EXHIBIT 10.4
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
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THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is made and entered into as of the 6th day of November, 2003 ("Effective
Date"), by and among CONGRESS FINANCIAL CORPORATION (SOUTHWEST), a Texas
corporation ("Lender"), SPORT SUPPLY GROUP, INC., a Delaware corporation
("SSG"), and ATHLETIC TRAINING EQUIPMENT COMPANY, INC., a Delaware
corporation ("ATEC") (SSG and ATEC, individually and/or collectively,
jointly and severally, "Borrower").
PRELIMINARY STATEMENTS
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A. Lender and Borrower have entered into that certain Loan and
Security Agreement, dated March 27, 2001, as amended by that certain First
Amendment to Loan and Security Agreement dated October 1, 2002, as further
amended by that certain Second Amendment to Loan and Security Agreement
dated June 27, 2003 (as amended, modified or supplemented from time to time,
the "Loan Agreement"), pursuant to which Lender has entered into certain
financing arrangements with Borrower.
B. The parties hereto have agreed to amend the Loan Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, agree
as follows:
AGREEMENT
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ARTICLE I
Definitions
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1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
Amendments
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2.01 Amendment to 1.5. Effective as of the Effective Date, Section 1.5
of the Loan Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"'Availability Reserves' shall mean, as of any date of
determination, such amounts as Lender may from time to time
establish and revise in good faith reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Lender in good
faith, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii)
the assets, business or prospects of Borrower or any Obligor or
(iii) the security interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on
behalf of Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as
provided in Section 2.2 hereof or (d) in respect of any state of
facts which Lender determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both,
constitute an Event of Default. Without limiting the foregoing,
(i) Lender may establish Availability Reserves with respect to
Borrower's personal property taxes relating to any property
located in the state of Texas immediately upon Borrower's receipt
of a notice from the taxing authority that such taxes are payable
and until Lender receives verification satisfactory to it that
such taxes have been paid in full, (ii) the Availability Reserves
established by Lender as of the date hereof set forth on
Schedule 1.5 and (iii) Lender may establish Availability Reserves
with respect to dilution of Borrower's Accounts in excess of five
percent (5%) (as determined by Lender in its discretion)."
2.02 Amendment to Section 1.15(b). Effective as of the Effective Date,
Section 1.15(b) of the Loan Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
"(b) (i) with respect to SSG, such Accounts are not unpaid
more than one hundred twenty (120) days after the date of the
original invoice for them and (ii) with respect to ATEC, such
Accounts are not unpaid more than one hundred eighty (180) days
after the date of the original invoice for them and do not exceed
$1,250,000 in the aggregate at any time;"
2.03 Amendment to Section 1.15(n). Effective as of the Effective Date,
Section 1.15(n) of the Loan Agreement is hereby deleted in its entirety and
the following is inserted in lieu thereof:
"(n) (i) with respect to SSG, such Accounts are not owed by
an account debtor who has Accounts unpaid one hundred twenty (120)
days after the date of the original invoice for them and (ii) with
respect to ATEC, such Accounts are not owned by an account debtor
who has Accounts paid one hundred eighty (180) days after the date
of the original invoice for them, which, in each case, unpaid
Accounts constitute more than fifty percent (50%) of the total
Accounts of such account debtor; and"
2.04 Amendment to Section 1.28. Effective as of the Effective Date,
Section 1.28 of the Loan Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"1.28 'Finished Goods Inventory Advance Rate' shall mean,
with respect to Eligible Inventory constituting finished goods,
the lesser of (a) eighty-five percent (85%) of net orderly
liquidation value, or (b) sixty-five percent (65%) of Cost."
2.05 Amendment to Section 1.34. Effective as of the Effective Date,
Section 1.34 of the Loan Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"1.34 'Interest Rate' shall mean, as to Prime Rate Loans,
a rate equal to the Prime Rate and, as to Eurodollar Rate Loans, a
rate equal to the sum of (a) the Adjusted Eurodollar Rate (based
on the Eurodollar Rate applicable for the Interest Period selected
by Borrower Representative as in effect three (3) Business Days
after the date of receipt by Lender of the request of Borrower
Representative for such Eurodollar Rate Loans in accordance with
the terms hereof, whether such rate is higher or lower than any
rate previously quoted to Borrower Representative), plus 2.25%.
