FOURTH AMENDMENT TO AMENDED AND RESTATED
REVOLVING LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN AND
SECURITY AGREEMENT (together with all appendices, exhibits, schedules and
attachments hereto, collectively this "AMENDMENT") is made and entered into
as of August 20, 1998, by and between THE ROACH ORGANIZATION, INC., a
Delaware corporation and TRO LEARNING (CANADA), INC., a corporation organized
under the laws of Canada (collectively, the "BORROWER") and SANWA BUSINESS
CREDIT CORPORATION, a Delaware corporation with its principal place of
business at One South Wacker Drive, Chicago, Illinois 60606 ("LENDER").
WHEREAS, Borrower and Lender entered into that certain Amended and
Restated Revolving Loan and Security Agreement dated as of March 5, 1997 by
and between Borrower and Lenders, as amended by that certain First Amendment
to Amended and Restated Revolving Loan and Security Agreement dated as of
March 18, 1997, by that certain Second Amendment to Amended and Restated
Revolving Loan and Security Agreement dated as of December 8, 1997 and by
that certain Third Amendment to Amended and Restated Revolving Loan and
Security Agreement dated as of April 15, 1998 (as so amended the "LOAN
AGREEMENT") together with documents ancillary thereto, including, without
limitation that certain Amended and Restated Guaranty of Payment and
Performance dated as of March 5, 1997 made by TRO Learning Inc. ("GUARANTOR")
in favor of Lender; and
WHEREAS, Borrower has requested that Lender extend the Supplemental Over
Advance Facility, extend the term of the Loan Agreement and further amend the
Loan Agreement as provided herein and Guarantor has consented to such
amendment.
NOW THEREFORE, for and in consideration of the premises, the mutual
covenants hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which the parties hereby acknowledge, the
parties hereby agree as follows:
ARTICLE
1.
RECITALS AND DEFINITIONS
1.1. Borrower represents and warrants that the foregoing recitals are
true and correct and constitute an integral part of this Amendment and
Borrower and Lender hereby agree that all of the recitals of this Amendment
are hereby incorporated herein and made a part hereof.
1.2. Unless otherwise defined herein or the context otherwise requires,
all capitalized terms used herein shall have the same meanings as ascribed to
them in the Loan Agreement.
ARTICLE
2.
AMENDMENT OF THE LOAN AGREEMENT
2.1. Subsection 2.2(C) to the Loan Agreement is deleted in its entirety
and the following is substituted therefor:
(C) Subject to the provisions of Section 2.2(A) and in addition
to the Over Advance Facility, Lender shall make available to Borrower a
supplemental over advance facility (the "Supplemental Over Advance
Facility," each supplemental over advance being a "Supplemental Over
Advance") as follows:
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Aggregate
Month Over Advance Available
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December, 1997 $1,000,000
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January, 1998 $1,500,000
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February, 1998 $2,500,000
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March, 1998 $3,500,000
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April, 1998 $4,500,000
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May, 1998 $4,500,000
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June, 1998 $4,500,000
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July, 1998 $4,500,000
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August, 1998 $4,500,000
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September, 1998 $4,500,000
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October, 1998 $3,500,000
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November, 1998 $3,500,000
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December, 1998 0
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January, 1998 0
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February, 1998 0
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Borrower agrees that the aggregate amount of Supplemental Over
Advances made by Lender shall never be greater than the dollar amount
set forth in the above table during each respective month. There shall
occur an immediate Event of Default in the event that the aggregate
amount of Supplemental Over Advances ever exceeds the respective dollar
amount set forth in the above table. In no event shall the aggregate
amount of Supplemental Over Advances ever exceed $4,500,000.
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2.2. Section 2.7 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
2.7 TERM OF AGREEMENT. This Agreement shall be in effect from the
Origination Date, through and including February 28, 1999 (the "Term"),
subject to earlier termination by Lender upon the occurrence of a
Default as provided in Section 11.1. Upon the effective date of
termination, all of the Liabilities shall become immediately due and
payable without presentment, notice or demand, except as otherwise
provided herein. Notwithstanding any termination, until all of the
Liabilities shall have been fully paid and satisfied, Lender shall be
entitled to retain its security interest in the Collateral. Borrower
shall continue to remit collections of Accounts and proceeds of
Collateral as provided in this Agreement, and Lender shall retain all of
its rights and remedies under this Agreement.
