EXHIBIT 10.1
LASALLE BUSINESS CREDIT, LLC
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Member ABN AMRO Group
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000 August 19, 2003
(000) 000-0000
The Singing Machine Company, Inc.
0000 Xxxxx Xxxx
Xxxxx X-0
Xxxxxxx Xxxxx, Xxxxxxx 00000
RE: FOURTEENTH AMENDMENT
Gentlemen:
The Singing Machine Company, Inc., a Delaware corporation ("Borrower")
and LaSalle Business Credit, LLC, a Delaware limited liability company
("Leader") 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) Subparagraph 11(o) of the Agreement is deleted in its entirety and
the following is substituted in its place:
(o) Borrower's Tangible Net Worth shall not at any time be less
than the "Minimum Tangible Net Worth"; Minimum Tantible Net
Worth being defined for purposes of this subparagraph as
Eleven Million Nine Hundred Thousand and No/100 Dollars
($11,900,000.00) at all times through March 31, 2003.
Commencing April 1, 2003 through August 30, 2003 Minimum
Tangible Net Worth shall be equal to Ten Million and No/100
Dollars ($10,000,000.00). Commencing August 31, 2003
through March 31, 2004 Minimum Tangible Net Worth shall be
equal to Fifteen Million and No/100
LASALLE BUSINESS CREDIT, LLC
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Member ABN AMRO Group
The Singing Machine Company, Inc.
August 19, 2003
Page 2
Dollars ($15,000,000.00); and "Tangible Net Worth" being
defined for purposes of this subparagraph as Borrower's
shareholders' equity (including retained earnings) less the
book value of all intangible assets as determined solely by
Lender on a consistent basis pllus the amount of any LIFO
reserve plus the amount of any debt subordinated to Lender, all
as determined under generally accepted accounting principles
applied on a basis consistent with the financial statement
dated March 31, 2003, except as set forth herein;
(b) Paragraph (l) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:
(1) LOANS: Subject io 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) (i) 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,
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 from July 31, 2003 through November 29, 2003; (ii)
up to sixty percent (60%), or such lesser percentage as
determined by Lender in its sole discretion exercised in
good faith, of the face amount (less maximum discounts,
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 from November 30, 2003 through December 14, 2003;
(iii) up to fifty percent (50%), or such lesser percentage
as determined by Lender in its sole discretion exercised in
good faith, of the face amount (less maximum discounts,
LASALLE BUSINESS CREDIT, LLC
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Member ABN AMRO Group
The Singing Machine Company, Inc.
August 19, 2003
Page 3
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 from December 15, 2003 through January 14, 2004;
(iv) up to twenty-five percent (25%), or such lesser
percentage as determined by Lendar in its sole discretion
exercised in good faith, of the face amount (less maximum
discounts, 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 from January 15, 2004 through January 31,
2004; (v) up zero percent (0%), or such lesser percentage
as determined by Lender in its sole discretion exercised in
good faith, of the face amount (less maximum discounts,
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 from February 1, 2004 through March 31, 2004; plus
(b) Subject to subparagraph (3)(a) of this Exhibit A, the
lesser of: up to twenty-five percent (25%), 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 Six Million and
No/100 Dollars ($6,000,000.00), provided, however, that
said subllmit shall reduce by the greater of sixty percent
(60%) of the cost of inventory sold from August 1, 2003
forward (to be computed weekly), or by One Million Five
Hundred Thousand ($1,500,000.00) each month beginning
Augu:at 31, 2003 and on the same day of each month
thereafter until said sublimit reaches zero; plus
(c) Subject to subparagraph (3)(a) of this Exhibit
LASALLE BUSINESS CREDIT, LLC
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Member ABN AMRO Group
The Singing Machine Company, Inc.
