Loan and Security Agreement
This Loan and Security Agreement (as it may be amended, this "Agreement")
is entered into on June 3, 1998 between NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION ("Lender"),
having an address at 1177 Avenue of the Americas, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 and GOLDEN BOOKS PUBLISHING COMPANY, INC. ("Borrower"), whose chief
executive office is located at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Borrower's Address"). The Schedules to this Agreement are an integral part of
this Agreement and are incorporated herein by reference. Terms used, but not
defined elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 Amount. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) Revolving Loans and Credit Accommodations. From time to time during the
Term at Borrower's request, make revolving loans to Borrower ("Revolving
Loans"), and make letters of credit, bankers acceptances and other credit
accommodations ("Credit Accommodations") available to Borrower, in each case to
the extent that there is sufficient Availability at the time of such request to
cover, dollar for dollar, the requested Revolving Loan or Credit Accommodation;
provided, that after giving effect to such Revolving Loan or Credit
Accommodation, (x) the outstanding balance of all monetary Obligations will not
exceed the Maximum Facility Amount set forth in Section 1(a) of Schedule A and
(y) none of the other Loan Limits set forth in Section 1 of Schedule A will be
exceeded. For this purpose, "Availability" means:
(i) the aggregate amount of Eligible Accounts (less maximum existing
or asserted taxes, discounts, credits and allowances) multiplied by the
Accounts Advance Rate set forth in Section 1(b)(i) of Schedule A but not to
exceed the Accounts Sublimit(s) set forth in Section 1(c) of Schedule A;
plus
(ii) the lower of cost or market value of Eligible Inventory (as
reflected in Borrower's perpetual inventory records) multiplied by the
Inventory Advance Rate(s) set forth in Section 1(b)(ii) of Schedule A, but
not to exceed the Inventory Sublimit(s) set forth in Section 1(d) of
Schedule A;
minus
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(iii) all Reserves which Lender has established pursuant to Section
1.2 (including those to be established in connection with the requested
Revolving Loan or Credit Accommodation);
minus
(iv) the outstanding balance of all of the monetary Obligations
(excluding the Credit Accommodation Balance); and
plus
(v) the Overadvance Amount, if any, set forth in Section 1(g) of
Schedule A.
(b) Intentionally Omitted.
(c) Such Revolving Loan requested by Borrower hereunder prior to 2:00 P.M.
Eastern Standard Time on any Business Day for which Borrower has sufficient
Availability shall be funded by Lender on such Business Day into such bank
account as Borrower shall have designated to Lender in writing.
1.2 Reserves. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("Reserves") to
reflect (i) Lender's good faith concern as to events, conditions, contingencies
or risks which affect or may affect (A) the Collateral or its value, or the
security interests and other rights of Lender in the Collateral or (B) the
assets, business or prospects of Borrower or any Obligor, (ii) Lender's good
faith concern that any Collateral report or financial information furnished by
or on behalf of Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect, (iii) any fact or
circumstance which Lender determines in good faith constitutes, or could
constitute, a Default or Event of Default or (iv) any other events or
circumstances which Lender determines in good faith make the establishment or
revision of a Reserve prudent. Without limiting the foregoing, Lender shall (x)
in the case of each Credit Accommodation issued for the purchase of Inventory
(a) which meets the criteria for Eligible Inventory set forth in clauses (i),
(ii), (iii), (v) and (vi) of the definition of Eligible Inventory, (b) which is
or will be in transit to one of the locations set forth in Section 9(d) of
Schedule A, (c) which is fully insured in a manner satisfactory to Lender and
(d) with respect to which Lender is in possession of all bills of lading and all
other documentation which Lender has requested, all in form and substance
satisfactory to Lender in its sole discretion, establish a Reserve equal to the
cost of such Inventory (plus all duties, freight, taxes, insurance, costs and
other charges and expenses relating to such Credit Accommodation or such
Eligible Inventory) multiplied by a percentage equal to 100% minus the Inventory
Advance Rate applicable to Eligible Inventory and (y) in the case of any other
Credit Accommodation issued for any purpose, establish a Reserve equal to the
full amount of such Credit Accommodation plus all costs and other charges and
expenses relating to such Credit Accommodation. Lender may, in its discretion,
establish and revise Reserves by deducting
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them in determining Availability or by reclassifying Eligible Accounts or
Eligible Inventory as ineligible; provided, that Lender shall not establish a
Reserve for any amount that has also been deducted in determining eligibility of
Accounts or Inventory. In no event shall the establishment of a Reserve in
respect of a particular actual or contingent liability obligate Lender to make
advances hereunder to pay such liability or otherwise obligate Lender with
respect thereto. Lender acknowledges that there are no Obligors on the date
hereof. Lender agrees to notify Borrower upon the establishment of any Reserve
pursuant to this section.
1.3 Other Provisions Applicable to Credit Accommodations. Lender may, in
its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions reasonably acceptable to Borrower to issue
them supported by Lender's guaranty or indemnification; provided, that after
giving effect to each Credit Accommodation, the Credit Accommodation Balance
will not exceed the Credit Accommodation Limit set forth in Section 1(e) of
Schedule A, if any. Any amounts paid by Lender in respect of a Credit
Accommodation will be treated for all purposes as a Revolving Loan which shall
be secured by the Collateral and bear interest, and be payable, in the same
manner as a Revolving Loan. Borrower agrees to execute all documentation
required by Lender or the issuer of any Credit Accommodation in connection with
any such Credit Accommodation.
1.4 Repayment. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Lender acknowledges that interest shall
not accrue on interest and fees included in the Obligations until they become
due and payable. If at any time any of the Loan Limits are exceeded, Borrower
will immediately pay to Lender such amounts (or provide cash collateral to
Lender with respect to the Credit Accommodation Balance in the manner set forth
in Section 7.3), as shall cause Borrower to be in full compliance with all of
the Loan Limits. Notwithstanding the foregoing, Lender may, in its sole
discretion, make or permit Revolving Loans, any Credit Accommodations or any
other monetary Obligations to be in excess of any of the Loan Limits; provided,
that Borrower shall, upon Lender's demand, pay to Lender such amounts as shall
cause Borrower to be in full compliance with all of the Loan Limits. All unpaid
monetary Obligations shall be payable in full on the Maturity Date (as defined
in Section 7.1) or, if earlier, the date of any early termination pursuant to
Section 7.2.
1.5 Intentionally Omitted.
1.6 Reduction of Maximum Facility Amount. Subject to Lender's approval,
which approval shall not be unreasonably withheld, Borrower may from time to
time, upon at least ten (10) days prior written notice to Lender during the
Initial Term or any Renewal Term, permanently reduce the Maximum Facility Amount
to such amount as Borrower shall specify in such notice; provided, that, except
as provided in the immediately following sentence, all fees payable by Borrower
under this Agreement shall be calculated as if no reductions in the Maximum
Facility Amount had occurred. Notwithstanding the foregoing, in the event that
the Maximum Facility Amount has been reduced effective as of the first day of a
given
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Renewal Term in accordance with the first sentence of this Section 1.6, (i) the
Facility Fee applicable to such Renewal Term shall be the fee set forth in
Section 6(b)(ii) of Schedule A multiplied by a fraction, the numerator of which
is the Maximum Facility Amount as so reduced and the denominator of which is
$30,000,000 (and such reduced Facility Fee shall be payable in three (3) equal
annual installments payable as provided in Section 2.2(b)) and (ii) the Early
Termination Fee applicable to such Renewal Term shall be calculated using such
Maximum Facility Amount as so reduced.
2. INTEREST AND FEES.
2.1 Interest. All Loans and other monetary Obligations shall bear interest
at the Interest Rate(s) set forth in Section 3 of Schedule A, except where
expressly set forth to the contrary in this Agreement or another Loan Document;
provided, that after the occurrence and during the continuance of an Event of
Default, all Loans and other monetary Obligations shall, at Lender's option,
bear interest at a rate per annum equal to two percent (2%) in excess of the
rate otherwise applicable thereto (the "Default Rate") until paid in full
(notwithstanding the entry of any judgment against Borrower or the exercise of
any other right or remedy by Lender) and all such interest shall be payable on
demand. Lender acknowledges that interest shall not accrue on interest or fees
included in the Obligations until they become due and payable. Changes in the
Interest Rate shall be effective as of the date of any change in the Prime Rate.
Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged or
collected by Lender is not intended to exceed the highest rate permissible under
any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 Fees. Borrower shall pay Lender the following fees, which are in
addition to all interest and other sums payable by Borrower to Lender under this
Agreement, and are not refundable:
(a) Closing Fee. A closing fee in the amount set forth in Section 6(a) of
Schedule A, one-half of which was deemed to be fully earned, and payable, and
which was paid by Borrower, as of the issuance and acceptance of the Commitment
Letter dated April 20, 1998, and the balance of which shall be deemed to be
fully earned as of, and payable on, the date hereof.
