EXHIBIT 15(B)
FIRST AMENDMENT TO LOAN AGREEMENT
AND CONSENT AND WAIVER
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND CONSENT AND WAIVER (this
"Amendment"), dated as of March 8, 2002, is entered into by and among JAKKS
Pacific, Inc., a Delaware corporation, Flying Colors Toys, Inc., a Michigan
corporation, Road Champs, Inc., a Delaware corporation and Pentech
International, Inc., a Delaware corporation (collectively, the "Borrowers"),
each of the Lenders listed on the signature pages hereto and Bank of America,
N.A. as Administrative Agent ("Agent") for itself and for the other Lenders.
RECITALS
A. Borrowers, Agent and Lenders are parties to that certain Loan
Agreement, dated October 12, 2001 (the "Loan Agreement"), pursuant to which
Lenders have extended certain credit facilities to Borrowers.
B. Borrowers have requested that Agent and Lenders amend the Loan
Agreement as set forth herein and Agent and Lenders are willing to do so on the
terms and conditions hereinafter set forth.
C. Borrowers have requested that Agent and Lenders consent to the
acquisition by JAKKS Pacific, Inc. of Toymax International, Inc. ("Toymax") and
its Subsidiaries (Toymax and such Subsidiaries, collectively, the "Toymax
Companies"), such acquisition to be completed in two phases (such phases, "Phase
I" and "Phase II" respectively), all on substantially the terms and conditions
set forth in the Waiver Request Memo (the "Waiver Request Memo") dated February
11, 2002 from Banc of America Securities LLC to the Lenders (such acquisition
and each of as Phase I and Phase II, collectively, the "Acquisition") and to
grant certain waivers in connection therewith.
D. Borrowers have advised Agent and Lenders that the Toymax
Companies have the following credit facilities (1) a US $40 million credit
facility extended under that certain Financing Agreement dated December 27, 2000
among Toymax, Inc., Go Fly A Kite, Inc.("GFK") and Funnoodle, Inc. ("Funnoodle,
and together with Toymax, Inc. and GFK, the "Companies") and The CIT
Group/Commercial Services, Inc. and Fleet Capital Corporation, as amended from
time to time (the CIT Facility") and (2) a US $3.3 million credit facility
extended by Hongkong and Shanghai Bank Corporation Limited to Toymax (H.K.)
Limited, a subsidiary of Toymax (the "Hongkong Bank Facility" and, collectively
with the CIT Facility, the "Facilities").
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E. Borrowers have requested that Agent and Lenders permit the
Facilities, each of the liens granted by Toymax and its Affiliates thereunder
(the "Liens") and each of the guaranties of Toymax and its Affiliates executed
and delivered in connection with the Facilities, including, without limitation,
that certain Guaranty of the Obligations of the Companies dated December 27,
2000, executed and delivered by Toymax to the lenders and agents under the CIT
Facility (collectively, the "Guaranties") to continue for a period not to exceed
45 days following the closing date of Phase I of the Acquisition (the "Phase I
Closing Date").
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINED TERMS. Any and all initially capitalized terms set forth
without definition in this Amendment (including, without limitation, in the
recitals hereto) shall have the respective meanings ascribed thereto in the Loan
Agreement.
2. SECTION 1.1 (DEFINED TERMS). Section 1.1 of the Loan Agreement is
hereby amended by adding the following at the end of clause (j) of the
definition of "Eligible Accounts": "provided that as to any accounts receivable
due from an account debtor which is an Approved Customer, the limit expressed in
this clause (j) shall be (i) 50%, with respect to the period from December 1
through and including March 31 in any Fiscal Year and (ii) 25%, with respect to
the period from April 1 through and including November 30 in any Fiscal Year ;".
3. SECTION 6.13 (QUICK RATIO). Section 6.13 of the Loan Agreement is
hereby amended and restated in its entirety as follows:
"Permit the Consolidated Quick Ratio as of the last day of any
Fiscal Quarter to be less than 1.25:1.00, or permit the Borrowers
Quick Ratio as of the last day of any Fiscal Quarter to be less than
1.00:1.00."
4. SECTION 7.1 (FINANCIAL AND BUSINESS INFORMATION). Section 7.1 of
the Loan Agreement is hereby amended by:
(a) deleting the words "calendar month" in the first sentence
of paragraph 7.1(b) thereof and substituting therefore the words "Fiscal
Quarter"; and
(b) deleting the word "and" at the end of paragraph 7.1(l),
deleting the period at the end of paragraph 7.1(m) and substituting
therefore "; and", and adding the following as new paragraph 7.1(n):
"As soon as practicable, and in any event within 20 days after the
end of each calendar month, (i) balance sheets of each Borrower at
the end of such calendar month, and (ii) statements of income and
cash flows of each Borrower for that calendar month. Such financial
statements shall
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be certified by a Senior Officer of the Borrowers as fairly
presenting the financial condition, results of operations and
changes in financial position of the Borrowers, and shall be
prepared and presented in accordance with Generally Accepted
Accounting Principles (other than any requirement for footnote
disclosures), consistently applied, as at such date and for such
periods, subject only to normal year-end accruals and audit
adjustments."
