UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 3, 1998
Golden Books Family Entertainment, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-14399 06-1104930
(Commission (IRS Employer
File Number) Identification No.)
888 Seventh Avenue, 43rd Floor, New York, NY 10106
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 547-6700
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Item 5: Other Events
On June 3, 1998, Golden Books Family Entertainment, Inc. (the "Company")
announced that it had obtained a previously disclosed $30 million, three-year
working capital credit agreement (the "New Credit Facility") with NationsCredit
Commercial Corporation, through its NationsCredit Commercial Funding division.
In conjunction with the New Credit Facility, the indenture (the "Indenture")
relating to the 7.65% Senior Notes due 2002 (the "Notes") of Golden Books
Publishing Company, Inc. ("GBPC") was amended.
The New Credit Facility permits GBPC to borrow revolving credit loans from
time to time in an aggregate amount not to exceed the lesser of (x) $30.0
million or (y) a borrowing base equal to the sum of (i) 70% of eligible accounts
receivable and (ii) 50% of eligible inventory. Interest on outstanding loans
accrues at the prime rate. Borrowings are subject to, among other things,
compliance with covenants and accuracy of representations and warranties. The
New Credit Facility is secured by a first priority security interest in GBPC's
accounts receivable and inventory. Covenants in the New Credit Facility include,
among others, (i) limitations on consolidation, merger or dissolution,
guarantees, dividends on and repurchases of capital stock and transactions with
affiliates and (ii) if there shall be less than $5.0 million of availability
under the New Credit Facility, limitations on assets sales or acquisitions
outside the ordinary course of business, investments or loans, incurrence of
debt outside the ordinary course of business, modifications of GBPC's capital
structure, payments on indebtedness owed to affiliates and other transactions
outside the ordinary course of business. Events of default under the New Credit
Facility include, among others, default under other agreements, change of
control, judgments and certain bankruptcy events.
The Indenture was amended to, among other things, (i) permit GBPC to secure
up to $30.0 million of borrowings and related obligations under any credit
facility, (ii) grant to the Trustee for its benefit and for the benefit of the
holders of the Notes a security interest in certain assets of GBPC, (iii) add a
guarantee from the Company and (iv) add certain additional restrictive covenants
and amend certain existing covenants. In addition, the Company and GBPC entered
into a Registration Rights Agreement, which requires the Company to file and
cause to become effective under the Securities Act of 1933 a registration
statement covering its guarantee of Notes held by certain holders.
The complete text of the press release issued by the Company announcing the
New Credit Facility and amendment of the Indenture is attached hereto as an
exhibit.
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Item 7: Financial Statements, Pro Forma Financial Information and Exhibits.
c. Exhibits
4.1 Amendment Agreement dated as of June 2, 1998 executed and delivered by
Golden Books Publishing Company, Inc. ("GBPC") and Golden Books Family
Entertainment, Inc. ("GBFE") and acknowledged by Marine Midland Bank, as
trustee (the "Trustee").
4.2 Second Supplemental Indenture dated as of June 2, 1998 among GBPC, GBFE and
the Trustee, to Indenture dated as of September 15, 1992 between GBPC and
the Trustee.
4.3 Security Agreement dated as of June 2, 1998 between GBPC and the Trustee.
4.4 Registration Rights Agreement dated as of June 2, 1998 among GBPC, GBFE and
the Trustee.
10.1 Loan and Security Agreement dated as of June 3, 1998 between GBPC and
Nations-Credit Commercial Corporation, through its NationsCredit Commercial
Funding division.
99.1 Press Release, dated June 3, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Golden
Books Family Entertainment, Inc. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
Dated: June 15, 1998
By: /s/ Philip Galanes
----------------------------------
Philip Galanes
General Counsel and Vice President,
Legal Affairs
AMENDMENT AGREEMENT
This Amendment Agreement (the "Agreement") is dated as of June 2, 1998
between GOLDEN BOOKS PUBLISHING COMPANY, INC., a Delaware corporation (the
"Company") and GOLDEN BOOKS FAMILY ENTERTAINMENT, INC., a Delaware corporation
(together with any and all future Parents of the Company, "Parent Guarantor"),
and relates to (i) that certain Indenture, dated as of September 15, 1992,
between the Company and Marine Midland Bank, as the Trustee, as amended from
time to time in accordance with its terms (as so amended, the "Indenture"), and
(ii) that certain credit facility between the Company and a Lender (the
"Eligible Credit Facility"). Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Indenture or that certain
Second Supplemental Indenture, attached hereto as Exhibit A. This Agreement, the
Second Supplemental Indenture, the Collateral Agreements and any other documents
contemplated by the foregoing (other than the Eligible Credit Facility), are
known as the "Transaction Documents."
WHEREAS, the Company and the Trustee will enter into a Second Supplemental
Indenture;
WHEREAS, the Company and the Trustee will revise certain covenants of the
Indenture;
WHEREAS, the Company will grant a first priority lien and security interest
on and in the First Lien Collateral and a second priority lien and security
interest on and in the Second Lien Collateral to secure the obligations of the
Company under the Indenture and the Securities;
WHEREAS, the Securities will be guaranteed, on an unconditional senior
basis, by Parent Guarantor;
WHEREAS, the Company may enter into an Eligible Credit Facility with a
Lender;
NOW, THEREFORE, in consideration of good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Representations and Warranties of the Company and Parent
Guarantor. Each of the Company and Parent Guarantor hereby jointly and severally
represents and warrants to the Trustee, the Collateral Agent and the Holders
that as of the date hereof and as of the Effective Date:
1.1 Organization, Power and Authority. Each of the Company and Parent
Guarantor: (a) is duly organized and validly existing in good standing under the
laws of the jurisdiction of its formation and under the laws of each other
jurisdiction in which it is qualified to do business, except where the failure
to be so qualified would not have a material adverse
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effect on the business, assets, property, operations or financial or other
condition of the Company, Parent Guarantor or any of their Subsidiaries, either
individually or taken as a whole; (b) has the power and authority to execute,
deliver and carry out the terms and provisions of the Transaction Documents and
consummate the transactions contemplated hereby; (c) has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
hereby; and (d) has duly executed and delivered the Transaction Documents to
which it is a party.
1.2 No Conflict. Neither the execution of the Transaction Documents nor the
consummation of the transactions contemplated therein will result in the breach
of any terms or provisions of the Charter or By-laws of the Company or Parent
Guarantor or result in the breach of any term or provision of, or conflict with
or constitute a default under or result in the acceleration of any obligation
under, any material agreement, indenture, loan, lease or credit agreement or
other material instrument to which the Company, Parent Guarantor or their
property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Company, Parent Guarantor or their
property is subject. This Agreement and the Transaction Documents constitute the
legal, valid and binding obligations of the Company and Parent Guarantor
enforceable against each in accordance with their terms, subject (as to
enforcement) to bankruptcy, insolvency, reorganization, moratorium or similar
laws at the time in effect affecting the enforceability of the rights of
creditors generally and the effect of general principles of equity (regardless
of whether considered in a proceeding at law or in equity).
1.3 Financial Statements. The financial statements of Parent Guarantor as
of December 27, 1997, and for the year then ended, included in its Annual Report
on Form 10-K for the year ended December 27, 1997 have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during such period, and fairly present, in all material respects, the
financial position of Parent Guarantor and its Subsidiaries as of the date of
the balance sheet included therein.
1.4 Disclosure. The certificates, written reports and other writings
furnished to the Holders and their advisors by the Company or Parent Guarantor
in connection with the negotiation of this Agreement or any other Transaction
Document, when taken together with the Parent Guarantor's filings with the
Commission under the Securities Exchange Act of 1934 (the "Exchange Act
Filings"), do not contain any untrue statement of material fact and do not omit
to state a material fact which would be necessary to make the statements
contained therein (taken as a whole), in light of the circumstances under which
they were made, not misleading.
1.5 No Consents Required. Other than the consents referenced in Section 2.4
hereto, the UCC-1 financing statement filings in the jurisdictions identified on
Schedule 3.1(b) to the Security Agreement which have heretofore been filed, the
Registration Statement referenced in Section 4 below, the Consent of Disney
Licensed Publishing which has heretofore been obtained and the Consent of First
Industrial Development Services, L.P. which has heretofore been obtained, no
consent, approval, authorization or other action by, or filing with or
notification to, any Governmental Entity or other third party is required to be
made or obtained
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by the Company or Parent Guarantor in connection with the execution, delivery
and performance of the Transaction Documents or the transactions contemplated
thereby.
1.6 Fees and Expenses. The Company has paid all reasonable professional
fees and related expenses due and owing for which invoices have been rendered,
and will promptly pay all such fees and expenses properly invoiced after the
date hereof incurred in connection with the transactions contemplated herein, to
the Trustee and its counsel, to Stroock & Stroock & Lavan LLP and Rubin & Levin,
legal counsels to the Holders, and to Houlihan Lokey Howard & Zukin, financial
advisors to counsel to the Holders.
1.7 Other Debt. The Company does not have any material Indebtedness other
than any Eligible Credit Facility and as described in the Exchange Act Filings.
1.8 Corporate Structure. Parent Guarantor does not have any material
Subsidiaries other than the Company and its Subsidiaries and Golden Books Home
Video, Inc. The Company does not have any material Subsidiaries other than as
set forth on Schedule 1.8 hereto. The corporate structure of the Company, Parent
Guarantor and their respective Subsidiaries described in the documents entitled
"Golden Books Family Entertainment, Inc. Corporate Structure And Partnership
Interests" and provided to the Holders' counsel under cover letter of the
Company, dated February 18, 1998, is true and correct as of the date hereof.
1.9 Capital Structure. At the Effective Date, the Company will have at
least $ 6,000,000 of cash and cash equivalents on hand and the Parent Guarantor
will have at least $ 6,000,000 of cash and cash equivalents on hand.
1.10 Payments to Affiliates. Each Account Receivable arising from
indebtedness due and owing the Company or Parent Guarantor from a Subsidiary of
the Company or a Subsidiary of the Parent Guarantor is a BONA FIDE intercompany
indebtedness arising from an appropriate business purpose incurred in the
ordinary course of the Company's or the Parent Guarantor's business and in
accordance with GAAP.
1.11 No Defaults. There are no existing Defaults or Events of Default under
the Indenture, the TOPRS or the Racine Lease.
1.12 Consent Solicitation Letter. The Company's letter dated May 9, 1998,
including, without limitation, the documents delivered in connection therewith,
soliciting consents from the Holders to the transactions contemplated by the
Transaction Documents does not contain any untrue statement of material fact and
does not omit to state a material fact which would be necessary in order to make
the statements contained therein (taken as a whole) not misleading.
1.13 Consideration. Neither the Company nor Parent Guarantor shall provide
any consideration related to the approval of this Agreement or the transactions
contemplated hereby, directly or indirectly, to any Holder, which consideration
is not made
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available to each other Holder.
1.14 No Amendments. Neither the Company nor Parent Guarantor has amended
its charter or bylaws since such documents were filed with the Commission as
Exhibits to the Exchange Act Filings, except as contemplated by the Parent
Guarantor's Proxy Statement for its 1998 Annual Meeting of Shareholders.
1.15 Transfer Restrictions. The Securities held by Holders who validly
tender consents to the Second Supplemental Indenture may not be transferred by
such Holders except (i) to (a) "qualified institutional buyers" as defined in
Rule 144A under the Securities Act, in compliance with Rule 144A, or (b)
institutional "accredited investors" as defined in Regulation D under the
Securities Act who make certain representations and agreements or (ii) pursuant
to the effective Registration Statement. No legend or stop transfer order or
other similar restriction will be required. The Securities held by each other
Holder will (assuming it is not an affiliate of the Company) remain transferable
without any requirement of registration under any federal or state securities
laws.
Section 2. Conditions of Closing. On or before the Closing Date, and as a
condition to the effectiveness of the Second Supplemental Indenture, the
following shall have occurred:
2.1 Delivery of Transaction Documents. Each of the Company and Parent
Guarantor shall have delivered to the Trustee the following items (other than
item (i) which shall have been delivered), each dated as of the Effective Date,
in form and substance satisfactory to counsel for the Holders and the Trustee:
(a) the Second Supplemental Indenture, attached hereto as Exhibit A;
(b) the Security Agreement, attached hereto as Exhibit B;
(c) the Copyright Security Interest Agreement, attached hereto as Exhibit
C;
(d) the Trademark Security Interest Agreement, attached hereto as Exhibit
D;
(e) the Mortgage, attached hereto as Exhibit E;
(f) the Mortgagor's Affidavit, attached hereto as Exhibit F;
(g) the Title Insurance, attached hereto as Exhibit G;
(h) the Survey, attached hereto as Exhibit H;
(i) the opinion of local counsel (Indiana), attached hereto as Exhibit I;
(j) the opinion of local counsel (Wisconsin), attached hereto as Exhibit
J;
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(k) the Fixture Filings, attached hereto as Exhibit K;
(l) the UCC Searches, attached hereto as Exhibit L;
(m) the UCC-1 Filings, attached hereto as Exhibit M;
(n) the opinion of special counsel to the Company and Parent Guarantor,
attached hereto as Exhibit N;
(o) the opinion of the general counsel of the Company and Parent
Guarantor, attached hereto as Exhibit O;
(p) officer's certificate from the Company and Parent Guarantor, executed
by their respective chief executive officer and chief financial
officer, attached hereto as Exhibit P;
(q) Landlord Waiver Letters, attached hereto as Exhibit Q;
(r) Registration Rights Agreement (the "Registration Agreement"), attached
hereto as Exhibit R; and
(s) such other documents and instruments as counsel to the Holders shall
reasonably request.
2.2 Agreement and Conditions. The Company shall have complied with and duly
performed all agreements and conditions on its part to be complied with and
performed pursuant to or in connection with this Agreement, the Indenture and
the other Transaction Documents, including Sections 12.1 and 12.2 of the
Indenture, unless waived by the Trustee.
2.3 Approval of Counsel to the Holders. All actions, proceedings,
instruments and documents required to carry out this Agreement or incidental
hereto, and all other related legal matters, shall be reasonably satisfactory to
counsel to the Holders.
2.4 Required Consents. The requisite consents approving the transactions
contemplated by the Transaction Documents shall have been obtained from the
Holders of the Securities under the Indenture.
Section 3. Indemnification. Without limitation of any rights of any Person
set forth elsewhere in the Transaction Documents, the Company and Parent
Guarantor shall hold harmless and indemnify the Trustee and each Holder, and
their respective directors, trustees, officers, employees, legal counsel,
advisors, representatives and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing (all such persons, "Indemnified
Persons"), from any claims, losses, damages or expenses (including reasonable
attorneys' fees
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and expenses) (collectively, "Losses") against the Trustee, any Holders or any
of the other Indemnified Persons arising from any material breach of, or default
under, the Transaction Documents by the Company or Parent Guarantor.
If the foregoing indemnification provided is unavailable to an Indemnified
Person in respect of any Losses referred to therein, then each of the Company
and Parent Guarantor in lieu of indemnifying such Indemnified Person thereunder,
shall contribute to the amount paid or payable by such Indemnified Person as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the Company and Parent Guarantor on the one hand and the
Indemnified Persons on the other, as well as any other relevant equitable
considerations. If applicable, the relative fault of the Company and Parent
Guarantor on the one hand and the Indemnified Persons on the other shall be
determined by reference to, among other things, whether the untrue or the
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and
Parent Guarantor or by the Indemnified Persons and such persons' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 3 were determined by pro rata allocation (even if the
Indemnified Persons were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an Indemnified Person as a result of the Losses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any action or claim. Notwithstanding the provisions of this Section 3,
in no event shall an Indemnified Person be required to contribute any amount in
excess of the amount by which proceeds received by such Indemnified Person from
sales of Securities exceed the amount of any damages that such Indemnified
Person has otherwise been required to pay by reason of such Losses. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 3 will
be in addition to any liability which the Company and Parent Guarantor may
otherwise have to the Indemnified Persons.
Section 4. Registration Rights. Pursuant to the Registration Agreement,
Parent will use its best efforts to file with the Commission and to cause to
become effective, as soon as reasonably practicable, and in any event, within
120 days, a shelf registration statement ("Registration Statement") covering the
Parent Guarantee of the Securities held by Holders who validly tendered consents
to the Second Supplemental Indenture and to keep the Registration Statement
effective under the Securities Act until the date which is 24 months from the
Effective Date or such earlier date on which such Securities have been sold (the
"Registration Effectiveness Period"). If either: (i) the Registration Statement
has not been declared effective
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under the Securities Act by the 121st day after the Effective Date or (ii) after
the Registration Statement is declared effective under the Securities Act, the
Registration Statement ceases to be effective, then, as liquidated damages,
until the Registration Statement is declared effective or the end of the
Registration Effectiveness Period, additional payments will accrue on the
Securities then outstanding in an amount equal to $0.05 per week per $1,000
principal amount of such Securities for the first 90 days following such
registration default, which amount shall increase by an additional $0.05 per
week per $1,000 principal amount of Securities at the beginning of each
subsequent 90-day period (up to a maximum of $0.25 per week per $1,000 principal
amount of Securities).
Section 5. Miscellaneous Provisions.
5.1 No Waiver. Except as specifically provided herein, nothing in this
Agreement constitutes or shall be deemed to constitute a cure or waiver of any
breach or Default or Event of Default under the Indenture or any and all other
documents executed and delivered in connection with the issuance of the
Securities, or a relinquishment of any rights and remedies of the Trustee or the
Holders with respect to such breach or Default or Event of Default under the
Indenture, the Collateral Agreements and all other collateral documents executed
and delivered in connection with the issuance of the Securities.
5.2 Successors and Assigns; Binding Effect of Indenture. The terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Although this
Agreement is between the Company and Parent Guarantor, the terms of this
Agreement shall inure to the benefit of the Trustee, the Holders and their
respective successors and assigns.
5.3 Counterparts. This Agreement, the Indenture and the Collateral
Agreements may be executed and delivered via facsimile, in any number of
counterparts, each of which shall be a valid and binding original, but all of
which together shall constitute one and the same instrument.
5.4 Amendment. This Agreement may be amended only by an agreement in
writing signed by each party hereto and consented to by the Trustee.
5.5 Construction. For all purposes of this Agreement, except as otherwise
herein expressly provided or unless the context otherwise requires, the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Agreement refer to this Agreement as a whole and not to any particular Section
hereof.
5.6 Survival Clause. All covenants, agreements, representations and
warranties made in this Agreement shall survive the consummation of the
transactions contemplated herein.
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5.7 Governing Law. This Agreement shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by and construed in accordance with the internal laws of the State of New York
without reference to any conflicts of laws provisions.
[Rest of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed the foregoing Agreement,
individually by their officers duly authorized, as of the date first above
written.
GOLDEN BOOKS PUBLISHING COMPANY, INC.,
as the Company
By: /s/ John C. Ferrara
-----------------------------------------
Name: John C. Ferrara
Title: Chief Financial Officer
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.,
as Parent Guarantor
By: /s/ John C. Ferrara
-----------------------------------------
Name: John C. Ferrara
Title: Chief Financial Officer
ACKNOWLEDGED:
MARINE MIDLAND BANK,
as Trustee
By: /s/ Frank J. Godino
---------------------------------
Name: Frank J. Godino
Title: Vice President
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SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE dated as of June 2, 1998 (the "Supplemental
Indenture"), to the Indenture, dated as of September 15, 1992, as amended (the
"Indenture"), between GOLDEN BOOKS PUBLISHING COMPANY, INC., a Delaware
corporation (hereinafter called the "Issuer"), GOLDEN BOOKS FAMILY
ENTERTAINMENT, INC., a Delaware Corporation (together with any and all future
Parents of the Issuer, "Parent Guarantor"), and MARINE MIDLAND BANK, a New York
banking corporation and trust company, as Trustee (the "Trustee").
RECITALS OF THE ISSUER
WHEREAS, Western Publishing Group, Inc. issued 7.65% Senior Notes Due 2002
(the "Securities") pursuant to the Indenture, and in May 1996 the Issuer became
the obligor of the Securities under the Indenture pursuant to the First
Supplemental Indenture, dated as of May 8, 1996, amending the Indenture, between
Western Publishing Group, Inc., Golden Books, Inc., Western Publishing Company,
Inc. and the Trustee;
WHEREAS, the Issuer desires and has requested the Trustee to join it in the
execution and delivery of this Supplemental Indenture in order to secure the
Securities with Collateral (as defined), revise certain covenants, provide for
the Parent Guaranty (as defined) and make certain other changes to the
Indenture;
WHEREAS, the Securities will be secured by a first priority lien on and
security interest in the First Lien Collateral (as defined) and a second
priority lien on and security interest in the Second Lien Collateral (as
defined). The Securities will be guaranteed, on an unconditional senior basis,
by the Parent Guarantor (as defined);
WHEREAS, Section 8.2 of the Indenture provides that this Supplemental
Indenture may be entered into by the Issuer and the Trustee with the consent of
the Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding;
WHEREAS, the conditions set forth in the Indenture for the execution and
delivery of this Supplemental Indenture have been complied with; and
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WHEREAS, all things necessary to make this Supplemental Indenture a valid
agreement of the Issuer and the Trustee, in accordance with its terms, and a
valid amendment of, and supplement to, the Indenture have been done.
NOW THEREFORE:
Contained herein, the Issuer mutually covenants and agrees with the
Trustee, for the equal and proportionate benefit of all Holders of the
Securities, that the Indenture is supplemented and amended, to the extent and
for the purposes expressed herein, as follows:
ARTICLE ONE
Scope Of This Supplemental Indenture
Section 1.1. Changes, etc. Applicable to the Securities. The changes,
modifications and supplements to the Indenture effected by this Supplemental
Indenture shall be applicable with respect to, and govern the terms of, the
Securities.
ARTICLE TWO
Amendments To The Indenture
Section 2.1. Amendments to Section 1.1. Section 1.1 of the Indenture is
hereby amended by adding the following definitions in their proper alphabetical
order:
"Amendment Agreement" means the Amendment Agreement, dated the
Effective Date, entered into by the Issuer and Parent Guarantor.
"Affiliate" shall have the same meaning as given to that term in Rule
405 of the Securities Act.
"Affiliate Transaction" shall have the meaning set forth in Section
3.13.
"Arm's Length" shall have the meaning given in Section 3.13.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating
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leases entered into in the ordinary course of business), assignment or
other transfer for value by the Issuer or any of its Subsidiaries
(including any Sale and Leaseback Transaction) to any Person other than the
Issuer or any of its Wholly-Owned Subsidiaries of (a) any capital stock of
any Subsidiary of the Issuer; or (b) any other property or assets of the
Issuer or any Subsidiary of the Issuer other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Issuer or its
Subsidiaries receive aggregate consideration of less than $500,000 and (ii)
the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Issuer as permitted under Section
3.6 hereof.