(b) Facility Fees. A facility fee for the Initial Term in the amount set
forth in Section 6(b)(i) of Schedule A (which shall be earned and payable in
equal installments due, respectively, on each anniversary of the date of this
Agreement during the Initial Term, other than the Maturity Date), and a facility
fee for each Renewal Term in the amount set forth in Section 6(b)(ii) of
Schedule A (which shall be payable in equal installments due, respectively, on
the first day of such Renewal Term and on each anniversary thereof during such
Renewal Term, other than the Maturity Date).
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(c) Intentionally Omitted.
(d) Intentionally Omitted.
(e) Intentionally Omitted.
(f) Intentionally Omitted.
(g) Intentionally Omitted.
(h) Credit Accommodation Fees. The fees relating to Credit Accommodations
set forth in Section 6(d) of Schedule A, payable, in arrears, on the first day
of each month so long as any of the Obligations are outstanding and on the
Maturity Date, plus all costs and fees charged by the issuer, payable as and
when such costs and fees are charged.
2.3 Computation of Interest and Fees. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 Loan Account; Monthly Accountings. Lender shall maintain a loan account
for Borrower reflecting all advances, charges, expenses and payments made
pursuant to this Agreement (the "Loan Account"), and shall provide Borrower with
a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within seventy-five days after such account is rendered,
describing the nature of any alleged errors or omissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the Obligations,
Borrower hereby grants to Lender a continuing security interest in all of
Borrower's interest in the following, whether now owned or in existence or
hereafter acquired or arising, wherever located, whether or not eligible for
lending purposes: (i) all Accounts, Chattel Paper, Documents and Inventory, (ii)
all proceeds and products of all of the foregoing (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties for
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loss or any destruction of any of the foregoing) and (iii) all books and records
relating to any of the foregoing.
4. ADMINISTRATION.
4.1 Lock Boxes and Blocked Accounts. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("Account Proceeds"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "Lock Box") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Lender's name
(each, a "Blocked Account"), under an arrangement acceptable to Lender with a
depository bank reasonably acceptable to Lender, pursuant to which all funds
deposited into each Blocked Account are to be transferred to Lender in such
manner, and with such frequency, as Lender shall specify or (iii) a combination
of the foregoing. Borrower agrees to execute, and to cause its depository banks
to execute, such Lock Box and Blocked Account agreements and other documentation
as Lender shall reasonably require from time to time in connection with the
foregoing. On the date hereof, Borrower shall have Lock Boxes and Blocked
Accounts at the banks set forth in Section 14 of Schedule A, which represent
collection procedures which are acceptable to Lender as of the date hereof.
4.2 Remittance of Proceeds. Except as provided in Section 4.1, all proceeds
arising from the sale or other disposition of any Collateral shall be delivered,
in kind, by Borrower to Lender in the original form in which received by
Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 Application of Payments. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the Obligations, such items shall be deemed applied by
Lender one and one-half Business Days after Lender's receipt of advice of
deposit thereof at Lender's Bank.
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4.4 Notification; Verification. Lender or its designee may, from time to
time, (i) whether or not a Default or Event of Default has occurred: (A) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; and (B) notify Account Debtors that Lender has a security interest
in the Accounts and that payment thereof is to be made directly to Lender;
provided, that so long as no Default or Event of Default has occurred and is
continuing, Lender shall use its best efforts to notify Borrower of any action
taken by Lender or its designee under this clause (i) (however, Lender shall
have no liability for its failure to do so); and (ii) after the occurrence and
during the continuance of a Default or Event of Default, demand, collect or
enforce payment of any Accounts and Chattel Paper (but without any duty to do
so).
4.5 Power of Attorney. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion, deem
advisable in order to perfect and maintain Lender's security interests in the
Collateral, to exercise a right of Borrower or Lender in respect of the
Collateral, or to fully consummate all the transactions contemplated by this
Agreement and the other Loan Documents (including such financing statements and
continuation financing statements, and amendments thereto, as Lender shall deem
necessary or appropriate) and to file as a financing statement any copy of this
Agreement or any financing statement signed by Borrower; (ii) after the
occurrence and during the continuance of a Default or Event of Default, execute
on behalf of Borrower any document exercising, transferring or assigning any
option to purchase, sell or otherwise dispose of or lease (as lessor or lessee)
any personal property which is part of the Collateral or in which Lender has an
interest; (iii) after the occurrence and during the continuance of a Default or
Event of Default, execute on behalf of Borrower any invoices relating to any
Accounts, any draft against any Account Debtor, any proof of claim in
bankruptcy, any notice of Lien or claim, and any assignment or satisfaction of
mechanic's, materialman's or other Lien; (iv) subject to the proviso in Section
4.4(i)(B), execute on behalf of Borrower any notice to any Account Debtor; (v)
receive and otherwise take control in any manner of any cash or non-cash items
of payment or proceeds of Collateral; (vi) endorse Borrower's name on all checks
and other forms of remittances received by Lender; (vii) pay, contest or settle
any Lien, charge, encumbrance, security interest and adverse claim in or to any
of the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; (viii) after the occurrence and during the
occurrence of a Default or Event of Default, grant extensions of time to pay,
compromise claims relating to, and settle Accounts or Chattel Paper for less
than face value and execute all releases and other documents in connection
therewith; (ix) pay any sums required to secure the release of any
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Liens on the Collateral for Borrower's taxes or any other Liens on the
Collateral; (x) pay any amounts necessary to obtain, or maintain in effect, any
of the insurance described in Section 5.12; (xi) settle and adjust, and give
releases of, any insurance claim that relates to any of the Collateral and
obtain payment therefor; (xii) instruct any third party having custody or
control of any Collateral or books or records belonging to, or relating to,
Borrower to give Lender the same rights of access and other rights with respect
thereto as Lender has under this Agreement; and (xiii) after the occurrence and
during the continuance of a Default or Event of Default, change the address for
delivery of Borrower's mail and receive and open all mail addressed to Borrower.
Any and all sums paid, and any and all costs, expenses, liabilities, obligations
and reasonable attorneys' fees incurred, by Lender with respect to the foregoing
shall be added to and become part of the Obligations, shall be payable on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Borrower agrees that Lender's rights under
the foregoing power of attorney or any of Lender's other rights under this
Agreement or the other Loan Documents shall not be construed to indicate that
Lender is in control of the business, management or properties of Borrower.
4.6 Disputes. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper, except for disputes or claims for
amounts which are less than $100,000 individually, or $200,000 in the aggregate,
outstanding at any given time between Borrower and its Account Debtors. Borrower
will not, without Lender's prior written consent, compromise or settle any
Account or Chattel Paper for less than the full amount thereof, grant any
extension of time of payment of any Account or Chattel Paper, release (in whole
or in part) any Account Debtor or other person liable for the payment of any
Account or Chattel Paper or grant any credits, discounts, allowances,
deductions, return authorizations or the like with respect to any Account or
Chattel Paper; except that so long as no Event of Default has occurred and is
continuing, Borrower may take any of such actions in the ordinary course of its
business, provided that Borrower promptly reports the same to Lender.
4.7 Invoices. After the occurrence and during the continuance of a Default
or an Event of Default, at Lender's request, Borrower will cause all invoices
and statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory to Lender, to reflect Lender's security
interest therein.
4.8 Inventory.
(a) Returns. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Lender). After the occurrence and during
the continuance of an Event of Default, Borrower will not accept any return
without Lender's prior written consent. After the occurrence and during the
continuance of an Event of Default, Borrower will, upon Lender's request (i)
hold
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the returned Inventory in trust for Lender; (ii) segregate all returned
Inventory from all of Borrower's other property; (iii) conspicuously label the
returned Inventory as Lender's property; and (iv) immediately notify Lender of
the return of such Inventory, specifying the reason for such return, the
location and condition of the returned Inventory and, at Lender's request,
deliver such returned Inventory to Lender at an address specified by Lender.
(b) Other Covenants. Borrower will not, without Lender's prior written
consent, (i) store any Inventory with any warehouseman or other third party
other than as set forth in Section 9(d) of Schedule A or (ii) sell any Inventory
on a sale-or-return, guaranteed sale, or other contingent basis (except that
Borrower may sell Inventory on a guaranteed or sale-or-return basis in
accordance with Borrower's customary practices as in effect on the date hereof).
Borrower may sell Inventory on a consignment basis; provided, that such
Inventory shall not constitute Eligible Inventory. All of the Inventory has been
produced only in accordance with the Fair Labor Standards Act of 1938 and all
rules, regulations and orders promulgated thereunder.
