<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
DECEMBER 12, 1996 (DECEMBER 10, 1996)
SPORT SUPPLY GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-10704 75-2241783
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1901 DIPLOMAT DRIVE, FARMERS BRANCH, TEXAS 75234
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(972) 484-9484
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On August, 1, 1996, Emerson Radio Corp. ("Emerson') and Emerson Radio
(Hong Kong) Limited, a wholly-owned subsidiary of Emerson ("Emerson HK"), filed
a Schedule 13D with the Securities and Exchange Commission. Pursuant to the
Schedule 13D, Emerson HK reported that it acquired 669,500 shares (or 9.9%) of
Sport Supply Group, Inc.'s ("SSG") issued and outstanding common stock, $.01
par value per share (the "Common Stock").
On December 10, 1996, pursuant to a Securities Purchase Agreement
dated November 27, 1996 between Emerson and SSG (the "Purchase Agreement"),
Emerson acquired directly from SSG an additional (i) 1,600,000 shares of
newly-issued Common Stock (the "New Shares") for an aggregate consideration of
$11,500,000, or approximately $7.19 per share, and (ii) 5-year warrants (the
"Warrants") to acquire an additional 1,000,000 shares of Common Stock at an
exercise price of $7.50 per share, subject to standard anti-dilution
adjustments, for an aggregate consideration of $500,000. In addition, Emerson
agreed to arrange for foreign trade credit financing of $2 million for the
benefit of SSG to supplement SSG's existing credit facilities.
Prior to the exercise of any of the Warrants, Emerson and Emerson HK
own approximately 27% of the issued and outstanding shares of Common Stock. If
all of the Warrants are exercised by Emerson, Emerson and Emerson HK will own
approximately 34.9% of the issued and outstanding shares of Common Stock.
Pursuant to a Registration Rights Agreement (the "Registration Rights
Agreement"), SSG granted to Emerson and Emerson HK certain demand and
incidental registration rights with respect to the resale of the shares of
Common Stock they own, as well as on the exercise and resale of the shares of
Common Stock Emerson may acquire under the Warrant Agreement governing the
Warrants.
The total consideration paid by Emerson pursuant to the Purchase
Agreement was $12 million, of which $11,500,000 was attributable to the
1,600,000 New Shares and $500,000 was attributable to the Warrants. The
$12,000,000 purchase price was borrowed by Emerson from Congress Financial
Corporation ("Congress"), Emerson's United States senior secured lender, under
the terms of Emerson's existing credit facility and in accordance with the
terms of the consent obtained from Congress. Pursuant to a Pledge and Security
Agreement, a copy of which is attached hereto as Exhibit 99, Emerson pledged
to Congress the New Shares and the Warrants together with all proceeds thereof
and all dividends and other income and distributions thereon or with respect
thereto and all rights of Emerson to have the New Shares (and any shares of
Common Stock acquired through the exercise of the Warrants (as permitted by
Congress) registered under the Registration Rights Agreement.
Pursuant to the Purchase Agreement, SSG also caused a majority of the
members of its Board of Directors to consist of Emerson's designees. SSG's
Board of Directors now includes the following Emerson designees: Geoffrey P.
Jurick, Emerson's Chairman and Chief Executive Officer; Eugene I. Davis,
Emerson's President; John P. Walker, Emerson's Executive Vice President and
Chief Financial Officer; Johnson C. Ko, an independent Hong Kong businessman;
and Peter J. Bunger, a consultant serving both Emerson and Savarina AG. Peter
S. Blumenfeld and William H. Watkins, Jr., currently Directors of SSG, will
continue as Directors, while Michael J. Blumenfeld and Robert W. Philip
resigned from the Board. See the Information Statement referenced in Exhibit
20(a) hereto for a detailed description of the directors. On December 11, 1996,
Mr. Jurick was elected as Chairman of the Board, Mr. Davis was elected as Chief
Executive Officer and Mr. Walker was elected as Executive Vice President-Chief
Financial Officer of SSG.
In addition, for a period of at least 2 years after the closing,
neither SSG nor any of its subsidiaries are permitted to enter into or be a
party to any agreement or transaction with any Affiliate (as such term is
defined in the Securities Exchange Act of 1934, as amended) of SSG or Emerson,
except (i) in the ordinary course of SSG's or its subsidiaries' business and on
terms no less favorable to SSG or its subsidiaries than would be obtained in a
comparable arms' length transaction with a person not an Affiliate of SSG or
Emerson or (ii) unless approved by a majority of SSG's directors who do not
have a direct or indirect material financial interest in the agreement or
transaction and which includes a majority of directors who are not officers or
employees of SSG or Emerson or directors of Emerson.
<PAGE> 3
Any description or disclosure made in this Form 8-K with respect to
the Securities Purchase Agreement, Warrant Agreement, Registration Rights
Agreement, Pledge and Security Agreement or Information Statement is qualified
in its entirety by reference to such documents, copies of which are attached
hereto as Exhibits and incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
2. Securities Purchase Agreement dated as of
November 27, 1996, by and between Sport
Supply Group, Inc. and Emerson Radio Corp.
4(a). Warrant Agreement by Sport Supply Group, Inc.
in favor of Emerson Radio Corp.
4(b). Registration Rights Agreement by and among
Sport Supply Group, Inc., Emerson Radio Corp.
and Emerson Radio (Hong Kong) Limited.
4(c). Modification Agreement dated November 27,
1996 by and among Sport Supply Group, Inc.,
Sport Supply Group International Holdings,
Inc. and LaSalle Business Credit, Inc.
4(d). Amendment No. 4 to Amended and Restated Loan
and Security Agreement dated November 27,
1996 by and among Sport Supply Group, Inc.,
Sport Supply Group International Holdings,
Inc. and LaSalle Business Credit, Inc.
4(e). $2,500,000 Consolidated, Amended and Restated
Term Loan Promissory Note from Sport Supply
Group, Inc. to the order of LaSalle Business
Credit, Inc.
4(f). $22,500,000 Fourth Amended and Restated
Revolving Loan Promissory Note from Sport
Supply Group, Inc. to the order to LaSalle
Business Credit, Inc.
20(a).* Information Statement pursuant to
Section 14(f) of the Securities Exchange
Act of 1934 and Rule 14(f)-1 thereof
(previously filed with the Securities and
Exchange Commission on November 29, 1996).
20(b). Letter to all shareholders of Sport Supply
Group, Inc. that was mailed to shareholders
on November 29, 1996.
99. Pledge and Security Agreement, dated December
10, 1996 by Emerson Radio Corp. in favor of
Congress Financial Corporation.
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* Previously filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sport Supply Group, Inc.
Date: December 12, 1996 By: /s/ Peter S. Blumenfeld
------------------------------
Peter S. Blumenfeld
President and
Chief Operating Officer
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
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<S> <C>
2. Securities Purchase Agreement dated November 27, 1996
by and between Sport Supply Group, Inc. and
Emerson Radio Corp.
4(a). Warrant Agreement by Sport Supply Group, Inc. in favor
of Emerson Radio Corp.
4(b). Registration Rights Agreement by and among Sport Supply
Group, Inc., Emerson Radio Corp. and Emerson Radio
(Hong Kong) Limited
4(c). Modification Agreement dated November 27, 1996 by and
among Sport Supply Group, Inc., Sport Supply Group
International Holdings, Inc. and LaSalle Business Credit,
Inc.
4(d). Amendment No. 4 to Amended and Restated Loan and Security
Agreement dated November 27, 1996 by and among Sport
Supply Group, Inc., Sport Supply Group International
Holdings, Inc. and LaSalle Business Credit, Inc.
4(e). $2,500,000 Consolidated, Amended and Restated Term Loan
Promissory Note from Sport Supply Group, Inc. to the order
of LaSalle Business Credit, Inc.
4(f). $22,500,000 Fourth Amended and Restated Revolving Loan
Promissory Note from Sport Supply Group, Inc. to the
order to LaSalle Business Credit, Inc.
20(a).* Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14(f)-1 thereof
(previously filed with the Securities and Exchange
Commission on November 29, 1996).
20(b). Letter to all shareholders of Sport Supply Group, Inc.
that was mailed to shareholders on November 29, 1996.
99. Pledge and Security Agreement, dated December 10, 1996 by
Emerson Radio Corp. in favor of Congress Financial
Corporation.
</TABLE>
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* Previously filed.
<PAGE> 1
EXHIBIT 2
SECURITIES PURCHASE AGREEMENT
Dated as of November 27, 1996
by and between
SPORT SUPPLY GROUP, INC.
and
EMERSON RADIO CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I
PURCHASE AND SALE . . . . . . . . . . . . . 1
1.1 Purchase and Sale of Shares and Warrants . . . . . . . . 1
ARTICLE II
PURCHASE PRICE . . . . . . . . . . . . . 2
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Payments . . . . . . . . . . . . . . . . . . . . 2
2.3 Deposit of Purchase Price . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SSG . . . . . . . . 2
3.1 Organization and Qualification; Subsidiaries . . . . . . 2
3.2 Capitalization; Minute Book . . . . . . . . . . . . . . . 3
3.3 Title to Shares . . . . . . . . . . . . . . . . . . . . . 4
3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 No Violations . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Reports . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Absence of Certain Changes or Events . . . . . . . . . . 6
3.8 Condition of Tangible Assets . . . . . . . . . . . . . . 8
3.9 Taxes, Tax Returns and Other Reports . . . . . . . . . . 8
3.10 Employment Contracts and Compensation . . . . . . . . . . 9
3.11 Patents, Trademarks, Etc . . . . . . . . . . . . . . . . 9
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Compliance with Laws; Permits . . . . . . . . . . . . . . 10
3.15 Hazardous and Toxic Substances; Hazardous Wastes
and Pollutants . . . . . . . . . . . . . . . . . . . . . . 11
3.16 Debt Instruments . . . . . . . . . . . . . . . . . . . . 12
3.17 Employee Benefit Plans; Collective Bargaining
Agreements . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Customs . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EMERSON . . . . . . . 14
4.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 No Violations . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Investment Representations . . . . . . . . . . . . . . . 15
4.4. Reports . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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4.5. Opinion of Counsel . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
CONDUCT OF BUSINESS BY SSG PENDING CLOSING . . . . . . 16
5.1 Preservation of Existence . . . . . . . . . . . . . . . . 17
5.2 Compliance with Laws . . . . . . . . . . . . . . . . . . 17
5.3 Accounting Methods; Inspections; Cooperation . . . . . . 17
5.4 Maintenance of Property . . . . . . . . . . . . . . . . . 17
5.5 Payment of Taxes and Claims . . . . . . . . . . . . . . . 18
5.6 Information Covenants . . . . . . . . . . . . . . . . . . 18
5.7 Action By Board of Directors . . . . . . . . . . . . . . 19
ARTICLE VI
ADDITIONAL AGREEMENTS OF SSG . . . . . . . . . . 19
6.1 Access to Information . . . . . . . . . . . . . . . . . . 19
6.2 Purchase or Sale of Assets . . . . . . . . . . . . . . . 19
6.3 Acquisition Proposals . . . . . . . . . . . . . . . . . . 19
6.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Compensation . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Agreements . . . . . . . . . . . . . . . . . . . . . . . 20
6.7 Issuance of Common Stock . . . . . . . . . . . . . . . . 20
6.8 Dividends . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Investments . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Merger, etc. . . . . . . . . . . . . . . . . . . . . . . 21
6.11 Charter Amendment . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII
POST-CLOSING COVENANTS OF SSG 22
ARTICLE VIII
CONDITIONS TO EMERSON'S OBLIGATION TO CLOSE . . . . . . 22
ARTICLE IX
CONDITIONS TO SSG'S OBLIGATIONS TO CLOSE . . . . . . . 24
ARTICLE X
CLOSING . . . . . . . . . . . . . . . 25
10.1 Time and Place of Closing . . . . . . . . . . . . . . . . 25
10.2 Delivery by SSG . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
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10.3 Delivery by Emerson . . . . . . . . . . . . . . . . . . . 26
10.4 Transaction Documents . . . . . . . . . . . . . . . . . . 27
ARTICLE XI
TERMINATION AND EXTENSION . . . . . . . . . . . 27
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 27
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . 28
11.3 Extension . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . 29
12.1 No Broker . . . . . . . . . . . . . . . . . . . . . . . . 29
12.2 Public Statements . . . . . . . . . . . . . . . . . . . . 30
12.3 Survival of Representations and Warranties . . . . . . . 30
12.4 Officers' and Directors' Indemnification and
Insurance . . . . . . . . . . . . . . . . . . . . . . . . 30
12.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . 31
12.6 Entire Agreement; Written Modifications . . . . . . . . . 31
12.7 Assignment; Binding Effect . . . . . . . . . . . . . . . 31
12.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 32
12.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.10 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 33
12.11 No Benefit to Others. . . . . . . . . . . . . . . . . . . 33
12.12 Headings, Gender, and "Person" . . . . . . . . . . . . . 33
12.13 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 33
12.14 Severability . . . . . . . . . . . . . . . . . . . . . . 33
12.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . 34
12.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . 34
12.17 Construction . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE> 5
SECURITIES PURCHASE AGREEMENT dated as of November 27, 1996,
by and between SPORT SUPPLY GROUP, INC., a Delaware corporation having an
address at 1901 Diplomat Drive, Farmers Branch, Texas 75234 ("SSG") and
EMERSON RADIO CORP., a Delaware corporation having an address at Nine Entin
Road, Parsippany, New Jersey 07054-0430 ("Emerson").
W I T N E S S E T H:
WHEREAS, SSG has agreed to issue or grant, as the case may be,
and sell to Emerson, and Emerson has agreed to subscribe for and purchase from
SSG, (i) 1,600,000 newly-issued shares (the "Shares") of Common Stock, $.01 par
value, of SSG (the "Common Stock") and (ii) five-year warrants to purchase up
to 1,000,000 newly-issued shares of the Common Stock at an exercise price of
$7.50 per share, subject to adjustment (the "Warrants"), subject to, and in
accordance with, the terms and provisions set forth herein.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of Shares and Warrants. Subject to
the terms and provisions of this Agreement, and on the basis of and in reliance
upon the representations, warranties, covenants, and agreements set forth
herein and in the Transaction Documents (as hereinafter defined), on the
Closing Date (as defined in Section 10.1 hereof), SSG shall validly issue or
grant, as the case may be, and sell to Emerson, and Emerson shall validly
subscribe for and purchase from SSG, the Shares and the Warrants.
<PAGE> 6
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price.
(a) In consideration of the issuance and sale of the
Shares, Emerson shall pay to SSG the sum of ELEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($11,500,000) (the "Stock Purchase Price").
(b) In consideration of the issuance and sale of the
Warrants, Emerson shall pay to SSG the sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000) (the "Warrants Purchase Price," and together with the Stock Purchase
Price, the "Purchase Price").
2.2 Closing Payments. On the Closing Date, Emerson shall
pay, in immediately available funds by wire transfer to SSG's bank account
designated not later than two business days prior to the Closing Date, the
Purchase Price to SSG.
2.3 Deposit of Purchase Price. Concurrently herewith,
Emerson shall provide SSG with an irrevocable standby letter of credit in the
amount of $3,000,000 from a financial institution located in the United States
and reasonably satisfactory to SSG, on terms and conditions reasonably
satisfactory to Emerson and SSG, for purposes of satisfying Emerson's
obligations under Section 11.2 of this Agreement. Emerson shall also provide
evidence reasonably satisfactory to SSG of Emerson's availability of funds in
or from a financial institution located in the United States for purposes of
paying the Purchase Price at Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SSG
As a material inducement to Emerson to purchase the Shares and
the Warrants, SSG hereby represents and warrants to Emerson as follows:
3.1 Organization and Qualification; Subsidiaries.
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(a) Each of SSG and its sole subsidiary, Sport Supply
Group International Holdings, Inc. ("SSGI"), is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own its respective properties and to
carry on its respective businesses as now conducted. Each of SSG and SSGI is
duly qualified or licensed and has all permits necessary to transact business,
and is in good standing as a foreign corporation, in each of the jurisdictions
set forth in Schedule 3.1 hereto, which are the only jurisdictions wherein the
nature of the respective businesses conducted by SSG or SSGI or their
respective leases of real property require them to be so qualified or licensed
or to hold such permits, except where the failure to be so qualified or
licensed or to hold such permits would not have a material adverse effect on
the financial condition, results of operation, assets, liabilities, business,
or prospects of SSG and SSGI, taken as a whole (hereinafter, a "Material
Adverse Effect").
(b) SSG has no other direct or indirect subsidiaries and
has no ownership or equity interest, or right to acquire any ownership or
equity interest, whether by conversion, option exercise, or otherwise, in any
corporation, partnership, association, business trust, limited liability
company, or any other entity except for SSGI. The total authorized capital
stock of SSGI consists of 10,000 shares of its common stock, $.01 par value per
share, of which 1,000 shares are outstanding, all of which are owned by SSG,
free and clear of any adverse claims. There are no outstanding subscriptions,
options, warrants, rights, calls, contracts, commitments, understandings, or
agreements to purchase or otherwise acquire, or relating to the issuance of
(collectively, the "Rights"), any shares of capital stock or other securities
of SSGI, including without limitation, any Rights of conversion or exchange
under any outstanding securities or instruments.
3.2 Capitalization; Minute Book. The total authorized
capital stock of SSG consists of 20,000,000 shares of Common Stock, having a
par value of $0.01 per share, of which 6,764,834 shares are outstanding, and
100,000 shares of Preferred Stock, having a par value of $0.01 per share, none
of which are
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<PAGE> 8
outstanding. Except as disclosed in the Reports (as hereinafter defined) or in
Schedule 3.2 attached thereto, there are no outstanding Rights to acquire any
shares of Common Stock or other securities of SSG, including, without
limitation, any rights of conversion or exchange under any outstanding
securities or instruments. The minute books of SSG and SSGI to be made
available to Emerson are true and complete in all material respects.
3.3 Title to Shares. The Shares upon issuance, and the
shares of Common Stock to be issued on exercise of the Warrants in accordance
with their terms, will be, and all other outstanding shares of Common Stock
have been, duly authorized and validly issued in full compliance with
applicable federal, state, and other securities and other laws, and without any
violation of any pre-emptive rights, and will be or are, as the case may be,
fully paid and non-assessable. Upon delivery by SSG to Emerson of the Stock
Certificates (as defined in Section 10.2) and upon exercise of the Warrants in
accordance with their terms, Emerson shall acquire the legal and valid title to
the Shares and shares of Common Stock underlying the Warrants, free and clear
of all adverse claims whatsoever not created by Emerson, and shall become the
lawful record and beneficial owner thereof.
3.4 Authority. SSG has all requisite corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents (as defined in Section 10.4) to which it may be a party and
consummate the transactions contemplated herein and therein. Except as may be
required by the rules of the New York Stock Exchange, Inc. ("NYSE"), SSG's
execution, delivery, and performance of this Agreement and the other
Transaction Documents to which SSG may be a party, and the consummation of the
transactions contemplated herein and therein, have been duly authorized by its
Board of Directors and no other action is required by law, the Certificate of
Incorporation or Bylaws of SSG, or otherwise, for such authorization. This
Agreement and each of the other Transaction Documents to which SSG may be a
party constitute the legal, valid, and binding obligations of, and are
enforceable against, SSG in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
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<PAGE> 9
3.5 No Violations. Except as set forth in Schedule 3.5
and except for matters which would not have a Material Adverse Effect and which
could not prevent or delay the Closing, the authorization, execution, and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated herein and therein by SSG do not
and will not, with or without the giving of notice or passage of time or both
(a) violate, conflict with, or result in the breach of any term or provision
of, or require any notice, filing or consent under (i) the Certificate of
Incorporation or Bylaws of SSG or SSGI, (ii) any statutes, laws, rules,
regulations, ordinances, or Permits (as defined in Section 3.14 below) of any
governmental body, authority, or agency applicable to SSG or SSGI, or (iii) any
judgment, decree, writ, injunction, order, or award of any arbitrator, court,
or governmental body, authority, or agency binding upon SSG or SSGI or any of
their respective properties or assets; (b) conflict with or result in the
breach of any term or provision of, require any notice or consent under, give
rise to a right of termination of, constitute a default under, result in the
acceleration of, or give rise to a right to accelerate any obligation under any
loan agreement, mortgage, indenture, financing agreement, lease, or any
agreement or instrument of any kind to which SSG or SSGI may be a party or by
which any of their respective properties or assets are bound; or (c) result in
any lien, claim, encumbrance, or restriction on any of the properties or assets
of SSG or SSGI.
3.6 Reports. Since December 31, 1994, SSG has filed all
required forms, reports, statements, and documents (the "Reports") with the
Securities and Exchange Commission ("SEC") required to be filed by it pursuant
to the Federal securities laws and the SEC rules and regulations promulgated
thereunder, all of which have complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder. None of
such Reports, including without limitation any financial statements or
schedules included therein, at the time filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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<PAGE> 10
The consolidated balance sheets and the related consolidated
statements of operations and cash flows (including the related notes thereto)
(the "Financial Statements") of SSG included in the Financial Statements
contained in SSG's Annual Report on Form 10-K for the fiscal year ended October
31, 1995 (the "1995 10-K") and SSG's Quarterly Reports on Form 10-Q for the
fiscal quarters ended February 2, 1996, May 3, 1996, and August 2, 1996 (the
"Interim 10-Q's"), present fairly in all material respects the consolidated
financial position of SSG as of their respective dates, and the results of
consolidated operations and cash flows for the periods presented therein, all
in conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP"), except as otherwise noted therein and except that
the Financial Statements included in the Interim 10-Q's may not contain all
footnotes required by GAAP and are subject to year-end audit adjustments.
3.7 Absence of Certain Changes or Events. Except as
specifically provided for herein or as set forth in Schedule 3.7, since August
2, 1996 (the "Balance Sheet Date"), neither SSG nor SSGI has:
(a) incurred any material obligation or liability except
trade or business obligations or liabilities incurred in the ordinary course of
business;
(b) other than pursuant to its existing lines of credit,
created, incurred, assumed, or guaranteed any indebtedness for money borrowed,
or mortgaged, pledged, or subjected to any lien, pledge, mortgage, charge,
security interest, conditional sales contract, or other encumbrance of any
nature whatsoever any of its assets or properties, except in the ordinary
course of business consistent with past practices;
(c) sold or committed to sell or assigned, transferred,
or leased or subleased any of its material assets or properties, other than in
the ordinary course of business;
(d) canceled, compromised, modified, or waived any
material debt or claim owing to it, except for adjustments made in the ordinary
course of business consistent with past practices;
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(e) declared, set aside, or paid any dividend or made or
agreed to make any other distribution or payment in respect of its capital
stock; or redeemed, purchased, or otherwise acquired or agreed to redeem,
purchase, or otherwise acquire any of its capital stock;
(f) transferred or granted any material rights under or
with respect to any Intellectual Property (as defined in Section 3.11 below);
(g) except as disclosed in Schedule 3.2 hereto, issued or
sold any of its capital stock or any other securities or granted any options,
warrants, or other rights to subscribe therefor or entered into any other
commitments for the sale or purchase of any of its capital stock or other
securities;
(h) made, committed to make, or initiated any material
capital expenditure or capital addition or betterment or programs with respect
thereto, except such as may be involved in the replacement of its assets in the
ordinary course of business;
(i) made or granted any promotion in title or
responsibility or increase with respect to any wages, salaries, or other
compensation (other than increases in the ordinary course of its business
consistent with past practices) of any director or officer of SSG or SSGI;
entered into any employment contract or other compensation arrangement with any
stockholder, director, or officer of SSG or SSGI; made any advance (excluding
advances for ordinary and necessary business expenses) or loan to any
stockholder, director, or officer of SSG or SSGI; or made any increase in, or
any addition to, other benefits to which any stockholder, director, or officer
may be entitled;
(j) changed in any material respect any of the accounting
principles followed by it or the methods of applying such principles;
(k) entered into any transaction other than in the
ordinary course of business consistent with past practices; or
(l) experienced any Material Adverse Effect.
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3.8 Condition of Tangible Assets. Neither SSG nor SSGI
has received notice that the Tangible Assets violate, and neither SSG nor SSGI
have any knowledge of any state of facts or the occurrence of any events which
might form a reasonable basis for a claim that the Tangible Assets violate, any
applicable laws, ordinances, codes, rules, or regulations relating to the use
and operation of the Tangible Assets, including, without limitation, any local
or municipal building, electrical, plumbing, safety, engineering,
environmental, or license or permit requirements in any manner which would
result in a Material Adverse Effect.
3.9 Taxes, Tax Returns and Other Reports. All federal,
state, and local tax returns, reports, and statements required to be filed by
SSG or SSGI (collectively, the "Tax Returns") have been filed with the
appropriate governmental agencies in all jurisdictions in which the Tax Returns
are required to be filed, and all of the Tax Returns are complete and correct
in all material respects and properly reflect the tax liabilities of SSG and
SSGI for the periods, properties, or events covered thereby. All federal,
state, and local taxes, assessments, interest, deficiencies, fees, and other
governmental charges or impositions which are called for by the Tax Returns
(collectively, the "Taxes") have been properly accrued or paid. The accruals
for Taxes, if any, contained in the Financial Statements are adequate in all
material respects to cover the tax liabilities of SSG and SSGI as of the dates
thereof. Except for a sales tax audit in the State of Florida, neither SSG nor
SSGI has received any notice of assessment or proposed assessment or been
advised as to any tax examination by any taxing authority in connection with
any Tax Returns and there are no pending tax examinations of, or tax claims
asserted against, SSG and SSGI or any of their respective assets or properties.
There are no tax liens on any of the assets or properties owned or used by SSG
and SSGI. Neither SSG nor SSGI is subject to any extension of a period for the
assessment of any Tax. Each of SSG and SSGI has made all deposits required by
law to be made by it with respect to employee withholding taxes. There are no
outstanding agreements or waivers extending the statute of limitations with
respect to, and neither SSG nor SSGI is now subject to any extension of a
period for the assessment of, any federal, state, or local income tax or other
tax.
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3.10 Employment Contracts and Compensation. Except as
disclosed in the Reports or on Schedule 3.10, neither SSG nor SSGI is a party
to any written employment contracts or agreements with any stockholders,
officers, directors, or employees of SSG or SSGI or any contracts or agreements
under which individuals acting as independent contractors perform analogous
services for SSG or SSGI on a regular basis.
3.11 Patents, Trademarks, Etc. Schedule 3.11 contains a
complete and correct list of all material patents, trademarks, trademark
rights, trade names, trade name rights, service marks, copyrights, and other
similar proprietary rights, and material applications for any of the foregoing,
of SSG and SSGI and other material agreements pertaining to any of the
foregoing or to the transfer of technical information, know-how, or technical
assistance to which either SSG or SSGI is a party or which relate to the
business of SSG or SSGI (collectively, the "Intellectual Property"). Except as
set forth in Schedule 3.11, and except for matters which would not have a
Material Adverse Effect, (a) SSG or SSGI, as the case may be, is the sole and
exclusive owner of the Intellectual Property and has the sole and exclusive
right to use the same; (b) no proceedings have been instituted or are pending
or threatened which challenge the rights of either SSG or SSGI in respect of
any of the Intellectual Property or the validity thereof; (c) to SSG's
knowledge, none of the Intellectual Property infringes upon or otherwise
violates the rights of others or is being infringed by others, and none is
subject to any outstanding order, decree, judgment, stipulation, or charge; (d)
no licenses, sublicenses, or agreements pertaining to any of the Intellectual
Property have been granted to or by either SSG or SSGI; (e) neither SSG nor
SSGI has received any charge of interference or infringement of any of the
Intellectual Property; (f) neither SSG nor SSGI has agreed to indemnify any
person or entity for or against any infringement of any patent, trademark, or
copyright; and (g) neither SSG nor SSGI has any knowledge of any trademarks or
applications therefor or similar property which infringe upon any of the
Intellectual Property or render obsolete or materially adversely affect the
distribution or sale of any of the products or services of the business of SSG
or SSGI.
