SECOND MODIFICATION AGREEMENT
SECOND MODIFICATION AGREEMENT ("SECOND MODIFICATION AGREEMENT") ENTERED
INTO AS OF THE 29th OF JUNE, 2000 BY AND BETWEEN KABLE NEWS COMPANY, INC.,
AN ILLINOIS CORPORATION ("BORROWER"), AMREP CORPORATION, AN OKLAHOMA
CORPORATION ("PARENT"), KABLE NEWS EXPORT, LTD, A DELAWARE CORPORATION,
KABLE NEWS COMPANY OF CANADA LTD, AN ONTARIO, CANADA CORPORATION, KABLE
NEWS INTERNATIONAL, INC., A DELAWARE CORPORATION, KABLE FULFILLMENT
SERVICES OF OHIO, INC., A DELAWARE CORPORATION (COLLECTIVELY REFERRED TO
HEREIN AS "ORIGINAL SUBSIDIARIES") AND DISTRIBUNET INC., A DELAWARE
CORPORATION ("DISTRIBUNET") AND MAGAZINE CONNECTION INC., A DELAWARE
CORPORATION ("CONNECTION") (DISTRIBUNET AND CONNECTION COLLECTIVELY, "NEW
SUBSIDIARIES" AND ORIGINAL SUBSIDIARIES AND NEW SUBSIDIARIES COLLECTIVELY
REFERRED TO AS "SUBSIDIARIES") (BORROWER, PARENT AND SUBSIDIARIES
COLLECTIVELY REFERRED TO HEREIN AS "BORROWING PARTIES"), AND AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("AGENT"), HELLER FINANCIAL,
INC. ("HELLER"), MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. ("MERRILL")
AND FIRST BANK ("FIRST BANK") (AGENT, HELLER, MERRILL AND FIRST BANK
COLLECTIVELY REFERRED TO HEREIN AS "LENDERS")
W I T N E S S E T H
WHEREAS, Borrower and Lenders have executed that certain Loan Agreement
dated September 15, 1998 ("Loan Agreement") relating to certain Loans ("Loans")
made by Lenders to Borrower, to wit, a certain Forty Million and No/100
($40,000,000.00) Dollar Secured Revolving Credit Facility, a certain One Million
Two Hundred Thousand and No/100 ($1,200,000.00) Dollar Secured Term Loan and a
certain One Million Five Hundred Thousand and No/100 ($1,500,000.00) Dollar
Secured Term Loan; and
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WHEREAS, the Loans are evidenced by Notes (the "Notes") all dated September
15, 1998 executed by Borrower and delivered to the Lenders; and
WHEREAS, in connection with the Loans, Borrower and each Original
Subsidiary have executed and delivered those certain Security Agreements
("Security Agreements") all dated September 15, 1998; and
WHEREAS, in connection with the Loans, Borrower has executed and delivered
that certain Trademark Collateral Assignment and Security Agreement ("Trademark
Assignment") dated September 15, 1998; and
WHEREAS, in connection with the Loans, Parent and each Original Subsidiary
have executed and delivered those certain Guaranties ("Guaranties") all dated
September 15, 1998; and
WHEREAS, in connection with the Loans, Parent has executed and delivered
that certain Stock Pledge Agreement ("Stock Pledge") dated September 15, 1998;
and
WHEREAS, Borrower, Original Subsidiaries and Lenders have executed that
certain Modification Agreement relating to the Loans (the "Modification
Agreement") dated July 7, 1999 (the Loan Agreement, Notes, Security Agreements,
Guaranties, Stock Pledge, all as modified by the Modification Agreement and this
Second Modification Agreement, and the hereafter defined New Subsidiarys'
Security Agreements and New Subsidiarys' Guaranties are collectively referred to
herein as the "Loan Documents"); and
WHEREAS, Borrower has formed Distribunet and is desirous of amending the
Loan Documents in order to allow Distribunet (a)to become a limited partner of
and to invest in two certain Limited Partnerships, to wit Magazinet, L.P.
("Magazinet"), a Delaware limited partnership and Senequier Holdings, L.P., a
Texas limited Partnership ("Senequier") (Magazinet and Senequier collectively
referred to as the "Partnerships"), and (b)invest in and become a member of
Magazinet Management, L.L.C., a Delaware limited liability company
("Management"), the general partner of Magazinet; and
WHEREAS, Borrower has also formed Connection in order to engage in the sale
of magazines directly to retail sellers of same.
