exv10w5



 






LOAN AND SECURITY AGREEMENT




by and among




CONGRESS FINANCIAL CORPORATION (SOUTHWEST)




as Lender




and




SPORT SUPPLY GROUP, INC. and




ATHLETIC TRAINING EQUIPMENT COMPANY, INC.




as Borrower




Dated: March 27, 2001




 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	SECTION 1. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	SECTION 2. CREDIT FACILITIES
	 	 	13	 
	 
	 	 	 	 
	2.1 Revolving Loans
	 	 	13	 
	2.2 Letter of Credit Accommodations
	 	 	15	 
	2.3 [Intentionally Omitted.]
	 	 	17	 
	2.4 Availability Reserves
	 	 	17	 
	2.5 Joint and Several Liability; Rights of Contribution
	 	 	17	 
	2.6 Structure of Credit Facility
	 	 	18	 
	 
	 	 	 	 
	SECTION 3. INTEREST AND FEES
	 	 	19	 
	 
	 	 	 	 
	3.1 Interest
	 	 	19	 
	3.2 Closing Fee
	 	 	21	 
	3.3 Servicing Fee
	 	 	21	 
	3.4 Unused Line Fee
	 	 	21	 
	3.5 Changes in Laws and Increased Costs of Loans
	 	 	21	 
	 
	 	 	 	 
	SECTION 4. CONDITIONS PRECEDENT
	 	 	22	 
	 
	 	 	 	 
	4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations
	 	 	22	 
	4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations
	 	 	24	 
	 
	 	 	 	 
	SECTION 5. GRANT OF SECURITY INTEREST
	 	 	25	 
	 
	 	 	 	 
	SECTION 6. COLLECTION AND ADMINISTRATION
	 	 	26	 
	 
	 	 	 	 
	6.1 Borrower’s Loan Account
	 	 	26	 
	6.2 Statements
	 	 	26	 
	6.3 Collection of Accounts
	 	 	26	 
	6.4 Payments
	 	 	27	 
	6.5 Authorization to Make Loans
	 	 	27	 
	6.6 Use of Proceeds
	 	 	28	 
	6.7 Reliance on Notices; Appointment of Borrower Representative
	 	 	28	 
	 
	 	 	 	 
	SECTION 7. COLLATERAL REPORTING AND COVENANTS
	 	 	29	 
	 
	 	 	 	 
	7.1 Collateral Reporting
	 	 	29	 
	7.2 Accounts Covenants
	 	 	29	 
	7.3 Government Receivables Covenants
	 	 	31	 
	7.4 Inventory Covenants
	 	 	31	 
	7.5 Equipment Covenants
	 	 	32	 
	7.6 Power of Attorney
	 	 	32	 
	7.7 Right to Cure
	 	 	33	 
	7.8 Access to Premises
	 	 	34	 
	 
	 	 	 	 
	SECTION 8. REPRESENTATIONS AND WARRANTIES
	 	 	34	 
	 
	 	 	 	 
	8.1 Corporate Existence, Power and Authority; Subsidiaries
	 	 	34	 
	8.2 Financial Statements; No Material Adverse Effect
	 	 	35	 
	8.3 Chief Executive Office; Collateral Locations
	 	 	35	 
	8.4 Priority of Liens; Title to Properties
	 	 	35	 
	8.5 Tax Returns
	 	 	35	 






(i)









 






	 	 	 	 	 
	 	 	Page	 
	8.6 Litigation
	 	 	35	 
	8.7 Compliance with Other Agreements and Applicable Laws
	 	 	36	 
	8.8 Employee Benefits
	 	 	36	 
	8.9 Environmental Compliance
	 	 	37	 
	8.10 Bank Accounts
	 	 	37	 
	8.11 Accuracy and Completeness of Information
	 	 	38	 
	8.12 Survival of Warranties; Cumulative
	 	 	38	 
	 
	 	 	 	 
	SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
	 	 	38	 
	 
	 	 	 	 
	9.1 Maintenance of Existence
	 	 	38	 
	9.2 New Collateral Locations
	 	 	38	 
	9.3 Compliance with Laws, Regulations, Etc.
	 	 	39	 
	9.4 Payment of Taxes and Claims
	 	 	39	 
	9.5 Insurance
	 	 	39	 
	9.6 Financial Statements and Other Information
	 	 	39	 
	9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
	 	 	41	 
	9.8 Encumbrances
	 	 	41	 
	9.9 Indebtedness
	 	 	42	 
	9.10 Loans, Investments, Guarantees, Etc.
	 	 	42	 
	9.11 Dividends and Redemptions
	 	 	43	 
	9.12 Transactions with Affiliates
	 	 	43	 
	9.13 Additional Bank Accounts
	 	 	44	 
	9.14 Compliance with ERISA
	 	 	44	 
	9.15 Adjusted Net Worth
	 	 	44	 
	9.16 Costs and Expenses
	 	 	45	 
	9.17 Further Assurances
	 	 	45	 
	 
	 	 	 	 
	SECTION 10. EVENTS OF DEFAULT AND REMEDIES
	 	 	46	 
	 
	 	 	 	 
	10.1 Events of Default
	 	 	46	 
	10.2 Remedies
	 	 	48	 
	 
	 	 	 	 
	SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
	 	 	49	 
	 
	 	 	 	 
	11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver
	 	 	49	 
	11.2 Waiver of Notices
	 	 	50	 
	11.3 Amendments and Waivers
	 	 	50	 
	11.4 Waiver of Counterclaims
	 	 	51	 
	11.5 Indemnification
	 	 	51	 
	 
	 	 	 	 
	SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
	 	 	52	 
	 
	 	 	 	 
	12.1 Term
	 	 	52	 
	12.2 Notices
	 	 	53	 
	12.3 Partial Invalidity
	 	 	53	 
	12.4 Successors
	 	 	53	 
	12.5 Confidentiality Agreement
	 	 	54	 
	12.6 Entire Agreement
	 	 	54	 
	12.7 NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ
	 	 	55	 
	12.8 ORAL AGREEMENTS INEFFECTIVE
	 	 	55	 






(ii)









 






INDEX TO

EXHIBITS AND SCHEDULES




	 	 	 
	Exhibit A

	 	Information Certificate
	 
	 	 
	Schedule 1.6

	 	Availability Reserves
	 
	 	 
	Schedule 4.1(l)

	 	Required Licensor Agreements
	 
	 	 
	Schedule 8.3

	 	Collateral Locations and Business Names
	 
	 	 
	Schedule 8.4

	 	Existing Liens
	 
	 	 
	Schedule 8.7

	 	Defaults
	 
	 	 
	Schedule 8.9

	 	Environmental Disclosures
	 
	 	 
	Schedule 8.10

	 	Bank Accounts
	 
	 	 
	Schedule 8.13

	 	Subsidiaries Stock
	 
	 	 
	Schedule 9.9

	 	Existing Indebtedness
	 
	 	 
	Schedule 9.10

	 	Existing Loans, Advances and Guarantees






(i)









 






LOAN AND SECURITY AGREEMENT




     This Loan and Security Agreement dated March 27, 2001 is entered into by and among CONGRESS
FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation (“Lender”) and SPORT SUPPLY GROUP,
INC., a Delaware corporation (“SSG”), individually and in its capacity as Borrower
Representative, and ATHLETIC TRAINING EQUIPMENT COMPANY, INC., a Delaware corporation
(“ATEC”) (SSG and ATEC, individually and/or collectively, jointly and severally, herein
referred to as “Borrower”).



W I T N E S S E T H:




     WHEREAS, Borrower has requested that Lender enter into certain financing arrangements with
Borrower pursuant to which Lender may make loans and provide other financial accommodations to
Borrower; and



     WHEREAS, Borrower has requested that SSG serve as Borrower Representative to facilitate Lender
entering and administering the financing arrangements contemplated herein;



     WHEREAS, Lender is willing to make such loans and provide such financial accommodations and
accept SSG as the Borrower Representative, on the terms and conditions set forth herein;



     NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:



SECTION 1. DEFINITIONS




     All terms used herein which are defined in Article 1 or Article 9 of the Uniform Commercial
Code shall have the meanings given therein unless otherwise defined in this Agreement. All
references to the plural herein shall also mean the singular and to the singular shall also mean
the plural unless the context otherwise requires. All references to Borrower, Borrower
Representative and Lender 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 Agreement” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced. The word “including” when used in this Agreement shall mean “including,
without limitation”. An Event of Default shall exist or continue or be continuing until such Event
of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory
to Lender, if such Event of Default is capable of being cured as determined by Lender. Any
accounting term used herein unless otherwise defined in this



1









 




Agreement shall have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective meanings given to them
below:




     1.1 “Accounts” shall mean all present and future rights of Borrower to payment for goods sold
or leased or for services rendered, which are not evidenced by instruments or chattel paper, and
whether or not earned by performance.



     1.2 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any
Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-sixteenth
(1/16) of one percent (1%)) determined by dividing (a) the Eurodollar Rate for such Interest Period
by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
“Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any
United States or foreign banking authority for determining the reserve requirement which is or
would be applicable to deposits of United States dollars in a non-United States or an international
banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan
made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has
made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.



     1.3 “Adjusted Net Worth” shall mean as to any Person, at any time, in accordance with GAAP
(except as otherwise specifically set forth below), on a consolidated basis for such Person and its
subsidiaries (if any), 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; provided, however, that one-time non-cash charges taken by SSG in its
fiscal year ending September 30, 2001 up to an aggregate amount of $300,000 shall be excluded from
the calculation of the Adjusted Net Worth of SSG.



     1.4 “ATEC” shall have the meaning set forth in the preamble hereto.



     1.5 “Availability Reserves” shall mean, as of any date of determination, such amounts as
Lender may from time to time establish and revise in good faith reducing the amount of Revolving
Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith, do or may affect either (i) the Collateral or any
other property which is security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Obligor or (iii) the security interests and other rights of Lender in
the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect
Lender’s good faith belief that any collateral report or financial information



2









 




furnished by or on behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit
Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts
which Lender determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default. Without limiting the foregoing, (i)
Lender may establish Availability Reserves with respect to Borrower’s personal property taxes
relating to any property located in the state of Texas immediately upon Borrower’s receipt of a
notice from the taxing authority that such taxes are payable and until Lender receives verification
satisfactory to it that such taxes have been paid in full, and (ii) the Availability Reserves
established by Lender as of the date hereof set forth on Schedule 1.5.




     1.6 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.



     1.7 “Borrower” shall have the meaning set forth in the preamble hereto. All references to
‘Borrower’ or ‘Borrowers’ herein shall refer to and include each of SSG and ATEC, separately and
all representations contained herein shall be deemed to be separately made by each of them, and
each of the covenants, agreements and obligations set forth herein shall be deemed to be the joint
and several covenants, agreements and obligations of them. Any notice, request, consent, report or
other information or agreement delivered to Lender by any Borrower shall be deemed to be ratified
by, consented to and also delivered by the other Borrower. Each Borrower recognizes and agrees
that each covenant and agreement of ‘Borrower’ or ‘Borrowers’ under this Agreement and the other
loan documents shall create a joint and several obligation of the Borrowers, which may be enforced
against Borrowers, jointly, or against each Borrower separately. Without limiting the terms of
this Agreement and the other Financing Agreements, security interests granted under this Agreement
and Financing Agreements in properties, interests, assets and collateral shall extend to the
properties, interests, assets and collateral of each Borrower.



     1.8 “Borrower Representative” shall mean SSG as a representative and agent for Borrower, and
its permitted successors and assigns, pursuant to Section 6.7 hereof, to take such actions
on behalf of Borrower, that are required or permitted in this Agreement, including, without
limitation, Section 6.7 hereof.



     1.9 “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the State of New York, the
State of North Carolina or the State of Texas, and a day on which the Reference Bank and Lender are
open for the transaction of business, except that if a determination of a Business Day shall relate
to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.



     1.10 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from
time to time hereafter be amended, modified, recodified or supplemented, together with all
regulations and interpretations thereunder or related hereto.



     1.11 “Collateral” shall have the meaning set forth in Section 5 hereof.



3









 





     1.12 “Cost” shall mean cost computed on a first-in-first-out basis in accordance with GAAP.



     1.13 “Dated Assets” shall have the meaning set forth in Section 2.5 hereof.



     1.14 “Dated Liabilities” shall have the meaning set forth in Section 2.5 hereof.