4.9 Access to Collateral, Books and Records.
(a) At reasonable times, and on one Business Day's notice, prior to the
occurrence of a Default or an Event of Default (except that Lender shall use its
best efforts to provide more notice), and at any time and with or without notice
after the occurrence and during the continuance of a Default or an Event of
Default, Lender or its agents shall have the right to inspect the Collateral,
and the right to examine and copy Borrower's books and records. Lender shall use
its best efforts to keep confidential all information obtained in any such
inspection or examination, but Lender shall have the right to disclose any such
information to its auditors, regulatory agencies, attorneys and participants in
the Loans on a need to know basis, and pursuant to any subpoena or other legal
process; provided that Lender makes such parties aware of the confidential
nature of such information. Borrower agrees to give Lender access to any or all
of Borrower's premises to enable Lender to conduct such inspections and
examinations. Such inspections and examinations shall be at Borrower's expense
and the charge therefor shall be $750 per person per day (or such higher amount
as shall represent Lender's then current standard charge), plus reasonable
out-of-pocket expenses. Lender may, at Borrower's expense, use Borrower's
personnel, computer and other equipment, programs, printed output and computer
readable media, supplies and premises for the collection, sale or other
disposition of Collateral to the extent Lender, in its reasonable discretion,
deems appropriate. Borrower hereby irrevocably authorizes all accountants and
third parties to disclose and deliver to Lender, at Borrower's expense, all
financial information, books and records, work papers, management reports and
other information in their possession regarding Borrower. Borrower will not
enter into any agreement with any accounting firm, service bureau or third party
to store Borrower's books or records at any location other than Borrower's
Address without first obtaining Lender's written consent (which consent may be
conditioned upon such accounting firm, service bureau or other third party
agreeing to give Lender the same rights with respect to access to
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books and records and related rights as Lender has under this Agreement but may
not otherwise be unreasonably withheld or delayed).
(b) Notwithstanding anything to the contrary contained herein, to the
extent the rights and remedies available to Lender and other obligations of the
Borrower pursuant to Section 4.9(a) above relate to Collateral located at the
Premises, such rights, remedies and obligations are and shall remain subject in
all respects to the terms and conditions of the Mortgagee Waiver.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided unless such
representation or warranty provides that it is made as of a specific earlier
date and shall not be affected by any knowledge of, or any investigation by,
Lender, and (ii) the accuracy of each such representation, warranty and covenant
will be a condition to each Loan and Credit Accommodation):
5.1 Existence and Authority. Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation. Borrower is qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property
(except as could not reasonably be expected to have a material adverse effect on
Borrower), do not constitute grounds for acceleration of any indebtedness or
obligation under any agreement or instrument which is binding upon Borrower or
its property (except as could not reasonably be expected to have a material
adverse effect on Borrower), and do not require the consent of any Person other
than the holders of the Senior Notes and Disney Licensed Publishing. This
Agreement and such other Loan Documents have been duly executed and delivered
by, and are enforceable against, Borrower, and all other Obligors who have
signed them, in accordance with their respective terms, except as limited by
applicable bankruptcy, reorganization, insolvency, fraudulent conveyance or
similar laws affecting the enforcement of creditors' rights generally or
principles of equity. Sections 9(g) and 9(h) of Schedule A set forth the
ownership of Borrower and the names and ownership of Borrower's Subsidiaries as
of the date of this Agreement.
5.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days'
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prior written notice before changing its name or doing business under any other
name. Borrower has complied with all laws relating to the conduct of business
under a fictitious business name. Borrower represents and warrants that (i) each
trade name does not refer to another corporation or other legal entity; (ii) all
Accounts invoiced under any such trade names are owned exclusively by Borrower
and are subject to the security interest of Lender and the other terms of this
Agreement and (iii) all schedules of Accounts, including any sales made or
services rendered using any trade name shall show Borrower's name as assignor.
5.3 Title to Collateral; Permitted Liens. Borrower has good and marketable
title to the Collateral, subject only to Permitted Liens. The Collateral now is
and will remain free and clear of any and all liens, charges, security
interests, encumbrances and adverse claims, except for Permitted Liens. Lender
now has, and will continue to have, a first-priority perfected and enforceable
security interest in all of the Collateral, subject only to the Permitted Liens,
and Borrower will at all times defend Lender and the Collateral against all
claims of others, other than holders of Permitted Liens. Except for leases or
subleases as to which Borrower has delivered to Lender a landlord's waiver in
form and substance satisfactory to Lender, Borrower is not a lessee or sublessee
under any real property lease or sublease pursuant to which the lessor or
sublessor may obtain any rights in any of the Collateral, and no such lease or
sublease now prohibits, restrains, impairs or conditions, or will prohibit,
restrain, impair or condition, Borrower's right to remove any Collateral from
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by Lender,
use its best efforts to cause such third party to execute and deliver to Lender,
in form and substance reasonably acceptable to Lender, such waivers and
subordinations as Lender shall specify, so as to ensure that Lender's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party; provided that in the absence of such waivers and subordinations,
Lender shall have the right, in its discretion, to classify such Collateral as
ineligible. Borrower will keep in full force and effect, and will comply with
such terms of, any lease of real property where any of the Collateral is
located, except where the failure to so comply could not reasonably be expected
to have a material adverse effect on the value or marketability of the
Collateral.
5.4 Accounts and Chattel Paper. As of each date reported by Borrower, all
Accounts which Borrower has reported to Lender as being Eligible Accounts comply
in all respects with the criteria for eligibility established by Lender and in
effect at such time. All Accounts and Chattel Paper are genuine and in all
respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower (except for Accounts relating to Inventory which Borrower
is permitted to sell on a guaranteed or sale-or-return basis pursuant to Section
4.8(b)) in the ordinary course of its business and in accordance with the terms
and conditions of all purchase orders, contracts or other documents relating
thereto, each Account Debtor thereunder had the capacity to contract at the time
any contract or other document giving rise to such Accounts and Chattel Paper
were executed, and the transactions giving rise to such
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Accounts and Chattel Paper comply with all applicable laws and governmental
rules and regulations.
5.5 Intentionally Omitted.
5.6 Place of Business; Location of Collateral. Borrower's Address is
Borrower's chief executive office and, along with Borrower's manufacturing and
administrative facility in Sturtevant, Wisconsin, the location of its books and
records. In addition, except as provided in the immediately following sentence,
other than sales offices, Borrower has places of business and Collateral located
only at the locations set forth on Sections 9(d) and 9(e) of Schedule A.
Borrower will give Lender at least thirty days' prior written notice before
opening any additional place of business, changing its chief executive office or
the location of its books and records, or (except for sales of Inventory in the
ordinary course of Borrower's business) moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth in
Sections 9(d) and 9(e) of Schedule A, and will execute and deliver all financing
statements and other agreements, instruments and documents which Lender shall
require as a result thereof.
5.7 Financial Condition, Statements and Reports. All financial statements
delivered to Lender by or on behalf of Borrower have been prepared in conformity
with GAAP and fairly present the financial condition of Parent and its
Subsidiaries in all material respects, at the times and for the periods therein
stated (except, in the case of interim financial statements, (i) for the
omission of footnotes and cash flow statements, (ii) for the classification of
certain expenses and assets and (iii) subject to audit and year-end
adjustments). Between the last date covered by any such financial statement
provided to Lender and the date hereof (or, with respect to the remaking of this
representation in connection with the making of any Loan or the providing of any
Credit Accommodation, the date such Loan is made or such Credit Accommodation is
provided), there has been no material adverse change in the financial condition
or business of Borrower. Borrower is solvent and able to pay its debts as they
come due, and has sufficient capital to carry on its business as now conducted
and as currently proposed to be conducted. All schedules, reports and other
information and documentation delivered by Borrower to Lender with respect to
the Collateral are, or will be, when delivered, true, correct and complete as of
the date delivered or the date specified therein.
5.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed all tax returns and reports required by applicable law, has timely paid
all applicable taxes, assessments, deposits and contributions owing by Borrower
and will timely pay all such items in the future as they became due and payable.
Borrower may, however, defer payment of any contested taxes; provided, that
Borrower (i) in good faith contests Borrower's obligation to pay such taxes by
appropriate proceedings promptly and diligently instituted and conducted; (ii)
notifies Lender in writing of the commencement of, and any material development
in, the proceedings; (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a Lien upon any of the Collateral and (iv)
maintains
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adequate reserves therefor in conformity with GAAP. Borrower is unaware of any
claims or adjustments proposed for any of Borrower's prior tax years which could
result in additional taxes becoming due and payable by Borrower. Borrower has
paid, and shall continue to pay, all amounts necessary to fund all present and
future pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in,
permitted partial or complete termination of, or permitted the occurrence of any
other event with respect to, any such plan which could result in any material
liability of Borrower, including any liability to the Pension Benefit Guaranty
Corporation or any other governmental agency.
5.9 Compliance with Laws. Borrower has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, the payment and withholding of taxes, ERISA
and other employee matters, safety and environmental matters, except where the
failure to so comply could not reasonably be expected to have a material adverse
effect on Borrower.
5.10 Litigation. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower as of the date hereof, which could
reasonably be expected to have a material adverse effect on Borrower. There is
no claim, suit, litigation, proceeding or investigation pending or (to the best
of Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted. Borrower will
promptly inform Lender in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower.