WHEREAS, Lenders have agreed to permit the investments and to modify the
Loan Documents in accordance with the terms of this Second Modification
Agreement conditioned on the terms contained herein including but not limited to
the delivery to Lenders of Security Agreements executed by the New Subsidiaries
(the "New Subsidiarys' Security Agreements") and Guaranties executed by the New
Subsidiaries (the "New Subsidiarys' Guaranties").
NOW, THEREFORE, in consideration of the mutual premises of the parties
hereto, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged,
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IT IS AGREED:
1. Preambles. The preambles to this Agreement are fully incorporated herein
by this reference thereto with the same force and effect as though restated
herein.
2. Defined Terms. To the extent not otherwise defined herein to the
contrary, all capitalized terms and/or phrases used in this Agreement shall have
the respective meanings assigned to them in the Loan Documents.
3. Modification of Loan Agreement. Borrowing Parties and Lenders hereby
agree that the Loan Agreement be and hereby is modified as follows:
(a) Distribunet, Inc., a Delaware corporation ("Distribunet"),
and Magazine Connection, Inc., a Delaware corporation
("Connection") are hereby added to the definition of
"Borrower Entities";
(b) The Security Agreement of even date with this Second
Modification Agreement executed by Distribunet in favor of
Agent for the ratable benefit of the Lenders as amended from
time to time (the "Distribunet Security Agreement") and the
Security Agreement of even date with this Second
Modification Agreement executed by Connection in favor of
Agent for the ratable benefit of the Lenders as amended from
time to time (the "Connection Security Agreement") are
hereby added to the definition of the "Collateral
Documents";
(c) Distribunet and Connection are hereby added to the
definition of "Guarantors";
(d) The Guaranty of even date with this Second Modification
Agreement executed by Distribunet ("Distribunet Guaranty")
and the Guaranty of even date with this Second Modification
Agreement executed by Connection (the "Connection Guaranty")
are hereby added to the definition of "Subsidiary
Guaranties";
(e) Distribunet and Connection are hereby added to the
definition of "Subsidiary Guarantors");
(f) Section 6.21 of the Loan Agreement is hereby restated to
read:
"6.21 Business Activities. The Borrower and its Subsidiaries
will not engage in any type of business except (a) the
businesses in which they were engaged on April 30, 1998,
including, without limitation, the distribution of
paperbacks, magazines and related products; product, order
and subscription processing and fulfillment; customer
service; telemarketing and related services; (b)
distribution of magazines in connection with and as
contemplated under that certain Investment Agreement between
Borrower, Senequier Holdings, L.P., a Texas limited
partnership, Distribunet and Mags2Go, L.L.C., a Delaware
limited liability company and (c) supplying magazines and
other periodicals to retail sellers. However, Borrower may
become engaged in the publishing business if such business
does not at any time account for greater than ten percent
(10%) of Borrower's revenues on an annual basis."
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Borrowing Parties further agree that the provisions of Section 6.22 of the
Loan Agreement apply with equal force and effect to Distribunet and Connection
and that in further consideration of Lenders executing this Second Modification
Agreement Borrower shall also make available and loan to Distribunet and
Connection portions of any Advances relating to the Revolving Loan to be used by
Distribunet and Connection for working capital purposes. Distribunet and
Connection by their execution of this Second Modification hereby join in the
Certificate of Acknowledgment and Pledge attached to the Loan Agreement as if
they were an original signatory thereto and hereby grants a security interest in
favor of Borrower in and to all presently existing and hereafter arising
accounts, inventory, equipment, general intangibles, instruments, investment
securities and chattel paper of Distribunet and Connection and the proceeds of
all of the foregoing to secure all amounts advanced and/or lent to them by
Borrower pursuant to said Section 6.22. Borrower by its execution of this Second
Modification Agreement hereby assigns all the foregoing together with all loans
made in connection therewith to Distribunet and Connection to Agent for the
ratable benefit of the Lenders to further secure the repayment of the
Obligations.
