EXHIBIT 10.66
AMENDMENT NO. 8 TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 8 TO LOAN AND SECURITY AGREEMENT (this "AMENDMENT"), is
entered into as of March 29, 2002, to be effective for all purposes as of
December 31, 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. The Borrower and Lender have agreed to amend and modify the Loan
Agreement as set forth below, subject to the terms, conditions and limitations
in the Loan Agreement and this Amendment.
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, hereby 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 DEFINITION OF EIGHTH AMENDMENT. SECTION 1 of the Loan Agreement
is hereby amended by adding the following SUBSECTION 1.34:
"1.34 "Eighth Amendment" shall mean that certain Amendment No. 8 to
Loan and Security Agreement, executed as of March 29, 2002, to be effective
for all purposes as of December 31, 2001, by and between Lender and
Borrower."
2.02 DEFINITION OF OVERADVANCE FACILITY. SECTION 1 of the Loan
Agreement is hereby amended by adding the following SUBSECTION 1.35:
"1.35 "Overadvance Facility" shall mean the Loans made under SECTION
2.2(b) of the Loan Agreement."
2.03 AMENDMENT TO SEASONAL INVENTORY ADVANCES. SECTION 2.2 of the Loan
Agreement is hereby amended and restated to read in its entirety as follows:
"2.2 SEASONAL INVENTORY ADVANCES.
(a) In addition to the Loans permitted under Section 2.1 above and
2.2(b) below, but subject to, and upon the terms and conditions contained
herein (including, without limitation, the provisions set forth in Sections
2.4 and 2.5 below), Lender agrees to make Loans to Borrower from time to
time up to the lesser of:
(1) the Maximum Credit LESS Loans extended under Section
2.1 above; and
(2) (i) during the period commencing January 1, 2002, and
extending through June 30, 2002, (A) ten percent (10%) of the Value
of Eligible Inventory; and (B) ten percent (10%) of the Value of
Eligible In-Transit Inventory; or
(ii) 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
(iii) 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 (All Loan amounts
calculated pursuant to Section 2.2(a)(2)(i) through (iii),
inclusive, shall be subject to reduction for all applicable
Availability Reserves); and
(b) In addition to the Loans permitted under SECTIONS 2.1 and
2.2(a) above and notwithstanding the provisions of Section 2.4 to the
contrary, but otherwise subject to, and upon the terms and conditions
contained herein (including, without limitation, the provisions set forth
in Sections 2.4 and 2.5 below), Lender agrees to allow overadvances to
remain outstanding up to, but not greater than, the following amounts
during the following periods:
(i) $500,000 during the period commencing March 28, 2002,
and ending on June 7, 2002;
(ii) $375,000 during the period commencing June 8, 2002, and
ending June 14, 2002;
(iii) $250,000 during the period commencing June 15, 2002,
and ending June 21, 2002; and
(iv) $125,000 during the period commencing June 22, 2002,
and ending June 28, 2002.
No overdvances shall remain outstanding pursuant to this Section
2.2(b) from and after June 29, 2002. In addition to the other
rights and remedies available to Lender upon the occurrence of any
Default or Event of Default, Lender may demand immediate payment of
any amounts outstanding pursuant to this Section 2.2(b) upon the
occurrence and during the continuation of any Default or Event of
Default without exercising any other rights or remedies or
otherwise limiting the rights of Lender otherwise pursuant to this
Agreement or applicable law."
2.04 AMENDMENT TO INTEREST AND FEES. SECTION 3.1 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:
"3.1 INTEREST.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations, other than the Overadvance
Facility, at the rate of three quarters of one percent (.75%) per annum in
excess of the Prime Rate, except that, at Lender's option, without notice,
Borrower shall pay to Lender interest at the lesser of (A) the Maximum Legal
Rate and (B) the Prime Rate, plus four percent (4%): (i) on the non-contingent
Obligations for (1) the period from and after the date of termination or
non-renewal hereof until such time as Lender has received full and final payment
of all such Obligations (notwithstanding entry of any judgment against
Borrower), and (2) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender and (ii) on the Loans at any time outstanding in excess of
the amounts available to Borrower under Section 2 (whether or not such
excess(es), arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default).
(b) Borrower shall pay to Lender interest on the outstanding
principal amount of the Overadvance Facility at the rate of two an three
quarters of one percent (2.75%) per annum in excess of the Prime Rate, except
that, at Lender's option, without notice, Borrower shall pay to Lender interest
at the lesser of (A) the Maximum Legal Rate and (B) the Prime Rate, plus four
percent (4%): (i) on the Overadvance Facility for (1) the period from and after
the date of termination or non-renewal hereof until such time as Lender has
received full and final payment of all such Obligations (notwithstanding entry
of any judgment against Borrower), and (2) the period from and after the date of
the occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender and (ii) on the Loans made under the
Overadvance Facility at any time outstanding in excess of the amounts available
to Borrower under Section 2 (whether or not such excess(es), arise or are made
with or without Lender's knowledge or consent and whether made before or after
an Event of Default).