5. SECTION 7.2 (COMPLIANCE CERTIFICATES). Section 7.2 of the Loan
Agreement is hereby amended by deleting the words "as soon as practical and in
any event within 30 days after the end of each calendar month" and substituting
therefor "concurrently with the delivery of the financial statements described
in Sections 7.1(b),".
6. CONSENT AND WAIVER. Subject to conditions set forth in Sections 7
and 9 hereof, each of Agent and the Lenders hereby:
(a) consent to the consummation of the Acquisition on
substantially the terms and conditions set forth in the Waiver Request
Memo;
(b) agree that the Acquisition shall be a Permitted
Acquisition for the purposes of the Loan Agreement;
(c) waive and exempt the Acquisition from the requirements of
Sections 5.11(a), 5.11(b), 5.11(e) and 5.11(f) of the Loan Agreement;
(d) waive the requirements of Sections 6.1(c), 6.8 and 6.9 of
the Loan Agreement to permit the continuance of each of the Facilities,
the Guaranties and the Liens for a period not to exceed 45 days following
the Phase I Closing Date and to permit the repayment in full of each of
the Facilities on or before such date provided that the principal amount
of the loans outstanding under the CIT Facility shall not, at any time,
exceed $18,000,000.; and
(e) extend the time for compliance with Section 5.13 and 5.14
of the Loan Agreement, with respect to Toymax Companies and any other
Subsidiaries of Borrowers formed or acquired in connection with the
Acquisition, in order to permit the Borrowers (i) to deliver the
certificates contemplated by Section 5.13(a), (ii) to deliver the joinder
documents contemplated by Section 5.13(b), (iii) to effect the pledges
contemplated by Section 5.13(c) and (iv) to maintain the deposit accounts
of any such formed or acquired Subsidiaries in accordance with Section
5.14, in each case, on or before the 45th day following the Phase I
Closing Date.
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The consent, waivers and exemptions set forth in this Section 6 are
granted in connection with the Acquisition only and shall not constitute a
consent to, waiver of or exemption from any term or condition of the Loan
Agreement with respect to any other or future transaction or any future breach
thereof.
7. CONDITIONS TO CONSENT, WAIVERS AND EXEMPTIONS. Borrowers
acknowledge and agree that the consent and each of the waivers and exemptions
set forth in Section 6 of this Amendment are expressly conditioned upon
Borrowers' satisfaction of each of the following conditions:
(a) Borrowers shall have delivered the certificate and
documents contemplated by Section 5.11(f) to the Agent not later than two
Business Days prior to the Phase 1 Closing Date;
(b) On or before the 45th day following the Phase I Closing
Date Borrowers shall have (i) caused all of the obligations under the
Facilities to repaid in full and each of the Facilities to be terminated
and (ii) obtained full and final releases and discharges, in form and
substances satisfactory to Agent, of each of the Guaranties and Liens;
(c) On or before the 45th day following the Phase I Closing
Date Borrowers shall have (i) delivered the certificates contemplated by
Section 5.13(a), (ii) delivered the joinder documents contemplated by
Section 5.13(b), (iii) effected the pledges contemplated by Section
5.13(c) and (iv) caused each of the deposit accounts of any Domestic
Subsidiaries formed or acquired in connection with the Acquisition to be
maintained in accordance with Section 5.14; and
(d) Borrowers shall not permit the principal amount of the
loans outstanding under the CIT Facility, at any time, to exceed
$18,000,000.
In the event that Borrowers shall fail to comply with any of the conditions set
forth in this Section 7 when required, such failure shall constitute an Event of
Default under the Loan Agreement and the Loan Documents. Borrowers shall
promptly provide Agent with such evidence of compliance with this Section 7 as
Agent may reasonably request.
