Exhibit No. 10.18
AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT dated as of March 20, 2000 by and among Play By Play Toys &
Novelties, Inc., a Texas corporation ("Play By Play"), Ace Novelty Co., Inc., a
Texas corporation ("Ace"), Newco Novelty, Inc., a Texas corporation ("Newco",
together with Play By Play and Ace, collectively, "Borrowers"), Friends, Food &
Games, Inc., a Nevada corporation ("Guarantor"), and Congress Financial
Corporation (Southwest), a Texas corporation ("Lender").
W I T N E S S E T H
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WHEREAS, Lender, Borrowers and Guarantor have entered into financing
arrangements pursuant to which Lender, has made and may make loans and advances
and provide other financial accommodations to Borrowers as set forth in the Loan
and Security Agreement, dated October 25, 1999, by and among Lender, Borrowers
and Guarantor, as the same may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement") and
the agreements, documents and instruments at any time executed and/or delivered
in connection therewith or related thereto (collectively, together with the Loan
Agreement, the "Financing Agreements"); and
WHEREAS, Borrowers and Guarantor have requested that Lender make certain
supplemental loans to Borrowers; and
WHEREAS, Borrowers and Guarantor have requested that Lender further extend
their time to deliver certain post-closing items to Lender; and
WHEREAS, Borrowers and Guarantor have requested that Lender agree to
certain amendments to the Loan Agreement and Lender is willing to agree to such
amendments, subject to the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
and covenants set forth herein, and for other good and valuable consideration,
the adequacy and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
1.1 ADDITIONAL DEFINITIONS. As used herein, the following terms shall have
the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation of,
each of the following definitions:
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(a) "AMENDMENT NO. 1" shall mean this Amendment No. 1 to the Loan
and Security Agreement by and among Borrowers, Guarantor, and Lender.
(b) "IRS" shall mean the United States Department of the Treasury
Internal Revenue Service.
(c) "MARCH 2000 REFUND DOCUMENTS" shall mean all of the documents
and correspondence related to and including the March 2000 Refund Form, as the
same now exist and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(d) "MARCH 2000 REFUND FORM" shall mean the IRS Form 1139
Corporation Application for Tentative Refund, dated March 3, 2000, as filed by
Play By Play with the IRS and seeking a refund in the amount of $2,825,777 in
respect of the application of the 1999 Net Operating Loss to the taxable income
reported by Play By Play for its 1997 and 1998 tax years which form is attached
hereto as Exhibit A.
(e) "MARCH 2000 TAX REFUND" shall mean the tax refund in the amount
of approximately $2,825,777 due to Play By Play from the IRS, as set forth in
the March 2000 Refund Form.
(f) "MR. TORRES" shall mean Arturo G. Torres, an individual whose
address is 4400 Tejasco, San Antonio, Texas 78218.
(g) "SUBORDINATED NOTEHOLDERS CONSENT" shall mean the Limited Waiver
and Consent, dated of even date with Amendment No. 1, by and among the
Subordinated Note Agent, Renaissance Capital, Renaissance US Growth, Banc One
Capital and Play By Play.
(h) "SUPPLEMENTAL LOAN LIMIT" shall mean $500,000, and shall be
reduced by $100,000 on the Friday of each week commencing the date two (2) weeks
after the Supplemental Loan Availability Date and until the Supplemental Loan
Termination Date, and shall mean zero at all times after the Supplemental Loan
Termination Date.
(i) "SUPPLEMENTAL LOANS" shall mean the loans hereafter made by
Lender to or for the benefit of Borrowers on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 3.1 of Amendment
No. 1.
(j) "SUPPLEMENTAL LOAN AVAILABILITY DATE" shall mean the date on
which Lender receives evidence, in form and substance satisfactory to Lender,
that Mr. Torres has advanced to Play By Play the aggregate amount of $2,500,000
pursuant to the Torres Loan Documents.
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(k) "SUPPLEMENTAL LOAN TERMINATION DATE" shall mean the earlier to
occur of (i) the date seven (7) weeks after the Supplemental Loan Availability
Date or (ii) the date that Borrowers receive the proceeds of the Val Verde Sale.