3.12 Litigation. Except as described in the Reports or
Schedule 3.12 hereto, there are no actions, suits, or legal, administrative,
arbitration, or other proceedings or governmental
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investigations pending or, to SSG's knowledge, threatened against either SSG or
SSGI before or by any federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, which, if
adversely determined, would result in a Material Adverse Effect.
3.13 Insurance. SSG has in full force and effect the
insurance policies listed on Schedule 3.13 and all premiums due thereon have
been paid and SSG has complied in all material respects with the provisions of
such policies. SSG will use its best efforts to maintain or cause to be
maintained in full force and effect all such insurance policies or similar
insurance policies through the Closing Date.
3.14 Compliance with Laws; Permits.
(a) Neither SSG nor SSGI has received notice of any
violation by SSG or SSGI of any federal, state, or local law, statute, rule, or
regulation applicable to SSG or SSGI, their respective assets or properties or
businesses as now conducted or any of the Permits (as defined in Section
3.14(b) below), which violation would have a Material Adverse Effect. Each of
SSG and SSGI has complied with, and is not in violation of, any judgment,
order, writ, injunction, or decree of any governmental authority, court or
administrative authority having jurisdiction over SSG or SSGI, their respective
assets or properties or businesses as now or heretofore conducted, except where
failure to comply would not have a Material Adverse Effect.
(b) SSG has all licenses, permits, approvals,
certificates of occupancy, and other authorizations (collectively, the
"Permits") which are material to the conduct of its business as now conducted
and has not failed to adhere to the requirements thereof in any material
respect. Each of SSG and SSGI has taken all steps necessary to maintain all of
the Permits, all of which are valid, in good standing, and in full force and
effect.
(c) No notice to, filing with, or consent from any
governmental body, authority, or agency is required as a result of, or as a
condition to the legality or validity of, the issuance or grant, as the case
may be, and sale of the Shares and Warrants (and the shares of Common Stock
underlying the Warrants) and the consummation of the transactions contemplated
by this Agreement
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<PAGE> 15
and the other Transaction Documents, nor will any Permit otherwise be
terminated, modified, or impaired or rendered invalid by reason thereof.
3.15 Hazardous and Toxic Substances; Hazardous Wastes and
Pollutants.
(a) SSG has complied in all material respects with, and
is not in material violation of, any material federal, state or local
ordinance, rule, regulation and statute governing the generation, transport,
storage, treatment, handling, release, emission, discharge, and disposal of
solid or hazardous wastes, hazardous substances, toxic substances or
pollutants.
(b) Except as set forth in Schedule 3.15, there are no
locations or premises currently or previously leased or operated by SSG or SSGI
where hazardous wastes, hazardous substances, toxic substances, or pollutants
have entered into the air, soil, surface water, groundwater, or other bodies of
water in violation of federal, state or local law, regulation or ordinance, and
neither SSG nor SSGI know of any on-site or off-site locations to which SSG or
SSGI has transported hazardous wastes, hazardous substances, toxic substances
or pollutants, which site is or may become the subject of any federal, state,
or local enforcement actions or other investigations that may lead to claims
against SSG or SSGI for remedial investigation costs, clean-up costs, remedial
work, damages to natural resources, or personal injury or property damage,
including, but not limited to, claims under the Comprehensive Environmental
Response Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, or any other federal, state, or local law, rule,
or regulation concerning the clean-up of the environment or discharges of
hazardous wastes, hazardous substances, toxic substances, or pollutants.
(c) As used in this Agreement, (i) the term "hazardous
wastes" shall have the meaning given to such term in the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, and the
regulations promulgated thereunder or under any similar federal, state, or
local law, rule, or regulation dealing with the generation, transport, storage,
treatment, handling, release, emission, discharge, or disposal of hazardous
wastes; (ii) the term "hazardous substances" shall have
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<PAGE> 16
the meaning given to such term in the Comprehensive Environmental Response,
Compensation, and Liability Act and the regulations promulgated thereunder or
under any similar federal, state, or local law, rule, or regulation dealing
with the generation, transport, storage, treatment, handling, release,
emission, discharge, or disposal of hazardous substances or the presence of
which requires investigation or remediation under any federal, state, or local
statute, rule, regulation, ordinance, order, action, policy, or under common
law, including all petroleum products; (iii) the term "toxic substances" shall
have the meaning given to such term in the Toxic Substances Control Act or the
regulations promulgated thereunder or under any similar federal, state, or
local law, rule, or regulation dealing with the generation, transport, storage,
treatment, handling, release, emission, discharge, or disposal of toxic
substances; (iv) the term "pollutants" shall mean all substances the emission
or discharge of which is regulated pursuant to the Federal Water Pollution
Control Act and the regulations promulgated thereunder, the Federal Clean Air
Act and the regulations promulgated thereunder, or under any similar federal,
state, or local law, rule, or regulation dealing with the generation,
transport, storage, treatment, handling, release, emission, discharge, or
disposal of pollutants; and (v) the terms "hazardous wastes," "hazardous
substances," "toxic substances," and "pollutants" shall also include all other
substances which are toxic, explosive, corrosive, flammable, infective,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and are or become
regulated by any federal, state, or local governmental authority, department,
commission, board, agency, or instrumentality, or the presence of which causes
or threatens to cause a nuisance or a hazard to health and safety.
3.16 Debt Instruments. The exhibit indexes to the 1995
10-K and the Interim 10-Q's contain a complete and correct list of all material
outstanding indentures, mortgages, chattel mortgages, deeds of trust,
conditional sales agreements, bank loans, credit agreements, and guarantees to
which either SSG or SSGI is a party or by which either SSG or SSGI or any of
their respective properties is bound.
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3.17 Employee Benefit Plans; Collective Bargaining
Agreements. Except as set forth in the Reports or in Schedule 3.17, neither
SSG nor SSGI maintains or offers any retirement or similar benefit plan for
their respective employees. Each of SSG and SSGI has performed all material
obligations required to be performed under, and is not in default under or in
violation of, any retirement or similar benefit plan for their respective
employees which it maintains or offers (each a "Plan"). Each of SSG and SSGI
is in compliance in all material respects with the requirements prescribed by
all statutes, orders, or governmental rules or regulations applicable to the
Plans, including, without limitation, the Employee Retirement Income Security
Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended.
Neither SSG nor SSGI maintains or participates as an employer under any
collective bargaining agreement, nor has either been advised of any labor
organizational activity or proceedings which are pending or to their knowledge,
threatened.
3.18 Customs. SSG and SSGI have at all times been in
compliance with all requirements administered and enforced by the U.S. Customs
Service and any foreign government customs service which has authority over the
respective businesses of SSG and SSGI, including, but not limited to, the
classification, valuation, and marketing of articles imported into or exported
from the United States or any such other country, except where the failure to
comply would not have a Material Adverse Effect.
3.19 Full Disclosure. The representations and warranties
of SSG in this Agreement and the other Transaction Documents are on the date
hereof true, correct and complete in all material respects. Except as
otherwise noted in the Schedules, SSG has provided to Emerson true, correct and
complete copies of all documents referred to or described in the Schedules
hereto. No representation or warranty by SSG in this Agreement, any Schedule
hereto, any Transaction Document, or in any closing certificate furnished or to
be furnished pursuant hereto contains or will contain any untrue statement of a
material fact or omits or will omit to state any fact necessary to make any
statement herein or therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EMERSON
Emerson hereby represents and warrants to SSG as follows:
4.1 Authority. Emerson has all requisite power and
authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and consummate the transactions contemplated
herein and therein. Emerson's execution, delivery, and performance of this
Agreement and the other Transaction Documents to which it is a party, and the
consummation of the transactions contemplated herein and therein, have been
duly authorized by its Board of Directors and no other action is required by
law, the Certificate of Incorporation, or Bylaws of Emerson, or otherwise, for
such authorization. This Agreement and each of the other Transaction Documents
to which Emerson is a party constitute the legal, valid, and binding
obligations of, and are enforceable against, Emerson in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
4.2 No Violations. Except for matters which would not
have a material adverse effect on the financial condition, results of
operation, assets, liabilities, business, or prospects of Emerson and its
subsidiaries, taken as a whole and which would not prevent or delay the Closing
or the availability or providing of trade financing credit by Emerson to SSG,
the authorization, execution, and delivery of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
herein and therein by Emerson do not and will not, with or without the giving
of notice or passage of time or both, (a) violate, conflict with, or result in
the breach of any term or provision of, or require any notice, filing, or
consent under (i) any statutes, laws, rules, regulations, ordinances, licenses,
or permits of any governmental body, authority, or agency applicable to Emerson
or (ii) any judgment, decree, writ, injunction, order, or award of any
arbitrator, court, or governmental body, authority, or agency binding upon
Emerson or any of its properties or assets; (b) conflict with or result in the
breach of any term
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or provision of, require any notice or consent under, give rise to a right of
termination of, constitute a default under, result in the acceleration of, or
give rise to a right to accelerate any obligation under any loan agreement,
mortgage, indenture, financing agreement, lease, or any agreement or instrument
of any kind to which Emerson is a party or by which its properties or assets
are bound; or (c) result in any lien, claim, encumbrance, or restriction on any
of the properties or assets of Emerson.
4.3 Investment Representations. Emerson is acquiring the
Shares and the Warrants for its own account, for investment, and not with a
view toward the resale or distribution thereof. Emerson understands that it
must bear the economic risk of such investment for an indefinite period of time
because the sale and issuance of the Shares and the Warrants are not registered
under the Securities Act or any applicable state securities laws, and may not
be resold unless subsequently registered under the Securities Act and such
other laws, or unless an exemption from such registration is available.
Emerson also understands that, except as provided in the Registration Rights
Agreement, it is not contemplated that any registration will be made under the
Securities Act to permit resale of the Shares and Warrants. Emerson agrees not
to pledge, transfer, convey or otherwise dispose of any of the Shares and the
Warrants, except in a transaction that is the subject of either (i) an
effective Registration Statement under the Securities Act and any applicable
state securities laws, or (ii) an exemption under the Securities Act or such
state securities laws. Emerson agrees that each certificate representing
Shares or Warrants will contain a restrictive legend restricting the sale,
transfer or other disposition of the Shares or Warrants unless the Shares
and/or Warrants are registered under the Securities Act or laws or exemptions
from registration are available. Emerson acknowledges that stop transfer
instructions will be given to SSG's transfer agent for the Shares. Emerson
further acknowledges that is has received copies of the Reports and has had the
opportunity to ask questions of, and receive answers from, officers of SSG with
respect to the business and financial condition of SSG and to obtain any
additional information necessary to verify such information or can acquire it
without unreasonable effort or expense. Emerson further represents that it is
an "accredited investor" as such term is defined in Rule 501 of Regulation D of
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the SEC under the Securities Act and that it has not been formed for the
purpose of purchasing the Shares and the Warrants.
4.4. Reports. Since December 31, 1994, Emerson has filed all
forms 10-K, 10-Q, 8-K and all proxy statements in connection with any annual or
special meeting of Emerson's stockholders (the "Emerson Reports") with the SEC
required to be filed by it pursuant to the Federal securities laws and the SEC
rules and regulations promulgated thereunder, all of which have complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated thereunder. None of
such Emerson Reports, including without limitation any financial statements or
schedules included therein, at the time filed, nor any of the information
contained in the section entitled "Board of Directors and Executive Officers -
Designation of Directors; Emerson's Designees" and in the table, the first
heading of which is "Persons to be Designated Directors" and the information
with respect to Emerson in the table, the first heading of which is "Principal
Stockholders (in each case, including the footnotes thereto), in the section
entitled "Beneficial Ownership of Common Stock" (copies of which are attached
as Exhibit A) to be included in the Information Statement to be provided by SSG
to its shareholders pursuant to Section 14(f) of the Exchange Act contained (or
contains) any untrue statement of a material fact or omitted (or omits) to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.5. Opinion of Counsel. Concurrently herewith Emerson
is providing to SSG an opinion of Wolff & Samson, counsel to Emerson, in the
form attached as Exhibit B.
ARTICLE V
CONDUCT OF BUSINESS BY SSG PENDING CLOSING
As a material inducement to Emerson to purchase the Shares and
Warrants, SSG covenants and agrees that, until the Closing Date, SSG will
comply with the following covenants and agreements:
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5.1 Preservation of Existence. SSG will do or cause to
be done all things necessary to preserve and maintain in full force and effect
the corporate existence and all material contracts, rights, licenses, permits,
franchises, patents, trademarks, and trade names necessary to the proper
conduct of its business and shall qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction in which the
character of the property owned or the nature of the business conducted by it
makes such qualification or authorization necessary, except such jurisdictions
in which the lack of qualification or authorization does not result in a
Material Adverse Effect.
5.2 Compliance with Laws. SSG will, and will cause SSGI
to, comply with all laws, ordinances, and governmental rules and regulations to
which it or its respective properties or assets is subject, the noncompliance
with which would materially interfere with the performance of SSG's obligations
under this Agreement or the Transaction Documents or would result in a Material
Adverse Effect.
5.3 Accounting Methods; Inspections; Cooperation. SSG
will, and will cause SSGI to, keep adequate records and books of account in
which complete entries will be made in all material respects. SSG will, and
will cause SSGI to, consult with Emerson and its representatives on their
respective accounting practices. SSG will, and will cause SSGI to, permit
Emerson and its agents and representatives (including without limitation
Emerson's lenders or potential lenders to SSG, and their agents and
representatives) to visit and inspect any of the properties or assets of SSG
and SSGI and to examine and make extracts of the books of account of SSG and
SSGI at all reasonable times and to such extent as Emerson or such lenders may
reasonably request. SSG will cooperate with Emerson and use its best efforts
to arrange access by Emerson's representatives to representatives of SSG's
primary lender to discuss SSG's current defaults and the nature of its current
and future relationship with SSG.
5.4 Maintenance of Property. SSG will, and will cause
SSGI to, keep all of their respective properties in good working order and
condition, subject to ordinary wear and tear and routine maintenance.
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5.5 Payment of Taxes and Claims. SSG will, and will
cause SSGI to, pay and discharge promptly all Taxes and all other claims,
demands, charges, or levies imposed by governmental authorities upon SSG or
SSGI or upon their respective income or profits or upon any of their respective
properties or assets before the same shall become delinquent; provided,
however, that none of the foregoing need be paid while being contested in good
faith and by appropriate proceedings, so long as adequate book reserves have
been established in accordance with GAAP with respect thereto and the title of
SSG or SSGI to, and the right to use, their respective properties are not
materially adversely affected thereby.
5.6 Information Covenants. SSG will furnish the
following information to Emerson:
(a) Reports. Concurrently with their filing with the
SEC, all Reports of SSG filed from and after the date hereof.
(b) Notice of Litigation and Other Matters. Prompt
notice of:
(i) the commencement of any material proceeding
or investigation by or before any governmental body and any material action and
proceeding in any court or before any arbitrator against or in any other way
relating adversely to SSG or any of its properties, assets, or businesses;
(ii) any written notice received from any
administrative official or agency relating to any order or ruling which may
result in, or cause, a Material Adverse Effect;
(iii) any amendment of the Certificate of
Incorporation or Bylaws of SSG or SSGI;
(iv) any breach by SSG of any of its obligations
hereunder or under any of the Transaction Documents; and
(v) the receipt of any proposal for a merger,
consolidation, sale of all or substantially all of its assets, tender offer,
sale of an equity interest, or other business combination involving SSG, SSGI,
or any future direct or indirect
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subsidiary of SSG (an "Acquisition Proposal") and its position with respect
thereto.
(c) Other Information. From time to time, such other
information or documents as Emerson may reasonably request.
5.7. Action By Board of Directors. The Board of
Directors of SSG will not vote to approve or recommend or otherwise take any
action with respect to the matter which is the subject of the memorandum to the
Board of Directors referred to in item (h) of Schedule 3.7.
ARTICLE VI
ADDITIONAL AGREEMENTS OF SSG
As a material inducement to Emerson to purchase the Shares and
Warrants, SSG covenants and agrees that, until the Closing Date, SSG will not
take any of the following actions:
6.1 Access to Information. SSG shall afford to Emerson
and its accountants, counsel, and other representatives reasonable access
during normal business hours throughout the period prior to the Closing Date to
all of its properties, books, contracts, commitments and records (including,
but not limited to, tax returns) and to its officers, consultants, and, subject
to any applicable privilege rules, professional advisors.
6.2 Purchase or Sale of Assets. SSG will not, and will
cause SSGI not to, purchase or acquire, or sell, lease, or otherwise dispose
of, any asset other than (i) in the ordinary course of their respective
businesses or (ii) assets having a price or value which does not exceed
$100,000 (the "Threshold Amount"). Notwithstanding any other provision of this
Agreement, SSG may proceed with its efforts to sell its golf business in the
manner previously disclosed to Emerson provided, further, that SSG shall obtain
the prior written consent of Emerson if such sale would be at a price less than
the book value of such business as reflected in SSG's balance sheet filed with
its Form 10-Q for the fiscal quarter ended August 2, 1996.
6.3 Acquisition Proposals. Except for the proposed sale
of its golf business, SSG shall not, and shall cause SSGI not
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to, directly or indirectly, through any officer, director, employee,
representative, agent, or otherwise, solicit, initiate, or encourage any
Acquisition Proposal, from any person (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Exchange Act) or entity other
than with respect to the transactions contemplated by this Agreement
(collectively, a "SSG Acquisition Transaction"); provided, however, that SSG or
SSGI may take any of the actions otherwise prohibited by this Section 6.3 if
counsel to SSG or its outside directors advises the Board of Directors of SSG
or SSGI that the failure to take such action or actions could subject the
directors to liability for breach of their fiduciary duties.
6.4 Indebtedness. Subject to fiduciary duties under
applicable law, SSG will not, and will cause SSGI not to, create, incur,
assume, guarantee, or in any way become liable or obligated in respect of any
indebtedness for borrowed money other than (i) in the ordinary course of the
business of SSG or SSGI or (ii) under its existing credit lines.
6.5 Compensation. Except as reflected in the Reports and
except for fees owing to Arthur Andersen, LLP described in Schedule 3.7, SSG
will not, and will cause SSGI not to, pay any salary or other compensation, or
enter into any agreement which obligates SSG or SSGI to pay any salary or other
compensation, to any officer, director, consultant, or independent contractor
in any amount which exceeds the Threshold Amount.
6.6 Agreements. Except as provided in Section 6.3, SSG
will not, and will cause SSGI not to, enter into any agreement, contract,
understanding, arrangement, or transaction other than (i) in the ordinary
course of business or (ii) which has a price or value, or imposes upon either
SSG or SSGI any obligation in an amount, which exceeds the Threshold Amount.
6.7 Issuance of Common Stock. Subject to fiduciary
duties under applicable law, SSG will not, and will cause SSGI not to,
authorize, issue, or enter into any agreement providing for the issuance
(contingent or otherwise) of (i) any notes or debt securities containing equity
features, including without limitation, any notes or debt securities
convertible into or exchangeable for equity securities or containing profit
participation features or (ii) any equity securities or capital
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stock, or any securities convertible into or exchangeable for equity securities
or capital stock, except for the issuance of shares of Common Stock upon
exercise of currently outstanding options or warrants, in each case upon the
terms and conditions in effect on the date of this Agreement.
6.8 Dividends. SSG will not, and will cause SSGI not to,
directly or indirectly (i) declare or pay any dividends or make any
distributions upon any of its equity securities or (ii) redeem, purchase or
otherwise acquire any of their respective equity securities (including without
limitation, warrants, options, and other rights to acquire equity securities).
6.9 Investments. SSG will not, and will cause SSGI not
to, make any loan or advance to, or purchase or acquire any equity interest in,
any corporation, partnership, association, business trust, limited liability
company, governmental agency, or any individual, except for (i) reasonable
advances to employees in the ordinary course of business, (ii) certificates of
deposit of U.S. commercial banks, or (iii) obligations of, or guaranteed by,
the U.S. government or any agency or instrumentality thereof.
6.10 Merger, etc. Subject to fiduciary duties under
applicable law, SSG will not, and will cause SSGI not to, enter into or
effectuate any merger, consolidation, or sale of all or substantially all of
the assets of SSG or SSGI, or liquidation, dissolution, reincorporation,
reorganization, or restructuring or assignment of all or substantially all of
its assets for the benefit of creditors, or file (or consent to the filing of)
any petition in bankruptcy.
6.11 Charter Amendment. SSG will not, and will cause
SSGI not to, amend, modify, or restate their respective Certificates of
Incorporation or Bylaws or take any action which would increase the number of
authorized shares of Common Stock or create any new class of capital stock or
adversely affect or otherwise impair the rights or relative priority of the
holders of the Common Stock.
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ARTICLE VII
POST-CLOSING COVENANTS OF SSG
The parties further agree as follows:For a period of at least
two (2) years after the Closing Date, the parties further agree that:
(a) for a period of at least two (2) years after the
Closing Date, unless approved by a majority of SSG's directors who do not have
a direct or indirect material financial interest in the agreement or
transaction (which shall include a majority of the Independent Directors, as
defined in clause (b) immediately below), SSG shall not, and shall not permit
any of its subsidiaries to, enter into or be a party to any agreement or
transaction with any Affiliate (as defined under the Exchange Act) of SSG or
Emerson, except in the ordinary course of SSG's or its subsidiaries' business
and on terms no less favorable to SSG or its subsidiaries than would be
obtained in a comparable arms' length transaction with a person not an
Affiliate of SSG or Emerson;
(b) for a period of at least two (2) years after the
Closing Date, SSG's Board of Directors shall be comprised of at least two
persons who are not officers or employees of SSG or Emerson or directors of
Emerson ("Independent Directors"); and
(c) for so long as they shall be applicable, SSG shall
comply with the rules of the NYSE with respect to related party transactions.
ARTICLE VIII
CONDITIONS TO EMERSON'S OBLIGATION TO CLOSE
The obligation of Emerson to consummate the purchase of the
Shares and the Warrants is subject to the satisfaction on or prior to the
Closing Date of all of the following conditions (any of which may be waived by
Emerson):
(a) The representations and warranties of SSG contained
in this Agreement shall be true in all material respects (to the extent any
such representation and warranty is not already
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qualified by materiality) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date.
(b) There shall not have been issued any order of any
court or tribunal of competent jurisdiction restraining or enjoining the
transactions contemplated by this Agreement and the Transaction Documents or
prohibiting Emerson's ownership or operation of all or any portion of the
business of Emerson or SSG and SSGI and there shall be no proceeding pending by
or brought by any governmental agency or authority seeking any of the
foregoing.
(c) There shall not be pending before any court or
tribunal of competent jurisdiction any action relating to the transactions
contemplated by this Agreement and the Transaction Documents which, might
reasonably be expected to result in a Material Adverse Effect to SSG.
(d) Effective as of the Closing Date, SSG shall cause its
Board of Directors to consist of such of Emerson's designees listed on Exhibit
A hereto as Emerson shall specify on or prior to the Closing.
(e) All consents and approvals of third parties to this
Agreement, the Transaction Documents, and the transactions contemplated hereby
and thereby, the failure to receive which could have a Material Adverse Effect,
shall have been obtained by SSG.
(f) An exception to the Shareholder Approval Policy
contained in Section 312.04 of the NYSE rules shall have been obtained by SSG,
and SSG shall have complied with the requirements for such an exception
contained in such Section. SSG also shall have complied with its obligations
under Section 14(f) of the Exchange Act, it being understood that SSG shall
rely upon the accuracy of the representation and warranty of Emerson set forth
in Section 4.4 hereof in so far as such representation and warranty relates to
information to be included by SSG in the filing to be made pursuant to such
Section of the Exchange Act.
(g) SSG shall secure the listing upon official notice of
issuance of (i) the Shares upon the NYSE on or prior to the
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Closing Date and (ii) the shares underlying the Warrants upon the NYSE as set
forth in the Warrant Agreement.
ARTICLE IX
CONDITIONS TO SSG'S OBLIGATIONS TO CLOSE
The obligation of SSG to consummate the sale of the Shares and
Warrants at the Closing is subject to the satisfaction on or prior to the
Closing Date of all of the following conditions (any of which may be waived by
SSG):
(a) The representations and warranties of Emerson
contained in this Agreement shall be true in all material respects (to the
extent any such representation and warranty is not already qualified by
materiality) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
(b) There shall not have been issued under any order of
any court or tribunal of competent jurisdiction restraining or enjoining the
transactions contemplated by this Agreement and the Transaction Documents
(including, without limitation, the sale of the Shares or Warrants) and there
shall be no proceeding pending by any governmental agency or authority seeking
to restrain or enjoin such sale.
(c) There shall not be pending before any court or
tribunal of competent jurisdiction any action relating to the transactions
contemplated by this Agreement and the Transaction Documents which, if adversely
determined, might reasonably be expected to result in a Material Adverse Effect
to SSG.
(d) All consents and approvals of third parties to this
Agreement, the Transaction Documents, and the transactions contemplated hereby
and thereby, the failure to receive which could have a material adverse effect
to Emerson, shall have been obtained by Emerson.
(e) Emerson shall have provided evidence, reasonably
satisfactory to SSG, of its ability to provide $2 million of available trade
finance credit to SSG for the purchase of goods sourced in the Far East through
a foreign subsidiary of Emerson.
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(f) As a result of the application by SSG to the NYSE for
(i) an exception to the Shareholder Approval Policy contained in Section 312.04
of the NYSE rules or (ii) the listing of the Shares upon the NYSE on or prior to
the Closing Date and the shares underlying the Warrants upon the NYSE as set
forth in the Warrant Agreement, SSG shall not have been notified by the NYSE of
its intention to delist other shares of common stock of SSG.
ARTICLE X
CLOSING
10.1 Time and Place of Closing. Subject to Section
11.1, the closing (the "Closing") of the issuance, sale or grant, and purchase
of the Shares and the Warrants shall take place at the corporate offices of SSG
at 10:00 a.m. on December 12, 1996, or at such other place or on such other
date as shall be agreed to by the parties hereto (the "Closing Date").
10.2 Delivery by SSG. On the Closing Date, SSG shall
deliver, or cause to be delivered, to Emerson the following:
(a) A Common Stock certificate or certificates evidencing
the Shares (the "Stock Certificates");
(b) A Warrant Agreement evidencing the Warrants (the
"Warrant Agreement"), to be executed substantially in the form attached hereto
as Exhibit C;
(c) A Registration Rights Agreement (the "Registration
Agreement") duly executed and delivered by SSG substantially in the form
attached hereto as Exhibit D; and
(d) A Certificate (the "SSG Secretary's Certificate") of
the Secretary of SSG dated the Closing Date to the effect that (i) the
Certificates of Incorporation of SSG and SSGI attached to the SSG Secretary's
Certificate are true, correct, and complete copies thereof and the same have
not been amended, restated, supplemented, or modified in any respect and are in
full force and effect on the Closing Date, (ii) the Bylaws of SSG and SSGI
attached to the SSG Secretary's Certificate are true, correct, and complete
copies thereof and the same have not been amended, restated, supplemented, or
modified in any respect and are in full force and effect on the Closing Date,
(iii) the resolutions of the Board of Directors of SSG authorizing the issuance
or grant, as the case may be, and sale of the Shares and the Warrants and the
consummation of the transactions contemplated by the Transaction Documents
attached to the SSG Secretary's Certificate are true, correct, and complete
copies thereof and the same have not been amended,
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<PAGE> 30
restated, supplemented, or modified in any respect and are in full force and
effect on the Closing Date, and (iv) the specimen signatures of the officers of
SSG executing this Agreement and the other Transaction Documents are true and
correct specimens thereof and such officers are duly authorized to execute and
deliver this Agreement and the other Transaction Documents on behalf of SSG;
(e) A good standing certificate as of a recent date to
the Closing Date issued by the Secretary of State of Delaware that SSG is
validly existing and in good standing in such jurisdiction;
(f) All other Transaction Documents signed by authorized
officers of SSG; and
(g) All other documents, instruments, and writings
required to be delivered by SSG at or prior to the Closing pursuant to this
Agreement, including, without limitation, all other documents and agreements
set forth in Article VIII hereof.
