EXHIBIT 10.4
AMENDMENT NO. 6 TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 6 TO LOAN AND SECURITY AGREEMENT (this "AMENDMENT"), is
entered into on and as of this 13th day of August, 2001, by and between SUNROCK
CAPITAL CORP., a Delaware corporation ("LENDER"), and DSI TOYS, INC., a Texas
corporation ("BORROWER").
RECITALS
A. Borrower and Lender have entered into that certain Loan and Security
Agreement, dated as of February 2, 1999 (as the same has been, and may hereafter
be, amended, modified, supplemented or restated from time to time, the "LOAN
AGREEMENT").
B. Borrower has requested extensions of the seasonal inventory advances
provided at SECTION 2.2 of the Loan Agreement through the Termination Date and
modification of certain financial covenants set forth in the Loan Agreement.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment, to the extent not otherwise
defined herein, shall have the same meanings as in the Loan Agreement, as
amended hereby.
ARTICLE II
AMENDMENTS
2.01 SEASONAL INVENTORY ADVANCES. Effective as of the date hereof, SECTION
2.2(B) is hereby amended by amending and restating SECTION 2.2(B)(IV) in its
entirety to read as follows and by adding new SECTIONS 2.2(B)(V)-(VII), in each
case as follows:
"(iv) during the period commencing July 1, 2001, and extending
through July 31, 2001, the sum of: (A) ten percent (10%) of the Value of
Eligible Inventory; and (B) ten percent (10%) of the Value of Eligible
In-Transit Inventory; or
"(v) during the period commencing January 1, 2002, and
extending through June 30, 2002, the sum of: (A) ten percent (10%) of the
Value of Eligible Inventory; and (B) ten percent (10%) of the Value of
Eligible In-Transit Inventory; or
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"(vi) during the period commencing January 1, 2003, and
extending through June 30, 2003, the sum of: (A) ten percent (10%) of the
Value of Eligible Inventory; and (B) ten percent (10%) of the Value of
Eligible In-Transit Inventory; or
"(vii) during the period commencing January 1, 2004, and
extending through June 30, 2004, the sum of: (A) ten percent (10%) of the
Value of Eligible Inventory; and (B) ten percent (10%) of the Value of
Eligible In-Transit Inventory."
2.02 AMENDMENT TO NET WORTH. SECTION 9.14 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"9.14 NET WORTH. The Borrower will not permit its Net Worth to be
less than the following respective amounts at the following respective
dates:
DATE MINIMUM NET WORTH
---- -----------------
06/30/01 $7,600,000
09/30/01 $9,400,000
12/31/01 $11,200,000
03/31/02 $8,700,000
06/30/02 $7,700,000
09/30/02 $12,200,000
12/31/02 $12,700,000
03/31/03 $10,200,000
06/30/03 $9,200,000
09/30/03 $13,700,000
12/31/03 $14,200,000
03/31/04 $11,700,000"
2.03 AMENDMENT TO NET INCOME. SECTION 9.19 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
"9.19 NET INCOME. The Borrower will not permit its Net Income to be
less than the following respective cumulative amounts for the periods
ended as of the following
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respective dates, each of which dates shall be a date of determination for
purposes of the definition of Net Income set forth at SUBSECTION 1.31
hereof:
DATE NET INCOME
---- ----------
06/30/01 $(3,100,000)
09/30/01 $ (1,250,000)
12/31/01 $ 600,000
03/31/02 $(2,500,000)
06/30/02 $(3,500,000)
09/30/02 $ 1,000,000
12/31/02 $ 1,500,000
03/31/03 $(2,500,000)
06/30/03 $(3,500,000)
09/30/03 $ 1,000,000
12/31/03 $ 1,500,000
03/31/04 $(2,500,000)"
ARTICLE III
RATIFICATIONS, REPRESENTATIONS, WARRANTIES AND COVENANTS
3.01 RATIFICATIONS. Except as expressly amended hereby, the terms and
provisions of the Loan Agreement are ratified and confirmed and shall continue
in full force and effect. Borrower and Lender agree that the Loan Agreement, as
amended hereby, and each agreement and instrument executed in connection
herewith, are, and shall continue to be, legal, valid, binding and enforceable
in accordance with their respective terms.
3.02 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment has been authorized by all requisite corporate action on the part of
Borrower and does not violate the Articles of Incorporation or Bylaws of
Borrower; (b) the representations and warranties contained in the Loan
Agreement, are true and correct on and as of the date hereof; (c) as of the date
hereof no Event of Default under the Loan Agreement is continuing and no event
or condition exists that with the giving of notice or the lapse of time, or
both, would be an Event of Default; and (d)
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Borrower is in full compliance with all covenants and agreements contained in
the Loan Agreement and each agreement and instrument entered into in connection
therewith.
3.03 FEE PAYABLE TO LENDER PAYMENT OF LEGAL AND OTHER EXPENSES. Upon the
execution of this Amendment by Lender, Borrower hereby agrees to pay to Lender a
fee in the amount of $30,000.00. In addition and as provided in the Loan
Agreement, Borrower agrees to pay on demand all costs and expenses incurred by
Lender in connection with the preparation, negotiation and execution of this
Amendment, including, without limitation, the costs and fees of Lender's legal
counsel, and all costs and expenses incurred by Lender in connection with the
enforcement or preservation of any rights under the Loan Agreement, as amended
hereby, or any agreement, document or instrument executed in connection
therewith. The fee, costs and expenses referred to in this SECTION 3.03 may be
charged by Lender to Borrower's loan account at the option of Lender.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made herein and in the Loan Agreement shall survive the execution and
delivery of this Amendment, and no investigation by Lender shall affect the
representations and warranties or the right of Lender to rely upon them.
4.02 REFERENCE TO LOAN AGREEMENT. The Loan Agreement, as amended hereby,
and all other agreements, documents or instruments now or hereafter executed and
delivered pursuant to the terms thereof are hereby amended so that any reference
in the Loan Agreement or such other agreements, documents and instruments shall
mean a reference to the Loan Agreement, as amended hereby.
4.03 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
4.04 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Lender and Borrower and their respective successors and
assigns, except Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of Lender.
4.05 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
4.06 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
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4.07 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
4.08 FINAL AGREEMENT. THE FINANCING AGREEMENTS (INCLUDING THE LOAN
AGREEMENT AND THIS AMENDMENT), AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE
THIS AMENDMENT IS EXECUTED. THE FINANCING AGREEMENTS, AS AMENDED HEREBY, 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. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY BORROWER AND LENDER.
4.09 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE OBLIGATIONS (AS DEFINED IN THE LOAN AGREEMENT) OR TO SEEK
AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY
VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOANS (AS DEFINED IN
THE LOAN AGREEMENT), INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR,
CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE LOAN AGREEMENT OR ANY FINANCING AGREEMENT, DOCUMENT OR INSTRUMENT ENTERED
INTO IN CONNECTION THEREWITH.
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Executed as of this 13th day of August, 2001.
DSI TOYS, INC.
By: /s/ XXXXXX X. XXXXXXXXXX
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Name: XXXXXX X XXXXXXXXXX
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Title: CFO
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SUNROCK CAPITAL CORP.
By: /s/ XXXXXX X. XXXXXX
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Name: XXXXXX X. XXXXXX
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Title: SENIOR VICE PRESIDENT
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