to the
generality of the foregoing, on receipt of a notice of prepayment pursuant
to Clause 4.2, at its sole option, serve a notice on the Borrower of its
intention to convert some or all of the Advance into shares in the Borrower
pursuant to the terms of the Loan Conversion Agreement. No amounts
converted into shares in the Borrower may be redrawn.
4.4 Any funds remaining in escrow pursuant to the Escrow Agreement upon the
Repayment Date shall be transferred by the Escrow Agent to Transceptgate
and will be credited towards satisfaction of any sum then due and payable
from the Borrower hereunder.
5. Fees and Expenses
5.1 The Borrower shall pay to Transceptgate on demand:
(a) fifty per cent of the reasonable expenses (including legal and out-of-
pocket expenses) incurred by Transceptgate in connection with the
instruction of US and Bermudian lawyers for the purposes of the
negotiation, preparation and execution of this Agreement and the
Security Documents and of any amendment or extension of or the
granting of any waiver or consent under or in respect of this
Agreement or the Security Documents; and
(b) all expenses (including legal and out-of-pocket expenses) reasonably
incurred by Transceptgate in contemplation of, or otherwise in
connection with, the enforcement of any rights under this Agreement
and the Security Documents together with interest at the rate referred
to in
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Clause 3 from the date on which such expenses were incurred to the
date of payment (as well after as before judgment).
All expenses payable pursuant to this Clause 5 shall be paid together with
Value Added Tax (if any) thereon.
6. Payments
6.1 If any period would end or payment would fall due under this Agreement on a
day which is not a Banking Day, the period (or the date for payment) shall
be extended to the next succeeding Banking Day, unless such next succeeding
Banking Day falls in the next calendar month in which case the period shall
be shortened (or the payment date advanced) to end on the immediately
preceding Banking Day. Where a period or date for payment is altered under
this clause, interest (and any other payment accruing from day to day)
shall be re-calculated accordingly.
6.2 The Borrower will pay interest on any moneys due and unpaid, from the due
date to actual payment (as well after as before judgment) at 20% per annum
so long as the default continues such interest shall be compounded at each
twelve-month anniversary of the Advance.
6.3 Transceptgate may apply any credit balance to which the Borrower is
entitled on any account of the Borrower with Transceptgate in or towards
satisfaction of any sum then due and payable from the Borrower hereunder.
For this purpose, Transceptgate is authorised to purchase with the moneys
standing to the credit of such account such other currencies as may be
necessary to effect such application.
6.4 The Borrower shall indemnify Transceptgate against any reasonable loss or
expense that Transceptgate shall incur or sustain in consequence of (i) any
default in payment by the Borrower of any sum under this Agreement when
due, (ii) the occurrence of any Event of Default (iii) any prepayment of
any Advance or part thereof other than on an Interest Payment Date therefor
in accordance with Clause 4 or (iv) any Advance not being made for any
reason (excluding any default by Transceptgate) after a Drawdown Notice has
been given for such Advance.
7. Representations and Warranties
By acceptance of this letter the Borrower and LOOK represent and warrant to
Transceptgate that:
7.1 the execution, delivery and performance of this Agreement and the Security
Documents will not (i) contravene any existing law, regulation or
authorisation to which it or LOOK is subject, (ii) result in any breach of
or default under any agreement or other instrument to which the Borrower or
LOOK is a party or is subject and this Agreement and the Security Documents
constitutes valid and
<PAGE>
legally binding obligations of the Borrower and LOOK enforceable in
accordance with its terms;
7.2 no litigation or arbitration is taking place, pending or, to the Borrower's
or LOOK's knowledge, threatened against the Borrower or LOOK or any assets
of the Borrower or LOOK that is or is likely to have a material adverse
effect on either the Borrower or LOOK; and
7.3 no Default has occurred and is continuing.