10.3 Delivery by Emerson. On the Closing Date, Emerson
shall deliver, or cause to be delivered, to SSG the following:
(a) Payment of the Purchase Price by wire transfer to
SSG's designated account(s) as contemplated by Section 3.2;
(b) A Certificate (the "Emerson Secretary's Certificate")
of the Secretary of Emerson dated the Closing Date to the effect that (i) the
Certificate of Incorporation of Emerson attached to the Emerson Secretary's
Certificate is true, correct, and complete copy thereof and the same has not
been amended, restated, supplemented, or modified in any respect and is in full
force and effect on the Closing Date, (ii) the Bylaws of Emerson attached to
the Emerson Secretary's Certificate are true, correct, and complete copies
thereof and the same have not been amended,
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restated, supplemented, or modified in any respect and are in full force and
effect on the Closing Date, (iii) the resolutions of the Board of Directors of
Emerson authorizing the purchase of the Shares and the Warrants and the
consummation of the transactions contemplated by the Transaction Documents
attached to the Emerson Secretary's Certificate are true, correct, and complete
copies thereof and the same have not been amended, restated, supplemented, or
modified in any respect and are in full force and effect on the Closing Date,
and (iv) the specimen signatures of the officers of Emerson executing this
Agreement and the other Transaction Documents are true and correct specimens
thereof and such officers are duly authorized to execute and deliver this
Agreement and the other Transaction Documents on behalf of Emerson;
(c) A good standing certificate as of a recent date to
the Closing Date issued by the Secretary of State of Delaware evidencing that
Emerson is validly existing and in good standing in such jurisdiction;
(d) All other documents, instruments, and writings
required to be delivered by Emerson at or prior to the Closing pursuant to this
Agreement, including, without limitation, all other documents and agreements
set forth in Article IX hereof.
10.4 Transaction Documents. As used herein, the term
"Transaction Documents" shall mean collectively this Agreement, the Warrant
Agreement, and the Registration Agreement, as the same may be amended,
modified, supplemented, or waived from time to time.
ARTICLE XI
TERMINATION AND EXTENSION
11.1 Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) By mutual written consent of SSG and Emerson;
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(b) By either SSG or Emerson if there has been a material
misrepresentation or breach of warranty not qualified by materiality, or a
misrepresentation or breach of warranty qualified by materiality, on the part
of the other party in the representations and warranties set forth in this
Agreement, which breach is incapable of cure on or prior to the Closing Date;
(c) By either Emerson or SSG if the purchase and sale of
the Shares and the Warrants shall not have been consummated on or before
December 16, 1996 (the "Termination Date");
(d) By SSG, if it accepts an Acquisition Proposal
relating to an SSG Acquisition Transaction, other than with Emerson.
11.2 Effect of Termination. In the event of termination
of this Agreement as provided above, this Agreement shall forthwith become void
and there shall be no liability under this Agreement on the part of SSG or
Emerson (except for a breach of this Agreement) or their respective officers or
directors; provided, however, that in the event of termination of this
Agreement (x) under Section 11.1(d), or as a result of (y) the failure of SSG
to comply with its covenants contained in Article VI hereof or satisfy the
condition in clause (d) of Article VIII or (z) any other act or failure to act
on the part of SSG constituting the willful failure to close by SSG and Emerson
has not in any way contributed to the failure to so close, SSG shall pay
Emerson, as its exclusive remedy, a termination fee of $750,000, to be paid on
the Termination Date by SSG to Emerson by wire transfer to a bank account
designated by Emerson; provided, further, that in the event of termination of
this Agreement as a result of the failure of SSG to satisfy the conditions in
clauses (a), (f) and (g) of Article VIII and Emerson has not in any way
contributed to the failure to so close, SSG shall pay to Emerson, as its
exclusive remedy, a termination fee equal to the actual out-of-pocket expenses
paid or incurred by Emerson in connection with the transactions contemplated by
this Agreement but, in any event, not in excess of $150,000, such amount to be
paid immediately by SSG to Emerson, by wire transfer to a bank account
designated by Emerson, upon presentation by Emerson to SSG of a certificate of
the chief financial officer of Emerson setting
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forth the amount of such out-of-pocket expenses; and provided, further, in the
event of the termination of this Agreement solely as a result of the financial
inability or willful failure to close by Emerson and SSG has not in any way
contributed to the failure to so close, Emerson shall pay to SSG, as its
exclusive remedy, a termination fee of $3,000,000 to be paid from the
irrevocable standby letter of credit provided to SSG by Emerson pursuant to
Section 2.3 of this Agreement; and provided, further, in the event of the
termination of this Agreement as a result of the failure of Emerson to satisfy
the conditions in clauses (a), (d) and/or (e) of Article IX and SSG has not in
any way contributed to the failure to so close, Emerson shall pay to SSG, as
its exclusive remedy, a termination fee equal to the actual out-of-pocket
expenses paid or incurred by SSG in connection with the transactions
contemplated by this Agreement, but, in any event, not in excess of $150,000,
such amount to be paid immediately by Emerson to SSG, by wire transfer to a
bank account designated by SSG, upon presentation to Emerson of a certificate
of the chief executive officer or President of SSG setting forth the amount of
such out-of-pocket expenses. Notwithstanding the foregoing, the failure of any
party to waive any condition or grant any extension or enter into any amendment
shall not be deemed contributory to the failure to close.
11.3 Extension. At any time prior to the Closing, the
parties hereto, by duly authorized action taken by their respective officers,
may extend the time for the performance of any of the obligations or other acts
of the other party hereto.
ARTICLE XII
MISCELLANEOUS
12.1 No Broker. Each party hereto represents and
warrants to the other that, except for the retention by SSG of Principal
Financial Securities, no broker or finder has been employed or retained in
connection with the transactions contemplated by this Agreement or is entitled
to any fee, commission or other compensation in connection herewith.
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12.2 Public Statements. The parties shall release a
press release in a form to be mutually agreed upon between Emerson and SSG.
Neither party hereto shall issue any press release or make any other public
statements, in each case relating to or connected with or arising out of this
Agreement or the matters contemplated herein, without obtaining the prior
written approval of the other parties to the contents and the manner of
presentation and publication thereof, provided, however, that nothing herein
shall prevent any party from making any disclosures required by applicable law
or regulation (including regulations of the SEC and the NYSE).
12.3 Survival of Representations and Warranties. All
representations, warranties, and agreements made by the parties in this
Agreement or in any agreement, document, statement, list, certificate, or
instrument furnished hereunder or in connection with the negotiation,
execution, and performance of this Agreement shall survive the Closing for a
period to and including January 31, 1998. Notwithstanding the foregoing, in
the event that, prior to the Closing, either party has knowledge that any
representation, warranty or covenant made by the other party is incorrect or is
breached in any material respect as of the date hereof or will be incorrect or
breached in any material respect as of the Closing Date, the party with such
knowledge shall have as its sole remedy hereunder the option (a) to terminate
this Agreement and enforce its remedies herein provided as a result thereof or
(b) to proceed with the Closing and, upon the Closing, such party shall be
conclusively deemed to have waived all claims hereunder relating to such
misrepresentation, breach of warranty or covenant.
12.4 Officers' and Directors' Indemnification and
Insurance. The parties to this Agreement agree that all rights to
indemnification now existing in favor of the directors or officers of SSG and
SSGI as provided in their respective Certificate of Incorporation or bylaws or
in any indemnification agreement, will survive the Closing and stay in effect
in accordance with their respective terms as presently in effect. For a period
of three years after the Closing Date, SSG will provide officers' and
directors' liability insurance from a sound and reputable insurer in respect of
acts or omissions occurring up to and including the
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Closing Date covering each such person currently covered by SSG's officers' and
directors' liability insurance policy on terms with respect to coverage and in
an amount (including deductibles) no less favorable than those of such policy
in effect on the date hereof. For purposes of this Section, the officers and
directors of SSG and SSGI shall be deemed to be third party beneficiaries of
this Agreement and each such person shall be entitled to enforce the terms of
this Section against SSG to its full extent and seek and obtain remedies from
SSG for non-performance of this Section as if such person was a named party to
this Agreement.
12.5 No Waiver. No failure on the part of any party
hereto at any time to require the performance by the other party of any term of
this Agreement shall be taken or held to be a waiver of such term or in any way
affect such party's right to enforce such term, and no waiver on the part of
any party hereto of any term of this Agreement shall be taken or held to be a
waiver of any other term hereof or the breach thereof.
12.6 Entire Agreement; Written Modifications. This
instrument (and the Confidentiality Agreement between Emerson and SSG, to the
extent the transactions contemplated by this Agreement are not consummated for
any reason) and any and all documents executed by the parties hereto on or as
of the date hereof contains the entire agreement among the parties hereto with
respect to the subject matter hereof; all representations, promises, and prior
or contemporaneous understandings among the parties with respect to the subject
matter hereof are merged into and expressed in this instrument and such
documents; and any and all prior agreements among the parties with respect to
the subject matter hereof (other than the Confidentiality Agreement as
described above) are hereby canceled. This Agreement shall not be amended,
modified, or supplemented without the written agreement of Emerson and SSG at
the time of such amendment, modification or supplement.
12.7 Assignment; Binding Effect.
(a) This Agreement and the rights and obligations of the
parties hereto may not be assigned or transferred by either party hereto.
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(b) All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of each of the parties thereto.
12.8 Expenses. Each of the parties hereto shall bear the
costs and expenses attributable to such party under this Agreement and the
transactions contemplated hereby.
12.9 Notices. Any notice, request, demand, waiver,
consent, approval, or other communication which is required or permitted
hereunder shall be in writing and shall be sent by hand delivery, overnight
courier, or by registered or certified mail, and shall be deemed given when
received at the address set forth below:
If to Emerson: Nine Entin Road
Parsippany, New Jersey 07054-0430
Attn: President
- with copy to -
Wolff & Samson, P.A.
5 Becker Farm Road
Roseland, New Jersey 07068
Attn: Jeffrey M. Davis, Esq.
If to SSG 1901 Diplomat Drive
Dallas, Texas 75234
Attn: Corporate Secretary
- with a copy to -
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Alan J. Bogdanow, Esq.
or such other party or address as may be expressly designated by either party
by notice given in accordance with the foregoing provisions.
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12.10 Cooperation. Subject to the terms and conditions
herein provided, the parties hereto shall use their best efforts to take, or
cause to be taken, such action to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things reasonably necessary, proper or advisable under the
provisions of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this Agreement.
12.11 No Benefit to Others. Except as provided in Section
12.4, the representations, warranties, covenants, and agreements contained in
this Agreement are for the sole benefit of the parties hereto, and their
permitted successors and assigns, and they shall not be construed as conferring
any rights on any other persons.
12.12 Headings, Gender, and "Person". All section
headings contained in this Agreement are for convenience of reference only, do
not form a part of this Agreement, and shall not affect in any way the meaning
or interpretation of this Agreement. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine, or neuter, as the context requires. Any reference to a "person"
herein shall include an individual, firm, corporation, partnership, trust,
governmental authority or body, association, unincorporated organization, or
other entity.
12.13 Schedules. All Schedules referred to herein are
intended to be and hereby are specifically made a part of this Agreement.
12.14 Severability. Any provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall be ineffective to
the extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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<PAGE> 38
12.15 Counterparts. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
12.16 Governing Law. This Agreement shall be governed
by and interpreted and enforced in accordance with the laws of the State of
Delaware, without regard to the conflicts of law principles thereof.
12.17 Construction. The parties hereto agree that each
party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
hereof or thereof or any amendments, exhibits, or schedules hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date above written.
EMERSON RADIO CORP.
By:
-------------------------------
Eugene I. Davis, President
SPORT SUPPLY GROUP, INC.
By:
-------------------------------
Peter S. Blumenfeld
President
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<PAGE> 1
EXHIBIT 4(a)
THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER
THE ACT AND THE LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR
INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION AND ITS
COUNSEL, TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT AND SUCH STATE STATUTES.
WARRANT AGREEMENT
For the Purchase of Common Stock, $0.01 Par Value Per Share,
of SPORT SUPPLY GROUP, INC.
(Incorporated Under the Laws of the State of Delaware)
Void After 5:00 P.M., Dallas, Texas,
time on December 10, 2001
No. 001 Warrant to Purchase
1,000,000 Shares
THIS IS TO CERTIFY, that, for value received, Emerson Radio Corp., or
registered assigns (the "Holder"), is entitled, subject to the terms and
conditions hereinafter set forth, on the date hereof and at any time prior to
5:00 P.M., Dallas, Texas, time, on December 10, 2001, but not thereafter, to
purchase the number of shares set forth above (the "Shares") of Common Stock,
$0.01 par value per share ("Common Stock"), of Sport Supply Group, Inc., a
Delaware corporation (the "Corporation"), from the Corporation upon payment to
the Corporation of $7.50 per share (the "Purchase Price") if and to the extent
this Warrant Agreement ("Warrant") is exercised, in whole or in part, during
the period this Warrant
<PAGE> 2
remains in force, subject in all cases to adjustment as provided in Article II
hereof, and to receive a certificate or certificates representing the Shares so
purchased, upon presentation and surrender to the Corporation of this Warrant,
with the form of subscription attached hereto duly executed, and accompanied by
payment of the Purchase Price of each Share purchased as provided herein.
ARTICLE 1 - TERMS OF THE WARRANT
Section 1.1 Subject to the provisions of Section 3.1 hereof, this
Warrant may be exercised at any time and from time to time after 9:00 A.M.,
Dallas, Texas, time, on the date hereof (the "Exercise Commencement Date"), but
no later than 5:00 P.M., Dallas, Texas, time, December 10, 2001 (the
"Expiration Time"). If this Warrant is not exercised on or before the
Expiration Time it shall become void, and all rights hereunder shall thereupon
cease.
Section 1.2
(a) The Holder may exercise this Warrant, in whole or in part,
upon surrender of this Warrant with the form of subscription attached hereto
duly executed, to the Corporation at its corporate office in Dallas, Texas,
together with the full Purchase Price for each Share to be purchased in lawful
money of the United States, or by wire transfer, check, bank draft, or postal
or express money order payable in United States dollars to the order of the
Corporation, and upon compliance with and subject to the conditions set forth
herein.
(b) Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price for
the Shares for which this Warrant is then being exercised, the Corporation
shall cause to be issued certificates for the total number of whole Shares as
to which this Warrant is being exercised in such denominations as are required
for delivery to the Holder, and the Corporation shall thereupon deliver such
certificates to the Holder or its nominee.
(c) In case the Holder shall exercise this Warrant with
respect to less than all of the Shares that may be purchased
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<PAGE> 3
under this Warrant, the Corporation shall execute a new Warrant for the balance
of the Shares that may be purchased upon exercise of this Warrant and deliver
such new Warrant to the Holder.
(d) The Corporation covenants and agrees it will pay when due
and payable any and all taxes (other than any income taxes) that may be payable
in respect of the issue of this Warrant, or the issue of any Shares upon the
exercise of this Warrant. The Corporation shall not, however, be required to
pay any such tax that may be payable in respect of any transfer involved in the
issuance or delivery of this Warrant or of the Shares in a name other than that
of the Holder at the time of surrender, and until the payment of such tax the
Corporation shall not be required to issue such Shares.
Section 1.3 This Warrant may be split-up, combined, or exchanged for
another Warrant or Warrants of like tenor to purchase a like aggregate number
of Shares. If the Holder desires to split-up, combine, or exchange this
Warrant, it shall make such request in writing delivered to the Corporation at
its corporate office and shall surrender this Warrant and any other Warrants to
be so split- up, combined, or exchanged at such office. Upon any such
surrender for a split-up, combination, or exchange, the Corporation shall
execute and deliver to the person entitled thereto a Warrant or Warrants, as
the case may be, as so requested. The Corporation shall not be required to
effect any split-up, combination, or exchange that will result in the issuance
of a Warrant entitling the Holder to purchase upon exercise a fraction of a
Share.
Section 1.4 Prior to due presentment for registration or transfer of
this Warrant, the Corporation may deem and treat the Holder, as registered on
the books of the Corporation maintained for that purpose, as the absolute owner
of this Warrant (notwithstanding any endorsement or notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes and the Corporation shall not be affected by any notice to the
contrary.
Section 1.5 Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Corporation at its principal office with the
form of assignment attached hereto duly executed and funds sufficient to pay
any transfer tax. In such event, the
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<PAGE> 4
Corporation shall, without charge, execute, and deliver a new Warrant in the
name of the assignee named in such instrument of assignment and this Warrant
shall promptly be canceled. This Warrant may be divided or combined with other
Warrants that carry the same rights upon presentation thereof at the corporate
office of the Corporation together with a written notice signed by the Holder,
specifying the names and denominations in which such new Warrants are to be
issued.
Section 1.6 Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Corporation. If, however, at any time prior to the
expiration of this Warrant and prior to its exercise, any of the following
shall occur:
(a) the Corporation shall declare any dividend payable in
stock to the holders of its Common Stock or make any other distribution
in property other than cash to the holders of its Common Stock; or
(b) the Corporation shall offer to the holders of its Common
Stock rights to subscribe for or purchase any shares of any class of
stock or any other rights or options or securities exchangeable for or
convertible into shares of any class of stock; or
(c) the Corporation shall effect any reclassification of its
Common Stock (other than a reclassification involving merely the
subdivision or combination of outstanding shares of Common Stock) or any
capital reorganization, or any consolidation or merger (other than a
merger in which no distribution of securities or other property is made
to holders of Common Stock), or any sale, transfer, or other disposition
of its property, assets, and business substantially as an entirety, or
the liquidation, dissolution, or winding up of the Corporation;
then, in each such case, the Corporation shall cause notice of such proposed
action to be mailed to the Holder. Such notice shall specify (i) the date on
which the books of the Corporation
-4-
<PAGE> 5
shall close, or a record be taken, for determining holders of Common Stock
entitled to receive such stock dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation,
dissolution, winding up, shall take place or commence, as the case may be, (ii)
the date as of which it is expected that holders of record of Common Stock
shall be entitled to receive securities or other property deliverable upon such
action, if any such date has been fixed (on which date in the event of a
voluntary or involuntary liquidation, dissolution, or winding up of the
Corporation, the right to exercise this Warrant shall terminate), and (iii)
such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Purchase Price and the
kind and amount of the Common Stock and other securities and property
deliverable upon exercise of this Warrant. Such notice shall be mailed in the
case of any action covered by Subsection 1.6(a) and 1.6(b) above, at least ten
(10) days prior to the record date of determining holders of the Common Stock
for purposes of receiving such payment or offer, and in the case of any action
covered by Subsection 1.6(c), at least ten (10) days prior to the earlier of
the date upon which such action is to take place or any record date to
determine holders of Common Stock entitled to receive such securities or other
property.
Without limiting the obligation of the Corporation to provide notice to
the Holder of actions hereunder, it is agreed that failure of the Corporation
to give notice shall not invalidate such action of the Corporation.
Section 1.7 If this Warrant is lost, stolen, mutilated, or destroyed,
the Corporation shall, on such reasonable terms as to indemnity or otherwise as
it may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an independent contractual obligation of the
Corporation, whether or not the Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
-5-
<PAGE> 6
Section 1.8
(a) The Corporation covenants and agrees that at all times it
shall reserve and keep available for the exercise of this Warrant such number
of authorized Shares as are sufficient to permit the exercise in full of this
Warrant.
(b) Prior to the issuance of any Shares upon exercise of this
Warrant, the Corporation shall secure the listing of such Shares upon any
securities exchange upon which the shares of the Corporation's Common Stock may
at the time be listed for trading.
(c) The Corporation covenants that all Shares when issued upon
the exercise of this Warrant in accordance with the terms hereof will be
validly issued, fully paid, nonassessable, and free of preemptive rights.
ARTICLE 2 -- ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES PURCHASABLE UPON EXERCISE
Section 2.1 Subject to the provisions of this Article II, the Purchase
Price in effect from time to time shall be subject to adjustment as follows:
(a) In case the Corporation shall (i) declare a dividend or
make a distribution on the outstanding shares of its Common Stock in
shares of its Common Stock, (ii) subdivide the outstanding shares of its
Common Stock into a greater number of shares, (iii) combine the
outstanding shares of its Common Stock into a smaller number of shares,
(iv) issue any shares of its Common Stock by reclassification of the
Common Stock, then in each case the Purchase Price in effect immediately
after the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the
Purchase Price in effect immediately prior thereto by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such dividend,
-6-
<PAGE> 7
distribution, subdivision, combination, or reclassification, and of
which the denominator shall be the number of shares of Common Stock
outstanding immediately after such dividend, distribution, subdivision,
combination, or reclassification. Any shares of Common Stock of the
Corporation issuable in payment of a dividend shall be deemed to have
been issued immediately prior to the record date for such dividend.
(b) All calculations under this Section 2. 1 shall be made to
the nearest whole cent.
Section 2.2 No adjustment in the Purchase Price in accordance with the
provisions of Subsection 2.1(a) hereof need be made if such adjustment would
amount to a change of less than 1% in such Purchase Price; provided that the
amount by which any adjustment is not made by reason of the provisions of this
Section 2.2 shall be carried forward and taken into account at the time of any
subsequent adjustment in the Purchase Price.
Section 2.3 Upon each adjustment of the Purchase Price pursuant to
Subsection 2.1(a) hereof, each Warrant shall thereupon evidence the right to
purchase that number of shares of Common Stock (calculated to the nearest
hundredth of a share) obtained by multiplying the number of shares of Common
Stock purchasable immediately prior to such adjustment upon exercise of the
Warrant by the Purchase Price in effect immediately prior to such adjustment
and dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment.
Section 2.4 In case of any capital reorganization, other than in the
cases referred to in Section 2.1 hereof, or the consolidation or merger of the
Corporation with or into another corporation (other than a merger or
consolidation in which the Corporation is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into shares
of other stock or other securities or cash or other property), or the sale of
the property of the Corporation as an entirety or substantially as an entirety,
or the conversion, however effected, of the Corporation into another form of
entity (collectively such actions being hereinafter referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of any
Warrant (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or cash or other
property to which a holder of the number of shares of Common Stock that would
otherwise have
-7-
<PAGE> 8
been deliverable upon the exercise of such Warrant would have been entitled to
have received upon such Reorganization if such Warrant had been exercised in
full immediately prior to such Reorganization. In case of any Reorganization,
appropriate adjustment, as determined in good faith by the Board of Directors
of the Corporation, shall be made in the application of the provisions herein
set forth with respect to the rights and interests of Warrant holders so that
the provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other securities or cash or other
property thereafter deliverable upon exercise of Warrants. The Corporation
shall not effect any such Reorganization, unless upon or prior to the
consummation thereof the successor entity, or if the Corporation shall be the
surviving entity in any such Reorganization and is not the issuer of the shares
of stock or other securities or property to be delivered to holders of shares
of the Common Stock outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash, or other property as the Holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of a sale or conveyance or other transfer of all or substantially all
of the assets of the Corporation as a part of a plan for liquidation of the
Corporation, all rights to exercise any Warrant shall terminate on the date
such sale or conveyance or other transfer is to be consummated.
Section 2.5 The Corporation may select a firm of independent certified
public accountants, which selection may be changed from time to time, to verify
the computations made in accordance with this Article II. The certificate,
report or other written statement of any such firm shall be conclusive evidence
of the correctness of any computation made under this Article II.
Section 2.6 Irrespective of any adjustments pursuant to this Article
II, Warrants theretofore or thereafter issued need not be amended or replaced,
but certificates thereafter issued shall bear an appropriate legend or other
notice of any adjustments.
Section 2.7 The Corporation shall not be required upon the exercise of
any Warrant to issue fractional shares of Common Stock that may result from
adjustments in accordance with this Article II to the Purchase Price or number
of shares of Common Stock
-8-
<PAGE> 9
purchasable under each Warrant. If more than one Warrant is exercised at one
time by the same Holder, the number of full shares of Common Stock that shall
be deliverable shall be computed based on the number of shares deliverable in
exchange for the aggregate number of Warrants exercised. With respect to any
final fraction of a share called for upon the exercise of any Warrant or
Warrants, the Corporation shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the market value of a share
of Common Stock on the business day next preceding the date of such exercise.
The Holder, by his acceptance of the Warrant, shall expressly waive any right
to receive any fractional share of Common Stock upon exercise of the Warrants.
For the purposes of this Section 2.7, the market price per share of Common
Stock at any date shall mean the last reported sale price regular way or, in
case no such reported sale takes place on such date, the average of the last
reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading
or listed if that is the principal market for the Common Stock or if not listed
or admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the
closing bid price (or closing sales price, if reported) as reported by the
NASDAQ or its successor, if any. If the price of the Common Stock is not so
reported, then such market price shall mean the last known price paid per share
by a purchaser of such stock in an arms'-length transaction. All calculations
under this Section 2.7 shall be made to the nearest 1/100th of a share.
Section 2.8 In no event shall the Exercise Price be adjusted below the
par value per share of the Common Stock.
ARTICLE 3
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
Section 3.1 The Holder of this Warrant, by acceptance hereof, both with
respect to this Warrant and the Shares to be issuable upon exercise of this
Warrant, represents and warrants:
(a) The Warrants and the Shares are being acquired for the
Holder's own account to be held for investment purposes
-9-
<PAGE> 10
only and not with a view to, or for, resale in connection with any
distribution of such Warrant or Shares or any interest therein without
registration or other compliance under the Act, and the Holder hereof
has no direct or indirect participation in any such undertaking or in
underwriting such an undertaking.
(b) The Holder hereof has been advised and understands that
the Warrant and the Shares have not been registered under the Act and
the Warrant and/or the Shares must be held and may not be sold,
transferred, or otherwise disposed of for value unless they are
subsequently registered under the Act or an exemption from such
registration is available; except as contemplated herein, the
Corporation is under no obligation to register the offer and sale of the
Warrant and/or the Shares under the Act; in the absence of such
registration, the Holder may be unable to sell the Warrant or Shares;
the Corporation's registrar and transfer agent will maintain stop
transfer orders against registration of transfer of the Warrant and the
Shares; and the certificates to be issued for any Shares will bear on
their face a legend in substantially the following form:
THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE ACT AND THE LAWS OF THE APPLICABLE STATE OR A "NO
ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT AND SUCH STATE STATUTES.
(c) The Corporation may refuse to issue the Shares to a person
other than the Holder upon exercise of the Warrant or transfer the
Warrant and/or the Shares unless the Holder thereof provides reasonable
assurances to the Corporation or a "no action" or interpretive response
from the Securities and Exchange Commission and any applicable state
securities commission to the effect that the transfer is proper;
further, unless such assurances indicate or the letter states
-10-
<PAGE> 11
that the Warrants and/or Shares are free of any restrictions under the
Act and any applicable state securities laws, the Corporation may refuse
to transfer the Warrant and/or the Shares to any transferee who does not
furnish in writing to the Corporation the same representations and
agrees to the same conditions with respect to such Warrant and Shares as
are set forth herein. The Corporation may also refuse to transfer the
Warrant or Shares if any circumstances are present reasonably indicating
that the transferee's representations are not accurate.