Notwithstanding the above, the Interest Rate shall mean the
rate equal to the sum of the two percent (2.00%) per annum plus
the otherwise applicable Interest Rate, at Lender's option, with
notice, (a) for the period (i) from and after the effective date
of termination or non-renewal hereof until Lender has received
full and final payment of all obligations (notwithstanding entry
of a judgment against Borrower) and (ii) from and after the date
of the occurrence of an Event of Default for so long as such Event
of Default is continuing as determined by Lender, and (b) on the
Revolving Loans at any time outstanding in excess of the amounts
available to Borrower under Section 2 (whether or not such
excess(es), arise or are made with or without Lender's knowledge
or consent and whether made before or after an Event of Default),
provided, however, that if any such excess arises as a direct and
immediate result of the imposition of additional Availability
Reserves, the reduction of any lending formula or the creation of
additional criteria for Eligible Accounts or Eligible Inventory by
Lender, then the Interest Rate shall not increase as a result of
such excess as provided in this paragraph until and unless such
excess continues to exist thirty (30) days after the commencement
of such action by Lender."
2.06 Amendment to Section 1.43. Effective as of the Effective Date,
Section 1.43 of the Loan Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"'Maximum Credit' shall mean the amount of $20,000,000."
2.07 Amendment to Section 2.1(a)(i). Effective as of the Effective
Date, the reference to "eighty percent (80%)" contained in Section 2.1(a)(i)
of the Loan Agreement is hereby deleted in its entirety, and the reference
to "eighty-five percent (85%)" is inserted in lieu thereof.
2.08 Amendment to Section 2.1(a)(ii)(A)(2). Effective as of the
Effective Date, Section 2.1(a)(ii)(A)(2) of the Loan Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(2) the lesser of (a) twenty-five percent (25%) of the Value
of Eligible Inventory consisting of raw materials for such
finished goods or (b) eighty-five percent (85%) of net orderly
liquidation value, as determined by Lender in good faith, plus"
2.09 Amendment to Section 3.1. Effective as of the Effective Date, the
reference to "eighty percent (80%)" contained in Section 3.1 of the Loan
Agreement is hereby deleted in its entirety, and the reference to "ninety
percent (90%)" is inserted in lieu thereof.
2.10 Amendment to Section 3.3. Effective as of the Effective Date, the
reference to "$3,000" contained in Section 3.3 of the Loan Agreement is
hereby deleted in its entirety and the reference to "$2,500" is inserted in
lieu thereof.
2.11 Amendment to Section 3.6. Effective as of the Effective Date,
Section 3.6 of the Loan Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"3.6 Third Amendment Closing Fee. Borrower shall pay to
Lender an amendment fee with respect to the Third Amendment to
Loan and Security Agreement dated as of November 6, 2003, in an
amount equal to $62,500.00 which fee shall be fully earned and
non-refundable as of November 6, 2003 and payable in installments
in the amount of $20,833.33, each of which shall be due and
payable on each of November 6, 2003, November 1, 2004 and
November 1, 2005. If Borrower terminates this Agreement pursuant
to Section 12.1(a)(ii) prior to November 1, 2005, Borrower shall
pay the outstanding amount of such amendment fee (in addition to
other amounts due hereunder) to Lender on such termination date."
2.12 Deletion of Section 7.4(e). Effective as of the Effective Date,
Section 7.4(e) of the Loan Agreement is hereby deleted in its entirety, and
subsections (f), (g), (h), (i) and (j) of Section 7.4 shall be re-lettered
to (e), (f), (g), (h) and (i), respectively.