8. COVENANTS. Notwithstanding anything to the contrary in the Loan
Agreement, until such date as Borrowers have satisfied each of the conditions
set forth in Section 7 of this Amendment, the Toymax Companies shall be deemed
not to be consolidated Subsidiaries of the Borrowers, and the relevant financial
information of the Toymax Companies shall be excluded from the Borrowers'
consolidated financial information, for the purpose of calculating Leverage
Ratio, Quick Ratio, Fixed Charge Coverage Ratio and Net Worth (and any
components thereof) and in testing
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compliance under sections 6.12, 6.13, 6.14 and 6.15 of the Loan Agreement
provided that for the first Fiscal Quarter following the delivery of joinder
documents for the Toymax Companies in accordance with Section 5.13(b) of the
Loan Agreement, Borrowers may include the Toymax consolidated fourth quarter
results (together with any adjustments thereto required or permitted under the
Loan Agreement) in calculating Leverage Ratio, Quick Ratio, Fixed Charge
Coverage Ratio and Net Worth (and any components thereof) and in testing
compliance under sections 6.12, 6.13, 6.14 and 6.15 of the Loan Agreement .
9. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
subject to the prior satisfaction of each of the following conditions:
(a) Agent shall have received this Amendment, duly executed by
each Borrower and each of the Requisite Lenders;
(b) Lender shall have received an acknowledgment, in the form
attached hereto as Exhibit A, from each Guarantor;
(c) Borrowers shall have paid the waiver fee described in the
Waiver Request Memo to each of the approving Lenders.
10. REAFFIRMATION OF LOAN AGREEMENT; NO DEFAULT; NO DEFENSES; ETC.
Each Borrower hereby reaffirms the Loan Agreement and its obligations to Agent
and Lenders thereunder. Each Borrower represents and warrants that there are no
outstanding Events of Default under the Loan Agreement. Each Borrower
acknowledges that Agent and Lenders have fully complied with their respective
obligations under the Loan Agreement and that such Borrower has no defenses to
the validity, enforceability or binding effect of the Loan Agreement.
11. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
when so executed and delivered shall be deemed an original and all of which when
taken together, shall constitute but one and the same instrument.
12. OTHERWISE NOT EFFECTED. In the event of any conflict or
inconsistency between the Loan Agreement and the provisions of this Amendment,
the provisions of this Amendment shall govern. Except to the extent set forth
herein, the Loan Agreement shall remain unaltered and in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment
by their respective duly authorized officers as of the date first above written.
BORROWERS:
JAKKS PACIFIC, INC.
FLYING COLORS TOYS, INC.
ROAD CHAMPS, INC. and
PENTECH INTERNATIONAL INC.
By: /s/ XXXX X. XXXXXXX
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Xxxx Xxxxxxx
Title: Executive Vice President and
Chief Financial Officer
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A., as
Administrative Agent
By: /s/ XXX XXXX
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Xxx Xxxx,
Vice President
LENDERS:
BANK OF AMERICA, N.A., as
Issuing Lender and as a Lender
By: /s/ XXXXX X. XXXXXXX
-------------------------
Xxxxx X. Xxxxxxx,
Vice President
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UNITED CALIFORNIA BANK, as Lender
By: /s/ XXXX XXXXX
Xxxx Xxxxx
Title: Vice President
BNP PARIBAS, as Issuing Lender and
as Lender
By: /s/ XXXXX XXXXXXX
Xxxxx Xxxxxxx
Title:
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EXHIBIT A
ACKNOWLEDGMENT OF GUARANTORS
In order to induce Agent and Lenders to execute the First Amendment
to Loan Agreement and Consent and Waiver of even date herewith (the "Amendment")
amending the Loan Agreement dated October 12, 2001, among JAKKS Pacific, Inc., a
Delaware corporation, Flying Colors Toys, Inc., a Michigan corporation, Road
Champs, Inc., a Delaware corporation and Pentech International, Inc., a Delaware
corporation, as Borrowers, Agent and each of the Lenders party thereto, and
granting certain consents and waivers, as set forth therein, each of the
undersigned hereby represents, warrants and agrees that the undersigned has
reviewed and approved the Amendment and that nothing contained therein shall
diminish, alter, amend or otherwise affect the undersigned's obligations to
Agent, for the benefit of Lenders, under the Guaranty dated October 12, 2001
(the "Guaranty") made by each of the undersigned in favor of Agent for the
benefit of the Lenders. Each of the undersigned further confirms that the
Guaranty shall continue in full force and effect and agrees that it shall
continue to be liable under such Guaranty in accordance with the terms thereof.
Each of the undersigned further confirms that it has no defense, counterclaim or
offset right whatsoever with respect to its obligations under the Guaranty.
Dated this ________ day of March, 2002.
"Guarantors"
JAKKS ACQUISITION CORP.
J-X ENTERPRISES, INC.
XXXX CORPORATION
PENTECH COSMETICS, INC.
SAWDUST PENCIL CO.
PENTECH-MON AMI, INC.
XX XXXXXXX PARKWAY, INC.
By: /s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Title: Exec. V.P./C.F.O.
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