8. Undertakings
By acceptance of this letter the Borrower and LOOK undertakes with
Transceptgate that (save with the prior written consent of Transceptgate)
throughout the Drawdown Period and so long as the Advance remains
outstanding under the Facility:
(a) the Borrower and LOOK, shall procure that the Advance is utilised
for the purpose only of purchasing the Shares and immediately upon the
issue of any Shares funded by the Advance or any part thereof it shall
procure that LOOK transfers the Shares to Transceptgate pursuant to
the terms of the Share Pledge;
(b) the Borrower and LOOK shall procure that on each twelve- month
anniversary of the Advance the aggregate amount of the Escrow Advances
together with all interest accrued on such Escrow Advances calculated
at the rate and in the manner set out in Clause 3 shall not exceed the
Share Market Value;
(c) the Borrower and LOOK shall procure that on each Share Subscription
Date that the number of Shares subject to the Share Pledge expressed
as a percentage of all the Shares shall be equal to or greater than
the aggregate amount of the Escrow Advances expressed as a percentage
of the total amount paid for Shares;
(d) LOOK will not create or allow to exist any Encumbrance over its
present or future assets, rights or revenues;
(e) the Borrower will not create or allow to exist any Encumbrance over
its present or future assets, rights or revenues otherwise than in the
ordinary course of its business (for the avoidance of doubt, the
ordinary course of the Borrower's business shall include investing in,
buying and selling assets goodwill and shares in other corporate
entities);
(f) LOOK will not enter into any guarantee, indemnity or like agreement to
answer for the obligations or default of any person;
(g) the Borrower will not enter into any guarantee, indemnity or like
agreement to answer for the obligations or default of any person other
<PAGE>
than a Subsidiary of the Borrower or otherwise in the ordinary course
of its business (for the avoidance of doubt, the ordinary course of
the Borrower's business shall include investing in, buying and selling
assets goodwill and shares in other corporate entities); and
(h) the Borrower and LOOK will not whether by one or a series of
transactions related or not, sell, transfer, lend or otherwise dispose
of or cease to exercise direct control over any part of their present
or future assets or revenues otherwise than by transfers, sales or
disposals of assets made for full consideration in the ordinary course
of business;
9. Information
By acceptance of this letter the Borrower and LOOK undertake with
Transceptgate that throughout the Drawdown Period and so long as any
moneys remain outstanding under the Facility:
(a) they will inform Transceptgate of any Default forthwith upon becoming
aware thereof; and
(b) they will provide Transceptgate with such financial and other
information concerning their financial affairs no less than six
monthly save that nothing in this sub-clause shall require the
Borrower to disclose market sensitive information.
10. Conditions
10.1 Transceptgate shall not be obliged to make the Advance under this
Agreement unless within seven (7) days after the date of the Drawdown
Notice for the Advance, it shall have received the Security Documents on
the terms set out in Schedule 3 and there has occurred completion of the
Joint Venture Agreement in accordance with all its terms both in form and
substance satisfactory to it.
10.2 The obligation of Transceptgate to make the Advance under this Agreement
is subject to the further conditions that, at the time of the proposed
date for the making of the Advance:
(a) the representations and warranties set out in Clause 7 are true and
correct as if each was made with respect to the facts and
circumstances existing at such time; and
(b) no Default shall have occurred and be continuing or would result from
the making of the Advance.
11. Events of Default
Transceptgate may, without prejudice to its other rights hereunder
including its rights pursuant to the Loan Conversion Agreement, terminate
its obligation to make the Facility available, declare some or all of the
Advance together with all
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accrued interest and other moneys payable hereunder immediately repayable
or payable at any time after any Event of Default shall have occurred (so
long as the same is continuing). The Borrower shall repay or pay any
moneys declared repayable or payable under this Clause 11 forthwith on
such declaration being made. Provided that the sole recourse of
Transceptgate for Default by the Borrower and/or LOOK hereunder shall be
by the exercise of its rights under the terms of any one or more of the
Security Documents.
12. Notices
12.1 Every notice under this letter shall be in writing and may be given or
made by post or telefax to the Borrower, LOOK or Transceptgate at their
respective addresses given below. Notices shall be effective only upon
actual receipt or when mailed by registered or certified mail, return
receipt requested.
12.2 No failure or delay by any party to this Agreement in exercising any right
or remedy hereunder shall operate as a waiver thereof nor shall any single
or partial exercise of any right or remedy preclude any further exercise
thereof or the exercise of any other right or remedy. The rights and
remedies herein are cumulative and not exclusive of any rights and
remedies provided by law.
12.3 The address and facsimile number of LOOK are:
Lookmart (Barbados) Inc.
Hastings Business Services Limited
Hastings
Christ Church
Barbados
Facsimile Number: (246) 437-7477
Attention: Chief Executive Officer
12.4 The address and facsimile number of the Borrower are:
LookSmart Ltd
625 Second Street
San Francisco
CA 94107
USA
Facsimile: (415) 348 7034
Attention: Chief Executive Officer (with a copy to the General Counsel at
the same address)
12.5 The address and facsimile number of Transceptgate are:
81 Newgate Street
London
EC1A 7AJ
Facsimile: +44 171 356 6054
<PAGE>
Attention: The Group Treasurer
13. Assignment
Transceptgate may assign all or any part of its rights under this
Agreement without the Borrower's consent to any wholly owned subsidiary of
British Telecommunications plc, but may only transfer any of its
obligations with the Borrower's prior consent in writing.
14. Conflict
In the event of any conflict between the provisions of this Agreement and
the Joint Venture Agreement the provisions of this Agreement shall
prevail.
15. Governing Law
This Agreement shall be governed by and interpreted in accordance with
English Law. The Courts of England shall have the non-exclusive
jurisdiction to settle any dispute which may arise in connection with this
Agreement.
16. Availability
We enclose a copy of this letter. To signify your acceptance of the
Facility we would ask you to sign the enclosed copy and return the same to
us before 28 February failing which the offer contained in this letter
will lapse.
Yours faithfully,
For and on behalf of
Transceptgate Limited
Accepted and agreed.