"Collateral" means, collectively, the First Lien Collateral and the
Second Lien Collateral.
"Collateral Agent" shall have the meaning assigned to such term in the
Security Agreement.
"Collateral Agreements" means, collectively, the Security Agreement,
the Copyright Assignment, the Trademark Assignment, the Mortgage and any
other document or instrument executed or delivered in connection with any
of the foregoing, in each case, as the same may be in force from time to
time.
"Company" means the Issuer.
"Copyright Assignment" means the Copyright Security Interest
Agreement, dated as of the Effective Date, by the Issuer in favor of the
Collateral Agent, in the form of Exhibit C to the Amendment Agreement, as
amended and supplemented from time to time in accordance with its terms.
"Default" means any event or condition that with the giving of notice
or the passage of time or both would become an Event of Default.
"Effective Date" means June 2, 1998.
"Eligible Assets" means inventory, accounts receivable, chattel paper,
documents, proceeds of the foregoing and such other related items,
including such items of the type described in Section 3.1 of the Loan and
Security Agreement between the Issuer and Nations Credit Commercial
Corporation, through its Nations Credit Commercial Funding Division, as
such agreement is in effect on the Effective Date.
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"Eligible Credit Facility" means one or more credit facilities between
the Issuer and one or more Lenders, and otherwise complying with the terms
of this Indenture, including, without limitation, the Loan and Security
Agreement dated as of June 2, 1998 between the Issuer and NationsCredit
Commercial Corporation, through its NationsCredit Commercial Funding
Division, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each
case as amended, modified, renewed, refunded, replaced or refinanced, in
whole or in part, from time to time as permitted herein, including to
increase the commitments thereunder.
"Eligible Credit Facility Liens" shall have the meaning set forth in
Section 3.8.
"First Lien Collateral" shall mean the "First Lien Collateral" as
defined in the Security Agreement and the collateral pledged under the
Copyright Assignment, the Trademark Assignment and the Mortgage.
"Independent Financial Advisor" means an investment banking,
accounting or appraisal firm of national standing (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct
or indirect ownership interest or material direct or indirect financial
interest in the Parent or any of its Subsidiaries, provided that ownership
of three percent (3%) or less of the issued and outstanding shares of
capital stock of the Parent shall not constitute having a direct or
indirect financial interest in the Parent or any of its Subsidiaries, and
(ii) which, in the judgment of the disinterested members of the Board of
Directors of the Parent, is independent and qualified to perform the task
for which it is to be engaged. Notwithstanding the foregoing, solely for
purposes of clause (b) of the definition of "Substitute Collateral,"
Independent Financial Advisor shall mean Houlihan Lokey Howard & Zukin or
any successor thereto; provided, however, that if Houlihan Lokey Howard &
Zukin or any such successor shall not be reasonably available to perform
the function called for by such definition, Independent Financial Advisor
shall have the meaning given in the preceding sentence.
"Intellectual Property" means intangible assets of the Issuer
described in Section 2.1(a)(i)of the Security Agreement and any similar
assets pledged in substitution thereof.
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"Lender" means a Person that is a lender in an Eligible Credit
Facility.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement
to sell or give a security interest in and filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction, excluding true lease and consignment
filings).
"Mortgage" means the Real Estate Mortgage, Assignment of Rents and
Security Agreement, dated as of the Effective Date between the Issuer and
Trustee, creating Liens on and related to the Premises (as defined herein),
including the Mortgaged Property secured by and described in the Real
Estate Mortgage, Assignment of Rents and Security Agreement, and any other
similar document or instrument executed in connection therewith.
"Mortgaged Property" shall have the meaning assigned to such term in
the Mortgage.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or cash equivalents including payments in
respect of deferred payment obligations when received in the form of cash
or cash equivalents (other than the portion of any such deferred payment
constituting interest) received by the Issuer or any of its Subsidiaries
from such Asset Sale net of (a) reasonable out-of-pocket expenses and fees
relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and sales commissions), (b) taxes
paid or payable after taking into account any reduction in consolidated tax
liability due to available tax credits or deductions and any tax sharing
arrangements, (c) repayment of Indebtedness that is required to be repaid
in connection with such Asset Sale and (d) appropriate amounts to be
provided by the Issuer or any Subsidiary, as the case may be, as a reserve,
in accordance with GAAP, against any post-closing adjustments or
liabilities associated with such Asset Sale and retained by the Issuer or
any Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
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"Non-Issuer Subsidiaries" means all direct and indirect Subsidiaries
of the Parent Guarantor other than the Issuer and direct and indirect
Subsidiaries of the Issuer.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages, sums and other liabilities
payable under the documentation governing any Indebtedness.
"Parent" means Golden Books Family Entertainment, Inc., together with
any of its successors and assigns and any other Person directly owning
outstanding securities or interests which have ordinary voting power to
elect a majority of the Board of Directors or similar governing body of the
Issuer.
"Parent Guarantor" means the Parent and any and all future Parents of
the Issuer that have, by execution and delivery of a supplemental
indenture, delivered a Parent Guaranty.
"Parent Guaranty" means the Guaranty by the Parent Guarantor pursuant
to Article Thirteen.
"Parent Restricted Payments" shall have the meaning set forth in
Section 13.12(a).
"Paying Agent" means the Trustee or its assignee.
"Permitted Liens" means the "Liens" permitted under Section 3.8.
"Premises" shall have the meaning set forth in Section 3.16(a).
"Racine Lease" means the lease between First Industrial Development
Services Group, L.P., as landlord, and Golden Books Family Entertainment,
Inc., as tenant, dated June 23, 1997, as amended.
"Released Interest" shall have the meaning set forth in Section
12.4(a).
"Second Lien Collateral" shall have the meaning assigned to such term
in the Security Agreement.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
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"Security Agreement" means the Security Agreement, dated as of the
Effective Date, between the Issuer and the Trustee, as amended or
supplemented from time to time in accordance with its terms, and any other
document or instrument executed or delivered in connection therewith.
"Security Interests" means the Liens on the Collateral created by this
Indenture and the Collateral Agreements in favor of the Trustee for the
benefit of the Trustee and the Holders.
"Substitute Collateral" means: (A) in the case of the Collateral
described in Section 2.1(a)(iii), (iv) and (v) of the Security Agreement,
other assets of the Issuer with a fair market value (as determined in good
faith by an Independent Financial Advisor) equal to or greater than (x) in
the case of Collateral on the Effective Date, the book value on the
Effective Date of the Released Interests as set forth on Schedules
2.1(a)(iii), 2.1(a)(iv) and 2.1(a)(v) of the Security Agreement and (y) in
the case of after acquired Collateral, the cost of such Collateral; and (B)
in the case of the Collateral described in Section 2.1(a)(i) and (ii) of
the Security Agreement, other Intellectual Property of the Issuer which an
Independent Financial Advisor shall approve as being of equal or greater
value than the fair market value of such Released Interests at the time of
substitution as determined in good faith by such Independent Financial
Advisor.
"TOPRS" means the Golden Books Financing Trust 83/4% Convertible Trust
Originated Preferred SecuritiesSM Due 2016.
"Trademark Assignment" means the Trademark Security Interest
Agreement, dated as of the Effective Date, by the Issuer in favor of the
Collateral Agent, in the form of Exhibit D to the Amendment Agreement, as
amended and supplemented from time to time in accordance with its terms.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person of which all the outstanding voting securities or
interests which normally have the right to vote in the election of the
board of directors or similar governing body of such Subsidiary are owned
directly or indirectly by such Person or any Wholly-Owned Subsidiary of
such Person.
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Section 2.2. Amendment of Certain Definitions. The following definitions of
certain terms replace the definitions of such terms in Section 1.1 of the
Indenture:
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of such board duly authorized to
act on its behalf. Unless the context indicates otherwise, "Board of
Directors" shall refer to the Board of Directors of the Issuer.
"Board Resolution" means, with respect to any Person, a copy of one or
more resolutions, certified by the secretary or an assistant secretary of
such Person to have been duly adopted or consented to by the Board of
Directors of such Person and to be in full force and effect, and delivered
to the Trustee. Unless the context indicates otherwise, "Board Resolutions"
shall refer to Board Resolutions of the Board of Directors of the Issuer.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time the corporate trust business shall be principally
administered, which office at the Effective Date is located at 140
Broadway, 12th Floor, New York, New York 10005.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity the outstanding securities or interests of
which having ordinary voting power to elect a majority of the board of
directors or similar governing body of such corporation, partnership or
other entity (whether or not any other class of securities has or might
have voting power by reason of the happening of a contingency) are at the
time owned directly or indirectly by such Person and/or one or more of its
Subsidiaries. Unless the context indicates otherwise, "Subsidiary" shall
refer to a Subsidiary of the Issuer.
Section 2.3. Amendment to Section 3.8. (a) Section 3.8 of the Indenture is
hereby amended by (i) deleting the phrase "mortgage, pledge, security interest
or lien (any such mortgage, pledge, security interest or lien being hereinafter
referred as a "lien" or "liens")" and replacing it with "Lien" and (ii)
replacing the word "liens" as it appears in clauses (1) through (6) with the
word "Liens" in each instance.
(b) Section 3.8 of the Indenture is hereby amended by deleting clause (7)
in its entirety and inserting instead the following new clauses (7) through
(10):
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(7) Liens ("Eligible Credit Facility Liens") on Eligible Assets of the
Issuer securing up to $30.0 million aggregate principal amount of
borrowings under any Eligible Credit Facility and its pro rata share of
related interest, default interest, expenses, fees and premiums;
(8) Liens incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security;
(9) attachment or judgment Liens not giving rise to a Default or Event of
Default;
(10) easements, rights-of way, zoning restrictions and other similar
charges or encumbrances not materially interfering with the ordinary course
of business of the Issuer and its Subsidiaries;
(c) Existing clauses (8) and (9) of Section 3.8 of the Indenture shall be
renumbered as (11) and (12) and the reference in the new clause (12) to "clauses
(1) through (8)" shall be replaced by "clauses (1) through (11)."
Section 2.4. Amendment to Section 3.9. Section 3.9 of the Indenture is
hereby amended by deleting clause (iii) thereof in its entirety, by deleting the
word "or" preceding such clause and by replacing the comma after the words "the
preceding Section 3.8" with the word "or."
Section 2.5. Amendment to Section 3.12. Section 3.12 of the Indenture is
hereby amended by adding the following to the end thereof:
"Notwithstanding the foregoing, the Issuer shall not, and shall not
permit any Subsidiary to, make a Restricted Payment if any Indebtedness of
the Issuer to any Affiliate shall be then outstanding."
Section 2.6. Amendment to Article III. Article Three of the Indenture is
hereby amended by adding the following Sections 3.13 through 3.19.
SECTION 3.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Parent will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transactions or
series of related transactions (including, without limitation, the
purchase,
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sale, lease or exchange of any property or the rendering of any services)
with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than, unless otherwise provided by this Indenture, (x)
Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are (i), in cases where such Affiliate
Transactions are among Parent and its Subsidiaries, fair to the Issuer and
its Subsidiaries or (ii) in cases where such Affiliate Transactions are
among Parent and its Subsidiaries no less favorable to the Issuer and its
Subsidiaries, and, in cases where such Affiliate Transactions are not among
Parent and its Subsidiaries, no less favorable to the Parent and its
Subsidiaries or the Issuer and its Subsidiaries, as applicable, than those
that might reasonably have been obtained in a comparable transaction at
such time on an arm's length basis from a Person that is not an Affiliate
of Parent or such Subsidiary (either (i) or (ii), "Arm's Length"). All
Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $2,000,000 shall be
approved by a majority of the disinterested members of the Board of
Directors of Parent or the Issuer, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
Parent or any such Subsidiary enters into an Affiliate Transaction (or a
series of related Affiliate Transactions which are similar or part of a
common plan) that involves aggregate payments or other property with a fair
market value in excess of $4,000,000, Parent or the Issuer, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to
Parent and its Subsidiaries or Issuer and its Subsidiaries, as the case may
be, from a financial point of view from an Independent Financial Advisor
and deliver such opinion to the Trustee.
(b) The restrictions set forth in clause (a) above shall not apply to:
(i) reasonable fees and compensation paid to, and indemnity provided on
behalf of, officers, directors, employees or consultants of Parent or any
of its Subsidiaries, as determined in good faith by the Board of Directors
or senior management of Parent or such Subsidiary; (ii) transactions
exclusively between or among Parent and/or one or more Non-Issuer
Subsidiaries; (iii) transactions exclusively between or among the Issuer
and/or one or more of its Wholly-Owned Subsidiaries; (iv) agreements, and
transactions pursuant to agreements, in effect on the
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Effective Date and listed on Schedule 3.13 hereto as in effect on the
Effective Date or as thereafter amended, supplemented or amended and
restated in a manner not adverse to the Holders; (v) (x) ordinary course
transactions or (y) operational allocations, in each case, between or among
Parent and/or one or more of its Subsidiaries and on an Arm's Length basis;
and (vi)Restricted Payments not prohibited by this Indenture.
SECTION 3.14. LIMITATION ON ASSET SALES.
(a) The Issuer shall not, and shall not permit any of its Subsidiaries
to, consummate, an Asset Sale unless (i) the Issuer or the applicable
Subsidiary, as the case may be, receives aggregate consideration at the
time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Issuer's Board of Directors), (ii) at least 85% of the consideration
received by the Issuer or the Subsidiary, as the case may be, from such
Asset Sale shall be in the form of (A) cash or cash equivalents, (B) the
assumption of Indebtedness, (C) Replacement Assets (as defined below) or
(D) any combination of the foregoing (A), (B) or (C), and is received at
the time of such disposition; and (iii) upon the consummation of an Asset
Sale, the Issuer shall apply, or cause such Subsidiary to apply, the Net
Cash Proceeds relating to such Asset Sale within 180 days of such Asset
Sale either (1) to repay any Indebtedness which is pari passu with the
Securities, (2) to make an investment in properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Issuer and
its Subsidiaries as existing on the Effective Date or in businesses
reasonably related thereto ("Replacement Assets"), (3) to repurchase
Securities from the Holders at par pursuant to a Net Proceeds Offer, as
defined below, (4) to fund working capital needs of the Issuer, or (5) a
combination of the foregoing clauses. On or before (i) the 121st day after
an Asset Sale, or (ii) such earlier date as the Board of Directors of the
Issuer or of such Subsidiary determines to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in the immediately preceding
sentence (the "Net Proceeds Offer Trigger Date"), such aggregate amounts of
Net Cash Proceeds which have not been applied on or before such Net
Proceeds Offer Trigger Date as permitted in the immediately preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Issuer or such Subsidiary to make an offer to purchase (the "Net Proceeds
Offer"), on a date (the "Net Proceeds Offer Payment Date") not less than 30
nor more than 60 days following the
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applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata
basis (to the extent practicable) that amount of Securities equal to the
Net Proceeds Offer Amount at a price equal to 100% of the aggregate
principal amount of the Securities to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however, that
if at any time any non-cash consideration (other than Replacement Assets)
received by the Issuer or any Subsidiary of the Issuer, as the case may be,
in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder, and the Net Cash Proceeds
thereof shall be applied in accordance with this Section. The Issuer may
defer the Net Proceeds Offer until there is an aggregate unutilized Net
Proceeds Offer Amount equal to or in excess of $3,500,000 resulting from
one or more Asset Sales (at which time, the entire unutilized Net Proceeds
Offer Amount, and not just the amount in excess of $3,500,000, shall be
applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Issuer and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 3.6, the successor Person
shall be deemed to have sold the properties and assets of the Issuer and
its Subsidiaries not so transferred for purposes of this covenant, and
shall comply with the provisions of this covenant with respect to such
deemed sale as if it were an Asset Sale. In addition, the fair market value
of such properties and assets of the Issuer or its Subsidiaries deemed to
be sold pursuant to the preceding sentence shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
(b) Subject to the deferral of the Net Proceeds Offer Trigger Date
contained in subsection (a) above, each notice of a Net Proceeds Offer
pursuant to this Section shall be mailed or caused to be mailed, by first
class mail, by the Issuer within 25 days after the Net Proceeds Offer
Trigger Date to all Holders at their last registered addresses as of a date
within 15 days of the mailing of such notice, with a copy to the Trustee.
The notice shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Net Proceeds Offer and
shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to this
Section and that all Securities
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tendered and not withdrawn, in whole or in part, in integral multiples
of $1,000 will be accepted for payment; provided, however, that if the
aggregate principal amount of Securities tendered in a Net Proceeds
Offer plus accrued interest at the expiration of such offer exceeds
the aggregate amount of the Net Proceeds Offer, the Issuer shall
select the Securities to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Issuer so that only
Securities in denominations of $1,000 or multiples thereof shall be
purchased);
(2) the purchase price (including the amount of any accrued
interest) and the purchase date (which shall be 20 Business Days from
the date of mailing of notice of such Net Proceeds Offer, or such
longer period as required by law) (the "Proceeds Purchase Date");
(3) that any Security not tendered will continue to accrue
interest on and after the Proceeds Purchase Date;
(4) that, unless the Issuer defaults in making payment therefor,
any Security accepted for payment pursuant to the Net Proceeds offer
shall cease to accrue interest on and after the Proceeds Purchase
Date;
(5) that Holders electing to have a Security purchased pursuant
to a Net Proceeds Offer will be required to surrender the Security to
the Paying Agent at the address specified in the notice prior to the
close of business on the third Business Day prior to the Proceeds
Purchase Date; and
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than five Business Days prior to
the Proceeds Purchase Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount
of the Securities the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Security
purchased.
On the second Business Day immediately preceding the Proceeds Purchase
Date, the Trustee shall notify the Issuer in writing of the Holders who
have so elected to have their Securities purchased pursuant to such Net
Proceeds Offer
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(and who have not withdrawn such election, as provided in (6) above.) On or
before the Proceeds Purchase Date, the Issuer shall (i) accept for payment
Securities tendered pursuant to the Net Proceeds Offer which are to be
purchased in accordance with item (b) (1) above, (ii) deposit with the
Paying Agent U.S. cash sufficient to pay the purchase price plus accrued
interest, if any, of all Securities to be purchased and (iii) deliver to
the Trustee Securities so accepted together with an Officers' Certificate
stating the Securities being purchased by the Issuer. The Paying Agent
shall promptly mail to the Holders of the Securities so accepted payment in
an amount equal to the purchase price for such Securities plus accrued
interest, if any, to the Proceeds Purchase Date. For purposes of this
Section 3.14, the Trustee shall act as the Paying Agent.
Any amounts deposited with the Paying Agent and remaining after the
purchase of Securities pursuant to a Net Proceeds Offer shall be promptly
returned by the Paying Agent to the Issuer.
The Issuer shall comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934 and any other securities laws and
regulations thereunder, in each case, to the extent such laws and
regulations are applicable in connection with the repurchase of Securities
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 3.14, the Issuer
shall comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under this Section 3.14 by
virtue thereof.
SECTION 3.15. IMPAIRMENT OF SECURITY INTEREST.
The Issuer shall, and shall cause its Subsidiaries to, take all
actions necessary to protect the Security Interests in favor of the
Trustee, on behalf of itself and the Holders, with respect to the
Collateral, and neither the Issuer nor any of its Subsidiaries shall grant
to any Person (other than to the Trustee on behalf of the Trustee and the
Holders), or permit any Person (other than the Issuer) to have any interest
whatsoever in the Collateral other than Permitted Liens on real property
and tangible assets and, in the case of the Second Lien Collateral, under
Section 3.8(7). Neither the Issuer nor any of its Subsidiaries will enter
into any agreement that requires the proceeds received from any sale of
Collateral, to be applied to repay, redeem, defease or otherwise acquire or
retire any Indebtedness of any Person, other than pursuant to this
Indenture, the
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Securities, the Collateral Agreements and agreements in respect of
Permitted Liens to the extent permitted above.
SECTION 3.16. REAL ESTATE MORTGAGES AND FILINGS.
On or prior to the Effective Date and at no cost or expense to the
Trustee or the Holders:
(a) the Trustee shall have received fully-executed counterparts of the
Mortgage, in the form attached as Exhibit E to the Amendment Agreement, for
all real property owned in fee by the Issuer in Crawfordsville, Indiana,
which property is listed on Schedule 3.16(a) attached hereto and made a
part hereof (individually and collectively, the "Premises");
(b) the Trustee shall have received a commitment for a mortgage title
insurance policy from a reputable title insurance company, in the form
attached as Exhibit G to the Amendment Agreement, insuring the Lien of the
Mortgage as a valid and enforceable Lien on the real estate collateral
described in the Mortgage and related to the Premises;
(c) The Trustee shall have received, with respect to the Premises, a
survey, local counsel opinions and fixture filings, in each case in the
forms attached as Exhibits to the Amendment Agreement, reasonably necessary
to create and evidence perfected, valid and enforceable Liens on the
Premises; and
(d) The Issuer shall have taken, or caused to be taken, all action
necessary in order to create and perfect the Lien of the Mortgage in the
County of Crawfordsville and State of Indiana.
SECTION 3.17. NO GUARANTEE OF PARENT GUARANTOR AND NON-ISSUER
SUBSIDIARIES.
Neither the Issuer nor any of its Subsidiaries shall guaranty (whether
directly or indirectly, including on a contingent basis) or otherwise
become liable in any way for Indebtedness of Parent Guarantor and its
Non-Issuer Subsidiaries. This Section 3.17 shall not apply to the TOPRS and
the Racine Lease as in effect on the Effective Date or as thereafter
amended, supplemented or amended and restated in a manner not adverse to
the Holders.
SECTION 3.18. LIMITATION ON ISSUANCES OF CAPITAL STOCK.
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The Issuer shall not permit any of its Subsidiaries to issue any
shares of capital stock or other equity interests, except shares of capital
stock or other equity interest issued by any Subsidiary to the Issuer or to
any of its Wholly-Owned Subsidiaries.
SECTION 3.19. NOTICE OF DEFAULT.
The Issuer will, so long as any Securities are Outstanding, deliver to
the Trustee, within 10 days of becoming aware of any Default or Event of
Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Issuer is taking or proposes to take with
respect thereto.
