EXHIBIT 10.26
AMENDMENT NO. 3 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT dated as of November 10, 2000 by and among Play By Play Toys &
Novelties, Inc., a Texas corporation ("Play By Play"), Ace Novelty Co., Inc., a
Texas corporation ("Ace"), Newco Novelty, Inc., a Texas corporation ("Newco",
together with Play By Play and Ace, collectively, "Borrowers"), Friends, Food &
Games, Inc., a Nevada corporation ("Guarantor"), and Congress Financial
Corporation (Southwest), a Texas corporation ("Lender").
W I T N E S S E T H
WHEREAS, Lender, Borrowers and Guarantor have entered into financing
arrangements pursuant to which Lender, has made and may make loans and advances
and provide other financial accommodations to Borrowers as set forth in the Loan
and Security Agreement, dated October 25, 1999, by and among Lender, Borrowers
and Guarantor, as amended by Amendment No. 1, dated March 21, 2000, by and among
Lender, Borrowers and Guarantor and Amendment No. 2, dated May 31, 2000, by and
among Lender, Borrowers and Guarantor(as the same may hereafter be further
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement") and the agreements, documents and instruments at any time
executed and/or delivered in connection therewith or related thereto
(collectively, together with the Loan Agreement, the "Financing Agreements");
and
WHEREAS, Borrowers and Guarantor have requested that Lender (i) agree to
certain amendments to the Loan Agreement, and (ii) waive an existing Event of
Default and Lender is willing to agree to such amendments and waiver, subject to
the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
and covenants set forth herein, and for other good and valuable consideration,
the adequacy and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
1.1 ADDITIONAL DEFINITION. As used herein, the following terms shall have
the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation of,
the following definition:
(a) "AMENDMENT NO. 3" shall mean this Amendment No. 3 to Loan Agreement,
by and among Lender and Borrowers, as the same now exist or may hereafter be
further amended, modified, supplemented, extended, renewed, restated or
replaced.
1.2 AMENDMENTS TO DEFINITIONS.
(a) The definition of "APPLICABLE SEASONAL ADVANCE RATE PERCENTAGE"
in Section 1.5 of the Loan Agreement shall be deleted in its entirety and
replaced with the following:
"1.5 "APPLICABLE SEASONAL ADVANCE RATE PERCENTAGE" shall mean, for
purposes of Section 2.1(a)(ii) hereof, the following percentages for the
periods indicated below:
"(a) fifty (50%) percent from the date of Amendment No. 3 through
and including November 19, 2000;
(b) fifty-three (53%) percent from the period commencing November
20, 2000 through and including November 30, 2000;
(c) fifty-five (55%) percent for period commencing December 1
(commencing with calendar year 2000) of any calendar year through
and including May 31 of the immediately succeeding calendar year;
and
(d) fifty (50%) percent for the period commencing June 1 of any
calendar year (commencing with the calendar year 2001) through and
including November 30, of the same calendar year; PROVIDED, THAT, in
the event that each of the following has been delivered to Lender,
in form and substance satisfactory to Lender, as soon as possible
but in any event not later than the date indicated below, the
Applicable Seasonal Advance Rate Percentage shall be fifty-five
(55%) percent for such period in any calendar year: (i) updated
semi-annual full physical inventory appraisal, in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender and upon which Lender is expressly
permitted to rely, by no later than March 31, 2000; (ii) sixty
percent of the net proceeds of the Val Verde Sale, in cash or
immediately available funds for application to the Term Loans by no
later than June 1, 2001; and (iii) an extension of the current
maturity date of the Subordinated Notes, in accordance with Section
9.9(f) of the Loan Agreement, so long as such extension is not less
than twenty-two (22) months beyond the current maturity date or the
refinancing of the Subordinated Notes prior to the current maturity
date of the Subordinated Notes, upon Lender's written consent and on
terms and conditions in all respects acceptable to Lender."
(b) The definition of "BASE CONSOLIDATED ADJUSTED NET WORTH" in
Section 1.8 of the Loan Agreement shall be amended to delete the reference to
July 31, 1999 and replace it with "July 31, 2000".