Section 3.2 Except as provided in that certain Registration Rights
Agreement dated as of even date herewith among the Corporation, Emerson Radio
Corp., and Emerson Radio (Hong Kong) Limited, the Corporation has no obligation
to register the offer and sale of the shares issuable upon exercise of the
Warrant or the Warrants under the Act or any applicable state law.
Section 3.3 The agreements in this Article III shall continue in effect
regardless of the exercise and surrender of this Warrant.
ARTICLE 4 -- OTHER MATTERS
Section 4.1 All the covenants and provisions of this Warrant by or for
the benefit of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder.
Section 4.2 Notices or demands pursuant to this Warrant to be given or
made shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, as follows:
To the Corporation:
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
Attention: Corporate Secretary
-11-
<PAGE> 12
To the Holder:
Emerson Radio Corp.
Nine Entin Road
Parsippany, New Jersey 07054-0430
Attention: President
or to such other address as the Corporation or the Holder, as the case may be,
shall designate in writing.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 10th day of December, 1996.
SPORT SUPPLY GROUP, INC.
By:
---------------------
Name:
Title:
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<PAGE> 13
SPORT SUPPLY GROUP, INC.
Subscription Form
(To be executed by the registered holder to exercise the right to
purchase Common Stock evidenced by the foregoing Warrant)
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
The undersigned hereby irrevocably subscribes for the purchase of
______ shares of your Common Stock pursuant to and in accordance with the
terms and conditions of this Warrant, and herewith makes payment, covering the
purchase of such shares of Common Stock, certificates for which should be
delivered to the undersigned at the address stated below. If such number of
shares shall not be all of the shares purchasable hereunder, please deliver a
new Warrant of like tenor for the balance of the remaining shares purchasable
hereunder to the undersigned at the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer, or otherwise dispose of any such shares of Common Stock except in
compliance with the requirements set forth in the legend described in Section
3.1 of this Warrant; (2) the Corporation may notify the transfer agent for its
Common Stock that the certificates for the Common Stock acquired by the
undersigned pursuant hereto are not to be transferred unless the transfer agent
receives advice from the Corporation that one or both of the conditions
referred to in (1)(a) and (1)(b) above have been satisfied; and (3) the
Corporation may affix the legend set forth in Section 3.1 of this Warrant to
the certificates for shares of Common Stock hereby subscribed for, if such
legend is applicable.
Dated: Name:
------------- --------------------------------
By:
-----------------------------
Name:
Title:
Tax Identification
Number:
----------------------
Address:
------------------------
------------------------
------------------------
------------------------
Signature Guaranteed:
- -----------------------------
<PAGE> 14
SPORT SUPPLY GROUP, INC.
Assignment Form
(To be executed by the registered holder to effect assignment of the foregoing
Warrant)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers
unto ________________________ the right to purchase __________ shares of Common
Stock, $0.01 par value per share, of the Corporation purchasable pursuant to
the within Warrant, on the terms and conditions set forth therein, and does
hereby irrevocably constitute and appoint ______________________________
Attorney, to transfer on the books of the Corporation Warrants representing
such rights, with full power of substitution.
Dated:
-----------------
Name:
-------------------------------
By:
----------------------------
Name:
Title:
Signature guaranteed:
- -----------------------------
<PAGE> 1
EXHIBIT 4(b)
================================================================================
REGISTRATION RIGHTS AGREEMENT
Among
SPORT SUPPLY GROUP, INC.
EMERSON RADIO CORP.
and
EMERSON RADIO (HONG KONG) LIMITED
Dated as of December 10, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. CERTAIN DEFINITIONS AND TERMS . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Number and Gender of Words; Other References . . . . . 2
SECTION 2. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . 3
2.1 Required Registration and Notice;
Transfer of Registrable Securities . . . . . . . . . . 3
2.2 Conditions to Required Registration. . . . . . . . . . 4
2.3 Incidental Registration. . . . . . . . . . . . . . . . 6
2.4 Registration Procedures. . . . . . . . . . . . . . . . 7
2.5 Furnish Information. . . . . . . . . . . . . . . . . . 12
2.6 Expenses of Registration . . . . . . . . . . . . . . . 13
2.7 Indemnification. . . . . . . . . . . . . . . . . . . . 13
2.8 Reports Under the Exchange Act . . . . . . . . . . . . 16
2.9 Lockup Agreement . . . . . . . . . . . . . . . . . . . 16
2.10 Preparation; Investigation . . . . . . . . . . . . . . 17
SECTION 3. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Relationships and Rights of the Holders. . . . . . . . 17
3.2 Headings . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Communications . . . . . . . . . . . . . . . . . . . . 18
3.4 Governing Law. . . . . . . . . . . . . . . . . . . . . 18
3.5 Invalid Provisions . . . . . . . . . . . . . . . . . . 18
3.6 Successors and Assigns . . . . . . . . . . . . . . . . 19
3.7 Amendments . . . . . . . . . . . . . . . . . . . . . . 19
3.8 Multiple Counterparts. . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of December 10,
1996 between Sport Supply Group, Inc., a Delaware corporation (the "Company"),
Emerson Radio Corp., a Delaware corporation ("Emerson"), and Emerson Radio
(Hong Kong) Limited, an entity organized under the laws of Hong Kong ("Emerson
(HK)").
WHEREAS, Emerson and Emerson (HK) own common stock of the Company and
warrants to purchase common stock of the Company; and
WHEREAS, such holders desire that the limitations on further
distributions of such securities be reduced and the Company is willing to offer
certain registration rights to such holders to reduce such limitations, all as
more specifically set forth herein;
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS AND TERMS.
1.1 Definitions. As used herein, the following terms have the
meanings indicated:
"Common Stock" means the Common Stock, par value $0.01 per share, of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Holder" or "holder" means the holder of any Registrable Securities as
shown on the stock ownership and transfer records maintained by or on behalf of
the Company.
"Person" means any individual, firm, corporation, trust, association,
partnership, joint venture or other entity.
"Register," "registered, " and "registration" refer to a registration of
securities effected by preparing and filing a
<PAGE> 4
registration statement in compliance with the Securities Act and/or state
securities laws and the declaration or ordering of effectiveness of such
registration statement.
"Registrable Securities" means (a) any of the shares of Common Stock
outstanding on the date hereof which are held by Emerson and Emerson (HK), (b)
any share or shares of Common Stock issued upon exercise of any Warrants
outstanding on the date hereof, and (c) any share or shares of Common Stock
issued hereafter in respect of either of the foregoing, in each case to the
extent that such shares are, at the time in question, "restricted securities"
or shares held by an "affiliate" as such terms are defined in Rule 144
promulgated under the Securities Act.
"Rights" means rights, remedies, powers, benefits, and privileges.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Warrants" means the warrants to purchase up to an aggregate of
1,000,000 shares of Common Stock at an initial exercise price of $7.50 per
share, subject to adjustment, represented by a Warrant Agreement dated as of
even date herewith, which are owned and held by Emerson.
1.2 Number and Gender of Words; Other References. Whenever in this
Agreement the singular is used, the same shall include the plural where
appropriate, and vice versa; and words of any gender herein shall include each
other gender where appropriate. References herein to "sections" are, unless
specified otherwise, references to sections of this Agreement. The words
"herein," "hereof," and "hereunder," and other words of similar import refer to
this Agreement as a whole and not to any particular part or subdivision hereof.
-2-
<PAGE> 5
SECTION 2. REGISTRATION RIGHTS.
2.1 Required Registration and Notice; Transfer of Registrable
Securities. (a) At the request of any holders of Registrable Securities,
setting forth such holders' intent to transfer not less than 200,000 shares of
Registrable Securities describing briefly the manner and circumstances of such
transfer, and requesting that the Company effect the registration or
qualification or filing for exemption under applicable Federal or State law of
such Registrable Securities, the Company shall promptly give written notice to
all holders of Registrable Securities of a proposed registration or
qualification or filing for exemption and shall, subject to the conditions of
Section 2.2, as expeditiously as practicable, use its best efforts to effect
any such registration or qualification or filing for exemption of:
(i) such Registrable Securities specified by the holder or holders
giving the initial notice, and
(ii) any other Registrable Securities the holders of which (or
prospective holders thereof upon exercise) shall have requested the
Company in writing, within 20 days after the giving of such written
notice by the Company, to register or qualify or file for exemption,
with any governmental authority under any Federal or State law, and any listing
with any securities exchange, which may be required to permit the offering and
sale or other disposition of any such Registrable Securities which the holders
(or prospective holders thereof upon exercise) propose to make upon the
effectiveness of such registration, qualification, or filing for exemption, and
the Company shall keep effective such registration, qualification, or exemption
for at least 150 days; provided, that the Company shall only be required
initially to file a registration statement or qualification application no
later than 145 days after any final year end of the Company and at such
reasonable time as it has available for utilization therein the audited
consolidated financial statements of the Company as of the preceding fiscal
year end.
-3-
<PAGE> 6
(b) The managing underwriter or underwriters, if any, for any
offering of Registrable Securities to be registered pursuant to this Section
shall be selected by the holders of a majority of the shares of Registrable
Securities being registered and must be acceptable to the Company in its
reasonable judgment. If requested by the underwriters for any underwritten
offering of Registrable Securities registered pursuant to a registration
requested under Section 2.1, the Company shall enter into an underwriting
agreement with such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in agreements with respect to secondary
distributions, including, without limitation, indemnity and contribution as
described in Section 2.7. The Holders of Registrable Securities who have
requested that Registrable Securities held by them be distributed by such
underwriters shall be parties to such underwriting agreement and the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holders of Registrable Securities and the conditions
precedent to the obligations of such Holders of Registrable Securities under
such underwriting agreement shall be satisfactory to such Holders of
Registrable Securities.
(c) A registration requested pursuant to this Section 2.1 will not be
deemed to have been effected unless it has become effective and does not become
subject to any stop order.
2.2 Conditions to Required Registration. (a) The Company's
obligation to make any filing under Section 2.1 may be deferred by the Company
for an appropriate period (not to exceed 90 days) if the Company shall in good
faith determine that the registration, qualification, or filing for exemption
would have a material adverse affect on an offering or contemplated offering or
a material acquisition, merger, or other corporate transaction to which the
Company or any of its subsidiaries is, or is expected to be, a party or any
other pending material corporate development. The Company shall have no
obligation to register, qualify, or file for exemption with respect to shares
of Registrable Securities in accordance with this Section 2 if counsel to the
Company provides a written opinion to the Company and the requesting holders
that
-4-
<PAGE> 7
the shares of Registrable Securities requested to be registered may be sold in
one or more public transactions within a period of 90 days pursuant to Rule 144
under the Securities Act, or any successor rule thereto.
(b) In addition, the Company shall not be required to take any action
under Section 2.1:
(i) more than once during any period of 12 consecutive
calendar months;
(ii) for any holder of Registrable Securities, within 90
days after the effective date of a registration
referred to in Section 2.1 or Section 2.3 pursuant
to which such holder was afforded the opportunity
to register Registrable Securities under the
Securities Act but declined so to do;
(iii) within 90 days following the execution of an
underwriting agreement with respect to any
underwritten public offering of securities by the
Company if the managing underwriter with respect to
such proposed public offering by the Company
advises the Company and the holder or holders
requesting registration in writing that such
proposed public offering by such holder or holders
would impair the public offering by the Company;
provided that if such managing underwriter shall
have advised the Company that a portion of the
Registrable Securities as to which registration
shall have been requested could be registered, then
such shares shall be registered in proportion to
the total number of shares of Registrable
Securities which each holder shall have requested
to have registered hereunder;
(iv) if such action would require the Company to qualify
as a foreign corporation to do business or file a
general consent to service of process in any state
or jurisdiction in which it is not then
-5-
<PAGE> 8
qualified or as to which it has not previously
filed a general consent to service of process; or
(v) if filing the registration statement would require
a special audit.
2.3 Incidental Registration. The Company agrees that at any time it
proposes to register any of its securities, whether held by third parties or to
be issued by the Company, under the Securities Act on Form S-1 or any other
form of registration statement then available for the registration under the
Securities Act of securities of the Company (other than a registration
statement on Form S-4 or Form S-8 or any form of registration statement not
available for general registration of securities) it shall give written notice
to all holders of outstanding shares of Registrable Securities of its intention
so to do, and upon the written request of the holder of any such shares of
Registrable Securities, given within 20 days after receipt of any such notice
from the Company, the Company shall in each instance use its best efforts,
subject to the next sentence, to cause all Registrable Securities held by any
such requesting holder of Registrable Securities to be registered under the
Securities Act and registered or qualified under any State securities law, all
to the extent necessary to permit the offering and sale or other disposition
thereof in the manner stated in such request by the prospective seller of the
securities so registered. If the managing underwriter of a proposed public
offering by the Company shall advise the Company in writing that, in its
opinion, the distribution of some or all of the shares of Registrable
Securities requested to be included in the registration concurrently with the
securities to be offered by the Company would materially impair the
distribution of securities by the Company, then the Company need not include in
such registration any shares which such underwriter believes would cause such
impairment and each holder of Registrable Securities requesting registration
shall reduce, on a pro rata basis (or such other basis as shall be agreed upon
by the holders requesting registration), the amount of securities as to which
such holder requested registration in such manner that the aggregate number of
shares being registered for holders does not exceed that number recommended by
such underwriter. Any holder of shares of
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<PAGE> 9
Registrable Securities requesting registration of such Registrable Securities
shall in its request describe briefly the manner of any proposed transfer of
such Registrable Securities. Nothing in this Section 2.3 shall be deemed to
require the Company to proceed with any registration of its securities after
giving the notice herein provided.
2.4 Registration Procedures. In connection with the obligations of
the Company with respect to the Registration Statements contemplated by
Sections 2.1 and 2.3, the Company shall use its best efforts to effect each
such registration to permit the sale of the Registrable Securities covered
thereby in accordance with the intended method or methods of disposition
thereof, and pursuant thereto it will, as expeditiously as possible:
(i) at least five days prior to filing a Registration
Statement or any amendments or supplements thereto, furnish to the
Holders of the Registrable Securities covered by such Registration
Statement and the underwriter(s), if any, copies of all such documents
proposed to be filed, and the Company will consider any comments thereon
by any of the foregoing and will not file any Registration Statement or
amendment thereto to which any of the Holders of the Registrable
Securities covered by such Registration Statement or the managing
underwriter(s), if any, shall reasonably object in writing;
(ii) in accordance with (i) above, promptly thereafter
prepare and file with the SEC, any such Registration Statement, which
Registration Statement (a) shall be available for the sale of the
Registrable Securities covered thereby in accordance with the intended
method or methods of distribution by the selling Holders thereof and (b)
shall comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required by
the SEC to be filed therewith;
(iii) (a) prepare and file with the SEC such amendments
to such Registration Statement as may be reasonably requested by any
Holder of Registrable Securities or the managing
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<PAGE> 10
underwriter(s), if any, or as may be required by the Securities Act, the
Exchange Act, or by the rules, regulations, or instructions applicable
to the registration form utilized by the Company or as may otherwise be
necessary to keep such Registration Statement effective; (b) cause the
prospectus contained in any such Registration Statement to be amended or
supplemented as may be reasonably requested by any of the Holders or the
managing underwriter(s), if any, or as may be required by the Securities
Act, the Exchange Act, or by the rules, regulations, or instructions
applicable to the registration form utilized by the Company or as may
otherwise be necessary to keep such Registration Statement effective;
(c) cause such prospectus as so amended or supplemented to be filed
pursuant to Rule 424 (or any successor rule) under the Securities Act;
(d) respond as promptly as practicable to any comments received from the
SEC with respect to the Registration Statement or any amendment thereto;
and (e) comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof;
(iv) promptly notify the selling Holders of Registrable
Securities and the managing underwriter(s), if any, and if requested by
any such Person, confirm such advice in writing:
(a) of the filing of a prospectus or any
supplement to such prospectus and of the effectiveness of the
Registration Statement and/or any post-effective amendment,
(b) of any request by the SEC for amendments or
supplements to the Registration Statement or such prospectus or for
additional information,
(c) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, and
(d) of the receipt by the Company of any
notification with respect to the suspension of the
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<PAGE> 11
qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threat of any proceeding for such purpose.
(v) use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement or
any qualification referred to in paragraph (iv)(d) at the earliest
possible moment;
(vi) if requested by the managing underwriter(s) or any
of the Holders of Registrable Securities being sold in connection with
an underwritten offering, promptly incorporate in a supplement to a
prospectus or post-effective amendment to the Registration Statement
such information as the managing underwriter(s) or any such Holder of
the Registrable Securities being sold reasonably request to have
included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation, information
with respect to the amount of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such
underwriters, and any other terms of the underwritten (or best-efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such supplement to such
prospectus or post-effective amendment to the Registration Statement
promptly after being notified of the matters to be incorporated in such
supplement to such prospectus or post-effective amendment to the
Registration Statement;
(vii) promptly furnish to each selling Holder of
Registrable Securities and each managing underwriter, if any, at least
one signed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(viii) promptly deliver to each Holder of Registrable
Securities and the managing underwriter(s), if any, as many copies of
the Registration Statement, each prospectus, and
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<PAGE> 12
any amendment or supplement thereto (in each case including all
exhibits), as such Persons may reasonably request, and such other
documents as such selling Holder may reasonably request to facilitate
the disposition of its Registrable Securities; and, in connection
therewith, the Company confirms that it consents to the use of such
prospectus and any amendment or supplement thereto by each such Holder
of Registrable Securities and the underwriter(s), if any, in connection
with the offering and sale of the Registrable Securities covered by such
prospectus or amendment or supplement thereto;
(ix) prior to the time the Registration Statement is
declared effective by the SEC, register or qualify the Registrable
Securities covered thereby or cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in connection with
the registration or qualification of such Registrable Securities for
offer and sale under the securities or blue sky laws of such
jurisdictions as any selling Holder or managing underwriter(s), if any,
reasonably request(s), keep each such registration or qualification
effective during the period such Registration Statement is required to
be kept effective, and do any and all other acts or things necessary to
enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement;
(x) cooperate with the selling Holders of Registrable
Securities and the managing underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any legends restricting the
transfer thereof; and enable such Registrable Securities to be in such
denominations and registered in such names as the selling Holders or the
managing underwriters may reasonably request at least two business days
prior to any sale of Registrable Securities;
(xi) upon execution and delivery of such mutually
acceptable confidentiality agreements as the Company may reasonably
request, make available to any underwriter
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<PAGE> 13
participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by such underwriter,
all financial and other records, pertinent corporate documents, and
properties of the Company, and cause the Company's officers, directors,
and employees to supply all information requested by any such
underwriter, attorney, or accountant in connection with the
registration, at such time or times as the Person requesting such
information shall determine;
(xii) otherwise use its best efforts to comply with the
Securities Act, the Exchange Act, all applicable rules and regulations
of the SEC and all applicable state blue sky and other securities laws,
rules, and regulations, and make generally available to its security
holders, as soon as practicable after the end of its first fiscal
quarter in which the first anniversary of the effective date of such
Registration Statement occurs, an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act;
(xiii) cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc.; and
(xiv) enter into such customary agreements (including, if
such Registration Statement relates to an underwritten offering, an
underwriting agreement) and take all such other customary actions in
connection therewith to expedite or facilitate the disposition of such
Registrable Securities and, in such connection, if the registration is
in connection with an underwritten offering, (a) make such
representations and warranties to the underwriters in such form,
substance, and scope as are customarily made by issuers to underwriters
in underwritten offerings and confirm the same if and when requested;
(b) obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions in form, scope, and substance shall be satisfactory
to the underwriters) addressed to the underwriters covering the matters
of the type customarily covered in opinions requested in underwritten
offerings and such other matters as may be
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<PAGE> 14
requested by such underwriters; (c) obtain "comfort" letters and updates
thereof from the Company's accountants addressed to the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "comfort" letters by underwriters in connection
with underwritten offerings; (d) set forth in full in any underwriting
agreement entered into the indemnification provisions and procedures of
Section 2.7 hereof with respect to all parties to be indemnified
pursuant to said Section; and (e) deliver such documents and
certificates as may be requested by the underwriters to evidence
compliance with clause (a) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Company; the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required
hereunder.
2.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 that
the holders of Registrable Securities shall furnish to the Company such
information regarding them, the Registrable Securities held by them, and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall reasonably be required in connection with the
action to be taken by the Company. If a holder of Registrable Securities
refuses to provide the Company with any of such information on the grounds that
it is not necessary to include such information in the registration statement,
the Company may exclude such holder's Registrable Securities from the
registration statement, unless such holder provides the Company with an opinion
of counsel, such opinion to be reasonably satisfactory to the Company, to the
effect that such information need not be included in the registration
statement. The exclusion of such holder's Registrable Securities from a
registration shall not affect the registration of the other Registrable
Securities to be included in such registration, except that each other holder
proposing to include Registrable Securities in such registration may, if
Registrable Securities have been excluded from such registration on the advice
of a managing underwriter as provided in Section 2.2(d) or Section 2.3,
increase the number of shares of such holder's Registrable Securities being
registered by his or its pro
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<PAGE> 15
rata (or such other proportion as shall be agreed upon by holders wishing to
increase their number of shares being registered) amount of such excluded
Registrable Securities.
2.6 Expenses of Registration. All expenses incurred in connection
with all registrations pursuant to Section 2.1 or Section 2.3 (in each case
excluding underwriters' discounts and commissions applicable to the shares of
Registrable Securities being registered), including without limitation all
registration, filing, and qualification fees (except that the Company shall not
be obligated to pay any registration, filing, or qualification fees payable by
any holder to the extent that such payment is prohibited by the laws or
regulations of any state), printers' and accounting fees, and fees and
disbursements of counsel for the Company shall be paid by the Company. Each
holder of Registrable Securities shall pay the underwriters' discounts and
commissions applicable to the securities sold by such holder and fees and
disbursements of such holder and fees and disbursements of such holder's
counsel, if any. No holder of Registrable Securities shall have the right to
cause the Company to employ any expert or professional to act on behalf of the
Company. Notwithstanding the foregoing, if a registration is withdrawn at the
request of the holder requesting such registration and if such requesting
holder elects not have such registration counted as a registration requested
under Section 2.1, then the requesting holder (the "Withdrawing Holder") shall
promptly pay all of the reasonable registration expenses of such registration;
provided, however, that the Withdrawing Holder shall not be responsible for any
such registration expenses if the Company or any other holder of securities of
the Company do not concurrently withdraw the registration or the transfer of
securities of the Company proposed to be issued or held by them.
2.7 Indemnification. (a) In connection with any registration,
qualification, or filing for exemption of Registrable Securities under Section
2.1 or Section 2.3, the Company will agree to indemnify the holder of such
Registrable Securities, and each underwriter thereof, including each Person, if
any, who controls such holder of Registrable Securities or such underwriter
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages, and liabilities caused
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<PAGE> 16
by any untrue, or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or offering circular (and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus or caused by any omission, or alleged
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company shall have no liability insofar as such losses, claims,
damages, or liabilities are caused by any untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished in
writing to the Company by such holder, or any such underwriter, expressly for
use therein, and the Company and each officer, director, and controlling Person
of the Company shall be indemnified by such holder of the Registrable
Securities, or such underwriter, for all such losses, claims, damages, and
liabilities caused by any untrue, or alleged untrue, statement or omission, or
alleged omission, based upon information furnished in writing to the Company by
such holder or such underwriter, as the case may be, for any such use;
provided, further, that the liability of each such holder shall be limited to
the proceeds net of discounts and commissions received by such holder from the
sale of Registrable Securities covered by such registration statement.
(b) The indemnification provisions shall provide that, promptly upon
receipt by a party indemnified pursuant to this Section 2.6 of notice of the
commencement of any action against such indemnified party in respect of which
indemnity or reimbursement may be sought against any indemnifying party
pursuant to this Section 2.6, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying the party shall not relieve it of any
liability which it may have to any indemnified party otherwise than pursuant to
the indemnification agreement provided for by this Section 2.6. In case notice
of commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in and,
to the extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by such indemnifying party and satisfactory to such indemnified party in
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<PAGE> 17
its reasonable judgment. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel satisfactory to the indemnified
party in its reasonable judgment, or (iii) the indemnified party has been
advised by counsel that one or more legal defenses may be available to the
indemnified party which are different from those available to the indemnifying
party, in which case the indemnifying party shall not be entitled to assume the
defense of such action on behalf of the indemnified party notwithstanding its
obligation to bear the fees and expenses of such counsel. No indemnifying
party shall be liable for any settlement entered into without its consent.
(c) (i) If the indemnification provided for in this Section 2.7 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities, or expenses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact, has been made by, or related to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information, and opportunity to correct
or prevent such action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities, and expenses referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
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<PAGE> 18
(ii) The parties hereto agree that it would not be just
and equitable if contribution pursuant to this subsection 2.7(c) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2.8 Reports Under the Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities Act
and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration,
the Company agrees to:
(a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(b) furnish to any Holder so long as such Holder owns any of the
Registrable Securities forthwith upon written request a written statement by
the Company to the effect that it has complied with the reporting requirements
of the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC permitting the selling of any such securities
without registration, provided that nothing herein shall impose upon the
Company any obligation to prepare or file any reports under the Securities Act,
the Exchange Act, or any other federal securities law or regulation if, by
virtue of the number of Persons owning its outstanding securities or any other
applicable circumstances, the Company is not so required to prepare or file any
such reports or other documents.
2.9 Lockup Agreement. In consideration of the performance by the
Company of its obligations under this Section 2, each holder of Registrable
Securities agrees in connection with a registration of the Company's securities
that, upon the written
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<PAGE> 19
request of the Company or the underwriters managing any underwritten offering
of the Company's securities, such holder will not sell, make any short sale of,
lend, grant any option for the purchase of, or otherwise dispose of, any
Warrants or shares of Common Stock (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 120
days) from the effective date of such registration as the Company or the
underwriters may specify.
2.10 Preparation; Investigation. In connection with the preparation
and filing of each registration statement registering Registrable Securities
under the Securities Act, the Company will give the holders of any such
Registrable Securities or to whom any such Registrable Securities are issuable
and their counsel the opportunity to participate in the preparation of such
registration statement, each prospectus contained therein or filed with the
Securities and Exchange Commission, and each amendment thereof or supplement
thereto, and will give each of them reasonable access to its books and records
and the officers of the Company and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of
such holders' counsel, to conduct an investigation within the meaning of the
Securities Act.
SECTION 3. MISCELLANEOUS.
3.1 Relationships and Rights of the Holders. Notwithstanding that
certain Rights of each holder of Registrable Securities herein may be affected
by similar Rights of other holders, the holders shall, in respect of the
ownership of the Registrable Securities, not be related as, or deemed to be, a
partnership, joint venture, or other "group" for the purpose of acquiring,
holding, voting, or disposing of capital stock of the Company.
3.2 Headings. The headings, captions, and arrangements used herein
are, unless specified otherwise, for convenience only and shall not be deemed
to limit, amplify, or modify the terms hereof, nor affect the meaning thereof.