4. Limited Waiver of Sections 6.14 and 6.17 of the Loan Agreement. Lenders
by their execution hereof hereby waive the provisions of Sections 6.14,
Investments and Acquisitions, of the Loan Agreement but only as it applies to
Investments, as said term is hereafter defined, in the Partnerships and
Management, and Section 6.17, Affiliates, of the Loan Agreement but only as it
applies to the services provided by Distribunet and Borrower to the Partnerships
and the services provided by Magazinet to Borrower or Borrower's Subsidiaries
upon the following terms and conditions:
(i) Provided there does not exist a Default or an event but which
for the passage of time or giving of notice would be a Default and
provided further that the making of any Investments would not cause a
breach of any of the Financial Covenants contained in Section 6.24 of
the Loan Agreement, Borrower and Borrower's Subsidiaries are hereby
permitted to make Investments in the Partnerships and Management
provided that the outstanding amounts of all Investments shall not
exceed the following dollar limitations (the "Investment Caps") at any
time during the following time periods (the "Investment Time
Periods").
Investment Cap Investment Time Period
-------------- ----------------------
$2,000,000 during the period from the date of this Second
Modification Agreement to and including April 30, 2001
$5,000,000 from May 1, 2001 to and including April 30, 2002
$8,000,000 from May 1, 2002 to and including April 30, 2003
$10,000,000 from May 1, 2003 to and including April 30, 2004
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As used in this paragraph, the term "Investments" means any and all
(a)capital contributions made by Borrower or any of its Subsidiaries
in the form of cash or property for any purpose to either of the
Partnerships or Management, plus (b)loans made by Borrower or any of
its Subsidiaries for any purpose to either of the Partnerships or
Management, plus (c)any guaranty of any debt of either Partnership or
Management, by Borrower or any of its Subsidiaries, plus (d)a pledge
of any assets of Borrower or any of its Subsidiaries to secure any
debt of either Partnership or Management, plus (e) cash paid or
property transferred by Borrower or any of its Subsidiaries to acquire
any ownership interest in or the right to acquire any ownership
interest in either Partnership or Management, plus (f) cash advances
made by Borrower or any of its Subsidiaries to Magazinet to fund
operating losses of Magazinet plus (g) any liability incurred by
Borrower under any Kable Sharing Agreement as said term is defined in
the Senequier Partnership Agreement. The determination of the value of
any property used in calculating the amount of the Investments shall
be done by Agent in its sole discretion. Borrowing Parties further
agree that (a) in connection with all other matters to be shown on the
Monthly Compliance Certificate attached as Exhibit G to the Loan
Agreement that there also shall be shown thereon in a form and detail
acceptable to Lender the amounts of all outstanding Investments as of
the date of each Compliance Certificate, and (b) if the applicable
Investment Cap is exceeded by Borrower and Borrower's Subsidiaries
same shall be considered a Default under the Loan Agreement.
(ii) To the extent the prohibition contained in Section
6.17 of the Loan Agreement prohibits Borrower and
Distribunet from providing services to the Partnerships or
prevents Magazinet from providing services to Borrower or
any Subsidiary of Borrower "upon fair and reasonable terms
no less favorable to Borrower or such Subsidiary than the
Borrower or such Subsidiary would obtain in a comparable
arms-length transaction" said prohibition is hereby waived
in connection with the services to be supplied by
Distribunet or Borrower to the Partnerships or the services
to be supplied by Magazinet to Borrower or Borrower's
Subsidiaries.
5. Modification of Security Agreement executed by Borrower. Borrowing
Parties and Lenders hereby agree that the Security Agreement executed by
Borrower be and hereby is modified to add to Item G of Schedule I contained
therein the following:
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<TABLE>
<S> <C> <C> <C> <C> <C>
Issuer Class of Stock # of Shares Certificate Number % of Outstanding Shares Par Value
------ -------------- ----------- ------------------ ----------------------- ---------
Distribunet Inc.,
a Delaware
corporation Common 1000 1 100% .01
Magazine Connection
Inc., a Delaware
corporation Common 1000 1 100% .01
</TABLE>
6. Conditions Precedent. Lenders' execution of the present Second
Modification Agreement and its agreement to the terms and conditions hereof is
expressly conditioned on the delivery to Agent of the following documents in a
form and content acceptable to Agent and its counsel:
(a) The executed New Subsidiarys' Security Agreements.
(b) The executed New Subsidiarys' Guaranties.
(c) UCC-1 Financing Statements executed by Distribunet in favor of
Agent for filing in New York.