BORROWER
LOOK
............................
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SCHEDULE 1
Form of Drawdown Notice
To:
[Date]
50,000,000 US Dollars Term Loan Facility Letter
dated [ ], 2000
We refer to the above agreement (the "Agreement") and hereby give you notice
that we wish to draw the Advance of an amount of [ ] US Dollars on ..........,
2000. The funds should be credited to The Pacific Bank, National Association,
with its principal place of business at 100, Montgomery Street, San Francisco,
California Account No. [ ].
We confirm that:
(i) we are in compliance with the obligations assumed by us and undertakings
given by us under the Agreement and no Default has occurred and is
continuing;
(ii) the representations and warranties contained in Clause 7 of the Agreement
are true and correct at the date hereof as if made with respect to the
facts and circumstances existing at such date;
(iii) the Advance shall be placed in an escrow account pursuant to the terms of
the Escrow Agreement and thereafter used for the sole purpose of
subscribing for ordinary shares in the capital of BT LookSmart.
Words and expressions defined in the Agreement shall have the same meanings when
used herein.
For and on behalf of
BORROWER
.......................................
For and on behalf of
LOOK
.......................................
<PAGE>
SCHEDULE 2
Events of Default
There shall be an Event of Default if:
(a) the Borrower fails to pay any sum payable by it under this Agreement
when due; or
(b) the Borrower and/or LOOK defaults in the due performance or observance
of any other provision of this Agreement and (if such default is in
the opinion of Transceptgate capable of remedy) such default shall not
have been remedied within 14 days of Transceptgate notifying the
Borrower and/or LOOK of such default and the remedy required; or
(c) any representation made or deemed to be made by the Borrower and/or
LOOK in or pursuant to this Agreement or the Joint Venture Agreement
is or proves to have been incorrect in any material respect; or
(d) any obligation (including a contingent obligation) of the Borrower
and/or LOOK in respect of Indebtedness is not paid when due or becomes
due or capable of being declared due prior to its stated maturity by
reason of default in circumstances where the aggregate amount of
Indebtedness is in excess of US$25 million; or
(e) a judgment or order made against the Borrower and/or LOOK is not
complied with within seven days or an encumbrancer takes possession or
a receiver or administrator is appointed of any part of the
undertaking, assets, rights or revenues of the Borrower and/or LOOK or
a distress, execution or other process is levied or enforced upon any
of the assets, rights, undertaking or revenues of the Borrower and/or
Guarantor and is not discharged within 7 days; or
(f) the Borrower and/or LOOK stops or suspends payment of its debts or is
unable to or admits inability to pay its debts (within the meaning of
section 268 of the Insolvency Act 1986 or otherwise but ignoring the
references in that section to determination by the court) or becomes
insolvent or proposes or commences negotiations with one or more of
its creditors with a view to the general rescheduling of its debts or
proposes or enters into any composition or other arrangement for the
benefit of its creditors generally or any class of its creditors; or
(g) a petition is presented or an order made for the insolvency of the
Borrower and/or LOOK; or
(h) any event occurs or proceeding is taken with respect to the Borrower
and/or LOOK in any jurisdiction to which it is subject which has an
<PAGE>
effect equivalent or similar to any of the events mentioned in sub-
paragraphs (e), (f) or (g); or
(i) any steps are taken to repossess any goods in the possession of the
Borrower and/or LOOK under any hire purchase, conditional sale,
leasing, retention of title or similar agreement where the aggregate
value of such goods exceeds US$25 million; or
(j) the Joint Venture Agreement is terminated in accordance with the terms
thereof; or
(k) the Borrower and/or LOOK defaults in the due performance or observance
of any material provision of the Joint Venture Agreement and/or any of
the Security Documents and in the case of default in respect of the
Joint Venture Agreement the default is not remedied pursuant to Clause
11.6 of that Agreement; or
(l) any Security Document is not, or ceases to be, in full force and
effect; or
m) LOOK fails, within 5 days of the date of any Escrow Advance to
subscribe for Shares and deliver the share certificates of the same to
Transceptgate; or
(n) any other event occurs or circumstance arises which, in the reasonable
opinion of Transceptgate, is likely materially and adversely to affect
the ability of the Borrower and/or LOOK to perform all or any of its
obligations under or otherwise to comply with the terms of this
Agreement and/or the Joint Venture Agreement.
<PAGE>
SCHEDULE 3
Documents and Evidence Required as Conditions Precedent
1. The Share Pledge.
2. The Loan Conversion Agreement.
3. The Escrow Agreement.
4. Legal Opinions in form and substance satisfactory to Transceptgate in
respect of the Borrower, and the Guarantee from each of Orrick Herrington &
Sutcliffe (New York) (in respect of the Loan Conversion Agreement) and
Graham Thompson (in respect of due execution of the Share Pledge) and
lawyers from Barbados (in respect of due execution of this Agreement and
the Share Pledge).