EXHIBIT 10.13
FOURTH AMENDMENT TO LETTER LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LETTER LOAN AGREEMENT ("Amendment") is made and
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entered into effective the 31st day of January, 1997, by and between DSI TOYS,
INC. f/k/a DIVERSIFIED SPECIALISTS, INC., a Texas corporation (herein called
"Borrower"), and BANK ONE, TEXAS, N.A., with offices in Houston, Texas (herein
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called "Lender").
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R E C I T A L S:
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WHEREAS, Borrower, Lender and Guarantor entered into a Letter Loan
Agreement dated December 11, 1995, as amended by First Amendment to Letter Loan
Agreement dated January 31, 1996, a Second Amendment to Letter Loan Agreement
dated effective August 1, 1996, and a Third Amendment to Letter Loan Agreement
dated effective November __, 1996 (collectively, the "Loan Agreement"; the terms
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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 to modify and increase the allowable inventory
overadvances from $1,500,000.00 to $2,000,000.00, and to move up the date under
which overadvances are allowed from February 1st through September 30th.
A G R E E M E N T:
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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
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date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, hereby amended as follows:
(a) Section 6(a) is deleted in its entirety and the following is
substituted therefor:
"(a) Permit its Net Worth to be less than (i) ($2,500,000) from
the date hereof until July 31, 1996, (ii) ($1,500,000) from August 1, 1996
through September 30, 1996, (iii) $100,000 from October 1, 1996 through
January 30, 1998, and (iv) for each annual period thereafter beginning
January 31, 1998, $1,500,000 plus the Net Worth required for the previous
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annual period; as used herein, the term "Net Worth" shall mean the total
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consolidated assets of Borrower, plus all subordinated debt, plus all notes
and accounts receivable from Tommy Moss (collectively, the "Moss Note"),
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minus (A) its total consolidated liabilities (including contingent
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liabilities), (B) all notes receivable from shareholders and affiliates
(other than the Moss Note), and (C) other items deducted in arriving at net
worth; provided, however, upon Borrower's delivery to Hibernia of the
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January 31, 1997 scheduled $1,500,000 payment on the Hibernia portion of
the Subordinated Indebtedness, the foregoing Net Worth requirements shall
thereafter be reduced by such $1,500,000."
(b) Schedule A, Definition of "Borrowing Base" is deleted in its
entirety and the following is substituted therefor:
"A. "Borrowing Base", as used herein, shall mean the sum of: (i)
eighty percent (80%) of Borrower's Eligible Accounts (as defined below)
outstanding on the date of a request for a Loan advance; plus (ii) fifty
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percent (50%) of Borrower's Net Security Value of Domestic Inventory (as
defined below); provided, however, during the period from February 1st
through September 30th of each year, advances exceeding the Borrowing Base
(the "Over-Advance") will be allowed provided that the aggregate amount of
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the Over-Advance does not exceed the lesser of (i) the sum of eighty
percent (80%) of Eligible Accounts plus one hundred percent (100%) of
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Domestic Eligible Inventory, or (ii) $2,000,000."
(c) Schedule "B" is hereby replaced by that which is attached hereto
indicating that the Over-advance (maximum) available under the Revolving Note is
increased to $2,000,000.00.
2. Conditions of Effectiveness. This Amendment shall become effective
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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) $5,000.00 loan modification fee;
(b) Certificates of the Boards of Directors of Borrower and Rosie
Acquisition, L.L.C. ("Guarantor") authorizing the execution, delivery and
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performance of this Amendment, and the matters contemplated hereby;
(c) Counterparts of the consent appended hereto (the "Consent of
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Guarantor") executed by Guarantor; and
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(d) Any and all other documentation as Lender may reasonably require.
3. Representations and Warranties of Borrower. Borrower represents and
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warrants as follows:
(a) 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.
(b) The representations and warranties made by Borrower in the Loan
Agreement are true and correct as of the date of this Amendment.
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(c) 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.
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(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
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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. Waiver. As additional consideration for the execution, delivery and
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performance of this Amendment by the parties hereto and to induce Lender to
enter into this Amendment, Borrower and Guarantor warrant and represent 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 (a) the payment of any obligations and indebtedness
under the Notes and/or the Security Instruments or (b) 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 and Guarantor unconditionally and irrevocably waive 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
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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
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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.
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8. Governing Law. This Amendment shall be governed by and construed in
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accordance with the laws of the State of Texas.
9. Final Agreement. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
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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. Davis
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Name: M. D. Davis
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Title: CEO
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LENDER:
BANK ONE, TEXAS, N.A.
By: /s/ John Elam
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Name: John Elam
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Title: VP
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GUARANTOR:
ROSIE ACQUISITION, L.L.C.
By: /s/ M. D. Davis
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Name: M. D. Davis
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Title: President
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to evidence its acknowledgment of the
waiver set forth in Paragraph 5 hereof
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CONSENT OF GUARANTOR
Dated effective as of January 31, 1997
The undersigned, ROSIE ACQUISITION, L.L.C., as the Guarantor referred to in
the foregoing Amendment, hereby consents to the foregoing Amendment and hereby
confirms and agrees that (i) the guaranty in effect on the date hereof to which
it is a party is, and shall continue to be, in full force and effect and is
hereby confirmed and ratified in all respects except that, upon the
effectiveness of, and on and after the date of, the Amendment, all references in
the guaranty to the Loan Agreement shall mean the Loan Agreement as amended by
the Amendment and (ii) the guaranty does, and shall continue to, guarantee the
payment by the Borrower of its obligations under the Loan Agreement as amended
by the Amendment.
ROSIE ACQUISITION, L.L.C.
By: /s/ M. D. Davis
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Name: M. D. Davis
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Title: President
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SCHEDULE "B"
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BORROWING BASE REPORT
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AND COMPLIANCE CERTIFICATE
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I. Total Accounts Receivable of Borrower: $______________
Less: Ineligible Accounts (as detailed on
attachment) - $______________
Eligible Accounts Receivable = $______________
II. Total Inventory: $______________
Less: Inventory Deductions - $______________
Eligible Inventory: = $______________
III. 80% x Domestic Eligible Accounts Receivable $______________
50% x Domestic Eligible Inventory: + $______________
Borrower's Loan Limit: = $______________
(maximum $9,000,000)
IV. Current Principal Balance: $______________
V. Available Funds: $______________
VI. Advance Request: $______________
VII. Over-Advance (maximum $2,000,000) + $______________
VIII. Total Outstanding After Advance (Maximum $9,000,000) $______________
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I. Current Ratio
II. Tangible Net Worth $______________
III. Debt to Worth Ratio _______________
IV. Debt Service Coverage _______________
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The undersigned officer of Borrower, hereby certifies to Lender that (i)
the computations set forth above are true, correct and complete as of the date
set forth above or as of the date of execution hereof, as the case may be, (ii)
such computations have been made in full compliance with and conformity to the
Letter Loan Agreement (the "Loan Agreement") between Borrower and Lender, (iii)
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the matters set forth in Paragraph 3 of the Loan Agreement are true and correct,
and (iv) Borrower is not in default under the Loan Agreement.
All capitalized terms used herein which have been defined in the Loan
Agreement have been used in accordance with the definitions ascribed to them in
the Loan Agreement.
EXECUTED this ____ day of _____________, 19___.
DSI TOYS, INC.
By:_____________________________
Name:___________________________
Title:__________________________