Section 2.7. Amendment to Section 5.1. Section 5.1 of the Indenture is
hereby amended by inserting the phrase ", in any of the Collateral Agreements"
before the words "or in this Indenture" in clause (c), by inserting the words
"or any Parent Guarantor" after the word "Issuer" in clauses (c) and (g), by
replacing the words "its property" with the words "their respective property" in
clause (g) and by adding the following clauses (i) through (l):
(i) the failure of the Holders to be perfected in their Security
Interests in the Collateral as set forth in the Collateral Agreements
and this Indenture; or
(j) failure of a future Parent to execute and deliver a Parent
Guaranty and enter into a Supplemental Indenture to effectuate such
Parent Guaranty within ten days of becoming a Parent; or
(k) any claim by the Issuer or any Affiliate, or judgment by a court
of competent jurisdiction, that any Parent Guaranty under Article
Thirteen or any Security Interest in the Collateral is not valid or
enforceable; or
(l) failure of any representation or warranty of the Issuer or any
Parent Guarantor contained in the Amendment Agreement to have been
true and correct in all material respects at the date such
representation or warranty was made.
Section 5.1 of the Indenture is further amended by deleting the phrase "or (h)"
in the third full paragraph thereof and inserting in its place the phrase "(h),
(i), (j), (k) or (l)."
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Section 2.8. Amendment to Section 6.3. Section 6.3 shall be amended by
inserting the words ", in the Collateral Agreements" after the words "contained
herein" in the first sentence thereof, by inserting the words ", any of the
Collateral Agreements" after the words "this Indenture" in the second sentence
thereof and by adding the following sentence to the end thereof:
The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted
to it hereunder or under any Collateral Agreement or to record this
Agreement or any Collateral Agreement in any public office.
Section 2.9. Amendment to Section 10.1. (a) Section 10.1(A) of the
Indenture shall be amended (x) by replacing the phrase "then this Indenture
shall cease to be of further effect with respect to the Securities" with:
then this Indenture, the Collateral Agreements, the Securities and any
Parent Guaranties shall be satisfied in full and discharged and cease to be
of further effect and the Lien of the Collateral Agreements on the
Collateral shall be released
(y) by replacing the words "and (vi)" with the words "(vi) rights of
reinstatement and (vii)", and (z) by replacing "shall execute proper instruments
acknowledging such satisfaction of and discharging this Indenture with respect
to the Securities" with
shall execute proper instruments (including UCC-3 termination statements
and mortgage releases) acknowledging such satisfaction of and discharging
this Indenture, the Collateral Agreements, the Securities and any Parent
Guaranties and release of the Lien of the Collateral Agreements on the
Collateral.
(b) The first sentence of Section 10.1(B) of the Indenture shall be amended
by replacing it with the following:
The Issuer shall be released from its obligations under Sections 3.6
through 3.19 and 9.1, Article Twelve and the Collateral Agreements, and
Parent shall be released from its obligations under Section 3.13 and 13.12,
and the Lien of the Collateral Agreements on the Collateral shall be
released, with respect to the Securities, and any Coupons appertaining
thereto, Outstanding on and
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after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance").
Section 2.10. Amendment to Section 11.8 of Article XI. Section 11.8 of the
Indenture is hereby amended by deleting such Section in its entirety and
inserting instead the following new Section 11.8:
SECTION 11.8. GOVERNING LAW; JURISDICTION; SUBMISSION TO VENUE.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COMPETENT COURTS OF THE STATE OF NEW YORK SITTING
IN THE CITY OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK IN ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES
HERETO IRREVOCABLY CONSENTS TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE PARTIES HERETO AT THE ADDRESS SET FORTH HEREIN, SUCH
SERVICE TO BECOME EFFECTIVE 15 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT ANY RIGHT OF ANY HOLDER OR THE TRUSTEE TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE ISSUER OR THE PARENT GUARANTORS IN
ANY OTHER JURISDICTION.
Section 2.11. Insertion of Article XII. A new Article Twelve of the
Indenture is hereby added by inserting the following:
ARTICLE TWELVE--SECURITY
SECTION 12.1. GRANT OF SECURITY INTEREST.
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To secure the due and punctual payment of the principal of,
premium, if any, and interest on the Securities when and as the same
shall be due and payable, whether on an interest payment date, at
maturity, by acceleration, purchase, repurchase, redemption or
otherwise, and interest on the overdue principal of, premium, if any,
and interest (to the extent permitted by law), if any, on the
Securities and the performance of all other Obligations of the Issuer
to the Holders or the Trustee under this Indenture and the Securities,
the Issuer hereby covenants to cause the Collateral Agreements to be
executed and delivered concurrently with this Indenture and to perform
all of the duties and obligations of the Issuer thereunder in
accordance with the terms thereof. The Collateral Agreements shall
grant to the Collateral Agent first priority Security Interests in the
First Lien Collateral and second priority Security Interests in the
Second Lien Collateral, subject only to Permitted Liens on real
property and tangible assets and, in the case of the Second Lien
Collateral, under Section 3.8(7), and shall be deemed hereby
incorporated by reference herein to the same extent and as fully as if
set forth in their entirety at this place, and reference is made
hereby to each Collateral Agreement for a more complete description of
the terms and provisions thereof.
Each Holder consents and agrees to the terms of each Collateral
Agreement, as the same may be in effect or may be amended from time to
time in accordance with its terms, and authorizes and directs the
Trustee and the Collateral Agent to enter into the Collateral
Agreements and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Issuer shall, and shall cause
each of its Subsidiaries to, do or cause to be done all such actions
and things as may be reasonably necessary or proper, or as may be
reasonably required by the provisions of the Collateral Agreements, to
assure and confirm to the Trustee and the Collateral Agent the
Security Interests in the Collateral contemplated hereby by the
Collateral Agreements, as from time to time constituted, so as to
render the same available, for the security and benefit of this
Indenture and of the Securities secured hereby, according to the
interest and purpose herein and therein expressed. The Issuer shall,
and shall cause each of its Subsidiaries to, take, upon request of the
Trustee or the Collateral Agent, any and all actions reasonably
required to cause the Collateral Agreements to create and maintain, as
security for the Obligations contained in this Indenture and the
Securities, valid and enforceable, perfected first priority Security
Interests in and on all the First Lien Collateral
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and second priority Security Interests in and on all the Second Lien
Collateral, in favor of the Collateral Agent, superior to and prior to
the rights of all third Persons, subject only to Permitted Liens on
real property and tangible assets and, in the case of the Second Lien
Collateral, under Section 3.8(7).
SECTION 12.2. RECORDING AND OPINIONS.
(a) The Issuer shall take or cause to be taken all action
required to perfect, maintain, preserve and protect the Security
Interests in the Collateral granted by the Collateral Agreements,
including, without limitation, the filing of financing statements,
continuation statements, collateral assignments and any instruments of
further assurance, in such manner and in such places as may be
required by law to preserve and protect fully the rights of the
Holders, the Trustee and the Collateral Agent under this Indenture and
the Collateral Agreements to all property comprising the Collateral.
The Issuer shall from time to time promptly pay all financing and
continuation statement recording and/or filing fees, charges and taxes
relating to this Indenture, the Collateral Agreements, and any
amendments hereto or thereto and any other instruments of further
assurance required pursuant hereto or thereto.
(b) The Issuer shall furnish to the Trustee and the Collateral
Agent (if other than the Trustee), on the date hereof, at such time as
required by Section 314(b) of the Trust Indenture Act of 1939, as
amended, and promptly after the execution and delivery of any other
instrument of further assurance or amendment granting, perfecting,
protecting, preserving or making effective a security interest
pursuant to any Collateral Agreement, an Opinion of Counsel either (i)
stating that, in the opinion of such counsel, this Indenture and the
Collateral Agreements, financing statements and fixtures filings then
executed and delivered, as applicable, and all other instruments of
further assurance or amendment then executed and delivered have been
properly recorded, registered and filed, to the extent necessary to
perfect the Security Interests created by this Indenture and the
Collateral Agreements and reciting the details of such action or
referring to prior Opinions of Counsel in which such details are
given, and stating that as to such Collateral Agreements and such
other instruments, such recording, registering, filing and delivery
are the only recordings, registerings, filings and deliveries
necessary to perfect such security interest and that no re-recordings,
re-registerings, re-filings or re-deliveries are necessary to maintain
such perfection, and further stating
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that all financing statements and continuation statements have been
executed and filed, and all such certificates have been delivered,
that are necessary fully to preserve and protect the rights of and
perfect such security interests of the Holders, the Trustee and the
Collateral Agent hereunder and under the Collateral Agreements or (ii)
stating that, in the Opinion of such Counsel, no such action is
necessary to perfect any Security Interest created under this
Indenture, the Securities or any of the Collateral Agreements as
intended by this Indenture, the Securities and such Collateral
Agreements.
(c) Annually, within 30 days after January 1 and beginning with
the year 1999, the Issuer shall furnish to the Trustee and the
Collateral Agent (if other than the Trustee), an Opinion of Counsel,
dated as of such date, either (i) stating that: (A) in the opinion of
such counsel, action has been taken with respect to the registering,
recording, filing, re-recording, re-registering and refiling of this
Indenture, and all supplemental indentures, financing statements,
continuation statements and other documents, and delivery of all
certificates, as are then necessary to perfect or continue the
perfection of the Security Interests created by the Collateral
Agreements and reciting the details of such action or referring to
prior Opinions of Counsel in which such details are given; and (B)
based on relevant laws as in effect on the date of such Opinion of
Counsel, all financing statements, continuation statements and other
documents have been executed and filed that are necessary as of such
date and during the succeeding 18 months fully to maintain, perfect or
continue the perfection of such Security Interests under the
Collateral Agreements with respect to the Collateral and to maintain,
preserve, and protect the rights of the Holders and the Trustee
hereunder and under the Collateral Agreements or (ii) stating that, in
the opinion of such counsel, no such action is then necessary to
perfect or continue the perfection of such Security Interests.
SECTION 12.3. RELEASE OF COLLATERAL.
(a) Neither the Collateral Agent nor the Trustee, in its capacity
as Collateral Agent under the Collateral Agreements, shall at any time
release Collateral from the Security Interests created by this
Indenture and the Collateral Agreements unless such release is in
accordance with the provisions of this Indenture and the applicable
Collateral Agreements.
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(b) At any time when a Default or an Event of Default shall have
occurred and be continuing, no release of Collateral pursuant to the
provisions of this Indenture and the Collateral Agreements shall be
effective as against the Holders or the Trustee.
(c) The release of any Collateral from the terms of the
Collateral Agreements shall not be deemed to impair the security under
this Indenture in contravention of the provisions hereof if and to the
extent the Collateral is released pursuant to this Indenture and the
Collateral Agreements. To the extent applicable, the Issuer shall
cause Section 314(d) of the Trust Indenture Act of 1939, as amended,
relating to the release of property from the Security Interests
created by this Indenture and the Collateral Agreements to be complied
with. Any certificate or opinion required by Section 314(d) of the
Trust Indenture Act of 1939, as amended, may be made by an Officer of
the Issuer, except in cases where Section 314(d) of the Trust
Indenture Act of 1939, as amended, requires that such certificate or
opinion be made by an independent Person, which Person shall be an
independent engineer, appraiser or other expert selected or approved
by the Trustee in the exercise of reasonable care. A Person is
"independent" if such Person (a) is in fact independent, (b) does not
have any direct financial interest or any material indirect financial
interest in the Issuer or in any Affiliate of the Issuer and (c) is
not an officer, employee, promoter, underwriter, trustee, partner or
director or person performing similar functions to any of the
foregoing for the Issuer. The Trustee shall be entitled to receive and
rely upon a certificate provided by any such Person confirming that
such Person is independent within the foregoing definition.
SECTION 12.4. SPECIFIED RELEASES OF COLLATERAL.
(a) The Issuer shall be entitled to obtain a full release of
items of Collateral (the "Released Interests") from the Security
Interests created by this Indenture, the Securities and the Collateral
Agreements upon compliance with the conditions precedent set forth in
Sections 3.14 or 10.1 of this Indenture and the applicable Collateral
Agreements. Upon the request of the Issuer and the furnishing of each
of the items required by Section 12.4(b), the Collateral Agent upon
the direction of the Trustee (or the Trustee if acting as Collateral
Agent) shall forthwith take all necessary action (at the request of
and the expense of the Issuer, without recourse, representation or
warranty) to release and reconvey to the Issuer all of the Released
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Interests, and shall deliver such Released Interests in its possession
to the Issuer.
(b) The Issuer shall be entitled to obtain a release of, and the
Collateral Agent and the Trustee shall release, the Released Interests
upon compliance with the condition precedent that the Issuer shall
have satisfied all applicable conditions precedent to any such release
as set forth in this Indenture, the Trust Indenture Act of 1939, as
amended, and the applicable Collateral Agreements and shall have
delivered to the Trustee and the Collateral Agent the following, as
applicable:
(i) in connection with release of Collateral resulting from
an Asset Sale under Section 3.14, notice from the Issuer
requesting the release of Released Interests: (A) describing the
proposed Released Interests; (B) specifying the value of such
Released Interests on a date within 60 days of such notice (the
"Valuation Date"); (C) stating that the release of such Released
Interests will not be expected to interfere with the Collateral
Agent's ability to realize the value of the remaining Collateral
and will not impair the maintenance and operation of the
remaining Collateral; and (D) certifying that such Asset Sale
complies with the terms and conditions of this Indenture and the
applicable Collateral Agreements with respect thereto;
(ii) in connection with release of Collateral resulting from
an Asset Sale under Section 3.14, an Officers' Certificate of the
Issuer stating that (A) such Asset Sale complies with the terms
and conditions of this Indenture with respect to Asset Sales; (B)
all Net Cash Proceeds from the sale of any of the Released
Interests will be applied pursuant to the provisions of this
Indenture in respect of Asset Sales; (C) the release of the
Collateral will not result in a Default or Event of Default under
this Indenture; and (D) all conditions precedent in this
Indenture relating to the release in question have been or will
be complied with;
(iii) an Officers' Certificate of the Issuer and an Opinion
of Counsel certifying that all conditions precedent to the
release of the Released Interests have been met and that such
release complies with the terms and conditions of this Indenture
and the applicable Collateral Agreements;
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(iv) all applicable certificates, opinions and other
documentation required by the Trust Indenture Act of 1939, as
amended, or this Indenture, if any;
(v) Substitute Collateral, along with the items required
under Section 12.2 to evidence perfection of a first priority
perfected Lien and a second priority perfected Lien, as the case
may be, in the Substitute Collateral by the Collateral Agent; and
(vi) an Officer's Certificate of the Issuer certifying that
there is no Default or Event of Default in effect or continuing
on the date thereof.
Upon compliance by the Issuer with the conditions precedent set
forth above, the Trustee shall cause to be released and reconveyed to
the Issuer, the Released Interests.
(c) Notwithstanding anything to the contrary in this Section 12.4 or
in the Collateral Agreements, the Issuer may, without any release or
consent by the Trustee or any Holder or, to the extent these may be waived,
any documents under the Trust Indenture Act of 1939, in the ordinary course
of business, (i) sell, transfer, assign or otherwise dispose of inventory,
(ii) so long as no Event of Default has occurred and is continuing and to
the extent permitted by Section 4.7 of the Security Agreement, sell,
transfer, assign or otherwise dispose of obsolete assets or assets no
longer useful to the business of the Company, and (iii) collect and dispose
of accounts receivable and checks. In each such case, the Lien of this
Indenture and the Collateral Agreements shall be deemed automatically
released without any action on the part of the Trustee.
(d) Notwithstanding anything to the contrary in this Section 12.4 or
in the Collateral Agreements, the Issuer may, without any release or
consent by the Trustee or any Holder or, to the extent these may be waived,
any documents under the Trust Indenture Act of 1939, in the ordinary course
of business, sell, transfer, assign or otherwise dispose of Equipment
included in the Collateral having an aggregate cost and/or book value, as
applicable, of up to $400,000 per year; provided, that (x) on the date of
any such release or within the preceding twelve months, the Company shall
have acquired Substitute Collateral with the lesser of cost or book value
equal to the cost and/or book value referred to above; (y) such Substitute
Collateral shall be subject to a first priority perfected Lien; and (z) the
Company shall deliver to the Trustee annually, commencing May 15, 1999, an
Officer's
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Certificate certifying that the provisions of this clause (d) have been
complied with.
SECTION 12.5. FORM AND SUFFICIENCY OF RELEASE.
In the event that the Issuer has sold, exchanged, or otherwise
disposed of or proposes to sell, exchange or otherwise dispose of any
portion of the Collateral in compliance with the terms of this Indenture
that may be sold, exchanged or otherwise disposed of by the Issuer, and the
Issuer requests the Trustee or the Collateral Agent to furnish a written
disclaimer, release or quit-claim of any interest in such property under
this Indenture and the Collateral Agreements, the Collateral Agent and the
Trustee, in its capacity as Collateral Agent under the Collateral
Agreements, shall execute, acknowledge and deliver to the Issuer (in proper
form) such an instrument promptly after satisfaction of the conditions set
forth herein for delivery of any such release. Notwithstanding the
preceding sentence, all purchasers and grantees of any property or rights
purporting to be released herefrom shall be entitled to rely upon any
release executed by the Trustee hereunder as sufficient for the purpose of
this Indenture and as constituting a good and valid release of the property
therein described from the Lien of this Indenture or of the Collateral
Agreements.
SECTION 12.6. PURCHASER PROTECTED.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of the Trustee
or the Collateral Agent to execute the release or to inquire as to the
existence of any conditions herein prescribed for the exercise of such
authority.
SECTION 12.7. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE
UNDER THE COLLATERAL AGREEMENTS.
Subject to the provisions of the applicable Collateral Agreements, (a)
the Trustee and the Collateral Agent may, in their sole discretion and
without the consent of the Holders, take all actions they deem necessary or
appropriate in order to (i) enforce any of the terms of the Collateral
Agreements and (ii) collect and receive any and all amounts payable in
respect of the Obligations of the Issuer hereunder, and (b) the Trustee and
the Collateral Agent shall have power to institute and to maintain such
suits and proceedings as they may deem expedient to prevent any impairment
of the Collateral by any act that may be unlawful
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or in violation of the Collateral Agreements or this Indenture, and suits
and proceedings as the Trustee and the Collateral Agent may deem expedient
to preserve or protect their interests and the interests of the Holders in
the Collateral (including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
thereunder or be prejudicial to the interests of the Holders, the Trustee
or the Collateral Agent).
If an Event of Default occurs and is continuing, the Collateral Agent
may, and subject to Sections 5.9 and 6.1(e), within three (3) Business Days
after written instructions from the Holders of not less than a majority in
aggregate principal amount of the Securities shall, commence the taking of
such actions toward action or enforcement of the Collateral Agreements (or
any portion thereof), including, without limitation, action toward
foreclosure upon any Collateral, as the Collateral Agent deems in its
discretion to be appropriate or as otherwise instructed in writing by the
Holders of not less than a majority in aggregate principal amount of the
Securities.
SECTION 12.8. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER
THE COLLATERAL AGREEMENTS.
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Collateral Agreements, and to make further
distributions of such funds to the Holders in accordance with the
provisions of Section 5.3 and the other provisions of this Indenture.
SECTION 12.9 PRESERVATION OF COLLATERAL.
The Collateral Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession
shall be to deal with it in the same manner as the Collateral Agent deals
with similar property for its own account.
Section 2.12. Addition of Article XIII. A new Article Thirteen of the
Indenture is hereby added by inserting the following:
ARTICLE THIRTEEN - PARENT GUARANTEE
SECTION 13.1. UNCONDITIONAL GUARANTEE.
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(a) In consideration of the premises contained herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Parent Guarantor hereby, irrevocably and unconditionally
guarantees, and agrees to be liable on a senior basis to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and enforceability
of this Indenture, the Securities or the Obligations of the Issuer under
this Indenture or the Securities, that: (i) the principal of, premium, if
any, and interest (including, without limitation, any interest accruing
following the commencement of a bankruptcy or other insolvency proceeding
of the Issuer, irrespective of the allowability of any such amounts in any
such proceeding) on the Securities shall be duly and punctually paid in
full when due (subject to any applicable grace period), whether at
maturity, upon redemption, by acceleration or otherwise, and interest on
the overdue principal and (to the extent permitted by law) interest, if
any, on the Securities and all other Obligations (including, without
limitation, any Obligations accruing following the commencement of a
bankruptcy or other insolvency proceeding of the Issuer, irrespective of
the allowability of any such amounts in any such proceeding) of the Issuer
or any Parent Guarantor to the Holders or the Trustee under the Indenture,
the Securities or the Collateral Agreements (including amounts due the
Trustee under this Indenture), shall be promptly paid in full or performed,
all in accordance with the terms of the Indenture, the Securities or the
Collateral Agreements, and (ii) in case of any extension of time of payment
or renewal of any Securities or any of such other Obligations of the
Issuer, the same shall be promptly paid in full when due or performed in
accordance with the terms of extension or renewal (subject to any
applicable grace period), whether at maturity, upon redemption, by
acceleration or otherwise. Failing payment when due (subject to any
applicable grace period) of any amount so guaranteed, or failing
performance of any other Obligation of the Issuer to the Holders or the
Trustee under this Indenture, under the Securities or under the Collateral
Agreement, for whatever reason, any Parent Guarantor shall be obligated to
pay, or to perform or cause the performance of, the same immediately. An
Event of Default under this Indenture or the Securities shall constitute an
event of default under such Parent Guaranty, and shall entitle the Holders
or Trustee to accelerate the Obligations of each Parent Guarantor under its
Parent Guaranty in the same manner and to the same extent as the
Obligations of the Issuer under this Indenture or under the Securities.
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(b) Each Parent Guarantor hereby agrees that its Obligations under its
Parent Guaranty shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture or any
Collateral Agreement, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any
provisions thereof, any release of any other Parent Guarantor, the recovery
of any judgment against the Issuer, any action to enforce the same, whether
or not a Parent Guaranty is affixed to any particular Security, or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Parent Guarantor hereby waives
the benefit of diligence, presentment, demand of payment, filing of claims
with a court in the event of insolvency or bankruptcy of the Issuer, any
right to require a proceeding first against the Issuer or the taking of any
action first against the Collateral, protest, notice and all demands
whatsoever and covenants that its Parent Guaranty shall not be discharged
except by complete performance of the Obligations contained in the
Securities, this Indenture and its Parent Guaranty. The Parent Guaranty
shall be a guarantee of payment and not of collection. If any Holder or the
Trustee is required by any court or otherwise to return to the Issuer or to
any Parent Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Issuer or such Parent Guarantor,
any amount paid by the Issuer or such Parent Guarantor to the Trustee or
such Holder, the Parent Guaranty, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Parent Guarantor shall
further agree that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (i) subject to this Article Thirteen, the
maturity of the Obligations guaranteed may be accelerated as provided in
Article Five hereof for the purposes of its Parent Guaranty,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed thereby, and (ii) in
the event of any acceleration of such Obligations as provided in Article
Five hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable jointly and severally by each Parent
Guarantor for the purpose of its Parent Guaranty.