(c) The definition of "BASE DOMESTIC ADJUSTED NET WORTH" in Section
1.9 of the Loan Agreement shall be amended to delete the reference to July 31,
1999 and replace it with "July 31, 2000".
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(d) The definition of "CONSOLIDATED ADJUSTED NET WORTH" in Section
1.22 of the Loan Agreement shall be deleted in its entirety and replaced with
the following:
"1.22 "CONSOLIDATED ADJUSTED NET WORTH" shall mean as to any Person, at
any time, in accordance with GAAP (except as otherwise specifically set
forth below), on a consolidated basis for such Person and its Subsidiaries
(if any), the amount equal to: (a) the aggregate net book value of all
assets (including all prepaid assets) of such Person and its Subsidiaries,
calculating the book value of inventory on a basis consistent with the
prior year, after deducting from such book values all appropriate reserves
in accordance with GAAP (including all reserves for doubtful receivables,
obsolescence, depreciation and amortization) minus (b) the sum of (i) the
amount equal to the aggregate amount of the Indebtedness and other
liabilities of such Person and its Subsidiaries (including tax and other
proper accruals) plus (ii) any loss arising from the Val Verde Sale."
(e) The definition of "DOMESTIC ADJUSTED NET WORTH" in Section 1.33
of the Loan Agreement shall be deleted in its entirety and replaced with the
following:
"1.33 "DOMESTIC ADJUSTED NET WORTH" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if
any), the amount equal to: (a) the aggregate net book value of all assets
(including all prepaid assets) of such Person and its Subsidiaries
(excluding Foreign Subsidiaries), calculating the book value of inventory
for this purpose on a basis consistent with the prior year, after
deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) minus (b) the sum of: (i) the amount equal
to the aggregate amount of the Indebtedness and other liabilities of such
Person and its Subsidiaries excluding its Foreign Subsidiaries (including
tax and other proper accruals) plus (ii) any loss arising from the Val
Verde Sale, minus (c) the dollar amount of the general ledger account for
corporate overhead charged to Foreign Subsidiaries by Play By Play,
PROVIDED, THAT, for the purposes of calculating the Domestic Adjusted Net
Worth of Play By Play and it Subsidiaries, any income of any Foreign
Subsidiary or any other Subsidiary which is not incorporated in any state
of the United States of America or does not have is chief executive office
in the United States of America shall not be included in the calculation.
(f) The definition of "VAL VERDE SALE" shall be deleted in its
entirety and replaced with the following:
"VAL VERDE SALE" shall mean a sale by Play By Play of all or substantially
all of the assets of Val Verde upon Lender's written consent and on terms
and conditions in all respects acceptable to Lender."
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1.3 INTERPRETATION. For purposes of this Amendment, all terms used herein,
including but not limited to, those terms used and/or defined herein or in the
recitals hereto shall have the respective meanings assigned thereto in the Loan
Agreement.
2. AMENDMENTS.
2.1 Section 9.16 of the Loan Agreement is amended as follows:
(a) to delete the chart contained in Section 9.16(a) and replace it
with the following:
MINIMUM CONSOLIDATED
"PERIOD ADJUSTED NET WORTH
(i) through and including October Base Consolidated Adjusted
31, 2000 Net Worth LESS $1,500,000
(ii) for the period commencing Base Consolidated Adjusted
November 1, 2000 Net Worth LESS $4,500,000
through and including
January 31, 2001
(iii) for the period commencing Base Consolidated
February 1, 2001 Adjusted Net Worth LESS $4,500,000
through and including
April 30, 2001
(iv) for the period commencing May Base Consolidated
1, 2001 through and Adjusted Net Worth LESS $500,000
including July 31, 2001
(v) for the period commencing Base Consolidated
August 1, 2001 Adjusted Net Worth LESS $1,250,000
through and
including October 31, 2001
(vi) for the period commencing Base Consolidated
November 1, 2001 Adjusted Net Worth LESS $3,750,000
through and including
January 31, 2002
(vii) for the period commencing Base Consolidated
February 1, 2002 Adjusted Net Worth LESS $3,750,000
through and including
April 30, 2002
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(viii) for the period commencing May 1, Base Consolidated
2002 through and Adjusted Net Worth
including July 31, 2002
for the period commencing August 1, 2002 and at all times thereafter, Play
By Play and its Subsidiaries shall maintain a Consolidated Adjusted Net
Worth at least equal to the sum of (i) Base Consolidated Adjusted Net
Worth, and (ii) fifty (50%) percent of Play By Play and its Subsidiaries'
actual net income (but not less than zero) shown on their quarterly
unaudited financial statements for the relevant fiscal quarter or for the
last fiscal quarter of any fiscal year, as shown on the audited financial
statements for the applicable fiscal year end."
