EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT, made the 18th day of June 1996, under the laws of the
State of New Jersey between PRINCETON PUBLICATIONS [sic], INC., a New York
corporation, herein called the "Debtor", whose principal place of business is
000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and XXXXXX CIRCULATION COMPANY, a
New Jersey corporation, herein called the "Secured Party", whose principal
place of business is 000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000.
WITNESSETH:
WHEREAS, the Debtor on or about April 1, 1996 has acquired by purchase
all of the right title and interest in various publications and titles to be
published and issued after March 31, 1996 (collectively hereinafter referred
to as "Publications"[1]) from corporations owned and controlled by Xxxxxx
Xxxxx, among then being, Xxxxx Magazines Services, Inc., Xxxxxxx Publications,
Inc., Xxxxxxx Publishing Inc., Adult Movie Review, Inc., Focus Publications,
Inc., X.X. Xxxxx, Inc., Xxxx X. Xxxxxxx, Inc., Woodhill Publishing, Inc.,
Lipstick Publications, Inc., Blueboy Publications, Inc., and Celeb
Publications, Inc. (collectively hereinafter referred to as "Sellers"); and
[1] A list of the Publications covered by the Distribution Agreement and this
Agreement is annexed hereto and made part hereof as Exhibit 1.
WHEREAS, the Sellers were parties to a Distribution Agreement with
Secured Party dated March 14, 1990, but executed on April 14, 1990, and
amended on November 20, 1990, October 28, 1991, December 10, 1991, February
24, 1992, August 5, 1992, July 1, 1993 and January 31, 1995 (hereinafter
referred to collectively as "Distribution Agreement"); and
WHEREAS, the Sellers assigned all of their rights under the Distribution
Agreement to Debtor for the Publications published after March 31, 1996 and
Debtor assumed all of Sellers' obligations and duties under the Distribution
Agreement for the publications published subsequent to March 31, 1996 in
accordance with a certain letter agreement among the Sellers, the Debtor and
Secured Party dated March 29, 1996 (hereinafter referred to as "Assignment and
Assumption Letter"); and
WHEREAS, the Debtor is the "Publisher" as that term is used in the
Distribution Agreements for the Publications published after March 31, 1996;
WHEREAS, the Secured Party will be lending to the Debtor pursuant to the
terms hereof up to the am of $500,000; and
WHEREAS the Debtor has agreed to grant to the Secured Party a security
interest in the Debtor's receivables from the Secured Party payable under the
Distribution Agreement and otherwise, including receivables due from
advertisers (hereafter collectively referred to as "Collateral").
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the covenants, terms, and conditions hereof, the parties covenant and agree
to the following:
1. Loan.
(a) Upon written request of Debtor made at anytime within one year of
date hereof and on condition that the Debtor is not in default under the terms
hereof or under the Distribution Agreement, the Secured Party shall lend to
the Debtor in multiples of $10,000 up to the sum of $500,000. Written request
for specified amount of the loan (hereinafter referred to as "Draw Down")
shall be by executing a promissory note in the form set forth in SubParagraph
(b), immediately below, and delivering same to the Secured Party. Each Draw
Down by Debtor shall be repayable in twelve equal monthly installments as
provided below. Debtor shall pay interest on each Draw Down as provided
below.
(b) In order for the Debtor to request the Draw Down, and in
consideration for the Draw Down, Debtor shall execute, and deliver to the
Secured Party a negotiable promissory note in the form annexed hereto ("Note")
whereby the Debtor promises to repay the principal owing on the Draw Down in
12 equal consecutive monthly installments commencing on the first day of the
month immediately following the Draw Down, together with interest accrued
thereon from the date of the Note. The Note shall be dated two business days
after the Note is delivered to the Secured Party. In any event, the entire
principal of each of the Draw Downs and interest accrued thereon as evidenced
by the Notes shall be paid by the Debtor no later than twelve months from the
date of each Note. Each Note shall provide for acceleration in the event
Debtor fails to pay interest or principal on any one or more notes or fails to
observe the terms of this agreement or the Distribution Agreement all as more
fully set forth below. The Debtor has the right to prepay the Draw Downs in
whole or in part as provided in the Notes. If there should be any
inconsistencies between the terms of this Agreement and the terms of the
Notes, the terms of this Agreement shall control.
