EXHIBIT 10.16
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
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WHEREAS, The Millbrook Press Inc., a Delaware corporation, with its
chief executive office located at ▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (referred to herein as "Borrower") entered into a Loan and
Security Agreement with People's Bank, a Connecticut banking corporation with a
place of business located at Bridgeport Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (referred to herein as "Lender") dated as of December 14, 1995
(the Loan and Security Agreement being herein referred to as the "Loan
Agreement"); and
WHEREAS, Borrower and Lender entered into a First Amendment to Loan
and Security Agreement dated as of June 17, 1997 and a Second Amendment to Loan
and Security Agreement dated as of June 10, 1998 and a Letter Amendment dated
January 8, 1999 to provide Borrower with a LIBOR interest rate option, a Third
Amendment to the Loan and Security dated as of January 31, 2000 and a Fourth
Amendment to the Loan and Security Agreement dated as of October 26, 2001 (the
Loan and Security Agreement, as amended by all of the prior Amendments and the
Letter Amendment shall be referred to herein as the "Amended Agreement"); and
WHEREAS, Borrower has advised Lender that Borrower is terminating
its distribution and fulfillment relationship with Mercedes Distribution and
entering into a distribution and fulfillment contract with Simon and ▇▇▇▇▇▇▇▇,
Inc.; and
WHEREAS, Borrower and Lender have agreed to further amend the terms
and provisions of the Amended Agreement effective as of be date stated herein by
the provisions set forth below;
NOW, THEREFORE, Borrower and Lender hereby agree that effective as
of June 30, 2002, the Amended Agreement shall be further amended to contain the
provisions set forth below and the applicable provisions of the Amended
Agreement shall be superseded to the extent necessary to give effect to the
provisions set forth below:
1. The definitional term "Account Debtor" shall be deleted in its entirety
and replaced with the following:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of an Account but from and after
October 31, 2002, Account Debtor shall mean only Simon & ▇▇▇▇▇▇▇▇,
Inc.
2. The definitional term "Collateral" shall be deleted in its entirety and
replaced with the following:
"Collateral" means each of the following: the Accounts; Borrower's
Books; the Equipment; the General Intangibles; the Inventory; the
Negotiable Collateral; any money, or other assets of Borrower which
now or hereafter come into the possession, custody, or control of
People's and the Letter of Credit issued by Chase Manhattan Bank USA,
N.A. bearing number 72454 and all rights to draw thereunder; and the
proceeds and products, whether tangible or intangible, of any
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of the foregoing including proceeds of insurance covering any or all
of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral,
money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and
the proceeds thereof.
3. The definitional term "Eligible Accounts" shall be deleted in its
entirety and replaced with the following:
"Eligible Accounts" means:
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(i) Through October 31, 2002, those Accounts created by Borrower
in the ordinary course of business that arise out of Borrower's sale of goods,
that comply in all material respects with all of Borrower's representations and
warranties to People's, that are and at all times shall continue to be
acceptable to People's in all respects and that People's has made one or more
Advances against on or before July 31, 2002 but under no circumstances shall
Eligible Accounts include the following:
(a) Accounts (due within 60 days) that the Account Debtor has failed
to pay within sixty (60) days of due date, Accounts (due within 90 days) that
the Account Debtor has failed to pay within thirty (30) days and all Accounts
owed by an Account Debtor that has failed to pay fifty percent (50%) or more of
its Accounts owed to Borrower within sixty (60) days of due date;
(b) Accounts with respect to which the Account Debtor is an officer,
employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional;
provided, however, that this subsection shall not make ineligible, any Account
which otherwise would be eligible, if the Account Debtor is a wholesaler and has
the right within six (6) months from the creation of the sale to return the
purchased goods in accordance with normal industry standards; provided, however,
that People's shall have the right to impose reasonable reserves from time to
time in connection with any Accounts from Account Debtors who are wholesalers
who have or exercise such right of return;
(d) Accounts with respect to which the Account Debtor is not a
resident of the United States, and which are not either (i) covered by credit
insurance in form and amount, and by an insurer, satisfactory to People's, or
(ii) supported by one or more letters of credit that are assignable by their
terms and have been delivered to People's in an amount, of a tenor, and issued
by a financial institution, acceptable to People's;
(e) Accounts with respect to which the Account Debtor is the United
States or any department, agency, or instrumentality of the United States;
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(f) Accounts with respect to which Borrower is or may become liable to
the Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower;
(g) Accounts with respect to which the Account Debtor disputes
liability or makes any claim with respect thereto to the extent of such dispute
or claim, or is subject to any Insolvency Proceeding, or becomes insolvent, or
goes out of business;
(h) Accounts the collection of which People's, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(i) Accounts that are payable in other than United States Dollars; and
(j) Accounts that represent progress payments or advance ▇▇▇▇▇▇▇▇ that
are due prior to the completion of performance by Borrower of the subject
contract for goods or services; provided, however; that upon delivery of such
goods or services or completion of performance such account shall be deemed an
Eligible Account; and
(ii) From and after July 1, 2002, the net amount owed to Borrower
by Simon & ▇▇▇▇▇▇▇▇, Inc. arising under Section 10(b) of a "Fulfillment and
Billing Services Agreement" dated as of April 2, 2002 which have been identified
in a statement issued by Simon & ▇▇▇▇▇▇▇▇, Inc. delivered to Borrower and to
Lender (by Simon & ▇▇▇▇▇▇▇▇ or Borrower) and which are due within ninety (90)
days of the end of the month for which the statement is issued, that are, in the
event of non payment by Simon & ▇▇▇▇▇▇▇▇ in accordance with Section 10(b) of a
"Fulfillment and Billing Services Agreement" dated as of April 2, 2002,
recoverable by Lender by a drawing under the Chase Manhattan Bank USA, N.A.