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<PAGE> 20
3.3 Communications. Unless otherwise specifically provided, whenever
this Agreement requires or permits any consent, approval, notice, request, or
demand from one party to another, such communication must be in writing (which
may be tested cable, tested telefacsimile, or tested telex) to be effective and
shall be deemed to have been given on the day actually delivered, cabled, sent
by telefacsimile, or telexed, or, if sent by nationally recognized delivery
service providing for overnight delivery, on the next commercial banking
business day in the State of Texas after it is delivered to such delivery
service with all delivery charges prepaid, or, if mailed, on the third
commercial banking business day in the State of Texas after it is enclosed in
an envelope, addressed to the party to be notified at the address stated below,
properly stamped, sealed, and deposited in the appropriate official postal
service. For purposes hereof, until changed by written notice pursuant hereto,
the Company, Emerson and Emerson (HK) are set forth below:
If to the Company:
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
Attn: Corporate Secretary
If to Emerson or Emerson (HK):
c/o Emerson Radio Corp.
Nine Entin Road
Parsippany, New Jersey 07054-0430
3.4 Governing Law. This Agreement is being executed and delivered
and is intended to be performed in the State of Texas, and the substantive laws
of such state and of the United States of America shall govern the rights and
duties of the parties hereto and the validity, construction, enforcement, and
interpretation hereof.
3.5 Invalid Provisions. If any provision of this Agreement is deemed
or held to be illegal, invalid, or unenforceable, this Agreement shall be
considered divisible and inoperative as to such
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<PAGE> 21
provision to the extent it is deemed to be illegal, invalid, or unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any provision of this Agreement is deemed or held to
be illegal, invalid, or unenforceable, there shall be added hereto
automatically a provision as similar as possible to such illegal, invalid, or
unenforceable provision while still being legal, valid, and enforceable.
Further, should any provision contained in this Agreement ever be reformed or
rewritten by any judicial body of competent jurisdiction, such provision as so
reformed or rewritten shall be binding upon all parties hereto.
3.6 Successors and Assigns. All of the terms and provisions of this
Agreement shall inure to the benefit of an be binding upon the parties hereto
and their respective successors and assigns.
3.7 Amendments. This Agreement may be amended only by an instrument
in writing executed by the holders of a majority of then outstanding
Registrable Securities and by the Company (or their respective successors or
assigns); provided, however, that no amendment providing one or more holders of
Registrable Securities with priority over other holders of Registrable
Securities in registering Registrable Securities, or providing for the
elimination of registration rights as to any holders, shall be made without the
consent of all holders adversely affected.
3.8 Multiple Counterparts. This Agreement may be executed in one or
more identical counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. This Agreement shall become effective when
counterparts hereof shall have been executed and delivered to the Company by
all of the holders of Registrable Securities and to all of the holders of
Registrable Securities by the Company.
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<PAGE> 22
EXECUTED as of the day and year first mentioned in this agreement.
SPORT SUPPLY GROUP, INC.
By:
---------------------------------
Name:
Title:
EMERSON RADIO CORP.
By:
---------------------------------
Name:
Title:
EMERSON RADIO (HONG KONG) LIMITED
By:
---------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4(c)
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT ("AGREEMENT") is executed on November 27,
1996 and is intended to be effective as of the "EFFECTIVE DATE" (as that term
is hereafter defined), by and among SPORT SUPPLY GROUP, INC., a Delaware
corporation ("BORROWER"), SPORT SUPPLY GROUP INTERNATIONAL HOLDINGS, INC., a
Delaware corporation ("GUARANTOR"), and LASALLE BUSINESS CREDIT, INC., formerly
known as StanChart Business Credit, Inc., a Delaware corporation ("LENDER").
The BORROWER and the GUARANTOR are sometimes collectively referred to herein as
the "OBLIGORS."
RECITALS
Pursuant to the Amended and Restated Loan and Security Agreement
between the BORROWER and the LENDER dated March 23, 1995, as modified by (i)
Amendment Number 1 to Amended and Restated Loan and Security Agreement dated
December 20, 1995, (ii) a letter agreement dated February 2, 1996, (iii)
Amendment Number 2 to Amended and Restated Loan and Security Agreement dated
March 12, 1996, and (iv) Amendment Number 3 to Amended and Restated Loan and
Security Agreement dated September 19, 1996 (collectively, "LOAN AGREEMENT"),
the LENDER extended various credit accommodations to the BORROWER, including:
(a) revolving loans in the maximum aggregate principal amount outstanding at
any one time of Thirty-Seven Million Five Hundred Thousand Dollars
($37,500,000.00) (collectively, "REVOLVING LOANS"); (b) a term loan in the
original principal amount of Two Million Five Hundred Thousand Dollars
($2,500,00.00) ("TERM LOAN"); and (c) additional term loans in the aggregate
principal amount of up to Ten Million Dollars ($10,000,000.00) (collectively,
"ADDITIONAL LOANS"). The REVOLVING LOANS, the TERM LOAN and the ADDITIONAL
LOANS are hereafter referred to collectively as the "LOANS."
Pursuant to a Guaranty Agreement dated September 16, 1994, the
GUARANTOR has guaranteed the payment and performance of all of the BORROWER'S
obligations to the LENDER, including without limitation the BORROWER'S
obligations under the LOAN AGREEMENT. Unless otherwise defined herein,
capitalized terms used in this AGREEMENT shall have the meanings given to such
terms in the LOAN AGREEMENT.
The BORROWER'S obligations under and in connection with the LOANS are
secured by the liens, assignments, pledges and security
<PAGE> 2
interests described in the LOAN AGREEMENT and in various other documents and
instruments (collectively with the LOAN AGREEMENT and the GUARANTY, the
"ORIGINAL LOAN DOCUMENTS"). This AGREEMENT, the ORIGINAL LOAN DOCUMENTS as
amended by or pursuant to this AGREEMENT, and all documents made pursuant to
this AGREEMENT are hereafter referred to collectively as the "LOAN DOCUMENTS."
Pursuant to a letter agreement dated June 21, 1996, LaSalle agreed to
waive certain defaults arising under paragraphs 11.3 and 11.4 of the LOAN
AGREEMENT for the Fiscal Quarter which ended February 2, 1996 as a result of
the BORROWER'S failure to equal or exceed the minimum Debt Service Coverage
Ratio and Interest Coverage Ratio required thereunder, and under paragraphs
11.1, 11.2 and 11.4 of the LOAN AGREEMENT for the Fiscal Quarter which ended
May 3, 1996 as a result of the BORROWER'S failure to equal or exceed the
minimum Tangible Net Worth, EBITDA and Interest Coverage Ratio required
thereunder.
The BORROWER is presently in default under the LOAN AGREEMENT as a
result of its failure to equal or exceed the minimum EBITDA required under
paragraph 11.2 of the LOAN AGREEMENT for the Fiscal Quarter which ended August
2, 1996. The OBLIGORS have asked the LENDER to (i) waive the aforesaid
default, (ii) consent to a transaction in which the Borrower is to receive a
capital infusion from Emerson Radio Corp. ("EMERSON") and (iii) modify the
terms and provisions of the ORIGINAL LOAN DOCUMENTS in certain additional
respects. The LENDER is willing to do so only if the OBLIGORS execute and
deliver this AGREEMENT and the other documents required by this AGREEMENT, and
fully perform and satisfy all of the covenants, conditions and terms of this
AGREEMENT and such other documents.
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Recitals. The Recitals set forth above are hereby
incorporated into this AGREEMENT by reference, and the OBLIGORS acknowledge
that the Recitals are accurate in all respects.
2. Acknowledgment Of Obligations And Default. The OBLIGORS
acknowledge: (a) that the ORIGINAL LOAN DOCUMENTS are the valid and binding
obligations of the OBLIGORS, as indicated, and
2
<PAGE> 3
are fully enforceable in accordance with their stated terms, and (b) that the
obligations of the OBLIGORS under the ORIGINAL LOAN DOCUMENTS are not subject
to any set-off, defense or counterclaim. The OBLIGORS further acknowledge that
they have defaulted under the ORIGINAL LOAN DOCUMENTS as a result of the
BORROWER'S failure to equal or exceed the minimum EBITDA required under
paragraph 11.2 of the LOAN AGREEMENT for the Fiscal Quarter which ended August
2, 1996 ("DEFAULT").
3. Acknowledgment Of Outstanding Balances Of The Loans. The
OBLIGORS acknowledge and agree that the outstanding principal and interest
balances of the LOANS are as set forth in this Section:
3.1 Balance Of Revolving Loans. The outstanding
principal and interest balances of the REVOLVING LOANS as of November 26, 1996
are as follows:
Principal: $ 18,965,607.54
Interest (through 11/26/96): $ 130,754.85
TOTAL AS OF 11/26/96: $ 19,096,362.39
3.2 Balance Of The Term Loan. The outstanding principal
and interest balances of the TERM LOAN as of November 26, 1996 are as follows:
Principal: $ 2,000,000.00
Interest (through 11/26/96): $ 4,375.00
TOTAL AS OF 11/26/96: $ 2,004,375.00
3.3 Balance Of The Additional Loans. The outstanding
principal and interest balances of the ADDITIONAL LOANS as of November 26, 1996
are as follows:
Principal: $ 628,125.85
Interest (through 11/26/96): $ 1,380.68
TOTAL AS OF 11/26/96: $ 629,506.53
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<PAGE> 4
3.4 Letters Of Credit. The OBLIGORS acknowledge and
agree that they also are obligated under the ORIGINAL LOAN DOCUMENTS for the
reimbursement of any sums drawn under any Letter of Credit issued by LaSalle
National Bank in accordance with the terms of the ORIGINAL LOAN DOCUMENTS.
3.5 Costs And Expenses. In addition, the OBLIGORS
acknowledge and agree that, under the terms of the ORIGINAL LOAN DOCUMENTS, the
OBLIGORS are obligated to pay all costs and expenses incurred by the LENDER in
connection with the ORIGINAL LOAN DOCUMENTS, including, without limitation: (a)
all reasonable attorneys' fees and expenses incurred by the LENDER in the
enforcement of its rights and remedies under the ORIGINAL LOAN DOCUMENTS, (b)
all reasonable attorneys' fees and expenses incurred by the LENDER in
connection with the preparation and administration of this AGREEMENT and the
documents to be executed in connection herewith, and (c) all reasonable costs
and expenses incurred by the LENDER in connection with any examination or
inspection of the collateral for the LOANS, including, without limitation, the
books and records of the BORROWER. All such costs and expenses shall be paid
by the OBLIGORS upon demand made by the LENDER.
4. Representations And Warranties. To induce the LENDER to enter
into this AGREEMENT and to provide the BORROWER and the GUARANTOR with the
accommodations described herein, the OBLIGORS make the representations and
warranties set forth below and acknowledge the LENDER'S justifiable right to
rely upon these representations and warranties.
4.1 No Default. Except as otherwise acknowledged in
Section 2 above, to the best of the OBLIGORS' knowledge, information and
belief, no OBLIGOR is in default under any material contract, agreement or
instrument to which any OBLIGOR is a party or under which any OBLIGOR is bound,
and the making and performance of this AGREEMENT will not immediately, or with
the passage of time, the giving of notice, or both: (a) violate any laws or
result in a default under any contract, agreement, or instrument to which any
OBLIGOR is a party or by which any OBLIGOR is bound, which violation or default
could have a material adverse effect on the business, financial condition or
assets of any OBLIGOR; or (b) result in the creation or imposition of any
security interest in, or lien or encumbrance upon, any of the assets of any
OBLIGOR, except for Permitted Liens.
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4.2 No Litigation. To the best of the OBLIGORS'
knowledge, there is no action, suit, investigation, or proceeding pending or
threatened against any OBLIGOR, or the assets of any OBLIGOR, except as
specifically disclosed in a writing annexed hereto as Schedule 4.2. In the
event that, subsequent to the execution and delivery of this AGREEMENT, any
OBLIGOR receives notice of, or otherwise acquires knowledge of, any such suit,
investigation, or proceeding, the OBLIGORS shall promptly disclose the same to
the LENDER in writing.
4.3 Primary Place Of Business. The primary place of
business of the BORROWER is 1901 Diplomat Drive, Farmers Branch, Texas 75234.
4.4 Taxes. The OBLIGORS have each filed with the United
States Internal Revenue Service, the State of Texas and all other governmental
agencies or instrumentalities having authority to collect taxes (collectively,
"TAXING AUTHORITIES") all tax returns, schedules, forms or other documents
which, under applicable law, are required to have been filed as of the date
hereof, and with respect to which the failure to file could have a material
adverse effect on the business, financial condition or assets of any OBLIGOR.
To the best of the OBLIGORS' knowledge, information and belief, except for
sales taxes which may be due in connection with an ongoing audit in the State
of Florida, the OBLIGORS have fully paid all taxes which, under applicable law,
are required to have been paid as of the date hereof, including, without
limitation, all income taxes, withholding taxes, real property taxes, personal
property taxes and sales taxes. No property of any of the OBLIGORS is subject
to any lien for any tax, except liens for taxes which are not yet due and
payable.
4.5 Payment Of Charges And Assessments. The OBLIGORS
have fully paid all utility charges, assessments and other charges due to any
person under any document or agreement which, if unpaid, give rise to a lien
(other than a Permitted Lien) on or the right of any other person to possession
of any property of any OBLIGOR, including, without limitation, the collateral
for the BORROWER'S obligations under the LOAN DOCUMENTS.
4.6 Payment Of Rent; Reporting. The OBLIGORS have each
fully paid all payments of rent or other charges due under
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any lease of real or personal property under which any OBLIGOR is a lessee,
except where a failure to pay would not, individually or in the aggregate, have
a material adverse effect (as determined by the LENDER in its sole reasonable
discretion) on the business, financial condition or assets of any OBLIGOR. In
the event that the OBLIGOR is required, under any lease, to provide financial
statements or other information or records to any person, the OBLIGOR has fully
complied with such requirement.
4.7 No Material Adverse Change. Except as otherwise
disclosed in the Securities Purchase Agreement between the BORROWER and
EMERSON, and the schedules attached thereto, or in a filing made with the
Securities and Exchange Commission, a true and complete copy of which has also
been forwarded to the LENDER: (a) no material adverse change has occurred in
the financial condition of any OBLIGOR as indicated on the financial statements
of such OBLIGOR most recently submitted to and reviewed by the LENDER, and (b)
no event has occurred or circumstance exists which may cause such a material
adverse change.
4.8 Organization; Good Standing; Authorization. Each
OBLIGOR: (a) has the corporate power to enter into this AGREEMENT and all
other LOAN DOCUMENTS required to be executed by such OBLIGOR, and has the
corporate power to perform all of its obligations hereunder and thereunder; (b)
has duly authorized the entry into and performance of this AGREEMENT and all
other LOAN DOCUMENTS required to be executed by such OBLIGOR; and (c) is in
good standing in the state of such OBLIGOR'S incorporation and in all other
states in which such OBLIGOR transacts business, except where a failure to be
in good standing will not have a material adverse effect on the business,
financial condition or assets of any OBLIGOR.
4.9 Understanding Of Agreement. Each OBLIGOR
acknowledges that it has read this AGREEMENT, understand its contents, and has
had the advise of counsel before executing and delivering this AGREEMENT.
5. Modification Of Loan Agreement. The LOAN AGREEMENT shall be
amended and modified in accordance with the terms and provisions of the
Amendment Number 4 to Amended and Restated Loan and Security Agreement of even
date herewith between the LENDER and the BORROWER ("AMENDMENT NUMBER 4").
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6. Reduction Of Maximum Revolving Credit Facility; Amendment And
Restatement Of Revolving Loan Note; No Overdrafts. The maximum aggregate
principal amount which may be outstanding at any one time as REVOLVING LOANS is
hereby reduced from Thirty-Seven Million Five Hundred Thousand Dollars
($37,500,000.00) to Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000.00). As reduced, the REVOLVING LOANS shall be evidenced by, and
shall be repaid in accordance with, the terms and provisions of the Fourth
Amended and Restated Revolving Loan Note of even date herewith from the
BORROWER to the order of the LENDER in the maximum principal amount outstanding
at any one time of Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000.00), the terms and provisions of which shall amend and restate, in
their entirety, the terms and provisions of the Revolving Loan Note.
Furthermore, the OBLIGORS acknowledge and agree that the LENDER shall have no
obligation to pay any check or other item presented for payment on any account
of any OBLIGOR with the LENDER, unless there are sufficient available funds in
such account to fully pay such check or other item. Funds in any account which
is subject to a restriction on withdrawal shall not be deemed available for
purposes of the preceding sentence unless the LENDER, in writing, specifically
permits such funds to be used to pay checks or other items.
7. Termination Of Additional Loans. The OBLIGORS acknowledge and
agree that the ADDITIONAL LOANS have been terminated, and that said termination
was valid and proper. The LENDER shall not be obligated or required to make
any further advances under the ADDITIONAL LOANS or the LOAN DOCUMENTS that were
executed in connection with the ADDITIONAL LOANS, provided that such
termination shall not affect BORROWER'S obligation to pay all sums due and
owing to the LENDER in connection with sums previously advanced under the
ADDITIONAL LOANS, in accordance with the terms of the ORIGINAL LOAN DOCUMENTS
as modified in accordance with the terms of this AGREEMENT and the documents to
be executed pursuant to this AGREEMENT. The OBLIGORS also acknowledge and
agree that the termination of the ADDITIONAL LOANS shall not create any
defense, offset or counterclaim in favor of the BORROWER or the GUARANTOR with
respect to their respective obligations under the LOAN DOCUMENTS.
8. Consolidation And Curtailment Of Term Loan And Additional
Loans. The TERM LOAN and the ADDITIONAL LOANS are hereby consolidated, such
that they shall hereafter constitute a
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single indebtedness, and the BORROWER shall pay on the date of this AGREEMENT a
principal curtailment in the amount necessary to reduce the outstanding
principal balance of such consolidated indebtedness to Two Million Five Hundred
Thousand Dollars ($2,500,000.00) ("CONSOLIDATED TERM LOAN"). The CONSOLIDATED
TERM LOAN shall be evidenced by, and shall be repaid in accordance with, the
terms and provisions of the Consolidated, Amended and Restated Term Loan Note
of even date herewith from the BORROWER to the order of the LENDER in the
original principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00), the terms and provisions of which shall amend and restate, in
their entirety, the terms and provisions of the Term Loan Note and the
Additional Loan Notes.
9. Waiver Of Default; Reinstatement Of Pre-Default Interest
Rates. Subject to the satisfaction by the OBLIGORS of the conditions precedent
set forth in Section 17 below, the LENDER agrees to waive the DEFAULT, and to
reinstate the LOANS to good standing, such that they shall accrue interest at
the respective pre-default interest rates provided for in the LOAN AGREEMENT,
as modified by AMENDMENT NUMBER 4. The contrary notwithstanding, the waiver
granted herein shall not constitute a waiver of any other violation or default
which may exist under the LOAN AGREEMENT or under any other LOAN DOCUMENT,
whether or not known to the LENDER, nor shall it constitute a waiver of any
future violation or default occurring under the LOAN AGREEMENT or any other
LOAN DOCUMENT, including without limitation any future default under paragraph
11.2 of the LOAN AGREEMENT, as modified by AMENDMENT NUMBER 4.
10. Guaranty. The GUARANTOR hereby ratifies and affirms its
obligations under the GUARANTY, and hereby confirms and acknowledges that it is
liable for the payment and performance of the BORROWER'S obligations under the
LOAN DOCUMENTS, in accordance with the terms and conditions set forth in the
GUARANTY.
11. Security. The BORROWER'S obligations under the LOAN
DOCUMENTS, as modified hereby, shall continue to be secured by the liens,
assignments, and security interests provided in the ORIGINAL LOAN DOCUMENTS.
12. Additional Information And Documents. The BORROWER shall
furnish to the LENDER, within thirty (30) calendar days after the date that
this AGREEMENT is executed, a current
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Perfection Certificate, setting forth the various assets owned by the BORROWER,
and shall also deliver to the LENDER such additional items and information as
may be requested by the LENDER in its sole but reasonable discretion with
respect to the BORROWER and its assets, including without limitation copies of
all material leases not previously furnished to the LENDER. Upon demand by the
LENDER, the BORROWER shall execute and deliver to the LENDER such documents and
agreements, including without limitation financing statements, mortgages, deeds
of trust, assignments of trademarks and patents, and landlord's agreements, as
may be necessary in the sole but reasonable discretion of the LENDER or its
counsel, to ensure that the LENDER has a perfected first priority lien and
security interest in and to all of the BORROWER'S assets, subject only to
Permitted Liens, including without limitation an amendment to the LENDER'S
existing assignment of trademarks in order to assign to the LENDER any
additional trademarks and trademark applications (as well as any rights with
respect to any trademarks and trademark applications) that the BORROWER has
obtained or acquired.
13. Emerson Transaction. The OBLIGORS shall provide the LENDER
with copies of all documents which are prepared in connection with the
transaction pursuant to which it is to receive a capital infusion from EMERSON,
and shall keep the LENDER fully informed regarding their progress in connection
therewith. The LENDER consents to the entry by the BORROWER into the
transaction with EMERSON upon the terms represented to the LENDER by the
BORROWER and EMERSON, and the LENDER specifically consents to the Change of
Control which will occur in connection with the EMERSON transaction, and to the
extension to the BORROWER by EMERSON of a foreign sourcing line of credit in
the amount of Two Million Dollars ($2,000,000.00). Notwithstanding anything to
the contrary contained in this AGREEMENT, the agreements of the LENDER to waive
the DEFAULT and modify the ORIGINAL LOAN DOCUMENTS as described in this
AGREEMENT shall not be effective until (i) closing by the BORROWER upon the
transaction in which the BORROWER is to receive the capital infusion, pursuant
to documents approved by the LENDER, (ii) execution and delivery by the
OBLIGORS of any additional documents that the LENDER or its counsel reasonably
deem necessary or appropriate in connection with such transaction, and (iii)
receipt by the BORROWER of the capital infusion.
14. Inspections Of Books And Records. Without limiting any rights
of the LENDER under the ORIGINAL LOAN DOCUMENTS, the
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OBLIGORS shall, from time to time, permit employees or other representatives of
the LENDER to enter the business premises of the BORROWER or any other place
where records concerning the collateral and business of the BORROWER are kept,
during normal business hours of the BORROWER or at any other reasonable time,
for the purpose of inspecting and photocopying any or all of such records. All
costs and expenses of such inspections shall be paid by the OBLIGORS
immediately upon the demand of the LENDER.
15. Financial And Other Information. In addition to any
information which the OBLIGORS are required to provide to the LENDER under the
ORIGINAL LOAN DOCUMENTS, the OBLIGORS shall, from time to time upon request by
the LENDER, provide the LENDER with all financial information the LENDER may
reasonably request, in a form that is reasonably acceptable to the LENDER and
containing such information and detail as the LENDER may reasonably require.
All information and reports shall be in form and substance reasonably
satisfactory to the LENDER. All information, statements and reports shall be
provided at the expense of the OBLIGORS.
16. Additional Events Of Default. In addition to all events of
default provided under the ORIGINAL LOAN DOCUMENTS, the following described
events shall also constitute events of default ("EVENTS OF DEFAULT") under the
LOAN DOCUMENTS:
16.1 Breach Of Representation Or Warranty. The failure of
any information represented or warranted by the BORROWER or the GUARANTOR
pursuant to this AGREEMENT or any of the other LOAN DOCUMENTS to be true and
correct in all material respects.
16.2 Breach Of Covenant. The failure by the BORROWER or
the GUARANTOR to perform or observe any covenant contained in this AGREEMENT in
all material respects.
16.3 Default Under Another Loan Document. The occurrence
of any event or the existence of any circumstance which, under the terms of any
other LOAN DOCUMENT, constitutes an event of default thereunder.
17. Effective Date; Conditions Precedent To Waiver And
Modification. The LENDER'S agreement to waive the DEFAULT and to modify the
terms of the ORIGINAL LOAN DOCUMENTS as provided in
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this AGREEMENT shall not be effective or enforceable until that date (the
"EFFECTIVE DATE"), upon which the BORROWER has attained the full satisfaction
of the conditions set forth below in this Section, and the LENDER shall have no
obligation to waive the DEFAULT or to modify the terms of the ORIGINAL LOAN
DOCUMENTS unless all of such conditions are fully satisfied on or before
December 18, 1996:
17.1 Execution And Delivery Of Documents. This AGREEMENT,
AMENDMENT NUMBER 4, the Fourth Amended and Restated Revolving Loan Note, the
Consolidated, Amended and Restated Term Loan Note, to be delivered prior to
closing pursuant to this AGREEMENT, and all documents required to be executed
and delivered in connection herewith have been executed, acknowledged where
indicated, and delivered by the OBLIGORS.
17.2 Receipt Of Capital Infusion. The BORROWER shall have
completed the transaction pursuant to which it is to receive a capital
infusion, in accordance with the requirements set forth herein, and the
BORROWER shall have received the proceeds of the capital infusion.
18. Notices. Any notice required or permitted by or in connection
with this AGREEMENT or the other LOAN DOCUMENTS (without implying any
requirement that the LENDER give any notice of default or of exercise of any of
its rights or remedies) shall be in writing and shall be made in accordance
with the procedures set forth in the LOAN AGREEMENT for the giving of notices
thereunder.
19. Miscellaneous.
19.1 Incorporation; Limited Modification. The terms and
conditions of the other LOAN DOCUMENTS are incorporated herein by reference and
made a part hereof as if fully set forth herein. Except as specifically
modified by or pursuant to this AGREEMENT, all terms and conditions of the
ORIGINAL LOAN DOCUMENTS remain unchanged, in full force and effect, and are
hereby ratified and confirmed in all respects. In the event of any
inconsistencies between the terms and conditions of this AGREEMENT and any of
the terms and conditions of the other LOAN DOCUMENTS, the terms and conditions
contained in this AGREEMENT shall control.
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19.2 Integration. This AGREEMENT and the other LOAN
DOCUMENTS constitute the entire agreement between the LENDER, the BORROWER and
the GUARANTOR with respect to the subject matter hereof, and any term or
condition not expressed in this AGREEMENT or the other LOAN DOCUMENTS does not
constitute a part of the agreement of the LENDER, the BORROWER and the
GUARANTOR with respect to such subject matter.
19.3 No Novation. This AGREEMENT shall not cause a
novation of any of the obligations of the BORROWER or the GUARANTOR under the
ORIGINAL LOAN DOCUMENTS, nor shall it extinguish, terminate or impair the
BORROWER'S and the GUARANTOR'S respective obligations under the ORIGINAL LOAN
DOCUMENTS. In addition, this AGREEMENT shall not release, affect or impair the
priority of any security interests and liens held by the LENDER against any
assets of the BORROWER or the GUARANTOR.
19.4 Severability. If any provision or part of any
provision of this AGREEMENT shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this AGREEMENT and this AGREEMENT shall
be construed as if such invalid, illegal or unenforceable provision or part
thereof had never been contained herein, but only to the extent of its
invalidity, illegality, or unenforceability.
19.5 Number, Gender, And Captions. As used herein, the
singular shall include the plural and the plural may refer to only the
singular. The use of any gender shall be applicable to all genders. The
captions contained herein are for purposes of convenience only and are not a
part of this Agreement.
19.6 Further Assurances. As part of this AGREEMENT, and
in consideration for the agreements of the LENDER as set forth therein, the
OBLIGORS each agree to execute and deliver to the LENDER such other and further
documents as may, from time to time, in the sole reasonable opinion of the
LENDER and the LENDER's counsel, be reasonably necessary or appropriate to
carry out the terms and conditions of this AGREEMENT and the LOAN DOCUMENTS.
If any OBLIGOR fails to execute any such documents within ten (10) days of
being requested to do so by the LENDER, such OBLIGOR hereby appoints the LENDER
or any officer of the LENDER as the attorney in fact for such OBLIGOR for
purposes of executing such documents in the name, place and stead of such
OBLIGOR, which
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power of attorney shall be considered as coupled with an interest and
irrevocable.
