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EXHIBIT 10.17
SECOND AMENDMENT TO LOAN DOCUMENTS
AMENDMENT dated as of May 17, 1995 by and between SOFTKEY
INC., a Minnesota corporation (the "Borrower") and FLEET BANK OF
MASSACHUSETTS, N.A., a national banking association (together
with its successors, the "Bank".
PRELIMINARY STATEMENT
1. The Bank and the Borrower entered into a Credit
Agreement dated as of September 30, 1994, as previously amended
by a letter amendment dated as of December 5, 1994 (the "CREDIT
AGREEMENT"), pursuant to which the Bank agreed to make Revolving
Line of Credit Loans to the Borrower up to a maximum aggregate
amount of $10,000,000. Unless otherwise defined herein,
capitalized terms used herein shall have the same respective
meanings as set forth in the Credit Agreement.
2. The Bank and the Borrower wish to amend certain
provisions of the Credit Agreement and the other Loan Documents
on the terms set forth herein.
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:
Section 1. Amendments to Credit Agreement.
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1.1 Section 1.1 of the Credit Agreement is hereby amended
as follows: (a) deleting the date "June 30, 1996" appearing in
the fourth line thereof and substituting the date "June 30, 1997"
and (b) deleting the amount "$10,000,000" appearing in the sixth
line thereof and substituting the amount of "$20,000,000."
1.2 Section 1.5 of the Credit Agreement is hereby amended
by deleting the date "July 1, 1996" appearing in the third line
thereof and substituting the date "July 1, 1997."
1.3 Section 7.4 of the Credit Agreement is hereby amended
by inserting immediately following subparagraph (c) the following
new paragraph:
"Notwithstanding the provisions of the letter of the Bank to
the Borrower dated December 9, 1994, the Borrower shall not
make any further sale or disposition to the Borrower's
wholly-owned subsidiary Softkey Software Products Inc. of
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accounts receivable due to the Borrower from debtors located
in Canada."
1.4 Section 7.12 through 7.15 of the Credit are hereby
restated in their entirety as follows:
"7.12 CURRENT RATIO. The Borrower will not permit the
Current Ratio at the end of any of the following fiscal
quarters to be less than the ratio set forth below opposite
such quarter:
Minimum
Fiscal Quarters Ending Current Ratio
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10/1/94 0.90 to 1
12/31/94 1.00 to 1
4/1/95, 7/1/95 and 10/1/95 1.10 to 1
1/6/96 and thereafter 1.25 to 1
7.13 MINIMUM PROFITABILITY. The Borrower will not
permit Adjusted Net Income to be less than $2,500,000 for
the fiscal quarters ending 10/1/94 and 12/31/94 or
$10,000,000 for the fiscal year ending 12/31/94. In
addition, the Borrower will not permit Adjusted Net Income
to be less than (a) $3,000,000 for the fiscal quarters
ending 4/1/95 and 7/1/95; (b) $4,000,000 for the fiscal
quarter ending 10/1/95 or any fiscal quarter thereafter; or
(c) $15,000,000 for the fiscal years ending 1/6/96 and
1/4/97.
7.14 LEVERAGE. The Borrower will not permit the ratio
of Total Liabilities to Stockholders Equity at the end of
any of the following fiscal quarters to be greater than the
ratio opposite such fiscal quarters:
Fiscal Quarters Ending Maximum Leverage
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10/1/94 and 12/31/94 2.5 to 1
4/1/95 and thereafter 2.0 to 1
7.15 STOCKHOLDERS EQUITY. The Borrower will not
permit its Stockholders Equity at the end of any fiscal
quarter to be less than $20,000,000 plus (a) 75% of Net
Income earned in each fiscal quarter commencing with the
fiscal quarter ending December 31, 1994 (with no reduction
or offset for Net Losses); and (b) 100% through 4/1/95 and
75% thereafter of any increase in Stockholders' Equity in
accordance with GAAP resulting from the issuance of any
shares of capital stock of the Guarantor, the Borrower or
any of their Subsidiaries, less, solely in the case of this
item (b), Eligible Write-Off Expenses. For purposes hereof,
"ELIGIBLE WRITE-OFF EXPENSES" shall mean the dollar amount
of research and development or other intangible assets of
any business or business assets acquired in consideration
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for the issuance of capital stock of the Guarantor or the
Borrower but only to the extent that such write-offs occur
within 90 days of the effective date of such acquisition.