August 19, 2003
Page 4
A, 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 new Eligible Inventory or Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000.00);
provided, however, said sublimit shall reduce to zero on
December 31, 2003 and thereafter;
(d) Subject to subparagraph (3)(a) of this Exhibit A, up to
sixty percent (60%), 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 up to Three Million and No/100
Dollars ($3,000,000.00); minus
(e) Such reserves as Lender elects, in its sole discretion
exercised in good faith, to establish from time to time,
including without (limitation, an additional dilution
reserve in the amount Five Hundred Thousand and No/100
Dollars ($500,000.00) against Borrower's "Eligible
Accounts" upon the execution of this Fourteenth Amendment,
increasing the amount to One Million and No/100 Dollars
($1,000,000.00) by September 15, 2003;
provided, that the aggregate amount of advances made
pursuant to subparagraphs (b) and (c) above shall in no
event exceed Seven Million and No/100 Dollars
($7,500,000.00);
further provided, that the Loan Limit shall in no event
exceed (i) Twelve Million Five Hundred Thousand and No/100
Dollars ($12,500,000.00) during the period of July
LASALLE BUSINESS CREDIT, LLC
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Member ABN AMRO Group
The Singing Machine Company, Inc.
August 19, 2003
Page 5
31, 2003 through November 29, 2003; (ii) Nine Million and
No/100 Dollars ($9,00O,000.00) during the period of
November 30, 2003 through December 6, 2003; (iii) Seven
Million and No/100 Dollars ($7,000,000.00) on December 7,
2003 through December 14, 2003; (iv) Five Million and
No/100 Dollars ($5,000,000.00) during the period of
December 15, 2003 through January 14, 2004; (v) Two Million
Five Hundred Thousand and No/100 Dollars ($2,500,000.00)
during the period of January 15, 2004 through January 31,
2004; and (vi) Zero and No/100 Dollars ($0.00) during the
period of February 1, 2004 through March 31, 2004, (the
"Maximum Loan Limit"), except as such amount may be
increased or, following the occurrance of an Event of
Default, decreased by Lender, in its sole discretion,
exercised in good faith, from time to time.
(c) Subparagraph (3)(a) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:
(a) Specific Category Inventory: With respect to the advance
described in subparagraphs (1)(b), {1}(c) and (1)(d) of this
Exhibit A, such inventory shall consist solely of finished
goods in the form of karaoke machines.
(d) Paragraph (4) of Exhibit A of the Agreement is deleted in its
entirety and the following is substitutr:d in its place:
(4) INTEREST RATE: Each Loan shall bear interest at the rate of Two
and one-half percent (2 1/2%) per annum in excess of LaSalle
Bank National Association's publicly announced prime rate
(which is not intended to be LaSalle Bank National
Association's lowest or most favorable rate in effect at any
time) (the "Prime Rate") in effect from time to time, payable
on the last business day of each month in arrears. Said rate of
interest shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on
LASALLE BUSINESS CREDIT, LLC
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Member ABN AMRO Group
The Singing Machine Company, Inc.
August 19, 2003
Page 6
the effective date; of each such change in the Prime Rate. Upon
the occurrence of an Event of Default, each Loan shall bear
interest at the rate of two percent (2%) per annum in excess
of the interest rate otherwise payable thereon, which interest
shaill be payable on demand. All interest shall be calculated
on the basis of a 360-day year.
(e) 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 Fee: 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 Fourteenth Amendment and payable on or
before August 31, 2003.
(f) Paragraph (5) of Exhibit A of the Agreement is amended to add the
following provision:
(d) Success Fee: Borrower shall pay to Bank a success fee of Three
Hundred Thousand and No/100 Dollars ($300,000.00), which fee
shall be deemed fully earned on the date hereof and payable on
March 31, 2004, or upon payment in full of all Liabilities,
whichever is sooner.
(g) Paragraph (6) of Exhibit A of the Agreement is amended to add the
following provision:
(6).(1) The date of the Original Term set forth in paragraph 9 of
the Agreement is deleted and the date of March 31, 2004 is
substituted in its place.
(h) Paragraph (7) Subparagraph (8)(c) of Exhibit A of the Agreement
entitled "Change of Management Default" and "Validity Agreements", respectively,
are deleted in their entirety and the phrase "Intentionally Omitted" is
substituted in their place.
