THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
WHEREAS, The Millbrook Press Inc., a Delaware corporation, with its
chief executive office located at 0 Xxx Xxx Xxxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxxxxx 00000 (referred to herein as "Borrower") entered into a Loan and
Security Agreement with People's Bank, a Connecticut banking corporation with a
place of business located at Bridgeport Center, 000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxx 00000 (referred to herein as "Lender") dated as of December 14, 1995
(the Loan and Security Agreement being herein referred to as the "Loan
Agreement"); and
WHEREAS, Borrower and Lender entered into a First Amendment to Loan and
Security Agreement dated as of June 17, 1997 amending and revising Sections
2.1(a), 2.1(c), 2.6, 4.6, 6.13(a), 6.13(c) and 6.13(d) of the Loan Agreement;
and
WHEREAS, Borrower and Lender entered into a Second Amendment to Loan
and Security Agreement dated as of June 10, 1998 amending and revising Sections
2.1(a), 2.1(c), 2.6(d), 3.3, 6.13(c) and 6.13(d) of the Loan Agreement; and
WHEREAS, Borrower and Lender entered into a Letter Amendment to the
Loan and Security Agreement as amended by the First and Second Amendments to
Loan and Security Agreement dated January 8, 1999 to provide Borrower with a
LIBOR interest rate option and to reduce the Interest Rate on non LIBOR
Obligations to the Reference Rate (the Loan and Security Agreement, as amended
by the First Amendment to Loan and Security Agreement, the Letter Amendment and
the Second Amendment to Loan and Security Agreement shall be referred to herein
as the "Amended Agreement"); and
WHEREAS, Borrower and Lender have agreed to further amend the terms and
provisions of the Amended Agreement effective as of the date stated herein by
the provisions set forth below;
NOW, THEREFORE, Borrower and Lender hereby agree that effective as of
January , 2000, the Amended Agreement shall be further amended to contain the
provisions set forth below and the applicable provisions of the Amended
Agreement shall be superseded to the extent necessary to give effect to the
provisions set forth below:
1. The definitional terms "Debt Service Ratio", "Obligations",
"Tangible Net Worth" and "Working Capital" shall be deleted in their entirety
and the following inserted in lieu thereof:
"Debt Service Ratio" shall mean the ratio obtained by dividing (i)
Net Profit After Taxes plus all non-recurring items, discretionary expenses,
depreciation, amortization, interest expense on Indebtedness (other than the
Term Promissory Note-1 and Term Promissory Note-2), less dividends, less
adjustments to retained earnings (other than accrued and unpaid dividends on
preferred stock), less internally funded capital expenditure costs and less
other adjustments to income by (ii) all current maturities of long term debt
(other than the Term Promissory Note-1
and Term Promissory Note-2) and interest on all indebtedness (other than the
Term Promissory Note-1 and Term Promissory Note-2) plus fees and costs paid to
People's and any other holder of Indebtedness.
"Obligations" means all loans, advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations owing to People's,
premiums (including Early Termination Premiums), liabilities (including all
amounts charged to Borrower's loan account pursuant to any agreement authorizing
People's to charge Borrower's loan account), obligations, fees, lease payments,
guaranties, covenants, and duties owing by Borrower to People's of any kind and
description (whether pursuant to or evidenced by the Loan Documents, by the Term
Promissory Note-1 or the Term Promissory Note-2 or by any other note or
instrument or pursuant to any other agreement between People's and Borrower, and
irrespective of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from Borrower to others
that People's may have obtained by assignment or otherwise, and further
including all interest not paid when due and all People's Expenses that Borrower
is required to pay or reimburse by the Loan Documents, by law, or otherwise.
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total stockholder's
equity plus the remaining principal amount outstanding from time to time under
Term Promissory Note-1 and Term Promissory Note-2; minus (b) the sum of: (i) all
intangible assets of Borrower; (ii) all of Borrower's prepaid expenses; (iii)
capitalized costs for new Inventory titles and (iv) all amounts due to Borrower
from Affiliates, calculated on a consolidated basis.