     1.15 “Eligible Accounts” shall mean Accounts created by Borrower which are and continue to be
acceptable to Lender based on the criteria set forth below. In general, Accounts shall be Eligible
Accounts if:



          (a) such Accounts arise from the actual and bona fide sale and delivery of
goods by Borrower or rendition of services by Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions contained in any documents
related thereto;




          (b) such Accounts are not unpaid more than (i) for the period from June 1 through October 31
of any year, ninety (90) days after the date of the original invoice for them; or (ii) for the
period from November 1 through May 31 of any year, one hundred twenty (120) days after the date of
the original invoice for them;




          (c) such Accounts comply with the terms and conditions contained in Section 7.2(c) of
this Agreement;




          (d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return,
sale on approval, or other terms under which payment by the account debtor may be conditional or
contingent;




          (e) the chief executive office of the account debtor with respect to such Accounts is located
in the United States of America or Canada, or, at Lender’s option, if either: (i) the account
debtor has delivered to Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender and, if required by
Lender, the original of such letter of credit has been delivered to Lender or Lender’s agent and
the issuer thereof notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by an insurer and on
terms and in an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to such lending formula with respect thereto as Lender may determine);




          (f) such Accounts do not consist of progress billings, bill and hold invoices or retainage
invoices, except as to bill and hold invoices, if Lender shall have received an agreement in
writing from the account debtor, in form and substance satisfactory to Lender, confirming the
unconditional obligation of the account debtor to take the goods related thereto and pay such
invoice;




4









 








          (g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense
or dispute and does not have, and does not engage in transactions which may give rise to, any right
of setoff against such Accounts (but the portion of the Accounts of such account debtor in excess
of the amount at any time and from time to time disputed or owed by Borrower to such account debtor
or claimed owed by such account debtor may be deemed Eligible Accounts);




          (h) there are no facts, events or occurrences which would impair the validity, enforceability
or collectability of such Accounts or reduce the amount payable or delay payment thereunder;




          (i) such Accounts are subject to the first priority, valid and perfected security interest of
Lender and any goods giving rise thereto are not, and were not at the time of the sale thereof,
subject to any liens except those permitted in this Agreement;




          (j) neither the account debtor nor any officer or employee of the account debtor with respect
to such Accounts is an officer, employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control, management or otherwise;




          (k) the account debtors with respect to such Accounts are not any foreign government, the
United States of America, any State, political subdivision, department, agency or instrumentality
thereof, unless, (i) if the account debtor is the United States of America or any department,
agency or instrumentality thereof, (A) the aggregate amount of the Accounts of all such account
debtors outstanding is less than $1,560,000, or (B) with respect to Accounts in excess of such
amount, such Accounts are assignable under, and upon Lender’s request, have been assigned to Lender
in accordance with, the Federal Assignment of Claims Act of 1940, as amended, in a manner
satisfactory to Lender (for purposes of this clause (k)(i)(B), Accounts in amounts less
than $1,000 (or such other amount as may hereafter be required under the Federal Assignment of
Claims Act of 1940, as amended, or the regulations promulgated thereunder in order for an Account
to be assignable thereunder) shall be counted first, such that Accounts in amounts greater than
$1,000 (or such other applicable amount) will be included in the excess (if any) over $1,560,000),
and (ii) if the account debtor is any state or any political subdivision, department, agent or
instrumentality thereof, such Accounts are assignable under, and upon Lender’s request, have been
assigned to Lender in accordance with, any applicable state or local law similar to the Federal
Assignment of Claims Act of 1940, in a manner satisfactory to Lender;




          (l) there are no proceedings or actions which are threatened or pending against the account
debtors with respect to such Accounts which may reasonably be expected to result in any material
adverse change in any such account debtor’s financial condition;




          (m) such Accounts of a single account debtor or its affiliates do not constitute more than
fifteen percent (15%) of all otherwise Eligible Accounts (but the portion of the Accounts not in
excess of such percentage may be deemed Eligible Accounts);




5









 








          (n) such Accounts are not owed by an account debtor who has Accounts unpaid (i) for the period
from June 1 through October 31 of any year, ninety (90) days after the date of the original invoice
for them or (ii) for the period from November 1 through May 31 of any year, one hundred twenty
(120) days after the date of the original invoice for them which, in each case, unpaid Accounts
constitute more than fifty percent (50%) of the total Accounts of such account debtor; and




          (o) such Accounts are owed by account debtors deemed creditworthy at all times by Lender, as
determined by Lender.



General criteria for Eligible Accounts may be established and revised from time to time by Lender
in good faith. Any Accounts which are not Eligible Accounts shall nevertheless be part of the
Collateral.




     1.16 “Eligible Inventory” shall mean Inventory consisting of finished goods held for resale in
the ordinary course of the business of Borrower and raw materials for such finished goods which are
acceptable to Lender based on the criteria set forth below. In general, Eligible Inventory shall
not include (a) work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or consumed in
Borrower’s business; (f) Inventory subject to a security interest or lien in favor of any Person
other than Lender except those permitted in this Agreement; (g) bill and hold goods; (h)
unserviceable, obsolete or slow moving Inventory, unless Lender has already established an
Availability Reserve for such items; (i) Inventory which is not subject to the first priority,
valid and perfected security interest of Lender; (j) damaged and/or defective Inventory or returned
Inventory that has not been processed; (k) Inventory purchased or sold on consignment; and (l)
in-transit Inventory not constituting In-Transit Inventory. General criteria for Eligible
Inventory may be established and revised from time to time by Lender in good faith. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.



     1.17 “Emerson” shall mean Emerson Radio Corp., a Delaware corporation, and its wholly owned
subsidiaries.



     1.18 “Environmental Laws” shall mean all foreign, Federal, State and local laws (including
common law), legislation, rules, codes, licenses, permits (including any conditions imposed
therein), authorizations, judicial or administrative decisions, injunctions or agreements between
Borrower and any governmental authority, (a) relating to pollution and the protection, preservation
or restoration of the environment (including air, water vapor, surface water, ground water,
drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any
other natural resource), or to human health or safety, (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials,
or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term “Environmental Laws” includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Water



6









 




Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and
the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws,
and (iii) any common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.




     1.19 “Equipment” shall mean all of Borrower’s now owned and hereafter acquired equipment,
machinery, computers and computer hardware and software (whether owned or licensed), vehicles,
tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements thereof, wherever
located.



     1.20 “ERISA” shall mean the United States Employee Retirement Income Security Act of 1974, as
the same now exists or may hereafter from time to time be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations thereunder or related
thereto.



     1.21 “ERISA Affiliate” shall mean any Person required to be aggregated with Borrower or any of
its subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of
the Code.



     1.22 “Eurodollar Rate” shall mean with respect to the Interest Period for a Eurodollar Rate
Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per
annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one percent (1%)) at
which Reference Bank is offered deposits of United States dollars in the London interbank market
(or other Eurodollar Rate market selected by Borrower Representative and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement of such Interest
Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to Borrower Representative in accordance with this Agreement, with a
maturity of comparable duration to the Interest Period selected by Borrower Representative.



     1.23 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is
payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.



     1.24 “Event of Default” shall mean the occurrence or existence of any event or condition
described in Section 10.1 hereof.



     1.25 “Excess” shall have the meaning set forth in Section 3.1(e).



     1.26 “Excess Availability” shall mean the amount, as determined by Lender, calculated at any
time, equal to: (a) the lesser of: (i) the amount of the Revolving Loans available to Borrower as
of such time pursuant to Section 2.1(a), and (ii) the Maximum Credit, minus (b) the
sum of: (i) the amount of all then outstanding and unpaid Obligations, plus (ii) the
aggregate amount of all then outstanding and unpaid trade payables of Borrower which are more than
sixty



7









 




(60) days past due as of such time, plus (iii) the amount of checks issued by Borrower
to pay trade payables, but not yet sent and the book overdraft of Borrower.




     1.27 “Financing Agreements” shall mean, collectively, this Agreement and all notes,
guarantees, security agreements, negative pledge agreements, collateral reports and other
agreements, documents, information and instruments now or at any time hereafter executed and/or
delivered by Borrower, Borrower Representative or any Obligor in connection with this Agreement, as
the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.



     1.28 “Finished Goods Inventory Advance Rate” shall mean, with respect to Eligible Inventory
constituting finished goods, (a) during the period from February 1 through August 30 of any year,
the lesser of (i) eighty-five percent (85%) of net orderly liquidation value, as determined by
Lender in good faith by reference to a high-selling-period appraisal, or (ii) sixty-five percent
(65%) of Cost and (b) during the period from September 1 through January 31 of any year, the lesser
of (i) eighty-five percent (85%) of net orderly liquidation value, as determined by Lender in good
faith by reference to a low-selling-period appraisal, or (ii) sixty percent (60%) of Cost.



     1.29 “GAAP” shall mean generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting Standards Board which are applicable to
the circumstances as of the date of determination consistently applied, except that, for purposes
of Section 9.15 hereof, GAAP shall be determined on the basis of such principles in effect
on the date hereof and consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.



     1.30 “Government Receivables” means all monies due and to become due, whether existing as of
the date hereof or arising thereafter, from the United States of America, together with all rights
to receive the same, under any letter of intent, letter of award, letter of acceptance of bid or
proposal, informal or incomplete contract, order, authorization to commence performance or other
similar instrument or communication made or received by the Borrower in anticipation of or in
connection with said contract and under any and all amendments thereof and supplements thereto,
between the United States of America acting through any agency, department or other instrumentality
thereof and the Borrower.



     1.31 “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials
and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or
type of pollutants or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes
and including any other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or toxic under any
Environmental Law).



8









 





     1.32 “Information Certificate” shall mean the Information Certificate of Borrower constituting
Exhibit A hereto containing material information with respect to Borrower, its business and assets
provided by or on behalf of Borrower to Lender in connection with the preparation of this Agreement
and the other Financing Agreements and the financing arrangements provided for herein.



     1.33 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one
(1), two (2), or three (3) months duration as Borrower Representative may elect, the exact duration
to be determined in accordance with the customary practice in the applicable Eurodollar Rate
market; provided, that, Borrower Representative may not elect an Interest Period
which will end after the last day of the then-current term of this Agreement.



     1.34 “Interest Rate” shall mean, as to Prime Rate Loans, a rate equal to the Prime Rate and,
as to Eurodollar Rate Loans, a rate equal to the sum of (a) the Adjusted Eurodollar Rate (based on
the Eurodollar Rate applicable for the Interest Period selected by Borrower Representative as in
effect three (3) Business Days after the date of receipt by Lender of the request of Borrower
Representative for such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower Representative), plus
(b) (i) from the date hereof through the date of delivery to Lender of the audited consolidated
annual financial statements of SSG and its subsidiaries for the fiscal year ended September 30,
2001, two and one-half percent (2.50%) per annum, and (ii) for the period from the day after the
date of delivery of the audited consolidated annual financial statements of SSG and its
subsidiaries for each fiscal year through the date of delivery of such financial statements for the
following fiscal year, the applicable Eurodollar Margin as set forth below:



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Applicable
	Criteria	 	Eurodollar Margin
	A.	 	Lender shall have received the audited consolidated
annual financial statements for the most recently ended
fiscal year of SSG and its subsidiaries reflecting:	 	 	2.25	%
	 	 	 	 	 	 	 	 	 
	 	 	(i)
	 	the existence of no Events of Default;	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	(ii)
	 	net profits (after taxes), certified by
Borrower’s independent certified public
accountants; and	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	(iii)
	 	Adjusted Net Worth of SSG on a
consolidated basis in excess of $42,000,000.	 	 	 	 






9









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Applicable
	Criteria	 	Eurodollar Margin
	B.	 	The criteria set forth in (A)(i) and (A)(ii) above
are satisfied and such financial statements also reflect
Adjusted Net Worth of SSG on a consolidated basis in
excess of $45,000,000.	 	 	2.00	%
	 	 	 	 	 	 	 	 	 
	C.	 	In all other cases, when the criteria set forth in
(A) and (B) above have not been satisfied.	 	 	2.50	%






     Notwithstanding the above, the Interest Rate shall mean the rate equal to the sum of the two
percent (2.00%) per annum plus the otherwise applicable Interest Rate, at Lender’s option, with
notice, (a) for the period (i) from and after the effective date of termination or non-renewal
hereof until Lender has received full and final payment of all obligations (notwithstanding entry
of a judgment against Borrower) and (ii) from and after the date of the occurrence of an Event of
Default for so long as such Event of Default is continuing as determined by Lender, and (b) on the
Revolving Loans at any time outstanding in excess of the amounts available to Borrower under
Section 2 (whether or not such excess(es), arise or are made with or without Lender’s
knowledge or consent and whether made before or after an Event of Default), provided,
however, that if any such excess arises as a direct and immediate result of the imposition
of additional Availability Reserves, the reduction of any lending formula or the creation of
additional criteria for Eligible Accounts or Eligible Inventory by Lender, then the Interest Rate
shall not increase as a result of such excess as provided in this paragraph until and unless such
excess continues to exist thirty (30) days after the commencement of such action by Lender.