(b) to delete the chart contained in Section 9.16(a) and replace it
with the following:
MINIMUM DOMESTIC
"PERIOD ADJUSTED NET WORTH
(i) through and including October Base Domestic Adjusted
31, 2000 Net Worth LESS $2,500,000
(ii) for the period commencing Base Domestic Adjusted
November 1, 2000 Net Worth LESS $7,000,000
through and
including January
31, 2001
(iii) for the period commencing Base Domestic Adjusted
February 1, 2001 Net Worth LESS $8,000,000
through and
including April 30,
2001
(iv) for the period commencing May Base Domestic Adjusted
1, 2001 through and Net Worth LESS $6,500,000
including July 31,
2001
(v) for the period commencing Base Domestic Adjusted
August 1, 2001 Net Worth LESS $2,250,000
through and
including October
31, 2001
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(vi) for the period commencing Base Domestic Adjusted
November 1, 2001 Net Worth LESS $6,500,000
through and
including January
31, 2002
(vii) for the period commencing Base Domestic Adjusted
February 1, 2002 Net Worth LESS $7,000,000
through and
including April 30,
2002
(viii) for the period commencing May 1, Base Domestic Adjusted
2002 through and Net Worth LESS $5,500,000
including July 31,
2002
for the period commencing August 1, 2002 and at all times thereafter, Play
By Play and its Subsidiaries shall maintain a minimum Domestic Adjusted
Net Worth at least equal to the sum of (i) Base Domestic Adjusted Net
Worth less $5,500,000, and (ii) fifty (50%) percent of Play By Play and
its Subsidiaries' (exclusive of Foreign Subsidiaries) actual net income
(but not less than zero and before the allocation of overhead by Play By
Play to its Foreign Subsidiaries) shown on their quarterly unaudited
financial statements for the relevant fiscal quarter for the last fiscal
quarter of any fiscal year, as shown on the audited financial statements
for the applicable fiscal year end."
2.2 Section 12.1(c) of the Loan Agreement is amended by deleting the chart
contained in this section and replacing it with the following:
"AMOUNT PERIOD
(a) Two (2%)
percent From the date hereof to and
of including October 25, 2001; and
Maximum
Credit
(b) One (1%) From October 26, 2001 to and including
percent October 24, 2002 or if of the term hereof
of is extended, at Maximuany time prior to
Maximum the end of the current term."
Credit
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3. WAIVER.
3.1 Subject to the terms and conditions contained herein, Lender hereby
waives the Event of Default arising under Section 10.1(a) of the Loan Agreement
as a result of the failure of Play By Play and its Subsidiaries to comply with
Section 9.16 of the Loan Agreement as of July 31, 2000; PROVIDED, THAT, such
waiver shall only apply to the failure of Play By Play and its Subsidiaries to
comply with such covenant for the period through and including July 31, 2000.
3.2 Lender has not waived, is not by this Amendment waiving, and has no
intention of waiving any Events of Default that may have occurred on or before
the date hereof (other than the Events of Default identified in Section 3.1
hereof), whether or not continuing on the date hereof, or that may occur after
the date hereof (whether the same or similar to the Event of Default referred to
in Section 3.1 or otherwise).