"Working Capital" means the result of subtracting Consolidated
Current Liabilities (exclusive of amounts included as liabilities from the Term
Promissory Note-1 and Term Promissory Note-2) from Consolidated Current Assets.
2. Section 2.1(a) of the Amended Agreement shall be deleted in its
entirety and the following inserted in lieu thereof:
2.1 Advances. (a) Subject to the terms and conditions of this
Agreement, People's agrees to make revolving advances to Borrower in an amount
at any one time outstanding not to exceed the Borrowing Base. For purposes of
this Agreement, "Borrowing Base", as of any date of determination, shall mean an
amount equal to (i) eighty percent (80%) of the amount of Eligible Accounts plus
(ii) an amount equal to the lowest of: (x) fifty percent (50%) of the amount of
Eligible Inventory, (y) the amount of credit availability created by Section
2.1(a) above or (z) Three Million Seven Hundred Fifty Thousand Dollars
($3,750,000) less (iii) the principal outstanding under the Term Promissory
Note-2 referenced in Section 2.1(e).
3. A new Section 2.1(e) is hereby added to the Amended Agreement to
contain the following terms:
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(e) Upon execution of this Second Amendment to Loan and Security
Agreement, People's agrees to advance the sum of $964,000 to Borrower in the
form of two (2) Term Loan accommodations denominated as Term Loan-1 which shall
be in the amount of $600,000 and be evidenced by Exhibit A (Term Promissory
Note-1) attached hereto and Term Loan-2 which shall be in the amount of $364,000
and be evidenced by Exhibit B (Term Promissory Note-2) attached hereto.
4. Section 2.3(a) of the Amended Agreement shall be deleted in its
entirety and the following inserted in lieu thereof:
(a) Interest Rate. All Obligations, other than those subject to
LIBOR fixed term contracts and the principal balance outstanding under Term
Promissory Note-1, shall bear interest, on the average Daily Balance, at a per
annum rate equal to the Reference Rate. The principal balance outstanding under
Term Promissory Note-1 shall bear interest, on the average Daily Balance, at a
per annum rate of two percentage points (2.0) in excess of the Reference Rate
5. Section 2.3(c) of the Amended Agreement shall be deleted in its
entirety and the following inserted in lieu thereof:
(c) Payments of Interest and Principal. Interest on all Obligations not
subject to LIBOR fixed term contracts shall be due and payable, in arrears, on
the first day of each month during the term hereof. Interest due under LIBOR
fixed term contracts shall be payable at the end of each such fixed term.
In addition to the payments of interest above described, payments of
principal under Term Promissory Note-1 shall be made on the first day of each
month, commencing February 1, 2000 and continuing on the first day of each month
thereafter, in amounts of $25,000 each with any remaining outstanding principal
balance due and payable in full on January 1, 2002. In addition to the monthly
principal payments due under Term Promissory Note-1, Borrower shall on the
earlier of March 15, 2000 and continuing on each June 15, September 15 and
December 15 thereafter or if earlier, the date of Borrower's filing of its Form
10(QSB) or its Form 10(KSB) with the Securities and Exchange Commission for each
fiscal quarter commencing with the fiscal quarter ending on January 31, 2000 and
continuing with the fiscal quarters ending on April 30, July 31 and October 31
and thereafter prepay the principal amount outstanding under Term Promissory
Note-1 by an amount equal to the lesser of (i) $25,000 or (ii) such amount which
exceeds 2.0 times Borrower's Debt Service Ratio.
If not sooner paid, one lump sum payment of all outstanding principal under Term
Promissory Note-2 shall be due on January 1, 2002.
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Borrower hereby authorizes People's, at its option, without prior notice to
Borrower, to charge such interest, all People's Expenses (as and when incurred),
and all installments or other payments due under any note or other Loan Document
to Borrower's loan account, which unpaid amounts thereafter shall accrue
interest at the rate then applicable hereunder. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.
6. Section 2.3(d) of the Amended Agreement shall be deleted in its
entirety and the following inserted in lieu thereof:
(d) Computation. The Reference Rate as of the date of this
Agreement is eight and one-half percent (8.50%) per annum. In the event the
Reference Rate is changed from time to time hereafter, the applicable rate of
interest hereunder automatically and immediately shall be increased or decreased
by an amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
7. A new Section 2.6(d) shall be added to Amended Agreement to contain
the following provision:
(d) Term Loan Balance Fee. On the first day of each month following the
extension of Term Loan-1 under this Amended Agreement, and thereafter so long as
any principal amount is outstanding under the Term Promissory Note-1, a fee in
an amount equal to one (1.0%) percent per annum of the remaining unpaid
principal balance shall be due and payable to People's.
8. Section 6.13 shall be deleted in its entirety and the following
substituted in lieu therefor:
6.13 Financial Covenants. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets divided by
Consolidated Current Liabilities (exclusive of Term Promissory Note-1 and Term
Promissory Note-2) of at least 1.50 to 1.0 at all times measured on a fiscal
quarter-end basis;
(b) Total Liabilities to Tangible Net Worth Ratio. A ratio of
Borrower's total liabilities (exclusive of Term Promissory Note-1 and Term
Promissory Note-2) divided by Tangible Net Worth of not more than 2.0 to 1.0
during the term of this Agreement, measured on a fiscal quarter-end basis;
(c) Tangible Net Worth. Tangible Net Worth of at least $4,500,000 at
all times measured on a fiscal quarter-end basis; and
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(d) Working Capital. Working Capital of not less than $3,750,000 at all
times measured on a fiscal quarter-end basis.
(e) Debt Service Ratio. Borrower shall maintain a Debt Service Ratio of
not less than 2.0 to 1.0 during the term of this Agreement, measured on a fiscal
quarter-end basis.
(f) Development Costs of New Titles. Borrower shall during each rolling
12 month period during the term of this Agreement limit its costs of development
of new titles to cash flow in excess of 1.25 times the Debt Service Ratio plus
additional paid in equity.
9. Lender has requested and Borrower has agreed to execute the Term
Promissory Note-1 and the Term Promissory Note-2 to evidence the term loan
advances under Section 2.1(e) which Term Promissory Notes shall be in the form
attached hereto as Exhibit A and Exhibit B.
10. Except as herein amended, all of the terms and provisions of the
Amended Agreement shall remain in full force and effect.
11. Except as set forth in Exhibit C attached hereto, all of the
representations and warranties made by the Obligors in Section 5 of the Amended
Agreement are true and correct on the date hereof as if made on and as of the
date hereof, except to the extent that any of such representations and
warranties related by their terms to a prior date.
12. Borrower and Lender agree that this Third Amendment to Loan and
Security Agreement has been prepared by the mutual effort of both parties and
that in the event of a conflict or interpretive question with respect to any
term, provision or section contained in this Third Amendment to Loan and
Security Agreement or the First or Second Amendments or Letter Amendment to or
the December 14, 1995 Loan and Security Agreement, that this Third Amendment to
Loan and Security Agreement shall not be construed more strictly against any one
party than any other party; it being agreed that both Borrower and Lender have
equally negotiated the terms hereof and thereof.
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13. The revisions and amendments recited herein shall not become
effective and shall be of no force or effect until Borrower has executed this
Third Amendment to Loan and Security Agreement and the original form of Term
Promissory Note-1 and Term Promissory Note-2 and provided Lender with a current
certificate of the Secretary of Borrower attesting to the adoption and/or
passage of applicable corporate resolutions authorizing and approving the
revisions and amendments contained in this Third Amendment to Loan and Security
Agreement which such certificate shall also contain an acceptable form of
incumbency certificate attesting to the current officers and directors of
Borrower.
The date of execution of this Third Amendment to Loan and Security
Agreement by Borrower is January 31, 2000.
LENDER: BORROWER:
PEOPLE'S BANK THE MILLBROOK PRESS INC.
By:_________________________ By:__________________________
Title:_____________________ Title:_______________________
EXHIBIT A
TERM PROMISSORY NOTE-1
January 31, 2000
FOR VALUE RECEIVED, at the earlier of January 1, 2002 or the occurrence
of an Event of Default under a Loan and Security Agreement dated December 14,
1995, as amended from time to time (hereinafter referred to as the "Agreement"),
the undersigned, The Millbrook Press Inc., a Delaware corporation (hereinafter
referred to as "Debtor"), with its chief executive office located at 0 Xxx Xxx
Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000 hereby promises to pay to the order
of People's Bank, a Connecticut banking corporation with a place of business
located at Bridgeport Center, 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000
(hereinafter referred to as "Lender") in such coin and currency of the United
States which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment, the principal sum of Six Hundred Thousand
Dollars ($600,000), or so much thereof as shall have been advanced and remain
outstanding and due, together with interest from January , 2000 at the rate
hereinafter set forth.
This Secured Promissory Note represents a term loan extended to Debtor
on this date.
Interest on all advances of principal remaining from time to time
unpaid shall be paid by Debtor to Lender at the Reference Rate plus 2 percent
per annum and after the occurrence and during the continuance of an Event of
Default at the rate of interest stated in Section 2.3(b) of the Agreement.
So long as no Event of Default shall have occurred under the Agreement,
the principal and interest shall be due and payable on the dates and in the
manner set forth in Section 2.3(c) of the Agreement.
Debtor, for itself and its legal representatives, successors and
assigns, expressly waives presentment, protest, notice of dishonor, notice of
nonpayment, notice of maturity, notice of protest, presentment for the purpose
of accelerating maturity, diligence in collection, and the benefit of any
exemption under the homestead exemption laws, if any, or any other exemption or
insolvency laws, and consents that Lender may release or surrender, exchange or
substitute any real estate and/or personal property or other collateral security
now held or which may hereafter be held as security for the payment of this
Note, and may extend the time for payment or otherwise modify the terms of
payment of any part or the whole of the debt evidenced hereby.
This Note has been issued pursuant to the Agreement between Debtor and
Lender of even date herewith, and all of the terms, covenants and conditions of
said Agreement (including all schedules thereto) and all other instruments
evidencing and/or securing the indebtedness hereunder are hereby made part of
this Note and are deemed incorporated herein in full. Any default in any of the
conditions, covenants, obligations or agreements contained in said Agreement
(and all schedules attached thereto) or any other instruments securing and/or
evidencing this indebtedness shall constitute a default under this Note and
shall entitle Lender to accelerate the entire indebtedness hereunder and take
such other action as may be provided for in said Agreement.
This Note and all transactions hereunder and/or evidenced herein shall
be governed by, construed and enforced in accordance with the laws of the State
of Connecticut.
DEBTOR ACKNOWLEDGES ITS UNDERSTANDING THAT LENDER MAY HAVE RIGHTS AGAINST
DEBTOR, NOW OR IN THE FUTURE, IN ITS CAPACITY AS SECURED PARTY, CREDITOR, OR IN
ANY OTHER CAPACITIES. SUCH RIGHTS MAY INCLUDE THE RIGHT TO DEPRIVE DEBTOR OF OR
AFFECT THE USE OF OR POSSESSION OR ENJOYMENT OF DEBTOR'S PROPERTY; AND IN THE
EVENT LENDER DEEMS IT NECESSARY TO EXERCISE ANY OF SUCH RIGHTS PRIOR TO THE
RENDITION OF A FINAL JUDGMENT AGAINST DEBTOR, OR OTHERWISE, DEBTOR MAY BE
ENTITLED TO NOTICE AND/OR HEARING UNDER THE LAWS OF THE STATE OF CONNECTICUT,
(TO DETERMINE WHETHER OR NOT LENDER HAS A PROBABLE CAUSE TO SUSTAIN THE VALIDITY
OF LENDER CLAIM), PRIOR TO THE EXERCISE BY LENDER OF ANY SUCH RIGHTS. DEBTOR
EXPRESSLY AGREES THAT THIS AGREEMENT REPRESENTS A COMMERCIAL TRANSACTION AND
WAIVES ANY RIGHT UNDER TITLE 52 SECTION 278 OF THE CONNECTICUT GENERAL STATUTES,
AS AMENDED, TO NOTICE OF ANY REQUEST FOR A PREJUDGMENT REMEDY OR HEARING TO
WHICH DEBTOR MAY BE ENTITLED; PROVIDED, HOWEVER, THAT THIS WAIVER SHALL NOT
INCLUDE A WAIVER OF SUCH RIGHTS AS DEBTOR SHALL HAVE TO PRIOR NOTICE OF THE
PROPOSED DISPOSITION OF COLLATERAL BY LENDER. SPECIFICALLY AND WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, DEBTOR RECOGNIZES THAT LENDER HAS AND SHALL
CONTINUE TO HAVE AN REASONABLE RIGHT TO EFFECT COLLECTION OF THE COLLATERAL WITH
RESPECT TO WHICH LENDER HOLDS A SECURITY INTEREST WITHOUT THE NECESSITY OF
ACCORDING TO DEBTOR ANY PRIOR NOTICE OR HEARING. THIS SHALL BE A CONTINUING
WAIVER AND REMAIN IN FULL FORCE AND EFFECT SO LONG AS DEBTOR IS OBLIGATED TO
LENDER.
IN WITNESS WHEREOF, Debtor has caused this Note to be signed in its
corporate name by its duly authorized corporate officer and its corporate seal
to be hereto affixed, by order of its Board of Directors on the day and year
first above written.
THE MILLBROOK PRESS INC.
By__________________________
Title:______________________
EXHIBIT B
TERM PROMISSORY NOTE-2
January 31, 2000
FOR VALUE RECEIVED, at the earlier of January 1, 2002 or the occurrence
of an Event of Default under a Loan and Security Agreement dated December 14,
1995, as amended from time to time (hereinafter referred to as the "Agreement"),
the undersigned, The Millbrook Press Inc., a Delaware corporation (hereinafter
referred to as "Debtor"), with its chief executive office located at 0 Xxx Xxx
Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000 hereby promises to pay to the order
of People's Bank, a Connecticut banking corporation with a place of business
located at Bridgeport Center, 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000
(hereinafter referred to as "Lender") in such coin and currency of the United
States which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment, the principal sum of Three Hundred Sixty Four
Thousand Dollars ($364,000), or so much thereof as shall have been advanced and
remain outstanding and due, together with interest from January , 2000 at the
rate hereinafter set forth.
This Secured Promissory Note represents a term loan extended to Debtor
on this date.
Interest on all advances of principal remaining from time to time
unpaid shall be paid by Debtor to Lender at the Reference Rate and after the
occurrence and during the continuance of an Event of Default at the rate of
interest stated in Section 2.3(b) of the Agreement.
So long as no Event of Default shall have occurred under the Agreement,
the principal and interest shall be due and payable on the dates and in the
manner set forth in Section 2.3(c) of the Agreement.
Debtor, for itself and its legal representatives, successors and
assigns, expressly waives presentment, protest, notice of dishonor, notice of
nonpayment, notice of maturity, notice of protest, presentment for the purpose
of accelerating maturity, diligence in collection, and the benefit of any
exemption under the homestead exemption laws, if any, or any other exemption or
insolvency laws, and consents that Lender may release or surrender, exchange or
substitute any real estate and/or personal property or other collateral security
now held or which may hereafter be held as security for the payment of this
Note, and may extend the time for payment or otherwise modify the terms of
payment of any part or the whole of the debt evidenced hereby.