     1.35 “In-Transit Inventory” shall mean Inventory that (a) Borrower has paid the full purchase
price therefor, (b) is in transit to either the premises of a customs broker in the United States
or premises of a Borrower in the United States and, as to premises of a customs broker or premises
which are not owned and controlled by a Borrower, only if (i) Lender has received a collateral
access agreement duly authorized, executed and delivered by such customs broker or the owner,
lessor and operator of such other premises, as the case may be or (ii) Lender has established
Availability Reserves with respect to such Inventory in an amount not less than five percent (5%)
of the value thereof, (c) (i) Lender has a first priority perfected (subject only to Lender
obtaining possession and control of originals as contemplated by clause (c)(ii) below)
security interest in all documents of title with respect to such Inventory and Borrower has control
and possession of all originals of such documents of title at its address set forth on the
signature page hereto (or such other address as Borrower may designate by written notice to Lender)
and maintains such possession and control in a manner satisfactory to Lender, or (ii) upon Lender’s
request, Lender has a first priority perfected security interest in and control and possession of
all originals of documents of title with respect to such Inventory, (d) Lender has received (i) a
copy of the certificate of marine cargo insurance in connection therewith in which it has been
named as an additional insured and loss payee in a manner acceptable to Lender and (ii) a copy of
the invoice and manifest with respect thereto, and (e) such Inventory is not subject to any Letter
of Credit Accommodation.



10









 





     1.36 “Inventory” shall mean all of Borrower’s now owned and hereafter existing or acquired raw
materials, work in process, finished goods and all other inventory of whatsoever kind or nature,
wherever located.



     1.37 “Knowledge” shall mean the actual knowledge of the senior officers, other senior
management or directors of any Borrower and any knowledge that any such individuals should
reasonably be expected to have with regards to such matter in his/her capacity as a senior officer,
senior manager or director of Borrower.



     1.38 “Larry Black Inventory” shall mean Inventory at locations currently operated under the
“Larry Black” name and constituting finished goods, provided that such Inventory shall not
constitute Eligible Inventory unless: (a) before the first anniversary of the date hereof,
if such Inventory is not reflected on perpetual inventory reports delivered to Lender in accordance
with the terms hereof, then (i) satisfactory testing of inventory rollforward on or before the date
hereof shall have been completed; and (ii) Borrower shall have caused to be conducted a physical
count of the Larry Black Inventory on a quarterly basis, and at any time or times as Lender may
request after an Event of Default has occurred and is continuing, and promptly following such
physical count Borrower Representative shall have supplied Lender with a report thereof in the form
and with such specificity as may be reasonably satisfactory to Lender, and (b) from and after the
first anniversary of the date hereof, such Inventory is reflected on perpetual inventory reports
delivered to Lender in accordance with the terms hereof.



     1.39 “Lender” shall have the meaning set forth in the preamble hereto.



     1.40 “Letter of Credit Accommodations” shall mean the letters of credit, merchandise purchase
or other guaranties which are from time to time either (a) issued or opened by Lender for the
account of Borrower or any Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower of its obligations to such issuer.



     1.41 “Loans” shall mean the Revolving Loans.



     1.42 “Material Adverse Effect” shall mean a material adverse effect upon the business,
operations, properties, assets, goodwill or condition (financial or otherwise) of SSG on a
consolidated basis. In determining whether any individual event would have a Material Adverse
Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse
Effect shall be deemed to have occurred if the cumulative effect of such event and all other then
existing events would have a Material Adverse Effect.



     1.43 “Maximum Credit” shall mean the amount of $25,000,000.



     1.44 “Maximum Legal Rate” shall have the meaning set forth in Section 3.1(e).



     1.45 “Net Amount of Eligible Accounts” shall mean the gross amount of Eligible Accounts, less
(a) sales, excise or similar taxes included in the amount thereof and (b) returns,



11









 




discounts, claims, credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto.




     1.46 “Obligations” shall mean any and all Revolving Loans and Letter of Credit Accommodations
and all other obligations, liabilities and indebtedness of every kind, nature and description owing
by Borrower to Lender and/or its affiliates, including principal, interest, charges, fees, costs
and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise
arising under this Agreement and the other Financing Agreements, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term of this Agreement
or after the commencement of any case with respect to Borrower under the United States Bankruptcy
Code or any similar statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in 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. The term Obligations shall include, without limitation, all obligations, liabilities
and indebtedness of SSG and ATEC, or any one of them, to Lender, whether such obligations,
liabilities and indebtedness shall be joint, several, joint and several or individual.



     1.47 “Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on
or with respect to the Obligations or who is the owner of any property which is security for the
Obligations, other than Borrower.



     1.48 “Payment Account” shall have the meaning set forth in Section 6.3 hereof.



     1.49 “Person” or “person” shall mean any individual, sole proprietorship, partnership,
corporation (including any corporation which elects subchapter S status under the Code), limited
liability company, limited liability partnership, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any agency or
instrumentality or political subdivision thereof.



     1.50 “Prime Rate” shall mean the rate from time to time publicly announced by First Union
National Bank or its successors, at its office in Charlotte, North Carolina, as its prime rate,
whether or not such announced rate is the best rate available at such bank.



     1.51 “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable
based on the Prime Rate in accordance with the terms thereof.



     1.52 “Real Property” shall mean all now owned and hereafter acquired real property of
Borrower, including leasehold interests, together with all buildings, structures, and other
improvements located thereon and all licenses, easements and appurtenances relating thereto,
wherever located.



     1.53 “Records” shall mean all of Borrower’s present and future books of account of every kind
or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other data



12









 




relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the foregoing maintained
with or by any other Person).




     1.54 “Reference Bank” shall mean First Union National Bank, or such other bank as Lender may
from time to time designate.



     1.55 “Renewal Date” shall have the meaning set forth in Section 12.1 hereof.



     1.56 “Revolving Loans” shall mean the loans now or hereafter made by Lender to or for the
benefit of Borrower on a revolving basis (involving advances, repayments and readvances) as set
forth in Section 2.1 hereof.



     1.57 “SSG” shall have the meaning set forth in the preamble hereto.



     1.58 “Value” shall mean, as determined by Lender in good faith, consistent with its credit
policies and practices, with respect to Inventory, the lower of (a) Cost or (b) market value.



SECTION 2. CREDIT FACILITIES




     2.1 Revolving Loans.



          (a) Subject to and upon the terms and conditions contained herein, Lender agrees to make
Revolving Loans to Borrower from time to time in amounts requested by Borrower up to the amount
equal to the sum of:





(i) eighty percent (80%) of the Net Amount of Eligible Accounts, plus




(ii) the lesser of:




(A) the sum of:




(1) the Finished Goods Inventory Advance Rate with respect to Eligible Inventory other
than Larry Black Inventory, plus




(2) twenty-five percent (25%) of the Value of Eligible Inventory consisting of raw
materials for such finished goods, plus




(3) the lesser of:




(x) the Finished Goods Inventory Advance Rate with
respect to Larry Black Inventory constituting
Eligible Inventory, or



13









 






(y) if such Larry Black Inventory is not reflected on
perpetual inventory reports delivered to Lender in
accordance with the terms hereof, $1,700,000, or




(B) $15,000,000, less




(iii) any Availability Reserves.



          (b) Lender may, in its discretion, from time to time, upon not less than five (5) days prior
written notice to Borrower, (i) reduce the lending formula with respect to Eligible Accounts to the
extent that Lender determines in good faith consistent with its credit policies and practices that:
(A) the dilution with respect to the Accounts for any period (based on the ratio of (1) the
aggregate dollar amount of reductions in Accounts other than as a result of payments in cash to (2)
the aggregate dollar amount of total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical levels for comparable
periods, or (B) the general creditworthiness of account debtors has declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Lender determines that:
(A) the number of days of the turnover of the Inventory for any period has increased in any
material respect other than due to seasonal fluctuations consistent with Borrower’s historical
seasonal fluctuations, or (B) the liquidation value of the Eligible Inventory, or any category
thereof, has decreased, or (C) the nature and quality of the Inventory has deteriorated. In
determining whether to reduce the lending formula(s), Lender may consider events, conditions,
contingencies or risks which are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves. Notwithstanding the foregoing, Lender agrees
not to reduce any lending formula to account for any matter which also serves as the basis for an
Availability Reserve established by Lender or has been applied by Lender as criteria to cause
Accounts or Inventory to not constitute Eligible Accounts or Eligible Inventory, as the case may
be.




          (c) Except in Lender’s discretion, the aggregate amount of the Loans and the Letter of Credit
Accommodations outstanding at any time shall not exceed the Maximum Credit. In the event that the
outstanding amount of any component of the Loans, or the aggregate amount of the outstanding Loans
and Letter of Credit Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(d) or the Maximum
Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Lender
in that circumstance or on any future occasions and Borrower shall, upon demand by Lender, which
may be made at any time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.




          (d) For purposes only of applying the sublimit on Revolving Loans based on Eligible Inventory
pursuant to Section 2.1(a)(ii)(B), Lender may treat the then undrawn amounts of outstanding
Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory as Revolving Loans
to the extent Lender is in effect basing the issuance of the Letter





14









 







of Credit Accommodations on the
Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations. In
determining the actual amounts of such Letter of Credit Accommodations to be so treated for
purposes of the sublimit, the outstanding Revolving Loans and Availability Reserves shall be
attributed first to any components of the lending formulas in Section 2.1(a) that are not
subject to such sublimit, before being attributed to the components of the lending formulas subject
to such sublimit.




     2.2 Letter of Credit Accommodations.



          (a) Subject to and upon the terms and conditions contained herein, at the request of Borrower
Representative, Lender agrees to provide or arrange for Letter of Credit Accommodations for the
account of Borrower containing terms and conditions acceptable to Lender and the issuer thereof.
Any payments made by Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to Borrower pursuant to
this Section 2.




          (b) In addition to any charges, fees or expenses charged by any bank or issuer in connection
with the Letter of Credit Accommodations, Borrower shall pay to Lender a letter of credit fee at a
rate equal to one and one-half percent (1.5%) per annum on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall pay to Lender such
letter of credit fee, at Lender’s option, with notice, at a rate equal to three and one-half
percent (3.50%) per annum on such daily outstanding balance for: (i) the period from and after the
effective date of termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the
period from and after the date of the occurrence of an Event of Default for so long as such Event
of Default is continuing as determined by Lender. Such letter of credit fee shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of
Borrower to pay such fee shall survive the termination or non-renewal of this Agreement.




          (c) No Letter of Credit Accommodations shall be available unless on the date of the proposed
issuance of any Letter of Credit Accommodations, the Revolving Loans available to Borrower (subject
to the Maximum Credit and any Availability Reserves) are equal to or greater than: (i) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred percent (100%) minus the then applicable percentage
set forth in Section 2.1(a)(ii)(A) above of the Value of such Eligible Inventory, plus (B)
freight, taxes, duty and other amounts which Lender estimates must be paid in connection with such
Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory
within the United States of America and (ii) if the proposed Letter of Credit Accommodation is for
any other purpose, an amount equal to one
hundred percent (100%) of the face amount thereof and all other commitments and obligations made or
incurred by Lender with respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, an Availability Reserve shall be established in the applicable amount set forth in
Section 2.2(c)(i) or Section 2.2(c)(ii).





15









 








          (d) Except in Lender’s discretion, the amount of all outstanding Letter of Credit
Accommodations and all other commitments and obligations made or incurred by Lender in connection
therewith shall not at any time exceed $5,000,000. At any time an Event of Default exists or has
occurred and is continuing, upon Lender’s request in writing, Borrower will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection with any Letter of
Credit Accommodations or furnish cash collateral to Lender for the Letter of Credit Accommodations,
and in either case, the Revolving Loans otherwise available to Borrower shall not be reduced as
provided in Section 2.2(c) to the extent of such cash collateral.




          (e) Borrower shall indemnify and hold Lender harmless from and against any and all losses,
claims, damages, liabilities, costs and expenses which Lender may suffer or incur in connection
with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to any action taken by
any issuer or correspondent with respect to any Letter of Credit Accommodation. Borrower assumes
all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrower’s
agent. Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or
any documents, drafts or acceptances thereunder. BORROWER HEREBY RELEASES AND HOLDS LENDER
HARMLESS FROM AND AGAINST ANY ACTS, WAIVERS, ERRORS, DELAYS OR OMISSIONS, WHETHER CAUSED BY
BORROWER, BY ANY ISSUER OR CORRESPONDENT OR OTHERWISE WITH RESPECT TO OR RELATING TO ANY LETTER OF
CREDIT ACCOMMODATION, INCLUDING ANY OF THE FOREGOING RESULTING FROM THE ORDINARY OR CONTRIBUTORY
NEGLIGENCE OF LENDER OR ITS EMPLOYEES, AGENTS OR REPRESENTATIVES, BUT EXCLUDING ANY OF THE
FOREGOING RESULTING SOLELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER
OR ITS EMPLOYEES, AGENTS OR REPRESENTATIVES, AS DETERMINED BY A FINAL NON-APPEALABLE ORDER OF A
COURT OF COMPETENT JURISDICTION. The provisions of this Section 2.2(e) shall survive the
payment of Obligations and the termination or non-renewal of this Agreement.