(c) Interest shall be accrued and computed on the first day of each
month on the unpaid principal of each Draw Down (or Note) at the annual prime
rate charged by Chemical Bank, N.A. (or its successor by merger with Chase
Manhattan Bank) in New York City plus two percent. The Debtor shall commence
paying interest on each Draw Down on the first day of each month following the
Draw Down. All payments made an account of the Draw Down shall first be
applied to interest and then Principal.
(d) On the first day of each month during the term of each Draw Down,
the Debtor hereby irrevocably authorizes the Secured Party to deduct from the
proceeds of the receivable due and owing from the Secured Party to the Debtor
under the Distribution Agreement and pay the monthly installment of interest
and principal. In the event that the proceeds from the Distribution Agreement
are insufficient to pay the monthly installment then due plus accrued
interest, then the Debtor within five business days of the due date of the
monthly installment shall make up the difference by paying the difference from
the Debtor's own funds. All payments made by the Debtor to the Secured Party
shall first be applied against accrued interest and then against principal.
(e) Status of Receivable from Secured Party. Although the Secures
Party is granted a security interest in, among other assets, the proceeds of
any monies which the Secured Party may be paying to the Debtor under the
Distribution Agreement (hereinafter "receivable"), the Debtor hereby agrees
that: (i) the Secured Party has the right to withhold payments of such monies
upon the terms and conditions provided in the Distribution Agreement,
including the right to offset against any monies payable to the Debtor under
the Distribution Agreement any advances, loans (including the Principal of the
Loan), or overpayment made to the Debtor; (ii) the Secured Party is not
required to first pay such monies or segregate such monies for the benefit of
the Debtor or its creditors; and (iii) until the Secured Party pays such
monies which are due under the Distribution Agreement, such monies are not
receivable for purposes of this Agreement.
(f) Conditions to Secured Party Making the Payments on the Draw Down.
In order for the Debtor to obtain a Draw Down from the Secured Party the
following conditions shall be in effect or extant:
(i) Debtor shall not be in default under the Distribution
Agreement and this agreement;
(ii) Debtor shall not be in default in any payments due under the
Notes than outstanding and unpaid;
(iii) Debtor's financial condition shall not be so weak or
precarious that in Secured Party's reasonable judgment any further payments by
the Secured Party on the Draw Down would be inadvisable and imprudent.
(iv) Debtor supplying financial information which Secured Party
may request pursuant to Paragraph 3(e) below.
2. Security Interest.
(a) In order to secure the Draw Downs, the Debtor hereby assigns and
grants to the Secured Party a first lien and security interest in and to the
collateral consisting of the following:
(i) Debtor's right to receive any and all monies now or
hereafter payable to the Debtor from the Secured Party under the Distribution
Agreement;
(ii) Debtor's right to receive any and all monies now or
hereafter payable to the Debtor by the advertisers in the Debtor's
publications. Annexed hereto is a schedule of the names and addresses of the
advertisers ("Schedule of Advertisers") which schedule also shows the amount
each advertiser currently owes.
(iii) Debtor's right, title, and interest, both present and
future, include all rights of copyright and trademark, in and to the
Publications and their titles, and Debtor's right title and interest in any
subsequently published titles or publications not now in existence, including
all rights of copyright and trademark.
All of the foregoing collateral shall hereafter collectively be referred as
"the Collateral". Of the Collateral referred to in sub-paragraphs (i) and
(ii) above, now or hereafter existing, at various times hereafter shall be
referred to as "Assigned Accounts". Included in the right to receive the
monies due on the Assigned Accounts, is the Secured Party's right to the
Assigned Accounts themselves and the Secured Party's right to enforce
collection of such monies with expenses of collection chargeable to the
Debtor. Debtor shall update the schedule of Advertisers every three months
commencing July 1, 1996.
(b) Upon five business days written notice, the Secured Party and its
agents and accountants may from time to time, at Debtor's expense, inspect the
Debtor's books and records pertaining to the Collateral, and to take such
extracts therefrom as deemed advisable.
(c) Debtor shall cause its accounts receivable ledger, and other books
and records pertaining to the Assigned Accounts, to be marked or notated to
reflect the assignment and security interest granted hereunder in a form
acceptable to the Secured Party.