19.7 Waivers. No failure or delay by the LENDER in the
exercise or enforcement of any of its rights under any LOAN DOCUMENT shall be a
waiver of such right or remedy, nor shall a single or partial exercise or
enforcement thereof preclude any other or further exercise or enforcement
thereof or the exercise or enforcement of any other right or remedy. The
LENDER may at any time or from time to time waive all or any rights under this
AGREEMENT or the other LOAN DOCUMENTS, but any such waiver must be specific and
in writing and no such waiver shall constitute, unless specifically so
expressed by the LENDER in writing, a future waiver of performance or exact
performance by the OBLIGORS. No notice to or demand upon any OBLIGOR in any
instance shall entitle any OBLIGOR to any other or further notice or demand in
the same, similar or other circumstance.
19.8 Choice Of Law. The laws of the State of Maryland
(excluding, however, conflict of law principles) shall govern and be applied to
determine all issues relating to this AGREEMENT and the rights and obligations
of the parties hereto, including the validity, construction, interpretation,
and enforceability of this AGREEMENT and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the execution of this AGREEMENT or which occurred or were to occur as a direct
or indirect result of this AGREEMENT having been executed.
19.9 Consent To Jurisdiction; Agreement As To Venue. Each
of the OBLIGORS irrevocably consents to the non-exclusive jurisdiction of the
courts of the State of Maryland and of the United States District Court For The
District Of Maryland, if a basis for federal jurisdiction exists. Each of the
OBLIGORS agrees that venue shall be proper in any circuit court of the State of
Maryland selected by the LENDER or in the United States District Court For The
District Of Maryland if a basis for federal jurisdiction exists and waives any
right to object to the maintenance of a suit in any of the state or federal
courts of the State of Maryland on the basis of improper venue or of
inconvenience of forum.
19.10 Actions Against Lender. Any action brought by any
OBLIGOR against the LENDER which is based, directly or
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indirectly, on this AGREEMENT or any matter in or related to this AGREEMENT,
including but not limited to the making of the credit accommodations to the
BORROWER or the administration or collection thereof, shall be brought only in
the courts of the State of Maryland. No OBLIGOR may file a counterclaim
against the LENDER in a suit brought by the LENDER against any OBLIGOR in a
state other than the State of Maryland unless under the rules of procedure of
the court in which the LENDER brought the action the counterclaim is mandatory,
and not merely permissive, and will be considered waived unless filed as a
counterclaim in the action instituted by the LENDER. Each of the OBLIGORS
agrees that any forum other than the State of Maryland is an inconvenient forum
and that a suit brought by any OBLIGOR against the LENDER in a court of any
state other than the State of Maryland should be forthwith dismissed or
transferred to a court located in the State of Maryland.
19.11 Binding Effect; No Oral Modification. This AGREEMENT
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives, successors and assigns. This AGREEMENT
may not be altered, modified or amended unless such alteration, modification or
amendment is in writing and executed by the LENDER.
19.12 Time. Time is of the essence with respect to all of
the obligations of the OBLIGORS under this AGREEMENT and the other LOAN
DOCUMENTS.
19.13 Costs Of Transaction. All costs of the transactions
contemplated by this AGREEMENT, including, without limitation all of attorneys'
fees and expenses incurred by the LENDER, and all appraisal fees and recording
costs, shall be paid by the OBLIGORS, regardless of whether such costs are
incurred before or after the execution and delivery of this AGREEMENT. The
OBLIGORS' liability for the payment of such costs is joint and several.
19.14 Obligations Unconditional. The OBLIGORS' respective
obligations under the LOAN DOCUMENTS shall be absolute and unconditional, and
shall be independent of any defense or rights of set-off, recoupment or
counterclaim which any of the OBLIGORS might have against the LENDER, and the
OBLIGORS each agree that all payments required under the LOAN DOCUMENTS shall
be made absolutely, free of any deductions and without abatement,
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diminution or set-off, and until such time as all sums outstanding under the
LOAN DOCUMENTS have been fully paid and all other obligations of the OBLIGORS
under the LOAN DOCUMENTS fully performed: (a) no payment provided for herein
shall be suspended or discontinued; (b) the OBLIGORS shall fully perform and
observe all of their respective covenants and agreements contained in the LOAN
DOCUMENTS, including without limitation, the covenants and agreements to make
all payments required under the LOAN DOCUMENTS; and (c) no OBLIGOR shall
attempt to terminate any of the LOAN DOCUMENTS.
20. Waiver Of Jury Trial. The parties hereto agree that any suit,
action, or proceeding, whether claim or counterclaim, brought or instituted by
any party to this AGREEMENT, or any of their successors or assigns, on or with
respect to this AGREEMENT or any other LOAN DOCUMENTS or which in any way
relates, directly or indirectly, to the obligations of any of the OBLIGORS to
the LENDER under the LOAN DOCUMENTS, or the dealings of the parties with
respect thereto, shall be tried only by a court and not by a jury. THE PARTIES
EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDINGS.
The parties acknowledge and agree that this provision is a specific and
material aspect of the agreement between the parties and that the parties would
not enter into this AGREEMENT if this provision, or any other provision of this
AGREEMENT, were not contained herein.
21. Release; Waiver. As part of the agreement set forth herein,
and in consideration of the same, the OBLIGORS each hereby release the LENDER
and all of the LENDER'S past, present and future directors, officers,
employees, agents and attorneys from any and all claims, causes of action,
suits and damages (including claims for attorneys' fees) which the OBLIGORS,
jointly, severally, or otherwise, ever had or now have against the LENDER or
any of the LENDER'S past, present and future directors, officers, employees,
agents or attorneys. Without limiting the generality of the foregoing, the
OBLIGORS each acknowledge and agree that there exists no offset or defense to
the obligations of the OBLIGORS as stated in the LOAN DOCUMENTS.
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IN WITNESS WHEREOF, the parties have executed this AGREEMENT on the
date first above written with the specific intention of creating a document
under seal, and the further intention that this AGREEMENT and the documents to
be executed pursuant to this AGREEMENT will be effective only as of the
EFFECTIVE DATE. This AGREEMENT may be executed in counterparts.
WITNESS/ATTEST: BORROWER:
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
By: (SEAL)
- ---------------------- --------------------------
Name:
-----------------------
Title:
----------------------
GUARANTOR:
SPORT SUPPLY GROUP INTERNATIONAL
HOLDINGS, INC.,
A Delaware Corporation
By: (SEAL)
- ---------------------- --------------------------
Name:
-----------------------
Title:
----------------------
LASALLE:
LASALLE BUSINESS CREDIT, INC.,
A Delaware Corporation
By: (SEAL)
- ---------------------- ---------------------------
Herbert M. Kidd, II,
First Vice President
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ACKNOWLEDGEMENTS
STATE OF ______________, CITY/COUNTY OF _________________, TO WIT:
I HEREBY CERTIFY that on this _____ day of November, 1996, before me,
the undersigned Notary Public of the jurisdiction aforesaid, personally
appeared ___________________________, and acknowledged himself to be the
____________________ of SPORT SUPPLY GROUP, INC., a Delaware corporation, and
that he, as such ________________ being authorized so to do, executed the
foregoing instrument for the purposes therein contained by signing the name of
SPORT SUPPLY GROUP, INC., by himself as ____________________.
IN WITNESS MY Hand and Notarial Seal.
(SEAL)
---------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
STATE OF ______________, CITY/COUNTY OF _________________, TO WIT:
I HEREBY CERTIFY that on this _____ day of November, 1996, before me,
the undersigned Notary Public of the jurisdiction aforesaid, personally
appeared ____________________________, and acknowledged himself to be
______________________ of SPORT SUPPLY GROUP INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, and that he, as such ___________________ being authorized
so to do, executed the foregoing instrument for the purposes therein contained
by signing the name of SPORT SUPPLY GROUP INTERNATIONAL HOLDINGS, INC., by
himself as ______________________.
IN WITNESS MY Hand and Notarial Seal.
(SEAL)
---------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
17
<PAGE> 18
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY, that on this ____ day of November, 1996, before me,
the undersigned a Notary Public of the State of Maryland, personally appeared
Herbert M. Kidd, II, who acknowledged himself to be a First Vice President of
LASALLE BUSINESS CREDIT, INC., a Delaware corporation, and acknowledged that
he, as such First Vice President, being authorized so to do, executed the
foregoing instrument for the purposes therein contained by signing the name of
LASALLE BUSINESS CREDIT, INC. by himself as First Vice President.
IN WITNESS MY Hand and Notarial Seal.
(SEAL)
---------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
18
<PAGE> 1
EXHIBIT 4(d)
AMENDMENT NUMBER 4 TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
By
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
Borrower
And
LASALLE BUSINESS CREDIT, INC.,
Formerly Known As StanChart Business Credit, Inc.,
A Delaware Corporation
LaSalle
Dated November 27, 1996,
To Be Effective As Of The EFFECTIVE DATE
<PAGE> 2
AMENDMENT NUMBER 4 TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER 4 TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ("Amendment") is executed on November 27, 1996, to be effective as of
the EFFECTIVE DATE (as that term is hereafter defined), by and between SPORT
SUPPLY GROUP, INC., a Delaware corporation ("Borrower"), and LASALLE BUSINESS
CREDIT, INC., formerly known as StanChart Business Credit, Inc., a Delaware
corporation ("LaSalle").
RECITALS
Pursuant to the Amended and Restated Loan and Security Agreement
between the Borrower and LaSalle dated March 23, 1995, as modified by (i) the
Amendment Number 1 to Amended and Restated Loan and Security Agreement dated
December 20, 1995, (ii) a letter agreement dated February 2, 1996, (iii) the
Amendment Number 2 to Amended and Restated Loan and Security Agreement dated
March 12, 1996, and (iv) the Amendment Number 3 to Amended and Restated Loan
and Security Agreement dated September 19, 1996 (collectively, "Agreement"),
LaSalle agreed to extend to the Borrower: (a) revolving loans in the maximum
aggregate principal amount outstanding at any one time of Thirty-Seven Million
Five Hundred Thousand Dollars ($37,500,000.00) (collectively, "Revolving
Loans"); (b) a term loan in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,00.00) ("Term Loan"); and (c) additional term
loans in the aggregate principal amount of up to Ten Million Dollars
($10,000,000.00) (collectively, "Additional Loans").
Pursuant to a Guaranty Agreement dated September 16, 1994, SPORT
SUPPLY GROUP INTERNATIONAL HOLDINGS, INC., a Delaware corporation
("Guarantor"), guaranteed the payment and performance of all of the Borrower's
obligations to LaSalle, including without limitation the Borrower's obligations
under the Agreement. The obligations of the Borrower and the Guarantor under
and in connection with the Revolving Loans, the Term Loan and the Additional
Loans (collectively, the "Loans"), are secured by the liens, assignments,
pledges and security interests described in the Agreement and in various other
documents and instruments (collectively with the Agreement and the Guaranty,
the "Loan Documents"). Unless otherwise defined herein, capitalized terms
<PAGE> 3
used in this Amendment shall have the meanings given to such terms in the
Agreement.
The Borrower is presently in default under the Agreement as a result
of its failure to equal or exceed the minimum EBITDA required under paragraph
11.2 of the Agreement for the Fiscal Quarter which ended August 2, 1996. The
Borrower has requested that LaSalle, among other things, waive the aforesaid
default and modify the Agreement in certain additional respects.
Pursuant to the terms and conditions set forth in the Modification
Agreement of even date herewith between LaSalle, the Borrower and the Guarantor
("Modification Agreement"), LaSalle has agreed to the Borrower's request. It
is a condition precedent to LaSalle's obligations under the Modification
Agreement that LaSalle and the Borrower enter into this Amendment.
NOW THEREFORE, in consideration of these premises 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:
1. Recitals. The Recitals set forth above are hereby
incorporated into this Amendment by reference, and the Borrower and the
Guarantor acknowledge that the Recitals are accurate in all respects.
2. Amendment. The Agreement is hereby amended as follows:
a. Section 1.1 is amended by replacing the existing
definitions of "Adjusted LIBOR Rate Option," "Loans," "Maximum Facility,"
"Maximum Revolving Credit Facility," "Notes" and "References Rate Option" with
the following:
"ADJUSTED LIBOR RATE OPTION" shall mean a fixed
annual rate which shall equal the rate obtained by
adding to the Adjusted LIBOR Rate: (a) for the
Revolving Loans, two hundred seventy-five (275) Basis
Points; and (b) for the Term Loan, three hundred
(300) Basis Points.
"LOANS"shall mean the Revolving Loans and the Term
Loan.
2
<PAGE> 4
"MAXIMUM FACILITY" shall mean Twenty-Five Million
Dollars ($25,000,000.00).
"MAXIMUM REVOLVING CREDIT FACILITY" shall mean
Twenty-Two Million Five Hundred Thousand Dollars
($22,500,000.00).
"NOTES"shall mean the Revolving Loan Note and the
Term Loan Note.
"REFERENCE RATE OPTION"shall mean the fluctuating
annual rate which shall at all times equal the rate
obtained by adding to the Reference Rate: (a) for the
Revolving Loans, three-fourths of one (0.75)
percentage point; and (b) for the Term Loan, one
(1.0) percentage point. Changes to the Reference
Rate Option shall be made effective as of, and
immediately upon the date of any change in the
Reference Rate.
b. Section 1.1 is further amended by adding the
following additional definitions:
"CONTINUING OPERATIONS" shall mean the core
institutional business of Borrower and all other
businesses and activities of Borrower not otherwise
described as Discontinued Operations.
"DISCONTINUED OPERATIONS" shall mean all golf-related
operations or businesses of Borrower and all other
activities of Borrower described in Borrower's
Quarterly Report for the period ended August 2, 1996
filed with the Securities and Exchange Commission on
Form 10-Q as "discontinued operations" or as
Borrower's "retail segment."
"DISCONTINUED OPERATIONS ACCOUNTS" shall mean any
Account owing to Borrower arising out of the sale or
lease of goods as part of the Discontinued
Operations.
c. Section 1.1 is further amended by deleting the
definitions of "Additional Loans," "Additional Loan Notes," "Approved
Acquisition," "Debt Service Coverage Ratio," "Interest
3
<PAGE> 5
Coverage Ratio," "Eligible Additional Loan Expenditures," and "Eligible
Equipment."
d. Section 2.1 is amended by replacing the existing
provision, in its entirety, with the following:
2.1. REVOLVING CREDIT FACILITY
Subject to the terms and provisions of this
Agreement, including without limitation, that no
Event of Default or Potential Default has occurred
and all other conditions precedent to lending under
Section 5 hereof have been satisfied, upon the
request of Borrower, made at any time and from time
to time during the term hereof, LaSalle shall make
revolving loans to Borrower (hereinafter individually
referred to as a "Revolving Loan" and collectively as
"Revolving Loans") so long as the aggregate amount of
the Revolving Loans outstanding at any time does not
exceed the lesser of: (a) the Maximum Revolving
Credit Facility minus the sum of the aggregate
undrawn face amount of any Letters of Credit, and (b)
Revolving Loan Availability, at such time. For
purposes hereof, "Revolving Loan Availability" shall
mean, at any time, the sum of the following:
(A) eighty-five percent (85%) multiplied by the
face amount then outstanding on existing
Eligible Accounts other than Government
Accounts and Discontinued Operations
Accounts; plus the lesser of (i) eighty-five
percent (85%) multiplied by the face amount
then outstanding on existing Government
Accounts which constitute Eligible Accounts,
and (ii) One Million Five Hundred Thousand
Dollars ($1,500,000.00); provided that if
Dilution equals or exceeds five percent (5%)
at any time, LaSalle may in its discretion
implement appropriate reserves to reflect
such increased Dilution; plus
(B) the lesser of (i) Twelve Million Five Hundred
Thousand Dollars ($12,500,000.00) or (ii)
4
<PAGE> 6
sixty percent (60%) of the value of Eligible
Finished Goods relating to Continuing
Operations at such time plus forty percent
(40%) of the value of Eligible Raw Materials
relating to Continuing Operations at such
time (each valued at the lower of cost or
fair market value, on a FIFO basis, in
accordance with Generally Accepted Accounting
Principles); plus
(C) the lesser of (i) Eight Million Dollars
($8,000,000.00) or (ii) eighty-five percent
(85%) multiplied by the face amount then
outstanding on existing Discontinued
Operations Accounts which constitute Eligible
Accounts, plus sixty percent (60%) of the
value of Eligible Finished Goods relating to
Discontinued Operations at such time plus
forty percent (40%) of the value of Eligible
Raw Materials relating to Discontinued
Operations at such time (each valued at the
lower of cost or fair market value, on a FIFO
basis, in accordance with Generally Accepted
Accounting Principles); minus
(D) forty percent (40%) of the aggregate face
amount of undrawn documentary Letters of
Credit; minus
(E) the aggregate undrawn face amount of any
standby Letters of Credit, provided that the
amount advanced, in the aggregate, for
Eligible Finished Goods and Eligible Raw
Materials which are in transit, including
those relating to both Continuing Operations
and Discontinued Operations, shall not at any
time exceed One Million Five Hundred Thousand
Dollars ($1,500,000.00).
The amount of Borrower's Eligible Accounts and
Eligible Inventory under this Section 2.1 shall be
determined after deduction of reserves consistent
with the definitions of such terms, and such other
reserves, deductions or adjustments deemed
5
<PAGE> 7
necessary by LaSalle in its reasonable credit
judgment to reflect Out-of-Pocket Fees and Costs and
other items reimbursable to LaSalle under this
Agreement which have been incurred or are anticipated
but not yet paid, any breaches of the warranties,
representations or covenants of Borrower under this
Agreement, or any Events of Default or Potential
Defaults; provided that LaSalle shall retain all of
its other rights and remedies under this Agreement.
LaSalle also shall impose reserves for slow moving or
potentially slow moving Inventory (i) against the
amount of the Borrower's Eligible Finished Goods
Inventory relating to Continuing Operations in the
amount of One Million Dollars ($1,000,000.00), and
(ii) against the amount of the Borrower's Eligible
Finished Goods Inventory relating to Discontinued
Operations in the following amounts:
<TABLE>
<S> <C>
Prior to 12/31/96 $208,333
From 1/1/97 through 1/31/97 $416,666
From 2/1/97 through 2/28/97 $624,999
From 3/1/97 through 3/31/97 $833,332
From 4/1/97 through 4/30/97 $1,041,665
From 5/1/97 and thereafter $1,250,000
</TABLE>
The Revolving Loans shall be evidenced by, and
repayable in accordance with, a Fourth Amended and
Restated Revolving Loan Promissory Note dated
November 27, 1996 from the Borrower to the order of
LaSalle ("Revolving Loan Note").
LaSalle is hereby authorized to make the Revolving
Loans provided for in this Agreement based upon
telephonic or other instructions received from anyone
purporting to be (and which LaSalle in good faith
believes to be) an authorized representative of
Borrower, or at the discretion of LaSalle, if such
Revolving Loans are necessary to satisfy any
Obligation of Borrower to LaSalle.
6
<PAGE> 8
e. Section 2.2 is amended by replacing the existing
provision, in its entirety, with the following:
2.2. TERM LOAN FACILITY
Subject to the terms and provisions of this Agreement, upon
fulfillment of all the conditions precedent to any Loans under
Section 5 hereof, LaSalle shall make a term loan in the
principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00), to Borrower ("Term Loan"). The Term Loan
shall be evidenced by, and repayable in accordance with, a
Consolidated, Amended and Restated Term Loan Promissory Note
dated November 27, 1996 in the aforementioned amount, from the
Borrower to the order of LaSalle ("Term Loan Note").
f. Section 2.3 is amended by replacing the reference
therein to "Seven Million Five Hundred Thousand Dollars ($7,500,000.00)" with
"Five Million Dollars ($5,000,000.00)."
g. Section 2.7(E) is amended by replacing the reference
therein to "One Thousand Dollars ($1,000.00)" with "One Thousand Five Hundred
Dollars ($1,500.00)."
h. Section 3.1(a) is amended by replacing the reference
therein to the expiration date of "October 1, 1998" with "October 31, 1997."
i. The Agreement is further amended by deleting in their
entirety Section 2.6(I), Rate, Additional Loans, Section 2.14, Additional Loan
Facility, and Section 3.4, Reduction Of Over Advance Amount/Mandatory
Prepayment Of Additional Loan.
j. Section 8.5 is amended by replacing the existing
provision with the following:
8.5 LOANS AND INVESTMENTS. Make any advance, loan,
investment or material acquisition of assets other
than (i) advances made to employees in the ordinary
course of business so long as the aggregate amount of
such advances do not exceed One Hundred Thousand
Dollars ($100,000.00) in the aggregate outstanding at
any time; (ii)
7
<PAGE> 9
investments in marketable securities so long as the
aggregate amount of such investments do not exceed
One Hundred Thousand Dollars ($100,000.00) at any
time; (iii) investments in short-term direct
obligations of the United States government; (iv)
investments in negotiable certificates of deposit
issued by a bank satisfactory to LaSalle, payable to
the order of Borrower or to bearer, and (v)
investments in commercial paper rated A-1 or P-1,
provided, that with respect to clauses (ii), (iii),
(iv), and (v), to the extent that the aggregate
amount of investments made by Borrower exceed One
Hundred Thousand Dollars ($100,000.00) at any time,
Borrower shall pledge all such investments to LaSalle
in form acceptable to LaSalle.
k. Section 8.6 is amended by changing the period at the end
thereof to a comma and adding the following:
and (iii) an unsecured foreign sourcing line of
credit from Emerson Radio Corp. in an amount not to
exceed Two Million Dollars ($2,000,000.00), upon
terms described to and approved by LaSalle.
l. Article 8 of the Agreement is amended by adding the following
provisions at the end thereof:
8.18 AFFILIATE TRANSACTIONS. Transfer any cash or
property to any direct or indirect shareholder of or
owner of or beneficial owner of any interest in
Borrower or other Affiliate or enter into any
transaction, including without limitation the
purchase, lease, sale or exchange of property or the
rendering of any service to or by any direct or
indirect shareholder of or owner of or beneficial
owner of any interest in Borrower or other Affiliate;
provided that Borrower may (i) sell Inventory to
Affiliates, not to exceed the amount of One Hundred
Thousand Dollars ($100,000.00) in any such sale or in
the aggregate during any Fiscal Year, for cash for
fair value in the ordinary course of business
pursuant to terms that are no less favorable to
Borrower than the
8
<PAGE> 10
terms upon which such transactions would have been
made had such transfers or transactions been made at
arm's length to or with a Person that is not an
Affiliate, (ii) pay salaries to employee stockholders
in the ordinary course of business subject to any
limitations on such payments set forth in this
Agreement and (iii) obtain from Emerson Radio Corp.
an unsecured foreign sourcing line of credit in an
amount up to Two Million Dollars ($2,000,000.00),
upon terms consistent with those represented to
LaSalle.
8.19 DISTRIBUTIONS. Purchase, redeem or retire any of its
capital stock of any class, whether now or hereafter
outstanding, pay, directly or indirectly, any cash,
stock or other securities or property dividends or
distributions to its shareholders.
m. Section 11.1 is amended by replacing the existing
provisions with the following:
11.1 TANGIBLE NET WORTH. Borrower shall maintain at all
times a Tangible Net Worth, calculated based on the
Borrower's divisional balance sheet for Continuing
Operations (net of the intercompany account relating
to Discontinued Operations presently shown on
Borrower's financial statements as "Due from
Subsidiary"), in an amount of not less than
Thirty-Six Million Five Hundred Thousand Dollars
($36,500,000.00).
n. Section 11.2 is amended by replacing the existing
provision with the following:
11.2 EBITDA. Borrower shall equal or exceed an EBITDA for
the fiscal periods set forth below, based solely on
Continuing Operations, in the amounts set forth
opposite such periods:
9
<PAGE> 11
<TABLE>
<CAPTION>
Period EBITDA
------ ------
<S> <C>
Three months ending 1/31/97 ($1,000,000.00)
Six months ending 5/2/97 $0.00
Nine months ending 8/1/97 $1,500,000.00
Twelve months ending 10/31/97 $2,900,000.00
</TABLE>
o. The Agreement is further amended by deleting in their
entirety Section 11.3, Debt Service Coverage, and Section 11.4, Interest
Coverage Ratio, and inserting the following provisions in their place:
11.3 ADVANCES TO DISCONTINUED OPERATIONS. Advances by
Borrower to the Discontinued Operations, presently
shown on the balance sheet of Borrower as an
intercompany account entitled "Due From Subsidiary,"
shall not at any time exceed the sum of (i) the
amount reflected on the balance sheet of Borrower as
of the EFFECTIVE DATE (as that term is defined in the
Modification Agreement dated November 27, 1996
between Borrower, Guarantor and LaSalle), plus (ii)
Two Million Dollars ($2,000,000.00). In the event
that Borrower has not sold or liquidated the
Discontinued Operations prior to the end of
Borrower's Fiscal Quarter ending May 2, 1997,
Borrower shall submit to LaSalle prior to the end of
such Fiscal Quarter a plan for liquidation or other
disposition of the Discontinued Operations, which
plan shall be acceptable to LaSalle in its sole
discretion.
11.4 SALE OF DISCONTINUED OPERATIONS. Borrower shall not
without the prior written consent of LaSalle enter
into any agreement providing for the sale of the
Discontinued Operations for a sale price which would
provide net proceeds in an amount less than that
portion of the Borrowing Base attributable to
Discontinued Operations Accounts and Eligible
Inventory relating to Discontinued Operations as of
such date.
3. Effective Date. This Amendment shall not be effective or
enforceable until the "EFFECTIVE DATE," as that term is defined in the
Modification Agreement.
10
<PAGE> 12
4. Cost And Expenses. Borrower shall pay, upon demand by
LaSalle, all reasonable costs and expenses incurred by LaSalle in connection
with the transactions described in this Amendment.
5. Warranties And Representations. As an inducement to LaSalle
to enter into this Amendment, Borrower makes the following representations and
warranties to LaSalle and acknowledges LaSalle's justifiable reliance thereon:
a. As of the date of this Amendment, the Borrower is not
in default under the Agreement or any of the other Loan Documents, and Borrower
is in full compliance with all of the terms and conditions thereof;
b. As of the date of this Amendment, no event exists
which is, or which with the passage of time, the giving of notice, or both,
would constitute a default under the Agreement or any of the Loan Documents;
c. All warranties and representations previously made to
LaSalle by Borrower in connection with the Loan Documents remain true, accurate
and complete, in all material aspects as of the date made;
d. Except as previously described in writing to LaSalle,
there have been no material adverse changes in Borrower's finances or
operations; and
e. The Agreement, as modified and amended herein, is the
valid and binding obligation of Borrower and is fully enforceable in accordance
with its terms.
6. Release. Borrower releases, acquits and forever discharges
LaSalle and LaSalle's subsidiaries, affiliates, officers, directors, agents,
employees, servants, attorneys and representatives from any and all claims,
demands, debts, actions, causes of action, suits, contracts, agreements,
obligations, accounts, defenses, offsets against the Borrower's obligation
under the Loan Documents, and liabilities of any kind or character whatsoever,
known or unknown, which Borrower ever had or now has against LaSalle or any of
LaSalle's subsidiaries, affiliates, officers, directors, agents, employees,
servants, attorneys or representatives.
11
<PAGE> 13
7. No Novation. The parties to this Amendment specifically
intend that the amendment of the Agreement pursuant to this Amendment shall not
constitute a novation and shall not extinguish, terminate, affect or impair
Borrower's obligations under the Loan Documents.
