EXHIBIT 10.12
THIRD AMENDMENT TO LETTER LOAN AGREEMENT
THIS THIRD AMENDMENT TO LETTER LOAN AGREEMENT ("Amendment") is made and
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entered into effective the 14th day of November, 1996, by and between DSI TOYS,
INC. f/k/a DIVERSIFIED SPECIALISTS, INC., a Texas corporation (herein called
"Borrower"), and BANK ONE, TEXAS, N.A., with offices in Houston, Texas (herein
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called "Lender").
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R E C I T A L S:
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WHEREAS, Borrower, Lender and Guarantor entered into a Letter Loan
Agreement dated December 11, 1995, as amended by First Amendment to Letter Loan
Agreement dated January 31, 1996, and Second Amendment to Letter Loan Agreement
dated effective August 1, 1996 (collectively, the "Loan Agreement"); the terms
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defined therein being used herein as therein defined unless otherwise defined
herein); and
WHEREAS, Borrower and Lender desire to amend certain terms and provisions
of the Loan Agreement to modify and increase the stated amount of the Revolving
Note by $3,000,000.00.
A G R E E M E N T:
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NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, Borrower and Lender hereby agree to amend the Loan Agreement as
hereinafter set forth.
1. Amendment to Loan Agreement. Paragraphs 1(a) and 2 of the Loan
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Agreement are, effective the date hereof, and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended by deleting
such in its entirety and substituting therefor the following:
1. Loan and Letters of Credit.
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(a) On the terms and subject to the conditions set forth in this
letter loan agreement (the "Agreement"), Lender agrees to lend to Borrower up to
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$23,400,000 (the "Loan"). The Loan shall be evidenced by (i) a Modification
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Revolving Promissory Note (the "Revolving Note") in a form satisfactory to
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Lender, duly executed by Borrower in the principal amount of $9,000,000 and made
payable to the order of Lender and (ii) a Promissory Note (the "Term Note") in a
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form satisfactory to Lender duly executed by Borrower in the principal amount of
$14,400,000 and made payable to the order of Lender. Principal and interest on
the Revolving Note shall be due and payable in the manner and at the times set
forth in the Revolving Note with final maturity on May 31, 1997 (the "Revolving
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Termination Date"). The total outstanding advances by Lender under the
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Revolving Note will not exceed at any one time the lesser of (i) $9,000,000, or
(ii) the Borrower's Loan Limit, as defined on Schedule "A" annexed hereto.
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Principal and interest (including any prepayment fee) on the Term Note shall be
due and payable in the manner and at the times set forth in the Term Note with
final maturity on December 11,
2000. The Revolving Note and the Term Note are hereinafter collectively referred
to as the "Notes".
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2. Revolving Credit Advances. Subject to the terms hereof, Borrower may
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borrow, pay, reborrow and repay under the Revolving Note, provided, however, the
maximum principal outstanding under the Revolving Note shall not exceed at any
one time the lesser of (i) $9,000,000, or (ii) the Borrower's Loan Limit.
Borrower's requests for advances (whether for cash or Working Capital Letter of
Credit) under the Loan shall specify the aggregate amount of the advance and the
date of such advance. Borrower shall furnish to Lender a request for borrowing
in a form satisfactory to Lender. Lender shall make the requested funds or
Working Capital Letter of Credit available to Borrower at Lender's principal
banking office in Houston, Texas. If at any time prior to the Revolving
Termination Date, the outstanding advances under the Revolving Note exceed
Borrower's Loan Limit as shown on any reports delivered to Lender under
Paragraph 5(c) or as indicated by Lender's own records, Borrower shall, on the
date of the delivery of such report to Lender or on the date of notice from
Lender as to Lender's records, prepay on the Revolving Note such amount as may
be necessary to eliminate such excess.
In addition, Schedule "B" of the Loan Agreement is hereby replaced by that which
is attached hereto indicating that the maximum available under the Revolving
Note is increased to $9,000,000.00.
2. Conditions of Effectiveness. This Amendment shall become effective
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when, and only when, Lender shall have received counterparts of this Amendment
executed by Borrower, and Section 1 hereof shall become effective when, and only
when, Lender shall have additionally received all of the following documents:
(a) $9,000,000.00 Modification Revolving Promissory Note executed by
Borrower;
(b) Certificates of the Boards of Directors of Borrower and Xxxxx
Acquisition, L.L.C. ("Guarantor") authorizing the execution, delivery and
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performance of this Amendment, and the matters contemplated hereby;
(c) Counterparts of the consent appended hereto (the "Consent of
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Guarantor") executed by Guarantor; and
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(d) Any and all other documentation as Lender may reasonably require.
3. Representations and Warranties of Borrower. Borrower represents and
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warrants as follows:
(a) Borrower is duly authorized and empowered to execute, deliver and
perform this Amendment and all other instruments referred to or mentioned
herein to which it is a party, and all action on its part requisite for the
due execution, delivery and the performance of this Amendment has been duly
and effectively taken. This Amendment, when executed and delivered, will
constitute valid and binding obligations of Borrower enforceable in
accordance with its terms. This Amendment does not violate any provisions
of Borrower's Articles of Incorporation, By-Laws, or any contract,
agreement, law or regulation to which Borrower is subject, and does not
require the
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consent or approval of any regulatory authority or governmental body of the
United States or any state.
(b) The representations and warranties made by Borrower in the Loan
Agreement are true and correct as of the date of this Amendment.