5.11 Use of Proceeds. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 Insurance. Borrower will at all times carry property, liability and
other insurance, with insurers reasonably acceptable to Lender, in such form and
amounts, and with such deductibles and other provisions, as Lender shall
require, and Borrower will provide evidence of such insurance to Lender, so that
Lender is satisfied that such insurance is, at all times, in full force and
effect. Each property insurance policy shall name Lender as loss payee and shall
contain a lender's loss payable endorsement in form acceptable to Lender, each
liability insurance policy shall name Lender as an additional insured, all in
form and substance satisfactory to Lender. All policies of insurance shall
provide that they may not be cancelled or changed without at least thirty days'
prior written notice to Lender, shall contain breach of warranty coverage, and
shall otherwise be in form and substance satisfactory to Lender. Upon receipt of
the proceeds of any such insurance, Lender shall apply such
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proceeds in reduction of the Obligations as Lender shall determine in its sole
discretion. Borrower will promptly deliver to Lender copies of all reports made
to insurance companies.
5.13 Financial and Collateral Reports. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP,
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) Collateral Reports. On or before the fifteenth day of each month, an
aging of Borrower's Accounts, Chattel Paper and notes receivable, and weekly
Inventory reports, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; provided, that
(i) so long as no Default or Event of Default has occurred and is continuing,
Borrower shall not be required to deliver invoice registers to Lender more often
than once per week and shall not be required to deliver copies or originals of
invoices evidencing Accounts having an individual face amount of less than
$100,000 and (ii) Borrower's failure to execute and deliver the same shall not
affect or limit Lender's security interests and other rights in any of the
Accounts, nor shall Lender's failure to advance or lend against a specific
Account affect or limit Lender's security interest and other rights therein.
Together with each such schedule, Borrower shall furnish Lender with copies of
invoices and evidence of delivery of goods, or, at Lender's request, originals
of all contracts, orders, invoices, and other similar documents, and all
original shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave rise
to such Accounts, and Borrower warrants the genuineness of all of the foregoing.
In addition, Borrower shall deliver to Lender the originals of all Instruments,
Chattel Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts with respect to which Borrower is required
to deliver copies of invoices pursuant to this subsection (a), immediately upon
receipt thereof and in the same form as received, with all necessary
endorsements. Lender may destroy or otherwise dispose of all documents,
schedules and other papers delivered to Lender pursuant to this Agreement (other
than originals of Instruments, Chattel Paper, security agreements, guaranties
and other documents and property evidencing or securing any Accounts) six months
after Lender receives them, unless Borrower requests their return in writing in
advance and arranges for their return to Borrower at Borrower's expense.
(b) Annual Statements. Not later than one hundred and twenty days after the
close of each fiscal year of Parent, unqualified (except for a qualification for
a change in accounting principles with which the accountant concurs) audited
financial statements of Parent and its Subsidiaries as of the end of such year,
on a consolidated basis (with supporting consolidating schedules for Borrower),
certified by a firm of independent certified
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public accountants of recognized standing selected by Parent but acceptable to
Lender, together with a copy of any management letter issued in connection
therewith;
(c) Interim Statements. Not later than twenty-five days after the end of
each month hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Parent and its Subsidiaries as of the
end of such month and of the portion of Parent's fiscal year then elapsed, on a
consolidated and consolidating basis, certified by the principal financial
officer of Parent as prepared in accordance with GAAP and fairly presenting the
consolidated financial position and results of operations of Parent and its
Subsidiaries for such month and period, except (i) for the omission of footnotes
and cash flow statements (ii) for the classification of certain expenses and
assets and (iii) subject to audit and year-end adjustments;
(d) Projections, Etc. Such business projections, Availability projections,
business plans, budgets and cash flow statements for Borrower and its
Subsidiaries as Lender shall request from time to time, provided, that so long
as no Event of Default has occurred and is continuing, Borrower shall be deemed
to have satisfied the requirements of this subsection (d) by delivery to Lender,
not more than semi-annually, of the projections, business plans, budgets and
cash flow statements which Borrower prepares in the ordinary course of
Borrower's business;
(e) Shareholder Reports, Etc. Promptly after the sending or filing thereof,
as the case may be, copies of any proxy statements, financial statements or
reports which Parent has made available to its shareholders generally and copies
of any regular, periodic and special reports or registration statements which
Parent files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange;
(f) ERISA Reports. Upon request by Lender, copies of any annual report to
be filed pursuant to the requirements of ERISA in connection with each plan
subject thereto; and
(g) Other Information. Such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Borrower's and each of its Subsidiary's financial
condition or results of operations.
5.14 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Lender (i) with respect to any Collateral or (ii) in
any manner relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
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5.15 Maintenance of Collateral, Etc. Borrower will maintain all of the
Collateral in good condition, ordinary wear and tear excepted, and Borrower will
not use the Collateral for any unlawful purpose. Borrower will promptly advise
Lender in writing of any material loss or damage to the Collateral and of any
investigation, action, suit, proceeding or claim relating to the Collateral or
which may result in an adverse impact upon Borrower's business, assets or
financial condition.
5.16 Notification of Changes. Borrower will promptly notify Lender in
writing of any change in its chief executive officer, chief financial officer or
any of its directors, the opening of any new bank account or other deposit
account, or any material adverse change in the business or financial affairs of
Borrower or the existence of any circumstance which would make any
representation or warranty of Borrower untrue in any material respect or
constitute a material breach of any covenant of Borrower.
5.17 Further Assurances. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
otherwise as Lender may reasonably request to fully effectuate the transactions
contemplated by this Agreement.
5.18 Negative Covenants.
(a) Except as set forth in Section 13 of Schedule A, Borrower will not,
without Lender's prior written consent, which consent shall not be unreasonably
withheld, (i) merge or consolidate with another Person, (ii) sell or transfer
any Collateral, except that Borrower may sell finished goods Inventory in the
ordinary course of its business; (iii) guaranty or otherwise become liable with
respect to the obligations of another party or entity; (iv) pay or declare any
dividends or other distributions on Borrower's stock, if Borrower is a
corporation (except for dividends payable solely in capital stock of Borrower)
or with respect to any equity interests, if Borrower is not a corporation; (v)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's capital stock or other equity interests; (vi) dissolve or elect to
dissolve; (vii) enter into any transaction with an Affiliate other than
transactions which are fair to the Borrower or on arms-length terms; or (viii)
agree to do any of the foregoing; provided, that Lender shall be deemed to have
consented to the foregoing actions if Borrower requests Lender's consent thereto
and Lender fails to respond with 15 days after Lender actually received such
request.
(b) Borrower may not, without Lender's prior written consent, (i) form any
new Subsidiary or acquire any interest in any Person; (ii) acquire any assets
outside the ordinary course of business; (iii) enter into any other transaction
outside the ordinary course of business; (iv) sell or transfer any assets other
than the Collateral outside the ordinary course of business; (v) make any loans
to, or investments in, any Affiliate or other Person in the
16
form of money or other assets; (vi) incur any debt outside the ordinary course
of business; (vii) make any change in Borrower's capital structure; or (viii)
pay any principal or interest on any indebtedness owing to an Affiliate, unless
in each such case, Borrower shall have Availability, after giving effect to such
transaction, of not less than $5,000,000.
5.19 Intentionally Omitted.
6. RELEASE AND INDEMNITY.
6.1 Release. Borrower hereby releases Lender and its Affiliates and their
respective directors, officers, employees, attorneys and agents and any other
Person affiliated with or representing Lender (the "Released Parties") from any
and all liability arising from acts or omissions under or pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from gross negligence or willful misconduct. However, in no
circumstance will any of the Released Parties be liable for lost profits or
other special or consequential damages. Such release is made on the date hereof
and remade upon each request for a Loan or Credit Accommodation by Borrower.
Without limiting the foregoing:
(a) Except for liability arising from Lender's gross negligence or willful
misconduct, Lender shall not be liable for (i) any shortage or discrepancy in,
damage to, or loss or destruction of, any goods, the sale or other disposition
of which gave rise to an Account; (ii) any error, act, omission, or delay of any
kind occurring in the settlement, failure to settle, collection or failure to
collect any Account; (iii) settling any Account in good faith for less than the
full amount thereof; or (iv) any of Borrower's obligations under any contract or
agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying transaction,
Lender shall not be responsible for the conformity of any goods to the documents
presented, the validity or genuineness of any documents, delay, default or fraud
by Borrower, shippers and/or any other Person. Borrower agrees that any action
taken by Lender, if taken in good faith, or any action taken by an issuer of any
Credit Accommodation, under or in connection with any Credit Accommodation,
shall be binding on Borrower and shall not create any resulting liability to
Lender. In furtherance thereof, Lender shall have the full right and authority
to clear and resolve any questions of non-compliance of documents, to give any
instructions as to acceptance or rejection of any documents or goods, to execute
for Borrower's account any and all applications for steamship or airway
guaranties, indemnities or delivery orders, to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
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6.2 Indemnity. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including reasonable attorneys' fees), of every nature, character and
description, which the Released Parties may sustain or incur based upon or
arising out of any of the transactions contemplated by this Agreement or the
other Loan Documents or any of the Obligations, including any transactions or
occurrences relating to the issuance of any Credit Accommodation, the Collateral
relating thereto, any drafts thereunder and any errors or omissions relating
thereto (including any loss or claim due to any action or inaction taken by the
issuer of any Credit Accommodation) (and for this purpose any charges to Lender
by any issuer of Credit Accommodations shall be conclusive as to their
appropriateness and may be charged to the Loan Account), or any other matter,
cause or thing whatsoever occurred, done, omitted or suffered to be done by
Lender relating to Borrower or the Obligations (except any such amounts
sustained or incurred as the result of the gross negligence or willful
misconduct of the Released Parties). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement.