8. Other Terms. Other than the foregoing, all other terms and
conditions of the Agreement shall remain unchanged and in full force and effect
and are ratified and confirmed in all respects by Borrower.
9. Successors and Assigns. This Amendment shall be binding upon
and inure to the benefit of Borrower and LaSalle and their respective
successors and assigns.
IN WITNESS WHEREOF, this Amendment is executed under seal, with the
intention that it be effective as of the EFFECTIVE DATE.
WITNESS/ATTEST: BORROWER:
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
By: (SEAL)
- ------------------------- --------------------------
Name:
-----------------------
Title:
----------------------
GUARANTOR:
SPORT SUPPLY GROUP INTERNATIONAL
HOLDINGS, INC.,
A Delaware Corporation
By: (SEAL)
- ------------------------ --------------------------
Name:
-----------------------
Title:
----------------------
12
<PAGE> 14
LASALLE:
LASALLE BUSINESS CREDIT, INC.,
A Delaware Corporation
By: (SEAL)
- ------------------------ --------------------------
Herbert M. Kidd, II,
First Vice President
ACKNOWLEDGEMENTS
STATE OF ______________, CITY/COUNTY OF _________________, TO WIT:
I HEREBY CERTIFY that on this _____ day of November, 1996, before me,
the undersigned Notary Public of the jurisdiction aforesaid, personally
appeared ___________________________, and acknowledged himself to be
_______________________ of SPORT SUPPLY GROUP, INC., a Delaware corporation,
and that he, as such _____________________ being authorized so to do, executed
the foregoing instrument for the purposes therein contained by signing the name
of SPORT SUPPLY GROUP, INC., by himself as ______________________.
IN WITNESS MY Hand and Notarial Seal.
(SEAL)
---------------------------
NOTARY PUBLIC
My Commission Expires:
- ------------------------
STATE OF ______________, CITY/COUNTY OF _________________, TO WIT:
I HEREBY CERTIFY that on this _____ day of November, 1996, before
me, the undersigned Notary Public of the jurisdiction aforesaid, personally
appeared ___________________________, and acknowledged himself to be
______________________ of SPORT SUPPLY GROUP INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, and that he, as such _______________________ being
authorized so to do, executed the foregoing instrument for the purposes therein
13
<PAGE> 15
contained by signing the name of SPORT SUPPLY GROUP INTERNATIONAL HOLDINGS,
INC., by himself as _______________________.
IN WITNESS MY Hand and Notarial Seal.
(SEAL)
---------------------------
NOTARY PUBLIC
My Commission Expires:
- ------------------------
14
<PAGE> 16
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY, that on this ____ day of November, 1996, before
me, the undersigned a Notary Public of the State of Maryland, personally
appeared Herbert M. Kidd, II, who acknowledged himself to be a First Vice
President of LASALLE BUSINESS CREDIT, INC., a Delaware corporation, and
acknowledged that he, as such First Vice President, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of LASALLE BUSINESS CREDIT, INC. by himself as First Vice President.
IN WITNESS MY Hand and Notarial Seal.
(SEAL)
---------------------------
NOTARY PUBLIC
My Commission Expires:
- ------------------------
15
<PAGE> 1
EXHIBIT 4(e)
$2,500,000.00
CONSOLIDATED, AMENDED AND RESTATED
TERM LOAN PROMISSORY NOTE
From
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
Borrower
To The Order Of
LASALLE BUSINESS CREDIT, INC.,
A Delaware Corporation
Lender
Dated November 27, 1996,
To Be Effective As Of the EFFECTIVE DATE
<PAGE> 2
Baltimore, Maryland $2,500,000.00
Dated November 27, 1996,
To Be Effective As Of The EFFECTIVE DATE
CONSOLIDATED, AMENDED AND RESTATED
TERM LOAN PROMISSORY NOTE
Pursuant to the terms and conditions of the Modification Agreement of
even date herewith ("Modification Agreement") between Sport Supply Group, Inc.
("Borrower"), Sport Supply Group International Holdings, Inc., and LaSalle
Business Credit, Inc. ("Lender"), the indebtedness evidenced by the Term Loan
Promissory Note dated March 23, 1995 from the Borrower to the order of the
Lender in the original principal amount of Two Million Five Hundred Thousand
Dollars ($2,500,000.00), and the Term Loan Promissory Note dated January ___,
1996 from the Borrower to the order of the Lender in the original principal
amount of Six Hundred Eighty-Five Thousand Two Hundred Twenty-Eight Dollars and
Twenty Cents ($685,228.20), has been consolidated, and the terms and provisions
of such promissory notes are hereby consolidated, amended and restated in their
entirety as follows, effective as of the "EFFECTIVE DATE," as that term is
defined in the Modification Agreement:
FOR VALUE RECEIVED, the undersigned SPORT SUPPLY GROUP, INC., a
Delaware corporation ("BORROWER"), promises to pay to the order of LASALLE
BUSINESS CREDIT, INC., INC., a Delaware corporation ("LENDER"), at the LENDER'S
offices at 120 East Baltimore Street, Suite 1802, Baltimore, Maryland 21202 or
at such other places as the holder of this Promissory Note may from time to
time designate, the principal sum of Two Million Five Hundred Thousand Dollars
($2,500,000.00), or so much as may have been advanced to the BORROWER under the
terms of the Amended and Restated Loan And Security Agreement dated as of March
23, 1995 between the LENDER and the BORROWER, as modified by (i) Amendment
Number 1 to Amended and Restated Loan and Security Agreement dated December 20,
1995, (ii) a letter agreement dated February 2, 1996, (iii) Amendment Number 2
to Amended and Restated Loan and Security Agreement dated March 12, 1996, (iv)
Amendment Number 3 to Amended and Restated Loan and Security Agreement dated
September 19, 1996, and (v) Amendment Number 4 to Amended and Restated Loan and
Security Agreement of even date herewith (collectively, the "AGREEMENT"),
together with interest thereon at the rate or rates specified in
<PAGE> 3
the AGREEMENT and any and all other sums due hereunder or under the AGREEMENT
which may be owing to the holder of this Promissory Note by the BORROWER at the
later of (a) the expiration of the Initial Term (as that term is defined in the
AGREEMENT), or (b) the expiration of the last Renewal Term (as that term is
defined in the AGREEMENT). That date which is the later of the Initial Term
and the Renewal Term is hereafter referred to as the "MATURITY DATE." The
following terms shall apply to this Promissory Note.
1. Repayment. Accrued and unpaid interest shall be paid in
consecutive monthly payments beginning on the first calendar day of the first
month following the EFFECTIVE DATE, and continuing on the first calendar day of
each succeeding month until this Promissory Note has been paid in full. The
unpaid principal balance of this Promissory Note shall be paid over the term
hereof in consecutive equal quarterly installments of principal, each such
installment to equal the sum of One Hundred Twenty-Five Thousand Dollars
($125,000.00), on the first calendar day of every calendar quarter, commencing
the first calendar day of January 1, 1997 and continuing on the first calendar
day of each succeeding third month until the MATURITY DATE, at which time all
sums due hereunder, including principal, interest, charges and fees, shall be
paid in full.
2. Late Payment Charge. If any payment due hereunder, including
any final installment, is not received by the holder within five (5) calendar
days after its due date, the BORROWER shall pay a late payment charge equal to
five percent (5%) of the amount then due. The late payment charge shall be due
whether or not the holder declares this Promissory Note in default as a result
thereof or demands immediate payment of the sums due hereunder. The existence
of the right by the holder to receive a late payment charge shall not
constitute a grace period or provide any right in the BORROWER to make a
payment other than on its due date.
3. Application Of Payments. All payments made hereunder shall be
applied first to late payment charges or other sums owed to the holder, next to
accrued interest, and then to principal or in such other order or proportion as
the holder, in the holder's sole discretion, may elect from time to time.
4. Voluntary Prepayment. The BORROWER may prepay this Promissory
Note to the extent provided in the AGREEMENT.
<PAGE> 4
5. Mandatory Prepayment. The BORROWER shall prepay this
Promissory Note to the extent required by the AGREEMENT.
6. Rights Upon Default. Upon the occurrence and during the
continuance of an Event of Default (as that term is defined in the AGREEMENT),
in addition to all other rights or remedies available to the holder under the
AGREEMENT or any other agreement or document executed by or on behalf of the
BORROWER for the benefit of the LENDER or any holder (collectively with the
AGREEMENT, "LOAN DOCUMENTS"), or under applicable law, the holder of this
Promissory Note shall have the following rights:
6.1. Acceleration. The holder of this Promissory Note, in
the holder's sole discretion and without notice or demand, may declare the
entire unpaid principal balance plus accrued interest and all other sums due
hereunder immediately due and payable. Reference is made to the LOAN DOCUMENTS
for further and additional rights on the part of the holder to declare the
entire unpaid principal balance plus accrued interest and all other sums due
hereunder immediately due and payable.
6.2. Default Interest Rate. The holder of this Promissory
Note, in the holder's sole discretion and without notice or demand, may raise
the rate of interest accruing on the unpaid principal balance in the manner
provided for in the AGREEMENT.
6.3. Confession Of Judgment. The BORROWER authorizes any
attorney admitted to practice before any court of record in the United States
to appear on behalf of the BORROWER in any court in one or more proceedings, or
before any clerk thereof or prothonotary or other court official, and to
confess judgment against the BORROWER in favor of the holder of this Promissory
Note in the full amount due on this Promissory Note (including principal,
accrued interest and any and all charges, fees and costs), plus attorneys' fees
equal to twenty percent (20%) of the first One Hundred Thousand Dollars
($100,000.00), and one percent (1%) of the remaining due, plus court costs, all
without prior notice or opportunity of the BORROWER for prior hearing. The
BORROWER agrees and consents that venue and jurisdiction shall be proper in the
Circuit Court of any County of the State of Maryland or of Baltimore City,
Maryland, or in the United States District Court for the District of Maryland.
The BORROWER waives the benefit of any and every statute, ordinance, or rule of
court
<PAGE> 5
which may be lawfully waived conferring upon the BORROWER any right or
privilege of exemption, homestead rights, stay of execution, or supplementary
proceedings, or other relief from the enforcement or immediate enforcement of a
judgment or related proceedings on a judgment. The authority and power to
appear for and enter judgment against the BORROWER shall not be exhausted by
one or more exercises thereof, or by any imperfect exercise thereof, and shall
not be extinguished by any judgment entered pursuant thereto; such authority
and power may be exercised on one or more occasions from time to time, in the
same or different jurisdictions, as often as the holder shall deem necessary,
convenient, or proper.
7. Interest Rate After Judgment. If judgment is entered against
the BORROWER on this Promissory Note, the amount of the judgment entered
(which, unless applicable law specifically provides to the contrary, include
all principal, prejudgment interest, late charges, prepayment fees if any are
provided for, collection expenses, reasonable attorneys' fees, and court costs)
shall bear interest at the highest rate after default authorized by this
Promissory Note as of the date of entry of the judgment to the extent permitted
by applicable law. In the event any statute or rule of court specifies the
rate of interest which a judgment on this Promissory Note may bear or the
amount on which such interest rate may apply and such rate or amount is less
than that called for in the preceding sentence absent a restriction under
applicable law, the BORROWER: (a) agrees to pay to the order of the holder an
amount as will equal the interest computed at the highest rate after default
provided for in this Promissory Note which would be due on the judgment amount
(which, for this purpose, shall be considered to include all principal,
prejudgment interest, late charges, prepayment penalties if any are provided
for, collection expense fee and reasonable attorneys' fees, and court costs)
less the interest due on the amount of the judgment which bears judgment
interest, and (b) authorizes the confession of judgment for such amount
pursuant to the confession of judgment provision of this Promissory Note if the
BORROWER fails to make payment thereof.
8. Expenses Of Collection And Attorneys' Fees. Should this
Promissory Note be referred to an attorney for collection, whether or not
judgment has been confessed or suit has been filed, the BORROWER shall pay all
of the holder's reasonable costs, fees and expenses, including reasonable
attorneys' fees, resulting from such referral.
<PAGE> 6
9. Waiver of Defenses. In the event any one or more holders of
this Promissory Note transfer this Promissory Note for value, the BORROWER
agrees that all subsequent holders of this Promissory Note who take for value
and without actual knowledge of a claim or defense of the BORROWER against a
prior holder shall not be subject to any claims or defenses which the BORROWER
may have against a prior holder, all of which are waived as to the subsequent
holder, and that all such subsequent holders shall have all rights of a holder
in due course with respect to the BORROWER even though the subsequent holder
may not qualify, under applicable law, absent this section, as a holder in due
course. The BORROWER shall retain all rights and claims which the BORROWER may
have against prior holders despite any such transfers and the waiver of
defenses provided in this section as to subsequent holders.
10. Waiver Of Protest. The BORROWER, and all parties to this
Promissory Note, whether maker, indorser, or guarantor, waive presentment,
notice of dishonor and protest.
11. Extensions Of Maturity. All parties to this Promissory Note,
whether maker, indorser, or guarantor, agree that the maturity of this
Promissory Note, or any payment due hereunder, may be extended at any time or
from time to time without releasing, discharging, or affecting the liability of
such party.
12. Manner and Method of Payment. All payments called for in this
Promissory Note shall be made in lawful money of the United States of America
in the manner provided in the AGREEMENT.
13. Security. This Promissory Note is secured by the security
interests, liens and other assurances of payment established or described in
the AGREEMENT.
14. Notices. Any notice or demand required or permitted by or in
connection with this Promissory Note shall be given in the manner specified in
the AGREEMENT for the giving of notices under the AGREEMENT.
15. Binding Nature. This Promissory Note shall inure to the
benefit of and be enforceable by the LENDER and the LENDER'S successors and
assigns and any other person to whom the LENDER or any holder may grant an
interest in the BORROWER'S obligations hereunder, and shall be binding and
enforceable against the
<PAGE> 7
BORROWER and the BORROWER'S personal representatives, successors and assigns.
16. Invalidity Of Any Part. If any provision or part of any
provision of this Promissory Note shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Promissory Note
and this Promissory Note shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality, or unenforceability.
17. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Promissory Note and the rights and obligations of
the parties hereto, including the validity, construction, interpretation, and
enforceability of this Promissory Note and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the issuance of this Promissory Note or which occurred or were to occur as a
direct or indirect result of this Promissory Note having been executed.
18. Consent To Jurisdiction; Agreement As To Venue. The BORROWER
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court for the District of
Maryland, if a basis for federal jurisdiction exists. The BORROWER agrees that
venue shall be proper in any circuit court of the State of Maryland selected by
the LENDER or in the United States District Court for the District of Maryland
if a basis for federal jurisdiction exists and waives any right to object to
the maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
19. Unconditional Obligations. The BORROWER'S obligations under
this Promissory Note shall be the absolute and unconditional duty and
obligation of the BORROWER and shall be independent of any rights of set-off,
recoupment or counterclaim which the BORROWER might otherwise have against the
holder of this Promissory Note, and the BORROWER shall pay absolutely the
payments of principal, interest, fees and expenses required hereunder, free of
any deductions and without abatement, diminution or set-off.
<PAGE> 8
20. Seal and Effective Date. This Promissory Note is an
instrument executed under seal and is to be considered effective and
enforceable as of the date set forth on the first page hereof, independent of
the date of actual execution and delivery.
21. Tense; Gender; Defined Terms; Section Headings. As used
herein, the singular includes the plural and the plural includes the singular.
A reference to any gender also applies to any other gender. Defined terms are
entirely capitalized throughout. The section headings are for convenience only
and are not part of this Promissory Note.
22. Actions Against Lender. Any action brought by the BORROWER
against the LENDER which is based, directly or indirectly, on this Promissory
Note or any matter in or related to this Promissory Note, including but not
limited to the making of the loan evidenced hereby or the administration or
collection thereof, shall be brought only in the courts of the State of
Maryland. The BORROWER may not file a counterclaim against the LENDER in a
suit brought by the LENDER against the BORROWER in a state other than the State
of Maryland unless under the rules of procedure of the court in which the
LENDER brought the action the counterclaim is mandatory, and not merely
permissive, and will be considered waived unless filed as a counterclaim in the
action instituted by the LENDER. The BORROWER agrees that any forum other than
the State of Maryland is an inconvenient forum and that a suit brought by the
BORROWER against the LENDER in a court of any state other than the State of
Maryland should be forthwith dismissed or transferred to a court located in the
State of Maryland by that Court.
23. Waiver Of Jury Trial. The BORROWER (by execution of this
Promissory Note) and the LENDER (by acceptance of this Promissory Note) agree
that any suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by or against the BORROWER or the LENDER, or any successor or assign
of the BORROWER or the LENDER, on or with respect to this Promissory Note or
any of the other LOAN DOCUMENTS, or which in any way relates, directly or
indirectly, to the obligations of the BORROWER to the LENDER under this
Promissory Note or any of the other LOAN DOCUMENTS, or the dealings of the
parties with respect thereto, shall be tried only by a court and not by a jury.
The BORROWER and the LENDER hereby expressly waive any right to a trial by jury
in any such suit, action, or proceeding. The BORROWER and the
<PAGE> 9
LENDER acknowledge and agree that this provision is a specific and material
aspect of the agreement between the parties and that the LENDER would not enter
into the transaction with the BORROWER if this provision were not part of their
agreement.
<PAGE> 10
IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory
Note under seal as of the date first above written.
WITNESS/ATTEST: THE BORROWER:
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
_______________________ By:__________________________(SEAL)
Name: _____________________
Title: _____________________
ACKNOWLEDGEMENT
STATE OF ________________, CITY/COUNTY OF ________________, TO WIT:
I HEREBY CERTIFY that on this _____ day of November, 1996, before me,
the undersigned Notary Public of the jurisdiction aforesaid, personally
appeared ___________________________, and acknowledged himself to be the
______________________ of SPORT SUPPLY GROUP, INC., a Delaware corporation, and
that he, as such __________________, being authorized so to do, executed the
foregoing instrument for the purposes therein contained by signing the name of
SPORT SUPPLY GROUP, INC., by himself as __________________.
IN WITNESS MY Hand and Notarial Seal.
____________________________(SEAL)
NOTARY PUBLIC
My Commission Expires:
_____________________
<PAGE> 1
EXHIBIT 4(f)
$22,500,000.00
FOURTH AMENDED AND RESTATED
REVOLVING LOAN PROMISSORY NOTE
From
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
Borrower
To The Order Of
LASALLE BUSINESS CREDIT, INC., Formerly
Known As StanChart Business Credit, Inc. ,
A Delaware Corporation
Lender
Dated November 27, 1996,
To Be Effective As Of The EFFECTIVE DATE
<PAGE> 2
Baltimore, Maryland $22,500,000.00
Dated November 27, 1996,
To Be Effective As Of The EFFECTIVE DATE
FOURTH AMENDED AND RESTATED
REVOLVING LOAN PROMISSORY NOTE
Pursuant to the terms and conditions of the Modification Agreement of
even date herewith ("Modification Agreement") between Sport Supply Group, Inc.
("Borrower"), Sport Supply Group International Holdings, Inc., and LaSalle
Business Credit, Inc. ("Lender"), the Third Amended and Restated Revolving Loan
Promissory Note dated March 23, 1995 from the Borrower to the order of the
Lender, in the maximum principal amount of Thirty-Seven Million Five Hundred
Thousand Dollars ($37,500,000.00), is hereby amended and restated in its
entirety as follows, effective as of the "EFFECTIVE DATE," as that term is
defined in the Modification Agreement:
FOR VALUE RECEIVED, the undersigned SPORT SUPPLY GROUP, INC., a
Delaware corporation ("BORROWER"), promises to pay to the order of LASALLE
BUSINESS CREDIT, INC., formerly known as StanChart Business Credit, Inc., a
Delaware corporation ("LENDER"), at the LENDER'S offices at 120 East Baltimore
Street, Suite 1802, Baltimore, Maryland 21202 or at such other places as the
holder of this Promissory Note may from time to time designate, the principal
sum of Twenty- Two Million Five Hundred Thousand Dollars ($22,500,000.00), or
so much as may have been advanced to the BORROWER under the terms of the
"Revolving Loans," as defined and described in the Amended and Restated Loan
And Security Agreement dated as of March 23, 1995 between the LENDER and the
BORROWER, as modified by (i) Amendment Number 1 to Amended and Restated Loan
and Security Agreement dated December 20, 1995, (ii) a letter agreement dated
February 2, 1996, (iii) Amendment Number 2 to Amended and Restated Loan and
Security Agreement dated March 12, 1996, (iv) Amendment Number 3 to Amended and
Restated Loan and Security Agreement dated September 19, 1996, and (v)
Amendment Number 4 to Amended and Restated Loan and Security Agreement of even
date herewith (collectively, the "AGREEMENT"), together with interest thereon
at the rate or rates specified in the AGREEMENT and any and all other sums due
hereunder or under the AGREEMENT which may be owing to the holder of this
Promissory Note by the BORROWER at the later of (a) the expiration of the
Initial Term (as that term is defined in the AGREEMENT), or (b) the expiration
of the last Renewal Term (as that term is defined in the
<PAGE> 3
AGREEMENT). The following terms shall apply to this Promissory Note.
1. Repayment. Accrued and unpaid interest shall be paid in
consecutive monthly payments on the first calendar day of each succeeding month
until this Promissory Note has been paid in full.
2. Late Payment Charge. If any payment due hereunder, including
any final installment, is not received by the holder within five (5) calendar
days after its due date, the BORROWER shall pay a late payment charge equal to
five percent (5%) of the amount then due. The late payment charge shall be due
whether or not the holder declares this Promissory Note in default as a result
thereof or demands immediate payment of the sums due hereunder. The existence
of the right by the holder to receive a late payment charge shall not
constitute a grace period or provide any right in the BORROWER to make a
payment other than on its due date.
3. Application Of Payments. All payments made hereunder shall be
applied first to late payment charges or other sums owed to the holder, next to
accrued interest, and then to principal or in such other order or proportion as
the holder, in the holder's sole discretion, may elect from time to time.
4. Prepayment. The BORROWER may prepay this Promissory Note to
the extent provided in the AGREEMENT.
5. Rights Upon Default. Upon the occurrence and during the
continuance of an Event of Default (as that term is defined in the AGREEMENT),
in addition to all other rights or remedies available to the holder under the
AGREEMENT or any other agreement or document executed by or on behalf of the
BORROWER for the benefit of the LENDER or any holder (collectively with the
AGREEMENT, "LOAN DOCUMENTS") or under applicable law, the holder of this
Promissory Note shall have the following rights:
5.1 Acceleration. The holder of this Promissory Note, in
the holder's sole discretion and without notice or demand, may declare the
entire unpaid principal balance plus accrued interest and all other sums due
hereunder immediately due and payable. Reference is made to the LOAN DOCUMENTS
for further and additional rights on the part of the holder to declare the
entire unpaid principal balance plus accrued interest and all other sums due
hereunder immediately due and payable.
2
<PAGE> 4
5.2 Default Interest Rate. The holder of this Promissory
Note, in the holder's sole discretion and without notice or demand, may raise
the rate of interest accruing on the unpaid principal balance in the manner
provided for in the AGREEMENT.
5.3 Confession Of Judgment. The BORROWER authorizes any
attorney admitted to practice before any court of record in the United States
to appear on behalf of the BORROWER in any court in one or more proceedings, or
before any clerk thereof or prothonotary or other court official, and to
confess judgment against the BORROWER in favor of the holder of this Promissory
Note in the full amount due on this Promissory Note (including principal,
accrued interest and any and all charges, fees and costs), plus attorneys' fees
equal to twenty percent (20%) of the first One Hundred Thousand Dollars
($100,000.00), and one percent (1%) of the remaining due, plus court costs, all
without prior notice or opportunity of the BORROWER for prior hearing. The
BORROWER agrees and consents that venue and jurisdiction shall be proper in the
Circuit Court of any County of the State of Maryland or of Baltimore City,
Maryland, or in the United States District Court for the District of Maryland.
The BORROWER waives the benefit of any and every statute, ordinance, or rule of
court which may be lawfully waived conferring upon the BORROWER any right or
privilege of exemption, homestead rights, stay of execution, or supplementary
proceedings, or other relief from the enforcement or immediate enforcement of a
judgment or related proceedings on a judgment. The authority and power to
appear for and enter judgment against the BORROWER shall not be exhausted by
one or more exercises thereof, or by any imperfect exercise thereof, and shall
not be extinguished by any judgment entered pursuant thereto; such authority
and power may be exercised on one or more occasions from time to time, in the
same or different jurisdictions, as often as the holder shall deem necessary,
convenient, or proper.
6. Interest Rate After Judgment. If judgment is entered against
the BORROWER on this Promissory Note, the amount of the judgment entered
(which, unless applicable law specifically provides to the contrary, includes
all principal, prejudgment interest, late charges, prepayment fees if any are
provided for, collection expenses, reasonable attorneys' fees, and court costs)
shall bear interest at the highest rate after default authorized by this
Promissory Note as of the date of entry of the judgment to the extent permitted
by applicable law. In the event any statute or rule of court specifies the
rate of interest which a judgment
3
<PAGE> 5
on this Promissory Note may bear or the amount on which such interest rate may
apply and such rate or amount is less than that called for in the preceding
sentence absent a restriction under applicable law, the BORROWER: (a) agrees to
pay to the order of the holder an amount as will equal the interest computed at
the highest rate after default provided for in this Promissory Note which would
be due on the judgment amount (which, for this purpose, shall be considered to
include all principal, prejudgment interest, late charges, prepayment penalties
if any are provided for, collection expense fee and reasonable attorneys' fees,
and court costs) less the interest due on the amount of the judgment which
bears judgment interest, and (b) authorizes the confession of judgment for such
amount pursuant to the confession of judgment provision of this Promissory Note
if the BORROWER fails to make payment thereof.
7. Expenses Of Collection And Attorneys' Fees. Should this
Promissory Note be referred to an attorney for collection, whether or not
judgment has been confessed or suit has been filed, the BORROWER shall pay all
of the holder's reasonable costs, fees and expenses, including reasonable
attorneys' fees, resulting from such referral.
8. Waiver of Defenses. In the event any one or more holders of
this Promissory Note transfer this Promissory Note for value, the BORROWER
agrees that all subsequent holders of this Promissory Note who take for value
and without actual knowledge of a claim or defense of the BORROWER against a
prior holder shall not be subject to any claims or defenses which the BORROWER
may have against a prior holder, all of which are waived as to the subsequent
holder, and that all such subsequent holders shall have all rights of a holder
in due course with respect to the BORROWER even though the subsequent holder
may not qualify, under applicable law, absent this section, as a holder in due
course. The BORROWER shall retain all rights and claims which the BORROWER may
have against prior holders despite any such transfers and the waiver of
defenses provided in this section as to subsequent holders.
9. Waiver Of Protest. The BORROWER, and all parties to this
Promissory Note, whether maker, indorser, or guarantor, waive presentment,
notice of dishonor and protest.
10. Extensions Of Maturity. All parties to this Promissory Note,
whether maker, indorser, or guarantor, agree that the maturity of this
Promissory Note, or any payment due hereunder,
4
<PAGE> 6
may be extended at any time or from time to time without releasing,
discharging, or affecting the liability of such party.
11. Manner and Method of Payment. All payments called for in this
Promissory Note shall be made in lawful money of the United States of America
in the manner provided in the AGREEMENT.
12. Security. This Promissory Note is secured by the security
interests, liens and other assurances of payment established or described in
the AGREEMENT.
13. Notices. Any notice or demand required or permitted by or in
connection with this Promissory Note shall be given in the manner specified in
the AGREEMENT for the giving of notices under the AGREEMENT.
