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Exhibit 10.9
AMENDMENT NO. 1
TO
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 (this "AMENDMENT") is entered into as of June 1,
2001, by and among DISCOVERY TOYS, INC., a California corporation ("BORROWER"),
PNC BANK, NATIONAL ASSOCIATION ("PNC"), the undersigned financial institutions
which are now or which hereafter become a party to the Loan Agreement
(collectively, the "LENDERS" and individually, a "LENDER"), and PNC as agent for
Lenders (PNC, in such capacity, "AGENT").
BACKGROUND
Borrower, Agent and Lenders are parties to a Revolving Credit and
Security Agreement dated as of June 1, 1999 (as amended, restated, supplemented
or otherwise modified from time to time, the "LOAN AGREEMENT") pursuant to which
Agent and Lenders provide Borrower with certain financial accommodations.
Borrower has requested that Agent and Lenders (i) consent to Sale of
Stock (as defined below) and (ii) amend provisions of the Loan Agreement as
hereafter provided. Agent and Lenders are willing to do so on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrower by Agent
and Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction of the conditions
precedent set forth in Section 6, the Loan Agreement is hereby amended as
follows:
(a) Section 1.2 is amended as follows:
(i) the following defined terms are added in their appropriate
alphabetical order:
"AMENDMENT NO. 1" shall mean Amendment No. 1 to Revolving
Credit and Security Agreement, dated as of June 1, 2001, by
and among Borrower, Agent and Lenders.
"GUARANTOR" shall mean Discovery Toys, L.L.C., a New Jersey
limited liability company.
"GUARANTY" shall mean that certain Limited Guaranty, dated as
of June 1, 2001, executed by Guarantor.
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"SEASONAL OVERADVANCE AMOUNT" shall mean $1,250,000 during the
Seasonal Overadvance Period and $0 at all other times.
"SEASONAL OVERADVANCE PERIOD" shall mean the period commencing
on June 1, 2001 and ending on December 31, 2001.
(ii) the following defined terms are amended in their entirety
to provide as follows:
"REVOLVING INTEREST RATE" shall mean, other than during the
Seasonal Overadvance Period, an interest rate per annum equal
to the sum of the Alternative Base Rate plus one and one-half
of one percent (1 1/2%). During the Seasonal Overadvance
Period, the Revolving Interest Rate shall mean an interest
rate per annum equal to the sum of the Alternative Base Rate
plus two and one-half percent (2 1/2%).
"TERM" shall mean the Closing Date through May 31, 2003.
(b) Section 2.1(a)(y) is amended in its entirety to provide as
follows:
"(y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section
2.1(b) hereof ("RECEIVABLES ADVANCE RATE"), of
Eligible Receivables, PLUS
(ii) 55%, subject to the provisions of Section 2.1(b)
hereof ("INVENTORY ADVANCE RATE"), of the value of
the Eligible Inventory (the Receivables Advance Rate
and the Inventory Advance Rate shall be referred to
collectively as the "ADVANCE RATES") in the aggregate
at any time, PLUS
(iii) the Seasonal Overadvance Amount, PLUS
(iv) the product of the aggregate amount of
outstanding documentary Letters of Credit times the
Inventory Advance Rate, MINUS
(v) the aggregate amount of outstanding Letters of
Credit, MINUS
(vi) such reserves as Agent may reasonably deem
proper and necessary from time to time.
The amount derived from (x) the sum of Sections
2.1(a)(y)(i),(ii),(iii) and (iv) MINUS (y) Section
2.1(a)(y)(vi) at any time and from time to time shall be
referred to as the "FORMULA AMOUNT." The Revolving Advances
shall be
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evidenced by secured promissory notes (collectively, the
"REVOLVING CREDIT NOTE") substantially in the form attached
hereto as EXHIBIT 2.1(A)."
(c) Section 6.5 is amended in its entirety to provide as
follows:
"AVAILABILITY. Maintain an Undrawn Availability of at least
$2,000,000 at all times, other than during the period
commencing upon the date of the effectiveness of Amendment No.
1 and ending upon January 1, 2002."
(d) Section 7.7 is amended in its entirety to provide as
follows:
"DIVIDENDS. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of
Borrower (other than dividends or distributions payable in its
stock, or split-ups or reclassifications of its stock) or
apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred
stock, or of any options to purchase or acquire any such
shares of common or preferred stock of Borrower; PROVIDED,
HOWEVER, on or before July 16, 2001, Borrower may (i) redeem
the shares of Borrower owned by Avon, and (ii) make a cash
dividend distribution to its shareholders, in an amount not to
exceed $6,000,000 in the aggregate for clauses (i) and (ii)."
3. ACCOMMODATION FEE. To induce Lender to enter into this Amendment,
Borrower hereby agrees to pay Agent an accommodation fee of $175,000 (the
"ACCOMMODATION FEE"). This fee is due and fully earned on the date hereof and
Agent shall, without making demand, charge this fee to Borrower's Account.
4. CONSENT TO AMENDMENT TO SUBORDINATED NOTE. Subject to satisfaction of
the conditions precedent set forth in Section 6 and subject to Agent receiving
an executed copy of the agreement between Avon and Borrower which amends the
maturity date of the Subordinated Note to June 30, 2003, which shall be in form
and substance satisfactory to Agent and its counsel, Agent hereby consents to
the change of the final maturity date of the Subordinated Note from January 15,
2006 to June 30, 2003 and hereby waives any Default or Event of Default which
may arise or result from such change to the Subordinated Note.
