Document:

Ex 10.89 - Amendment No. 3 to Revolving Credit and Security Agreement

	

AMENDMENT NO. 3

TO

REVOLVING CREDIT AND
SECURITY AGREEMENT

     THIS
AMENDMENT NO. 3 (this “Amendment”) is entered into as of July 21, 2002,
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 by Amendment No. 2 dated as of April 25, 2002, Amendment No. 1
dated as of June 1, 2001 and as same may be further 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) permit Borrowers to upstream funds to EOS
International, Inc. 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 3, the Loan Agreement is hereby amended as
follows: 

			(a)  		Section
1.2 is amended as follows: 

					(i)  		the
following defined term is added in its appropriate alphabetical order: 

							“ Overadvances”shall
mean at any time the aggregate amount of outstanding Advances in excess of the Formula
Amount calculated assuming the Seasonal Overadvance Amount is zero.  

					(ii)  		the
following defined terms are amended in their entirety to provide as follows: 

	

     “Seasonal
Overadvance Amount”shall mean during the Seasonal Overadvance Period the amount
set forth below opposite the period corresponding thereto:  

		
			July 1, 2002 - July 31, 2002	 	$   600,000	 
		 	August 1, 2002 - August 31, 2002	 	$1,500,000	 
		 	September 1, 2002 - October 31, 2002	 	$1,750,000	 
		 	November 1, 2002 - November 30, 2002	 	$   700,000	 
		 	December 1, 2002 and at all times thereafter	 	$              0	 

	

     “Term”shall
mean the Closing date through July 31, 2003.  

			(b)  		Section
7.10 of the Loan Agreement is hereby amended by inserting the following sentence at the
end thereof to provide as follows: 

					“ Notwithstanding
the foregoing, Borrower shall be prohibited from paying management fees due under clause
(a) above and upstreaming funds to dreamlife after June 30, 2002 under clause (c) above
if, after giving effect to such payments, there would be outstanding Overadvances.” 

	

     3.     
Conditions of Effectiveness. This Amendment shall become effective upon satisfaction
of the following conditions precedent: Agent shall have received (i) four (4) copies of
this Amendment executed by Borrower and Lenders; (ii) an amendment fee in the amount of
$25,000, which amount shall be paid by Agent charging Borrower’s loan account with a
Revolving Advance for such amount; and (iii) 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.  

     4.      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 agrees 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. 

     5.      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.  

 2

	

          (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)
     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.  

     6.      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. 

     7.      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. 

     8.     
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. 

 3

	

     IN
WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first
written above.  

			DISCOVERY TOYS, INC., as Borrower

By: JACK B. HOOD
——————————————

     Name:  Jack B. Hood
     Title:  Chief Financial Officer

			PNC BANK, NATIONAL ASSOCIATION, as Agent and Lender

By: ROBIN AURIOLA
——————————————

     Name  Robin Auriola:
     Title:  Vice President

	

 4Exhibit 10.90 - Agreement between Eos and DL Holdings dated August 14, 2002

	

AGREEMENT

This Agreement (this “Agreement”)
is made as of August 14, 2002, by and between EOS International, Inc., a Delaware
corporation (formerly dreamlife, inc.) (“EOS”) and DL Holdings I, L.L.C. a
Delaware limited liability company (“DL”). 

RECITALS

     A.
Reference is made to the Secured $3,500,000 Bridge Loan Promissory Note dated as of
December 14, 2001, as amended, issued by EOS to DL (the “Note”) and the Secured
$3,000,000 Bridge Loan Promissory Note dated as of December 14, 2001, as amended, issued
by EOS to Weichert Enterprises, LLC (the “Weichert Note”).  

     B.
Reference is made to the Warrant to purchase common stock of EOS dated as of December 14,
2001, as amended, issued by EOS to DL (the “Warrant”). 

     C. EOS
and DL desire to further amend the Note and the Warrant on the terms set forth herein. 

     EOS
and DL hereby agree as follows:  

			1.  		The
Note Amendments. 

	

     Extension
of Maturity Date. The reference to “August 14, 2002” in the definition of “Maturity
Date” set forth in Section 1 of the Note, as amended, is hereby deleted and in its
place inserted “September 30, 2002.” 

     Reference
to Warrant. The reference to “August 15, 2002” in Section 2(b) of the Note, as
amended, is hereby deleted and in its place inserted “October 1, 2002.” 

			2.  		The
Warrant Amendments. 

	

     Amendments
Relating to Section 5. If the Note and the Weichert Note are repaid in full on or
prior to September 30, 2002, then Section 5.2 of the Warrant is deleted in its entirety and in
its place inserted “[intentionally omitted]” and the reference to Section 5.2 in
Section 5.4 is deleted without any further action by the parties hereto in each case
effective April 15, 2002. Notwithstanding Section 5.2, no adjustment provided for therein
shall be made during the period of April 15, 2002 through and including September 30, 2002 but
if the Note and the Weichert Note are not paid in full on or before September 30, 2002, then
any adjustment which would have been made pursuant to Section 5.2 but for this sentence
shall thereupon be made effective October 1, 2002.  

     Deletion
of Definitions. If the Note and the Weichert Note are repaid in full on or prior to
August 14, 2002, then Section 9 of the Warrant is amended by deleting therefrom the
following definitions: “Fair Market Value,” “Issue Date,” “New
Issuance,” “New Issue Price” and “Relevant Date” in each case
effective April 15, 2002.  

     Amendment
of Exercise Period. The definition of “Exercise Period” set forth in Section
9 of the Warrant is hereby amended to mean the period from October 1, 2002 to October 1, 2007.  

     Amendment
of Introductory Paragraph. The introductory paragraph of the Warrant is amended by
adding after the words “$2.95 per share”, the following words “, provided
however, that if the Company sells any Common Stock for its own account during the period
from April 15, 2002 through and including September 30, 2002 for cash in a private placement
or public offering (a “Qualifying Sale”), then the exercise price per share
shall be the weighted average cash price paid for each share of Common Stock (without
reduction for any fees or expenses including placement agent fees and expenses and/or
underwriters’ discounts or commissions and without allocation of any cash
consideration received by the Company in such a transaction to any warrants or options to
purchase Common Stock or any registration rights granted by the Company in any Qualifying
Sale) (except in no event will sales under written agreements by the Company to sell the
Common Stock existing on April 15, 2002 be a Qualifying Sale).” 

[SIGNATURE PAGE
FOLLOWS]

     IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and
year first above written.  

	DL HOLDINGS I, L.L.C.

By:        DAN STERN 
——————————————

Name:    Dan Stern
Title:      Managing Member		EOS INTERNATIONAL, INC.

By:        PETER A. LUND
——————————————

Name:    Peter A. Lund
Title:      Chairman

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