          (f) Nothing contained herein shall be deemed or construed to grant Borrower or Borrower
Representative any right or authority to pledge the credit of Lender in any manner. Lender shall
have no liability of any kind with respect to any Letter of Credit Accommodation provided by an
issuer other than Lender unless Lender has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made in good faith by Lender, or any
other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any
documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrower or Borrower Representative.
Lender shall have the sole and exclusive right and authority to, and Borrower shall not: (i) at
any time an Event of Default exists or has occurred and is continuing, (A) approve or resolve any
questions of non-compliance of documents, (B) give any instructions as to acceptance or rejection
of any documents or goods or (C) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders, and (ii) at all times after prior notice to





16









 







Borrower
Representative, (A) grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents, and (B) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or
any letters of credit included in the Collateral. Lender may take such actions either in its own
name or in Borrower’s name.




          (g) Any rights, remedies, duties or obligations granted or undertaken by Borrower to any
issuer or correspondent in any application for any Letter of Credit Accommodation, or any other
agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation,
shall be deemed to have been granted or undertaken by Borrower to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any application for any Letter
of Credit Accommodation, or any other agreement by Lender in favor of any issuer or correspondent
relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower
to Lender and to apply in all respects to Borrower.




          2.3 [Intentionally Omitted.]




          2.4 Availability Reserves. All Revolving Loans otherwise available to Borrower
pursuant to the lending formulas and subject to the Maximum Credit and other applicable limits
hereunder shall be subject to Lender’s continuing right to establish and revise Availability
Reserves. Notwithstanding the foregoing, Lender agrees not to establish an Availability Reserve
with respect to any matter, if such matter has also been applied as criteria to cause Accounts or
Inventory to not constitute Eligible Accounts or Eligible Inventory, respectively. Lender agrees to
notify Borrower Representative after establishing any new Availability Reserves.




          2.5 Joint and Several Liability; Rights of Contribution.




          (a) Each Borrower states and acknowledges that: (i) pursuant to this Agreement, Borrowers
desire to utilize their borrowing potential on a consolidated basis to the same extent possible if
they were merged into a single corporate entity and that this Agreement reflects the establishment
of credit facilities which would not otherwise be available to such Borrower if each Borrower were
not jointly and severally liable for payment of all of the Obligations; (ii) it has determined that
it will benefit specifically and materially from the advances of credit contemplated by this
Agreement; (iii) it is both a condition precedent to the obligations of Lender hereunder and a
desire of the Borrowers that each Borrower execute and deliver to Lender this Agreement; and (iv)
Borrowers have requested and bargained for the structure and terms of and security for the advances
contemplated by this Agreement.




          (b) Each Borrower hereby irrevocably and unconditionally: (i) agrees that it is jointly and
severally liable to Lender for the full and prompt payment of the Obligations and the performance
by each Borrower of its obligations hereunder in accordance with the terms hereof; (ii) agrees to
fully and promptly perform all of its obligations hereunder with respect to each advance of credit
hereunder as if such advance had been made directly to it; and (iii) agrees as a primary obligation
to indemnify Lender on demand for and against any loss incurred by Lender as a result of any of the
Obligations of any one or more of the Borrowers being or becoming




17









 







void, voidable, unenforceable or
ineffective for any reason whatsoever, whether or not known to Lender or any Person, the amount of
such loss being the amount which Lender would otherwise have been entitled to recover from any one
or more of the Borrowers.




          (c) It is the intent of each Borrower that the indebtedness, obligations and liability
hereunder of no one of them be subject to challenge on any basis, including, without limitation,
pursuant to any applicable fraudulent conveyance or fraudulent transfer laws. Accordingly, as of
the date hereof, the liability of each Borrower under this Section 2.5, together with all
of its other liabilities to all Persons as of the date hereof and as of any other date on which a
transfer or conveyance is deemed to occur by virtue of this Agreement, calculated in amount
sufficient to pay its probable net liabilities on its existing Indebtedness as the same become
absolute and matured (“Dated Liabilities”) is, and is to be, less than the amount of the
aggregate of a fair valuation of its property as of such corresponding date (“Dated
Assets”). To this end, each Borrower under this Section 2.5, (i) grants to and
recognizes in each other Borrower, ratably, rights of subrogation and contribution in the amount,
if any, by which the Dated Assets of such Borrower, but for the aggregate of subrogation and
contribution in its favor recognized herein, would exceed the Dated Liabilities of such Borrower
or, as the case may be, (ii) acknowledges receipt of and recognizes its right to subrogation and
contribution ratably from each of the other Borrowers in the amount, if any, by which the Dated
Liabilities of such Borrower, but for the aggregate of subrogation and contribution in its favor
recognized herein, would exceed the Dated Assets of such Borrower under this Section 2.5.
In recognizing the value of the Dated Assets and the Dated Liabilities, it is understood that
Borrowers will recognize, to at least the same extent of their aggregate recognition of liabilities
hereunder, their rights to subrogation and contribution hereunder. It is a material objective of
this Section 2.5 that each Borrower recognizes rights to subrogation and contribution
rather than be deemed to be insolvent (or in contemplation thereof) by reason of an arbitrary
interpretation of its joint and several obligations hereunder. In addition to and not in
limitation of the foregoing provisions of this Section 2.5, the Borrowers and Lender hereby
agree and acknowledge that it is the intent of each Borrower and of Lender that the obligations of
each Borrower hereunder be in all respects in compliance with, and not be voidable pursuant to,
applicable fraudulent conveyance and fraudulent transfer laws.




          (d) Notwithstanding the foregoing, and the Borrowers’ agreement to be jointly and severally
liable for payment of all the Obligations, each of the Borrowers is a separate and distinct
corporation. Lender acknowledges and agrees that each Borrower is a separate and distinct entity
and further agrees not to challenge or dispute the separate existence of each Borrower.




     2.6 Structure of Credit Facility. Each Borrower agrees and acknowledges that the
present structure of the credit facilities detailed in this Agreement is based in part upon the
financial and other information presently known to Lender regarding each Borrower, the corporate
structure of Borrowers, and the present financial condition of each Borrower. Each Borrower hereby
agrees that Lender shall have the right, in its sole credit judgment, to require that any or all of
the following changes be made to these Loans: (i) advance Revolving Loans to a specific Borrower,
(ii) restrict loans and advances between Borrowers, (iii) require that each Borrower execute a
guaranty of the indebtedness of each other Borrower to Lender and



18









 




(iv) require that any advances
made by a Borrower to another Borrower be collateralized in a manner acceptable to Lender.




SECTION 3. INTEREST AND FEES




     3.1 Interest.



          (a) Borrower shall pay to Lender interest on the outstanding principal amount of the
non-contingent Obligations at the Interest Rate. All interest accruing hereunder on and after the
occurrence and continuance of an Event of Default or effective date of termination or non-renewal
hereof shall be payable upon demand.




          (b) Borrower Representative may from time to time request that Prime Rate Loans be converted
to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional
Interest Period. Such request from Borrower Representative shall specify the amount of the Prime
Rate Loans which will constitute Eurodollar Rate Loans (subject to the limits set forth below) and
the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of such a request from
Borrower Representative, such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no
Event of Default, or event which with notice or passage of time or both would constitute an Event
of Default exists or has occurred and is continuing, (ii) no party hereto shall have sent any
notice of termination or non-renewal of this Agreement, the effective date of which is prior to the
end of the Interest Period specified for such Eurodollar Rate Loan, (iii) Borrower Representative
shall have complied with such customary procedures as are established by Lender and specified by
Lender to Borrower in writing from time to time for requests by Borrower Representative for
Eurodollar Rate Loans, (iv) no more than five (5) Interest Periods may be in effect at any one
time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the maximum amount of the
Eurodollar Rate Loans at any time requested by Borrower Representative shall not exceed the amount
equal to eighty percent (80%) of the lowest principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest Period, in each case as determined
by Lender (but with no obligation of Lender to make such Revolving Loans) and (vii) Lender shall
have determined that the Interest Period or Adjusted Eurodollar Rate is available to Lender through
the Reference Bank and can be readily determined as of the date of the request for such Eurodollar
Rate Loan
by Borrower Representative. Any request by Borrower Representative to convert Prime Rate
Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender and Reference Bank
shall not be required to purchase United States Dollar deposits in the London interbank market or
other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference Bank had purchased such deposits to fund
the Eurodollar Rate Loans.





19









 








          (c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last
day of the applicable Interest Period, unless Lender has received and approved a request to
continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in
accordance with the terms hereof. Any Eurodollar Rate Loans shall, at Lender’s option, upon notice
by Lender to Borrower Representative, convert to Prime Rate Loans in the event that (i) an Event of
Default or event which, with notice or passage of time, or both, would constitute an Event of
Default, shall exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the aggregate
principal amount of the Prime Rate Loans which have previously been converted to Eurodollar Rate
Loans or existing Eurodollar Rate Loans continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest Period exceed either (A) the aggregate
principal amount of the Loans then outstanding, or (B) the Revolving Loans then available to
Borrower under Section 2 hereof. Borrower shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such Person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.




          (d) Interest shall be payable by Borrower to Lender monthly in arrears not later than the
first day of each calendar month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other
than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any change in such Prime
Rate is announced based on the Prime Rate in effect on the last day of the month in which any such
change occurs. In no event shall charges constituting interest payable by Borrower to Lender
exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any
such part or provision of this Agreement is in contravention of any such law or regulation, such
part or provision shall be deemed amended to conform thereto.




          (e) No agreements, conditions, provisions or stipulations contained in this Agreement or any
other instrument, document or agreement between Borrower and Lender or default of Borrower, or the
exercise by Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or any other Financing
Agreement, or the arising of any contingency whatsoever, shall entitle Lender to contract for,
charge, or receive, in any event, consideration for the use, forbearance or detention of money
(“interest”) at a rate exceeding the maximum rate of interest permitted by applicable state or
federal law in effect from time to time (hereinafter “Maximum Legal Rate”). In no event
shall Borrower be obligated to pay interest at any rate exceeding such
Maximum Legal Rate and all agreements, conditions or stipulations, if any, which may in any
event or contingency whatsoever operate to bind, obligate or compel Borrower to pay a rate of
interest exceeding the Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest determined at a rate over such Maximum Legal
Rate. In the event any interest is contracted for, charged or received at any rate in excess of
the Maximum Legal Rate (“Excess”), Borrower acknowledges and stipulates that any such
contract, charge, or receipt shall be the result of an accident and bona fide error, and that any
Excess received by Lender shall be applied, first, to reduce the principal then unpaid hereunder;
second,




20









 







to reduce the other Obligations; and third, returned to Borrower, it being the intention of
the parties hereto not to enter at any time into a usurious or otherwise illegal relationship.
Borrower recognizes that, with fluctuations in the Prime Rate, the Eurodollar Rate and the Maximum
Legal Rate, such a result could inadvertently occur. By the execution of this Agreement, Borrower
covenants that (i) the credit or return of any Excess shall constitute the acceptance by Borrower
of such Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable,
against Lender, based in whole or in part upon contracting for, charging or receiving of any
interest in excess of the maximum authorized or receiving of any interest in excess of the maximum
authorized by applicable law. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by Lender, all interest at any time contracted for, charged or
received by Lender in connection with this Agreement shall be amortized, prorated, allocated and
spread in equal parts during the full stated term of this Agreement and otherwise as provided in
Tex. Fin Code section 306.004 (or the successor(s) thereof). If, as a result of any circumstances
whatsoever, fulfillment of any provision hereof or of any related agreement, at the time
performance of such provision shall be due, shall involve transcending the limit of validity
prescribed by applicable usury law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity.




     3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount of
$125,000, all of which shall be fully earned and non-refundable as of the date hereof and which
shall be payable in two installments of $62,500 each on (i) the date hereof, and (ii) the first
anniversary of the date hereof.



     3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee in an amount
equal to $3,000 in respect of Lender’s services for each month (or part thereof) while this
Agreement remains in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be fully earned as of and payable in advance on the date hereof (pro-rated for the
portion of the month remaining) and on the first day of each month hereafter.



     3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line fee at a
rate equal to one-quarter of one percent (.25%) per annum calculated upon the amount by which
$20,000,000 exceeds the average daily principal balance of the outstanding Revolving Loans and
Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this
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.



     3.5 Changes in Laws and Increased Costs of Loans. 



          (a) Notwithstanding anything to the contrary contained herein, all Eurodollar Rate Loans
shall, upon notice by Lender to Borrower, convert to Prime Rate Loans in the event that (i) any
change in applicable law or regulation (or the interpretation or administration thereof) shall
either (A) make it unlawful for Lender, Reference Bank or any participant to make or maintain
Eurodollar Rate Loans or to comply with the terms hereof in connection with the Eurodollar Rate
Loans, or (B) shall result in the increase in the costs to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans by an amount deemed by Lender to be
material, or (C) reduce the amounts received or receivable by Lender in respect





21









 







thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans shall otherwise increase by an
amount deemed by Lender to be material. Borrower shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such Person as a result of the foregoing,
including, without limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting forth the basis for
the determination of such amount necessary to compensate Lender as aforesaid shall be delivered to
Borrower Representative and shall be conclusive, absent manifest error. Notwithstanding the
foregoing, Lender agrees not to take any of the actions contemplated by this Section 3.5(a)
unless it also takes such action with respect to its other borrowers.




