LookSmart Ltd
625 Second Street
San Francisco
CA 94107
USA
7 December 2001
Dear Sirs,
We refer to a loan facility letter from us, Transceptgate Limited, a company
incorporated in the Isle of Man and having a registered office at 2nd Floor,
10-12 Prospect Hill, Douglas, Isle of Man, IM1 1ES ("Transceptgate"), addressed
to you, LookSmart Limited (the "Borrower") dated 15 February 2000 (as accepted
by the Borrower) (the "Existing Facility Agreement") and various arrangements
relating to it and referred to therein, namely:
(a) a loan conversion agreement between the Borrower and Transceptgate dated 15
February 2000 (the "Loan Conversion Agreement");
(b) an escrow agreement among Transceptgate, the Borrower, LookSmart
(Barbados), Inc ("LOOK") and The Pacific Bank, National Association (now
known as City National Bank) dated 15 February 2000 (the "Existing Escrow
Agreement");
(c) a share charge between LOOK and Transceptgate dated 15 February 2000 (the
"Existing Share Charge"); and
(d) a joint venture agreement between Transceptgate, the Borrower, LOOK, BT
LookSmart, Ltd ("BT LookSmart") and British Telecommunications Plc ("BT")
dated 15 February 2000 (the "JVA").
Transceptgate shall make a term loan facility of up to US Dollars $34,980,457.65
(the "New Facility") available to the Borrower on the terms and conditions set
out in this letter.
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1. Definitions
1.1 In this letter "this Agreement" means this letter as accepted by the
Borrower and LOOK:
"Advance" Means an advance under the New Facility made
or to be made in accordance with the terms of
this Agreement, being as the context requires
the "Repayment Advance" or the "New Escrow
Advance", and includes where the context
requires accrued interest thereon;
"Amendment to JVA" Means the agreement dated on or about the date
on which this letter is accepted by the
Borrower reflecting the amendments to the JVA
in the Letter of Intent signed by BT,
Transceptgate and the Borrower dated 25
October 2001;
"Banking Day" Means a day on which dealings in deposits of
US Dollars are carried on in the London
Interbank Market;
"BT Group" Means BT, any subsidiary of BT, any holding
company of BT and any subsidiary of any such
holding company;
"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;
"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 as escrow agent from
time to time pursuant to the terms of the New
Escrow Agreement, being as at the date of this
letter City National Bank (formerly known as
The Pacific Bank, National Association);
"Event of Default" Means any of the events or circumstances set
out in Schedule 1;
"Indebtedness" Means any obligation for the payment or
repayment of
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money, whether as principal or as surety and
whether present or future, actual or
contingent;
"Interest Payment Date" Means the last Banking Day of each quarter;
"Loan" Means the aggregate principal amount from
time to time borrowed and outstanding under
the New Facility (being for the avoidance of
doubt the Repayment Advance and the New Escrow
Advance) and the interest accrued thereon up
to the date of this Agreement;
"New Escrow Advance" Means an advance released to LOOK from time to
time pursuant to the terms of the New Escrow
Agreement;
"New Escrow Agreement" Means the agreement dated on or about the date
on which this letter is accepted by the
Borrower pursuant to which the Borrower
deposits in an escrow account held with the
Escrow Agent the New Escrow Advance for
application in accordance with the terms of
the New Escrow Agreement;
"New Share Charge" Means the instrument pursuant to which LOOK
charges 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;
"Repayment Date" Has the meaning stated in Clause 6.2;
"Security Documents" Means the New Share Charge and the New Escrow
Agreement;
"Share Subscription Means any day on which LOOK subscribes for
Date" Shares;
"Shares" Means all the shares purchased by LOOK from
time to time in accordance with the terms of
the JVA in the share capital of BT LookSmart;
"Subsidiary" Means:
(a) a subsidiary within the meaning of
Section 736 of the Companies Act
1985 as amended
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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;
"US Dollars" or "US$" Means the lawful currency of the United States
of America.
1.2 In this Agreement, a reference to a document, agreement or deed shall
be construed as a reference to that document, agreement or deed as the
same may be amended, replaced, supplemented or novated from time to
time and any reference to any statute, statutory instrument or other
rule or regulations is a reference to the same as it may from time to
time be amended, consolidated, re-enacted or extended. In addition, any
reference to a party shall include references to that party's
successors and lawful assigns.