(c) Each Parent Guarantor further agrees that the validity of this
Guaranty and the obligations of each Parent Guarantor hereunder shall in no
way be terminated, affected or impaired (i) by reason of the assertion by
the Trustee or any Holder of any rights or remedies which any of them may
have under or with respect to either the Securities or this
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Indenture, against any person obligated thereunder, (ii) by reason of any
failure to file or record any of such instruments or to take or perfect any
security intended to be provided thereby, (iii) by reason of the release or
exchange of the Collateral or any other collateral pledged in support of
the Securities, (iv) by reason of the Trustee's or any Holder's failure to
exercise, or delay in exercising, any such right or remedy or any right or
remedy the Trustee or any Holder may have hereunder or in respect of this
Guaranty, or (v) by reason of the commencement of a case under the United
States Bankruptcy Code by or against any person obligated under the
Securities, this Indenture or this Guaranty or the discharge or release of
any Obligation in a case commenced under the United States Bankruptcy Code.
It is further understood, that if the Issuer shall have taken advantage of,
or be subject to the protection of, any provision in the United States
Bankruptcy Code, the effect of which is to prevent or delay the Trustee or
any Holder from taking any remedial action against the Issuer, including
the exercise of any option the Trustee or any Holder has to declare the
Obligations due and payable upon the occurrence of any default or event by
which under the terms of the Securities or the Indenture the Obligations
shall become due and payable, and notwithstanding anything to the contrary
contained in this Guaranty, the Trustee and/or the Holders of 25% or more
in aggregate principal amount of the Securities (regardless of whether or
not the Trustee has acted) may, as against any Parent Guarantor,
nevertheless declare the Obligations due and payable and enforce any or all
of its and their rights and remedies against any Parent Guarantor provided
for herein.
(d) Each of the Issuer and Parent Guarantor agrees to cause each
Person that shall become a Parent after the date of this Indenture to
become a Parent Guarantor and execute and deliver a supplement to this
Indenture, pursuant to which such Person will guarantee the Obligations of
the Issuer on the same terms and conditions as contained in this Article
Thirteen. Subject to Section 10.1 of this Indenture, in no event shall any
Parent Guarantor be released from its Parent Guaranty.
(e) Each Parent Guarantor agrees that all related businesses to those
of the Issuer will be conducted by or beneath an entity that has complied
with Section 13.1(d).
SECTION 13.2. NO SET-OFF.
Each payment to be made by a Parent Guarantor hereunder in respect of
the Obligations under its Parent Guaranty
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shall be payable in the currency or currencies in which such Obligations
are denominated, and shall be made without set-off, counterclaim, reduction
or diminution of any kind or nature.
SECTION 13.3. OBLIGATIONS ABSOLUTE.
The Obligations of each Parent Guarantor under its Parent Guaranty
shall be absolute and unconditional and any monies or amounts expressed to
be owing or payable by such Parent Guarantor which may not be recoverable
from such Parent Guarantor on the basis of a Parent Guaranty shall be
recoverable from such Parent Guarantor as a primary obligor and principal
debtor in respect thereof.
SECTION 13.4. OBLIGATIONS CONTINUING
The Obligations of each Parent Guarantor under its Parent Guaranty
shall be continuing and shall remain in full force and effect until all the
Obligations hereunder have been paid and satisfied in full. Each Parent
Guarantor hereby agrees with the Trustee that it will from time to time
deliver to the Trustee suitable acknowledgments of this continued liability
hereunder and under any other instrument or instruments in such form as
counsel to the Trustee may advise and as will prevent any action brought
against it in respect of any default hereunder being barred by any statute
of limitations now or hereafter in force and, in the event of the failure
of a Parent Guarantor so to do, it shall irrevocably appoint the Trustee,
the attorney and agent of such Parent Guarantor to make, execute and
deliver such written acknowledgment or acknowledgments or other instruments
as may from time to time become necessary or advisable, in the judgment of
the Trustee on the advice of counsel, to fully maintain and keep in force
the liability of such Parent Guarantor under its Parent Guaranty. Each
Parent Guarantor hereby waives the pleading of any statute of limitations
as a defense to Obligations hereunder.
SECTION 13.5. OBLIGATIONS NOT REDUCED.
The Obligations of each Parent Guarantor under its Parent Guaranty
shall not be satisfied, reduced or discharged solely by the payment of less
than all of the Obligations by any other Person.
SECTION 13.6. OBLIGATIONS REINSTATED.
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The Obligations of each Parent Guarantor under its Parent Guaranty
shall continue to be effective or shall be reinstated, as the case may be,
if at any time any payment which would otherwise have reduced such
Obligations of any Parent Guarantor (whether such payment shall have been
made by or on behalf of the Issuer or by or on behalf of a Parent
Guarantor) is rescinded or reclaimed from any of the Holders upon the
insolvency, bankruptcy, liquidation or reorganization of the Issuer or any
Parent Guarantor or otherwise, all as though such payment had not been
made. If demand for, or acceleration of the time for, payment by the Issuer
is stayed upon the insolvency, bankruptcy, liquidation or reorganization of
the Issuer, all such Indebtedness otherwise subject to demand for payment
or acceleration shall nonetheless be payable by each Parent Guarantor as
provided herein.
SECTION 13.7. WAIVER.
Without in any way limiting the provisions of Section 13.1 hereof,
each Parent Guarantor hereby waives notice of acceptance hereof, notice of
any liability of any Parent Guarantor under its Parent Guaranty, notice or
proof of reliance by the Holders upon the Obligations of any Parent
Guarantor under its Parent Guaranty, and diligence, presentment, demand for
payment on the Issuer, protest, notice of dishonor or non-payment of any of
the Issuer's Obligations under this Indenture or the Securities, default,
any adverse change in the Issuer's financial condition or of any other fact
which might increase such Parent Guarantor's risk hereunder, all notices
that may be required by statute, rule of law or otherwise, now or hereafter
in effect, to preserve intact any rights against such Parent Guarantor or
other notice or formalities to the Issuer or any Parent Guarantor of any
kind whatsoever.
SECTION 13.8. NO OBLIGATION TO TAKE ACTION AGAINST THE ISSUER.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under
any security for the Obligations of the Issuer under this Indenture or the
Securities, or against the Issuer or any other Person or any assets or
properties of the Issuer or any other Person before the Trustee is entitled
to demand payment and performance by any or all Parent Guarantors of their
liabilities and obligations under any Parent Guaranty or under this
Indenture.
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<PAGE>
SECTION 13.9. DEALING WITH THE ISSUER AND OTHERS.
The Holders or the Trustee, without releasing, discharging, limiting
or otherwise affecting in whole or in part the Obligations of any Parent
Guarantor and without the consent of or notice to any Parent Guarantor,
may:
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases and discharges to the Issuer or any other Person;
(b) take or abstain from taking security or Collateral from the
Issuer or from perfecting security interests in the Collateral;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security,
including, without limitation, the Collateral, given by the Issuer or
any third party with respect to the Obligations of the Issuer under,
or matters contemplated by, this Indenture or the Securities;
(d) accept compromises or arrangements from the Issuer;
(e) apply all monies at any time received from the Issuer or in
respect of the Collateral upon such part of the Obligations of the
Issuer under this Indenture or the Securities as the Holders may see
fit or change any such application in whole or in part from time to
time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, the Issuer and all other Persons and any Collateral as the
Holders or the Trustee may see fit.
SECTION 13.10. DEFAULT AND ENFORCEMENT.
Subject to the Trust Indenture Act of 1939, as amended, if an
Event of Default occurs and is continuing, the Trustee in its name as
trustee hereunder and/or the Holders of 25% or more in aggregate
principal amount of the Securities(regardless of whether or not the
Trustee has acted) may proceed in the enforcement of the Parent
Guaranty and such Parent Guarantor's Obligations thereunder and
hereunder by any remedy provided by law, whether by legal proceedings
or otherwise, and to recover from such Parent Guarantor the Issuer's
Obligations under this Indenture and the Securities.
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<PAGE>
SECTION 13.11. CERTAIN BANKRUPTCY EVENTS.
Each Parent Guarantor hereby covenants and agrees, to the fullest
extent that it may do so under applicable law, that in the event of
the insolvency, bankruptcy, dissolution, liquidation or reorganization
of the Issuer, such Parent Guarantor shall not file (or join in any
filing of), or otherwise seek to participate in the filing of, any
motion or request seeking to stay or to prohibit (even temporarily)
execution on the Parent Guaranty and hereby waives and agrees not to
take the benefit of any such stay of execution, whether under Section
362 or 105 of the United States Bankruptcy Code or otherwise.
SECTION 13.12. PARENT GUARANTOR ADDITIONAL COVENANTS
Each Parent Guarantor, on behalf of itself and its Non-Issuer
Subsidiaries, hereby covenants as follows:
(a) Each Parent Guarantor shall not declare or pay any dividend
on, or make any distribution to the holders of, any shares of capital
stock of such Parent Guarantor other than dividends or distributions
payable in its capital stock (other than redeemable preferred stock
which is mandatorily redeemable or which matures prior to the final
maturity of the Securities), and each Parent Guarantor shall not, and
shall not permit any Non-Issuer Subsidiary to repay, redeem or
otherwise acquire or retire for value any shares of capital stock of
such Parent Guarantor, and each Parent Guarantor shall not repay,
redeem or otherwise acquire or retire for value or defease the TOPRS
prior to its scheduled maturity or prior to any scheduled repayment of
principal or sinking fund payment or make any loan or advance to or
investment in any Affiliate other than any of its Subsidiaries
(collectively, "Parent Restricted Payments") if (a) at the time of
such declaration, payment, distribution, purchase, redemption, other
acquisition, retirement, defeasance, loan or advance, a Default or an
Event of Default shall have occurred and be continuing or (b) if, at
the time of such Parent Restricted Payment, and after giving effect
thereto, the aggregate amount expended for all such Parent Restricted
Payments (including, without limitation, the aggregate amount of
Parent Restricted Payments on Golden Books Family Entertainment,
Inc.'s Series B Preferred Stock, No Par Value, on and after the
Effective Date) subsequent to the Effective Date shall exceed the sum
of (i) 25% of Consolidated Net Income of Parent Guarantor (minus 100%
if such Consolidated Net Income is negative) subsequent to the
Effective Date, as determined in accordance with generally accepted
accounting principles in effect on the Effective
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<PAGE>
Date; and (ii) the aggregate net proceeds, including cash and the fair
market value of property other than cash (as determined by the Board
of Directors, whose determination shall be evidenced by a Board
Resolution filed with the Trustee), received by such Parent Guarantor
from any Person other than a Subsidiary from the issue or sale,
subsequent to the Effective Date, of capital stock (other than
redeemable preferred stock which is mandatorily redeemable or which
matures prior to the final maturity of the Securities) of Parent
Guarantor including any such shares issued upon exercise of any
warrants or conversions of any indebtedness; provided, however, that
clause (b) will not prevent (w) the payment of any dividend within 60
days after the date of its declaration if the dividend would have been
permitted on the date of declaration, (x) the retirement of any shares
of such Parent Guarantor's capital stock or the repayment of any
indebtedness in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary) of, other
shares of its capital stock (other than redeemable preferred stock
which is mandatorily redeemable or which matures prior to the final
maturity of the Securities)and (y) the payment by Golden Books Family
Entertainment, Inc. of dividends on its Series B Preferred Stock, No
Par Value, as in effect and outstanding on the Effective Date.
(b) Each Parent Guarantor will not, and will not permit any of
its Subsidiaries to create, incur, assume or suffer to exist any Lien
to secure the TOPRS.
(c) Each Parent Guarantor covenants to file with the Trustee,
within 15 days after such Parent Guarantor is required to file the
same with Commission, copies of the annual reports and of the
information, documents and other reports that such Parent Guarantor
may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 or pursuant to
Section 314 of the Trust Indenture Act of 1939. Each Parent Guarantor
shall also comply with the other provisions of Section 314(a) of the
Trust Indenture Act of 1939.
SECTION 13.13. AMENDMENT, ETC.
No amendment, modification or waiver of any provision of this
Indenture relating to any Parent Guarantor or consent to any departure
by any Parent Guarantor or any other Persons from any such provision
will in any event be effective unless it is signed by such Parent
Guarantor and the Trustee.
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<PAGE>
SECTION 13.14. ACKNOWLEDGMENT.
Each Parent Guarantor hereby acknowledges communication of the
terms of this Indenture and the Securities and consents to and
approves of the same.
SECTION 13.15. COSTS AND EXPENSES.
Each Parent Guarantor shall pay or reimburse on demand by the
Trustee any and all costs, fees and expenses (including, without
limitation, legal fees) incurred by the Trustee, its agents, advisors
and counsel or any of the Holders in enforcing any of their rights
under any Parent Guaranty.
SECTION 13.16. NO MERGER OR WAIVER; CUMULATIVE REMEDIES.
No Parent Guaranty shall operate by way of merger of any of the
obligations of a Parent Guarantor under any other agreement,
including, without limitation, this Indenture. No failure to exercise
and no delay in exercising, on the part of the Trustee or the Holders,
any right, remedy, power or privilege under this Indenture or the
Securities, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege under this
Indenture or the Securities preclude any other or further exercise
thereof or the exercise of any other right, remedy power or privilege.
The rights, remedies, powers and privileges in each Parent Guaranty
and under this Indenture, the Securities and any other document or
instrument between a Parent Guarantor and/or the Issuer and the
Trustee are cumulative and not exclusive of any rights, remedies,
powers and privilege provided by law.
SECTION 13.17. SURVIVAL OF OBLIGATIONS.
Without prejudice to the survival of any of the other Obligations
of each Parent Guarantor, the Obligations of each Parent Guarantor
under Section 13.1 hereof shall be enforceable against such Parent
Guarantor without regard to and without giving effect to any defense,
right of offset or counterclaim available to or which may be asserted
by the Issuer or any Parent Guarantor.
SECTION 13.18. SEVERABILITY.
Any provision of this Article Thirteen which is prohibited or
unenforceable in any jurisdiction shall not
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<PAGE>
invalidate the remaining provisions and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.19. SUCCESSORS AND ASSIGNS.
Each Parent Guaranty shall be binding upon and inure to the
benefit of each Parent Guarantor and the Trustee and the other Holders
and their respective successors and permitted assigns, except that no
Parent Guarantor may assign any of its obligations hereunder or
thereunder. Subject to Section 10.1 of this Indenture, in no event
shall any Parent Guarantor be released from its Parent Guaranty.
SECTION 13.20. MERGER OF PARENT INTO ISSUER
Any Parent Guarantor may merge or consolidate with or into the
Issuer and the Issuer may merge or consolidate with or into any Parent
Guarantor in compliance with the terms of this Indenture, including,
without limitation, Section 3.6 and Article Nine.
ARTICLE THREE
MISCELLANEOUS
Section 3.1. Defined Terms. Unless otherwise provided in this Supplemental
Indenture, all defined terms used in this Supplemental Indenture shall have the
meanings assigned to them in the Indenture.
Section 3.2. Conflict of Any Provision of Indenture with Trust Indenture
Act of 1939. If and to the extent that any provision of this Supplemental
Indenture limits, qualifies or conflicts with another provision included in this
Supplemental Indenture or in the Indenture which is required to be included
herein or therein by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act of 1939, as amended, such required provision shall control.
Section 3.3. New York Law to Govern. THIS SUPPLEMENTAL INDENTURE AND THE
SECURITIES SHALL BE DEEMED TO BE CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN
THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW
RULES OF SAID STATE.
Section 3.4. Counterparts. This Supplemental Indenture may be executed in
any number of counterparts, each of
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which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
Section 3.5. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
Section 3.6. Severability of Provisions. In case any provision in this
Supplemental Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 3.7. Successors and Assigns. All covenants and agreements in this
Supplemental Indenture by the parties hereto shall bind their respective
successors and assigns and inure to the benefit of their respective successors
and assigns, whether so expressed or not.
Section 3.8. Benefit of Supplemental Indenture. Nothing in this
Supplemental Indenture, express or implied, shall give to any Person, other than
the parties hereto, any Collateral Agent and their successors hereunder, and the
Holders of the Securities, any benefit or any legal or equitable right, remedy
or claim under this Supplemental Indenture.
Section 3.9. Acceptance by Trustee. The Trustee accepts the amendments to
the Indenture effected by this Supplemental Indenture and agrees to execute the
trusts created by the Indenture as hereby amended, but only upon the terms and
conditions set forth in the Indenture. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals contained herein, which shall be taken as the statements of the Issuer
and except as provided in the Indenture the Trustee shall not be responsible or
accountable in any way whatsoever for or with respect to the validity or
execution or sufficiency of this Supplemental Indenture and the Trustee makes no
representation with respect thereto.
Section 3.10. Ratification of Indenture; Supplemental Indenture Controls.
The Indenture, as supplemented by this Supplemental Indenture, is in all
respects ratified and confirmed, and this Supplemental Indenture shall be deemed
part of the Indenture in the manner and to the extent herein and therein
provided. The provisions of this Supplemental Indenture shall, subject to
Section 3.2 hereof, supersede the provisions of the Indenture to the extent the
Indenture is inconsistent herewith.
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<PAGE>
Section 3.11. Adoption. The Parent Guarantor acknowledges that by its
execution of this Supplemental Indenture it hereby adopts and agrees to be bound
by the Indenture in its entirety.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
[CORPORATE SEAL] GOLDEN BOOKS PUBLISHING COMPANY,
INC.
Attest: By: /s/ John C. Ferrara
---------------------------------
Name: John C. Ferrara
Title: Chief Financial Officer
By: /s/ Philip Galanes
--------------------------
Name: Philip Galanes
Title: Secretary
[CORPORATE SEAL] GOLDEN BOOKS FAMILY ENTERTAINMENT,
INC.
Attest: By: /s/ John C. Ferrara
---------------------------------
Name: John C. Ferrara
Title: Chief Financial Officer
By: /s/ Philip Galanes
--------------------------
Name: Philip Galanes
Title: Secretary
[CORPORATE SEAL] MARINE MIDLAND BANK,
as Trustee
Attest: By: /s/ Frank J. Godino
---------------------------------
Name: Frank J. Godino
Title: Vice President
By: /s/ Eileen M. Hughes
---------------------------
Name: Eileen M. Hughes
Title: Vice President
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 2nd day of June, 1998 before me personally came John C. Ferrara, to
me personally known, who, being by me duly sworn, did depose and say that he
resides at ______________; that he is the Executive Vice President and Chief
Financial Officer of Golden Books Publishing Company, Inc., one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to said instrument
is such corporate seal, that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
[NOTARIAL SEAL]
/s/ Joshua D. Saltman
-------------------------------------
Notary Public
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 2nd day of June, 1998 before me personally came John C. Ferrara, to
me personally known, who, being by me duly sworn, did depose and say that he
resides at ______________; that he is the Executive Vice President and Chief
Financial Officer of Golden Books Family Entertainment, Inc. one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to said instrument
is such corporate seal, that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
[NOTARIAL SEAL]
/s/ Maureen P. Murphy
----------------------------------
Notary Public
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 2nd day of June, 1998 before me personally came Frank J. Godino, to
me personally known, who, being by me duly sworn, did depose and say that he
resides at ______________; that he is the Vice President of Marine Midland Bank,
one of the corporations described in and which executed the above instrument;
that he knows the corporate seal of said corporation; that the seal affixed to
said instrument is such corporate seal, that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[NOTARIAL SEAL]
/s/ Maureen P. Murphy
------------------------------------
Notary Public
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 2, 1998 (the "Security Agreement"),
entered into by and between GOLDEN BOOKS PUBLISHING COMPANY, INC. (together with
its successors and assigns, the "Company"), and MARINE MIDLAND BANK, as the
Trustee under the Indenture (defined below) and Collateral Agent and secured
party hereunder, for its benefit and the ratable benefit of the holders (the
"Holders") of the Notes (defined below) (together with its successors and
assigns, in such capacity, the "Collateral Agent"). This Security Agreement is
being entered into in connection with, pursuant to and as collateral security
for the debts, liabilities and obligations arising under or with respect to the
Indenture and the Notes.
NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein and in the Indenture, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, capitalized terms defined in the
Indenture and not otherwise defined herein shall have the meanings ascribed to
them in the Indenture. All terms defined in the UCC (defined below) and not
otherwise defined herein or in the Indenture shall have the meanings assigned to
them in the UCC.
"Accounts Receivable" shall have the meaning ascribed to it by the UCC.
"Chattel Paper" shall have the meaning ascribed to it by the UCC.
"Christmas Classics" shall have the meaning ascribed to it in Schedule
1.1(a) attached hereto.
"Collateral" shall have the meaning ascribed to it in Article II hereof.
"Copyrights" shall mean all of the Company's proprietary rights, in whole
or in part, related to Christmas Classics, Lone Ranger and Underdog; all
copyrights, in whole or in part, related to Christmas Classics, Lone Ranger and
Underdog, whether registered or unregistered, and whether or not the underlying
works of authorship have been published, and all works of authorship and other
rights therein or derived therefrom, and all Records relating thereto; and all
right, title and interest to make and exploit all derivative works based upon or
adopted from works, now owned or hereafter acquired, covered by such copyright,
copyright registrations, copyright applications and proprietary rights, and any
renewals or extensions thereof, including, without limitation, (a) the right to
print, reproduce, publish and distribute any of the foregoing, (b) the right to
sue or otherwise recover for any and all past, present and future
<PAGE>
infringements and misappropriations thereof, (c) all income, royalties, damages
and other payments now or hereafter due and/or payable with respect thereto
(including, without limitation, payments under all agreements and contracts
entered into in connection therewith, and damages and payments for past or
future infringements thereof), and (d) all rights of the Company corresponding
thereto throughout the world and all other rights of any kind whatsoever of the
Company accruing thereunder or pertaining thereto.
"Copyright Licenses" shall mean, with respect to the Company, all
agreements and contracts with any other Person in connection with or referring
to, in whole or in part, any of the Copyrights, now owned or hereafter acquired,
throughout the world, subject, in each case, to the terms of such agreements and
contracts.
"Disney" shall mean Disney Licensed Publishing, Inc., doing business as
Disney Licensed Publishing.
"Distribution Center" shall have the meaning ascribed to it in Paragraph
2.1(a)(iii).
"Documents" shall have the meaning ascribed to it by the UCC.
"Equipment" shall have the meaning ascribed to it by the UCC.
"First Lien Eligible Assets" shall mean the Eligible Assets related to
Christmas Classics, Lone Ranger and Underdog.
"Goods" shall have the meaning ascribed to it by the UCC.
"Governmental Authority" shall mean any agency, instrumentality,
department, commission, court, tribunal or board of any government, whether
foreign or domestic and whether national, federal, state, provincial or local.