(d) Until there is an "event of default", Debtor, as agent of Secured
Party, shall continue to collect the Assigned Accounts in the same manner as
the Debtor has heretofore collected such accounts and deposit same in Debtor's
bank accounts for use by Debtor in paying its debts and obligations incurred
in the ordinary course of Debtor's business. Upon the happening of an event
of default, all monies received on account of the Assigned Accounts
("Proceeds") shall be promptly transferred in form received to the Secured
Party, except for Debtor's indorsement when required, and until the Proceeds
are so transferred to the Secured Party, same shall be held in trust in the
hands of the Debtor, its officers, agents and employees, for the Secured Party
and shall not be commingled with any other funds or property of Debtor.
(e) Upon the happening of an event of default:
(i) the secured party may notify each advertiser to remit the
amount the advertiser owes to the Debtor to the Secured Party;
(ii) the Secured Party may also request the Debtor to give notice
with all bills and statements that the account bas been assigned to Secured
Party and that the debt arising from each account is due and payable to the
Secured Party;
(iii) the Secured Party may indorse the Debtor's name on all
notes, checks and commercial paper of any kind on any Proceeds received from
the Assigned Accounts;
(iv) the Secured Party, or any of its officers, agents or
employees, is hereby irrevocably appointed the agent and attorney for the
Debtor to permit the Secured Party to withdraw Proceeds from any bank or trust
company; and any bank or trust company upon receiving a true or certified copy
of this Agreement is hereby irrevocably authorized to permit such withdrawals
without inquiry as to the circumstances of indorsement, without inquiring
as to the purpose of withdrawal, and without responsibility for the
application by the Secured Party of the Proceeds so withdrawn;
(v) the Secured Party may without notice to Debtor, extend the
time of payment of, compromise, or settle for cash, credit, or otherwise any
Assigned Account, and thereby discharge or release the person or persons
liable for the payment of such account; and the Secured Party shall not be
liable for so doing to the Debtor; and the Secured Party shall not be liable
to the Debtor for Secured Party's failure to collect any of the Assigned
Accounts.
(vi) The Collateral consisting of the Publications, both now or
hereafter existing, their copyright and trademarks, shall be promptly turned
over to the Secured Party's possession, management and control in such manner
as the Secured Party shall direct.
3. Debtor's Covenants.
(a) Debtor covenants and agrees to make the payments of interest and
principal on the Draw Downs (or Notes) as provided in Article 1, above.
(b) The Debtor has not pledged, sold, assigned or otherwise disposed
of or granted an interest in any part of the Collateral. The Debtor shall
defend the title to the Collateral against all persons and against all claims
whatsoever except for the security interest granted hereby. The Collateral is
lawfully owned by the Debtor and is now free and clear of any liens, security
interests, claims, charges, encumbrances, taxes and assessments.
(c) On demand of the Secured Party, the Debtor shall furnish further
assurance of title which may be required, execute any written agreement or
instrument, including, but not limited to, assignments, of copyrights and
trademarks to the Publications now or hereafter in existence in form suitable
for filing with the United States Copyright Office and United States Patent
and Trademark Office, or do any other acts necessary to effectuate the
purposes and provisions of this Agreement so as to perfect, continue or
terminate the security interest at the Secured Party in the Collateral and pay
all costs of filing in connection therewith and all costs in connection with
the preparation of such documents including the costs for the preparation of
this agreement and its related documents.
(d) The Debtor shall not assign, pledge, lien, or otherwise encumber
the Collateral, and the Debtor otherwise will keep the Collateral free and
clear of all liens, charges, incumbrance, taxes and assessments.
(e) Upon request of the Secured Party, the Debtor shall deliver to the
Secured Party its latest financial statement and corporate federal and state
income tax returns. Such financial statement and income tax returns shall
accurately and fully reflect the financial condition of the Debtor as of their
respective dates, including the reflection of any and all liabilities of the
Debtor, whether liquidated or not, whether absolute or contingent. In the
event that the Secured Party desires information on the financial condition of
the Debtor before making any Draw Down, Debtor agrees to supply same, whether
or not it be the financial statements and income tax returns or other relevant
information, and until Debtor supplies such financial information in manner
satisfactory to Secured Party, Secured Party need not make any payments to the
Debtor.
(f) The Debtor's principal and only place of business is located in
New York County, State of New York. In the event Debtor shall change its
principal place of business, it will promptly inform Secured Party thereof in
writing.