2. Termination of Previous Arrangements
2.1 Transceptgate and the Borrower hereby agree that upon acceptance by the
Borrower, LOOK and the Escrow Agent of this letter:
(a) all monies standing to the credit of the Existing Escrow
Agreement amounting, as at the date of acceptance by the
Borrower of this letter, to US$ 39,796,780 (the "Drawn But
Returned Amount") shall be paid to Transceptgate and such
payment shall effect a corresponding reduction in the
repayment obligation of the Borrower under the Existing
Facility Agreement;
(b) no further drawing shall be permitted by the Borrower under
the Existing Facility Agreement;
(c) the Existing Escrow Agreement and the Loan Conversion
Agreement shall be terminated and each of the parties thereto
shall be discharged from their respective obligations
thereunder for all purposes;
(d) the Existing Share Charge shall be discharged; and
(e) following the making of the Repayment Advance (as defined in
Clause 4.1(a)) under the New Facility in accordance with
Clause 4.1 of this Agreement in refinancing:
(i) the principal amount outstanding under the Existing
Facility Agreement (namely US$10,203,220);
(ii) all interest on such principal amount and the Drawn
But Returned Amount accrued as at such date amounting
in aggregate to US$19,527,237.65; and
(iii) the Drawn But Returned Amount amounting in aggregate
to US$39,796,780,
the Existing Facility Agreement shall be terminated and each of
the parties thereto shall be discharged from their obligations
thereunder for all purposes.
LOOK and the Escrow Agent are to countersign this letter by way of
confirmation of their agreement and acknowledgement of the termination of
the agreements referred to above to which they are party.
3. Purpose of the New Facility
3.1 The New Facility shall comprise a combination of:
(a) monies advanced to the Borrower and currently outstanding under
the Existing Facility Agreement; and
(b) new monies to be advanced in accordance with Clause 4.1(b).
3.2 The New Facility is to be used strictly for the two purposes described
below:
(a) the refinancing of all amounts outstanding under the Existing
Facility Agreement (as regards the Repayment Advance (as defined
in Clause 4.1(a)); and
(b) for application in or towards meeting all or part of LOOK's
funding obligations in respect of BT LookSmart as described in the
JVA (as regards the New Escrow Advance (as defined in Clause
4.1(b)).
4. Operation of the New Facility
4.1 The New Facility shall be drawn in two Advances:
(a) one Advance (the "Repayment Advance") shall be the amount of
US$29,730,457.65 (comprising US$19,527,237.65 accrued interest and
US$10,203,220 cumulative draw downs) which is required to
refinance all amounts outstanding under the Existing Facility
Agreement as at the date of the Borrower's acceptance of this
letter. By its acceptance of this letter, the Borrower requests
that the Repayment Advance be advanced to it (and applied in
accordance with this sentence) on the date of such acceptance or,
if later, the date on which Transceptgate confirms that it is
satisfied that all conditions precedent referred to in Schedule 2
to this letter have been fulfilled unconditionally, and hereby
irrevocably authorises and instructs Transceptgate to apply the
proceeds of the Repayment Advance in repayment of all amounts
outstanding under the Existing Facility Agreement; and
(b) the other Advance (the "New Escrow Advance") shall be in the
amount of US$5,250,000 and shall be credited in full to the New
Escrow
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Account (as defined below) in accordance with this Clause 4, and
the Borrower hereby irrevocably authorises and instructs
Transceptgate to pay the New Escrow Advance into the New Escrow
Account promptly following the acceptance of this letter by the
Borrower.
4.2 Transceptgate shall deposit the New Escrow Advance in an escrow account
(the "New Escrow Account") to be opened, held and operated pursuant to
the terms of the New Escrow Agreement. The New Escrow Agreement shall
contain terms substantially similar to those contained in the Existing
Escrow Agreement.
4.3 From the New Escrow Account, the Borrower may authorise and instruct the
Escrow Agent to apply the proceeds of the New Escrow Advance held in the
New Escrow Account in settlement of obligations of LOOK to provide
funding to, and invest in, BT LookSmart under and in accordance with the
terms of the JVA and the New Escrow Agreement.
5. Interest and Charges
Interest shall accrue on the amount of the Loan from time to time
outstanding at the rate of 15% per annum. Such interest shall accrue from
day to day by reference to a year of 360 days and shall be applied to the
Loan at each twelve-month anniversary of the acceptance of this letter
and on the Repayment Date.
6. Repayment and Prepayment
6.1 The Loan shall be repaid, and all interest accrued thereon and any other
amounts outstanding under this Agreement shall be paid, on the Repayment
Date.
6.2 The Repayment Date shall be the first to occur of the following:
(a) 31 March 2003;
(b) the date on which the Loan becomes repayable pursuant to Clause
13;
(c) the date on which LOOK ceases to be a shareholder in BT Looksmart;
and
(d) the date on which Transceptgate ceases to be a shareholder in BT
Looksmart as a result of a call made by LOOK under the exit
provisions in the Amendment to JVA.
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6.3 The Loan may be prepaid (in whole or in part, provided that any such part
must be at least US$ 1,000,000) on an Interest Payment Date provided that
Transceptgate is given not less than 10 (ten) Banking Days' written
notice of the intended prepayment. No amount prepaid may be redrawn.