"Headquarters" shall have the meaning ascribed to it in Paragraph
2.1(a)(v).
"Headquarters Lease" shall mean the Lease between Paramount Group, Inc., as
agent for 888 7th Avenue Associates Limited Partnership and Golden Books Family
Entertainment, Inc. dated as of December 24, 1996.
"Indenture" shall mean the Indenture, dated September 15, 1992, between the
Company and Marine Midland Bank, as trustee thereunder, relating to the Notes,
as amended or supplemented from time to time in accordance with its terms,
including the Second Supplemental Indenture thereto dated as of the Effective
Date.
"Inventory" shall have the meaning ascribed to it by the UCC.
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<PAGE>
"License Agreement" shall mean that certain Licensed Book Publishing
Agreement, dated September 26, 1997, between Disney and the Company.
"Lone Ranger" shall have the meaning ascribed to it in Schedule 1.1(b)
hereto.
"Manufacturing Facility" shall have the meaning ascribed to it in Paragraph
2.1(a)(iv).
"Notes" shall mean the 7.65% Senior Notes Due 2002 of the Company issued in
accordance with the Indenture.
"Obligations" shall mean the Company's and the Parent Guarantor's
Obligations under the Indenture, the Notes and the Collateral Agreements.
"Permitted Lien Collateral" shall mean the items of First Lien Collateral
listed in Sections 2.1(a)(ii), (iii), (iv) and (v) hereof together with the
Second Lien Collateral.
"Person" or "person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Records" shall mean all of the present and future books of account of
every kind or nature of the Company, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of the Company
with respect to the foregoing maintained with or by any other Person).
"Requisite Holders" shall mean the Holder or Holders of at least a majority
in principal amount of the outstanding Notes, unless otherwise provided in
Article Eight of the Indenture.
"Restricted Collateral" shall mean any Inventory owned by the Company
which, upon the sale of such Inventory, results in an obligation of the Company
to pay a royalty to Disney under the License Agreement.
"Second Lien Eligible Assets" shall mean all Eligible Assets other than
First Lien Eligible Assets.
"Secured Parties" shall mean the collective reference to the Collateral
Agent and each Holder.
"Trademarks" shall mean all trademarks, service marks, trade names, trade
dress or other indicia of trade origin, in whole or in part, trademark and
service mark registrations, and
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<PAGE>
applications for trademark or service mark registrations and any renewals
thereof, and all Records relating thereto, throughout the world, now owned or
hereafter acquired, related to Christmas Classics, Lone Ranger and Underdog,
including, without limitation, (a) the right to sue or otherwise recover for any
and all past, present and future infringements and misappropriations thereof,
(b) all income, royalties, damages and other payments now or hereafter due
and/or payable with respect thereto (including, without limitation, payments
under all agreements and contracts entered into in connection therewith, and
damages and payments for past or future infringements thereof), and (c) the
right to use and register and all rights corresponding thereto and all other
rights of any kind whatsoever of the Company accruing thereunder or pertaining
thereto, together, in each case, with the goodwill of the business connected
with the use of, and symbolized by, each such trademark, service mark, trade
name, trade dress or other indicia of trade origin. Solely for the avoidance of
doubt, the term "Trademarks" as used herein shall not include any trademarks,
service marks, trade names, trade dress or other indicia of origin that are used
solely to identify the Company, including, but not limited to, GOLDEN BOOKS, the
G Design and the distinctive gold spine.
"Trademark Licenses" shall mean, with respect to the Company, all
agreements and contracts with any other Person in connection with or referring
to, in whole or in part, any of the Trademarks, now owned or hereafter acquired,
throughout the world, subject, in each case, to the terms of such agreements and
contracts.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of New York, PROVIDED that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy.
"Underdog" shall have the meaning ascribed to it in Schedule 1.1(c) hereto.
ARTICLE II
GRANT OF SECURITY INTERESTS
2.1 SECURITY INTEREST.
(a) As security for the prompt and complete payment and performance in full
of the principal of, premium, if any, and interest on the Notes when and as the
same shall be due and payable, whether on an interest payment date, at maturity,
by acceleration, purchase, repurchase, redemption or otherwise, and interest on
the overdue principal of, premium and interest, if any, to the extent such
premium or interest is permitted by law, on the Notes and the performance of all
other Obligations, the Company hereby grants to the Collateral Agent, for the
benefit of itself and the Holders, a security interest in and continuing first
priority Lien on, all of its right, title and
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<PAGE>
interest in, to and under the following, in each case, whether now owned or
existing or hereafter acquired or arising, and wherever located (all of which is
defined as the "First Lien Collateral"):
(i) the Copyrights, Copyright Licenses, Trademarks, Trademark Licenses, and
all proprietary rights in and to all products and proceeds therefrom, except the
Copyright Licenses and Trademark Licenses listed in Schedule 2.1(a)(i);
(ii) the First Lien Eligible Assets, and all products and proceeds
therefrom;
(iii) personal property (other than Second Lien Collateral) and fixtures
owned by the Company located at the Company's distribution center in
Crawfordsville, Indiana, on the land more particularly described in Exhibit A
hereto (the "Distribution Center"), including, but not limited to, any Equipment
or Goods, all items listed on Schedule 2.1(a)(iii) and all excess cash proceeds
held by the Collateral Agent pursuant to section 1.05 or section 1.13 of the
Mortgage, and all products and proceeds therefrom;
(iv) personal property (other than Second Lien Collateral) and fixtures
owned by the Company located at the Company's manufacturing facility in Racine,
Wisconsin, on the land more particularly described in Exhibit B hereto (the
"Manufacturing Facility"), including, but not limited to, any Equipment or Goods
and all items listed on Schedule 2.1(a)(iv), and all products and proceeds
therefrom; and
(v) personal property (other than Second Lien Collateral) and fixtures
owned by the Company located at the Company's and its Parent's headquarters in
New York City, on the land more particularly described in Exhibit C hereto (the
"Headquarters"), including, but not limited to, any Equipment or Goods and all
items listed on Schedule 2.1(a)(v), and all products and proceeds therefrom;
PROVIDED that the security interest and continuing first priority Lien granted
to the Collateral Agent by the Company with respect to the items of the First
Lien Collateral listed in Sections 2.1(a)(ii), (iii), (iv) and (v) hereof, may
be subject to Permitted Liens (as defined in the Indenture) other than Eligible
Credit Facility Liens.
(b) As further security for the prompt and complete payment and performance
in full of the principal of, premium, if any, and interest on the Notes when and
as the same shall be due and payable, whether on an interest payment date, at
maturity, by acceleration, purchase, repurchase, redemption or otherwise, and
interest on the overdue principal of, premium and interest, if any, to the
extent such premium or interest is permitted by law, on the Notes and the
performance of all other Obligations, the Company hereby grants to the
Collateral Agent, for the benefit of itself and the Holders, a security interest
in and continuing second priority Lien (subject to Permitted Liens) on, all of
its right, title and interest in, to and under the Second Lien Eligible Assets,
in each case whether now owned or existing or hereafter acquired or arising, and
wherever located (all of which is defined as the "Second Lien Collateral");
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PROVIDED, however, (A) such Lien and security interest in the Second Lien
Collateral shall be junior in all respects to Eligible Credit Facility Liens of
the Lenders in the Second Lien Collateral securing up to $30.0 million aggregate
principal amount of borrowings under the Eligible Credit Facilities and their
pro rata share of related interest, default interest, expenses, fees and
premiums; (B) notwithstanding anything to the contrary contained in this
Security Agreement (including, without limitation, Article VI hereof), the
Indenture or any other Collateral Agreement, until the Eligible Credit Facility
Liens are indefeasibly fully satisfied, released or terminated, the Collateral
Agent shall be prohibited from taking any action with respect to any such
Eligible Credit Facility Liens or Second Lien Collateral, including, without
limitation, attempting to foreclose or realize upon or collect the proceeds of
any Second Lien Collateral or otherwise exercising any rights and remedies of
any kind or nature whatsoever with respect to any such Eligible Credit Facility
Liens or Second Lien Collateral, including, without limitation, (I) any right to
seek adequate protection in a bankruptcy proceeding of its interests in the
Second Lien Collateral prior to similar action by the Lenders, (II) any right
with respect to any such Eligible Credit Facility Liens to object to or
participate in the manner of liquidating the Second Lien Collateral, or (III)
any right with respect to any such Eligible Credit Facility Liens to claim the
benefits of any doctrine of marshaling; and (C) if the claims of the Lenders
have not been satisfied in all respects, then any proceeds, consideration or
other value received by the Collateral Agent in respect of the aforesaid Second
Lien Collateral shall be received in trust for and promptly remitted to the
Lenders, except this subparagraph (C) shall not apply with respect to any
proceeds, consideration or other value received or to be received by the
Collateral Agent (I) under a confirmed plan of reorganization of the Company or
(II) following the consensual release by the Lenders of any such Second Lien
Collateral. Nothing in the foregoing shall in any manner alter or abridge the
rights and remedies of the Collateral Agent with respect to (x) any other
collateral that is pledged to it, (y) the right to file and prosecute a secured
or unsecured claim under Section 501 of the United States Bankruptcy Code or
similar evidence of indebtedness in an out-of-court or other proceeding with
respect to the debt secured by this Lien or any other debt, and (z) the right to
defend its interests if challenged.
Notwithstanding the foregoing proviso, Lenders may at any time modify or
amend their agreements (including renewals and extensions) without notice to the
Collateral Agent and Holders and without affecting this Paragraph 2.1(b). The
Collateral Agent agrees that it shall not contest the validity, perfection,
priority or enforceability of the Lenders' Liens and security interests in the
Second Lien Collateral, and that this Paragraph 2.1(b) shall be in full force
and effect at all times including upon the commencement of and during any
bankruptcy proceeding.
At the request of the Lenders, the Collateral Agent shall enter into a
Mortgagee Waiver Letter or similar document substantially in the form of Exhibit
D hereto.
On the Effective Date, the Collateral Agent shall execute and deliver to
the Company the Environmental Disclosure Document for Transfer of Real Property
and the Acknowledgment and Waiver under the Indiana Responsible Property
Transfer Law substantially in the forms of Exhibits E-1 and E-2 hereto,
respectively.
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Collectively, the First Lien Collateral and the Second Lien Collateral,
including, in each case, without limitation, the Substitute Collateral, if any,
will be referred to as the "Collateral."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Collateral Agent, which
representations and warranties shall survive execution and delivery of this
Security Agreement, as follows:
3.1 VALIDITY, PERFECTION AND PRIORITY.
(a) Upon the filing of UCC-1 financing statements in the jurisdictions
identified in Schedule 3.1(a), the filing of the Trademark Assignment with the
United States Patent and Trademark Office and the filing of the Copyright
Assignment with the United States Copyright Office, all of which have been
completed as of the date hereof, the security interests in the First Lien
Collateral granted to the Collateral Agent hereunder constitute and will
constitute valid and continuing first priority perfected security interests
therein, superior and prior to all Liens and rights or claims of all other
Persons, PROVIDED that the Permitted Lien Collateral may be subject to Permitted
Liens, except that First Lien Collateral shall not be subject to Eligible Credit
Facility Liens.
(b) Upon the filing of UCC-1 financing statements in the jurisdictions
identified in Schedule 3.1(b), which has been done as of the date hereof, the
security interests in the Second Lien Collateral granted to the Collateral Agent
hereunder constitute and will constitute valid and continuing second priority
perfected security interests therein, superior and prior to all Liens and rights
or claims of all other Persons, except Permitted Liens.
(c) Notwithstanding anything in the Indenture or the Collateral Agreements
to the contrary, so long as no Event of Default has occurred and is continuing,
the Company need not perfect the Lien on vehicles having a book value of up to
$100,000 unless requested to do so by the Collateral Agent.
3.2 NO LIENS; OTHER FINANCING STATEMENTS.
(a) Except for the Security Interests granted to the Collateral Agent
hereunder and, in the case of the Permitted Lien Collateral, Permitted Liens
(except that First Lien Collateral shall not be subject to Eligible Credit
Facility Liens), the Company owns and, as to all Collateral whether now existing
or hereafter acquired, subject to Section 4.7 hereof and the terms of the
Indenture, will continue to own, each item of the Collateral free and clear of
all Liens, rights and claims, and the Company shall defend the Collateral
against all claims and demands of all Persons at any time claiming the same or
any interest therein adverse to the
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Collateral Agent on the Collateral (other than claims against any Permitted Lien
Collateral relating to any Permitted Lien).
(b) Without limiting the generality of the foregoing subparagraph (a), the
Company expressly represents, warrants and covenants that it owns all Equipment
and Goods constituting Collateral located at the Distribution Center, the
Manufacturing Facility and the Headquarters and each item of personal property
listed on Schedules 2.1 (a)(iii), (iv) and (v) and will, subject to Section 4.7
hereof and the terms of the Indenture, continue to own such property and all
other personal property hereafter acquired and located at the Distribution
Center, the Manufacturing Facility and the Headquarters, free and clear of all
Liens (other than Permitted Liens), rights or claims including, without
limitation, any Liens, rights or claims based upon an assertion that any item of
such property is a fixture or an appurtenance to the premises or otherwise has
become property of, or subject to, an interest of a landlord.
(c) No financing statement or other evidence of any Lien covering or
purporting to cover any of the Collateral is on file and is effective in any
public office other than (i) financing statements filed or to be filed in
connection with the Security Interests granted to the Collateral Agent
hereunder, (ii) in the case of the Second Lien Collateral, financing statements
filed or to be filed in connection with the Eligible Credit Facility, (iii) in
the case of Permitted Lien Collateral, financing statements relating to any
Permitted Lien (except that no financing statement regarding Eligible Credit
Facility Liens is on file and effective in any public office with respect to
First Lien Collateral), and (iv) financing statements for which proper, executed
termination statements have been delivered to the Collateral Agent for filing.
3.3 CHIEF EXECUTIVE OFFICE. The chief executive office of the Company is
located at 888 Seventh Avenue, New York, New York 10106-4100. The originals of
the Records are located at the chief executive office of the Company, at the
Manufacturing Facility and at the Distribution Facility. All Records are
maintained at, and controlled and directed (including, without limitation, for
general accounting purposes) from the chief executive office or other offices
identified on Schedule 3.3 as such.
3.4 LOCATION OF INVENTORY. All Inventory constituting Collateral is kept
only at (or shall be in transit to) the locations listed on Schedule 3.4 hereto.
None of such Inventory is in the possession of an issuer of a negotiable
document (as defined in Section 7-104 of the UCC) therefor or otherwise in the
possession of a bailee or other Person.
3.5 TRADE NAMES; PRIOR NAMES. The only names under which the Company has
conducted business during the last five years are as set forth on Schedule 3.5
hereto.
3.6 ACCOUNTS RECEIVABLE AND CHATTEL PAPER.
(a) Each Account Receivable and Chattel Paper constituting Collateral
arises from the actual and BONA FIDE sale and delivery of goods by the Company
or rendition of services by the Company in the ordinary course of its business.
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(b) The representation and warranty contained in this Section shall be
deemed to be repeated by the Company as of the time when each respective Account
Receivable or Chattel Paper arises.
3.7 INTELLECTUAL PROPERTY.
(a) With respect to Schedules 1.1(a), (b) and (c), (i) such schedules set
forth all Trademarks of the Company as of the date hereof, (ii) the Trademarks
listed in such schedules are valid, in use and in full force and effect, (iii)
the Company owns and has good and marketable title to, free and clear of all
Liens, all such Trademarks listed in such schedules and (iv) the Company has
made or is currently in the process of making, which process shall be complete
within three months of the date hereof, all necessary filings and recordations
to protect and maintain its interest in such Trademarks listed in such
schedules, including, without limitation, all necessary filings and recordings
in the United States Patent and Trademark Office and throughout the world. With
respect to the Trademark Licenses, (i) such licenses are valid and in full force
and effect and (ii) the Company owns and has good and marketable title to such
licenses, free and clear of all Liens.
(b) With respect to Schedules 1.1(a), (b) and (c), (i) such schedules set
forth all Copyrights of the Company as of the date hereof, (ii) the Copyrights
listed in such schedules are valid, in use and in full force and effect, (iii)
the Company owns and has good and marketable title to, free and clear of all
Liens, all such Copyrights listed in such schedules and (iv) to the Company's
best knowledge, after due inquiry, the Company and its predecessors-in-interest
have made all necessary filings and recordations and have complied with all
formalities and notice requirements to protect and maintain its interest in such
Copyrights listed on such schedules including, without limitation, all necessary
filings and recordings in the United States Copyright Office and throughout the
world and all formalities and notice requirements set forth in the 1909 and 1976
Copyright Act. With respect to the Copyright Licenses, (i) such licenses are
valid and in full force and effect and (ii) the Company owns and has good and
marketable title to such licenses, free and clear of all Liens.
(c) As of the date hereof, each Trademark and Copyright is subsisting, has
not been abandoned, and is valid and enforceable throughout the world.
(d) As of the date hereof, except for the Trademark Licenses and Copyright
Licenses, the Company has not made a previous assignment, license, sale,
transfer, Lien or agreement constituting a present or future assignment, grant
of any rights or encumbrance of any of or on any of such Trademarks or
Copyrights throughout the world. Except as identified in Schedule 3.7(d), the
Company has not granted any release, covenant not to sue, or non-assertion
assurance to any Person with respect to any of the Trademarks, Trademark
Licenses, Copyrights or Copyright Licenses.
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(e) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity, registrability or
enforceability of any of the Trademarks or Copyrights throughout the world.
(f) To the Company's best knowledge, after due inquiry, no right or any
claim exists that is likely to be made under or against any of the Trademarks or
Copyrights throughout the world.
(g) To the Company's best knowledge, after due inquiry, no claim has been
made and is continuing or threatened that the use by the Company of any of the
Trademarks or Copyrights is invalid or unenforceable or that the use of such
Trademarks or Copyrights does or may violate the rights of any Person throughout
the world. To the Company's best knowledge, after due inquiry, there is
currently no infringement or unauthorized use of any of the Trademarks or
Copyrights throughout the world.
(h) No action or proceeding is pending (i) seeking to limit, cancel or
question the validity of any of the Trademarks or Copyrights throughout the
world or (ii) which, if adversely determined, would be reasonably likely to have
a material adverse effect on the value of any such Trademarks or Copyrights
throughout the world.
3.8 EQUIPMENT. All Equipment constituting Collateral is owned free and
clear of all Liens, except Permitted Liens (other than Eligible Credit Facility
Liens), is located only at the locations set forth on Schedule 3.8 hereto and is
in good working condition subject only to wear and tear in the ordinary course,
all of which is accounted for at the lower of cost or fair market value in
accordance with GAAP on the financial statements of the Company.
3.9 BASIC REPRESENTATIONS AND WARRANTIES. The Company (a) is duly organized
and validly existing in good standing under the laws of the jurisdiction of its
formation or other jurisdiction in which it is qualified to do business; (b) has
the power and authority to execute, deliver and carry out the terms and
provisions of this Security Agreement and consummate the transactions
contemplated hereby; (c) has taken all necessary action to authorize the
execution, delivery and performance of this Security Agreement and the
consummation of the transactions contemplated hereby; and (d) has duly executed
and delivered this Security Agreement. This Security Agreement constitutes the
Company's legal, valid and binding obligation, enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability. Except as set forth on Schedule 3.9 hereto, no consent of any
lender, security holder of the Company or other Person is required for the
Company to enter into and deliver this Security Agreement or to consummate the
transactions contemplated hereby (other than consents which have been duly
obtained) nor do the Certificate of Incorporation or By-Laws of the Company or
any contract, agreement, license, lease, commitment, mortgage or other
instrument to which the Company is bound or affecting any of its respective
properties or leasehold interests conflict with or restrict the execution and
delivery of this Security Agreement or the consummation of the transactions
contemplated hereby.
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ARTICLE IV
COVENANTS
The Company covenants and agrees with the Collateral Agent that from and
after the date of this Security Agreement:
4.1 FURTHER ASSURANCES. The Company will from time to time at its own
expense, promptly execute, deliver, file and record all further instruments,
endorsements and other documents, and take such further action consistent with
the terms of this Security Agreement, the Indenture and the other Collateral
Agreements, as may be required by law for the Collateral Agent to obtain, or as
the Collateral Agent may deem necessary in obtaining, the full benefits of this
Security Agreement and of the rights, remedies and powers herein granted,
including, without limitation, the following:
(a) the filing of any financing statements, in form reasonably
acceptable to the Collateral Agent, under the Uniform Commercial Code in
effect in any jurisdiction with respect to the Liens and security interests
granted hereby (and the Company hereby authorizes the Collateral Agent to
file any such financing statement without its respective signature to the
extent permitted by applicable law);
(b) furnish to the Collateral Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail and in form reasonably
satisfactory to the Collateral Agent;
(c) execute and deliver the Trademark Assignment and cause it to be
duly filed with the United States Patent and Trademark Office;
(d) execute and deliver the Copyright Assignment and cause it to be
duly filed with the United States Copyright Office;
(e) execute and deliver any other trademark security agreement
relating to Trademarks and Trademark Licenses and cause it to be perfected
outside the United States; and
(f) execute and deliver any other copyright security agreement
relating to Copyrights and Copyright Licenses and cause it to be perfected
outside the United States.
Notwithstanding the foregoing, the Company acknowledges its own
obligation, independent of any request by the Collateral Agent, to
maintain (i) with respect to the First Lien Collateral, valid and
continuing first priority perfected security interests, superior to
all Liens and rights or claims of all other Persons, and (ii) with
respect to the Second Lien Collateral, valid and continuing second
priority perfected security interests,
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superior to all Liens and rights or claims of all other Persons;
PROVIDED that Permitted Lien Collateral may be subject to Permitted
Liens, except that First Lien Collateral shall not be subject to
Eligible Credit Facility Liens.
4.2 CHANGE OF NAME, IDENTITY, CORPORATE STRUCTURE, CHIEF EXECUTIVE OFFICES,
OR LOCATION OF INVENTORY AND EQUIPMENT. The Company will not change its name,
identity, corporate structure or the location of its chief executive offices (as
specified in Section 3.3 hereof) or location of its Inventory or (subject to
Section 4.12 hereof) Equipment constituting Collateral without (i) giving the
Collateral Agent at least thirty (30) days' prior written notice clearly
describing such new name, identity, corporate structure or new location and
providing such other information in connection therewith as the Collateral Agent
may reasonably request, and (ii) taking all action necessary and reasonably
satisfactory to the Collateral Agent, as may be required by law or as the
Collateral Agent may reasonably request, to maintain the security interest of
the Collateral Agent in the Collateral intended to be granted hereby at all
times fully perfected with the same or better priority than exists on the date
hereof and in full force and effect. All Accounts Receivable, Chattel Paper,
Documents and Records of the Company will continue to be maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, such chief executive office or a location identified as a
location at which Accounts Receivable, Chattel Paper, Documents or Records are
maintained, controlled and directed on Schedule 3.3, or such new locations as
the Company may establish in accordance with this Section 4.2.
