Annual Report — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 60± 285K
2: EX-1 Underwriting Agreement 9± 36K
3: EX-2 Plan of Acquisition, Reorganization, Arrangement, 1 8K
Liquidation or Succession
4: EX-3 Articles of Incorporation/Organization or By-Laws 17± 68K
5: EX-4 Instrument Defining the Rights of Security Holders 16± 68K
6: EX-5 Opinion re: Legality 5± 22K
7: EX-6 Opinion re: Discount on Capital Shares 3± 16K
9: EX-7 Opinion re: Liquidation Preference 3± 14K
10: EX-8 Opinion re: Tax Matters 1 6K
8: EX-27 Financial Data Schedule (Pre-XBRL) 1 7K
EX-5 — Opinion re: Legality
AMENDMENT NO. 7 TO FINANCING AGREEMENTS
As of March 31, 1998
Emerson Radio Corp.
Majexco Imports, Inc.
9 Entin Road
Parsippany, New Jersey 07054
Gentlemen:
Congress Financial Corporation ("Lender"), Emerson Radio Corp. ("Emerson")
and Majexco Imports, Inc., ("Majexco"; and together with Emerson, individually
and collectively, the "Borrower") have entered into certain financing
arrangements pursuant to the Loan and Security Agreement, dated March 31, 1994,
by and between Lender and Borrower, as amended by Amendment No. 1 to Financing
Agreements, dated August 24, 1995, Amendment No. 2 to Financing Agreements,
dated February 13, 1996, Amendment No. 3 to Financing Agreements, dated August
20, 1996, Amendment No. 4 to Financing Agreements, dated November 14, 1996,
Amendment No. 5 to Financing Agreements, dated February 18, 1997, and Amendment
No. 6 to Financing Agreements, dated August 14, 1997 (as amended, the "Loan
Agreement"), together with various other agreements, documents and instruments
at any time executed and/or delivered in connection therewith or related thereto
(as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, collectively, the "Financing
Agreements"). All capitalized terms used herein and not herein defined shall
have the meanings given to them in the Loan Agreement.
Borrower has requested that Lender agree to certain amendments to the
Financing Agreements, and Lender is willing to agree to such amendments, subject
to the terms and conditions set forth herein.
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. MAXIMUM CREDIT. The reference to "$30,000,000" in Section 1.34 of the
Loan Agreement, as previously amended, is hereby deleted and replaced with
"$10,000,000".
2. LETTER OF CREDIT ACCOMMODATIONS. The reference to "$15,000,000" in
Section 2.2(d) of the Loan Agreement, as previously amended, is hereby deleted
and replaced with "$5,000,000".
3. ADJUSTED NET WORTH.
(a) Section 1.2 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"1.2 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP on a consolidated basis with such Person's
subsidiaries (except as otherwise specifically set forth below), the
amount equal to: (a) the difference between: (i) the aggregate net
book value of all assets of such Person and its subsidiaries,
calculating the book value of inventory, for this purpose on a first-
in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other
liabilities of such Person and its subsidiaries (including tax and
other proper accruals), plus (b) indebtedness of such Person and its
subsidiaries which is subordinated in right of payment to the full and
final payment of all of the Obligations on terms and conditions
acceptable to Lender."
(b) Section 9.14 of the Loan Agreement, as previously amended, shall
be deleted in its entirety and replaced with the following, effective as of the
date hereof:
"9.14 ADJUSTED NET WORTH. Emerson shall, at all
times, maintain, on a consolidated basis with its subsidiaries,
Adjusted Net Worth of not less than $10,000,000."
4. REVOLVING LOAN FORMULAS.
Section 2.1(a) of the Loan Agreement is hereby deleted in its entirety
and replaced with the following:
"2.1 LOANS.
(a) Subject to, and upon the terms and conditions
contained herein, Lender agrees to make Loans to Borrower from time to
time in amounts requested by Borrower up to the amount equal to:
(i) the sum of:
(A) the lesser of:
(1) $500,000; or
(2) sixty (60%) percent of the
Net Amount of Eligible Accounts of Emerson;
plus
(B) fifty-five (55%) percent of the
Value of Eligible Inventory consisting of first quality
finished goods of Emerson; plus
(C) twenty (20%) percent of the Value
of Eligible Inventory of Emerson consisting of finished
goods returned to Emerson by its customers, that is both (a)
owned by Emerson and (b) in the possession of Emerson or in
public warehouses under Emerson's control; less
(ii) any Availability Reserves."