(l) "TAX REFUND SUBORDINATION AGREEMENT" shall mean the
Subordination Agreement, dated of even date with Amendment No. 1, by and among
Mr. Torres, Lender, the Subordinated Note Agent, Renaissance Capital,
Renaissance US Growth, Banc One Capital and Play By Play, as the same now exist
and may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(m) "TORRES LOAN AGREEMENT" shall mean the Loan Agreement, dated of
even date with Amendment No. 1, by and between Play By Play and Mr. Torres, as
the same now exists and may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(n) "TORRES LOAN DOCUMENTS" shall mean all of the documents and
correspondence related to and including the Torres Loan Agreement including, but
not limited to, the Torres Note and the Torres Security Agreement, as the same
now exist and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(o) "TORRES NOTE" shall mean the Promissory Note, dated of even date
with Amendment No. 1, issued by Play By Play and payable to Mr. Torres in the
original maximum principal amount of $2,500,000, as the same now exists and may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(p) "TORRES PAYMENT AVAILABILITY" shall mean, as to Borrowers, the
US Dollar Equivalent of the amount as determined by Lender, calculated at any
time, equal to: (a) the lesser of (i) the amount of the Revolving Loans
available to Borrowers as of such time based on the applicable lending formulas
multiplied by the Net Amount of Eligible Accounts and the Value of Eligible
Inventory and subject to the sublimits and Availability Reserves from time to
time established by Lender hereunder and (ii) the Revolving Loan Limit, MINUS
(b) the sum of the amount of all then outstanding and unpaid Obligations of
Borrowers.
(q) "TORRES PAYMENT DATE" shall mean each Monday during the period
beginning with (and including) the first Monday following the earlier to occur
of (i) the date Debtor's remit the cash proceeds of the March 2000 Tax Refund to
Mr. Torres or (ii) the date on which Debtor receives a final written
determination from the IRS that the amount of the March 2000 Tax Refund is zero;
PROVIDED, THAT, if such Monday is not a Business Day, the Torres Payment Date
shall be the next Business Day.
(r) "TORRES SECURITY AGREEMENT" shall mean the Pledge, Security
Agreement & Assignment, dated of even date with Amendment No. 1, by Play By Play
in favor of Mr. Torres, as the same now exists and may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
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(s) "VAL VERDE" shall mean the Val Verde Vending division of Play By
Play and the assets related thereto.
(t) "VAL VERDE SALE" shall mean the sale by Play By Play of any of
the assets of Val Verde.
(u) "1999 NET OPERATING LOSS" shall mean the net operating loss in
the amount of ($17,358,736) reported by Play By Play to the IRS on Form 1120
U.S. Corporation Income Tax Return, dated March 3, 2000, for the tax year ended
July 31, 1999.
1.2 AMENDMENT TO DEFINITIONS.
(a) All references to the term "Loans" herein and in the Loan
Agreement shall be deemed and each such reference is hereby amended to include,
in addition and not in limitation, the Supplemental Loans.
(b) All references to the term "Obligations" herein and in the Loan
Agreement shall be deemed and each such reference is hereby amended to include,
in addition and not in limitation, the Supplemental Loans as defined herein.
(c) All references to the term "Maximum Credit" herein and in the
Loan Agreement shall be deemed and each such reference is hereby amended to mean
$35,000,000.
(d) All references to the term "Revolving Loan Limit" herein and in
the Loan Agreement shall be deemed and each such reference is hereby amended to
mean $32,590,000.
1.3 INTERPRETATION. For purposes of this Amendment, all terms used herein,
including but not limited to, those terms used and/or defined herein or in the
recitals hereto shall have the respective meanings assigned thereto in the Loan
Agreement.
2. CONSENTS. Subject to the terms and conditions contained herein, Lender
hereby consents to the following:
2.1 the Indebtedness of Play By Play to Mr. Torres as evidenced by the
Torres Note and the other Torres Loan Documents, as the same exist on the date
hereof;
2.2 the lien and security interest granted by Play By Play for the benefit
of Mr. Torres as set forth in the Torres Security Agreement, as it exists on the
date hereof, with respect to the March 2000 Tax Refund as described in the March
2000 Tax Refund Form, as the same exists on the date hereof; and
2.3 the further extension of Borrowers' and Guarantor's time to deliver
certain items set forth in Section 4 of Amendment No.1.