4.3 MAINTAIN RECORDS. The Company will keep and maintain at its own cost
and expense satisfactory and complete records of the Collateral, including, but
not limited to, the originals of all documentation with respect to all Accounts
Receivable and records of all payments received and all credits granted on the
Accounts Receivable, and all other dealings therewith.
4.4 RIGHT OF INSPECTION. The Collateral Agent, any authorized
representative of the Collateral Agent and any authorized representative of any
Holder or Holders of 25% or more aggregate principal amount of the Notes shall
at all times have reasonable access during normal business hours and upon
reasonable notice to the Company to all the books, correspondence and records of
the Company relating to the Collateral, and the Collateral Agent and its
representative and any such representative of a Holder or Holders may examine
the same, take extracts therefrom and make photocopies thereof, and the Company
agrees to render the Collateral Agent and any such representative of a Holder or
Holders, at the cost and expense of the Company, such clerical and other
assistance as may be reasonably requested with regard thereto.
4.5 PAYMENT OF OBLIGATIONS. The Company will pay, prior to the date when
material penalties would attach thereto, all taxes, assessments and governmental
charges or levies imposed upon the Collateral, as well as all claims of any kind
(including, without limitation, claims for labor, materials, supplies and
services) against or with respect to the Collateral, except that no such tax,
assessment, charge, claim or levy need be paid if (i) the validity thereof is
being contested in good faith by appropriate proceedings properly instituted
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and diligently conducted for which adequate reserves, to the extent required
under GAAP, have been taken and (ii) such proceedings do not involve, in the
reasonable opinion of the Collateral Agent, any material danger of the sale,
forfeiture or loss of any of the Collateral or any interest therein.
4.6 NEGATIVE PLEDGE. (a) The Company will not create, incur or permit to
exist, and will defend the Collateral against, and will take such other action
as is necessary to remove, any Lien or claim on or to the Collateral, other than
the Security Interests created hereby and, in the case of Permitted Lien
Collateral, Permitted Liens (except that the Company will not create, incur or
permit to exist, will defend against, and will take such other action as is
necessary to remove, in the case of First Lien Collateral, any Eligible Credit
Facility Liens).
(b) Without limiting the generality of the foregoing subparagraph (a), the
Company expressly covenants that it will not create, incur or permit to exist,
will defend against, and will take such other action as is necessary to remove,
any Lien (other than Permitted Liens) or claim on or to any Equipment or Goods
presently or hereafter located or used at the Distribution Center, the
Manufacturing Facility and the Headquarters and each item of personal property
listed on Schedules 2.1(a)(iii), (iv) and (v), including, without limitation,
any Lien or claim based upon an assertion that any item of such property is a
fixture or an appurtenance to the premises or otherwise has become property of,
or subject to an interest of, a landlord.
4.7 LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Company will not sell,
transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer
or contract to do so except (i) as permitted in Section 12.4 of the Indenture
and (ii) so long as no Event of Default occurs and is continuing, obsolete
Equipment and Equipment no longer useful to the business of the Company
constituting Collateral in an amount less than $50,000 per year in the
aggregate.
(a) The Company hereby grants to the Collateral Agent, for the benefit of
itself and the Holders, a security interest in and continuing first or second
priority Lien, as applicable, on all of its right, title and interest in, to and
under the Substitute Collateral, as defined in the Indenture, whether now owned
or existing or hereafter acquired or arising, and wherever located, and shall
deliver or cause to be delivered the items required under Section 12.2 of the
Indenture to evidence perfection of a first or second priority perfected Lien,
as applicable (in the case of Permitted Lien Collateral, subject to Permitted
Liens, except that First Lien Collateral shall not be subject to Eligible Credit
Facility Liens), in the Substitute Collateral by the Collateral Agent.
(b) The Company agrees that the Substitute Collateral and its grant of the
security interest therein as contemplated in Section 4.7(a) hereof shall be
subject to all of the terms of this Security Agreement.
4.8 PERFORMANCE BY THE COLLATERAL AGENT OF THE OBLIGATIONS OF THE COMPANY;
REIMBURSEMENT. If the Company fails to perform or comply with any of its
agreements contained herein the Collateral Agent may, without consent
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by the Company, perform or comply or cause performance or compliance therewith,
and the reasonable expenses of the Collateral Agent incurred in connection with
such performance or compliance, together with interest thereon at a rate per
annum borne by the Notes, shall be payable by the Company to the Collateral
Agent on demand and such reimbursement obligation shall be secured hereby.
4.9 NO IMPAIRMENT. Except as expressly permitted herein or in the Indenture
(including, without limitation, in the case of Permitted Lien Collateral, the
creation of Permitted Liens, except that First Lien Collateral shall not be
subject to Eligible Credit Facility Liens), the Company will not take or
knowingly permit to be taken (to the extent of its power) any action which could
impair the Collateral Agent's rights in the Collateral. The Company shall
promptly notify the Collateral Agent of any changes in fact or circumstance
represented or warranted by the Company or that could reasonably be expected to
have a material adverse effect with respect to any material portion of the
Collateral, of any material impairment of the Collateral and of any claim,
action or proceeding affecting title to all or any of the Collateral, except any
claims, actions or proceedings affecting title which in the aggregate during a
one year period involve Equipment constituting Collateral with book value of
less than $50,000.
4.10 INSURANCE. The Company will maintain, with financially sound and
reputable insurers reasonably acceptable to the Collateral Agent and licensed to
do business in each state in which any of the Collateral covered by any policy
is located, insurance against loss or damage to the extent that property of
similar character is usually so insured by corporations similarly situated and
owning like properties. With respect to the First Lien Collateral, and with
respect to the Second Lien Collateral, except as limited by the rights of a
Lender in the Second Lien Collateral, all policies of insurance shall (i) name
the Collateral Agent as additional insured (with respect to liability insurance
policies) or loss payee with a lender's loss payable endorsement, (ii) include
waivers by the insurer of all claims for insurance premiums against the
Collateral Agent, (iii) provide that any losses shall be payable to the
Collateral Agent notwithstanding (A) any act, failure to act or negligence of or
violation of warranties, declarations or conditions contained in such policy by
the Company, (B) any foreclosure or other proceedings or notice of sale relating
to any Collateral insured thereunder, or (C) any change in the title to or
ownership of any Collateral insured thereunder, and (iv) provide that no
cancellation, termination or lapse in coverage thereof shall be effective until
at least 30 days after receipt by the Collateral Agent of written notice
thereof, except that the insurer may cancel such policies upon ten days written
notice to the Collateral Agent if cancellation is for nonpayment of premium.
4.11 INTELLECTUAL PROPERTY. (a) The Company will (i) continue to use or
will make a good faith effort to commence use of each of the Trademarks on each
and every trademark class of goods applicable to its current line as reflected
in its current catalogs, brochures and price lists or as set forth in any
intention to use application in order to maintain such Trademarks in full force
throughout the world free from any claim of abandonment for non-use, (ii)
maintain the quality of products offered under such Trademarks, (iii) employ
such Trademarks with any appropriate notice of registration, (iv) not adopt or
use any mark throughout the world which is confusingly similar or a colorable
imitation of such Trademarks, unless the
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Collateral Agent shall obtain a perfected security interest in such mark
pursuant to this Security Agreement, and (v) not do any act or knowingly omit to
do any act whereby any such Trademarks would be reasonably likely to become
invalid or unenforceable.
(b) The Company (i) will not do any act, or omit to do any act, whereby any
registered Copyrights or Trademarks may become invalid, unenforceable, abandoned
or dedicated, (ii) will not print, reproduce, publish or distribute any work
which is substantially similar to such Copyrights unless the Collateral Agent
shall obtain a perfected security interest in such work pursuant to this
Security Agreement, and (iii) will take any and all steps necessary to maintain
such Copyrights and registrations therefor throughout the world.
(c) The Company will notify the Collateral Agent promptly if it knows or
could reasonably be expected to know, that any application or registration
relating to any Trademarks or Copyrights may become abandoned or dedicated, and
of any adverse determination or material adverse development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal throughout the world) regarding the
Company's ownership of any such Trademarks or Copyrights or its right to
register the same or to keep and maintain the same.
(d) The Company agrees that, in the event that it shall at any time and
from time to time obtain an ownership interest in any trademark or copyright
related to Christmas Classics, Lone Ranger or Underdog, or become a party to any
copyright or trademark agreement or contract related to Christmas Classics, Lone
Ranger or Underdog, the provisions of Section 2.1 hereof shall automatically
apply thereto and any such trademark, copyright, agreement or contract shall
automatically become part of the Collateral.
(e) Whenever the Company, either by itself or through any agent, employee
or designee, shall file an application for the registration of any Trademark
with the United States Patent and Trademark Office or in any country throughout
the world, or for the registration of any Copyright with the United States
Copyright Office, or shall acquire any such trademark or copyright, the Company
shall report such filing or acquisition to the Collateral Agent within twenty
Business Days after the last day of the fiscal quarter in which such filing or
acquisition occurs and shall promptly execute and deliver any and all
agreements, instruments, documents, and papers as may be necessary (or as the
Collateral Agent otherwise may request) to evidence the Collateral Agent's
security interest in any such trademark or copyright, and the goodwill and
general intangibles of the Company relating thereto or represented thereby.
(f) The Company will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office or the United States Copyright Office, or any court or tribunal
throughout the world, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the Trademarks and
Copyrights throughout the world and participate in opposition, cancellation,
infringement and misappropriation proceedings throughout the world.
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(g) In the event that any of the Trademarks or Copyrights is infringed or
misappropriated by a third party, the Company shall promptly notify the
Collateral Agent of such infringement or misappropriation and shall promptly sue
for infringement or misappropriation, to seek injunctive relief where
appropriate and seek to recover any and all damages for such infringement or
misappropriation, or take such other actions as the Company or Collateral Agent
shall reasonably deem appropriate under the circumstances to protect such
Trademarks or Copyrights.
4.12 EQUIPMENT. The Company shall maintain the Equipment constituting
Collateral in good and working condition, subject to ordinary wear and tear and
consistent with current business practice, free of all Liens, except Permitted
Liens (other than Eligible Credit Facility Liens), and shall not remove or
relocate any Equipment constituting Collateral except as provided herein, except
that any vehicles or rolling stock intended to be mobile may be so used to the
extent that all necessary and appropriate actions have been taken and filings
made to perfect a first priority security interest therein in favor of the
Collateral Agent for its benefit and the ratable benefit of the Holders.
4.13 ASSEMBLY OF TENANT'S PROPERTY. With respect to items of personal
property and fixtures owned by the Company which are "Tenant's Property" under
Section 4.01 of the Headquarters Lease, if an Event of Default occurs and is
continuing, the Company covenants to remove such items of personal property and
fixtures owned by the Company from the Headquarters and to deliver the same to
the Collateral Agent upon the request of the Collateral Agent in accordance with
the terms of Section 6.2 hereof.
ARTICLE V
POWER OF ATTORNEY
The Company hereby irrevocably constitutes and appoints the Collateral
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Company and in the name of the Company, from time to
time in the Collateral Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action, and to
execute in any appropriate manner any and all documents and instruments which
may be necessary to accomplish the purposes of this Security Agreement. This
power of attorney is a power coupled with an interest and shall be irrevocable
until termination of this Security Agreement pursuant to Section 7.7 hereof.
-16-
<PAGE>
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 RIGHTS AND REMEDIES GENERALLY. If an Event of Default occurs and is
continuing, then and in every such case, the Collateral Agent shall have all the
rights of a secured party under the UCC, shall have all rights now or hereafter
existing under all other applicable laws, and, subject to any mandatory
requirements of applicable law then in effect, shall have all the rights set
forth in this Security Agreement and all the rights set forth with respect to
the Collateral or this Security Agreement in any other agreement between the
parties.
6.2 ASSEMBLY OF COLLATERAL. If an Event of Default occurs and is
continuing, upon written notice to the Company, the Company shall forthwith, at
its own expense, and to the extent commercially practicable, assemble the
Collateral (or from time to time any portion thereof) and make it available to
the Collateral Agent at any place or places designated by the Collateral Agent
which is reasonably convenient to both parties.
6.3 DISPOSITION OF COLLATERAL. If an Event of Default occurs and is
continuing, the Collateral Agent will determine the circumstances and manner in
which the Collateral will be disposed of, including, but not limited to, the
determination of whether to foreclose on the Collateral if an Event of Default
occurs and is continuing. The Collateral Agent will give the Company reasonable
written notice of the time and place of any public sale of the Collateral or any
part thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. The Company agrees that the requirements of
reasonable notice to it shall be met if such notice is delivered to its address
specified in and in accordance with Section 7.3 hereof (or such other address
that the Company may provide to the Collateral Agent in writing) at least ten
days before the time of any public sale or after which any private sale may be
made.
6.4 PROCEEDS. If an Event of Default occurs and is continuing, (i) all
proceeds and distributions on the Collateral received by the Company shall be
held in trust for the Collateral Agent, segregated from other funds of the
Company in a separate deposit account containing only such proceeds and
distributions, and shall forthwith upon receipt thereof, be turned over to the
Collateral Agent in the same form received (appropriately endorsed or assigned
to the order of the Collateral Agent or in such other manner as shall be
satisfactory to the Collateral Agent) and (ii) any and all such proceeds and
distributions received by the Collateral Agent (whether from the Company or
otherwise), or any part thereof, may, in the sole discretion of the Collateral
Agent, be held by the Collateral Agent in a separate account as Collateral
hereunder and/or then or at any time or from time to time thereafter, be applied
by the Collateral Agent against the Obligations (whether matured or unmatured)
and related expenses, including attorney's fees as provided in Section 6.6
hereof.
6.5 RECOURSE. The Company shall pay or remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to satisfy the Obligations. The Company shall also be liable for all reasonable
expenses of the Collateral
-17-
<PAGE>
Agent incurred in connection with collecting such deficiency, including, without
limitation, the reasonable fees and disbursements of any attorneys employed by
the Collateral Agent to collect such deficiency.
6.6 EXPENSES; ATTORNEYS FEES. The Company shall pay or reimburse the
Collateral Agent for all its reasonable expenses in connection with the exercise
of its rights hereunder, including, without limitation, (i) all reasonable
attorneys' fees and reasonable legal expenses incurred by the Collateral Agent
and (ii) all filing fees and related expenses contemplated by Section 4.1
hereof. Expenses of retaking, holding, preparing for sale, selling or the like
shall include the reasonable attorneys' fees and reasonable legal expenses of
the Collateral Agent. All such expenses shall be secured hereby.
6.7 LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL.
(a) The Collateral Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Collateral Agent deals with similar property for its own account;
(b) The Collateral Agent shall have no obligation to take any steps to
preserve rights against prior parties to any Collateral; and
(c) Neither the Collateral Agent nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligations to sell or otherwise dispose of any Collateral upon the
request of the Company or otherwise, except with respect to actions taken or
omitted with negligence, willful misconduct or in bad faith.
6.8 GRANT OF LICENSE TO USE COPYRIGHT AND TRADEMARK COLLATERAL.
(a) For the purposes of enabling the Collateral Agent to exercise its
rights and remedies under Article VI hereof at such time as the Collateral
Agent, without regard to this Section 6.8(a), shall be lawfully entitled to
exercise such rights and remedies, the Company hereby grants, effective upon the
occurrence and during the continuance of an Event of Default, to the Collateral
Agent an irrevocable (until cure, waiver or other satisfaction of such Event of
Default), non-exclusive license (exercisable without payment of royalty or other
compensation to the Company) to use, license or sublicense any Copyright, now
owned or hereafter acquired by the Company, throughout the world, PROVIDED that
such license will automatically terminate upon the termination of this Security
Agreement pursuant to Section 7.7 hereof.
(b) For the purposes of enabling the Collateral Agent to exercise its
rights and remedies under Article VI hereof at such time as the Collateral
Agent, without regard to this Section 6.8(b), shall be lawfully entitled to
exercise such rights and remedies, the Company hereby grants, effective upon the
occurrence and during the continuance of an Event of Default,
-18-
<PAGE>
to the Collateral Agent an irrevocable (until cure, waiver or other satisfaction
of such Event of Default), non-exclusive license (exercisable without payment of
royalty or other compensation to the Company) to use, license or sublicense any
Trademark, now owned or hereafter acquired by the Company, throughout the world,
PROVIDED that such license will automatically terminate upon the termination of
this Security Agreement pursuant to Section 7.7 hereof.
6.9 LIMITATIONS WITH RESPECT TO RESTRICTED COLLATERAL. Notwithstanding
anything to the contrary contained herein, the Collateral Agent shall not
dispose of any Restricted Collateral except (i) on terms regarding sale and
distribution acceptable to Disney and (ii) where, out of the proceeds therefor,
the Collateral Agent shall deduct therefrom and pay to Disney an amount equal to
the royalty due to Disney out of the proceeds of such sale, in each case as
determined by Disney pursuant to and in accordance with the License Agreement.
The Collateral Agent may, prior to taking any other action with respect to any
Collateral, require the advice of Disney or the Company as to what Collateral
constitutes Restricted Collateral.
ARTICLE VII
MISCELLANEOUS
7.1 INDEMNITY. The Company agrees to indemnify, reimburse and hold the
Collateral Agent and its officers, directors, employees, representatives and
agents ("Indemnitees") harmless from any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs or expenses
or disbursements (including reasonable attorneys' fees and expenses) of
whatsoever kind or nature ("Losses") which may be imposed on, asserted against
or incurred by any of the Indemnitees in any way relating to or arising out of
this Security Agreement or the transactions contemplated hereby, except to the
extent that such Losses are caused by the negligence or bad faith of such
Indemnitees as determined by a final judgment of a court of competent
jurisdiction. The obligations of the Company under this Section shall be secured
hereby and shall survive payment and performance or discharge of the Obligations
and the termination of this Security Agreement.
7.2 GOVERNING LAW. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS).
7.3 NOTICES. Except as otherwise expressly provided herein, all notices,
requests and demands to or upon the respective parties hereto to be effective
shall be in writing (including by telecopy, telex, or cable communication), and
shall be deemed to have been duly given or made when delivered by hand, or five
days after being deposited in the United States mail, postage prepaid, or, in
the case of telex notice, when sent, answer-back received, or in the case of
telecopy notice, when sent, or in the case of a nationally recognized overnight
courier service, one business day after delivery to such courier service,
addressed, in the case of each party hereto to the following address, or to such
other address as may be designated by any party in a written notice to the other
party hereto:
-19-
<PAGE>
IF TO THE COMPANY:
Golden Books Publishing Company, Inc.
888 Seventh Avenue
New York, New York 10106-4100
Attention: Philip Galanes, General Counsel
Telephone: (212) 547-4466
Facsimile: (212) 547-6771
WITH A COPY TO:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Michael Becker, Esq.
Telephone: (212) 701-3000
Facsimile: (212) 269-5420
IF TO THE COLLATERAL AGENT:
Marine Midland Bank
Corporate Trust Services
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Department
Telephone: (212) 658-6433
Facsimile: (212) 658-6425
WITH A COPY TO:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Eric M. Hellige, Esq.
Telephone: (212) 421-4100
Facsimile: (212) 326-0806
7.4 SUCCESSORS AND ASSIGNS. This Security Agreement shall be binding upon
and inure to the benefit of the Company, the Collateral Agent, all future
holders of the Obligations and their respective successors and assigns, except
that the Company may not assign or transfer any of its rights or obligations
under this Security Agreement without the prior written consent of the
Collateral Agent or as otherwise permitted by the Indenture.
-20-
<PAGE>
7.5 WAIVERS AND AMENDMENTS. None of the terms or provisions of this
Security Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with the terms of Article Nine of the Indenture and, in the
case of amendments, supplements and other modifications affecting the rights of
Lenders under Paragraph 2.1(b), including, without limitation, definitions
relating thereto that affect such rights, with the written consent of Lenders,
as Lenders are third party beneficiaries under such paragraph. In the case of
any waiver, the Company and the Collateral Agent shall be restored to their
former position and rights hereunder and under the outstanding Obligations, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing, but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
7.6 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the
Collateral Agent in exercising any right, power or privilege hereunder and no
course of dealing between the Company and the Collateral Agent shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy which the Collateral Agent would otherwise
have on any future occasion. The rights and remedies herein expressly provided
are cumulative and may be exercised singly or concurrently and as often and in
such order as the Collateral Agent deems expedient and are in addition to any
other rights and remedies that the Collateral Agent would otherwise have whether
by security agreement or now or hereafter existing under applicable law. No
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Collateral Agent to any other or future
action in any circumstances without notice or demand.
7.7 TERMINATION; RELEASE. When the Obligations have been completely paid
and performed in full in accordance with Section 10.1 of the Indenture, this
Security Agreement shall terminate, and the Collateral Agent, at the request and
sole expense of the Company, and subject to and in accordance with the
applicable terms of the Indenture, will execute and deliver to the Company the
proper instruments (including, without limitation, UCC termination statements)
acknowledging the termination of this Security Agreement, and will duly assign,
transfer and deliver to the Company, without recourse, representation or
warranty of any kind whatsoever, such of the Collateral as may be in possession
of the Collateral Agent and that has not theretofore been disposed of, applied
or released, all in accordance with the terms and conditions of the Indenture
and the Collateral Agreements. In addition, so long as no Default or Event of
Default is continuing (with respect to a Released Interest other than in
connection with the immediately preceding sentence), the Collateral Agent, at
the request and sole expense of the Company, will execute and deliver to the
Company the proper instruments to effect the release of the Released Interests
in compliance with Section 12.4 of the Indenture.
7.8 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
-21-
<PAGE>
7.9 SEVERABILITY. In case any provision in or obligation under this
Security Agreement or the Obligations shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
7.10 COUNTERPARTS. This Security Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Security Agreement by
signing any such counterpart.
7.11 TRUSTEE CAPACITY. In acting as Collateral Agent hereunder, the
Collateral Agent shall benefit from and be entitled to all of the protections
and benefits of the terms set forth in Articles Six and Twelve of the Indenture.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered as of the date first above written.
GOLDEN BOOKS PUBLISHING COMPANY INC.