This Note has been issued pursuant to the Agreement between Debtor and
Lender of even date herewith, and all of the terms, covenants and conditions of
said Agreement (including all schedules thereto) and all other instruments
evidencing and/or securing the indebtedness hereunder are hereby made part of
this Note and are deemed incorporated herein in full. Any default in any of the
conditions, covenants, obligations or agreements contained in said Agreement
(and all schedules attached thereto) or any other instruments securing and/or
evidencing this indebtedness shall constitute a default under this Note and
shall entitle Lender to accelerate the entire indebtedness hereunder and take
such other action as may be provided for in said Agreement.
This Note and all transactions hereunder and/or evidenced herein shall
be governed by,
construed and enforced in accordance with the laws of the State of Connecticut.
DEBTOR ACKNOWLEDGES ITS UNDERSTANDING THAT LENDER MAY HAVE RIGHTS AGAINST
DEBTOR, NOW OR IN THE FUTURE, IN ITS CAPACITY AS SECURED PARTY, CREDITOR, OR IN
ANY OTHER CAPACITIES. SUCH RIGHTS MAY INCLUDE THE RIGHT TO DEPRIVE DEBTOR OF OR
AFFECT THE USE OF OR POSSESSION OR ENJOYMENT OF DEBTOR'S PROPERTY; AND IN THE
EVENT LENDER DEEMS IT NECESSARY TO EXERCISE ANY OF SUCH RIGHTS PRIOR TO THE
RENDITION OF A FINAL JUDGMENT AGAINST DEBTOR, OR OTHERWISE, DEBTOR MAY BE
ENTITLED TO NOTICE AND/OR HEARING UNDER THE LAWS OF THE STATE OF CONNECTICUT,
(TO DETERMINE WHETHER OR NOT LENDER HAS A PROBABLE CAUSE TO SUSTAIN THE VALIDITY
OF LENDER CLAIM), PRIOR TO THE EXERCISE BY LENDER OF ANY SUCH RIGHTS. DEBTOR
EXPRESSLY AGREES THAT THIS AGREEMENT REPRESENTS A COMMERCIAL TRANSACTION AND
WAIVES ANY RIGHT UNDER TITLE 52 SECTION 278 OF THE CONNECTICUT GENERAL STATUTES,
AS AMENDED, TO NOTICE OF ANY REQUEST FOR A PREJUDGMENT REMEDY OR HEARING TO
WHICH DEBTOR MAY BE ENTITLED; PROVIDED, HOWEVER, THAT THIS WAIVER SHALL NOT
INCLUDE A WAIVER OF SUCH RIGHTS AS DEBTOR SHALL HAVE TO PRIOR NOTICE OF THE
PROPOSED DISPOSITION OF COLLATERAL BY LENDER. SPECIFICALLY AND WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, DEBTOR RECOGNIZES THAT LENDER HAS AND SHALL
CONTINUE TO HAVE AN REASONABLE RIGHT TO EFFECT COLLECTION OF THE COLLATERAL WITH
RESPECT TO WHICH LENDER HOLDS A SECURITY INTEREST WITHOUT THE NECESSITY OF
ACCORDING TO DEBTOR ANY PRIOR NOTICE OR HEARING. THIS SHALL BE A CONTINUING
WAIVER AND REMAIN IN FULL FORCE AND EFFECT SO LONG AS DEBTOR IS OBLIGATED TO
LENDER.
IN WITNESS WHEREOF, Debtor has caused this Note to be signed in its
corporate name by its duly authorized corporate officer and its corporate seal
to be hereto affixed, by order of its Board of Directors on the day and year
first above written.
THE MILLBROOK PRESS INC.
By__________________________
Title:______________________
EXHIBIT C
EXCEPTIONS TO WARRANTIES AND REPRESENTATIONS