4. Consent to Extensions of Time for Payments.
In the event that the Secured Party consents to allowing the Debtor any
extension of time for payment, the Debtor consents to such extensions of time
without releasing the Collateral covered hereby.
5. Non-Waiver.
Waiver of or acquiescence in any default by the Debtor or failure of the
Secured Party to insist upon strict performance of any one or more of the
payments, or any one or more or the covenants, terms and conditions contained
herein or in the Distribution Agreement, shall not constitute a waiver of any
subsequent or other default or failure on the part of the Debtor.
6. Notices.
Notices to the Debtor or to the Secured Party shall be in writing and
shall be delivered personally, or by telefax, confirmed by mail, addressed to
the party at the addresses herein set forth, or by delivery by licensed
carriers such as U.S. Postal Service, Express Mail, Federal Express, DHL, UPS,
or by certified mail, return receipt requested, addressed to the party at the
address herein set forth or otherwise designated in writing. Notices shall
also been sent to:
7. Default of Debtor.
The following shall constitute events of default by the Debtor whichever
shall first occur:
(a) Failure to pay the Principal or any installment of principal, or
interest within five days after written notice to the Debtor from the Secured
Party that the receivables due from the Secured Party to Debtor are not
sufficient to pay the installment of principal or interest then due on the
Notes;
(b) Failure of the Debtor to comply with or perform any other
provision of the Distribution Agreement or this Agreement (other than non-
payment) capable of being cured within ten business days after receiving
written notice from the Secured Party;
(c) False or misleading representations or covenants made or given by
the Debtor in connection with this Agreement or the Distribution Agreement;
(d) The Debtor permitting the Collateral to be subject to levy of
execution, tax assessment or other judicial process.
(e) Commencement of a proceeding by or against the Debtor for relief
under the bankruptcy laws of the United States or for any other insolvency
proceeding, or the Debtor making an assignment for the benefit of creditors.
(f) Sale, transfer or assignment of any one of the titles covered by
the Distribution Agreement without first obtaining the written consent of the
Secured Party.
(g) Cessation of publication of any of the titles covered by the
Distribution Agreement without first obtaining the written consent of the
Secured Party unless the title is not making a profit.
8. Remedies on Default.
(a) Upon default of the Debtor, and at the option of the Secured
Party, all unpaid installments of principal on each outstanding unpaid Note
with interest accrued thereon shall be accelerated and shall immediately
become due and payable in full without notice or demand and the Secured Party
shall have the rights, remedies and privileges with respect to retention,
possession, and sale of the Collateral (at either or public or private sale in
accordance with the Uniform Commercial Code) and distribution of proceeds as
are accorded to a secured party by applicable sections of the Uniform
Commercial Code respecting "Default", in effect as of the date of this
Security Agreement. In addition, the Secured Party shall have the rights of
collection of the Proceeds of the Assigned Accounts as provided in Article 2
(e), above. In the event of a default under Article 7, Paragraph (a) above,
no default will occur unless and until Secured Party gives notice of such
default in writing and Debtor fails to cure within five (5) business days of
giving notice as provided in the Promissory Note annexed.
(b) In addition to the rights provided by the Uniform Commercial Code,
Secured Party has the right upon default of the Debtor to deduct from the
proceeds of the receivable owing to the Debtor under the Distribution
Agreement the unpaid amount of the Notes with interest accrued thereon.
(c) Upon any default, the Secured Party's reasonable attorneys' fees
and legal and other expenses in connection with the enforcement of this
Agreement and for advertising and selling the Collateral shall be chargeable
to the Debtor. The Debtor shall remain liable for any deficiency resulting
from a sale of the Collateral and shall pay such deficiency forthwith on
demand.
9. Applicable Law.
The Uniform Commercial Code of the State of New York shall govern the
rights, duties, and remedies of the parties, and any provisions herein
declared invalid under the law shall not invalidate any other provision of
this Agreement.
10. Financing Statement.
The Secured Party is hereby authorized by the Debtor to file Forms UCC-1
with the appropriate authorities in the State of New York, or in such other
jurisdictions where Debtor is located, reflecting the security interests
granted to it by the Debtor hereunder without any further writing from the
Debtor. Upon execution hereof, the Debtor shall execute the Form UCC-1.