(d) UCC-1 Financing Statement executed by Distribunet in favor of
Borrower and assigned to Agent for filing in New York.
(e) UCC-1 Financing Statement executed by Connection in favor of Agent
for filing in New York.
(f) UCC-1 Financing Statement executed by Connection in favor of
Borrower and assigned to Agent for filing in New York.
(g) UCC-3 Financing Statement executed by Borrower in favor of Agent
for filing in Illinois.
(h) Executed copy of the amended and restated limited partnership
agreement of Senequier (The "Senequier Partnership Agreement").
(i) Executed copy of the limited partnership agreement of Magazinet.
(j) Original stock certificate representing all the issued and
outstanding stock of Distribunet together with stock power executed by
Borrower.
(k) Original stock certificate representing all the issued and
outstanding stock of Connection together with stock power executed by
Borrower.
(l) Certificate of Goodstanding for Distribunet issued by the Delaware
Secretary of State.
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(m) Certificate of Goodstanding for Connection issued by the Delaware
Secretary of State.
(n) Certificate of Existence for Senequier executed by the Texas
Secretary of State.
(o) Certificate of Goodstanding issued by the Delaware Secretary of
State for Management.
(p) Certificate of Existence issued by the Secretary of State of
Delaware for Magazinet.
(q) Secretary's Certificate for Distribunet certifying as to (i)
attached certified copy of Articles of Incorporation, (ii) attached
By-Laws, (iii) authorized incumbent officers, and (iv) attached resolutions
of Board of Directors.
(r) Secretary's Certificate for Connection certifying as to (i)
attached certified copy of Articles of Incorporation, (ii) attached
By-Laws, (iii) authorized incumbent officers, and (iv) attached resolutions
of Board of Directors.
(s) Secretary's Certificate for Borrower, Parent and each Subsidiary
certifying as to (i) authorized incumbent officers and (ii) attached
resolution of Board of Directors.
(t) Notice, Acknowledgment and Consent executed by Distribunet and
Senequier.
(u) Notice, Acknowledgment and Consent executed by Distribunet and
Magazinet.
(v) Notice, Acknowledgment and Consent executed by Distribunet and
Mags2Go, L.L.C., a Delaware limited liability company.
(w) Copy of executed Retail Supply Agreement between Magazinet and
Senequier.
(x) Copy of executed Interim Services Agreement between Borrower and
Magazinet.
(y) Copies of all Supply Agreements executed by any Subsidiary of
Borrower with Magazinet.
(z) Copy of executed Limited Liability Company Agreement of
Management.
(aa) Copy of executed Investment Agreement between Senequier,
Borrower, Distribunet and Mags2Go, L.L.C., a Delaware limited liability
company.
(bb) Copy of executed Registration Rights Agreement between Senequier
and Distribunet.
(cc) Opinion letter of counsel to Borrowing Parties.
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7. Other Loan Document Modifications. All Loan Documents are hereby deemed
amended and modified to provide that any and all references to any Loan
Documents therein are hereby deemed to be references to said Loan Documents as
modified by this Agreement.
8. Other Documents. At Agent's request, the Borrowing Parties hereby agree
to execute and deliver promptly to Agent such other documents as Agent, in its
reasonable discretion, shall deem necessary or appropriate to evidence the
transactions contemplated herein.
9. Reaffirmation. The Borrowing Parties do hereby reaffirm each and every
covenant, condition, obligation and provision set forth in the Loan Documents,
as modified hereby. The Borrowing Parties hereby restate and reaffirm all of the
warranties and representations contained in the Loan Documents, as modified
hereby, as being true and correct as of the date hereof.
10. References. All references herein to any of the Loan Documents shall be
understood to be to the Loan Documents as modified hereby. All references in any
of the Loan Documents to any other one or more of the Loan Documents shall
hereafter be deemed to be to such document(s) as modified hereby.
11. No Defense, Counterclaims. Each Borrowing Party hereby represents and
warrants to, and covenants with, Lenders that as of the date hereof, (a) each
Borrowing Party has no defenses, offsets or counterclaims of any kind or nature
whatsoever against any Lender with respect to the Loans or any of the Loan
Documents, or any action previously taken or not taken by any Lender with
respect thereto or with respect to any security interest, encumbrance, lien or
collateral in connection therewith to secure the liabilities of each Borrowing
Party, and (b) that the Lenders have fully performed all obligations to each
Borrowing Party which it may have had or has on and of the date hereof.