(i) Paragraph (11) of Exhibit A of the Agreement is deleted in its
entirety and the following substituted in its place:
LASALLE BUSINESS CREDIT, LLC
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The Singing Machine Company, Inc. Member ABN AMRO Group
August 19, 2003
Page 7
11).(1) Subordination Agroement: Prior to August 31,2003,
Borrower shall cause the appropriate parties to
Invest an additional minimum of Three Million and
No/100 Dollars ($3,000,000.00) into Borrower in
the form of subordinated debt. Relative thereto,
Borrower shall cause each such subordinated debt
holder to execute and deliver to Bank a
Subordination Agreement in form and substance
satisfactory to Bank in its sole discretion. Upon
receipt of evidence by Bank of the information of
an additional minimum of Three Million and No/100
Dollars ($3,000,000.00) into Borrower in form of
subordinated debt, Bank shall release to Borrower
that certain Standby Letter of Credit No. G5027
issued by Bank Xxx Xxxxx in the amount of
$1,000,000,00.
(j) Exhibit B to the Agreement is amended and restated as attached
hereto and made a part hereof.
2. As of March 31, 2003, Bank hereby waives the Events of
Default existing under, and as defined in, Section 12 of Agreement because of
the occurrence of the following event:
(a) Borrower's failure to maintain a Minimum Net Worth as set
forth in Subparagraph 11(0) of the Agreement.
(b) Borrower's failure; to retain Xxxxxx Xxxxxx and Xxxx Xxxxxx
as the Chief Executive Officer and President, respectively, of Borrower as set
forth in Paragraph (7) of Exhibit A of the: Agreement.
3. This Amendment shall not become effective until fully executed
by all parties hereto.
4. 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, LLC
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The Singing Machine Comany, Inc. Member ABN AMRO Group
August 19, 2003
Page 8
LASALLE BUSINESS CREDIT, LLC, A
DELAWARE LIMITED LIABILITY COMPANY
By /s/ Xxxxx Xxxxxxxx
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Title Vice President
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ACKNOWLEDGED AND AGREED TO
this 19th day of August, 2003
The Singing Machine Company, Inc.
By /s/ Yi Xxxx Xxxx
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Yi Xxxx Xxxx
Title: Chief Operating Officer
By /s/ April X. Xxxxx
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April X. Xxxxx
Title: Chief Financial Officer
EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS
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Attached to and made a part of that certain Loan and Security
Agreement, as it may be amended in accordance with its terms from time to time,
including all exhibits attached thereto (the "Agreement") dated April 26, 2001
between THE SINGING MACHINE COMPANY, INC. ("Borrower") and LASALLE BUSINESS
CREDIT, LLC, A DELAWARE LlMIITED LIABILITY COMPANY, SUCCESSOR BY MERGER TO
LASALLE BUSINESS CREDIT, INC. ("Lender").
A. Borrower's Business Locations (please indicate which location is the
principal place of business and at which locations originals and all copies of
Borrower's books, records and accounts are kept).
1. 0000 Xxxxx Xxxx
Xxxxx X-0 (including Suite A-6 and Suite A-8)
Xxxxxxx Xxxxx, Xxxxxxx 00000
(leased location/principal place of business)
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of Borrower. Please Indicate the relationship of such location to Borrower
(i.e. public warehouse, processor, etc.).
1. c/o El Mar Plastics 2. 000 Xxxx Xxxxxxx Xxxx.
000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxx, Xxxxxxxxxx 00000 [leased location]
[public warehouse location]
3. 0000 Xxxxxxx Xxxxxxx Xxxxxx 4. Ocean Centre
Rancho Xxxxxxxxx, California 0 Xxxxxx Xx. Xxxxx 0000
[leased location] RST
Hong Kong
[leased office space]
EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS
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PAGE 2
C. Bank Accounts of Borrower:
Bank (with address) Account Number Type of Account
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1. Wachovia Sank 2000142793574 Operating 1 Account
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxx Xxxxx, Xx. 00000
2. Wachovia Bank 200014279368 Payroll Account
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxx Xxxxx, XX 00000
3. Bank of America 0467313224 Operating/xxxxx Cash
000 X. Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Borrower's Initial: [ILLEGIBLE]
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Borrower's Initial: [ILLEGIBLE]
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Officer's Initials: [ILLEGIBLE]
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