5. CONSENT TO STOCK PURCHASE DOCUMENTATION.
(a) Subject to satisfaction of the conditions precedent set forth in
Section 6 and subject to Agent receiving an executed copy of the Stock Purchase
Agreement (defined below), which shall be in form and substance satisfactory to
Agent and its counsel, Agent hereby consents to the Change of Ownership arising
due to the sale of stock (the "Sale of Stock") by the shareholders of Borrower
to dreamlife, inc., ("dreamlife") as contemplated by the Stock Purchase
Agreement to be entered into between dreamlife, Borrower and all of the holders
of the issued and outstanding capital stock of Borrower (the "Stock Purchase
Agreement") and all other documents to be executed in connection therewith
(collectively, with the Stock Purchase Agreement, the "Stock Purchase
Documents"), and hereby waives any Default or Event of Default which may arise
or result from the execution of the Stock Purchase Documents.
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(b) Upon the execution of the Stock Purchase Documents and the
occurrence of the Sale of Stock as contemplated thereunder, the Loan Agreement
shall be further amended as follows:
(i) Section 1.2 shall be amended such that the following
defined terms are added in their appropriate alphabetical order:
"DREAMLIFE" shall mean dreamlife, inc., a Delaware
corporation.
"STOCK PURCHASE AGREEMENT" shall mean the Stock Purchase
Agreement entered into between dreamlife, Borrower and all of
the holders of the issued and outstanding capital stock of
Borrower, a copy of which has been furnished to Lender."
(ii) Section 1.2 shall be further amended by amending the term
"Original Owner" in its entirety to provide as follows:
"ORIGINAL OWNER" shall mean dreamlife.
(iii) Section 5.18 is amended in its entirety to provide as
follows:
"DELIVERY OF ACQUISITION AGREEMENT AND STOCK PURCHASE
AGREEMENT. Agent has received complete copies of the
Acquisition Agreement and Stock Purchase Agreement (including
all exhibits, schedules and disclosure letters referred to
therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side
letters or agreements affecting the terms thereof. None of
such documents and agreements has been amended or
supplemented, except as set forth in the documents delivered
to Agent nor have any of the provisions thereof been waived,
except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent."
(iv) Section 6.9 is amended in its entirety to provide as
follows:
"Enforce all of its material rights under the Acquisition
Agreement and the Stock Purchase Agreement and the documents
executed in connection therewith including, but not limited
to, all indemnification rights and pursue all material
remedies available to it with diligence and in good faith in
connection with the enforcement of any such rights."
(v) Section 7.8 is hereby amended by (i) deleting the "and"
before clause (iii), and (ii) adding at the end thereof "; and (iv) the
Subordinated Loan".
(vi) A new Section 7.18 is hereby added which provides as
follows:
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"7.18 SUBORDINATED LOAN. At any time, directly or indirectly,
(a) pay, prepay, repurchase, redeem, retire or otherwise
acquire, or make any payment on account of any principal of,
interest on, or premium payable in connection with the
repayment or redemption of the Subordinated Note other than to
the extent payment is due upon maturity of the Subordinated
Note, or (b) enter into any material amendment or modification
of the Subordinated Note."
(vii) Section 9.9 is amended in its entirety to provide as
follows:
"Furnish Agent as soon as available, but in any event within
ten (10) days after the issuance thereof, (i) copies of such
financial statements, reports and returns as Borrower shall
send to its stockholders generally and (ii) copies of all
notices sent pursuant to the Acquisition Agreement and Stock
Purchase Agreement."
(viii) Article X is amended by changing the period at the end
of Section 10.17 to "; and" and adding a new Section 10.18 which shall provide
as follows:
"10.18 Two of the following three individuals shall cease to
have the authority, through membership on the board of
directors of Borrower or dreamlife, or holding a senior
executive position with Borrower, to direct the business
operations of Borrower: William Walsh, Anthony Calandra and
James Cascino."
6. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
upon satisfaction of the following conditions precedent on or before June 29,
2001: Agent shall have received (i) four (4) copies of this Amendment executed
by Borrower and Lenders; (ii) four (4) copies of the Guaranty executed by
Guarantor; (iii) the Accommodation Fee; and (iv) such other certificates,
instruments, documents, agreements and opinions of counsel as may be required by
Agent or its counsel, each of which shall be in form and substance satisfactory
to Agent and its counsel.
7. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrower hereby reaffirms
all covenants, representations and warranties made in the Loan Agreement to the
extent the same are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment.
(c) Borrower has no defense, counterclaim or offset with respect to the
Loan Agreement.
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8. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) Except as set forth in Sections 4 and 5 hereof, the execution,
delivery and effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of Agent or Lenders, nor constitute a waiver of any
provision of the Loan Agreement, or any other documents, instruments or
agreements executed and/or delivered under or in connection therewith.
9. GOVERNING LAW. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
10. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
11. COUNTERPARTS; FACSIMILE. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed an
original and all of which when taken together shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
DISCOVERY TOYS, INC., as Borrower
By:
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Name:
Title:
PNC BANK, NATIONAL ASSOCIATION, as
Agent and Lender
By:
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Name:
Title:
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