CONSENT NO. 1 UNDER FINANCING AGREEMENTS
November 27, 1996
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; 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, currently 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 and Amendment No. 4 to
Financing Agreements, dated November 14, 1996 (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.
Reference is made to the Securities Purchase Agreement, dated as of
the date hereof, between Sport Supply Group, Inc. ("SSG") and Emerson (the
"Securities Purchase Agreement"), together with the documents, agreements
and instruments to be entered into in connection therewith, including,
without limitation: (a) the Warrant Agreement by SSG in favor of Emerson or
registered assigns (the "Warrant Agreement") and (b) the Registration
Rights Agreement by and among SSG, Emerson and Emerson Radio (Hong Kong)
Limited (the "Registration Rights Agreement"; and together with the
Securities Purchase Agreement and the Warrant Agreement, collectively, the
"Purchase Agreements"), providing for, inter alia, the sale by SSG to
Emerson of certain capital stock and warrants of SSG (the "Stock and
Warrants").
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. CONSENT. Subject to the terms and conditions set forth herein,
Lender hereby consents to the purchase by Emerson of the Stock and Warrants
pursuant to the Securities Purchase Agreement (as in effect on the date
hereof), but not any exercise of Emerson's rights under the Warrant
Agreement or the subsequent purchase of capital stock of SSG pursuant to
the Warrant Agreement; PROVIDED, THAT:
(a) the closing of the purchase of the Stock and Warrants
contemplated by the Securities Purchase Agreement shall occur by no later
than December 16, 1996;
(b) no indebtedness has been incurred by Borrower in connection
with the funds used for the purchase of the Stock and Warrants, except for
Revolving Loans borrowed within all applicable lending formulas and subject
to all applicable sublimits under the Loan Agreement;
(c) immediately prior to the purchase of the Stock and Warrants,
and the payment of any portion of the purchase price therefor, Borrower's
Excess Availability, determined after the issuance of the SSG Purchase L/C
(as defined below), and while the same is outstanding and after taking into
account the $3,000,000 of Availability Reserves or cash collateral
established by Lender in connection with the SSG Purchase L/C, shall be at
least $13,000,000;
(d) after giving effect to the purchase of the Stock and
Warrants, and the payment in full of the purchase price thereof, Excess
Availability shall be at least $4,000,000; and
(e) the proceeds of Revolving Loans borrowed in connection with
the Securities Purchase Agreement shall not be used in any manner, directly
or indirectly, that would violate the provisions of Regulations G or X of
the Board of Governors of the Federal Reserve System ("Regulations G or
X").
2. LETTER OF CREDIT. By separate application, Emerson has requested
the issuance of a Letter of Credit Accommodation in the form of an
irrevocable standby letter of credit (the "SSG Purchase L/C") in the face
amount of $3,000,000 in favor of SSG to be used by Emerson as a deposit
against the purchase price of the Stock and Warrants or as payment of a
termination fee under Sections 2.3 and 11.2 of the Securities Purchase
Agreement. Borrower hereby represents, warrants and covenants that the SSG
Purchase L/C will be drawn upon on the date of the closing of the
acquisition of the Stock and Warrants pursuant to the Securities Purchase
Agreement and the amounts drawn applied to the purchase price for the Stock
and Warrants. Lender agrees to submit an application signed by Borrower
and co-signed by Lender to CoreStates Bank N.A. as issuer, requesting the
issuance of the SSG Purchase L/C.
3. CONDITIONS PRECEDENT. The effectiveness of the consent by Lender
contained herein shall be subject to the receipt by Lender of each of the
following, in form and substance as satisfactory to Lender:
(a) an original of this Consent, duly authorized, executed and
delivered by the parties hereto; and
(b) a true, correct and complete copy of the Securities Purchase
Agreement, with all exhibits and schedules thereto, duly authorized,
executed and delivered by the parties hereto.
4. ADDITIONAL COVENANTS. In addition to the continuing
representations, warranties and covenants heretofore or hereafter made by
Borrower pursuant to the Loan Agreement and other Financing Agreements,
Borrower hereby covenants with and to Lender that, prior to or
contemporaneously with the closing of the transactions contemplated by the
Purchase Agreements, Emerson shall deliver, or cause to be delivered, to
Lender each of the following, in form and substance satisfactory to Lender:
(a) a true, correct and complete copy of the Warrant Agreement,
duly authorized, executed and delivered by SSG;
(b) a true, correct and complete copy of the Registration Rights
Agreement, duly authorized, executed and delivered by the parties thereto;
(c) an original Pledge and Security Agreement pursuant to which
Emerson shall pledge to Lender, as additional Collateral for payment and
performance of the Obligations of Emerson, the Stock and 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 Stock (and any capital stock of SSG acquired through the exercise
of the Warrants (as may hereafter be permitted by Lender) registered under
the Registration Rights Agreement, together with associated original stock
power(s) (executed undated and in blank), original stock certificate(s),
original warrant Assignment Form(s) (executed undated and in blank) and
original warrant(s), each duly authorized, executed and delivered by the
parties thereto;
(d) an original of a Statement of Purpose for an Extension of
Credit Secured by Margin Stock by a Person Subject to Registration under
Regulation G (Federal Reserve Form G-3), duly authorized, executed and
delivered by Borrower; and
(e) an original of an opinion letter of counsel to Emerson
addressed to Lender, in form and substance satisfactory to Lender, with
respect to the transactions contemplated by this Consent, including,
without limitation, an opinion:
(i) with respect to the corporate power, due
authorization, execution and delivery by Emerson of the Purchase
Agreements, the Consent and the agreements and instruments executed and
delivered by Emerson hereunder;
(ii) that the execution, delivery and performance of the
Purchase Agreements and the transactions contemplated by this Consent do
not violate the terms of any existing agreements to which Borrower is a
party; and
(iii) that the proceeds of the Revolving Loans, to the
extent used to purchase the Stock and Warrants, have not been used in any
manner, directly or indirectly, which violates the provisions of
Regulations G or X, assuming the accuracy of the factual statements
contained in the Federal Reserve Form G-3 delivered hereunder.
5. MISCELLANEOUS.
(a) EFFECT OF THE CONSENT. Except as modified pursuant hereto,
no other changes or modifications to the Financing Agreements are intended
or implied.
(b) GOVERNING LAW. This Consent and the rights 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 Consent shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) COUNTERPARTS. This Consent 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 Consent it shall not
be necessary to produce or account for more than one counterpart thereof
signed by each of the parties hereto.
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By the signature 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/ KENNETH G. DONAHUE
Title: ASSISTANT VICE PRESIDENT
AGREED AND ACCEPTED:
EMERSON RADIO CORP.
By: /S/ JOHN P. WALKER
Title: EXECUTIVE VICE PRESIDENT & CFO
MAJEXCO IMPORTS, INC.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
CONSENTED TO AND AGREED:
H.H. SCOTT, INC.
EMERSON COMPUTER CORP.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
EMERSON RADIO CANADA LTD.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
EMERSON RADIO & TECHNOLOGIES N.V.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER