Exhibit 10.11
LaSalle Business Credit, Inc.
LASALLE BANKS
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
October 1, 2001
The Singing Machine Company, Inc.
0000 Xxxxx Xxxx
Xxxxx X-0
Xxxxxxx Xxxxx, Xxxxxxx 00000
Re: First Amendment (Revised)
Gentlemen:
The Singing Machine Company, Inc., a Delaware corporation ("Borrower")
and LaSalle Business Credit, Inc., a Delaware corporation ("Lender") have
entered into that certain Loan and Security Agreement dated April 26, 2001 (the
"Security Agreement"). From time to time thereafter, Borrower and Bank may have
executed various amendments (each an "Amendment" and collectively the
"Amendments") to the Security Agreement (the Security Agreement and the
Amendments hereinafter are referred to, collectively, as the "Agreement").
Borrower and Lender now desire to further amend the Agreement as provided
herein, subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. The Agreement hereby is amended as follows:
(a) Paragraph 1(a) of the Agreement is hereby amended and restated in
its entirety, as follows:
(a) "Account", "Account Debtor", "Chattel Paper",
"Commercial Tort Claims", "Deposit Accounts",
"Documents", "Electronic Chattel Paper", "Equipment",
"Fixtures'.", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
Page 2
Property", "Letter-of-Credit Right", "Proceeds" and
"Tangible Chattel Paper" shall have the respective
meanings assigned to such terms in the Illinois
Uniform Commercial Code, as the same may be in effect
from time to time.
(b) Paragraph 4 of the Agreement is hereby amended and restated in its
entirety, as follows:
4. GRANT OF SECURITY INTEREST TO LENDER.
As security for the payment of all Loans now or in
the future made by Lender to Borrower hereunder and
for the payment or other satisfaction of all other
Liabilities, Borrower hereby assigns to Lender and
grants to Lender a continuing security interest in
the following property of Borrower, whether now or
hereafter owned, existing, acquired or arising and
wherever now or hereafter located: (a) all Accounts
(whether or not Eligible Accounts) and all Goods
whose sale; lease or other disposition by Borrower
has given rise to Accounts and have been returned to,
or repossessed or stopped in transit by, Borrower;
(b) all Chattel Paper, Instruments, Documents and
General Intangibles (including, without limitation,
all patents, patent applications, trademarks,
trademark applications, tradenames, trade secrets,
goodwill, copyrights, copyright applications,
registrations, licenses, software, franchises,
customer lists, tax refund claims, claims against
carriers and shippers, guarantee claims, contract
rights, payment intangibles, security interests,
security deposits and rights to indemnification); (c)
all Inventory (whether or not Eligible Inventory);
(d) all Goods (other than Inventory), including,
without limitation, Equipment (other than tooling
located in Hong Kong), vehicles and Fixtures; (e) all
Investment Property; (f) all Deposit Accounts, bank
accounts, deposits and cash; (g) all Letter-of-Credit
Rights; (h) Commercial Tort Claims listed on Exhibit
D hereto; (i) any other property of Borrower now or
hereafter in the possession-, custody or control of
Lender or any
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
Page 3
agent or any parent, affiliate or subsidiary of
Lender or any participant with Lender in the Loans,
for any purpose (whether for safekeeping, deposit,
collection, custody, pledge, transmission or
otherwise); and (j) all additions and accessions to,
substitutions for, and replacements, products and
Proceeds of the foregoing property, including,
without limitation, proceeds of all insurance
policies insuring the foregoing property, and all of
Borrower's books and records relating to any of the
foregoing and to Borrower's business.
(c) Paragraph 5 of the Agreement is hereby amended and restated in its
entirety, as follows:
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTEREST THEREIN.
Borrower shall, at Lender's request, at any time and
from time to time, authenticate, execute and deliver
to Lender such financing statements, documents and
other agreements and instruments (and pay the cost of
filing or recording the same in all public offices
deemed necessary or desirable by Lender) and do such
other acts and things or use its best efforts to
cause third parties to do such other acts and things
as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a
valid, attached and perfected security interest in
the Collateral in favor of Lender (free and clear of
all other liens, claims, encumbrances and rights of
third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to
secure payment of the Liabilities, and in order to
facilitate the collection of the Collateral. Borrower
irrevocably hereby makes, constitutes and appoints
Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney and
agent-in-fact to execute and file such financing
statements, documents and other agreements and
instruments and do such other acts and things as
may be necessary to preserve and perfect Lender's
security interest in the
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
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Collateral. Borrower further agrees, upon the
occurrence of an Event of Default, that a carbon,
photographic, photostatic or other reproduction of
this Agreement or of a financing statement shall be
sufficient as a financing statement. Borrower further
notifies and confirms the prior filing by Lender of
any and all financing statements which identify the
Borrower as debtor, Lender as secured party and any
or all Collateral as collateral.