2.13 Amendment to Section 9.15. Effective as of the Effective Date,
Section 9.15 of the Loan Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"9.15 Adjusted Net Worth. SSG and its subsidiaries, on a
consolidated basis, shall, at all times during the periods set
forth below, maintain Adjusted Net Worth of not less than the
amount set forth below for each such period:
Period Minimum Adjusted
Net Worth
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At all times during the period from October 1, 2003 $25,000,000
through March 31, 2004
At all times thereafter $27,500,000"
2.14 Amendments to Section 12.1. Effective as of the Effective Date,
(a) the first sentence of Paragraph (a) of Section 12.1 of the Loan
Agreement is hereby deleted in its entirety and the following is inserted in
lieu thereof:
"This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof
and shall continue in full force and effect for a term ending on
the earlier of (i) October 31, 2007 (the "Renewal Date"), and from
year to year thereafter, unless sooner terminated pursuant to the
terms hereof or (ii) at Lender's option, the date on which any
Person or group of Persons (as used within the context of the
definition of beneficial ownership described below), other than
Xxxxxxx and its shareholders, officers and directors, shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities Exchange Commission under the
Securities Exchange Act of 1934, as amended) of and having voting
control over shares of capital stock of SSG in amount sufficient
to allow them to elect a majority of the board of directors of SSG
(in which case, no renewals or extensions shall apply)."
and (b) Paragraph (c) of Section 12.1 of the Loan Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(c) If for any reason this Agreement is terminated pursuant
to Section 12.1(a)(ii) prior to the Renewal Date or is otherwise
terminated prior to the end of the then current term or renewal
term of this Agreement, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement
of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender,
upon the effective date of such termination, an early termination
fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
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(i) 0.25% of Maximum Credit From November 6, 2003 to and
including October 31, 2005
(ii) 0.125% of Maximum Credit From November 1, 2005 to and
including October 31, 2006
(iii) 0.00% of Maximum Credit From November 1, 2006 to and
including October 31, 2007
Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination
and Borrower agrees that it is reasonable under the circumstances
currently existing. In addition, Lender shall be entitled to such
early termination fee upon the occurrence of any Event of Default
described in Sections 10.1(g) and 10.1(h) hereof, even if Lender
does not exercise its right to terminate this Agreement, but
elects, at its option, to provide financing to Borrower or permit
the use of cash collateral under the United States Bankruptcy
Code. The early termination fee provided for in this Section 12.1
shall be deemed included in the Obligations. Notwithstanding
anything contained herein to the contrary, the early termination
fee shall not apply to any early termination as the result of (i)
a complete refinancing of the Loans by an affiliate of Lender, or
(ii) a complete refinancing pursuant to the sale in the capital
markets of debt obligations of, or equity interests in, Borrower,
(iii) a complete refinancing of the Loans by an affiliate of
Borrower, or (iv) if Borrower merges with Xxxxxxx."
ARTICLE III
Conditions Precedent
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3.01 Conditions to Effectiveness. The effectiveness of this Amendment
is subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) Lender shall have received, in form and substance
satisfactory to Lender and its legal counsel:
(i) this Amendment, duly executed by Borrower;
(ii) a certificate of the Secretary of Borrower dated as of
the date of this Amendment, in form and substance satisfactory to
Lender, certifying among other things, (i) that Borrower's Board
of Directors has met and has adopted, approved, consented to and
ratified resolutions which authorize the execution, delivery and
performance by Borrower of this Amendment and all such other
Financing Agreements to which Borrower is or is to be a party, and
(ii) the names of the officers of Borrower authorized to sign this
Amendment and each of such other Financing Agreements to which
Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen
signatures of such officers; and
(iii) such additional documents, instruments and
information as Lender or its legal counsel may request.
(b) The representations and warranties contained herein, in the
Loan Agreement and in the other Financing Agreements, shall be true and
correct as of the date hereof, as if made on the date hereof (unless
otherwise made on a specific date as set forth therein, in which case,
such representations and warranties shall be true and correct as of
such date).
(c) No Event of Default or event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall
have occurred and be continuing, unless such event, condition or Event
of Default has been specifically waived in writing by Lender.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to Lender and its legal counsel.
(e) Borrower shall have paid the portion of the amendment fee due
on the Effective Date of this Amendment as required pursuant to
Section 3.6 of the Loan Agreement, as amended hereby.
ARTICLE IV
No Waiver
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Nothing contained in this Amendment shall be construed as a waiver by
Lender of any covenant or provision of the Loan Agreement or the other
Financing Agreements or of any other contract or instrument among Borrower
and Lender, and the failure of Lender at any time or times hereafter to
require strict performance by Borrower of any provision thereof shall not
waive, affect or diminish any right of Lender to thereafter demand strict
compliance therewith. Lender hereby reserves all rights granted under the
Loan Agreement, the other Financing Agreements and any other contract or
instrument among Borrower and Lender.