14. Binding Nature. This Promissory Note shall inure to the
benefit of and be enforceable by the LENDER and the LENDER'S successors and
assigns and any other person to whom the LENDER or any holder may grant an
interest in the BORROWER'S obligations hereunder, and shall be binding and
enforceable against the BORROWER and the BORROWER'S personal representatives,
successors and assigns.
15. Invalidity Of Any Part. If any provision or part of any
provision of this Promissory Note shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Promissory Note
and this Promissory Note shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality, or unenforceability.
16. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Promissory Note and the rights and obligations of
the parties hereto, including the validity, construction, interpretation, and
enforceability of this Promissory Note and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the issuance of this Promissory Note or which occurred or were to occur as a
direct or indirect result of this Promissory Note having been executed.
5
<PAGE> 7
17. Consent To Jurisdiction; Agreement As To Venue. The BORROWER
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court for the District of
Maryland, if a basis for federal jurisdiction exists. The BORROWER agrees that
venue shall be proper in any circuit court of the State of Maryland selected by
the LENDER or in the United States District Court for the District of Maryland
if a basis for federal jurisdiction exists and waives any right to object to
the maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
18. Unconditional Obligations. The BORROWER'S obligations under
this Promissory Note shall be the absolute and unconditional duty and
obligation of the BORROWER and shall be independent of any rights of set-off,
recoupment or counterclaim which the BORROWER might otherwise have against the
holder of this Promissory Note, and the BORROWER shall pay absolutely the
payments of principal, interest, fees and expenses required hereunder, free of
any deductions and without abatement, diminution or set-off.
19. Seal and Effective Date. This Promissory Note is an
instrument executed under seal and is to be considered effective and
enforceable as of the date set forth on the first page hereof, independent of
the date of actual execution and delivery.
20. Tense; Gender; Defined Terms; Section Headings. As used
herein, the singular includes the plural and the plural includes the singular.
A reference to any gender also applies to any other gender. Defined terms are
entirely capitalized throughout. The section headings are for convenience only
and are not part of this Promissory Note.
21. Actions Against Lender. Any action brought by the BORROWER
against the LENDER which is based, directly or indirectly, on this Promissory
Note or any matter in or related to this Promissory Note, including but not
limited to the making of the loan evidenced hereby or the administration or
collection thereof, shall be brought only in the courts of the State of
Maryland. The BORROWER may not file a counterclaim against the LENDER in a
suit brought by the LENDER against the BORROWER in a state other than the State
of Maryland unless under the rules of procedure of the court in which the
LENDER brought the action the counterclaim is mandatory, and not merely
permissive, and will be considered waived unless filed as a counterclaim in the
action
6
<PAGE> 8
instituted by the LENDER. The BORROWER agrees that any forum other than the
State of Maryland is an inconvenient forum and that a suit brought by the
BORROWER against the LENDER in a court of any state other than the State of
Maryland should be forthwith dismissed or transferred to a court located in the
State of Maryland by that Court.
22. Waiver Of Jury Trial. The BORROWER (by execution of this
Promissory Note) and the LENDER (by acceptance of this Promissory Note) agree
that any suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by or against the BORROWER or the LENDER, or any successor or assign
of the BORROWER or the LENDER, on or with respect to this Promissory Note or
any of the other LOAN DOCUMENTS, or which in any way relates, directly or
indirectly, to the obligations of the BORROWER to the LENDER under this
Promissory Note or any of the other LOAN DOCUMENTS, or the dealings of the
parties with respect thereto, shall be tried only by a court and not by a jury.
The BORROWER and the LENDER hereby expressly waive any right to a trial by jury
in any such suit, action, or proceeding. The BORROWER and the LENDER
acknowledge and agree that this provision is a specific and material aspect of
the agreement between the parties and that the LENDER would not enter into the
transaction with the BORROWER if this provision were not part of their
agreement.
IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory
Note under seal as of the date first above written.
WITNESS/ATTEST: THE BORROWER:
SPORT SUPPLY GROUP, INC.,
A Delaware Corporation
By:
- ---------------------- ----------------------------
Name:
-----------------------
(SEAL) Title:
----------------------
7
<PAGE> 9
ACKNOWLEDGEMENT
STATE OF ______________, CITY/COUNTY OF _______________, TO WIT:
I HEREBY CERTIFY that on this _____ day of November, 1996,
before me, the undersigned Notary Public of the jurisdiction aforesaid,
personally appeared __________________________, and acknowledged himself to be
the ___________________ of SPORT SUPPLY GROUP, INC., a Delaware corporation,
and that he, as such __________________, being authorized so to do, executed
the foregoing instrument for the purposes therein contained by signing the name
of SPORT SUPPLY GROUP, INC. by himself as _______________.
IN WITNESS MY Hand and Notarial Seal.
_______________________________(SEAL)
NOTARY PUBLIC
My Commission Expires:
_____________________
8
<PAGE> 1
EXHIBIT 20(b)
[SPORT SUPPLY GROUP, INC. LETTERHEAD]
TO: ALL SHAREHOLDERS OF SPORT SUPPLY GROUP, INC.
Sport Supply Group, Inc. (NYSE - "GYM") is pleased to report to you
that, subject to the terms and conditions of a Securities Purchase Agreement
between Sport Supply and Emerson Radio Corp. ("Emerson"), Sport Supply intends
to issue to Emerson (i) 1,600,000 newly-issued shares of its Common Stock and
(ii) five-year warrants to purchase up to 1,000,000 newly-issued shares of its
Common Stock at an exercise price of $7.50 per share. In exchange for such
issuance, Sport Supply will receive $12,000,000 in cash and $2,000,000 of
available trade finance credit for the purchase of goods sourced in the Far
East through a foreign subsidiary of Emerson. In addition, and subject to Sport
Supply's receipt of the cash infusion, Sport Supply and its Senior Lender have
agreed to amend their existing credit agreement. Sport Supply will no longer
be in default under such agreement because the $12,000,000 cash infusion will be
used by Sport Supply primarily to repay outstanding bank debt. Sport Supply
will then have significant availability under its senior credit facility to be
used for general corporate purposes.
Upon closing the Securities Purchase Agreement, a majority of the
members of Sport Supply's Board of Directors will consist of Emerson's
designees. Information regarding Emerson and Emerson's designees to the Sport
Supply Board of Directors is included in the information Statement attached to
this letter.
The terms of the transaction described above were recommended by a
Special Committee of independent directors of Sport Supply and were unanimously
approved by Sport Supply's Board of Directors. In addition, an independent
investment banking firm opined that Sport Supply's sale of securities to
Emerson on the terms described above is fair, from a financial point of view,
to Sport Supply.
The transaction with Emerson would normally require approval of
shareholders according to the Shareholder Approval Policy of the New York Stock
Exchange (the "Exchange"). The Audit Committee of the Board of Directors of
Sport Supply determined that the delay necessary in securing shareholder
approval prior to the issuance of the foregoing securities would seriously
jeopardize the financial viability of Sport Supply. Because of that
determination, the Audit Committee, pursuant to an exception provided in the
Exchange's shareholder approval policy for such a situation, expressly approved
Sport Supply's omission to seek the shareholder approval that would otherwise
have been required under that policy. The Exchange has accepted Sport Supply's
application of the exception.
Sport Supply, in reliance on the exception, is mailing a copy of this
letter to all shareholders notifying them of its intention to issue the shares
without seeking their approval. Upon closing of the transaction with Emerson,
which is expected to occur ten days after the notice is mailed, Sport Supply
will proceed to issue certificates for 1,600,000 newly-issued shares of Common
Stock and will reserve an additional 1,000,000 shares of Common Stock for
issuance upon exercise of the Warrants.
I believe Emerson's equity investment will be the capital infusion Sport
Supply needs to support its expanding revenue base and bring all vendor payables
current. It will also enable Sport Supply to return to a historic level of
profitability. Sport Supply's current revolving debt will be reduced to less
than $10 million, which is the lowest level in years, and Sport Supply's
related interest expenses are expected to decline dramatically as compared to
year earlier results. I hope you share my enthusiasm for this significant
investment by Emerson and I thank you for your continued interest in Sport
Supply.
Very Truly Yours,
/s/ MIKE BLUMENFELD
Michael J. Blumenfeld
Chairman of the Board
and Chief Executive Officer
<PAGE> 1
EXHIBIT 99
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated
December 10, 1996, is by EMERSON RADIO CORP., a Delaware corporation
("Pledgor"), with its chief executive office at 9 Entin Road, Parsippany, New
Jersey 07054-0430 to and in favor of CONGRESS FINANCIAL CORPORATION, a
California corporation ("Pledgee"), having an office at 1133 Avenue of the
Americas, New York, New York 10036.
W I T N E S S E T H:
WHEREAS, Pledgor is now the direct and beneficial owner of certain
issued and outstanding shares of capital stock (the "Pledged Stock") of Sport
Supply Group, Inc., a Delaware corporation ("Issuer"), and certain warrants of
Issuer (the "Pledged Warrants), all as described on Exhibit A annexed hereto
and made a part hereof (collectively, the "Pledged Securities); and
WHEREAS, Pledgee and Pledgor have entered into financing arrangements
pursuant to which Pledgee has made and may make loans and advances and has
provided and may provide other financial accommodations to Pledgor and Majexco
Imports, Inc. ("Majexco") as set forth in the Loan and Security Agreement,
dated March 31, 1994, currently by and among Pledgee, Pledgor and Majexco (as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement") and other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto,
including, but not limited to, this Pledge Agreement (all of the foregoing,
together with the Loan Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the "Financing Agreements"); and
WHEREAS, in order to induce Pledgee to continue to make loans and
advances and continue to provide other financial accommodations to Pledgor and
Majexco pursuant to the Financing Agreements, Pledgor has agreed to further
secure the payment and performance of the Obligations (as hereinafter defined)
to Pledgee and to accomplish same by (i) executing and delivering to Pledgee
this Pledge Agreement, (ii) delivering to Pledgee the
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Pledged Securities which are registered in the name of Pledgor, together with
appropriate powers and assignment forms duly executed in blank by Pledgor and
undated, and (iii) delivering to Pledgee any and all other documents which
Pledgee deems necessary to protect Pledgee's interests hereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST
(a) the Pledged Securities, together with all cash dividends,
stock dividends, interests, profits, redemptions, warrants, subscription
rights, stock, securities options, substitutions, exchanges and other
distributions now or hereafter distributed by Issuer or which may hereafter be
delivered to the possession of Pledgor or Pledgee with respect thereto, (b) all
rights of Pledgor to have the Pledged Securities (and any capital stock of
Issuer acquired through the exercise of the Pledged Warrants or any other
warrants which constitute a portion of the Pledged Securities or of any other
warrants at any time owned by Pledgor) registered under the Registration Rights
Agreement dated of even date herewith by and among Issuer, Pledgor and Emerson
Radio (Hong Kong) Limited (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the
"Registration Rights Agreement"), (c) Pledgor's records with respect to the
foregoing, and (d) the proceeds of all of the foregoing (all of the foregoing
being collectively referred to herein as the "Pledged Property").
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2. OBLIGATIONS SECURED
The security interest, lien and other interests granted to Pledgee
pursuant to this Pledge Agreement shall secure the prompt performance and
payment in full of any and all obligations, liabilities and indebtedness of
every kind, nature and description owing by Pledgor to Pledgee and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Pledge Agreement, the Loan Agreement, the
other Financing Agreements or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal
term of the Loan Agreement or after the commencement of any case with respect
to Pledgor under the United States Bankruptcy Code or any similar statute
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the commencement of such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Pledgee (all of the foregoing being collectively referred
to herein as the "Obligations").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
Pledgor hereby represents, warrants and covenants with and to Pledgee
the following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) The Pledged Stock consists of duly authorized, validly issued,
fully paid and non-assessable shares of common stock of Issuer and the Pledged
Warrants consist of duly authorized, validly issued, fully paid and non-
assessable warrants to acquire common stock of Issuer, and the Pledged
Securities constitute Pledgor's entire interest in Issuer and are not
registered, nor has Pledgor authorized the registration thereof, in the name of
any person or entity other than Pledgor or Pledgee. The Pledged Stock does not
include the 669,500 shares of common stock of Issuer owned by Emerson Radio
(Hong Kong) Limited.
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(b) The Pledged Property is directly, legally and beneficially
owned by Pledgor, free and clear of all claims, liens, pledges and encumbrances
of any kind, nature or description, except for the pledge and security interest
in favor of Pledgee and the pledges and security interests permitted under the
Loan Agreement.
(c) The Pledged Property is not subject to any restrictions
relative to the transfer thereof, except as noted on the certificates and
warrants evidencing the Pledged Securities and as provided under the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, and Pledgor has the right
to transfer and hypothecate the Pledged Property free and clear of any liens,
encumbrances or restrictions.
(d) The Pledged Property is duly and validly pledged to Pledgee
and no consent or approval of any governmental or regulatory authority or of
any securities exchange or the like, nor any consent or approval of any other
third party, was or is necessary to the validity and enforceability of this
Pledge Agreement.
(e) Pledgor authorizes Pledgee to: (i) store, deposit and
safeguard the Pledged Property, (ii) perform any and all other acts which
Pledgee in good faith deems reasonable and/or necessary for the protection and
preservation of the Pledged Property or its value or Pledgee's security
interest therein, including, without limitation, transferring, registering or
arranging for the transfer or registration of the Pledged Property to or in
Pledgee's own name and receiving the income therefrom as additional security
for the Obligations and (iii) pay any charges or expenses which Pledgee deems
necessary for the foregoing purpose, but without any obligation to do so. Any
obligation of Pledgee for reasonable care for the Pledged Property in Pledgee's
possession shall be limited to the same degree of care which Pledgee generally
uses for similar property pledged to Pledgee by other persons.
(f) If Pledgor shall become entitled to receive or acquire, or
shall receive any stock certificate, or option or right with respect to the
stock of Issuer (including without limitation, any
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certificate representing a dividend or a distribution or exchange of or in
connection with reclassification of the Pledged Securities) whether as an
addition to, in substitution of, or in exchange for any of the Pledged Property
or otherwise, Pledgor agrees to accept same as Pledgee's agent, to hold same in
trust for Pledgee and to deliver same forthwith to Pledgee or Pledgee's agent
or bailee in the form received, with the endorsement(s) of Pledgor where
necessary and/or appropriate powers and/or assignments duly executed to be held
by Pledgee or Pledgee's agent or bailee subject to the terms hereof, as further
security for the Obligations.
(g) Pledgor shall not, without the prior consent of Pledgee,
directly or indirectly, sell, assign, transfer, or otherwise dispose of, or
grant any option with respect to the Pledged Property, nor shall Pledgor
create, incur or permit any further pledge, hypothecation, encumbrance, lien,
mortgage or security interest with respect to the Pledged Property.
(h) So long as no Event of Default (as hereinafter defined) has
occurred and is continuing, Pledgor shall have the right to vote and exercise
all corporate rights with respect to the Pledged Securities, except as
expressly prohibited herein, and to receive any cash dividends payable in
respect of the Pledged Securities.
(i) No action has been taken or is being taken by or is currently
planned by Pledgor, or any agent acting on its behalf, which would cause this
Pledge Agreement, the Obligations or the other Financing Agreements to violate
Regulation G or Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, or any other applicable law or regulation, in
each case as now in effect or as the same may hereafter be amended or
supplemented.
(j) Pledgor shall pay all charges and assessments of any nature
against the Pledged Property or with respect thereto prior to said charges
and/or assessments being delinquent.
(k) Pledgor shall promptly reimburse Pledgee on demand, together
with interest at the rate then applicable to the
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Obligations set forth in the Loan Agreement, for any charges, assessments or
expenses paid or incurred by Pledgee in its reasonable discretion for the
protection, preservation and maintenance of the Pledged Property and the
enforcement of Pledgee's rights hereunder, including, without limitation,
reasonable attorneys' fees and legal expenses incurred by Pledgee in seeking to
protect, collect or enforce its rights in the Pledged Property or otherwise
hereunder.
(l) Pledgor shall furnish, or cause to be furnished, to Pledgee
such information concerning Issuer and the Pledged Property as Pledgee may from
time to time reasonably request in good faith, including, without limitation,
current financial statements which are otherwise reasonably available from
Issuer.
(m) Pledgee may notify Issuer or the appropriate transfer agent of
the Pledged Securities to register the security interest and pledge granted
herein and honor the rights of Pledgee with respect thereto.
(o) Pledgor waives: (i) all rights to require Pledgee to proceed
against any other person, entity or collateral or to exercise any remedy, (ii)
the defense of the statute of limitations in any action upon any of the
Obligations, (iii) any right of subrogation or interest in the Obligations or
Pledged Property until all Obligations have been paid in full, (iv) any rights
to notice of any kind or nature whatsoever, unless specifically required in
this Pledge Agreement or non-waivable under any applicable law, and (v) to the
extent permissible, its rights under Section 9-112 and 9-207 of the Uniform
Commercial Code. Pledgor agrees that the Pledged Property, other collateral,
or any other guarantor or endorser may be released, substituted or added with
respect to the Obligations, in whole or in part, without releasing or otherwise
affecting the liability of Pledgor, the pledge and security interests granted
hereunder, or this Pledge Agreement. Pledgee is entitled to all of the
benefits of a secured party set forth in Section 9-207 of the New York Uniform
Commercial Code.
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4. EVENTS OF DEFAULT
All Obligations shall become immediately due and payable, without
notice or demand, at the option of Pledgee, upon the occurrence of any Event of
Default, as such term is defined in the Loan Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
At any time an Event of Default exists or has occurred and is
continuing, in addition to all other rights and remedies of Pledgee, whether
provided under this Pledge Agreement, the Loan Agreement, the other Financing
Agreements, applicable law or otherwise, Pledgee shall have the following
rights and remedies which may be exercised without notice to, or consent by,
Pledgor except as such notice or consent is expressly provided for hereunder:
(a) Pledgee, at its option, shall be empowered to exercise its
continuing right to instruct the Issuer (or the appropriate transfer agent of
the Pledged Securities) to register any or all of the Pledged Securities in the
name of Pledgee or in the name of Pledgee's nominee and Pledgee may complete,
in any manner Pledgee may deem expedient, any and all stock powers, assignments
or other documents heretofore or hereafter executed in blank by Pledgor and
delivered to Pledgee. After said instruction, and without further notice,
Pledgee shall have the exclusive right to exercise all voting and corporate
rights with respect to the Pledged Securities and other Pledged Property, and
exercise any and all rights of conversion, redemption, exchange, subscription
or any other rights, privileges, or options pertaining to any shares of the
Pledged Securities or other Pledged Property as if Pledgee were the absolute
owner thereof, including, without limitation, the right to exchange, in its
discretion, any and all of the Pledged Securities and other Pledged Property
upon any merger, consolidation, reorganization, recapitalization or other
readjustment with respect thereto. Upon the exercise of any such rights,
privileges or options by Pledgee, Pledgee shall have the right to deposit and
deliver any and all of the Pledged Securities and other Pledged Property to any
committee, depository, transfer agent, registrar or other designated agency
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upon such terms and conditions as Pledgee may determine, all without liability,
except to account for property actually received by Pledgee. However, Pledgee
shall have no duty to exercise any of the aforesaid rights, privileges or
options (all of which are exercisable in the sole discretion of Pledgee) and
shall not be responsible for any failure to do so or delay in doing so.
(b) Pledgee may (but shall not be required to) exercise and
enforce all rights of Pledgor under the Registration Rights Agreement.
(c) In addition to all the rights and remedies of a secured party
under the Uniform Commercial Code or other applicable law, Pledgee shall have
the right, at any time and without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Pledgor or any other person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived to the extent permitted by applicable law), to proceed
forthwith to collect, redeem, recover, receive, appropriate, realize, sell, or
otherwise dispose of and deliver said Pledged Property or any part thereof in
one or more lots at public or private sale or sales at any exchange, broker's
board or at any of Pledgee's offices or elsewhere at such prices and on such
terms as Pledgee may deem best. The foregoing disposition(s) may be for cash
or on credit or for future delivery without assumption of any credit risk, with
Pledgee having the right to purchase all or any part of said Pledged Property
so sold at any such sale or sales, public or private, free of any right or
equity of redemption in Pledgor, which right or equity is hereby expressly
waived or released by Pledgor. The proceeds of any such collection,
redemption, recovery, receipt, appropriation, realization, sale or other
disposition, after deducting all costs and expenses of every kind incurred
relative thereto or incidental to the care, safekeeping or otherwise of any and
all Pledged Property or in any way relating to the rights of Pledgee hereunder,
including reasonable attorneys' fees and legal expenses, shall be applied first
to the satisfaction of the Obligations (in such order as Pledgee may elect and
whether or not due) and then to the payment of any other amounts required by
applicable law, including Section 9- 504(1)(c) of the Uniform
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Commercial Code, with Pledgor to be and remain liable for any deficiency.
Pledgor shall be liable to Pledgee for the payment on demand of all such costs
and expenses, together with interest at the then applicable rate set forth in
the Loan Agreement, and any attorneys' fees and legal expenses. To the extent
any notice of disposition is required under applicable law, Pledgor agrees that
five (5) days prior written notice by Pledgee designating the place and time of
any public sale or of the time after which any private sale or other intended
disposition of any or all of the Pledged Property is to be made, is reasonable
notification of such matters.
(d) Pledgor recognizes that Pledgee may be unable to effect a
public sale of all or part of the Pledged Property by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, as now or
hereafter in effect or in applicable Blue Sky or other state securities law, as
now or hereafter in effect, but may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such Pledged Property for their own account for
investment and not with a view to the distribution or resale thereof. If at
the time of any sale of the Pledged Property or any part thereof, the same
shall not, for any reason whatsoever, be effectively registered (if required)
under the Securities Act of 1933 (or other applicable state securities law), as
then in effect, Pledgee in its sole and absolute discretion is authorized to
sell such Pledged Property or such part thereof by private sale in such manner
and under such circumstances as Pledgee or its counsel may deem necessary or
advisable in order that such sale may legally be effected without registration.
Pledgor agrees that private sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Property were sold at public sale,
and that Pledgee has no obligation to delay the sale of any such Pledged
Property for the period of time necessary to permit Issuer, even if Issuer is
required to register any of the Pledged Property under the Registration Rights
Agreement or would otherwise agree to register such Pledged Property for public
sale under such applicable securities laws. Pledgor agrees that any private
sales made under the foregoing circumstances shall be deemed to have been in a
commercially reasonable manner.
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(e) All of the Pledgee's rights and remedies, including, but not
limited to, the foregoing and those otherwise arising under this Pledge
Agreement, the Loan Agreement and the other Financing Agreements, the
agreements and instruments comprising the Pledged Property, applicable law or
otherwise, shall be cumulative and not exclusive and shall be enforceable
alternatively, successively or concurrently as Pledgee may deem expedient. No
failure or delay on the part of Pledgee in exercising any of its options,
powers or rights or partial or single exercise thereof, shall constitute a
waiver of such option, power or right.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
(a) The validity, interpretation and enforcement of this Pledge
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Pledgor irrevocably consents and submits to the non-exclusive
jurisdiction of Supreme Court of the State of New York for the County of New
York and the United States District Court for the Southern District of New York
and waives any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Pledge Agreement or any of the
other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Pledge
Agreement or any of the other Financing Agreements or the transactions related
hereto or thereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity or otherwise, and agrees that any dispute
with respect to any such matters shall be heard only in the courts described
above (except that Pledgee shall have the right to bring any action or
proceeding against Pledgor or its property in the courts of any other
jurisdiction which Pledgee deems necessary or appropriate in order to realize
on the Pledged Property or to otherwise enforce its rights against Pledgor or
its property).
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(c) Pledgor hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth herein and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Pledgee's option, by
service upon Pledgor in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Pledgor shall appear in
answer to such process, failing which Pledgor shall be deemed in default and
judgment may be entered by Pledgee against Pledgor for the amount of the claim
and other relief requested.
(d) PLEDGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE IN RESPECT OF THIS
PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. PLEDGOR HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PLEDGOR OR PLEDGEE MAY
FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) Pledgee shall not have any liability to Pledgor (whether in
tort, contract, equity or otherwise) for losses suffered by Pledgor in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Pledge Agreement, or any act, omission or
event occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Pledgee, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Pledgee shall be entitled to the benefit
of the rebuttable presumption that it acted in good faith and with the exercise
of ordinary care in the performance by it of the terms of this Pledge
Agreement.
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7. MISCELLANEOUS
(a) Pledgor agrees that at any time and from time to time upon the
written request of Pledgee, Pledgor shall execute and deliver such further
documents, including, but not limited to, irrevocable proxies or stock powers,
in form satisfactory to counsel for Pledgee, and will take or cause to be taken
such further acts as Pledgee may request in order to effect the purposes of
this Pledge Agreement and perfect or continue the perfection of the security
interest in the Pledged Property granted to Pledgee hereunder.
(b) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Property (whether such custody is exercised by Pledgee,
or Pledgee's nominee, agent or bailee) Pledgee or Pledgee's nominee agent or
bailee shall have no duty or liability to protect or preserve any rights
pertaining thereto and shall be relieved of all responsibility for the Pledged
Property upon surrendering it to Pledgor or foreclosure with respect thereto.
(c) All notices, requests and demands to or upon the respective
parties hereto shall be in writing and shall be deemed to have been duly given
or made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by registered or certified mail, return receipt requested, five
(5) days after mailing. All notices, requests and demands upon the parties are
to be given to the following addresses (or to such other address as any party
may designate by notice in accordance with this Section):
If to Pledgor: Emerson Radio Corp.
9 Entin Road
Parsippany, New Jersey 07054-0430
Attention: President
If to Pledgee: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Andrew Robin
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(d) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural. All references to
Pledgor, Pledgee and Issuer pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their respective
successors and assigns. The words "hereof," "herein," "hereunder," "this
Pledge Agreement" and words of similar import when used in this Pledge
Agreement shall refer to this Pledge Agreement as a whole and not any
particular provision of this Pledge Agreement and as this Pledge Agreement now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced. An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section
7(g) hereof. All references to the term "Person" or "Persons" herein shall
mean any individual, sole proprietorship, partnership, corporation (including,
without limitation, any corporation which elects subchapter S status under the
Internal Revenue Code of 1986, as amended), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
company, trust, joint venture or other entity or any government or any agency,
instrumentality or political subdivision thereof.
(e) This Pledge Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon Pledgor and
its successors and assigns and inure to the benefit of and be enforceable by
Pledgee and its successors and assigns.
(f) If any provision of this Pledge Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Pledge Agreement as a whole, but this Pledge Agreement shall be
construed as though it did not contain the particular provision held to be
invalid or unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by applicable
law.
(g) Neither this Pledge Agreement nor any provision hereof shall
be amended, modified, waived or discharged orally or by
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course of conduct, but only by a written agreement signed by an authorized
officer of Pledgee. Pledgee shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Pledgee. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Pledgee of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Pledgee would otherwise
have on any future occasion, whether similar in kind or otherwise.
IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of
the day and year first above written.
EMERSON RADIO CORP.
By:
-----------------------
Title:
--------------------
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<PAGE> 15
EXHIBIT A
TO
PLEDGE AND SECURITY AGREEMENT
Capital Stock
<TABLE>
<CAPTION> Certificate
Issuer Number Shares
------ ----------- ------
<S> <C> <C>
Sport Supply Group, Inc. GYM 7162 1,600,000
</TABLE>
Warrants
<TABLE>
<CAPTION>
Number of Shares
Warrant Which May Be
Issuer Number Purchased
------ -------- ----------------
<S> <C> <C>
Sport Supply Group, Inc. 001 1,000,000
</TABLE>
- 15 -