7. TERM.
7.1 Maturity Date. Lender's obligation to make Loans and to provide Credit
Accommodations under this Agreement shall initially continue in effect until the
Initial Maturity Date set forth in Section 7 of Schedule A (the "Initial Term");
provided, that such date shall automatically be extended (the Initial Maturity
Date, as it may be so extended, being referred to as the "Maturity Date") for
successive additional terms of three years each (each a "Renewal Term"), unless
one party gives written notice to the other, not less than sixty days prior to
the Maturity Date, that such party elects not to extend the Maturity Date. This
Agreement and the other Loan Documents and Lender's security interests in and
Liens upon the Collateral, and all representations, warranties and covenants of
Borrower contained herein and therein, shall remain in full force and effect
after the Maturity Date until all of the monetary Obligations are paid in full.
7.2 Early Termination. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence of an Event of Default, without notice, effective
immediately; provided, that if any Affiliate of Borrower is also a party to a
financing arrangement with Lender, no such early termination shall be effective
unless such Affiliate simultaneously terminates its financing arrangement with
Lender. If so terminated under this Section 7.2, Borrower shall pay to Lender
(i) an early termination fee (the "Early Termination Fee") in the amount set
forth in Section 6(c) of Schedule A plus (ii) any earned but unpaid Facility
Fee. Such fee shall be due and payable on the effective date of termination and
thereafter shall bear interest at a rate equal to the highest rate applicable to
any of the Obligations. In addition, if Borrower so terminates and repays the
18
Obligations without having provided Lender with at least thirty days' prior
written notice thereof, an additional amount equal to thirty days of interest at
the applicable Interest Rate(s), based on the average outstanding amount of the
Obligations for the six month period immediately preceding the date of
termination.
7.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if, on the Maturity
Date or on any earlier effective date of termination, there are any outstanding
Credit Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Obligations (including estimated attorneys' fees and other
expenses) relating to said Credit Accommodations or such greater percentage or
amount as Lender reasonably deems appropriate, pursuant to a cash pledge
agreement in form and substance satisfactory to Lender.
7.4 Effect of Termination. No termination shall affect or impair any right
or remedy of Lender or relieve Borrower of any of the Obligations until all of
the monetary Obligations have been paid in full. Upon payment and performance in
full of all of the monetary Obligations (and the provision of cash collateral
with respect to any Credit Accommodation Balance as required by Section 7.3) and
termination of this Agreement, Lender shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be reasonably required to terminate Lender's security interests in the
Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Lender immediate written notice thereof: (i) if any warranty, representation,
statement, report or certificate made or delivered to Lender by Borrower or any
of Borrower's officers, employees or agents is untrue or misleading; (ii) if
Borrower fails to pay when due any principal or interest on any Loan or any
other monetary Obligation within three (3) days after it becomes due; (iii) if
Borrower breaches any covenant or obligation contained in this Agreement or any
other Loan Document or fails to perform any other non-monetary Obligation, which
breach or failure is not cured within fifteen (15) days after notice thereof is
given to Borrower; (iv) if any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made or permitted to exist on all
or any part of the Collateral; (v) except for judgments aggregating not in
excess of $1,000,000 outstanding at any given time which do not result in a Lien
against any of the Collateral or which do not, in Lender's judgment, adversely
affect the Collateral, if one or more judgments aggregate in excess of $100,000
or any injunction or attachment, is obtained against Borrower or any Obligor
which remains unstayed or unpaid for more than ten days or is enforced; (vi) the
occurrence of any default under any financing agreement, security agreement or
other agreement, instrument or document executed and
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delivered by Borrower with, or in favor of, any Person other than Lender; (vii)
the dissolution, termination of existence in good standing (unless Borrower's
existence in good standing is reinstated within 15 days), insolvency or business
failure or suspension or cessation of business as usual of Borrower or any
Obligor (or of any general partner of Borrower or any Obligor if it is a
partnership) or the appointment of a receiver, trustee or custodian for all or
any part of the property of, or an assignment for the benefit of creditors by
Parent or Borrower or any Obligor, or the commencement of any proceeding by
Borrower or any Obligor under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, or if Borrower makes or sends
a notice of a bulk transfer or calls a meeting of its creditors; (viii) the
commencement of any proceeding against Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect which is not dismissed within thirty days after its
commencement; (ix) the actual or attempted revocation or termination of, or
limitation or denial of liability upon, any guaranty of the Obligations, or any
security document securing the Obligations, by any Obligor; (x) if Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations attempts to limit or terminate its subordination agreement; (xi)
if there is any actual or threatened indictment of Borrower or any Obligor under
any criminal statute or commencement or threatened commencement of criminal or
civil proceedings against Borrower or any Obligor, pursuant to which the
potential penalties or remedies sought or available include forfeiture of any
property of Borrower or such Obligor; (xii) if there is a change in the record
or beneficial ownership of an aggregate of more than 20% of the outstanding
shares of stock of Borrower, or of more than fifty percent (50%) of the
outstanding shares of stock of Parent, in one or more transactions, compared to
the ownership of outstanding shares of stock of Borrower as of the date hereof,
without the prior written consent of Lender; or (xiii) if an Event of Default
occurs under any Loan and Security Agreement between Lender and an Affiliate of
Borrower.
8.2 Remedies. Upon the occurrence and during the continuance of any
Default, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence and during the continuance of any Event of Default, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store,
20
or remove any of the Collateral, and remain (or cause a custodian to remain) on
the premises in exclusive control thereof, without charge for so long as Lender
deems it reasonably necessary in order to complete the enforcement of its rights
under this Agreement or any other agreement; provided, that if Lender seeks to
take possession of any of the Collateral by court process, Borrower hereby
irrevocably waives (A) any bond and any surety or security relating thereto
required by law as an incident to such possession, (B) any demand for possession
prior to the commencement of any suit or action to recover possession thereof
and (C) any requirement that Lender retain possession of, and not dispose of,
any such Collateral until after trial or final judgment; (iv) require Borrower
to assemble any or all of the Collateral and make it available to Lender at one
or more places designated by Lender which are reasonably convenient to Lender
and Borrower, and to remove the Collateral to such locations as Lender may deem
advisable; (v) complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Lender shall have the right to use Borrower's premises,
vehicles and other Equipment and all other property without charge; (vi) sell,
lease or otherwise dispose of any of the Collateral, in its condition at the
time Lender obtains possession of it or after further manufacturing, processing
or repair, at one or more public or private sales, in lots or in bulk, for cash,
exchange or other property, or on credit (a "Sale"), and to adjourn any such
Sale from time to time without notice other than oral announcement at the time
scheduled for Sale (and, in connection therewith, (A) Lender shall have the
right to conduct such Sale on Borrower's premises without charge, for such times
as Lender deems reasonable, on Lender's premises, or elsewhere, and the
Collateral need not be located at the place of Sale; (B) Lender may directly or
through any of its Affiliates purchase or lease any of the Collateral at any
such public disposition, and if permissible under applicable law, at any private
disposition and (C) any Sale of Collateral shall not relieve Borrower of any
liability Borrower may have if any Collateral is defective as to title, physical
condition or otherwise at the time of sale); (vii) demand payment of and collect
any Accounts and Chattel Paper included in the Collateral and, in connection
therewith, Borrower irrevocably authorizes Lender to endorse or sign Borrower's
name on all collections, receipts, Instruments and other documents, to take
possession of and open mail addressed to Borrower and remove therefrom payments
made with respect to any item of Collateral or proceeds thereof and, in Lender's
sole discretion, to grant extensions of time to pay, compromise claims and
settle Accounts, General Intangibles relating to the Collateral and the like for
less than face value; and (viii) demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or relating thereto. In addition to the
rights and remedies set forth above, Lender shall have all the other rights and
remedies accorded a secured party after default under the UCC and under all
other applicable laws, and under any other Loan Document, and all of such rights
and remedies are cumulative and non-exclusive. Exercise or partial exercise by
Lender of one or more of its rights or remedies shall not be deemed an election
or bar Lender from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Lender to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and
21
performed. If notice of any sale or other disposition of Collateral is required
by law, notice at least seven days prior to the sale designating the time and
place of sale in the case of a public sale or the time after which any private
sale or other disposition is to be made shall be deemed to be reasonable notice,
and Borrower waives any other notice. If any Collateral is sold or leased by
Lender on credit terms or for future delivery, the Obligations shall not be
reduced as a result thereof until payment is collected by Lender.