None of the Inventory or Accounts of the Eligible Subsidiary shall be considered
Eligible Inventory or Eligible Accounts and no Loans or Letter of Credit
Accommodations shall be available in respect thereof. The "Canadian Sublimit"
as referred to in Section 2.1(e) of the Loan Agreement is hereby reduced to zero
($0). The last sentence of Section 2.1(c) of the Loan Agreement, as previously
amended, is hereby further amended by changing the reference to "$20,000,000"
contained therein to "$10,000,000".
5. UNUSED LINE FEE. Section 3.4 of the Loan Agreement, as previously
amended, is hereby deleted in its entirety and replaced with the following:
"3.4 UNUSED LINE FEE. Borrower shall pay to Lender
monthly an unused line fee calculated at the rate of nine-tenths
(.9%) percent per annum upon the amount by which $10,000,000
exceeds the average daily principal balance of the
outstanding Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while the
Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first
day of each month, in arrears."
6. RENEWAL DATE. The reference to "the date four (4) years from the date
hereof" contained in Section 12.1(a) of the Loan Agreement, as previously
amended, is hereby deleted and replaced with the following: "March 31, 2001".
7. EARLY TERMINATION FEE.
Section 12.1(c) of the Loan Agreement shall be deleted in its entirety
and replaced by the following:
"(c) If for any reason this Agreement is terminated
prior to the end of the then current term or renewal term of
this Agreement, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual
agreement of the parties as to a reasonable calculation of
Lender's lost profits as a result thereof, Borrower agrees to
pay to Lender, upon the effective date of such termination,
an early termination fee in the amount of one percent (1%)
of the Maximum Credit."
The provisions of Section 9(b) of Amendment No. 1 to Financing Agreements and of
Section 6(b) of Amendment No. 4 to Financing Agreements are no longer applicable
and are hereby deleted.
8. RELEASE OF PORTIONS OF PLEDGED COMMON STOCK AND WARRANTS. Lender
agrees to release from the Collateral all except 500,000 shares of the common
stock of Sport Supply Group Inc. previously pledged by Emerson to Lender and all
of the common stock warrants issued by Sport Supply Group Inc. previously
pledged by Emerson to Lender pursuant to the Pledge and Security Agreement,
dated December 10, 1996, by Emerson in favor of Lender, subject to the terms and
conditions contained herein and as provided in Amendment No. 1 to Pledge and
Security Agreement executed and delivered by Emerson in favor of Lender as of
the date hereof.
9. CONDITIONS PRECEDENT. The effectiveness of the other terms and
conditions contained herein shall be subject to
(a) the receipt by Lender of each of the following, in form and
substance satisfactory to Lender:
(i) an original of this Amendment, duly authorized, executed an
delivered by Borrower and consented and agreed to by the other Obligors; and
(ii) an original of Amendment No. 1 to Pledge and Security
Agreement, duly authorized, executed and delivered by Emerson; and
(b) no Event of Default shall exist or have occurred, and no event or
condition, which with the giving of notice or passage of time, or both, would
constitute an Event of Default, shall exist or have occurred.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; RATIFICATION AND CONFIRMATION OF THE FINANCING
AGREEMENTS. This Amendment contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior or contemporaneous
term sheets, proposals, discussions, negotiations, correspondence, commitments
and communications between or among the parties concerning the subject matter
hereof. This Amendment may not be modified or any provision waived, except in
writing signed by the party against whom such modification or waiver is sought
to be enforced.
Except as specifically modified pursuant hereto, the Loan Agreement and the
other Financing Agreements are hereby ratified, restated and confirmed by the
parties hereto as of the effective date hereof. To the extent of conflict
between the terms of this Amendment, the Loan Agreement and the other Financing
Agreements, the terms of this Amendment shall control.
(b) GOVERNING LAW. This Amendment and the right and obligations
hereunder of each of the parties hereto shall be governed by and interpreted and
determined in accordance with the laws of the State of New York.
(c) BINDING EFFECT. This Amendment shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns.
(d) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
By the signatures hereto of each of their duly authorized officers, all of
the parties hereto mutually covenant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: /s/ Josephine Norris
Title: 1st VP
[SIGNATURES CONTINUED ON THE NEXT PAGE]
[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]
AGREED AND ACCEPTED:
EMERSON RADIO CORP.
By: /s/ John Walker
Title: EVP, CFO
MAJEXCO IMPORTS, INC.
By: /s/ John Walker
Title: SVP - Finance - Treasurer
CONSENTED TO AND AGREED:
H. H. SCOTT, INC.
EMERSON COMPUTER CORP.
By: /s/ John Walker
Title: SVP - Finance - Treasurer
EMERSON RADIO CANADA LTD.
By: /s/ John Walker
Title: Treasurer
EMERSON RADIO & TECHNOLOGIES N.V.
By: /s/ John Walker
Title: SVP - Finance - Treasurer
Dates Referenced Herein and Documents Incorporated by Reference
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