Letter of Credit Number 72454 and that are and at all times shall continue to be
acceptable to People's in all respects; provided, however, that standards of
eligibility may be fixed and revised from time to time by People's in People's
reasonable credit judgment.
4. Section 2.1(a) of the Amended Agreement shall be deleted in its entirety
and the following inserted in lieu thereof.
2.1 Revolving Advances. (a) Subject to the terms and conditions of
this Agreement, People's agrees to make revolving advances to Borrower in
an amount at any one time outstanding not to exceed the Borrowing Base. For
purposes of this Agreement, "Borrowing Base", as of any date of
determination, shall mean an amount equal to the lesser of (i) eighty
percent (80%) of the amount of Eligible Accounts (as defined in Subsection
(a) above through June 30, 2002 or as defined in Subsection (b) above from
and after July 1, 2002) or (ii) $3,500,000 plus (iii) an amount equal to
the lowest of :(x) fifty percent (50%) of the amount of Eligible Inventory,
(y) the amount of credit availability created by Section 2.1(a) above or
(z) Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000).
5. Section 5.2 of the Amended Agreement shall be deleted in its entirety
and the following inserted in lieu thereof:
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5.2 Eligible Accounts. The Eligible Accounts are, at the time of the
creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, bona fide existing obligations
created by the sale and delivery of Inventory to Account Debtors in the
ordinary course of Borrower's business, unconditionally owed to Borrower
without defenses, disputes, offsets, counterclaims as to such sales
occurring on or before June 30, 2002 and under the Fulfillment and Billing
Services Agreement dated as of April 2, 2002 between Simon & ▇▇▇▇▇▇▇▇, Inc.
and Borrower as to such sales occurring from and after July 1, 2002 in the
ordinary course of Borrower's business. As to Eligible Accounts which are
the subject of Advances on and prior to June 30, 2002, the Inventory giving
rise to such Eligible Accounts has been delivered to the Account Debtor, or
to the Account Debtor's agent for immediate shipment to and unconditional
acceptance by the Account Debtor. At the time of the creation of an
Eligible Account and as of each date on which Borrower includes an Eligible
Account in a Borrowing Base calculation or certification, Borrower has not
received notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any applicable Account Debtor
regarding such Eligible Account.
6. All references to the Term Loan or Term Loans and references to interest
on the Term Loan contained in Sections 2.1(e), 2.3(c) and 2.6(e) shall be
deleted as the Term Loans have been repaid in full.
7. Except as herein amended, all of the terms and provisions of the Amended
Agreement shall remain in full force and effect.
8. All of the representations and warranties made by the Obligors in
Section 5 of the Amended Agreement are true and correct on the date hereof as if
made on and as of the date hereof, except to the extent that any of such
representations and warranties relate by their terms to a prior date.
9. Borrower and Lender agree that this Fifth Amendment to Loan and Security
Agreement has been prepared by the mutual effort of both parties and that in the
event of a conflict or interpretive question with respect to any term, provision
or section contained in this Fifth Amendment to Loan and Security Agreement or
the First, Second, Third, Fourth or Letter Amendments, that this Fifth Amendment
to Loan and Security Agreement shall not be construed more strictly against any
one party than any other party; it being agreed that both Borrower and Lender
have equally negotiated the terms hereof and thereof.
10. The revisions and amendments recited herein shall not become effective
and shall be of no force or effect until:
(a) Borrower has executed this Fifth Amendment to Loan and Security
Agreement; and
(b) Borrower and Simon & ▇▇▇▇▇▇▇▇, Inc, have executed the Fulfillment
and Billing Services Agreement dated as of April 2, 2002 in form satisfactory to
Lender; and
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(c) Chase Manhattan Bank USA, N.A., has issued and delivered to Lender
Letter of Credit Number 72454 in form satisfactory to Lender.
The date of execution of this Fifth Amendment to Loan and Security
Agreement by Borrower is as of June 30, 2002.
LENDER: BORROWER:
PEOPLES BANK THE MILLBROOK PRESS INC.
By:___________________________ By:___________________________
▇▇▇▇▇ ▇▇▇▇▇▇
Vice President Title:_________________________
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