12. Release. Without limiting the generality of the foregoing, each
Borrowing Party, on its own behalf and on the behalf of its representatives,
partners, shareholders, subsidiaries, affiliated and related entities,
successors and assigns (hereinafter collectively referred to as the "Borrowing
Group" and as to the Borrowing Group, each Borrowing Party represents and
warrants that it has the right, power and authority to waive, release and
forever discharge on behalf of the Borrowing Group, the "Bank Group" as
hereinafter defined) waives, releases and forever discharges each Lender, and
their respective officers, directors, subsidiaries, affiliated and related
companies or entities, agents, servants, employees, shareholders,
representatives, successors, assigns, attorneys, accountants, assets and
properties, as the case may be (together hereinafter referred to as the "Bank
Group") from and against all manner of actions, cause and causes of action,
suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, obligations,
liabilities, costs, expenses, losses, damages, judgments, executions, claims and
demands, of whatsoever kind or nature, in law or in equity, whether known or
unknown, whether or not concealed or hidden, arising out of or relating to any
matter, cause or thing whatsoever, that any of the Borrowing Group, jointly or
severally, may have had, or now have or that may subsequently accrue against the
Bank Group by reason of any matter or thing whatsoever arising out of or in way
connected to, directly, or indirectly, the Loans and/or any of the Loan
Documents through the date hereof, Each Borrowing Party acknowledges and agrees
that Lenders are specifically relying upon the representations, warranties,
covenants and agreements contained herein and that such representations,
warranties, covenants and agreements constitute a material inducement to enter
into this Agreement.
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13. No Custom. This Agreement shall not establish a custom or waive, limit
or condition the rights and remedies of Lenders under the Loan Documents, all of
which rights and remedies are expressly reserved.
14. Reaffirmation of Loan Documents, No Novation. Except as may be
expressly set forth herein to the contrary, the Loan Documents remain
unmodified, and all other terms and conditions thereof remain in full force and
effect. Notwithstanding anything to the contrary contained herein, Borrowing
Parties and Lenders expressly state, declare and acknowledge that this Agreement
is intended only to modify each Borrowing Party's continuing obligations in the
manner set forth herein, and is not intended as a novation of any and all
amounts presently due and owing from any Borrowing Party to Lenders.
15. Captions; Counterparts. The captions used herein are for convenience of
reference only and shall not be deemed to limit or affect the construction and
interpretation of the terms of this Agreement. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which shall
be deemed one Agreement.
16. Choice of Law and Severability. This Agreement shall be governed and
construed under the laws of the State of Illinois. If any provision of this
Agreement is held invalid or unenforceable, the remainder of this Agreement will
not be affected thereby and the provisions of this Agreement shall be severable
in any such instance.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BORROWER:
KABLE NEWS COMPANY, INC.,
an Illinois corporation
By: /s/ Daniel Friedman
Title: Chairman President & CEO
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LENDERS:
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
Individually and as Agent
By: /s/ Robin Winer
Title: V.P.
HELLER FINANCIAL, INC.
By: /s/ Dennis Graham
Title: Assistant Vice President
MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC.
By: /s/ Michael J. Wiers
Title: VP
FIRST BANK
By: /s/ Thomas J. Huffman
Title: Regional President
PARENT:
AMREP CORPORATION, an Oklahoma corporation
By: /s/ Daniel Friedman
Title: Senior Vice President
SUBSIDIARIES:
KABLE NEWS EXPORT, LTD,
a Delaware corporation
By: /s/ Daniel Friedman
Title: Chairman President & CEO
KABLE NEWS COMPANY OF CANADA LTD, an Ontario, Canada corporation
By: /s/ Daniel Friedman
Title: President & CEO
KABLE NEWS INTERNATIONAL, INC., a Delaware corporation
By: /s/ Daniel Friedman
Title: President
KABLE FULFILLMENT SERVICES OF OHIO, INC., a Delaware corporation
By: Daniel Friedman
Title: Chairman & CEO
NEW SUBSIDIARIES:
DISTRIBUNET INC., a Delaware corporation
By: /s/ Michael Duloc
Title: President
MAGAZINE CONNECTION INC., a Delaware corporation
By: /s/ Michael Duloc
Title: President
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