(c) All interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rates set forth in Sections
3.1(a) and 3.1(b) shall increase or decrease by an amount equal to each increase
or decrease in the Prime Rate effective as of the date on which the applicable
increase or decrease in the Prime Rate shall be published in the printed version
of the Wall Street Journal (Eastern Edition, New York Metro) or such other
publication as Lender may select in accordance with the terms hereof. All
interest accruing hereunder on and after an Event of Default or termination or
non-renewal hereof shall be payable on demand. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto. No
agreements, conditions, provisions or stipulations contained in this Agreement
or any other instrument, document or agreement between Borrower and Lender or
default of Borrower, or the exercise by Lender of the right to accelerate the
payment of the maturity of principal and interest, or to exercise any option
whatsoever contained in this Agreement or any other Financing Agreement, or the
arising of any contingency whatsoever, shall entitle Lender to contract for,
charge, or receive, in any event, interest exceeding the maximum rate of
interest permitted by applicable state or federal law in effect from time to
time (hereinafter "Maximum Legal Rate"). In no event shall Borrower be obligated
to pay interest exceeding such Maximum Legal Rate and all agreements, conditions
or stipulations, if any, which may in any event or contingency whatsoever
operate to bind, obligate or compel Borrower to pay a rate of interest exceeding
the Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such Maximum Legal
Rate. In the event any interest is contracted for, charged or received in excess
of the Maximum Legal Rate ('"Excess"), Borrower acknowledges and stipulates that
any such contract, charge, or receipt shall be the result of an accident and
bona fide error, and that any Excess received by Lender shall be applied, first,
to reduce the principal then unpaid hereunder; second, to reduce the other
Obligations; and third, returned to Borrower, it being the intention of the
parties hereto not to enter at any time into a usurious or otherwise illegal
relationship. Borrower recognizes that, with fluctuations in the Prime Rate and
the Maximum Legal Rate, such a result could inadvertently occur. By the
execution of this Agreement, Borrower covenants that (i) the credit or return of
any Excess shall constitute the acceptance by Borrower of such Excess, and (ii)
Borrower shall not seek or pursue any other remedy, legal or equitable, against
Lender, based in whole or in part upon contracting for, charging or receiving of
any interest in excess of the maximum authorized or receiving of any interest in
excess of the maximum authorized by applicable law. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Lender, all interest at any time contracted for, charged or received
by Lender in connection with this Agreement shall be amortized, prorated,
allocated and spread in equal parts during the entire term of this Agreement."
2.05 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:
12/31/01 $ 9,000,000
03/31/02 $ 6,500,000
06/30/02 $ 5,500,000
09/30/02 $ 8,500,000
12/31/02 $10,000,000
03/31/03 $ 7,500,000
06/30/03 $ 6,500,000
09/30/03 $ 9,500,000
12/31/03 $11,000,000
03/31/04 $8,500,000"
2.06 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 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
12/31/01 ($1,500,000)
03/31/02 ($2,500,000)
06/30/02 ($3,500,000)
09/30/02 ($500,000)
12/31/02 $1,000,000
03/31/03 ($2,500,000)
06/30/03 ($3,500,000)
09/30/03 ($500,000)
12/31/03 $1,000,000
03/31/04 ($2,500,000)"
ARTICLE III
ADDITIONAL DEFAULTS
3.01 ACKNOWLEDGEMENT OF AVAILABILITY RESTRICTIONS. Borrower acknowledges
and agrees that the Overadvance Facility does not create "excess availability"
for advances of Loans as calculated under SECTION 2.1 of the Loan Agreement, and
that the ability to make principal
payments pursuant to SECTION 9.9(c) of the Loan Agreement is subject to the
limitations set forth in SECTION 9.9(c) of the Loan Agreement, including the
payment in full of the Overadvance Facility. Any payment of indebtedness in
violation of SECTION 9.9(c) of the Loan Agreement will result in an immediate
Event of Default under the Loan Agreement and the other Financing Agreements.
The Lender will have all of the rights and remedies provided in the Loan
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by the Borrower or any Obligor.
3.02 SUBORDINATION AGREEMENT. Borrower's failure to deliver to Lender an
amendment to the Subordination Agreement, together with corresponding amendments
to the Loan Agreement, on or before May 31, 2002, executed by E. Xxxxxx Xxxxxx
and MVII (as such term is defined in the Loan Agreement) and acknowledged by
Borrower, which amendment shall be in a form satisfactory to Lender and shall
(a) eliminate payments of the subordinated debt owing to such persons at all
times prior to payment in full of the Overadvance Facility and (b) contain such
other and additional limitations on the payment of the principal portion of the
subordinated indebtedness from and after May 31, 2002, as shall be acceptable to
Lender at its sole option, will result in an immediate Event of Default under
the Loan Agreement and the other Financing Agreements. The Lender will have all
of the rights and remedies provided in the Loan Agreement, the other Financing
Agreements, the Uniform Commercial Code and other applicable law, all of which
rights and remedies may be exercised without notice to or consent by the
Borrower or any Obligor.
ARTICLE IV
CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective upon satisfaction of the following
conditions:
(a) the execution of this Amendment by Borrower and Lender.
(b) payment by Borrower of all fees and expenses required to be paid by
Borrower pursuant to Section 5.03 of this Amendment.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS, WARRANTIES AND COVENANTS
5.01 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, shall continue to be legal, valid, binding and enforceable in
accordance with their respective terms.
5.02 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) upon the effectiveness of this Amendment, 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) 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 (assuming execution and delivery of this Amendment).
5.03 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
commitment fee in the amount of $15,000.00, which may be charged by Lender to
Borrower's loan account without further agreement or consent of Borrower. 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.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 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.
6.02 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.
6.03 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.
6.04 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.
6.05 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.
6.06 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.07 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTEDPURSUANT 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.
6.08 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.
6.09 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.
[Signature Page Follows]
Executed as of the day and year first written above.
DSI TOYS, INC.
By: /s/ X. X. XXXXXXXXXX
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Name: X. X. XXXXXXXXXX
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Title: CFO
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SUNROCK CAPITAL CORP.
By: /s/ XXXXXX X. XXXXXXXXXX
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Name: XXXXXX X. XXXXXXXXXX
---------------------------
Title: SVP
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