8.3 Application of Proceeds. Subject to any application required by law,
all proceeds realized as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole discretion.
Unless otherwise required by applicable law, any surplus shall be paid to the
Collateral Agent under the Senior Notes Collateral Agreement if such Agreement
has not been terminated and thereafter to Borrower or other persons legally
entitled thereto, but Borrower shall remain liable to Lender for any deficiency.
If Lender, in its sole discretion, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any Sale, Lender shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Lender of
the cash therefor.
8.4 Disney Collateral. Lender agrees that in connection with any sale or
disposition of Eligible Inventory constituting Collateral which Lender is
permitted to undertake pursuant to Section 8.2 hereof, which Eligible Inventory
shall have been produced by Borrower pursuant to the Licensed Book Publishing
Agreement between Borrower and Disney Licensed Publishing dated September 27,
1997 as in effect on the date hereof, Lender shall refrain from "dumping" as
defined in Section 26.5 thereof as in effect on the date hereof.
9. GENERAL PROVISIONS.
9.1 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in Section 9(i) of
Schedule A, or at any other address (or to any other facsimile number)
designated in writing by one party to the other party in the manner prescribed
in this Section 9.1. All notices shall be deemed to have been given when
received or when delivery is refused by the recipient.
9.2 Severability. If any provision of this Agreement, or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent jurisdiction, such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.
9.3 Integration. This Agreement and the other Loan Documents represent the
final, entire and complete agreement between Borrower and Lender and supersede
all prior and
22
contemporaneous negotiations, oral representations and agreements, all of which
are merged and integrated into this Agreement. THERE ARE NO ORAL UNDERSTANDINGS,
REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT SET FORTH IN
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 Waivers. The failure of Lender at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
Loan Documents shall not waive or diminish any right of Lender later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other Loan Document
shall be deemed to have been waived by any act or knowledge of Lender or its
agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
Account, Document, Chattel Paper, or guaranty relating to the Collateral at any
time held by Lender on which Borrower is or may in any way be liable, and notice
of any action taken by Lender, unless expressly required by this Agreement, and
notice of acceptance hereof.
9.5 Amendment. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement and the other Loan Documents.
9.7 Attorneys' Fees and Costs. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors pursuant to and as permitted by the terms
hereof; to commence, intervene in, or defend any action or proceeding; to
enforce and protect, or to seek to enforce and protect, any of its rights and
interests in any bankruptcy case of Borrower, including, without limitation, by
initiating and prosecuting any motion for relief from the automatic stay and by
initiating, prosecuting or defending any other contested matter or adversary
proceeding in bankruptcy; to file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim against Borrower or any Obligor; to
examine, audit, copy, and inspect any of the Collateral or any of Borrower's
books and records; to protect, obtain possession of, lease, dispose of, or
otherwise enforce Lender's
23
security interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Lender may be entitled pursuant to this
Section shall immediately become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
9.8 Benefit of Agreement; Assignability. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
provided, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void. No consent by Lender to any assignment shall release
Borrower from its liability for any of the Obligations. Lender shall not have
the right to assign any of its rights or obligations under the Loan Documents
except that, in the case of a merger or sale of all or substantially all of the
assets of Lender (as a Division of NationsCredit Commercial Corporation or
otherwise), Lender may assign all of its rights and obligations under the Loan
Documents to the surviving person in the merger or the transferee of such
assets, which surviving person or transferee shall be a financial institution
that makes loans in the ordinary course of its business. In such case, Borrower
agrees to execute such agreements, instruments and documents as are reasonably
requested by Lender to evidence such assignment. Notwithstanding anything to the
contrary in the foregoing, Lender shall have the right at any time to sell
participating interests in all or any of Lender's rights or obligations under
the Loan Documents to one or more financial institutions that make loans in the
ordinary course of t heir business; provided, however, that (i) Lender's
obligations under the Loan Documents shall remain unaffected; (ii) Lender shall
remain solely responsible to Borrower for the performance of such obligations;
(iii) Borrower shall deal solely and directly with Lender in connection with
Lender's rights and obligations under the Loan Documents; and (iv) Lender shall
remain vested with the power and authority to make credit, underwriting,
management and servicing decisions, including, but not limited to, the decision
to declare a Default or Event of Default and acceleration of the Loans.
9.9 Headings; Construction. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
24
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER
AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE
EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO,
25
EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S TAKING
POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S
REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS.
BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO
LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
26
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
Borrower: Lender:
GOLDEN BOOKS PUBLISHING COMPANY, INC. NATIONSCREDIT COMMERCIAL
INC. CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Xxxxxx Xxxxxxx
------------------------------
By /s/ Xxxx X. Xxxxxxx Its Authorized Signatory
-----------------------------------
Its Chief Financial Officer
-----------------------------
27
Schedule A
Description of Certain Terms
This Schedule is an integral part of the Loan and Security Agreement
between GOLDEN BOOKS PUBLISHING COMPANY, INC. and NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the
"Agreement").
1. Loan Limits for Revolving Loans:
(a) Maximum Facility Amount: $ 30,000,000
(b) Advance Rates:
(i) Accounts Advance 70%; provided, that if the
Rate: Dilution Percentage exceeds
15%, at Lender's option, such
advance rate will bereduced
by the number of full or
partial percentage points of
such excess or Lender may
implement a Reserve in the
amount of such percentage
(ii) Inventory Advance
Rate(s):
(A) Finished
goods: 50%
(B) Raw
materials: 50%
(c) (i) General At any time of determination,
Accounts $30,000,000 less the aggre-
Sublimit: gate advances against Inven-
tory outstanding at such time
(ii) Toys "R" Us
Accounts Sublimit: $5,000,000
(d) Inventory Sublimit(s):
A-1
Overall sublimit on $15,000,000 or, if less, the
advances against aggregate advances against
Eligible Inventory Accounts at any time of
determination
(e) Credit Accommodation Limit: Not applicable
(f) Permanent Reserve Amount: None
(g) Overadvance Amount: None
2. Intentionally Omitted
3. Interest Rates:
Revolving Loans: -0-% per annum in excess of
the Prime Rate
4. Minimum Loan Amount: $-0-
5. Maximum Days:
(a) Maximum days after
original invoice date for
Eligible Accounts: 150
(b) Maximum days after
original invoice due date
for Eligible Accounts: 60
6. Fees:
(a) Closing Fee: $75,000
(b) Facility Fee:
A-2
(i) Initial Term: $225,000, payable in three
annual installments of
$75,000 each
(ii) Renewal Term(s): $225,000, payable in three
annual installments of
$75,000 each
(c) Early Termination Fee: 2% of the Maximum Facility
Amount if terminated during
the first year of the Initial
Term or any Renewal Term,
0.50% of the Maximum Facility
Amount if terminated during
the second year of the
Initial Term or any Renewal
Term, and 0% of the Maximum
Facility Amount if terminated
thereafter and prior to the
Maturity Date.
(d) Fees for letters of credit Not applicable
and other Credit
Accommodations (or guaranties
thereof by Lender):
7. Initial Maturity Date: June 3, 2001
8. Intentionally Omitted
9. Borrower Information:
(a) Prior Names of Borrower: WPC, Inc.
WPC Publishing, Inc.
Western Publishing Company,
Inc.
(b) Prior Trade Names of Western Publishing Company
Borrower: Western Graphics Communica-
tions Merrigold Press
(c) Existing Trade Names of Golden Books
Borrower: Gold Key
Merrigold Press
A-3
(d) Inventory Locations: 1. 00000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
2. Golden Books Publishing
U.S. Xxxxxxx 000, X
Xxxxxxxxxxx, Xxxxxx 00000
3. Golden Books Publishing
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxxxxxx, Xxxxxxx 00000
4. c/o Carolina Converting, Inc.
000 Xxx Xxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
A-4
(e) Other Locations: 1. 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxx 00000
2. 1221-23 & 0000 0xx Xxxxxx
Xxxxxx, Xxxxxxxxx 00000
3. 0000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxx 00000
4. 000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX XXX 0X0
5. 105, 106, 108, 116,
and 000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
6. 1040 & 0000 00xx Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxxx 00000
7. 0000 00xx Xxxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxx 00000
8. X-00
Xxxxxxx, Xxxxxxxxx 00000
9. 00-00 Xxxxx Xxx
Xxxxxxxxxxxxx, XX 0XX 177
10. 00-00 Xxxxxxx Xxxx
Xxxxxxxxxxxxx, XX 0XX 176
11. Columbia Drive
Durrington, FN 0BN 188
12. 000 0xx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
13. 0 Xxxxxxxxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, Xxxxxx FN
(f) Litigation: See attached form 10-Q
(g) Ownership of Borrower: Borrower's common stocks owned 100%
by Golden Books Family Entertainment,
Inc.