3.3 The foregoing waiver shall not be construed as a bar to or a waiver of
any other or further defaults or Events of Default on any future occasion,
whether similar in kind or otherwise and shall not constitute a waiver, express
or implied of any of the rights and remedies of Lender arising under the terms
of the Financing Agreements on any future occasion or otherwise. Nothing
contained herein should be construed to entitle Borrowers to any other or
further waiver with respect to any defaults under the Loan Agreement at any time
after the date hereof or otherwise.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers to Lender pursuant to the other Financing Agreements,
Borrowers hereby represent, warrant and covenants with and to Lender as follows
(which representations, warranties and covenants are continuing and shall
survive the execution and delivery of this Amendment and shall be incorporated
into and made a part of the Financing Agreements):
4.1 NO DEFAULT. No Event of Default or condition or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred as of the date of this Amendment (after giving effect to the
amendments made and waivers granted by Lender pursuant to this Amendment).
4.2 CORPORATE POWER AND AUTHORITY. This Amendment has been duly executed
and delivered by Borrowers and Guarantor and is in full force and effect as of
the date of this Amendment and the agreements and obligations of Borrowers and
Guarantor contained herein constitute legal, valid and binding obligations of
Borrowers and Guarantor enforceable against Borrowers and Guarantor in
accordance with their respective terms.
4.3 MATERIAL CONTRACTS. The execution and delivery and performance of this
Amendment by Borrower and Guarantors will not violate any material agreement,
instrument or undertaking by which it is bound, and will not result in, or
require, the creation or imposition of any lien, charge, security interest or
other encumbrance on any of its properties or revenues.
4.4 SUBORDINATED CREDITOR AGREEMENTS. No default or event of default, or
condition or event which with notice or the passage of time or both would
constitute an event of default exists or has occurred as of the date of this
Amendment under the Subordinated Creditor Agreements.
5. AMENDMENT FEE. In consideration of the Amendment set forth herein,
Borrowers shall on the date hereof, pay to Lender, and Lender may, at its
option, charge the account of Borrowers maintained by Lender, a fee in the
amount of $50,000, which fee shall constitute part of the Obligations and is
fully earned as of the date hereof.
6. CONDITIONS PRECEDENT. The effectiveness of the amendments and waiver
pursuant to this Amendment shall be subject to the satisfaction of each of the
following conditions precedent in a manner satisfactory to Lender:
6.1 Lender shall have received, in form and substance satisfactory to
Lender, an original of this Amendment, duly authorized, executed and delivered
by Borrowers and Guarantor;
6.2 Lender shall have received the fee referred to in Section 4 hereof;
and
6.3 After giving effect to the amendments to the Loan Agreement provided
in this Amendment, no Event of Default shall exist or have occurred and no
event, act or condition shall have occurred or exist which with notice or
passage of time or both would constitute an Event of Default.
7. ADDITIONAL EVENTS OF DEFAULT. The parties hereto acknowledge, confirm
and agree that the failure of Borrowers, Guarantor or any Subsidiary to comply
with the covenants, conditions and agreements contained herein shall constitute
an Event of Default under the Financing Agreements (subject to the applicable
cure period, if any, with respect thereto provided for in the Loan Agreement as
in effect on the date hereof).
8. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, no other
waivers, changes or modifications to the Financing Agreements are intended or
implied, and in all other respects, the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of
effective date hereof. Any acknowledgment or consent or waiver contained herein
shall not be construed to constitute a consent or waiver to any other or further
action by Borrowers or to entitle Borrowers to any other consent or waiver. The
Loan Agreement and this Amendment shall be read and construed as one agreement.
To the extent of conflict between the terms of this Amendment and the other
Financing Agreements, the terms of this Amendment shall control.
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90 FURTHER ASSURANCES. The parties hereto shall execute and deliver such
additional documents and take such additional actions as may be necessary to
effectuate the provisions and purposes of this Amendment.
100 GOVERNING LAW. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of Texas.
110 BINDING EFFECT. This Amendment shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns.
120 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers as of the date and year
first above written.
Very truly yours,
PLAY BY PLAY TOYS & NOVELTIES, INC.
By: ___________________________________
Title: __________________________________
ACE NOVELTY CO., INC.
By: ___________________________________
Title: __________________________________
NEWCO NOVELTY, INC.
By: ___________________________________
Title: __________________________________
FRIENDS, FOOD & GAMES, INC.
By: ___________________________________
Title: __________________________________
AGREED TO:
CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By:_________________________________
Title:________________________________
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