2.3. The following subsection shall be added as a new subsection 2.8(D)
to the Loan Agreement:
(C) On or before November 30, 1998, Borrower shall make a
mandatory prepayment on the Term Loan of $1,000,000. Such mandatory
prepayment shall not be subject to a prepayment penalty or premium and
shall be applied to the scheduled installments of principal on the Term
Loan in the inverse order of maturity.
2.4. Subsection 10.1(B) is hereby deleted in its entirety and the
following is substituted therefor:
(D) Borrower shall maintain Operating Profit, measured quarterly
on the last day of each fiscal quarter of Borrower, as follows:
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First Quarter: 1998 ($2,900,000)
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Second Quarter: 1998 ($450,000)
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Third Quarter: 1998 $2,000,000
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Fourth Quarter: 1998 $4,850,000
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First Quarter: 1999 ($2,900,000)
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ARTICLE
3.
FEES
3.1. EARNED FEE. Borrower shall pay to Lender the non-sales success fee
in the amount of Two Hundred Thousand and no/100 Dollars ($200,000.00), which
fee was earned pursuant to the terms of the Second Amendment to Amended and
Restated Revolving Loan and Security Agreement and shall be paid concurrently
with Borrower's execution of this Amendment.
3.2. SUCCESS FEES. Upon the occurrence of a "Sale Event" (defined
herein), Borrower shall pay to Lender a sales success fee (a "SALES SUCCESS
FEE") in an amount equal to the greater of (i) Three Hundred Thousand and
no/100 Dollars ($300,000) and (ii) the product of (x) 100,000 MULTIPLIED BY
(y) the excess, if any, of the "Market Price" (defined herein) of a share of
Guarantor's common stock as of the date of any Sale Event over the Market
Price of a share of common stock of Guarantor as of December 8, 1997. For
purposes of this Section, the term "Market Price" day shall mean $6,625 and
the term "Sale Event" shall mean: (A) the closing of any sale of securities
of Guarantor to a person if, after such sale, such person, other than the
persons who were shareholders of Guarantor immediately prior to the
effectiveness of such transaction, would own or control securities which
possess in the aggregate the ordinary voting power to elect a majority of the
directors of Guarantor; or (B) the effectiveness of a merger, consolidation
or similar transaction involving Guarantor if, after such transaction, a
person in the aggregate, other than the persons who were shareholders of
Guarantor immediately prior to the effectiveness of such transaction, would
own or control securities which possess in the aggregate the ordinary voting
power to elect a majority of the surviving entity's directors; or (C) the
sale of all or substantially all of the assets of Guarantor to another entity
or person. Borrower shall pay to Lender a non-sales success fee (a
"NON-SALES SUCCESS FEE") in an amount equal to Two Hundred Thousand and
No/Dollars ($200,000) in the event that a Sales Event has not occurred prior
to the earlier of (a) December 31, 1998, or (b) the date on which Lender
accelerates the Liabilities pursuant to Section 11.2 of the Loan Agreement
which Non-sales Success Fee shall be credited against the Sales Success Fee
in the event a Sale Event occurs prior to February 28, 1999. Borrower shall
pay to Lender a supplemental non-sales success fee (a "SUPPLEMENTAL NON-SALES
SUCCESS FEE") in an amount equal to One Hundred Thousand and No/100 Dollars
($100,000) in the event that a Sales Event has not occurred prior to the
earlier of (a) February 28, 1999, or (b) the date on which Lender accelerates
the Liabilities pursuant to Section 11.2 of the Loan Agreement. Each of the
Sales Success Fee, the Non-sales Success Fee and the Supplemental Non-sales
Success Fee shall be a Liability secured by the Collateral and shall be
payable within three days of its determination and shall be separate and
distinct from the fee identified in Section 3.1.
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ARTICLE
4.
REPRESENTATIONS AND WARRANTIES
4.1. Borrower hereby makes the following representations and warranties
to Lender, which representations and warranties shall constitute the
continuing covenants of Borrower and shall remain true and correct until all
of Borrower's liabilities are paid and performed in full:
a. The representations and warranties of Borrower contained in
the Loan Agreement are true and correct on and as of the date hereof as though
made on and as of such date;
b. No Event of Default or event which, but for the Lapse of time
or the giving of notice, or both, would constitute an Event of Default under
the Loan Agreement has occurred and is continuing or would result from the
execution and delivery of this Amendment;
c. Borrower is in full compliance with all of the terms,
conditions and all provisions of the Loan Agreement and the other agreements;
d. This Amendment and all other agreements required hereunder to
be executed by Borrower and delivered to Lender, have been duly authorized,
executed and delivered on Borrower's behalf pursuant to all requisite
corporate authority and this Amendment and each of the other agreements
required hereunder to be executed and delivered by Borrower to Lender
constitute the legal, valid and binding obligations of Borrower enforceable
in accordance with their terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights; and
e. Borrower hereby acknowledges and agrees that Borrower has no
defense, offset or counterclaim to the payment of said principal, interest,
fees or other liabilities and hereby waives and relinquishes any such
defense, offset or counterclaim and Borrower hereby releases Lender and its
respective officers, directors, agents, affiliates, successors and assigns
from any claim, demand or cause of action, known or unknown, contingent or
liquidated, which may exist or hereafter be known to exist relating to any
matter prior to date hereof.