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3. AMENDMENTS TO LOAN AGREEMENT.
3.1 SUPPLEMENTAL LOANS.
(a) In addition to the Loans which may be made by Lenders to
Borrowers pursuant to Sections 2.1 and 2.2 of the Loan Agreement on or after the
date hereof, upon the request of Borrowers made at any time after the
Supplemental Loan Availability Date and prior to the Supplemental Loan
Termination Date, and subject to and upon the terms and conditions contained
herein and in the Loan Agreement and the other Financing Agreements, Lender
agrees to make the Supplemental Loans to Borrowers from time to time after the
Supplemental Loan Availability Date and prior to the Supplemental Loan
Termination Date, in an amount requested by Borrowers, up to the amount equal to
the Supplemental Loan Limit as then in effect. In the event that the
Supplemental Loan Availability Date does not occur prior to April 10, 2000, no
Supplemental Loans shall be available to Borrowers.
(b) Except in Lender's discretion, Borrowers shall not have any
right to request, and Lender shall not make any Supplemental Loans in excess of
the Supplemental Loan Limit or at any time before the Supplemental Loan
Availability Date or on or after the Supplemental Loan Termination Date.
(c) The Supplemental Loans shall be secured by all Collateral.
Notwithstanding anything to the contrary contained herein or in the Loan
Agreement or the other Financing Agreements, (i) on each date when any reduction
in the Supplemental Loan Limit becomes effective, Borrowers agree absolutely and
unconditionally to automatically and without notice or demand to make a payment
in respect of the Supplemental Loans in an amount equal to the excess, if any,
of the aggregate unpaid principal amount of the Supplemental Loans over the
Supplemental Loan Limit as so reduced in immediately available funds and (ii)
unless sooner demanded by Lender in accordance with terms of the Loan Agreement
or the other Financing Agreements, Borrowers further agree that all outstanding
and unpaid Obligations arising pursuant to the Supplemental Loans (including
without limitation, principal, interest, fees, costs, expenses and other charges
in respect thereof payable by Borrowers to Lender) shall automatically, without
notice or demand, be absolutely and unconditionally due and payable and
Borrowers shall pay to Lender in immediately available funds all such
Obligations on the Supplemental Loan Termination Date. Interest shall accrue and
be due, until and including the next business day, if amount paid by Borrowers
to the bank account designated by Lender for such purpose is received in such
bank account later than 11:00 a.m., Dallas time.
(d) Borrowers and Guarantor each acknowledge and agree that,
notwithstanding anything to the contrary contained in the Loan Agreement or the
Financing Agreements, the failure of Borrowers to pay such Obligations arising
pursuant to the Supplemental Loans on the effective date of any reduction in the
Supplemental Loan Limit to the extent set forth in Section
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3.1(c) above or all of such Obligations arising pursuant to the Supplemental
Loans on or before the Supplemental Loan Termination Date, shall constitute an
Event of Default.
3.2 ENCUMBRANCES. Section 9.8 of the Loan Agreement is hereby amended by
adding a new Section 9.8(k) thereto as follows:
"(k) security interests in and liens upon the March 2000 Tax Refund
granted by Play By Play in favor of Mr. Torres to secure the obligations
of Play By Play to Mr. Torres arising pursuant to the Torres Note (as in
effect on the date of Amendment No.1 ), as permitted in Section 9.9 (n)
hereof."