(d) Paragraph 7(e) of the Agreement is hereby amended and restated in
its entirety, as follows:
(e) Promptly upon Borrower's receipt of any portion of
the Collateral evidenced by an agreement, instrument
or Document, including without limitation, any
Tangible Chattel Paper and any Investment Property
consisting of certificated securities, Borrower shall
deliver the original thereof to Lender together with
an appropriate endorsement or other specific evidence
of assignment thereof to Lender (in form and
substance acceptable to Lender). If an endorsement or
assignment of any such items shall not be made for
any reason, Lender is hereby irrevocably authorized,
as Borrower's attorney and agent-in-fact to endorse
or assign the same on Borrower's behalf.
(e) Paragraph 10(i) of the Agreement is hereby amended and restated in
its entirety, as follows:
(i) (x) there are no actions or proceedings which are
pending or to the best of Borrower's knowledge,
threatened against Borrower which is, in the
determination of Lender made in good faith,
reasonably likely to result in any material adverse
change in Borrower's business, property, assets,
operations or condition, financial or otherwise and
Borrower shall, promptly upon becoming aware of any
such pending or threatened action or proceeding, give
written notice thereof to Lender and (y) Borrower has
no Commercial Tort Claims pending other than Tort
Claims of Borrower which may arise, which notice
shall constitute Borrower's
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
Page 5
authorization to amend Exhibit D to add such
Commercial Tort Claim;
(f) Paragraph 10(t) of the Agreement is hereby amended and restated in
its entirety, as follows:
(t) if Borrower is a corporation, limited liability
company or partnership, Borrower is duly organized,
validly existing and in good standing in the State of
Delaware, its organizational identification number is
2376345 and Borrower is duly qualified and in good
standing in all states where the nature and extent of
the business transacted by it or the ownership of its
assets makes such qualification necessary or, if
Borrower is not so qualified, Borrower may cure any
such failure without losing any of its rights,
incurring any liens or material penalties, or
otherwise affecting Lender's rights;
(g) Paragraph 11(j) of the Agreement is hereby amended and restated in
its entirety, as follows:
(j) Borrower shall not assume, guarantee or endorse, or
otherwise become liable in connection with, the
obligations of any Person, except by endorsement of
instruments for deposit or collection or similar
transactions in the ordinary course of business; and,
except that Borrower may guarantee, on a limited
basis, obligations of any Subsidiary of Borrower up
to $500,000.00 in the aggregate outstanding at any
time, and any obligations over that amount shall
require prior written consent by Lender. Such consent
of Lender shall not be unreasonably withheld and, in
any event, Lender shall use its best efforts to grant
or deny such consent of Lender in writing within ten
(10) business days of 'receipt of a written request
from Borrower for such consent.
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
Page 6
(h) Paragraph 11(k) of the Agreement is hereby amended and restated in
its entirety, as follows:
(k) Borrower shall not (i) enter into any merger or
consolidation; (ii) change the state of Borrower's,
organization or enter into any transaction which has
the effect of changing Borrower's state of
organization; (iii) sell, lease or otherwise dispose
of any of its assets other than in the ordinary
course of business; (iv) purchase the stock or all or
substantially all of the assets of any Person or
division of such Person; or (v) enter into any other
transaction outside the ordinary course of Borrower's
business, including, without limitation, any
purchase, redemption or retirement of any shares of
any class of its stock or any other equity interest,
and any issuance of any shares of, or warrants or
other rights to receive or purchase any shares of,
any class of its stock or any other equity interest;
provided, that Borrower may (a) issue securities to
any Person so long as such issuance of securities
does not exceed ten percent (10%) of the Borrower's
issued and outstanding capital stock, (b) grant
options to employees, (c) adopt a stock option plan,
(d) issue securities upon the exercise of outstanding
stock options and warrants, and (e) file a
registration statement on Form S-8 or Form S-3;
provided further, that with respect to each of the
foregoing, (x) no Event of Default shall be caused by
the issuance of any securities, stock or warrants and
(y) no put rights or mandatory dividends are granted
in connection with such issuance;
(i) Paragraph 11 of the Agreement is hereby amended to add a new
subparagraph (s) as follows:
(s) To the extent that Borrower obtains or maintains any
Electronic Chattel Paper, Borrower shall create,
store and assign the record or records comprising the
Electronic Chattel Paper in such a manner that (i) a
single authoritative copy of the record or records
exists which is unique, identifiable and except as
otherwise provided in clauses (iv), (v) and (vi)
below, unalterable, (ii) the authoritative copy
identifies Lender as the assignee of the record or
records, (iii) the
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
Page 7
authoritative copy is communicated to and maintained
by the Lender or its designated custodian, (iv)
copies or revisions that add or change an identified
assignee of the authoritative copy can only be made
with the participation of Lender, (v) each copy of
the authoritative copy and any copy of a copy is
readily identifiable as a copy that is not the
authoritative copy and (vi) any revision of the
authoritative copy is readily identifiable as an
authorized or unauthorized revision.