11. Loan Expenses.
The Debtor shall reimburse the Secured Party for its legal expenses in
the preparation of this and related documents plus filing fees not to exceed
$1,800.
12. Captions.
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this agreement
nor the intent of any provisions thereof.
13. Other Provisions.
(a) The Secured Party may assign this Agreement and if assigned the
Assignee shall be entitled, upon notifying the Debtor, to all of Debtor's
obligations and agreements hereunder, and the Assignee shall be entitled to
all the rights and remedies of the Secured Party hereunder. Debtor will
assert no claim or defenses to the Assignee which the Debtor may have against
the Secured Party. Upon written request of the Secured Party, Debtor will
confirm in writing the amount Debtor owes on the interest and Principal of the
Loan and that there are no defenses, offsets, or counterclaims with respect
thereto.
(b) The covenants, terms, and conditions herein contained shall bind
and inure to the benefit of the respective parties hereto and the respective
legal representatives, successors and assigns.
(c) The gender and number used in this Agreement are used as a
reference term only and shall apply with the same effect whether the parties
are of masculine or feminine gender, corporate or other form, and singular
shall likewise include the plural.
(d) This Agreement may not be changed orally.
IN WITNESS WHEREOF, the parties have respectively signed and sealed this
Agreement, on the date and year first above written.
PRINCETON PUBLICATIONS [sic], INC.
By: /s/ Xxxxx XxXxxxxx
Xxxxx XxXxxxxx, President
XXXXXX CIRCULATION COMPANY
By: /s/
STATE OF NEW YORK
COUNTY OF NEW YORK SS.:
On the 28th day of June, 1996, before me personally came XXXXX XXXXXXXX,
to me known, who, being by me duly sworn, did depose and say that he resides
at Palm Beach, Florida, that he is the President of PRINCETON PUBLICATIONS
[sic], Inc., the corporation described in and which executed the foregoing
Loan and Security Agreement; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
/s/
Notary Public
Exhibit 1
LIST OF THE PUBLICATIONS
All of the titles covered by and to be covered by Publisher' Code P-11 as
currently and hereafter maintained by Xxxxxx Circulation Company.
NEGOTIABLE PROMISSORY NOTE
$000,000.00 , 1996
In consideration for the loan of [ ] ($000,000) dollars from
Xxxxxx Circulation Company to the undersigned, receipt of which is hereby
acknowledged, the undersigned, Princeton Publications [sic], Inc., promises to
pay to the order of Xxxxxx Circulation Company ("Xxxxxx" or "Holder") at 0000
XxXxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 (or at such other address as
Xxxxxx or Holder shall inform the undersigned of), the sum of [ ]
dollars ($0,000.00) ("Principal") in twelve (12) equal consecutive monthly
installments of [ ] dollars ($0,000.00) ("Principal
Installment") commencing [ ] 1, 1996 and on the first day of each month
thereafter together with interest payable monthly with the Principal
Installment on the unpaid Principal balance (before crediting the Principal
Installment) at the rate of two percent (2%) above the annual prime rate
charged by the Chemical Bank, N.A. in New York City in effect five (5)
business days before the dates on which each monthly Principal Installment is
due, except that interest payable on Principal from date hereof to [ ] 1,
1996 shall be paid on [ ] 1, 1996. In any event, the unpaid Principal and
all unpaid accrued interest shall be payable by [ ] 1, 1997.
This note is one of a series of notes issued under a Loan and Security
Agreement made by the Maker with Xxxxxx under date of June [ ] 1996.
The undersigned hereby waives demand, notice of presentment and protest.
The undersigned consents to any extensions that Xxxxxx or Holder may give with
respect to any payment required hereunder.
The undersigned has the right to prepay this note in whole or in part at
any time provided that the pre-payment is equal to the Principal Installment
or multiples thereof with interest accrued thereon through date of pre-
payment, and same shall be applied against the last payments due in reverse
order to regular payments.
The entire unpaid Principal shall became accelerated and immediately due
and payable in the event of a default as set forth in a Loan and Security
Agreement of this date between the undersigned as Debtor, and Xxxxxx as
Secured Party.
In the event legal proceedings are instituted to collect upon this note,
the undersigned shall pay the Holder of this note all court costs and
reasonable attorneys fees incurred by the holder.
PRINCETON PUBLICATIONS [sic], INC.
By:
Xxxxx XxXxxxxx, President
