EXHIBIT 10.1
LASALLE BUSINESS CREDIT, INC.
MEMBER ABN AMRO GROUP
135 South LaSalle Street
Suite 425 December 27, 2002
Chicago, Illinois 60603
(312) 904-8490
The Singing Machine Company, Inc.
6601 Lyons Road
Suite A-7
Coconut Creek, Florida 33073
RE: SIXTH AMENDMENT
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) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:
(i) LOANS: Subject to the terms and conditions of the Agreement
and the Other Agreements, Lender shall, absent the
occurrence of an Event of Default, advance an amount up to
the sum of the following sublimits (the "LOAN LIMIT"):
(a) Up to seventy percent (70%), or such lesser percentage
as determined by Lender in its sole discretion
exercised in good faith, of the face amount (less
maximum discounts,
EXHIBIT 10.1
LASALLE BUSINESS CREDIT, INC.
MEMBER ABN AMRO GROUP
The Singing Machine Company, Inc.
December 27, 2002
Page 2
credits and allowances which may be taken by or granted
to Account Debtors in connection therewith in the
ordinary course of Borrower's business) of Borrower's
Eligible Accounts; plus
(b) Subject to subparagraph (3)(a) of this Exhibit A, the
lesser of: up to forty percent (40%), or such lesser
percentage as determined by Lender in its sole
discretion exercised in good faith, of the lower of the
cost or market value of Borrower's Eligible Inventory
or (I) Two Million Five Hundred Thousand and No/100
Dollars ($2,500,000.00) during the period of May 1st
through July 31st of each calendar year; (II) Five
Million and No/100 Dollars ($5,000,000.00) during the
period of August 1st through November 30th of each
calendar year; provided, that commencing on December
1st of each calendar year, said sublimit shall reduce
by One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00) per week and shall continue to reduce
on the same day of each week until December 15th of
each calendar year, on which date said advance rate
shall reduce to zero percent (0%) during the period of
December 15th of each calendar year through April 30th
of each following calendar year;
provided, however the following advance rates and
amounts shall apply during the following periods:
subject to subparagraph (3)(a) of this Exhibit A, the
lesser of: A) up to twenty percent (20%), or such
lesser percentage as determined by Lender in its sole
discretion exercised in good faith, of the lower of
the cost or market value of Borrower's Eligible
Inventory or Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,00000) during the period of
December 16, 2002 through January 15, 2003; and B) up
to ten percent (10%), or such lesser percentage as
determined by Lender in its sole discretion exercised
in good faith, of the lower of the cost or market
value of Borrower's Eligible Inventory or Two Million
and No/100 Dollars ($2,000,000.00) during the period
of January 16, 2003 through February 10, 2003; and
EXHIBIT 10.1
LASALLE BUSINESS CREDIT, INC.
MEMBER ABN AMRO GROUP
The Singing Machine Company, Inc.
December 27, 2002
Page 3
commencing on February 11, 2003 through April 30,
2003, said sublimit shall reduce to Zero and No/100
Dollars ($0.00), and during which time said advance
rate shall reduce to zero percent (0%); plus
(c) Subject to subparagraph (3)(a) of this Exhibit A, the
lesser of: up to forty percent (40%), or such lesser
percentage as determined by Lender in its sole
discretion exercised in good faith, against the face
amount of commercial Letters of Credit issued or
guaranteed by Lender for the purpose of purchasing
Eligible Inventory; provided, that such commercial
Letters of Credit are in form and substance
satisfactory to Lender or Two Million Five Hundred
Thousand and No/100 Dollars ($2,500,000.00); provided,
that said advance rate shall reduce to zero percent
(0%) during the period of December 1st of each calendar
year through April 30th of each following calendar
year; minus
(d) Such reserves, as Lender elects, in its sole discretion
exercised in good faith, to establish from time to
time, including without limitation, (I) a seasonal
dilution reserve in the amount of One Million and
No/100 Dollars ($1,000,000.00) against Borrower's
"Eligible Accounts" during the periods of October 1,
2002 until March 15, 2003 and October 1st of each
subsequent calendar year until the "Clean Up Period"
(as defined below), and (II) to the extent that the
ratio of Free on Board sales to domestic sales
increases, Lender in its sole discretion may create a
reserve to account for the additional dilution;
provided, that the Loan Limit shall in no event
exceed (I) Twenty-Five Million and No/100 Dollars
($25,000,000.00) during the period of August 1st
through December 15th of each calendar year; (II)
Twenty Million and No/100 Dollars ($20,000,000.00)
during the period of December 16th through December
31st of each calendar year; and (III) Ten Million and
No/100 Dollars ($10,000,000.00) during the period of
January 1st through July 31st of each calendar year;
and (IV) zero ($0) during any consecutive ninety (90)
day
EXHIBIT 10.1
LASALLE BUSINESS CREDIT, INC.
MEMBER ABN AMRO GROUP
The Singing Machine Company, Inc.
December 27, 2002
Page 4
period between December 15th of each year through
April 30th of each following year (the "Clean Up
Period") as determined by Borrower (the "Maximum Loan
Limit"), except as such amount may be increased or,
following the occurrence of an Event of Default,
decreased by Lender, in its sole discretion,
exercised in good faith, from time to time;
provided further, however, that the following Maximum
Loan Limits shall apply during the following time
periods: the Loan Limit shall in no event exceed (I)
Fifteen Million and No/100 Dollars ($15,000,000.00)
during the period of December 16, 2002 through
December 31, 2002; (III) Twelve Million Five Hundred
Thousand and No/100 Dollars ($12,500,000.00) during
the period of January 1, 2003 through January 14,
2003; (IV) Ten Million and No/100 Dollars
($10,000,000.00) during the period of January 15,
2003 through July 31, 2003; and (V) zero ($0) during
the consecutive forty-five (45) day period between
March 15, 2003 through April 30, 2003, except as such
amount may be increased or, following the occurrence
of an Event of Default, decreased by Lender, in its
sole discretion, exercised in good faith, from time
to time.
(a) Paragraph (5)(c) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:
(c) ONE-TIME AMENDMENT FEES: Borrower shall pay to Bank a
one-time amendment fee of Twenty-five Thousand and
No/100 Dollars ($25,000.00), which fee shall be deemed
fully earned on the date of this Amendment and payable
on January 31, 2003.
2. This Amendment shall not become effective until fully executed by all
parties hereto.
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.
EXHIBIT 10.1
LASALLE BUSINESS CREDIT, INC.
MEMBER ABN AMRO GROUP
The Singing Machine Company, Inc.
December 27, 2002
Page 5
LASALLE BUSINESS CREDIT, INC.
By /s/ Casey Orlowski
---------------------------
Title Vice President
---------------------------
ACKNOWLEDGED AND AGREED TO
this 27th day of December, 2002.
THE SINGING MACHINE COMPANY, INC.
By /s/ John F. Klecha
-------------------------------
JOHN F. KLECHA
Title PRESIDENT/SECRETARY