(j) Paragraph 13(b) of the Agreement is hereby amended and restated in
its entirety, as follows:
(b) Upon the occurrence and during the continuance of an
Event of Default, Lender may exercise from time to
time any rights and remedies available to it under
the Uniform Commercial Code and any other applicable
law in addition to, and not in lieu of, any rights
and remedies expressly granted in this Agreement or
in any of the Other Agreements and all of Lender's
rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In
particular, but not by way of limitation of the
foregoing, Lender may, without notice, demand or
legal process of any kind, take possession of any or
all of the Collateral (in addition to Collateral of
which it already has possession), wherever it may be
found, and for that purpose may-pursue the same
wherever it may be found, and may enter onto any of
Borrower's premises where any of the Collateral may
be, and search for, take possession of, remove, keep
and store any of the Collateral until the same shall
be sold or otherwise disposed of, and Lender shall
have the right to store the same at any of Borrower's
premises without cost to Lender. At Lender's request,
Borrower shall, at Borrower's expense, assemble the
Collateral and make it available to Lender at one or
more places to be designated by Lender and reasonably
convenient to Lender and Borrower. Borrower
recognizes that if Borrower fails to perform, observe
or discharge
The Singing Machine Company, Inc.
October 1, 2001
Page 8
any of its Liabilities under this Agreement or the
Other Agreements, no remedy at law will provide
adequate relief to Lender, and agrees that Lender
shall be entitled to temporary and permanent
injunctive relief in any such case without the
necessity of proving actual damages. Any notification
of intended disposition of any of the Collateral
required by law will- be deemed to be a reasonable
authenticated notification of disposition if given at
least ten (10) calendar days prior to such
disposition and such notice shall (i) describe Lender
and Borrower, (ii) describe the Collateral that is
the subject of the intended disposition, (iii) state
the method of the intended disposition, (iv) state
that Borrower is entitled to an accounting of the
Liabilities and state the charge, if any, for an
accounting and (v) state the time and place of any
public disposition or the time after which any
private sale is to be made. Lender may disclaim any
warranties that might arise in connection with the
sale, lease or other disposition of the Collateral
and has no obligation to provide any warranties at
such time. Any Proceeds. of any disposition by Lender
of any of the Collateral may be applied by Lender to
the payment of expenses in connection with the
Collateral, including, without limitation, legal
expenses and reasonable attorneys' fees, and any
balance of such Proceeds' may be applied by Lender
toward the payment of such of the Liabilities, and in
such order of application, as Lender may from time to
time elect.
(k) All references to "fixtures" in the Agreement shall be amended to
read "Fixtures".
(l) The Agreement is hereby amended to add a new Exhibit D-Commercial
Tort Claims, as set forth on Exhibit D hereto.
(m) Exhibit B to the Agreement is amended and restated as attached
hereto and made a part hereof.
2. This Amendment shall not become effective until fully executed by
all parties hereto.
LaSalle Business Credit Inc.
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LASALLE BANKS
The Singing Machine Company, Inc.
October 1, 2001
Page 9
3. Except as expressly amended hereby and by any other supplemental
documents or instruments executed by either party hereto in order to effectuate
the transactions contemplated hereby, the Agreement and Exhibit A thereto hereby
are ratified and confirmed by the parties hereto and remain in full force and
effect in accordance with the terms thereof.
LASALLE BUSINESS CREDIT, INC.
By /s/ Xxxxx Xxxxxxxx
--------------------------
Title Vice President
-------------------------
ACKNOWLEDGED AND AGREED TO
this 1st day of October, 2001.
The Singing Machine Company, Inc.
By /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Title President/Secretary