          (b) If any payments or prepayments in respect of the Eurodollar Rate Loans are received by
Lender other than on the last day of the applicable Interest Period (whether pursuant to
acceleration, upon maturity or otherwise), including any payments pursuant to the application of
collections under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any additional loss (including loss of anticipated profits), cost or
expense incurred by such Person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Person to make or maintain such Eurodollar Rate Loans or
any portion thereof.




SECTION 4. CONDITIONS PRECEDENT




     4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations. Each of
the following is a condition precedent to Lender making the initial Loans and providing the initial
Letter of Credit Accommodations hereunder:



          (a) Lender shall have received evidence, in form and substance satisfactory to Lender, that
Lender has valid perfected and first priority security interests in and liens upon the Collateral
and any other property which is intended to be security for the Obligations or the liability of any
Obligor in respect thereof, subject only to the security interests and liens permitted herein or in
the other Financing Agreements;




          (b) all requisite corporate action and proceedings in connection with this Agreement and the
other Financing Agreements shall be satisfactory in form and substance to Lender, and Lender shall
have received all information and copies of all documents, including records of requisite corporate
action and proceedings which Lender may have requested in connection therewith, such documents
where requested by Lender or its counsel to be certified by appropriate corporate officers or
governmental authorities;





22









 








          (c) no change which has had or could be reasonably expected to have a Material Adverse Effect
shall have occurred since the date of Lender’s latest field examination and no change or event
shall have occurred which would impair the ability of the Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which it is a party or of
Lender to enforce the Obligations or realize upon the Collateral;




          (d) Lender shall have completed a field review of the Records and such other information with
respect to the Collateral as Lender may require to determine the amount of Revolving Loans
available to Borrower, the results of which shall be satisfactory to Lender, not more than five (5)
Business Days prior to the date hereof;




          (e) Lender shall have received evidence of insurance and loss payee or additional insured, as
applicable, endorsements required hereunder and under the other Financing Agreements, in form and
substance reasonably satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as loss payee or additional insured as applicable;




          (f) Lender shall have received, in form and substance satisfactory to Lender, such opinion
letters of counsel to Borrower with respect to the Financing Agreements, the security interests and
liens of Lender and such other matters as Lender may request;




          (g) Lender shall have received a certificate regarding the solvency of Borrower, in form and
substance satisfactory to Lender, executed by the chief executive officer and the chief financial
officer of Borrower;




          (h) Lender shall have received, in form and substance satisfactory to Lender, a pledge of one
hundred percent (100%) of the common stock, or other equity interests, in any Person owned by SSG
(other than Sport Supply Group Asia, Ltd., a Hong Kong corporation, with respect to which Lender
shall have received a pledge of sixty-five percent (65%) of such stock);




          (i) Lender shall have received a certificate executed by the chief executive officer and the
chief financial officer of Borrower, setting forth in reasonable detail the sources and uses of
funds in the transactions contemplated herein;




          (j) Lender shall have received, in form and substance satisfactory to Lender, written
instructions from Borrower Representative directing the application of the initial Revolving Credit
Loans or Letter of Credit Accommodations, if any, on the date hereof pursuant to this Agreement;




          (k) the Excess Availability, as determined by Lender, as of the date hereof shall be not less
than $2,000,000 after giving effect to the initial Loans made or to be made and the Letter of
Credit Accommodations issued or to be issued in connection with the initial transactions hereunder;






23









 








          (l) Lender shall have received a licensor agreement, in form and substance satisfactory to
Lender, for each trademark or any other intellectual property which Borrower licenses set forth on
Schedule 4.1(l), executed by Borrower and the licensor;




          (m) Lender shall have received, in form and substance satisfactory to Lender, all releases,
terminations and such other documents as Lender may request to evidence and effectuate the
termination by the existing lender or lenders to Borrower of their respective financing
arrangements with Borrower and the termination and release by it or them, as the case may be, of
any interest in and to any assets and properties of Borrower and each Obligor (or payoff letters in
form and substance satisfactory to Lender including the agreement of such existing lender or
lenders to effectuate such terminations and releases promptly upon receipt of the payoff amount set
forth therein), duly authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements previously filed by it
or any of them or their predecessors, as secured party and Borrower or any Obligor, as debtor and
(ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by
Borrower or any Obligor in favor of such existing lender or lenders, in form acceptable for
recording in the appropriate government office;




          (n) Lender shall have received from Borrower a report of Borrower’s slow-moving Inventory,
based upon Inventory on-hand versus quantity sold for the twelve month period ending February 23,
2001, and Lender shall be satisfied with the result thereof; and




          (o) Lender shall have received the other Financing Agreements (including, without limitation,
a negative pledge agreement for each location where Borrower owns Real Property) and all
instruments and documents hereunder and thereunder shall have been duly executed and delivered to
Lender, in form and substance reasonably satisfactory to Lender.




     4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations. Each of
the following is an additional condition precedent to Lender making Loans and/or providing Letter
of Credit Accommodations to Borrower, including the initial Loans and Letter of Credit
Accommodations and any future Loans and Letter of Credit Accommodations:



          (a) all representations and warranties contained herein and in the other Financing Agreements
shall be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of the making of each such Loan
or providing each such Letter of Credit Accommodation and after giving effect thereto except for
any representations and warranties given as of a specific date, which shall have been true and
correct in all material respects on and as of such date; and




          (b) no Event of Default and no event or condition which, with notice or passage of time or
both, would constitute an Event of Default, shall exist or have occurred and be continuing on and
as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.





24









 








SECTION 5. GRANT OF SECURITY INTEREST




     To secure payment and performance of all Obligations, Borrower hereby grants to Lender a
continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to
Lender as security, the following property and interests in property of Borrower, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the “Collateral”):



     5.1 Accounts;



     5.2 all present and future contract rights (including rights under service agreements (except
to the extent prohibited by the applicable service agreement)), general intangibles (including tax
and duty refunds, registered and unregistered patents, trademarks, service marks, copyrights, trade
names, applications for the foregoing, trade secrets, good will, processes, drawings, blueprints,
customer lists, licenses (except to the extent prohibited by the applicable license agreement),
whether as licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper, documents, instruments,
securities and other investment property, letters of credit, bankers’ acceptances and guaranties;



     5.3 all present and future monies, securities, credit balances, deposits, deposit accounts and
other property of Borrower now or hereafter held or received by or in transit to Lender or its
affiliates or at any other depository or other institution from or for the account of Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all present
and future liens, security interests, rights, remedies, title and interest in, to and in respect of
Accounts and other Collateral, including (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance related to the
Collateral, (b) rights of stoppage in transit, replevin, repossession, reclamation and other rights
and remedies of an unpaid vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including returned, repossessed and reclaimed goods, and (d)
deposits by and property of account debtors or other Persons securing the obligations of account
debtors;



     5.4 Inventory;



     5.5 Equipment;



     5.6 Records; and



     5.7 all products and proceeds of the foregoing, in any form, including insurance proceeds and
all claims against third parties for loss or damage to or destruction of any or all of the
foregoing.



25









 





SECTION 6. COLLECTION AND ADMINISTRATION




     6.1 Borrower’s Loan Account. Lender shall maintain one or more loan account(s) on its
books in which shall be recorded (a) all Loans, Letter of Credit Accommodations and other
Obligations and the Collateral, (b) all payments made by or on behalf of Borrower and (c) all other
appropriate debits and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in accordance with
Lender’s customary practices as in effect from time to time.



     6.2 Statements. Lender shall render to Borrower Representative each month a statement
setting forth the balance in the Borrower’s loan account(s) maintained by Lender for Borrower
pursuant to the provisions of this Agreement, including principal, interest, fees, costs and
expenses. Each such statement shall be subject to subsequent adjustment by Lender but shall,
absent manifest errors or omissions, be considered correct and deemed accepted by Borrower
Representative and conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower Representative of any specific exceptions of
Borrower Representative thereto within thirty (30) days after the date such statement has been
mailed by Lender. Until such time as Lender shall have rendered to Borrower Representative a
written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.



     6.3 Collection of Accounts.



          (a) Borrower shall establish and maintain, at its expense, blocked accounts (“Blocked
Accounts”), with such banks as are reasonably acceptable to Lender into which Borrower shall
promptly deposit all payments on Accounts and all payments constituting proceeds of Inventory or
other Collateral in the identical form in which such payments are made, whether by cash, check or
other manner. The banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Lender, providing
that all items received or deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein and that the
depository bank will wire, or otherwise transfer, in immediately available funds, on a daily basis,
all funds received or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose (“Payment Account”). Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by Lender, whether on
the Accounts or as proceeds of Inventory or other Collateral or otherwise shall be the property of
Lender.




          (b) For purposes of calculating the amount of the Loans available to Borrower, such payments
will be applied (conditional upon final collection) to the Obligations on the Business Day of
receipt by Lender of payments or other funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender’s usual and customary practices as in effect
from time to time and within sufficient time to credit Borrower’s loan account on such day, and if
not, then on the next Business Day. For the purposes of calculating interest on the Obligations,
such payments or other funds received will be applied





26









 







(conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately available funds by
Lender in the Payment Account provided such payments or other funds and notice thereof are received
in accordance with Lender’s usual and customary practices as in effect from time to time and within
sufficient time to credit Borrower’s loan account on such day, and if not, then on the next
Business Day.




          (c) Borrower and all of its subsidiaries, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into their possession or
under their control and promptly upon receipt thereof, shall (or, if Borrower has Knowledge that
any of the foregoing has come into the possession or under the control of any of Borrower’s
affiliates, shareholders or directors, Borrower shall use its best efforts to cause such Person to)
deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender. In no event shall the same be commingled with Borrower’s
own funds. Borrower agrees to reimburse Lender promptly after request for any amounts owed or paid
to any bank at which a Blocked Account is established or any other bank or Person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender’s payments to or
indemnification of such bank or Person. The obligation of Borrower to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or non-renewal of this
Agreement.




     6.4 Payments. All Obligations shall be payable to the Payment Account as provided in
Section 6.3 or such other place as Lender may designate from time to time. Lender may
apply payments received or collected from Borrower or for the account of Borrower (including the
monetary proceeds of collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Lender determines. At Lender’s option, all
principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall
continue in full force and effect as if such payment or proceeds had not been received by Lender.
Borrower shall be liable to pay to Lender, and does hereby indemnify and hold Lender harmless for
the amount of any payments or proceeds surrendered or returned. This Section 6.4 shall
remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon
such payment or proceeds. This Section 6.4 shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.



     6.5 Authorization to Make Loans. Lender is authorized to make the Loans and provide
the Letter of Credit Accommodations based upon telephonic or other instructions received from
anyone purporting to be an officer of Borrower Representative or employee authorized by Borrower
Representative or, at the discretion of Lender, if such Loans are



27









 




necessary to satisfy any
Obligations. All requests for Loans or Letter of Credit Accommodations hereunder shall specify the
date on which the requested advance is to be made or Letter of Credit Accommodations established
(which day shall be a Business Day) and the amount of the requested Loan. Requests received after
12:00 p.m. Central Standard Time on any day shall be deemed to have been made as of the opening of
business on the immediately following Business Day. All Loans and Letter of Credit Accommodations
under this Agreement shall be conclusively presumed to have been made to, and at the request of and
for the benefit of, Borrower when (a) deposited to the credit of Borrower, (b) deposited to the
credit of Borrower Representative on account of Borrower (without liability or responsibility of
Lender for the application of funds by Borrower Representative), or (c) otherwise disbursed or
established in accordance with the instructions of Borrower acceptable to Lender or in accordance
with the terms and conditions of this Agreement.




     6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans provided by
Lender to Borrower hereunder only for: (a) payments to each of the Persons listed in the
disbursement direction letter furnished by Borrower Representative to Lender on or about the date
hereof and (b) costs, expenses and fees in connection with the preparation, negotiation, execution
and delivery of this Agreement and the other Financing Agreements. All other Loans made or Letter
of Credit Accommodations provided by Lender to Borrower pursuant to the provisions hereof shall be
used by Borrower only for general operating, working capital and other proper corporate purposes of
Borrower not otherwise prohibited by the terms hereof. None of the proceeds will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be considered a “purpose
credit” within the meaning of Regulation G of the Board of Governors of the Federal Reserve System,
as amended.



     6.7 Reliance on Notices; Appointment of Borrower Representative.



          (a) Lender shall be entitled to rely upon, and shall be fully protected in relying upon, any
instruction, request, notice or other communication with respect to Revolving Loan or Letter of
Credit Accommodations or similar notice believed by Lender to be genuine. Lender may assume that
each Person executing and delivering such a instruction, request or notice was duly authorized.




          (b) Borrower hereby designates SSG as its representative and agent on its behalf for the
purposes of (i) giving, receiving and/or issuing such instructions, requests or notices with
respect to the disbursement of the proceeds of the Loans, (ii) selecting interest rate options, (b)
requesting Letter of Credit Accommodations, (iii) receiving and distributing funds hereunder, (iv)
providing financial information and all other notices and consents hereunder or under any of the
other Financing Agreements, and (v) taking all other actions (including in respect of compliance
with covenants) on behalf of Borrower under the Financing Agreements as may be requested by Lender,
together with actions incidental thereto. Borrower Representative hereby accepts such appointment.