6.4 Any funds remaining in the New Escrow Account pursuant to the New Escrow
Agreement on the Repayment Date shall be transferred by the Escrow Agent
to Transceptgate and will be credited by Transceptgate towards
satisfaction of any sum then due and payable from the Borrower under this
Agreement.
7. Fees and Expenses
7.1 The Borrower shall pay to Transceptgate (or an associated company of
Transceptgate as Transceptgate may specify) on demand:
(a) fifty per cent of the reasonable and fully-documented expenses
(including legal and out-of-pocket expenses) incurred by
Transceptgate or BT in connection with the instruction of its
English, US, Barbados and Bermudan lawyers for the purposes of the
negotiation, preparation and execution of this Agreementand the
Security Documents, any amendment to or extension of, or the
granting of any waiver or consent under, or in respect of this
Agreement or any of 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/or the Security Documents together with
interest at the rate referred to in Clause 5 from the date on
which such expenses were incurred to the date of payment (as well
after as before judgment or the insolvency or bankruptcy of the
Borrower).
7.2 All expenses payable pursuant to this Clause 7 shall be paid together
with Value Added Tax (if any) thereon.
8. Payments
8.1 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.
8.2 The Borrower will pay interest on any moneys due and unpaid, from the due
date to actual payment (as well after as before judgment or the
insolvency or bankruptcy of the Borrower) at 15% per annum so long as the
default continues.
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Such interest shall accrue from day to day and be compounded at each
twelve-month anniversary of the date of this Agreement.
8.3 Transceptgate may apply any credit balance held by it 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.
8.4 The Borrower shall indemnify Transceptgate against any reasonable loss or
expense that Transceptgate shall incur or sustain in consequence of:
(a) any default in payment by the Borrower of any sum when due under
this Agreement;
(b) the occurrence of any Event of Default; or
(c) any prepayment of any Advance or part thereof other than on an
Interest Payment Date therefor in accordance with Clause 6.
9. Representations and Warranties
9.1 By its acceptance of this letter, each of the Borrower and LOOK
respectively represents and warrants to Transceptgate that:
(a) the execution and, delivery of, and the performance of its
obligations under, this Agreement and the Security Documents to
which it is party will not (i) contravene any existing law,
regulation or authorisation to which it is subject, or (ii) result
in any breach of or default under any agreement or other
instrument to which it is a party or is subject and this Agreement
and the Security Documents to which it is party constitutes valid
and legally binding obligations of the Borrower and LOOK
enforceable in accordance with its respective terms;
(b) no litigation or arbitration is taking place, pending or, to the
best of its knowledge, threatened against it or any of its assets
that has had or is likely to have a material adverse effect on it;
and
(c) no Default has occurred and is continuing.
10. Undertakings
10.1 By its acceptance of this letter, each of the Borrower and LOOK
respectively undertakes with Transceptgate that (save with the prior
written consent of Transceptgate) for so long as any monies remain
outstanding under the New Facility:
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(a) it shall procure that the Advances are utilised for the purpose only
of purchasing the Shares and immediately upon the issue of any Shares
funded by either Advance or any part thereof it shall procure that
LOOK transfers the Shares to Transceptgate pursuant to the terms of
the New Share Charge;
(b) LOOK will not create or allow to exist any Encumbrance over any of its
present or future assets, rights or revenues;
(c) the Borrower will not create or allow to exist any Encumbrance over
any of its present or future assets, rights or revenues otherwise than
in the ordinary course of its business (and 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);
(d) LOOK will not enter into any guarantee, indemnity or like agreement to
answer for the obligations or default of any person;
(e) the Borrower will not enter into any guarantee, indemnity or like
agreement to answer for the obligations or default of any person other
than a Subsidiary of the Borrower or otherwise in the ordinary course
of its business (and 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
(f) 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
respective present or future assets or revenues otherwise than by
transfers, sales or disposals of assets made for full consideration in
the ordinary course of its respective business.
11. Information
11.1 By acceptance of this letter, each of the Borrower and LOOK respectively
undertakes with Transceptgate that and for so long as any moneys remain
outstanding under the New Facility:
(a) it will inform Transceptgate of any Default forthwith upon becoming
aware thereof; and
(b) it will provide Transceptgate with such financial and other
information concerning its respective financial affairs as
Transceptgate may require no less than six monthly save that nothing
in this sub-clause shall require the Borrower to disclose market
sensitive information.
12. Conditions
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12.1 Transceptgate shall not be obliged to make any Advance under this Agreement
unless within seven (7) days after the date of acceptance by the Borrower
and LOOK of this letter, it shall have received the Security Documents duly
executed by the parties thereto and the Amendment to JVA duly executed by
the parties thereto on the terms set out in Schedule 2 in accordance with
all its terms both in form and substance satisfactory to Transceptgate.
