FIRST AMENDMENT TO AMENDED AND
RESTATED LETTER LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LETTER LOAN AGREEMENT
("AMENDMENT") is made and entered into effective the 31st day of January, 1998,
by and between DSI TOYS, INC., a Texas corporation (herein called "BORROWER"),
BANK ONE, TEXAS, N.A., with offices in Houston, Texas (herein called "LENDER").
RECITALS:
WHEREAS, Borrower and Lender entered into an Amended and Restated Letter
Loan Agreement dated October 22, 1997 (the "LOAN AGREEMENT"; the terms 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, which include (i) modifying the maturity date
of the revolving line of credit, (ii) modifying the existing financial
covenants, and (iii) amending certain other terms and provisions of the Loan
Agreement.
AGREEMENT:
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. The Loan Agreement is, effective the
date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, hereby amended as follows:
(a) Section 1(a), LOAN AND LETTERS OF CREDIT, is hereby amended
by deleting the reference to the Maturity Date of "OCTOBER 22, 2000" and
substituting "MARCH 31, 1999" therefor.
(b) Section 5(a), AFFIRMATIVE COVENANTS, is hereby amended to
reflect monthly financial reporting rather than quarterly; to-wit
Section 5(a) is amended by deleting the reference to "WITHIN FORTY-FIVE
(45) DAYS AFTER THE END OF EACH FISCAL QUARTER," and substituting
"WITHIN THIRTY (30) DAYS AFTER THE END OF EACH MONTH," therefor; and
FURTHER deleting any reference to financial reporting from "QUARTER
REPORTING" to "MONTHLY REPORTING" therefor.
(c) Section 5(c), AFFIRMATIVE COVENANTS, is hereby amended by
adding the following:
"; AND (III) MONTHLY INVENTORY AND ACCOUNTS RECEIVABLE
FIELD EXAMINATION AUDITS, BEGINNING IN MARCH 1998, TO BE
PERFORMED BY AN INDEPENDENT THIRD PARTY ACCEPTABLE TO LENDER, AT
BORROWER'S SOLE COST AND EXPENSE, AND TO CONTINUE THEREAFTER
THROUGH MATURITY OF THE LOAN."
(d) Section 5 of the Loan Agreement is amended by adding the
following subsection (o) thereto:
"(O) BORROWER SHALL TIMELY MAKE THE PAYMENTS TO
ADVERTISERS, AS SET FORTH IN THE SCHEDULE BELOW (WITHOUT
PREPAYMENT):
03/98.............. $525,586.20
04/98.............. $200,000.00
05/98.............. $200,000.00
06/98.............. $800,000.00
07/98.............. $800,000.00
08/98.............. $800,000.00
09/98.............. $900,000.00
10/98.............. $911,808.70
IF BORROWER CANNOT ADHERE TO ITS PAYMENT OBLIGATIONS RELATING TO
THE ADVERTISING SCHEDULE, IT AGREES THAT IT WILL PROMPTLY NOTIFY
LENDER OF THE SAME."
(e) Section 6(a), NEGATIVE COVENANTS, is hereby amended to
require a minimum Tangible Net Worth equal to the following amounts for
the following dates:
End of 03/98 ............... $ 2,200,000.00
End of 04/98 ............... $ 1,900,000.00
End of 05/98 ............... $ 1,550,000.00
End of 06/98 ............... $ 1,800,000.00
End of 07/98 ............... $ 2,500,000.00
End of 08/98 ............... $ 3,000,000.00
End of 09/98 ............... $ 3,800,000.00
End of 10/98 ............... $ 4,800,000.00
End of 11/98 ............... $ 5,100,000.00
End of 12/98 ............... $ 4,700,000.00
End of 01/99 through
Maturity Date .......... $ 4,100,000.00
(f) Section 6(b), NEGATIVE COVENANTS, is hereby amended as
follows:
"(B) PERMIT ITS EBITDA (CALCULATED CUMULATIVELY COMMENCING
FEBRUARY 1, 1998) TO BE LESS THAN THE FOLLOWING AMOUNTS BY THE
FOLLOWING DATES:
End of 03/98 ................. $ (1,500,000.00)
End of 04/98 ................. $ (1,900,000.00)
End of 05/98 ................. $ (2,300,000.00)
End of 06/98 ................. $ (1,800,000.00)
End of 07/98 ................. $ (500,000.00)
End of 08/98 ................. $ 750,000.00
End of 09/98 ................. $ 2,300,000.00
End of 10/98 ................. $ 3,800,000.00
End of 11/98 ................. $ 4,300,000.00
End of 12/98 ................. $ 3,800,000.00
End of 01/99 through
Maturity Date ............ $ 3,100,000.00
(g) Section 6(c) is hereby deleted in its entirety.
(h) The "BORROWING BASE" definition on Schedule A is hereby
amended by deleting the reference to "ONE HUNDRED PERCENT (100%) OF
DOMESTIC ELIGIBLE INVENTORY" and substituting therefor "NINETY PERCENT
(90%) OF DOMESTIC ELIGIBLE INVENTORY".
2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
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:
(a) A fully executed $10,000,000.00 Modification Revolving
Promissory Note;
(b) A $25,000.00 loan commitment fee;
(c) Certificate of the Boards of Directors of Borrower
authorizing the execution, delivery and performance of this Amendment,
and the matters contemplated hereby; and
(d) Any and all other documentation as Lender may reasonably
require.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants as follows:
(a) That there will be no material adverse changes from and
between the Borrower's internally prepared January 31, 1998 financial
statements and the annual audited consolidated financial statements
which are being prepared by an independent certified public
accountant(s) to be dated at the close of the fiscal year, January 31,
1998. Further, Borrower represents and warrants to Lender that the
audited consolidated financial statements will be delivered to Lender by
no later than May 31, 1998, and shall include, a profit and loss
statement, balance sheet, cash flow statement, and any other matters as
Lender may reasonably request.
(b) That 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 consent or approval of any
regulatory authority or governmental body of the United States or any
state.
(c) That the representations and warranties made by Borrower in
the Loan Agreement are true and correct as of the date of this
Amendment.
(d) 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.
(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 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, 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. COVENANT DEVIATION AND WAIVER.
(a) As of January 31, 1998, Borrower failed to maintain
compliance with certain financial covenant requirements set forth in the
Letter Loan Agreement. Borrower has requested, and Lender has approved,
a deviation from such compliance with respect to such time period. It is
understood and agreed that Lender's consent to such deviations shall not
act as a waiver of any covenants, restrictions, rights or remedies with
respect to the Loan Agreement, but that such deviations shall apply only
to the specific matters and instances set forth hereinabove.
(b) As additional consideration for the execution, delivery and
performance of this Amendment by the parties hereto and to induce Lender
to enter into this Amendment, Borrower warrants and represents 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 (i) the payment of any
obligations and indebtedness under the Notes and/or the Security
Instruments, or (ii) 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 unconditionally and irrevocably waives 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
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
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
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
accordance with the laws of the State of Texas.
9. FINAL AGREEMENT. THIS WRITTEN FIRST AMENDMENT TO AMENDED AND RESTATED
LETTER LOAN AGREEMENT REPRESENTS THE FINAL 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
Name: M. D. Xxxxx
Title: Chief Executive Officer
LENDER:
BANK ONE, TEXAS, N.A.
By: /s/ XXXX X. XXXX
Name: Xxxx X. Xxxx, Xx.
Title: Vice President