A-5
(h) Subsidiaries (and
ownership thereof): See sub-chart attached
(i) Facsimile Numbers:
Borrower: (000) 000-0000
Lender: (000) 000-0000
10. Intentionally Omitted
11. Lender's Bank: The First National Bank of Chicago
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
12. Intentionally Omitted
13. Exceptions to Negative
Covenants: None
14. Lock Boxes and Blocked Accounts 1. Chase
P. O. Xxx 00000
Xxxxxx, Xxx Xxxxxx 00000-0000
2. First Chicago
P. O. Xxx 00000
Xxxxxxx, Xxxxxxx 00000-0000
3. Xxxxxxx Xxxx
X. X. Xxx 000000
Xxxxxxx, Xxxxxxx 00000-0000
A-6
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as of
the date set forth in the heading to the Agreement.
Borrower: Lender:
GOLDEN BOOKS PUBLISHING COMPANY, NATIONSCREDIT COMMERCIAL
INC. CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Xxxxxx Xxxxxxx
------------------------------------
Its Authorized Signatory
By /s/ Xxxx X. Xxxxxxx
--------------------------------
Its Chief Financial Officer
-----------------------------
A-7
Schedule B
Definitions
This Schedule is an integral part of the Loan and Security Agreement
between GOLDEN BOOKS PUBLISHING COMPANY, INC. and NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the
"Agreement").
As used in the Agreement, the following terms have the following meanings:
"Account" means any right to payment for Goods sold or leased or for
services rendered by Borrower's Children's Publishing Division which is not
evidenced by an Instrument or Chattel Paper, whether or not it has been earned
by performance, excluding Accounts relating to the Borrower's Christmas
Classics, Lone Ranger and Underdog properties.
"Account Debtor" means the obligor on an Account or Chattel Paper.
"Account Proceeds" has the meaning set forth in Section 4.1.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person affiliated, directly
or indirectly, by virtue of family membership, ownership, management or
otherwise.
"Agreement" and "this Agreement" mean the Loan and Security Agreement of
which this Schedule B is a part and the Schedules thereto.
"Availability" has the meaning set forth in Section 1.1(a)
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. ss.
101 et seq.).
"Blocked Account" has the meaning set forth in Section 4.1.
"Borrower" has the meaning set forth in the heading to the Agreement.
"Borrower's Address" has the meaning set forth in the heading to the
Agreement.
"Business Day" means a day other than a Saturday or Sunday or any other day
on which Lender or banks in New York are authorized to close.
"Chattel Paper" has the meaning set forth in the UCC, but including only
Chattel Paper relating to Goods sold or leased or for services rendered by
Borrower's Children's Publishing Division, and excluding Chattel Paper relating
to the Borrower's Christmas Classics, Lone Ranger and Underdog properties.
B-1
"Children's Publishing Division" means Borrower's Consumer Products
Business Segment (excluding only Borrower's adult publishing division).
"Christmas Classics" has the meaning ascribed to such term in the Senior
Notes Collateral Agreement.
"Collateral" means all property and interests in property in or upon which
a security interest or other Lien is granted pursuant to this Agreement or the
other Loan Documents.
"Credit Accommodation" has the meaning set forth in Section 1.1(a).
"Credit Accommodation Balance" means the sum of (i) the aggregate undrawn
face amount of all outstanding Credit Accommodations and (ii) all interest, fees
and costs due or, in Lender's estimation, likely to become due in connection
therewith.
"Default" means any event which with notice or passage of time, or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.1.
"Deposit Account" has the meaning set forth in the UCC.
"Dilution Percentage" means the gross amount of all returns, allowances,
discounts, credits, write-offs and similar items relating to Borrower's Accounts
computed as a percentage of Borrower's gross sales, calculated on a twelve month
rolling average.
"Document" has the meaning set forth in the UCC, but including only
Documents relating to Goods sold or leased or for services rendered by
Borrower's Children's Publishing Division, and excluding Documents relating to
the Borrower's Christmas Classics, Lone Ranger and Underdog properties.
"Early Termination Fee" has the meaning set forth in Section 7.2.
"Eligible Account" means, at any time of determination, an Account which
satisfies the general criteria set forth below and which is otherwise acceptable
to Lender (provided, that Lender may, in its reasonable discretion, change the
general criteria for acceptability of Eligible Accounts upon at least fifteen
days' prior notice to Borrower). An Account shall be deemed to meet the current
general criteria if (i) neither the Account Debtor nor any of its Affiliates is
an Affiliate, creditor or supplier of Borrower; (ii) it does not remain unpaid
more than the earlier to occur of (A) the number of days after the original
invoice date set forth in Section 5(a) of Schedule A (210 days for Toys "R" Us
Accounts provided that the dilution percentage does not exceed 15%) or (B) the
number of days after the original invoice due date set forth in Section 5(b) of
Schedule A; (iii) the Account Debtor or its Affiliates are not past due on other
Accounts owing to Borrower comprising more than 50% of all of the Accounts owing
to Borrower by such Account Debtor or its Affiliates; (iv) all Accounts owing by
the Account Debtor or its Affiliates do not represent more than 20% of all
otherwise Eligible
B-2
Accounts (25% with respect to Accounts owing by WalMart) (provided, that
Accounts which are deemed to be ineligible solely by reason of this clause (iv)
shall be considered Eligible Accounts to the extent of the amount thereof which
does not exceed 20% of all otherwise Eligible Accounts); (v) no covenant,
representation or warranty contained in this Agreement with respect to such
Account (including any of the representations set forth in Section 5.4) has been
breached; (vi) the Account is not subject to any contra relationship,
counterclaim, dispute or set-off (provided, that Accounts which are deemed to be
ineligible solely by reason of this clause (vi) shall be considered Eligible
Accounts to the extent of the amount thereof which is not affected by such
contra relationships, counterclaims, disputes or set-offs); (vii) the Account
Debtor's chief executive office or principal place of business is located in the
United States or Provinces of Canada which have adopted the Personal Property
Security Act or a similar act, unless (A) the sale is fully backed by a letter
of credit, guaranty or acceptance acceptable to Lender in its sole discretion,
and if backed by a letter of credit, such letter of credit has been issued or
confirmed by a bank satisfactory to Lender, is sufficient to cover such Account,
and if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender or (B) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender; (viii) it is absolutely
owing to Borrower and does not arise from a sale on a xxxx-and-hold, guarantied
sale, sale-or-return, sale-on-approval, consignment, retainage or any other
repurchase or return basis or consist of progress xxxxxxxx (except for Accounts
with respect to such guaranteed and sale-or-return sales of Inventory as
Borrower is permitted to make pursuant to Section 4.8(b) of the Agreement); (ix)
Lender shall have verified the Account in a manner satisfactory to Lender; (x)
the Account Debtor is not the United States of America or any state or political
subdivision (or any department, agency or instrumentality thereof), unless
Borrower has complied with the Assignment of Claims Act of 1940 (31 U.S.C.
ss.203 et seq.) or other applicable similar state or local law in a manner
satisfactory to Lender; (xi) it is at all times subject to Lender's duly
perfected, first priority security interest and to no other Lien that is not a
Permitted Lien, and the goods giving rise to such Account (A) were not, at the
time of sale, subject to any Lien except Permitted Liens and (B) have been
delivered to and accepted by the Account Debtor, or the services giving rise to
such Account have been performed by Borrower and accepted by the Account Debtor;
(xii) the Account is not evidenced by Chattel Paper or an Instrument of any kind
and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness to Borrower does not exceed the amount of any credit limit
established by Borrower or Lender and the Account Debtor is otherwise deemed to
be creditworthy by Lender (provided, that Accounts which are deemed to be
ineligible solely by reason of this clause (xiii) shall be considered Eligible
Accounts to the extent the amount of such Accounts does not exceed the lower of
such credit limits); (xiv) there are no facts or circumstances existing, or
which could reasonably be anticipated to occur, which might result in any
adverse change in the Account Debtor's financial condition or impair or delay
the collectibility of all or any portion of such Account; (xv) Lender has been
furnished with all documents and other information pertaining to such Account
which Lender has requested, or which Borrower is obligated to deliver to Lender,
pursuant to this Agreement; (xvi) Borrower has not made an agreement with the
Account Debtor to extend the time of payment thereof beyond the time periods set
forth in
B-3
clause (ii) above; and (xvii) Borrower has not posted a surety or other bond in
respect of the contract under which such Account arose.