3.3 INDEBTEDNESS. Section 9.9 of the Loan Agreement is hereby amended by
adding a new Section 9.9(n) thereto as follows:
"(n) Indebtedness of Play By Play to Mr. Torres arising pursuant to
or in connection with the loan to be made by Mr. Torres to Play By Play
and evidenced by the Torres Note, as it exists on the date of Amendment
No. 1; PROVIDED, THAT, (i) such Indebtedness is and shall only be secured
by a lien and security interest in the March 2000 Tax Refund, (ii) the
terms and conditions of such Indebtedness shall be acceptable in all
respects to Lender, (iii) the principal amount of such Indebtedness shall
not exceed approximately $2,500,000 at any time outstanding (less the
aggregate amount of all repayments in respect thereof), (iv) Borrowers,
Guarantor or any Subsidiary shall not directly or indirectly, make any
payments with respect to such Indebtedness, EXCEPT THAT (A) Play By Play
may make payments in respect of such Indebtedness using the cash proceeds
of the March 2000 Tax Refund; PROVIDED, THAT, in the event that the amount
of the March 2000 Tax Refund exceeds the unpaid principal amount of the
Torres Note plus accrued interest thereon, as determined by Lender, such
excess amount shall be immediately remitted to Lender for application to
the Loans in accordance with the Financing Agreements, and (B) Play By
Play may make additional payments in respect of such Indebtedness on a
Torres Payment Date so long as each such payment is in an amount not to
exceed seventy-five (75%) percent of the average Torres Payment
Availability calculated for the Business Days occurring during the
immediately preceding week, as calculated by Lender, PROVIDED, THAT, on
such Torres Payment Date and after giving effect to such payment, Torres
Payment Availability shall not be less than $1, (v) Borrowers shall not,
directly or indirectly, without the prior written consent of Lender: (A)
amend, modify, alter or change any terms of such Indebtedness or the
Torres Loan Documents or any other provisions of any agreement, document
or instruments to the extent such provision governs or affects the
Indebtedness without the prior written consent of Lender; PROVIDED, THAT,
Borrowers may amend or modify the March 2000 Refund Form so long as Play
By Play provides Lender with copies of any such amendment or modification
within five (5) days of the filing thereof with the IRS,
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or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for
such purpose, and (vi) Borrowers shall furnish to Lender a copy of all
notices, correspondence or demands in connection with such Indebtedness
either received by Borrowers or on their behalf, including written notice
of receipt by Play By Play of the cash proceeds of the March 2000 Tax
Refund, within two (2) days after the receipt thereof or sent by Borrowers
or on their behalf concurrently with the sending thereof, as the case may
be."
4. ADDITIONAL TIME TO DELIVER CERTAIN POST-CLOSING ITEMS. Borrowers and
Guarantor hereby agree that, in addition to all other terms, conditions and
provisions set forth in the other Financing Agreements, Borrowers and Guarantor
shall deliver or cause to be delivered to Lender, the following, in form and
substance satisfactory to Lender, as soon as possible, but in any event, by no
later than April 15, 2000 for the delivery of:
4.1 the Pledge and Security Agreement by PBP Europe in favor of Lender
with respect to certain of shares of the capital stock of PBP UK, duly
authorized, executed and delivered by PBP Europe;
4.2 the original stock certificates representing sixty-five (65%) percent
of the issued and outstanding shares of capital stock of PBP UK together with
the original stock powers, duly executed in blank with respect to such shares
and the appropriate corporate authorizations with respect thereto;
4.3 the opinion letters of Spanish and British counsel to Play By Play and
its subsidiaries with respect to the enforcement of the pledge of certain shares
of the capital stock of PBP UK;
4.4 evidence of the establishment of a separate depository account at a
bank located in Canada and evidence that Borrowers have sent an instruction
letter to such depository bank by certified mail return receipt requested;
4.5 Collateral Access Agreements, with respect to the premises of Play By
Play owned or controlled by the following parties (in each case, duly
authorized, executed and delivered by such owner and lessor or warehouse
operator): (A) Spieker Properties, L.P., (B) Alpha Beta Company; and (C)
Distribution 2000;
4.6 Credit Card Acknowledgments from each of First Financial Bank, United
Merchant Services, Paymentech Merchant Services, LLC and American Express Travel
Related Services, Inc., duly authorized, executed and delivered by such parties
and Play By Play; and
4.7 certificate issued by the Secretary of State of Illinois indicating
that Play By Play is a foreign corporation duly qualified to conduct business in
such states and is in good standing in such state.
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5. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers to Lender pursuant to the other Financing Agreements,
Borrowers hereby represent, warrant and covenants with and to Lender as follows
(which representations, warranties and covenants are continuing and shall
survive the execution and delivery of Amendment No.1 and shall be incorporated
into and made a part of the Financing Agreements):
5.1 TORRES LOAN. Play By Play has received cash proceeds in the amount of
$1,000,000 from Mr. Torres pursuant to the Torres Loan Documents and, as of the
date hereof, the total Indebtedness owed by Play By Play to Mr. Torres pursuant
to the Torres Loan Documents is $1,000,000. This Indebtedness and any further
loans and advances by Mr. Torres to Play By Play pursuant to the terms of the
Torres Loan Documents (as the same exist on the date hereof) is the only
Indebtedness evidenced by the Torres Note.