By: /s/ John C. Ferrara
-------------------------------------
Name: John C. Ferrara
Title: Chief Financial Officer
MARINE MIDLAND BANK, as Collateral Agent
By: /s/ Frank J. Godino
-------------------------------------
Name: Frank J. Godino
Title: Vice President
-23-
<PAGE>
SCHEDULE 1.1(a)
CHRISTMAS CLASSICS
The "Christmas Classics" shall mean:
1. All of the Company's proprietary rights in the properties listed in the
table below, in whole or in part, all copyrights therein, in whole or in
part, whether registered or unregistered, and whether or not the underlying
works of authorship have been published, and all works of authorship and
other rights therein or derived therefrom, and all Records relating
thereto; and all right, title and interest to make and exploit all
derivative works based upon or adopted from works, now owned or hereafter
acquired, covered by such copyrights, copyright registrations, copyright
applications and proprietary rights, and any renewals or extensions
thereof, including, without limitation, (a) the right to print, reproduce,
publish and distribute any of the foregoing, (b) the right to sue or
otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (c) all income, royalties, damages and other
payments now or hereafter due and/or payable with respect thereto
(including, without limitation, payments under all agreements and contracts
entered into in connection therewith, and damages and payments for past or
future infringements thereof), and (d) all rights of the Company
corresponding thereto throughout the world and all other rights of any kind
whatsoever of the Company accruing thereunder or pertaining thereto,
including, but not limited to, the following:
<TABLE>
<CAPTION>
PROPERTY REGISTRATION NO. RENEWAL NO.
<S> <C> <C>
Rudolf the Red Nosed Reindeer PA 393-260; registered 12/6/83 RE 578-253; renewed in 1992
Frosty the Snowman PA 393-253; registered 12/3/69 RE 752-663; renewed 1/10/97
Santa Claus Is Coming to Town PA 395-212; registered 12/13/70 not yet renewed
The Little Drummer Boy PA 392-705; registered RE 735-831; renewed 4/22/96
6/l/68
Frosty Returns the exclusive and perpetual right to distribute and subdistribute
throughout the world a one-half hour animated program presently entitled
FROSTY RETURNS, subject to all of the terms and conditions of an
agreement dated as of November 28, 1989, as amended, between T.E.
Acquisition Company, Inc. and CBS; Memorandum of Transfer as recorded in
the Copyright Office on March 15, 1993 in Volume 2879 at pages 107 -108.
</TABLE>
(hereinafter collectively referred to as "the Scheduled Copyrights 1.(a)").
<PAGE>
2. All agreements and contracts now owned or hereafter acquired, throughout
the world, with any other Person, in connection with or referring to, in
whole or in part, any of the rights set forth in paragraph 1 of this
schedule.
3. All trademarks, service marks, trade names, trade dress or other indicia of
trade origin relating to or used in connection with the Scheduled
Copyrights 1.1(a) set forth in paragraph 1 of this schedule, in whole or in
pail, including any trademark and service mark registrations, and
applications for trademark or service mark registrations and any renewals
thereof, and all Records relating thereto, throughout the world, now owned
or hereafter acquired, including, without limitation, (a) the right to sue
or otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all agreements and contracts
entered into in connection therewith, and damages and payments for past or
future infringements thereof), and (c) the right to use and register and
all rights corresponding thereto and all other rights of any kind
whatsoever of the Company accruing thereunder or pertaining thereto,
together, in each case, with the goodwill of the business connected with
the use of, and symbolized by, each such trademark, service mark, trade
name, trade dress or other indicia of trade origin (hereinafter
collectively referred to as "the Scheduled Trademarks 1. 1 (a)"). The term
"the Scheduled Trademarks 1.1(a)" as used herein shall not include any
trademarks, service marks, trade names, trade dress or other indicia of
origin that are used solely to identify the Company, including, but not
limited to, GOLDEN BOOKS, the G Design and the distinctive gold spine.
4. All agreements and contracts now owned or hereafter acquired, throughout
the world, with any other Person in connection with or referring to, in
whole or in part, any of the rights set forth in paragraph 3 of this
schedule.
<PAGE>
SCHEDULE 1.1(b)
LONE RANGER
The "Lone Ranger" shall mean:
1. All of the Company's proprietary rights in the properties listed in the
attached Schedule of Copyrights, in whole or in part, all copyrights
therein, in whole or in part, whether registered or unregistered, and
whether or not the underlying works of authorship have been published, and
all works of authorship and other rights therein or derived therefrom, and
all Records relating thereto; and all right, title and interest to make and
exploit all derivative works based upon or adopted from works, now owned or
hereafter acquired, covered by such copyrights, copyright registrations,
copyright applications and proprietary rights, and any renewals or
extensions thereof, including, without limitation, (a) the right to print,
reproduce, publish and distribute any of the foregoing, (b) the right to
sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (c) all income, royalties,
damages and other payments now or hereafter due and/or payable with respect
thereto (including, without limitation, payments under all agreements and
contracts entered into in connection therewith, and damages and payments
for past or future infringements thereof), and (d) all rights of the
Company corresponding thereto throughout the world and all other rights of
any kind whatsoever of the Company accruing thereunder or pertaining
thereto, including, but not limited to, the copyrights set forth in the
Schedule of Copyrights annexed hereto (hereinafter collectively referred to
as "the Scheduled Copyrights 1. 1 (b)").
2. All agreements and contracts now owned or hereafter acquired, throughout
the world, with any other Person, in connection with or referring to, in
whole or in part, any of the rights set forth in paragraph 1 of this
schedule.
3. All trademarks, service marks, trade names, trade dress or other indicia of
trade origin relating to or used in connection with the Scheduled
Copyrights 1.1(b) set forth in paragraph 1 of this schedule, in whole or in
part, including any trademark and service mark registrations, and
applications for trademark or service mark registrations and any renewals
thereof, and all Records relating thereto, throughout the world, now owned
or hereafter acquired, including, without limitation, (a) the right to sue
or otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all agreements and contracts
entered into in connection therewith, and damages and payments for past or
future infringements thereof), and (c) the right to use and
<PAGE>
register and all rights corresponding thereto and all other rights of any
kind whatsoever of the Company accruing thereunder or pertaining thereto,
together, in each case, with the goodwill of the business connected with
the use of, and symbolized by, each such trademark, service mark, trade
name, trade dress or other indicia of trade origin, including, but not
limited to, those set forth in the Schedule of Trademarks annexed hereto
(hereinafter collectively referred to as "the Scheduled Trademarks
1.1(b)"). The term "the Scheduled Trademarks 1.1(b)" as used herein shall
not include any trademarks, service marks, trade names, trade dress or
other indicia of origin that are used solely to identify the Company,
including, but not limited to, GOLDEN BOOKS, the G Design and the
distinctive gold spine.
4. All agreements and contracts now owned or hereafter acquired, throughout
the world, with any other Person, in connection with or referring to, in
whole or in part, any of the rights set forth in paragraph 3 of this
schedule.
<PAGE>
LONE RANGER Trademarks
<TABLE>
<CAPTION>
Country Mark Reg. No./(Appl. No.) Reg. Date/(Filing Date) Class
<S> <C> <C> <C> <C>
USA LONE RANGER 850,146 6/4/68 28
LONE RANGER 2,116,491 11/25/97 25
THE LONE RANGER 1,314,682 1/15/85 21
THE LONE RANGER 770,539 5/26/64 41
THE LONE RANGER 365,670 3/14/39 16
LONE RANGER (74/370,704) (3/22/93) 9
LONE RANGER (74/366,207) (3/9/93) 16
LONE RANGER (74/390,778) (5/17/93) 28
LONE RANGER (75/131,669) (7/9/96) 3
SILVER 1,802,750 11/2/93 21
Lone Ranger Theme Music (74/639,801) (2/22/95) 41
Lone Ranger Theme Music (74/639,802) (2/22/95) 9
Australia LONE RANGER A337415 1/14/58 16
LONE RANGER A337416 9/4/79 28
LONE RANGER & Al35276 1/14/58 16
Design
LONE RANGER & Al35277 1/14/79 29
Design
LONE RANGER & A267698 1/14/58 30
Design
LONE RANGER & A267699 1/14/58 31
Design
LONE RANGER & A267700 1/14/58 32
Design
Austria LONE RANGER 135808 5/15/91 9,16,25,28,30
Benelux LONE RANGER 302514 2/2/71 9,16,25,28
Canada LONE RANGER 164396 8/l/69
LONE RANGER 262736 10/2/81
LONE RANGER 320299 11/7/86
THE LONE RANGER 306644 9/6/85
HI-YO-SILVER 320949 11/21/86
TONTO 320950 11/21/86
Denmark LONE RANGER 271/1983 1/28/83 9,16,25,28
Finland LONE RANGER 81353 4/20/82 9,16
France THE LONE RANGER 1511443 1/27/89 9,16,25,28,41
UK LONE RANGER 1120271 9/7/86 14
LONE RANGER 769768 10/3/78 16
LONE RANGER 769769 10/3/78 30
LONE RANGER 683037 10/10/49 28
LONE RANGER 1147875 1/30/81 14
LONE RANGER 2043434 11/3/95 9
LONE RANGER (2017896) (4/19/95) 25
HI-YO SILVER 1304179 8/28/90 9
TONTO 1318390 8/10/87 9
Germany LONE RANGER 871678 1/23/88 9,16
Greece LONE RANGER 53414 9/8/81 28
Hong Kong LONE RANGER 943/1980 9/7/79 28
LONE RANGER 944/1980 9/7/79 30
THE LONE RANGER 946/1980 9/7/79 16
THE LONE RANGER 945/1980 9/7/79 9
TONTO 2575/1988 3/27/87 9
Page 1
<PAGE>
India LONE RANGER 353470 9/13/79 28
THE LONE RANGER 353471 9/13/79 9
THE LONE RANGER 353472 9/13/79 16
Ireland LONE RANGER 96793 9/6/79 28
THE LONE RANGER 96792 9/6/79 16
THE LONE RANGER 96791 9/6/79 9
Israel LONE RANGER 48595 9/10/79 14
LONE RANGER 48598 9/10/79 28
LONE RANGER 48597 9/10/79 25
THE LONE RANGER 48596 9/10/79 16
THE LONE RANGER 48594 9/10/79 9
Italy LONE RANGER 268078 2/28/73 9,16,25,28
LONE RANGER 378918 11/15/85 14,30
Jamaica LONE RANGER 21137 9/26/79 28
THE LONE RANGER 21307 9/26/79 9
THE LONE RANGER 20008 9/26/79 16
Japan LONE RANGER 2284319 11/30/90 9
LONE RANGER 2243395 7/30/90 28
LONE RANGER (4141/94) (1/18/94) 16
HI-YO-SILVER 2243613 7/30/90 9
TONTO 2243612 7/30/90 16
HI-YO-SILVER 157739 8/2/88 9
TONTO 157719 8/1/88 9
Macao THE LONE RANGER 5469 9/2/96 9
New Zealand LONE RANGER 129398 9/3/79 30
LONE RANGER 129394 9/3/79 14
LONE RANGER 129397 9/3/79 28
LONE RANGER 129396 9/3/79 25
THE LONE RANGER 129393 9/3/79 9
THE LONE RANGER 129395 9/3/79 16
Norway LONE RANGER 112827 1/13/83 9,16,25,28
Peru THE LONE RANGER 99073 8/26/92 9
Portugal LONE RANGER 279636J 10/20/93 28
THE LONE RANGER 203713G 12/12/94 9
THE LONE RANGER 279635 10/20/93 16
Singapore LONE RANGER 81975 9/5/79 28
THE LONE RANGER 81973 9/5/79 9
THE LONE RANGER 81974 9/5/79 16
Spain EL LLANERO SOLITARIO 989487 11/20/82 28
LONE RANGER 917501 7/5/80 25
THE LONE RANGER 917414 7/5/80 16
Sweden LONE RANGER 177610 7/31/81 9,16,25,28
LONE RANGER 159683 6/3/77 28
Switzerland LONE RANGER 306628 9/5/79 9,16,28
Venezuela LONE RANGER 101990-f 4/15/83 28
LONE RANGER 102211 5/27/83 16
LONE RANGER 102794 9/1/83 25
CTM THE LONE RANGER (171850) (4/1/96) 9,16,25,28
</TABLE>
Page 2
<PAGE>
SCHEDULE 1.1(c)
UNDERDOG
"Underdog" shall mean:
1. All of the Company's proprietary rights in the animated series "Underdog"
and the property registered in the United States Copyright Office on
4/29/83 by Registration No. PA 301-494, and renewed on 10/16/89 by Renewal
No. RE 442-154, in whole or in part, all copyrights therein, in whole or in
part, whether registered or unregistered, and whether or not the underlying
works of authorship have been published, and all works of authorship and
other rights therein or derived therefrom, and all Records relating
thereto; and all right, title and interest to make and exploit all
derivative works based upon or adopted from works, now owned or hereafter
acquired, covered by such copyrights, copyright registrations, copyright
applications and proprietary rights, and any renewals or extensions
thereof, including, without limitation, (a) the right to print, reproduce,
publish and distribute any of the foregoing, (b) the right to sue or
otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (c) all income, royalties, damages and other
payments now or hereafter due and/or payable with respect thereto
(including, without limitation, payments under all agreements and contracts
entered into in connection therewith, and damages and payments for past or
future infringements thereof), and (d) all rights of the Company
corresponding thereto throughout the world and all other rights of any kind
whatsoever of the Company accruing thereunder or pertaining thereto,
including, but not limited to, "Underdog", registered in the United States
Copyright Office on 4/29/83 by Registration No. PA 301-494, and renewed on
10/16/89 by Renewal No. RE 442-154 (hereinafter collectively referred to as
"the Scheduled Copyrights 1.1(c)").
2. All agreements and contracts now owned or hereafter acquired, throughout
the world, with any other Person, in connection with or referring to, in
whole or in part, any of the rights set forth in paragraph 1 of this
schedule.
3. All trademarks, service marks, trade names, trade dress or other indicia of
trade origin relating to or used in connection with the Scheduled
Copyrights 1.1(c) set forth in paragraph 1 of this schedule, in whole or in
part, including any trademark and service mark registrations, and
applications for trademark or service mark registrations and any renewals
thereof, and all Records relating thereto, throughout the world, now owned
or hereafter acquired, including, without limitation, (a) the right to sue
or otherwise recover for any and all past, present and future infringements
and misappropriations thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments
<PAGE>
under all agreements and contracts entered into in connection therewith,
and damages and payments for past or future infringements thereof), and (c)
the right to use and register and all rights corresponding thereto and all
other rights of any kind whatsoever of the Company accruing thereunder or
pertaining thereto, together, in each case, with the goodwill of the
business connected with the use of, and symbolized by, each such trademark,
service mark, trade name, trade dress or other indicia of trade origin,
including, but not limited to, the following:
TRADEMARK REGISTRATION / APPLICATION NO.
DESIGN (Underdog) Application No. 75/167,392
DESIGN (Underdog) Application No. 75/167,388
DESIGN (Underdog) Application No. 75/167,387
DESIGN (Underdog) Application No. 75/167,386
UNDERDOG Registration No. 2,145,933
UNDERDOG Application No. 75/167,390
UNDERDOG Application No. 75/167,385
UNDERDOG Application No. 75/167,383
(hereinafter collectively referred to as "the Scheduled Trademarks
1.1(c)"). The term "the Scheduled Trademarks 1.1(c)" as used herein
shall not include any trademarks, service marks, trade names, trade
dress or other indicia of origin that are used solely to identify the
Company, including, but not limited to, GOLDEN BOOKS, the G Design and
the distinctive gold spine.
4. All agreements and contracts now owned or hereafter acquired,
throughout the world, with any other Person, in connection with or
referring to, in whole or in part, any of the rights set forth in
paragraph 3 of this schedule.
<PAGE>
Schedule 2.1(a)(i)
EXCLUDED COPYRIGHT LICENSES AND TRADEMARK LICENSES
1. Agreement dated December 26, 1995 between Golden Books Entertainment Group
and Fox Family Films concerning the development and possible production of
a theatrical motion picture project entitled "The Lone Ranger" to the
extent that said agreement is not assignable by the Company (except that
all proceeds payable to the Company under the Agreement are not excluded).
<PAGE>
Exhibit D
Mortgagee Waiver
June 2, 1998
Marine Midland Bank, as Trustee
Corporate Trust Services
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Department
Re: Golden Books Publishing Company, Inc. (the "Company")
Gentlemen:
NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL
FUNDING DIVISION ("Lender"), wishes to inform you that Lender and the Company
have entered, or may enter, into various agreements, instruments and documents,
including a Loan and Security Agreement of even date herewith and related loan
documents (collectively, the "Financing Agreements") providing for loans and
advances by Lender to or for the benefit of the Company, to be secured by
security interests in certain of the Company's assets, as described on Exhibit A
hereto and hereafter acquired property of the same nature (the "Collateral").
The Company has indicated that certain of the Collateral may, from time to time,
be located on the premises commonly known as 803 North Engelwood Drive,
Crawfordsville, Indiana (the "Premisies"). Lender has been informed that you are
the Trustee under the Indenture dated as of September 15, 1992 among the
Company, certain guarantors and you, as Trustee, governing the Company's 7.65%
Senior Notes due 2002 (the "Notes"), and that the Notes are secured by a
mortgage on the Premises (the "Mortgage"), which mortgage also grants to you a
first priority lien upon all personal property located on the Premises other
than the Collateral (the "Mortgage Collateral"), which lien Lender acknowledges
to be superior in interest with respect to any interest Lender may have in the
Mortgage Collateral. Lender further acknowledges that in the event of a default
by the Company under any of the Financing Agreements, Lender shall have no
rights with respect to the Mortgage Collateral or, if Lender shall have any
rights with respect to the Mortgage Collateral, such rights shall be subordinate
to any rights you may have with respect thereto in accordance with the Mortgage.
As one of the conditions to making loans and advances to the Company,
Lender requests that, if and to the extent that you shall be in possession of or
otherwise in control of the Premises, you agree as follows:
<PAGE>
1. Upon reasonable notice to you, Lender may have access to the Premises
for the purpose of reviewing all portions of any books and records located at
the Premises relating to the Company, and exercising its rights under the
Financing Agreements with respect to all Collateral contained thereon without
any objection, delay, hindrance or interference by you; provided that Lender, is
exercising its rights hereunder, shall minimize interference with the operation
of the Premises.
2. In the event of default by the Company under the Financing Agreements,
Lender, upon three (3) business days written notice to you, which notice may be
delivered to you at the address first set forth above by overnight courier, may
remove the Collateral from the Premises without any objection, delay, hindrance
or interference by you; provided that Lender, in exercising its rights
hereunder, shall minimize interference with the operation of the Premises. In
the event of such default and after having given such notice, Lender shall have
the right, during normal business hours, to enter upon the Premises to assemble,
appraise, display, remove, maintain, prepare for sale or lease, repair, lease,
transfer and sell the Collateral.
3. Lender shall repair any damage to the Premises caused by the removal of
any property by Lender, and such removal shall be at Lender's expense.
Please acknowledge your agreement to the terms of this letter by executing
this letter in the space provided below and returning a copy to NationsCredit
Commercial Corporation, through its NationsCredit Commercial Funding Division,
1177 Avenue of the Americas, 36th Floor, New York, New York 10036, Attention:
Nancy Kagan. This letter shall be binding upon, and inure to the benefit of, the
successors and assigns of each party hereto.
Very truly yours,
NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION
By /s/ Robert Bellish
--------------------------------------------
Its Vice President
--------------------------------------------
-2-
<PAGE>
Accepted and Agreed to this 2nd of
June, 1998
MARINE MIDLAND BANK, as Trustee
By /s/ Frank J. Godino
------------------------------------
Frank J. Godino
Its Vice President
------------------------------------
-3-
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
)SS.
COUNTY OF NEW YORK )
I, Maureen P. Murphy, a Notary Public in and for and residing in said
County and State, DO HEREBY CERTIFY THAT Frank J. Godino of Marine Midland Bank,
a New York banking and Trust company, personally known to me to be the same
person whose name is subscribed to the foregoing instruments, appeared before me
this day in person and acknowledged that he signed and delivered said instrument
as his own free and voluntary act as the free and voluntary act of said
corporation for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this 2nd day of June, 1998.
/s/ Maureen P. Murphy
-------------------------------------
Notary Public
[Notarial Seal]
My Commission Expires:
3/30/99
--------------------------------------
-4-
<PAGE>
EXHIBIT A
MORTGAGEE WAIVER BETWEEN MARINE MIDLAND BANK, AS TRUSTEE
AND NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING DIVISION
All of Company'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) any right to payment for goods sold or leased or for services
rendered by Company's Children's Publishing Division which is not evidenced
by an instrument or chattel paper, whether or not it has been earned by
performance ("Accounts"), excluding Accounts relating to Company's
Christmas Classics, Long Ranger and Underdog properties;
(ii) all chattel paper and documents relating toe Company's Children's
Publishing Division, excluding chattel paper and documents relating to
Company's Christmas Classics, Lone Ranger and Underdog properties;
(iii) all goods held for sale or lease or furnished or to be furnished
under contracts of service in connection with Company'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 ("Inventory"), excluding all Inventory relating
to Company's Christmas Classics, Lone Ranger and Underdog properties;
(iv) all proceeds and products of all of the foregoing (including
proceeds of any insurance policies, proceeds of proceeds and claims against
third parties for loss or any destruction of any of the foregoing; and
(v) all books and records relating to any of the foregoing.
All terms used above, unless otherwise indicated, shall have the meanings
provided by the Uniform Commercial Code as adapted and in effect in the State of
Illinois on the date of this filing, to the extent such terms are defined
therein.
-5-
REGISTRATION RIGHTS AGREEMENT
Dated as of June 2, 1998
among
GOLDEN BOOKS PUBLISHING COMPANY, INC.,
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.
and
MARINE MIDLAND BANK, as Trustee on Behalf of
The Participating Holders
<PAGE>
REGISTRATION RIGHTS AGREEMENT
PREAMBLE
This Registration Rights Agreement (this "Agreement") is dated as of June
2, 1998, by and among GOLDEN BOOKS PUBLISHING COMPANY, INC., a Delaware
corporation (the "Company"), GOLDEN BOOKS FAMILY ENTERTAINMENT, INC., a Delaware
corporation and the parent of the Company ("Parent"), and MARINE MIDLAND BANK,
as trustee (the "Trustee") on behalf of the Participating Holders. The Company
and Parent shall be referred to herein collectively as the "Issuers".
This Agreement is made pursuant to that certain Amendment Agreement, dated
as of the date hereof, delivered by the Company and Parent to the Trustee (the
"Amendment Agreement") relating to (a) the amendment by the Company pursuant to
a Second Supplemental Indenture (the "Supplemental Indenture") with respect to
the Indenture dated September 15, 1992 between the Company and the Trustee, as
amended, governing the Company's 7.65% Senior Notes due 2002 (the "Notes") and
(b) the issuance by Parent of a guarantee of the Company's obligations with
respect to the Notes (the "Guarantee") as such Guarantee is set forth in the
Supplemental Indenture. In order to induce the Participating Holders to enter
into the Supplemental Indenture, the Issuers have agreed to provide the
registration rights set forth in this Agreement for the benefit of the
Participating Holders and their direct and indirect transferees.
The parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
Additional Payments: As defined in Section 3 below.
Advice: As defined in Section 4 below.
Agreement: As defined in the Preamble.
Amendment Agreement: As defined in the Preamble.
Commission: The Securities and Exchange Commission.
<PAGE>
-3-
Company: As defined in the Preamble.
DTC: As defined in Section 4 below.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
Guarantee: As defined in the Preamble.
Indemnified Person: As defined in Section 6 below.
Indemnifying Person: As defined in Section 6 below.
Issuers: As defined in the Preamble.
Notes: As defined in the Preamble.
Parent: As defined in the Preamble.
Participant: As defined in Section 6 below.
Participating Holders: Holders of Notes who delivered valid consents
to the Supplemental Indenture and their beneficial owners and their
respective direct and indirect transferees.
Prospectus: The prospectus included in the Registration Statement.
Registrable Securities: The Parent Guarantee of those Notes held by
Participating Holders, until (i) the Registration Statement has been
declared effective by the Commission and such Registrable Securities have
been disposed of in accordance with such effective Registration Statement,
(ii) such Registrable Securities are sold in compliance with Rule 144 under
the Securities Act or would be permitted to be sold pursuant to Rule
144(k), or (iii) such Registrable Securities cease to be outstanding.
Registration Effectiveness Deadline: As defined in Section 3 below.
<PAGE>
-4-
Registration Default: As defined in Section 3 below.
Registration Effectiveness Period: As defined in Section 2 below.
Registration Statement: As defined in Section 2 below.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
Supplemental Indenture: As defined in the Preamble.
TIA: As defined in Section 4 below.
Trustee: As defined in the Preamble.
Underwritten registration or underwritten offering: A registration in
which Registrable Securities are sold to an underwriter for reoffering to
the public.
Section 2. Registration Statement.
The Issuers will use their best efforts to file with the Commission and to
cause to become effective, as soon as reasonably practicable, and in any event,
within 120 days of the date of this Agreement, a registration statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all
Registrable Securities (including all amendments and supplements thereto, all
exhibits thereto and all materials incorporated by reference therein, the
"Registration Statement"). The Registration Statement shall be on Form S-3 (if
available) or another appropriate form permitting registration of Registrable
Securities for resale by the Participating Holders in the manner or manners
designated by them (including, without limitation, one or more underwritten
offerings). The Issuers will use their best efforts to keep the Registration
Statement continuously effective under the Securities Act until that date which
is 24 months from the Effective Date (such 24 months, as extended as provided
herein, the "Registration Effectiveness Period"), or such earlier date on which
all Registrable Securities covered by the Registration Statement have been sold
in the manner set forth and as contemplated in the Registration Statement. The
Issuers shall promptly amend and supplement the Registration Statement if
required by the rules, regulations or instructions applicable to the form used
for the Registration Statement or if required by applicable law.
<PAGE>
-5-
Section 3. Additional Payments.
If either:
(a) the Registration Statement has not been declared effective under
the Securities Act by the 121st day after the Effective Date (the
"Registration Effectiveness Deadline"); or
(b) after the Registration Statement is declared effective under the
Securities Act, the Registration Statement ceases to be effective at any
time during the Registration Effectiveness Period or fails to be usable for
its intended purpose without being succeeded immediately by a
post-effective amendment that cures such failure (either (a) or (b), a
"Registration Default"),
then, until (i) in the case of clause (a), the Registration Statement is
declared effective or (ii) in the case of clause (b), the end of the
Registration Effectiveness Period or the effectiveness of the Registration
Statement, additional payments ("Additional Payments") will accrue as liquidated
damages on the Notes then outstanding in an amount equal to $0.05 per week (or
portion thereof) per $1,000 principal amount of the Notes for the first 90 days
following Registration Default, which amount shall increase by an additional
$0.05 per week (or portion thereof) per $1,000 principal amount of the Notes at
the beginning of each subsequent 90-day period (up to a maximum of $0.25 per
week (or portion thereof) per $1,000 principal amount of the Notes).
The Company will pay any accrued Additional Payments on each scheduled
interest payment date for the Notes to the holders of record on the record date
for such interest payment (as set forth in the Notes) in the same manner as the
Company pays interest on the Notes.
Section 4. Registration Procedures.
(a) Before filing the Registration Statement or Prospectus or any
amendments or supplements thereto, the Issuers shall (upon written request)
furnish to and afford the Participating Holders, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents proposed to be filed.
(b) The Issuers will notify the selling Participating Holders, their
counsel and the managing underwriters,
<PAGE>
-6-
if any, who have provided the Issuers with their names and addresses
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when the Prospectus or any supplement or
post-effective amendment thereto has been filed, and when the Registration
Statement or any post-effective amendment thereto has become effective
under the Securities Act, (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or
the initiation of any proceedings for that purpose, (iii) of the receipt by
the Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (iv)
of the happening of any event or any information that becomes known that
makes any statement made in the Registration Statement or the Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in the Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (v) of
the Issuers' reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(c) The Issuers hereby consent to the use of the Prospectus and each
amendment or supplement thereto by each of the selling Participating
Holders and the underwriters or agents, if any, and dealers, if any, in
connection with the offering and sale of the Registrable Securities covered
by the Prospectus and any amendment or supplement thereto.
(d) Upon the occurrence of any event contemplated by Section 4(b)(iv)
or (v), the Issuers will as promptly as practicable prepare and (subject to
paragraph (a)) file with the Commission, solely at the Issuers' expense, a
<PAGE>
-7-
supplement or post-effective amendment to the Registration Statement or a
supplement to the Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(e) In connection with an underwritten offering of Registrable
Securities, the Issuers will enter into an underwriting agreement as is
customary in underwritten offerings and take all such other actions as are
reasonably requested by the managing underwriters in order to expedite or
facilitate the registration or the disposition of such Registrable
Securities, and in such connection, (i) make such representations and
warranties to the underwriters, with respect to the business of the Issuers
and their subsidiaries and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters
in underwritten offerings and consistent with past practices of the Issuers
and their affiliates, and confirm the same if and when requested; (ii) use
their best efforts to obtain an opinion of counsel to the Issuers in form
and substance reasonably satisfactory to the managing underwriters,
addressed to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings and consistent with past
practices of the Issuers and their affiliates; (iii) use their best efforts
to obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters from the independent
certified public accountant(s) of the Issuers, addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and consistent with past practices of the Issuers
and their affiliates; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 6 of this Agreement (or such
other provisions and procedures acceptable to the Issuers and to the
holders of a majority in aggregate principal amount of Registrable
<PAGE>
-8-
Securities and the managing underwriters or agents) with respect to all
parties to be indemnified pursuant to said paragraph. The above shall be
done at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(f) The Issuers may require each seller of Registrable Securities to
furnish to the Issuers such information regarding such seller and the
distribution of such Registrable Securities as the Issuers may, from time
to time, reasonably request. The Issuers may exclude from the Registration
Statement Registrable Securities of any seller that fails to furnish such
information within a reasonable time after receiving such request. Each
seller as to which the Registration Statement is being effected is deemed
to agree to furnish promptly to the Issuers all information required to be
disclosed in order to make the information previously furnished to the
Issuers by such seller not materially misleading.
(g) The Issuers shall, upon request, make available, during regular
business hours and upon reasonable notice, for inspection by one designated
representative of the selling Participating Holders, the underwriters
participating in any disposition pursuant to such Registration Statement,
and any one firm of attorneys or accountants retained by such selling
Participating Holders or underwriter(s) (the foregoing persons being
referred to herein collectively as the "Inspectors"), all material
financial and other records, pertinent corporate documents and properties
of the Issuers (such records, corporate documents, properties and
information being referred to herein as "Records"), and cause the Issuers'
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such Registration
Statement subsequent to the filing thereof and prior to its effectiveness.
Records determined in good faith by the Issuers to be confidential shall
not be disclosed by any Inspector notified of such determination unless (1)
the disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in the Registration Statement, (2) the release of
such Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (3) the information in such Records has been
made generally available to the public in a manner that does not otherwise
involve a breach of any confidentiality obligation by any party. Each
selling Participating Holder will be required to agree that infor-
<PAGE>
-9-
mation obtained by it or its representative as a result of such inspections
shall be deemed confidential. Each selling Participating Holder will be
required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice to
the Issuers and allow them at their own expense to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(h) The Issuers shall, if requested in writing by any selling
Participating Holders or the underwriter(s), if any, promptly incorporate
in any Registration Statement or Prospectus, pursuant to a Prospectus
supplement or post-effective amendment if necessary, such information as
such selling Participating Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Registrable
Securities, information with respect to the principal amount of Registrable
Securities being sold to such underwriter(s), the purchase price being paid
therefor and any other material terms of the offering of the Registrable
Securities to be sold in such offering; and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
practicable after the Issuers are notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(i) The Issuers shall furnish to each selling Participating Holder and
each of the underwriter(s), if any, without charge, as many copies of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein (but excluding exhibits unless expressly requested) as such persons
may reasonably request.
(j) The Issuers shall deliver to each selling Participating Holder and
each of the underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request.
(k) The Issuers shall, prior to any public offering of Registrable
Securities, cooperate with the selling Participating Holders, the
underwriter(s), if any, and their respective counsel in connection with the
registration and qualification of the Registrable Securities under the
se-
<PAGE>
-10-
curities or Blue Sky laws of such jurisdictions as the selling
Partiicpating Holders or underwriter(s) may request and do any and all
other reasonable acts or things necessary or advisable to enable the
disposition in such jurisdictions of the transfer of Registrable Securities
covered by the Registration Statement; provided, however, that the Issuers
shall not be required to register or qualify as a foreign corporation where
they are not so qualified or to take any action that would subject them to
the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where they are not now so subject.
(l) The Issuers shall cooperate with the selling Participating Holders
and the underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities
to be in such denominations and registered in such names as the selling
Participating Holders or the underwriter(s), if any, may request at least
two business days prior to consummation of any sale or Registrable
Securities made by such selling Participating Holders or underwriter(s).
(m) The Issuers shall cooperate and assist in any filings required to
be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules
and regulations of the NASD, and use their reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
selling Participating Holders to consummate the disposition of such
Registrable Securities.
(n) The Issuers shall otherwise use their best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to the selling Participating Holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158 (which
need not be audited) for the twelve-month period (A) commencing at the end
of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts underwritten offering or (B) if not
sold to underwriters in such an offering, beginning
<PAGE>
-11-
with the first month of the Company's first fiscal quarter after the
effective date of the Registration Statement.
(o) The Issuers shall, if applicable, cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended (the "TIA") not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the Trustee
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use their best efforts to cause the Trustee to execute, all
documents that may be required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner.
(p) Each selling Participating Holder agrees that, upon receipt of any
notice from the Issuers of the happening of any event of the kind described
in Section 4(b)(ii), (iii), (iv) or (v), such selling Participating Holder
shall forthwith discontinue disposition of Registrable Securities until
such selling Participating Holder's receipt of the copies of the amended or
supplemented Prospectus contemplated by Section 4(d), or until such selling
Participating Holder is advised in writing (the "Advice") by the Issuers
that the use of the applicable Prospectus may be resumed, and such selling
Participating Holder has received copies of any amendments or supplements
thereto. In the event the Company shall give any such notice, the
Registration Effectiveness Period shall be extended by the number of days
during the period from and including the date of the giving of such notice
to and including the earlier to occur of the date when each selling
Participating Holder covered by such Registration Statement shall have
received (i) the copies of the supplemental or amended Prospectus
contemplated by Section 4(d) hereof or (ii) the Advice. For purposes of
this Section 4(p), "receipt" shall be deemed to occur, if notices or
materials are delivered (X) by fax or by hand, the same business day that
notices or materials are so delivered, (Y) by overnight courier, the next
business day after notices or materials are so delivered and (Z) via the
United States postal service, the third business day after notices or
materials are posted.
<PAGE>
-12-
Section 5. Registration Expenses.
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or
not the Registration Statement is filed or becomes effective, including,
without limitation, (i) all registration and filing fees, (ii) any printing
expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel and independent auditors for the Issuers, (v) fees
and expenses of all other persons retained by the Issuers, and (vi) the
reasonable expenses relating to printing, word processing and distributing
all Registration Statements, underwriting agreements, securities sales
agreements, indentures and any other documents necessary in order to comply
with this Agreement; provided, however, that notwithstanding the foregoing,
the Issuers will not be responsible for any underwriter's discounts,
commissions or fees attributable to the sale of Registrable Securities.
(b) The Issuers shall reimburse holders of Registrable Securities
being registered in the Registration Statement for the reasonable fees and
disbursements of not more than one counsel chosen by the holders of a
majority in aggregate principal amount of Registrable Securities being so
registered, subject to the reasonable approval of the Issuers. Such holders
shall be responsible for any and all other out-of-pocket expenses of the
holders of Registrable Securities incurred in connection with the
registration of Registrable Securities.
Section 6. Indemnification.
(a) The Issuers agree to indemnify and hold harmless each
Participating Holder and each person, if any, who controls any such
Participating Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"),
from and against any and all losses, claims, damages and liabilities
(including, without limitation, the reasonable legal fees and other
expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
(or any amendment thereto) or Prospectus (as amended or supplemented if the
Issuers shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to
<PAGE>
-13-
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Company or Parent
in writing by such Participant expressly for use therein; provided,
however, that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Participant from whom the
person asserting any such losses, claims, damages or liabilities purchased
Registrable Securities if such untrue statement or omission or alleged
untrue statement or omission made in such preliminary prospectus is
eliminated or remedied in the related Prospectus (as amended or
supplemented if the Issuers shall have furnished any amendments or
supplements thereto) and a copy of the related Prospectus (as so amended or
supplemented) shall not have been furnished to such person at or prior to
the sale of such Registrable Securities to such person.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Issuers, their directors,
officers and each person who controls the Issuers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Issuers to each
Participant, but only with reference to information relating to such
Participant furnished to the Company or Parent in writing by such
Participant expressly for use in any Registration Statement or Prospectus,
any amendment or supplement thereto, or any preliminary prospectus. The
liability of any Participant under this paragraph shall in no event exceed
the proceeds received by such Participant from sales of Registrable
Securities giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnity may
be sought (the "Indemnifying Person") in writing (provided that the failure
to give such notice shall not limit the rights of such Indemnified Person
ex-
<PAGE>
-14-
cept to the extent such failure to give notice shall materially prejudice
the rights of the Indemnifying Person), and the Indemnifying Person, upon
request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person
and any others the Indemnifying Person may designate in such proceeding and
shall pay the reasonable fees and expenses actually incurred by such
counsel related to such proceeding. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed
within a reasonable time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and
the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the
Participants and such control persons of Participants shall be designated
in writing by Participants who sold a majority in interest of Registrable
Securities sold by all such Participants and any such separate firm for the
Issuers, their directors, officers and such control persons of the Issuers
shall be designated in writing by the Issuers. The Indemnifying Person
shall not be liable for any settlement of any proceeding effected without
its written consent, provided, however, that such written consent was not
unreasonably withheld.
(d) If the indemnification provided for in paragraph (a) or (b) of
this Section 6 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the Issuers on the one hand and the Participants
<PAGE>
-15-
on the other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Issuers on the
one hand and the Participants on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers or by the Participants and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro rata allocation (even if the
Participants were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any reasonable legal or
other expenses actually incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Securities exceeds the amount of any
damages that such Participant has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in this Section 6
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
Section 7. Underwritten Registrations.
(a) If any Registrable Securities covered by any Registration
Statement are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be
<PAGE>
-16-
selected by the holders of a majority in aggregate principal amount of
Registrable Securities included in such offering, subject to the reasonable
approval of the Issuers.
(b) No Participating Holder may participate in any underwritten
registration hereunder unless such Participating Holder (i) agrees to sell
such ParticipatingHolder's Registrable Securities on the basis provided in
any underwriting arrangements approved by the Issuers and the Holders of a
majority in aggregate principal amount of Registrable Securities included
in such offering and (ii) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
Section 8. 144A.
The Issuers hereby agree with each Participating Holder, for so long
as any Registrable Securities remain outstanding, to make available to any
Participating Holder or beneficial owner of Registrable Securities in
connection with any sale thereof and any prospective purchaser of such
Registrable Securities in connection with any sale thereof and any
prospective purchaser of such Registrable Securities from such
Participating Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Securities pursuant to Rule 144A.
Section 9. Miscellaneous Provisions.
(a) Successors and Assigns; Binding Effect of Indenture. The terms and
provisions of this Agreement shall be binding upon and inure to the benefit
of (i) the parties hereto and their respective successors and assigns and
(ii) the Participating Holders and their respective successors and assigns,
including, without limitation, and without the need for an express
assignment, subsequent direct and indirect transferees of Participating
Holders.
(b) Counterparts. This Agreement may be executed and delivered via
facsimile, in any number of counterparts, each of which shall be a valid
and binding original, but all of which together shall constitute one and
the same instrument.
<PAGE>
-17-
(c) Amendment. This Agreement may be amended only by an agreement in
writing signed by each party hereto.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
(e) Enforcement by Participating Holders. This Agreement may be
enforced directly by the Participating Holders. It is expressly agreed that
the Trustee has no duties or obligations to take any action on behalf of
the Participating Holders or otherwise under this Agreement and that the
Trustee is executing this Agreement solely on behalf of the Participating
Holders pursuant to the terms of the Supplemental Indenture.
<PAGE>
-18-
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed by their duly authorized representatives as of this
1st day of June, 1998.
GOLDEN BOOKS PUBLISHING COMPANY, INC.,
as the Company
By:/s/ John C. Ferrara
----------------------------------------
Name: John C. Ferrara
Title: Executive Vice President and
Chief Financial Officer
GOLDEN BOOKS FAMILY ENTERTAINMENT, INC.,
as Parent
By:/s/ John C. Ferrara
----------------------------------------
Name: John C. Ferrara
Title: Executive Vice President and
Chief Financial Officer
MARINE MIDLAND BANK, as trustee
on behalf of the Participating Holders
By:/s/ Frank J. Godino
---------------------------------------
Name: Frank J. Godino
Title: Vice President
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, 36th Floor, New York, New York
10036 and GOLDEN BOOKS PUBLISHING COMPANY, INC. ("Borrower"), whose chief
executive office is located at 888 Seventh Avenue, New York, New York 10106
("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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<PAGE>
(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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<PAGE>
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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<PAGE>
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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<PAGE>
(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
5
<PAGE>
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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<PAGE>
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
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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
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<PAGE>
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,
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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
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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
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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
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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.
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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,
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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.
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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/ Robert Bellish
------------------------------
By /s/ John C. Ferrara Its Authorized Signatory
-----------------------------------
Its Chief Financial Officer
-----------------------------
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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
<PAGE>
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
<PAGE>
(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
<PAGE>
(d) Inventory Locations: 1. 10101 Science Drive
Sturtevant, Wisconsin 53177
2. Golden Books Publishing
U.S. Highway 169, N
Coffeyville, Kansas 67337
3. Golden Books Publishing
803 North Englewood Drive
Crawfordsville, Indiana 47933
4. c/o Carolina Converting, Inc.
107 Tom Starling Road
Fayetteville, NC 28306
A-4
<PAGE>
(e) Other Locations: 1. 1220 Mound Avenue
Racine, Wisconsin 53404
2. 1221-23 & 1350 6th Street
Racine, Wisconsin 53403
3. 5945 Erie Street North
Racine, Wisconsin 53402
4. 200 Sheldon Drive
Cambridge, ON NTR 5X2
5. 105, 106, 108, 116,
and 314 Woodfield Mall
Schaumburg, Illinois 60172
6. 1040 & 1130 68th Place South
West Allis, Wisconsin 53214
7. 9801 80th Avenue
Pleasant Prairie, Wisconsin 53158
8. I-94
Bristol, Wisconsin 53104
9. 10-14 Eldon Way
Littlehampton, FN 0BN 177
10. 12-13 Arndale Road
Littlehampton, FN 0BN 176
11. Columbia Drive
Durrington, FN 0BN 188
12. 888 7th Avenue
Manhattan, New York 10106
13. 1 Northumberland Avenue
Trafalgar Square, London 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
<PAGE>
(h) Subsidiaries (and
ownership thereof): See sub-chart attached
(i) Facsimile Numbers:
Borrower: (212) 547-6788
Lender: (212) 597-1666
10. Intentionally Omitted
11. Lender's Bank: The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
12. Intentionally Omitted
13. Exceptions to Negative
Covenants: None
14. Lock Boxes and Blocked Accounts 1. Chase
P. O. Box 10507
Newark, New Jersey 07193-0507
2. First Chicago
P. O. Box 93558
Chicago, Illinos 60673-3558
3. Nations Bank
P. O. Box 100122
Atlanta, Georgia 30384-0123
A-6
<PAGE>
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/ Robert Bellish
------------------------------------
Its Authorized Signatory
By /s/ John C. Ferrara
--------------------------------
Its Chief Financial Officer
-----------------------------
A-7
<PAGE>
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
<PAGE>
"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
<PAGE>
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 bill-and-hold, guarantied
sale, sale-or-return, sale-on-approval, consignment, retainage or any other
repurchase or return basis or consist of progress billings (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
<PAGE>
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
<PAGE>
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
<PAGE>
"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
<PAGE>
"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
<PAGE>
"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
<PAGE>
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/ Robert Bellish
----------------------------------
Its Authorized Signatory
By /s/ John C. Ferrara
------------------------------
Its Chief Financial Officer
---------------------------
B-9
GOLDEN BOOKS SIGNS $30 MILLION CREDIT AGREEMENT
NEW YORK, June 3, 1998 -- Golden Books Family Entertainment (NASDAQ:GBFE)
announced today that it has signed a previously disclosed $30 million,
three-year working capital credit agreement with NationsCredit Commercial
Corporation, through its NationsCredit Commercial Funding division. In
conjunction with this new credit facility, the company amended the Indenture
governing its senior notes and granted noteholders a security interest in
certain assets of the company.
"We now have a solid foundation in place to accelerate growth and return
the company to profitability as it transitions from a traditional publishing
company to a broadly based children's entertainment company," said Richard E.
Snyder, Chairman and Chief Executive Officer. "These new funds will help us make
planned investments in operational improvements and growth initiatives."
Golden Books Family Entertainment, Inc. is the leading publisher of
children's books in North America and owns one of the largest libraries of
family entertainment copyrights. The Company creates, publishes and markets
entertainment products for children and families through all media.