"Eligible Inventory" means, at any time of determination, Inventory (other
than packaging materials and supplies) which satisfies the general criteria set
forth below and which is otherwise acceptable to Lender (provided, that Lender
may, in its reasonable discretion, change the general criteria for acceptability
of Eligible Inventory upon at least fifteen days' prior written notice to
Borrower). Inventory shall be deemed to meet the current general criteria if (i)
it consists of raw materials or finished goods, or work-in-process that is
readily marketable in its current form; (ii) it is in good, new and saleable
condition; (iii) it is not slow-moving, obsolete, unmerchantable, returned or
repossessed; (iv) it is not in the possession of a processor, consignee or
bailee, or located on premises leased or subleased to Borrower, or on premises
subject to a mortgage in favor of a Person other than Lender, unless such
processor, consignee, bailee or mortgagee or the lessor or sublessor of such
premises, as the case may be, has executed and delivered all documentation which
Lender shall require to evidence the subordination or other limitation or
extinguishment of such Person's rights with respect to such Inventory and
Lender's right to gain access thereto; (v) it meets all standards imposed, if
any, by any governmental agency or authority; (vi) it conforms in all respects
to any covenants, warranties and representations set forth in the Agreement;
(vii) it is at all times subject to Lender's duly perfected, first priority
security interest and no other Lien except a Permitted Lien; and (viii) it is
situated at an Inventory Location listed in Section 9(d) of Schedule A or other
location of which Lender has been notified as required by Section 5.6.
"Equipment" means all Goods which are used or bought for use primarily in
business (including farming or a profession) or by a Person who is a non-profit
organization or governmental subdivision or agency and which are not Inventory,
farm products or consumer goods, including all machinery, molds, machine tools,
motors, furniture, equipment, furnishings, fixtures, trade fixtures, motor
vehicles, tools, parts, dies and jigs, and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to, or spare
parts for, any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974 and all
rules, regulations and orders promulgated thereunder.
"Event of Default" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
"General Intangibles" has the meaning set forth in the UCC, and includes
all books and records pertaining to the Collateral and other business and
financial records in the possession of Borrower or any other Person, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks,
trademark applications (other than "intent to use" applications until a verified
statement of use is filed with respect to such applications) and the goodwill of
the business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, causes of action
B-4
and other rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, rights to purchase or sell real or personal
property, rights as a licensor or licensee of any kind, royalties, telephone
numbers, internet addresses, proprietary information, purchase orders, and all
insurance policies and claims (including life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other insurance),
tax refunds and claims, letters of credit, banker's acceptances and guaranties,
computer programs, discs, tapes and tape files in the possession of Borrower or
any other Person, claims under guaranties, security interests or other security
held by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature.
"Goods" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"Initial Term" has the meaning set forth in Section 7.1.
"Instrument" has the meaning set forth in the UCC.
"Inventory" means all Goods held for sale or lease or furnished or to be
furnished under contracts of service by Borrower's Children's Publishing
Division, including all raw materials, work in process, finished goods, goods in
transit and materials and supplies which are or might be used or consumed in a
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such Goods, and all products of the
foregoing, and shall include interests in goods represented by Accounts,
returned, reclaimed or repossessed goods and rights as an unpaid vendor,
excluding all Inventory relating to the Borrower's Christmas Classics, Lone
Ranger and Underdog properties.
"Investment Property" shall mean all of Borrower's securities, whether
certificated or uncertificated, securities entitlements, securities accounts,
commodity contracts and commodity accounts.
"Lender" has the meaning set forth in the heading to the Agreement.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on common law, statute or contract, including rights of sellers under
conditional sales contracts or title retention agreements and reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property. For the purpose of this Agreement, Borrower shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
B-5
"Loan Account" has the meaning set forth in Section 2.4.
"Loan Documents" means the Agreement and all notes, guaranties, security
agreements, certificates, landlord's agreements, Lock Box and Blocked Account
agreements and all other agreements, documents and instruments now or hereafter
executed or delivered by Borrower or any Obligor in connection with, or to
evidence the transactions contemplated by, this Agreement.
"Loan Limits" means, collectively, the Availability limits and all other
limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.
"Loans" means the Revolving Loans.
"Lock Box" has the meaning set forth in Section 4.1.
"Lone Ranger" has the meaning ascribed to such term in the Senior Notes
Collateral Agreement.
"Maturity Date" has the meaning set forth in Section 7.1.
"Mortgagee Waiver" means that certain Mortgagee Waiver, dated as of the
date hereof, by and between Lender and Marine Midland Bank, as Trustee for the
holders of the Senior Notes and Collateral Agent under the Senior Notes
Collateral Agreements.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit, opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, Closing Fees, Facility Fees, Credit Accommodation Fees and any
other sums chargeable to Borrower under this Agreement or under any other Loan
Document.
"Obligor" means any guarantor, endorser, acceptor, surety or other person
liable on, or with respect to, the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower.
"Parent" means Golden Books Family Entertainment, Inc., a Delaware
corporation.
B-6
"Permitted Liens" means: (i) Liens for taxes not yet due and payable or
being contested pursuant to Section 5.8; (ii) additional Liens which are fully
subordinate to the security interests of Lender and are consented to in writing
by Lender; (iii) security interests being terminated concurrently with the
execution of this Agreement; (iv) Liens imposed by operation of law, such as
Liens in favor of materialmen, mechanics, warehousemen or carriers, and Liens in
connection with workers' compensation, unemployment insurance and other types of
social security, in each case arising in the ordinary course of business and (A)
securing obligations which are not delinquent or (B) securing obligations which
are delinquent, provided, that Borrower (1) in good faith contests Borrower's
obligation to pay such Liens by appropriate proceedings promptly and diligently
instituted and conducted, (2) notifies Lender in writing of the commencement of,
and any material development in, the proceedings, (3) posts bonds or takes any
other steps required to keep the contested Liens from being enforced against any
of the Collateral, and (4) maintains adequate reserves therefor in accordance
with GAAP; (v) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in clause
(ii) above; provided, that any extension, renewal or replacement Lien is limited
to the property encumbered by the existing Liens and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (vi) Liens
in favor of customs and revenue authorities which secure payment of customs
duties in connection with the importation of goods; (vii) security deposits
posted in connection with real property leases or subleases; (viii) Liens
created pursuant to the Senior Notes Collateral Agreement and (ix) attachment or
judgment Liens not giving rise to a Default or Event of Default. Lender will
have the right to require, as a condition to its consent under clause (ii)
above, that the holder of the additional Lien sign an intercreditor agreement in
form and substance satisfactory to Lender, in its sole discretion, acknowledging
that the Lien is subordinate to the security interests of Lender, and agreeing
not to take any action to enforce its subordinate Lien so long as any
Obligations remain outstanding, and that Borrower agree that any uncured default
in any obligation secured by the subordinate Lien shall also constitute an Event
of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"Prime Rate" means, at any given time, the prime rate as quoted in The Wall
Street Journal as the base rate on corporate loans posted as of such time by at
least 75% of the nation's 30 largest banks (which rate is not necessarily the
lowest rate offered by such banks).
"Premises" has the meaning assigned to such term in the Mortgagee Waiver.
"Released Parties" has the meaning set forth in Section 6.1.
"Renewal Term" has the meaning set forth in Section 7.1.
"Reserves" has the meaning set forth in Section 1.2.
"Revolving Loans" has the meaning set forth in Section 1.1(a).
B-7
"Sale" has the meaning set forth in Section 8.2.
"Senior Notes" means those certain 7.65% Senior Note due 2002 of the
Borrower issued pursuant to that certain Indenture, dated as of September 15,
1992, as amended and supplements.
"Senior Notes Collateral Agreement" means that certain (i) Security
Agreement, dated as of the date hereof, by and between the Borrower and
Collateral Agent, (ii) Copyright Security Interest Agreement, dated as of the
date hereof, by and between the Borrower and Collateral Agent, (iii) Trademark
Security Interest Agreement, dated as of the date hereof, by and between
Borrower and Collateral Agent, (iv) Real Estate Mortgage, Assignment of Rents
and Security Agreement, dated as of the date hereof, by and between Borrower and
Collateral Agent and (v) any and all documents, instruments or agreements of any
kind executed in connection with or evidencing the foregoing.
"Subsidiary" means any corporation or other entity of which a Person owns,
directly or indirectly, through one or more intermediaries, more than 50% of the
capital stock or other equity interest at the time of determination.
"Term" means the period commencing on the date of this Agreement and ending
on the Maturity Date.
"Toys "R" Us Accounts" means all Accounts payable to Borrower by [Toys "R"
Us].
"UCC" means, at any given time, the Uniform Commercial Code as adopted and
in effect at such time in the State of New York.
"Underdog" has the meaning ascribed to such term in the Senior Notes
Collateral Agreement.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "including," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
B-8
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.
Borrower: Lender:
GOLDEN BOOKS PUBLISHING COMPANY, NATIONSCREDIT COMMERCIAL
INC. CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Xxxxxx Xxxxxxx
----------------------------------
Its Authorized Signatory
By /s/ Xxxx X. Xxxxxxx
------------------------------
Its Chief Financial Officer
---------------------------
B-9