28









 








          (c) Borrower Representative shall not resign from such capacity without Lender’s prior written
consent to such resignation and, in any event, until and unless the existing Borrower
Representative shall have identified and Lender shall have approved, any replacement for such
representative.




          (d) Lender may regard any instruction, request, notice or other communication pursuant to any
Financing Agreement from Borrower Representative as an instruction, request, notice or
communication from Borrower and may give any notice or communication required or permitted to be
given to Borrower hereunder to Borrower Representative on behalf of Borrower. Borrower agrees that
each notice, election, representation and warranty, covenant, agreement and undertaking made on its
behalf by Borrower Representative shall be deemed for all purposes to have been made by Borrower
and shall be binding upon and enforceable against Borrower to the same extent as if the same had
been made directly by Borrower. Borrower waives and releases Lender from compliance with the terms
hereof, including for the application of funds disbursed or directed to Borrower Representative on
behalf of Borrower.




SECTION 7. COLLATERAL REPORTING AND COVENANTS




     7.1 Collateral Reporting. Borrower Representative shall provide Lender with the
following documents in a form regularly prepared by Borrower or otherwise reasonably satisfactory
to Lender: (a) on a regular basis as required by Lender, a schedule of Accounts, sales made,
credits issued and cash received; (b) on a monthly basis or more frequently as Lender may request,
(i) perpetual inventory reports, (ii) inventory reports by category, (iii) agings of accounts
payable, and (iv) agings of accounts
receivable, (c) on a quarterly basis or more frequently as Lender may request, slow-moving
inventory reports; (d) upon Lender’s request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, and (iii) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by Borrower; and (e) such other reports as to the
Collateral as Lender shall reasonably request from time to time. If any of Borrower’s records or
reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper
or other agent, Borrower hereby irrevocably authorizes such service, contractor, shipper or agent
to deliver such records, reports, and related documents to Lender and to follow Lender’s
instructions with respect to further services at any time that an Event of Default exists or has
occurred and is continuing.



     7.2 Accounts Covenants.



          (a) Borrower Representative shall notify Lender promptly of: (i) any material delay in
Borrower’s performance of any of its obligations to any account debtor or the assertion of any
material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes
with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material
adverse information relating to the financial condition of any material account debtor and (iii)
any event or circumstance which, to Borrower’s Knowledge would cause Lender to consider any then
existing Accounts as no longer constituting Eligible Accounts. No material





29









 







credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to any account debtor
without Lender’s consent, except in the ordinary course of Borrower’s business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no Event of Default
exists or has occurred and is continuing, Borrower shall settle, adjust or compromise any claim,
offset, counterclaim or dispute with any account debtor. At any time that an Event of Default
exists or has occurred and is continuing, Lender shall, at its option with notice to Borrower, have
the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with
account debtors or grant any credits, discounts or allowances.




          (b) Without limiting the obligation of Borrower Representative to deliver any other
information to Lender, Borrower shall promptly report to Lender any return of Inventory by any one
account debtor if the Inventory so returned in such case has a value in excess of $100,000. At any
time that Inventory is returned, reclaimed or repossessed, the Account (or portion thereof) which
arose from the sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an Event of Default
exists or has occurred and is continuing, Borrower Representative shall, upon Lender’s request, (i)
hold the returned Inventory in trust for Lender, (ii) segregate all returned Inventory from all of
its other property, (iii) dispose of the returned Inventory solely according to Lender’s
instructions, and (iv) not issue any credits, discounts or allowances with respect thereto without
Lender’s prior written consent.




          (c) With respect to each Account: (i) the amounts shown on any invoice delivered to Lender or
schedule thereof delivered to Lender shall be true and complete, (ii) no payments shall be made
thereon except payments promptly delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor except as reported to Lender in accordance
with this Agreement and except for credits, discounts, allowances or extensions made or given in
the ordinary course of Borrower’s business in accordance with practices and policies previously
disclosed to Lender, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims
or disputes existing or asserted with respect thereto except as reported to Lender in accordance
with the terms of this Agreement, and (v) none of the transactions giving rise thereto will violate
any applicable State or Federal laws or regulations, all documentation relating thereto will be
legally sufficient under such laws and regulations and all such documentation will be legally
enforceable in accordance with its terms.




          (d) Lender shall have the right at any time or times, in Lender’s name or in the name of a
nominee of Lender, to verify the validity, amount or any other matter relating to any Account or
other Collateral, by mail, telephone, facsimile transmission or otherwise.




          (e) Borrower Representative shall deliver or cause to be delivered to Lender, with appropriate
endorsement and assignment, with full recourse to Borrower, all chattel paper and instruments which
Borrower now owns or may at any time acquire immediately upon Borrower’s receipt thereof, except as
Lender may otherwise agree.




          (f) Lender may, at any time or times that an Event of Default exists or has occurred and is
continuing, (i) notify any or all account debtors that the Accounts have been





30









 







assigned to Lender
and that Lender has a security interest therein and Lender may direct any or all accounts debtors
to make payment of Accounts directly to Lender, (ii) with notice to Borrower, extend the time of
payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and
upon any terms or conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party or parties in any way liable
for payment thereof without any such discharge, release or other action being deemed to have
reduced any of the Obligations (but any amounts received pursuant thereto shall be deemed to have
reduced the Obligations when applied thereto in accordance with the terms hereof), (iii) demand,
collect or enforce payment of any Accounts or such other obligations, but without any duty to do
so, and Lender shall not be liable for its failure to collect or enforce the payment thereof nor
for the negligence (except for gross negligence or willful misconduct as determined by a final
non-appealable order of a court of competent jurisdiction) of its agents or attorneys with respect
thereto and (iv) take whatever other action Lender may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or has occurred and is
continuing, at Lender’s request, all invoices and statements sent to any account debtor shall state
that the Accounts and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any Accounts as Lender may
require.




     7.3 Government Receivables Covenants. Upon Lender’s request with respect to each
order or sale that creates a new Government Receivable in an amount greater than or equal to $1,000
(or such other amount as may hereafter be required under the Federal Assignment of Claims Act of
1940, as amended, or the regulations promulgated thereunder in order for such Government Receivable
to be
assignable thereunder), Borrower shall (i) comply with the Federal Assignment of Claims Act of
1940, as amended, (ii) send proper notices of the assignment to Lender of the proceeds of such
Government Receivable to the appropriate contracting and disbursing officers in accordance with
such Act, (iii) make such diligent efforts as the Lender may request to obtain proper
acknowledgments of each such notice and (iv) promptly provide to Lender fully executed originals of
each such notice and the acknowledgments relating thereto within five (5) Business Days of receipt
of such acknowledgments.



     7.4 Inventory Covenants. With respect to the Inventory: (a) Borrower shall at all
times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s cost
therefor and daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or times as Lender may
request after an Event of Default has occurred and is continuing, and promptly following such
physical inventory shall supply Lender with a report in the form and with such specificity as may
be reasonably satisfactory to Lender concerning such physical count; (c) Borrower shall not remove
any Inventory from the locations set forth or permitted herein, without thirty (30) days prior
written notice to Lender (such notice to include a description of the Inventory being moved, the
location to which it is being moved and the date of such relocation), except for sales of Inventory
in the ordinary course of Borrower’s business and except to move Inventory directly from one
location set forth or permitted herein to another such location; (d) Borrower Representative shall,
at its expense, deliver or cause to be delivered to Lender on an annual basis,



31









 




but at any time or
times as Lender may request after an Event of Default has occurred and is continuing, written
reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to
Lender and by an appraiser reasonably acceptable to Lender, addressed to Lender or upon which
Lender is expressly permitted to rely; (e) without limiting the foregoing clause (d), Borrower
Representative shall, at its expense, deliver or cause to be delivered to Lender on a semi-annual
basis, a desktop appraisal as to the Inventory in form, scope and methodology reasonably
acceptable to Lender and by an appraiser reasonably acceptable to Lender, addressed to Lender or
upon which Lender is expressly permitted to rely; (f) Borrower shall produce, use, store and
maintain the Inventory with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (g) Borrower assumes all responsibility and liability arising from or relating to
the production, use, sale or other disposition of the Inventory; (h) Borrower shall not sell
Inventory to any customer on approval, or any other basis which entitles the customer to return or
may obligate Borrower to repurchase such Inventory other than for warranties in the ordinary course
of business; (i) Borrower shall keep the Inventory in good and marketable condition; and (j)
Borrower shall not, without prior written notice to Lender, acquire or accept any Inventory on
consignment or approval.




     7.5 Equipment Covenants. With respect to the Equipment: (a) Borrower Representative
shall, at its expense, at any time or times as Lender may request after an Event of Default has
occurred and is continuing, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment in form, scope and
methodology reasonably acceptable to Lender and by an appraiser acceptable to Lender; (b) Borrower
shall keep the Equipment repaired and in running condition; (c) Borrower shall use the Equipment
with care and caution in all material respects and in accordance in all material respects with
applicable standards of any insurance and in conformity in all material respects with all
applicable material laws; (d) the Equipment is and shall be used in Borrower’s business and not for
personal, family, household or farming use; (e) Borrower shall not remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to move Equipment
directly from one location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and Borrower shall not permit
any of the Equipment to be or become a part of or affixed to real property (unless Lender shall
have received a satisfactory agreement from the owner of such property including an acknowledgement
that such Equipment shall remain personal property); and (g) Borrower assumes all responsibility
and liability arising from the use of the Equipment.



     7.6 Power of Attorney. Borrower and Borrower Representative hereby irrevocably
designates and appoints Lender (and all persons designated by Lender) as Borrower’s and Borrowers
Representative’s true and lawful attorney-in-fact, and authorizes Lender, in Borrower’s, Borrower
Representative’s or Lender’s name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory or other Collateral,
(ii) enforce payment of Accounts by legal proceedings



32









 




or otherwise, (iii) exercise all of
Borrower’s rights and remedies to collect any Account or other Collateral, (iv) sell or assign any
Account upon such terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign Borrower’s name on any proof of claim in bankruptcy or other similar
document against an account debtor, (viii) notify the post office authorities to change the address
for delivery of Borrower’s mail to an address designated by Lender, and open mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender’s reasonable credit
judgment, to fulfill Borrower’s and/or Borrower Representative’s obligations under this Agreement
and the other Financing Agreements and (b) at any time to (i) take control in any manner of any
item of payment or proceeds of Collateral, (ii) have access to any lockbox or postal box into which
Borrower’s mail is deposited, (iii) endorse Borrower’s name upon any items of payment or proceeds
of Collateral and deposit the same in the Lender’s account for application to the Obligations, (iv)
endorse Borrower’s name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Account or any goods pertaining thereto or any other Collateral, (v)
sign Borrower’s name on any verification of Accounts and notices thereof to account debtors and
(vi) execute in Borrower’s name and file any UCC financing statements or amendments thereto
consistent with the terms of this Agreement. BORROWER AND BORROWER REPRESENTATIVE HEREBY RELEASE
LENDER AND ITS OFFICERS, EMPLOYEES AND DESIGNEES FROM ANY LIABILITIES ARISING FROM ANY ACT OR ACTS
UNDER THIS POWER OF ATTORNEY AND IN FURTHERANCE THEREOF, WHETHER OF OMISSION OR COMMISSION,
INCLUDING ANY OF THE FOREGOING ARISING AS A RESULT OF LENDER’S OR ITS OFFICERS’,
EMPLOYEES’ OR DESIGNEES’ ORDINARY OR CONTRIBUTORY NEGLIGENCE, BUT EXCLUDING THAT ARISING SOLELY AND
DIRECTLY AS A RESULT OF LENDER’S OR ITS OFFICERS’, EMPLOYEES’ OR DESIGNEES’ GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS DETERMINED PURSUANT TO A FINAL NON-APPEALABLE ORDER OF A COURT OF COMPETENT
JURISDICTION.




     7.7 Right to Cure. Lender may, at its option, with prior written notice to Borrower
(unless an Event of Default shall have occurred and be continuing or would result if Lender did not
take such action, in which case Lender shall give such notice upon taking such action) (a) cure any
default by Borrower under any material agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, if an Event of Default has occurred and is continuing or would
otherwise arise from such default or if such default results in the impairment of the ability of
Borrower to perform its obligations under this Agreement or any of the Financing Agreements to
which it is a party or the ability of Lender to enforce or collect any of the Obligations, (b)
discharge taxes, liens, security interests or other encumbrances at any time levied on or existing
with respect to the Collateral not otherwise permitted by this Agreement and (c) pay any amount,
incur any expense or perform any act which, in Lender’s reasonable credit judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the rights of Lender with
respect thereto. Lender may add any amounts so expended to the Obligations and charge Borrower’s
account therefor, such amounts to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrower. Any



33









 




payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.