ARTICLE V
Ratifications, Representations and Warranties
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5.01 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions
set forth in the Loan Agreement and the other Financing Agreements, and,
except as expressly modified and superseded by this Amendment, the terms and
provisions of the Loan Agreement and the other Financing Agreements are
ratified and confirmed and shall continue in full force and effect.
Borrower and Lender agree that (a) the Loan Agreement, as amended hereby,
and the other Financing Agreements shall continue to be legal, valid,
binding and enforceable in accordance with their respective terms, and
(b) the security interests in the Collateral are in full force and effect.
5.02 Representations and Warranties of Borrower. Borrower hereby
represents and warrants to Lender that (a) the execution, delivery and
performance of this Amendment and any and all other Financing Agreements
executed and/or delivered in connection herewith have been authorized by all
requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations
and warranties contained in the Loan Agreement, as amended hereby, and any
other Financing Agreement are true and correct on and as of the date hereof
and on and as of the date of execution hereof as though made on and as of
each such date (unless otherwise made on a specific date as set forth
therein, in which case, such representations and warranties shall be true
and correct as of such date); (c) no Event of Default or event or condition
which, with notice or passage of time or both, would constitute an Event of
Default under the Loan Agreement, as amended hereby, has occurred and is
continuing; (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Financing
Agreements, as amended hereby; and (e) Borrower has not amended, modified or
in any way altered its Certificate of Incorporation or Bylaws since March
27, 2001.
ARTICLE VI
Miscellaneous Provisions
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6.01 Survival of Representations and Warranties. All representations
and warranties made in the Loan Agreement or any other Financing Agreement,
including, without limitation, any document furnished in connection with
this Amendment, shall survive the execution and delivery of this Amendment
and the other Financing Agreements, and no investigation by Lender or any
closing shall affect the representations and warranties or the right of
Lender to rely upon them.
6.02 Reference to Loan Agreement. Each of the Loan Agreement and the
other Financing Agreements, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms
hereof or pursuant to the terms of the Loan Agreement, as amended hereby,
are hereby amended so that any reference in the Loan Agreement and such
other Financing Agreements to the Loan Agreement shall mean a reference to
the Loan Agreement and the other Financing Agreements as amended hereby.
6.03 Expenses of Lender. As provided in Section 9.16 of the Loan
Agreement, Borrower agrees to pay on demand all costs and expenses incurred
by Lender in connection with the preparation, negotiation and execution of
this Amendment and the other Financing Agreements executed pursuant hereto,
and any and all amendments, modifications, and supplements thereto,
including, without limitation, all costs and expenses of filing or recording
and the reasonable costs and fees of Lender's legal counsel (including legal
assistants).
6.04 Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 Successors and Assigns. This Amendment is binding upon and shall
inure to the benefit of Lender and Borrower and their respective successors
and assigns, except that Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of Lender.
6.06 Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
6.07 Effect of Waiver. No consent or waiver, express or implied, by
Lender to or for any breach of or deviation from any covenant or condition
by Borrower shall be deemed a consent to or waiver of any other breach of
the same or any other covenant, condition or duty.
6.08 Headings. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW).
6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT
IS EXECUTED. THE LOAN AGREEMENT AND THE OTHER FINANCING AGREEMENTS, AS
AMENDED, 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. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE,
EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND LENDER.
6.11 Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF
ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR
DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS,
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS,
EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL,
AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE
THIS AMENDMENT IS EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST
LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT
OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING
FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN
EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND
REMEDIES UNDER THE LOAN AGREEMENT OR OTHER FINANCING AGREEMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
LENDER:
CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Vice President
BORROWERS:
SPORT SUPPLY GROUP, INC.
By: /s/ Xxxxxxx Xxxxx
Name: Xxxxxxx Xxxxx
Title: Vice President - Corp. Development
ATHLETIC TRAINING EQUIPMENT
COMPANY, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
Name: Xxxxxxxx X. Xxxxxxx
Title: General Counsel