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ARTICLE
5.
RATIFICATION
Except as expressly amended hereby, the Loan Agreement and all other
agreements executed in connection therewith shall remain in full force and
effect. The Loan Agreement, as amended hereby, and all rights and powers
created thereby and thereunder or under such other agreements, are in all
respects ratified and confirmed. From and after the date hereof the Loan
Agreement shall be deemed amended and modified as herein provided but, except
as so amended and modified, the Loan Agreement shall continue in full force
and effect and the Loan Agreement and this Amendment shall be read, taken and
construed as one and the same instrument. On and after the date hereof, the
term "Agreement" as used in the Loan Agreement and all other references to
the Loan Agreement therein, in any other instrument, document or writing
executed by Borrower or any guarantor or furnished to Lender by Borrower or
any guarantor in connection therewith or herewith shall mean the Loan
Agreement as amended by this Amendment.
ARTICLE
6.
MISCELLANEOUS
6.1. This Amendment may be signed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
6.2. Except as otherwise specified herein, this Amendment embodies the
entire agreement and understanding between Lender and Borrower with respect
to the subject matter hereof and supersedes all prior agreements, consents
and understandings relating to such subject matter.
6.3. The headings in this Amendment have been inserted for convenience
only and shall be given no substantive meaning or significance in construing
the terms of this Amendment.
6.4. This Amendment shall inure to the benefit of Lender and its
successors and assigns and shall be binding upon and inure to the successors
and assigns of Borrower, except that Borrower may not assign any of its
rights in and to this Amendment.
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IN WITNESS WHEREOF, Borrower and Lender have caused this Fourth
Amendment to Amended and Restated Revolving Loan and Security Agreement to be
executed and delivered as of the day and year written above.
THE ROACH ORGANIZATION, INC.
By: /s/ Andrew N. Peterson
----------------------------
Name: Andrew N. Peterson
--------------------------
Title: Chief Financial Officer
--------------------------
TRO LEARNING (CANADA), INC.
By: /s/ Andrew N. Peterson
----------------------------
Name: Andrew N. Peterson
--------------------------
Title: Chief Financial Officer
--------------------------
SANWA BUSINESS CREDIT CORPORATION
By: ____________________________
Name: __________________________
Title: _________________________
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REAFFIRMATION OF AMENDED AND RESTATED
GUARANTY OF PAYMENT AND PERFORMANCE
THE UNDERSIGNED PARTY, as guarantor ("GUARANTOR") of the above Borrowers
pursuant to its Amended and Restated Guaranty of Payment and Performance (the
"GUARANTY") identified below, acknowledges the terms and conditions set forth
in this Fourth Amendment to Amended and Restated Revolving Loan and Security
Agreement and ratifies and reaffirms its guaranty obligations as set forth in
the Guaranty, as reaffirmed. To further induce Lender to enter into this
Amendment, Guarantor hereby represents and warrants to Lender that it
possesses no claims, defenses, offsets, recoupment or counterclaims of any
kind or nature against or with respect to the enforcement of the Loan
Agreement of any other Ancillary Agreement, each as amended by this
Amendment, or to the Guaranty (collectively, the "CLAIMS"), nor does
Guarantor have any knowledge of any facts that would or might give rise to
any Claims. If facts now exist which would or could give rise to any Claim
against or with respect to the enforcement of the Loan Agreement, any
Ancillary Agreement, or the Guaranty, Guarantor hereby unconditionally,
irrevocably and unequivocally waives and fully releases any and all such
Claims as if such Claims where the subject of a lawsuit, adjudicated to final
judgment from which no appeal could be taken and therein dismissed with
prejudice.
DATED: As of the date first above written.
TRO LEARNING (CANADA), INC.
By: /s/ Andrew N. Peterson
----------------------------
Name: Andrew N. Peterson
--------------------------
Its: Chief Financial Officer
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(Amended and Restated Guaranty of Payment
and Performance dated as of March 5, 1997)
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