     7.8 Access to Premises. From time to time as requested by Lender, at the cost and
expense of Borrower, (a) Lender or its designee shall have complete access to all of Borrower’s
premises during normal business hours and after notice to Borrower Representative, or at any time
and without notice to Borrower or Borrower Representative if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral
and all of Borrower’s books and records, including the Records, and (b) Borrower Representative
shall promptly furnish to Lender such copies of such books and records or extracts therefrom as
Lender may request, and (c) use during normal business hours such of Borrower’s personnel,
equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event
of Default exists or has occurred and is continuing for the collection of Accounts and realization
of other Collateral, provided, however, that if disclosure of any of the
information located at Borrower’s premises would, in the reasonable judgment of outside counsel to
Borrower (as expressed in a legal opinion delivered to Lender), result in a waiver of the
attorney-client or work product privilege that would otherwise apply to such information, then
Borrower shall not be required to disclose such information pursuant to this Section 7.8.



SECTION 8. REPRESENTATIONS AND WARRANTIES




     Borrower hereby represents and warrants to Lender the following (which shall survive the
execution and delivery of this Agreement), the truth and accuracy of which are a continuing
condition of the making of Loans and providing Letter of Credit Accommodations by Lender to
Borrower:



     8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is a corporation
duly organized and in good standing under the laws of its state of incorporation and is duly
qualified as a foreign corporation and in good standing in all states or other jurisdictions where
the nature and extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to so qualify would
not have a material adverse effect on Borrower’s financial condition, results of operation or
business or the rights of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements to which Borrower is a party and the
transactions contemplated hereunder and thereunder are all within Borrower’s corporate powers, have
been duly authorized and are not in contravention of law or the terms of Borrower’s certificate of
incorporation, by-laws, or other organizational documentation, or any material indenture, agreement
or undertaking to which Borrower is a party or by which Borrower or its property are bound.
Assuming the due execution and delivery by Lender, this Agreement and the other Financing
Agreements to which Borrower is a party, when executed and delivered, constitute legal, valid and
binding obligations of Borrower enforceable in accordance with their respective terms. Borrower
does not have any subsidiaries except as set forth on the Information Certificate.



34









 





     8.2
Financial Statements; No Material Adverse Effect. All financial statements
relating to SSG and its subsidiaries which have been or may hereafter be delivered by Borrower to
Lender have been prepared in accordance with GAAP (except for unaudited financial statements which
may not contain footnotes and are subject to year-end audit) and fairly present, in all material
respects, the financial condition and the results of operation of Borrower as at the dates and for
the periods set forth therein. Except as disclosed in any interim financial statements furnished
by Borrower to Lender prior to the date of this Agreement, there has been no change which would
result in a material increase in the liabilities of Borrower or otherwise have a Material Adverse
Effect since the date of the most recent audited financial statements furnished by Borrower to
Lender prior to the date of this Agreement.



     8.3 Chief Executive Office; Collateral Locations. The chief executive office of
Borrower and Borrower’s Records concerning Accounts are located only at the address set forth below
and its only other places of business and the only other locations of Collateral, if any, are the
addresses set forth in the Information Certificate, subject to the right of Borrower to establish
new locations in accordance with Section 9.2 below. The Information Certificate correctly
identifies any of such locations which are not owned by Borrower and sets forth the owners and/or
operators
thereof. No Collateral is located in any jurisdiction other than the jurisdictions identified on
Schedule 8.3, and Borrower does not conduct business in any jurisdiction identified on
Schedule 8.3 hereto under any name other than the names set forth for such jurisdiction on
Schedule 8.3.



     8.4 Priority of Liens; Title to Properties. The security interests and liens granted
to Lender under this Agreement and the other Financing Agreements constitute valid and perfected
first priority liens and security interests in and upon the Collateral subject only to the liens
indicated on Schedule 8.4 hereto and the other liens permitted under Section 9.8
hereof. Borrower has good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those
granted to Lender and such others as are specifically listed on Schedule 8.4 hereto or
permitted under Section 9.8 hereof.



     8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely manner (after
giving effect to any properly requested extensions) all tax returns, reports and declarations which
are required to be filed by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to be paid all taxes
due and payable or claimed due and payable in any assessment received by it, except taxes the
validity of which are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have been set aside on its
books. Adequate provision has been made for the payment of all accrued and unpaid Federal, State,
county, local, foreign and other taxes whether or not yet due and payable and whether or not
disputed.



     8.6 Litigation. Except as set forth on the Information Certificate, there is no
present investigation by any governmental agency pending, or to Borrower’s Knowledge threatened,
against or affecting Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the Borrower’s Knowledge threatened, against Borrower or



35









 




its
assets or goodwill, or against or affecting any transactions contemplated by this Agreement, which,
in either case, if adversely determined against Borrower would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing Agreements to which it is a
party or of Lender to enforce any Obligations or realize upon any Collateral or otherwise have a
Material Adverse Effect.




     8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not in default
under, or in violation of any of the terms of, any agreement, contract, instrument, lease or other
commitment to which it is a party or by which it or any of its assets are bound and Borrower is in
compliance with all applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority, except as described on
Schedule 8.7 hereto and except for such other defaults, violations or instances of
noncompliance which would not impair the ability of Borrower to perform its obligations under this
Agreement or any of the Financing Agreements to which it is a party or would not otherwise have a
Material Adverse Effect.



     8.8 Employee Benefits.



          (a) Borrower has not engaged in any transaction in connection with which Borrower or any of
its ERISA Affiliates could be subject to either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Code, including any accumulated funding deficiency
described in Section 8.8(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.8(d) hereof.




          (b) No liability to the Pension Benefit Guaranty Corporation has been or is expected by
Borrower to be incurred with respect to any employee benefit plan of Borrower or any of its ERISA
Affiliates. There has been no reportable event (within the meaning of Section 4043(b) of ERISA) or
any other event or condition with respect to any employee pension benefit plan of Borrower or any
of its ERISA Affiliates which presents a risk of termination of any such plan by the Pension
Benefit Guaranty Corporation.




          (c) Full payment has been made of all amounts which Borrower or any of its ERISA Affiliates is
required under Section 302 of ERISA and Section 412 of the Code to have paid under the terms of
each employee benefit plan as contributions to such plan as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, and no accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any employee benefit plan, including any penalty or tax described in Section
8.8(a) hereof and any deficiency with respect to vested accrued benefits described in
Section 8.8(d) hereof.




          (d) The current value of all vested accrued benefits under all employee benefit plans
maintained by Borrower that are subject to Title IV of ERISA does not exceed the current value of
the assets of such plans allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.8(a) hereof and any accumulated funding deficiency described in
Section 8.8(c) hereof. The terms “current value” and “accrued benefit” have the meanings
specified in ERISA.





36









 








          (e) Neither Borrower nor any of its ERISA Affiliates is or has ever been obligated to
contribute to any “multiemployer plan” (as such term is defined in Section 4001(a)(3) of ERISA)
that is subject to Title IV of ERISA.




     8.9 Environmental Compliance.



          (a) Except as set forth on Schedule 8.9 hereto, Borrower has not generated, used,
stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, and the operations of Borrower comply in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations
thereunder, except, in each of the foregoing, to the extent that the result of such violation or
non-compliance could not reasonably be expected to have a materially adverse affect
on Borrower’s ability to perform its obligations under this Agreement or the other Financing
Agreements.




          (b) Except as set forth on Schedule 8.9 hereto, there has been no investigation,
proceeding, complaint, order, directive, claim, citation or notice by any governmental authority or
any other Person nor is any pending or to Borrower’s Knowledge threatened, with respect to (i) any
non-compliance with, or violation of the requirements of any Environmental Law by, Borrower or (ii)
to Borrower’s Knowledge, the release, spill or discharge, threatened or actual, of any Hazardous
Material or the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials, except, in either case, to
the extent that the result of such non-compliance, violation, or action could not reasonably be
expected to have a materially adverse effect on Borrower’s ability to perform its obligations under
this Agreement or the other Financing Agreements.




          (c) Borrower has no material liability (contingent or otherwise) in connection with a release,
spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous
Materials.




          (d) Borrower has all licenses, permits, certificates, approvals or similar authorizations
required to be obtained or filed in connection with the operations of Borrower under any
Environmental Law and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect, except to the extent that the failure to
obtain or maintain such licenses, permits, certificates, approvals, or similar authorizations could
not reasonably be expected to have a materially adverse effect on Borrower’s ability to perform its
obligations under this Agreement or the other Financing Agreements.




     8.10 Bank Accounts. All of the deposit accounts, investment accounts or other
accounts in the name of or used by Borrower maintained at any bank or other financial institution



37









 




are set forth on Schedule 8.10 hereto, subject to the right of Borrower to establish new
accounts in accordance with Section 9.13 below.




     8.11 Accuracy and Completeness of Information All information furnished by or on
behalf of Borrower in writing to Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby, including all information
on the Information Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact necessary in order to
make such information not misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a Material Adverse Effect, which has not been fully and accurately
disclosed to Lender in writing.



     8.12 Survival of Warranties; Cumulative. All representations and warranties contained
in this Agreement or any
of the other Financing Agreements shall survive the execution and delivery of this Agreement and
shall be deemed to have been made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder (except for representations and warranties given as of a specific
date) and shall be conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations and warranties set
forth herein shall be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.



     8.13 Subsidiaries Stock. Except as set forth on Schedule 8.13 hereto, all of
the issued and outstanding shares of capital stock of each subsidiary of SSG are directly and
beneficially owned by SSG and all such shares have been duly authorized and are fully paid and
nonassessable, free and clear of all claims, liens, pledges and encumbrances of any kind other than
liens and encumbrances in favor of Lender.



SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS




     9.1 Maintenance of Existence. Borrower shall at all times preserve, renew and keep in
full, force and effect its corporate existence and rights and franchises with respect thereto and
maintain in full force and effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the business as presently or proposed to
be conducted. Borrower Representative shall give Lender no less than thirty (30) days prior written
notice of any proposed change in Borrower’s corporate name, which notice shall set forth the new
name and Borrower Representative shall deliver to Lender a copy of the amendment to the Certificate
of Incorporation of Borrower providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation of Borrower as soon as it is available.



     9.2 New Collateral Locations. Borrower may open any new location within the
continental United States provided (a) Borrower Representative gives Lender no less than thirty
(30) days prior written notice of the intended opening of any such new location and (b) Borrower
executes and delivers, or causes to be executed and delivered, to Lender such agreements,



38









 




documents, and instruments as Lender may deem reasonably necessary or desirable to protect its
interests in the Collateral at such location, including UCC financing statements.




     9.3 Compliance with Laws, Regulations, Etc. Borrower shall, at all times, comply in
all material respects with all material laws, rules, regulations, licenses, permits, approvals and
orders of any Federal, State or local governmental authority applicable to it.



     9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against it or its properties or assets,
except for taxes the validity of which are being contested in good faith by appropriate proceedings
diligently pursued and
available to Borrower and with respect to which adequate reserves have been set aside on its books.
Borrower shall be liable for any tax or penalties imposed on Lender as a result of the financing
arrangements provided for herein and Borrower agrees to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof, and until paid by
Borrower such amount shall be added and deemed part of the Loans, provided, that,
nothing contained herein shall be construed to require Borrower to pay any income or franchise
taxes attributable to the income of Lender from any amounts charged or paid hereunder to Lender.
The foregoing indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.



     9.5 Insurance. Borrower shall, at all times, maintain with financially sound and
reputable insurers insurance with respect to the Collateral against loss or damage and all other
insurance of the kinds and in the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly situated. Said
policies of insurance shall be reasonably satisfactory to Lender as to form, amount and insurer.
Borrower Representative shall furnish certificates, policies or endorsements to Lender as Lender
shall require as proof of such insurance, and, if Borrower Representative fails to do so, Lender is
authorized, but not required, to obtain such insurance at the expense of Borrower. All policies
shall provide for at least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in obtaining, and at any
time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending
and canceling such insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender’s loss payable endorsements to all insurance policies
in form and substance satisfactory to Lender. Such lender’s loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to Lender as its interests may appear
and further specify that Lender shall be paid regardless of any act or omission by Borrower or any
of its affiliates. Lender shall apply any insurance proceeds received by Lender at any time to
payment of the Obligations.



     9.6 Financial Statements and Other Information.



          (a) Borrower shall keep proper books and records in which true and complete entries shall be
made of all dealings or transactions of or in relation to the Collateral and the business of
Borrower and its subsidiaries (if any) in accordance with GAAP (except for unaudited financial
statements which may not contain footnotes and are subject to year-end





39









 







audit) and Borrower
Representative shall furnish or cause to be furnished to Lender: (i) within forty-five (45) days
after the end of each fiscal month, monthly unaudited consolidated and consolidating financial
statements of SSG and its subsidiaries (including in each case balance sheets and statements of
income and loss), all in reasonable detail, fairly presenting in all material respects the
financial position and the results of the operations of SSG and its subsidiaries as of the end of
and through such fiscal month and (ii) within ninety (90) days after the end of each fiscal year,
audited consolidated statements of SSG and its subsidiaries (including in each case balance sheets,
statements of income and loss, statements of cash flow
and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the operations of SSG and its
subsidiaries as of the end of and for such fiscal year, together with the unqualified (except for a
qualification for a change in accounting principles with which the accountants concur) opinion of
its independent certified public accountants, which accountants shall be an independent accounting
firm selected by SSG and reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly in all material respects the results of
operations and financial condition of SSG and its subsidiaries as of the end of and for the fiscal
year then ended.