5.2 INTEREST PAYMENT ON SUBORDINATED NOTES . Borrowers agree to make a
payment in the total aggregate amount of $398,125 in respect of the unpaid
current interest obligation of Play By Play pursuant to the Subordinated
Creditor Agreements for the months of December 1999, January 2000 and February
2000. Borrowers acknowledge that upon the making of such payment, no default or
event of default, or event which with notice or the passage of time or both
would constitute an event of default exists under the Subordinated Creditor
Agreements.
5.3 NO DEFAULT. No Event of Default exists on the date of Amendment No. 1
(after giving effect to the amendment to the Loan Agreement made by the
provisions of Amendment No. 1).
5.4 CORPORATE POWER AND AUTHORITY. This Amendment has been duly executed
and delivered by Borrowers and Guarantor and is in full force and effect as of
the date of Amendment No. 1 and the agreements and obligations of Borrowers and
Guarantor contained herein constitute legal, valid and binding obligations of
Borrowers and Guarantor enforceable against Borrowers and Guarantor in
accordance with their respective terms.
5.5 CONSENTS. Borrowers and Guarantor have received all necessary consents
and approvals of third parties to the transactions contemplated by Amendment No.
1, including the Torres Loan.
60 CONDITIONS PRECEDENT. The effectiveness of the consents, waivers and
other terms and conditions contained herein shall be subject to the receipt by
Lender of the following in form and substance satisfactory to Lender:
6.1 evidence that Play By Play has received from Mr. Torres the minimum
amount of the Torres Loan, approximately $1,000,000, in immediately available
funds;
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6.2 true, correct and complete copies of the Torres Loan Documents, each
duly authorized, executed and delivered by Play By Play and Mr. Torres;
6.3 a true correct and complete copy of the Tax Refund Subordination
Agreement, duly authorized, executed and delivered by the parties thereto;
6.4 a true correct and complete copy of the Subordinated Noteholders
Consent, duly authorized, executed and delivered by the parties thereto;
6.5 true, correct and complete copies of the March 2000 Refund Documents,
each duly authorized, executed and delivered by Play By Play; and
6.6 a true correct and complete copy of Amendment No. 1, duly authorized,
executed and delivered by Borrowers and Guarantors.
70 ADDITIONAL EVENTS OF DEFAULT. The parties hereto acknowledge, confirm
and agree that the failure of Borrowers, Guarantor or any Subsidiary to comply
with the covenants, conditions and agreements contained herein shall constitute
an Event of Default under the Financing Agreements (subject to the applicable
cure period, if any, with respect thereto provided for in the Loan Agreement as
in effect on the date hereof).
80 EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, no other
waivers, changes or modifications to the Financing Agreements are intended or
implied, and in all other respects, the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of
effective date hereof. Any acknowledgment or consent or waiver contained herein
shall not be construed to constitute a consent or waiver to any other or further
action by Borrowers or to entitle Borrowers to any other consent or waiver. The
Loan Agreement and this Amendment shall be read and construed as one agreement.
To the extent of conflict between the terms of this Amendment and the other
Financing Agreements, the terms of this Amendment shall control.
90 FURTHER ASSURANCES. The parties hereto shall execute and deliver such
additional documents and take such additional actions as may be necessary to
effectuate the provisions and purposes of this Amendment.
100 GOVERNING LAW. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the laws of the State of Texas.
110 BINDING EFFECT. This Amendment shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns.
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120 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their authorized officers as of the date and year
first above written.
Very truly yours,
PLAY BY PLAY TOYS & NOVELTIES, INC.
By:_________________________________________
Title:______________________________________
ACE NOVELTY CO., INC.
By:_________________________________________
Title:______________________________________
NEWCO NOVELTY, INC.
By:_________________________________________
Title:______________________________________
FRIENDS, FOOD & GAMES, INC.
By:_________________________________________
Title:______________________________________
AGREED TO:
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CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By:_________________________________
Title:________________________________
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