12.2 The obligation of Transceptgate to make either Advance under this Agreement
is subject to the further conditions that, at the time of the proposed date
for the making of the relevant Advance:
(a) each of the representations and warranties set out in Clause 9 is 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.
13. Events of Default
Transceptgate may, without prejudice to its other rights hereunder,
terminate its obligation to make the New Facility available, declare some
or all of either Advance together with all accrued interest and other
moneys payable hereunder immediately repayable or, as the case may be,
payable at any time after any Event of Default shall have occurred (so long
as the same is continuing). The Borrower shall repay or, as the case may
be, pay any moneys declared repayable or payable under this Clause 13
forthwith on such declaration being made. Provided that the sole recourse
of Transceptgate for an Event of 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.
14. Notices
14.1 Every notice under this letter shall be in writing and may be given or made
by airmail or courier post or facsimile to the Borrower, LOOK or
Transceptgate at their respective addresses and facsimile numbers given
below. Notices shall be effective only upon actual receipt or when mailed
by registered, certified or courier mail, return receipt requested.
14.2 The address and facsimile number of LOOK are:
LookSmart (Barbados) Inc.
KPMG Corporate Services
Suite 201, Building #1
Chelston Park, Culloden Road
St. Michael, Barbados
Facsimile: +1 (246) 437-7477
Attention: Chief Executive Officer
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14.3 The address and facsimile number of the Borrower are:
LookSmart Ltd
625 Second Street
San Francisco
CA 94107
USA
Facsimile: +1 (415) 348 7034
Attention: Chief Executive Officer (with a copy to the General Counsel at
the same address)
14.4 The address and facsimile number of Transceptgate are:
Transceptgate Limited
2nd Floor
10 - 12 Prospect Hill
Douglas
Isle of Man
IM1 1ES
Facsimile: +01624 615654
Attention: The Chairman of the Board
With a copy to:
British Telecommunications plc
81 Newgate Street
London
EC1A 7AJ
Facsimile: +44 (0) 20 7356 6054
Attention: The Group Treasurer
15. No Waivers
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.
16. Assignment
Transceptgate may assign or transfer all or any part of its rights or
obligations under this Agreement without the Borrower's consent to:
(a) any BT Group company; or
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(b) in the event that Transceptgate sells all of its shares in BT
Looksmart, to the purchaser of all of Transceptgate's shares.
17. Conflict
In the event of any conflict between the provisions of this Agreement and
the JVA or the Amendment to JVA, the provisions of this Agreement shall
prevail.
18. Governing Law and Jurisdiction
This Agreement shall be governed by and interpreted in accordance with
English law. The parties hereto acknowledge and accept that the Courts of
England shall have non-exclusive jurisdiction to settle any dispute which
may arise under or in connection with this Agreement.
19. Availability
We enclose a copy of this letter. To signify your acceptance of the New
Facility and the terms and conditions contained herein, we would ask you to
sign and date the enclosed copy and return the same to us before 7 December
2001 failing which the offer contained in this letter will automatically
and without further notice lapse.
Yours faithfully,
Transceptgate Limited
Accepted and agreed
__________________________________
For and on behalf of
LookSmart Limited
__________________________________
For and on behalf of
LookSmart (Barbados), Inc.
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With respect to the acknowledgement in Section 2.1 hereof only:
_____________________________
For and on behalf of
City National Bank
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SCHEDULE 1
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 JVA 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
LOOK 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 its inability to pay its debts (within the meaning
of section 123 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
effect
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equivalent or similar to any of the events mentioned in sub-paragraphs
(e), (f) or (g); or
(i) any step is 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 JVA 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 JVA or the Amendment to JVA and/or
any of the Security Documents and in the case of default in respect of
the JVA or the Amendment to JVA 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 in accordance with its terms; or
(m) LOOK fails, within 5 days of the date of any New Escrow Advance, to
subscribe for Shares and deliver the share certificates in respect 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
respective obligations under or otherwise to comply with the terms of
this Agreement and/or the JVA or the Amendment to JVA.
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SCHEDULE 2
Documents and Evidence Required as Conditions Precedent
1. The New Share Charge.
2. The New Escrow Agreement.
3. The Amendment to JVA.
4. Legal opinions in form and substance satisfactory, and addressed, to
Transceptgate in respect of:
(a) the Borrower from Wilson Sonsini Goodrich & Rosati in respect of this
Agreement, the Amendment to JVA and the New Escrow Agreement; and
(b) LOOK from Lystra A. Kodilinye in respect of this Agreement, Amendment
to JVA, the New Escrow Agreement and the New Share Charge.
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