(c) No event has occurred and is continuing which constitutes an
Event of Default or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
4. Reference to and Effect on the Security Instruments.
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(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof each reference in the Loan Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import, and each reference
in the other Security Instruments (hereinafter defined) to the Loan
Agreement, shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended above, the Loan Agreement and all
other instruments securing or guaranteeing Borrower's obligations to Lender
(the "Security Instruments") shall remain in full force and effect and are
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hereby ratified and confirmed. Without limiting the generality of the
foregoing, the Security Instruments and all collateral described therein do
and shall continue to secure the payment of all obligations of Borrower
under the Loan Agreement, as amended hereby, (including the increased
Revolving Note) and under the other Security Instruments.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of Lender under any of the Security Instruments, nor
constitute a waiver of any provision of any of the Security Instruments.
5. Waiver. As additional consideration for the execution, delivery and
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performance of this Amendment by the parties hereto and to induce Lender to
enter into this Amendment, Borrower and Guarantor warrant and represent to
Lender that no facts, events, statuses or conditions exist or have existed
which, either now or with the passage of time or giving of notice, or both,
constitute or will constitute a basis for any claim or cause of action against
Lender or any defense to (a) the payment of any obligations and indebtedness
under the Notes and/or the Security Instruments or (b) the performance of any of
their obligations with respect to the Notes and/or the Security Instruments, and
in the event any such facts, events, statuses or conditions exist or have
existed, Borrower and Guarantor unconditionally and irrevocably waive any and
all claims and causes of action against Lender and any defenses to their payment
and performance obligations in respect to the Notes and the Security
Instruments.
6. Costs and Expenses. Borrower agrees to pay on demand all costs and
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expenses of Lender in connection with the preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
counsel for Lender. In addition, Borrower shall pay any and all fees payable or
determined to be payable in connection with the execution and delivery, filing
or recording of this Amendment and the other instruments and documents to be
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delivered hereunder, and agrees to save Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such fees.
7. Execution in Counterparts. This Amendment may be executed in any
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number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
8. Governing Law. This Amendment shall be governed by and construed in
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accordance with the laws of the State of Texas.
9. Final Agreement. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
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AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed in multiple counterparts, each of which is an original instrument
for all purposes, all as of the day and year first above written.
BORROWER:
DSI TOYS, INC.
By: /s/ M.D. Xxxxx
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Name: M.D. Xxxxx
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Title: CEO
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LENDER:
BANK ONE, TEXAS, N.A.
By: /s/ Xxxx X. Xxxx
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Name: Xxxx X. Xxxx
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Title: Vice President
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GUARANTOR:
XXXXX ACQUISITION, L.L.C.
By: /s/ M.D. Xxxxx
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Name: M.D. Xxxxx
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Title: President
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to evidence its acknowledgment of the waiver set
forth in Paragraph 5 hereof
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CONSENT OF GUARANTOR
Dated effective as of November 14, 1996
The undersigned, XXXXX ACQUISITION, L.L.C., as the Guarantor referred to in
the foregoing Amendment, hereby consents to the foregoing Amendment and hereby
confirms and agrees that (i) the guaranty in effect on the date hereof to which
it is a party is, and shall continue to be, in full force and effect and is
hereby confirmed and ratified in all respects except that, upon the
effectiveness of, and on and after the date of, the Amendment, all references in
the guaranty to the Loan Agreement shall mean the Loan Agreement as amended by
the Amendment and (ii) the guaranty does, and shall continue to, guarantee the
payment by the Borrower of its obligations under the Loan Agreement as amended
by the Amendment (including the increased Revolving Note).
XXXXX ACQUISITION, L.L.C.
By: /s/ M.D. Xxxxx
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Name: M.D. Xxxxx
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Title: President
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SCHEDULE "B"
BORROWING BASE REPORT
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AND COMPLIANCE CERTIFICATE
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I. Total Accounts Receivable of Borrower: $ _____________________
Less: Ineligible Accounts (as detailed on
attachment) - $ _____________________
Eligible Accounts Receivable = $ _____________________
II. Total Inventory: $ _____________________
Less: Inventory Deductions - $ _____________________
Eligible Inventory: = $ _____________________
III. 80% x Domestic Eligible Accounts Receivable $ _____________________
50% x Domestic Eligible Inventory: + $ _____________________
Borrower's Loan Limit: = $ _____________________
(maximum $9,000,000)
IV. Current Principal Balance: $ _____________________
V. Available Funds: $ _____________________
VI. Advance Request: $ _____________________
VII. Over-Advance (maximum $1,000,000) + $ _____________________
VIII. Total Outstanding After Advance (Maximum $9,000,000) $ _____________________
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I. Current Ratio
II. Tangible Net Worth $ _____________________
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III. Debt to Worth Ratio _____________________
IV. Debt Service Coverage _____________________
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The undersigned officer of Borrower, hereby certifies to Lender that (i)
the computations set forth above are true, correct and complete as of the date
set forth above or as of the date of execution hereof, as the case may be, (ii)
such computations have been made in full compliance with and conformity to the
Letter Loan Agreement (the "Loan Agreement") between Borrower and Lender, (iii)
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the matters set forth in Paragraph 3 of the Loan Agreement are true and correct,
and (iv) Borrower is not in default under the Loan Agreement.
All capitalized terms used herein which have been defined in the Loan
Agreement have been used in accordance with the definitions ascribed to them in
the Loan Agreement.
EXECUTED this ____ day of _____________, 19___.
DIVERSIFIED SPECIALISTS, INC.
By:_______________________________________
Name:_____________________________________
Title:______________________________________