In addition, for purposes of calculating compliance with the
requirements of this Section 7.15 for the fiscal quarter
ending October 1, 1994, the Called Convertible Debt shall be
included in stockholders equity."
1.5 The definition of "Eligible Domestic Accounts
Receivable" appearing in Section 9.1 of the Credit Agreement is
hereby amended by restating subparagraph (o) thereunder in its
entirety as follows:
"(o) The account debtor is a person or entity located
in the United States or Canada and the account arose
out of services rendered or goods delivered in the
United States or Canada."
1.6 The form of Compliance Certificate attached to the
Credit Agreement as Exhibit D and the form of Borrowing Base
Certificate attached to the Credit Agreement as Exhibit E are
hereby restated in the forms of Exhibit D and Exhibit E hereto."
Section 2. Conditions of Effectiveness.
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This Amendment shall be deemed effective as of May 17, 1995
provided that the Bank shall have received on or before May 26,
1995 two copies of this Amendment executed by the Borrower
with the accompanying Consent duly executed by the Guarantor; and
an amended and restated promissory note in the form enclosed
duly executed by the Borrower (the "Amended Note"); and (c) a
certificate of the Secretary or Assistant Secretary of the
Borrower as to resolutions of the Board of Directors of the
Borrower authorizing this amendment. In addition, the Borrower
agrees that the Bank shall be furnished on or before May 31, 1995
a certificate of the Assistant Secretary of the Guarantor as to
resolutions of the Board of Directors authorizing the Consent.
Section 3. Confirmation of Representations, Absence of Default.
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The Borrower hereby confirms that the representations set
forth in the Loan Documents, as amended by this Amendment are
true and correct as of the date hereof, subject to the exceptions
and further disclosures set forth in EXHIBIT A hereto. The
Borrower hereby confirms that, except as set forth in EXHIBIT A
hereto, no Event of Default has occurred and is continuing under
the Credit Agreement. In addition, the Borrower (and the
guarantor signing below) agrees that, as of this date, it has no
defenses against its obligations to pay any amounts under the
Credit Agreement and the other Loan Documents.
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Section 4. Reference to and Effect on the Credit
Agreement and the other Loan Documents.
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4.1 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 Notes 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.
4.2 Except as specifically amended above, the Credit
Agreement shall remain in full force and effect and is hereby
ratified and confirmed. Each of the other Loan Documents is in
full force and effect and is hereby ratified and confirmed. The
Borrower (and Softkey International Inc. in consenting hereto as
guarantor by signing below) agrees that, as of the date hereof,
it has no defenses against the obligations represented by the
Credit Agreement, the Note, the Guaranty or the other Loan
Documents.
4.3 The amendments set forth above in Section 1 hereof (i)
do not constitute a waiver or modification of any term, condition
or covenant of the Credit Agreement, the 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 Note, the other Loan Documents or any of the
instruments or documents referred to therein.
Section 5. Cost and Expenses.
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The Borrower agrees 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 Sullivan &
Worcester, special counsel for the Bank with respect thereto.
Section 6. Governing Law.
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THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
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Section 7. Counterparts.
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This Amendment may be signed in one or more counterparts
each of which taken together shall constitute one and the same
instrument.
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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. Scott Murray
Title: Chief Financial Officer
FLEET BANK OF MASSACHUSETTS, N.A.
By:
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Name: Thomas W. Davies
Title: Vice President
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EXHIBIT A
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Exceptions and Qualifications to Representations
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None.