          (b) Borrower Representative shall promptly notify Lender in writing of the details of (i) any
material loss, damage, investigation, action, suit, proceeding or claim relating to the Collateral
or any other property which is security for the Obligations or which would have a Material Adverse
Effect (ii) the receipt of any official notice that its property taxes for property located in the
state of Texas are payable and (iii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of Default.




          (c) Borrower Representative shall promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which Borrower sends to its stockholders
generally and copies of all material reports and registration statements which Borrower files with
the Securities and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.




          (d) Subject to Section 12.5, Borrower Representative shall furnish or cause to be
furnished to Lender such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time, reasonably request.
Subject to Section 12.5, Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to any court or other
government agency or to any participant or assignee or prospective participant or assignee.
Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrower’s expense, copies of the financial statements of Borrower and any reports or
management letters prepared by such accountants or auditors on behalf of Borrower and to disclose
to Lender such information as they may have regarding the business of Borrower. Notwithstanding
the foregoing, if disclosure of any of the information required to be delivered to Lender pursuant
to this Section 9.6(d) would, in the reasonable judgment of outside counsel to Borrower (as
expressed in a legal opinion to Lender), result in a waiver of the attorney-client or work product
privilege that would otherwise apply to such information, then neither Borrower nor its accountants
or auditors shall be required to disclose such information pursuant to this




40









 







Section 9.6(d).
Any documents, schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to Lender, except as
otherwise designated by Borrower Representative to Lender in writing.




          (e) Simultaneous with the delivery of the monthly financial statements pursuant to Section
9.6(a)(i), Borrower will deliver a certificate of an authorized senior officer identifying all
defaults under its real property leases and license agreements.




     9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall not,
directly or indirectly, (a) merge into or with or consolidate with any other Person or permit any
other Person to merge into or with or consolidate with it, except (i) a subsidiary of Borrower may
merge with and into SSG, if SSG is the surviving corporation, and (ii) with Lender’s prior written
consent (which shall not be unreasonably withheld and which shall not be conditioned upon the
payment to Lender of a consent or similar fee) SSG may merge with and/or into Emerson, or (b) sell,
assign, lease, transfer, abandon or otherwise dispose of any indebtedness to any other Person or
any of its assets to any other Person, except for (i) sales of Inventory in the ordinary course of
business, (ii) the disposition of worn-out or obsolete Equipment or Equipment no longer used in the
business of Borrower so long as (A) if an Event of Default exists or has occurred and is
continuing, any proceeds are paid to Lender and (B) such sales do not involve Equipment having an
aggregate fair market value in excess of $300,000 for all such Equipment disposed of in any fiscal
year of Borrower or (iii) the sale of Borrower’s real property in Anniston, Alabama for no less
than fair market value and on terms no less favorable to Borrower than Borrower would reasonably be
expected to obtain in an arm’s-length transaction for such sale, provided that Lender receives
prior written notice of the terms of such sale and that the proceeds thereof are immediately and
directly applied to payment of the Obligations, or (c) form or acquire any subsidiaries, or (d)
wind up, liquidate or dissolve or (e) agree to do any of the foregoing.



     9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to exist any
security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet overdue or the
validity of which are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have been set aside on its
books; (c) non-consensual statutory liens (other than liens securing the payment of taxes) arising
in the ordinary course of Borrower’s business to the extent: (i) such liens secure indebtedness
which is not overdue or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured (subject to deductible or self-insured retention consistent with Borrower’s
current business practices) and being defended at the sole cost and expense and at the sole risk of
the insurer or being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower, in each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of
real property which do not interfere in any material respect with the use of such real property or
ordinary conduct of the business of Borrower as presently conducted thereon or materially impair
the value of the real property which may be subject thereto; (e) purchase money security



41









 




interests
in Equipment (including capital leases) and purchase money mortgages on real estate not to exceed
$500,000 in the aggregate at any time outstanding so long as such security interests and mortgages
do not apply to any property of Borrower other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be; and (f) the security interests and liens set forth on Schedule
8.4 hereto.




     9.9 Indebtedness. Borrower shall not incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any obligations or indebtedness, except:
(a) the Obligations; (b) trade obligations and normal accruals in the ordinary course of business
more than sixty (60) days past due, or with respect to which the Borrower is contesting in good
faith the amount or validity thereof by appropriate proceedings diligently pursued and available to
Borrower, and with respect to which adequate reserves have been set aside on its books; (c)
purchase money indebtedness (including capital leases) to the extent not incurred or secured by
liens (including capital leases) in violation of any other provision of this Agreement; (d) the
indebtedness set forth on Schedule 9.9 hereto and (e) indebtedness that is subordinated to
the Obligations in a manner satisfactory to Lender, and any extensions, renewals or refinancings
(each a “refinancing”) of any of the foregoing on terms and conditions that are not
materially more onerous to Borrower than the terms and conditions of such indebtedness on the date
hereof or, if later, the date of the original issuance thereof (including that the principal amount
of such refinancing indebtedness does not exceed the principal amount of, plus the amount of
accrued and unpaid interest on, the indebtedness so refinanced); provided, that,
(i) Borrower may only make regularly scheduled payments of principal and interest in respect of
such indebtedness in accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof or, if later, the date of the original
issuance thereof, (ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument related thereto
unless such amendment, modification, alteration or change would not (i) result in an Event of
Default or otherwise have a Material Adverse Effect, (ii) cause the terms of such indebtedness,
agreement, document or instrument to be materially more onerous to Borrower than the terms thereof
in effect on the date hereof, or (iii) otherwise adversely effect the Collateral or any of Lender’s
rights under the Financing Agreements, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums for such purpose,
and (iii) Borrower shall furnish to Lender all material notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the receipt thereof, or
sent by Borrower or on its behalf, concurrently with the sending thereof, as the case may be.



     9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly or indirectly,
make any loans or advance money or property to any Person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the stock or indebtedness or all or a substantial
part of the assets or property of any Person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance, obligations or dividends of
any Person or agree to do any of the foregoing, except: (a) the endorsement of instruments
for collection or deposit in the ordinary course of business; (b) investments in: (i) short-term
direct obligations of the United States Government, (ii) negotiable



42









 




certificates of deposit issued
by any bank satisfactory to Lender, payable to the order of the Borrower or to bearer and delivered
to Lender, and (iii) commercial paper rated A1 or P1; provided, that, as to any of
the foregoing, unless waived in writing by Lender, Borrower shall take such actions as are deemed
necessary by Lender to perfect the security interest of Lender in such investments, (c) loans to
employees of Borrower not to exceed $100,000 in the aggregate outstanding at any time and (d) the
loans, advances and guarantees set forth on Schedule 9.10 and all renewals, extensions and
refinances
thereof (subject to the same conditions imposed on “refinancings” under Section 9.9)
hereto; provided, that, as to such loans, advances and guarantees, (i) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such loans,
advances or guarantees or any agreement, document or instrument related thereto, or (B) as to such
guarantees, redeem, retire, defease, purchase or otherwise acquire the obligations arising pursuant
to such guarantees, or set aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all material notices or demands in connection with such loans,
advances or guarantees or other indebtedness subject to such guarantees either received by Borrower
or on its behalf, promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.




     9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly, declare
or pay any cash dividends on account of any shares of class of capital stock of Borrower now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or
redeem, retire, defease, purchase or otherwise acquire any shares of any class of capital stock (or
set aside or otherwise deposit or invest any sums for such purpose) for any consideration other
than common stock or apply or set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares or agree to do any of the foregoing.



     9.12 Transactions with Affiliates. Borrower shall not, directly or indirectly, (a)
purchase, acquire or lease any property from, or sell, transfer or lease any property to, any
officer, director, agent or other Person affiliated with Borrower, except in the ordinary course of
and pursuant to the reasonable requirements of Borrower’s business and upon fair and reasonable
terms no less favorable to the Borrower than Borrower would obtain in a comparable arm’s length
transaction with an unaffiliated Person or (b) make any payments of management, consulting or other
fees for management or similar services, or of any indebtedness owing to any officer, employee,
shareholder, director or other Person affiliated with Borrower except (i) reasonable compensation
to officers, employees and directors for services rendered to Borrower in the ordinary course of
business, (ii) payments made to Emerson, pursuant to a management services agreement entered into
pursuant to and in accordance with that certain Securities Purchase Agreement between SSG and
Emerson dated as of November 27, 1996, provided that such fees are for bona fide management
services rendered to Borrower on terms no less favorable to Borrower than Borrower would obtain in
a comparable arm’s length transaction with an unaffiliated Person, and (iii) reasonable consulting
fees pursuant to a bona fide consulting arrangement on terms no less favorable to Borrower than
Borrower would obtain in a comparable arm’s length transaction with an unaffiliated Person and, if
the fees payable to any Person pursuant to any such arrangement exceed $100,000, approved by
Borrower’s board of directors.



43









 





     9.13 Additional Bank Accounts. Borrower shall not, directly or indirectly, open,
establish or maintain any deposit account, investment account or any other account with any bank or
other financial institution, other than the Blocked Accounts and the accounts set forth in
Schedule 8.10 hereto, except: (a) as to any new or additional Blocked Accounts and other
such new or additional accounts which contain any Collateral or proceeds thereof, with the prior
written consent of Lender and subject to such
conditions thereto as Lender may establish and (b) as to any accounts used by Borrower to make
payments of payroll, taxes or other obligations to third parties, after prior written notice to
Lender.



     9.14 Compliance with ERISA.



          (a) Borrower shall not with respect to any “employee benefit plans” maintained by Borrower or
any of its ERISA Affiliates: (i) terminate any of such employee benefit plans so as to incur any
liability to the Pension Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or
suffer to exist any prohibited transaction involving any of such employee benefit plans or any
trust created thereunder which would subject Borrower or such ERISA Affiliate to a tax or penalty
or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA,
(iii) fail to pay to any such employee benefit plan any contribution which it is obligated to pay
under Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or suffer
to exist any accumulated funding deficiency, whether or not waived, with respect to any such
employee benefit plan, (v) allow or suffer to exist any occurrence of a reportable event or any
other event or condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee benefit plan that is a single employer plan, which
termination could result in any liability to the Pension Benefit Guaranty Corporation or (vi) incur
any withdrawal liability with respect to any multiemployer pension plan.




          (b) As used in this Section 9.14, the terms “employee benefit plans”, “accumulated
funding deficiency” and “reportable event” shall have the respective meanings assigned to them in
ERISA, and the term “prohibited transaction” shall have the meaning assigned to it in Section 4975
of the Code and ERISA.




     9.15 Adjusted Net Worth. SSG and its subsidiaries, on a consolidated basis, shall, at
all times during the periods set forth below, maintain Adjusted Net Worth of not less than the
amount set forth below for each such period:



	 	 	 	 	 
	 	 	Minimum Adjusted	 
	Period	 	Net Worth	 
	From the date hereof through September
30, 2001
	 	$	34,000,000	 
	 
	 	 	 	 
	From October 1, 2001 through March 31,
2002
	 	$	32,000,000	 
	 
	 	 	 	 
	From April 1, 2002 through September 30,
2002
	 	$	35,000,000	 




 Each
fiscal year of SSG thereafter
                    
            
            
            
            The sum of:


44









 






	 	 	 	 	 	 	 	 	 
	 	 	(a)	 	the minimum Adjusted Net
Worth required hereunder for the
immediately preceding period,
plus
	 
	 	 	 	 	 	 	 	 
	 	 	(b)	 	the greater of:
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	(i)
	 	fifty percent (50%) of the
actual profits of SSG on a
consolidated basis for the

immediately preceding fiscal year; or

	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	(ii)
	 	$ 1,000,000






     9.16 Costs and Expenses. Borrower shall pay to Lender on demand all costs, expenses,
filing fees and taxes paid or payable in connection with the preparation, negotiation, execution,
delivery, recording, administration, collection, liquidation, enforcement and defense of the
Obligations, Lender’s rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments, supplements or consents
which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (c) all costs and expenses of filing or recording as Lender deems necessary or
appropriate (including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (d) all
insurance premiums, appraisal fees and search fees; (e) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and maintaining the
Blocked Accounts, together with Lender’s customary charges and fees with respect thereto; (f)
charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (g) costs and expenses of preserving and protecting the Collateral; (h) costs and
expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the transactions contemplated
hereby and thereby (including preparations for and consultations concerning any such matters); (i)
all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Lender
during the course of periodic field examinations of the Collateral and Borrower’s operations, plus
a per diem charge at the rate of $650.00 per person per day for Lender’s examiners in the field and
office; and (j) the reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing. Notwithstanding the foregoing, the legal fees
(exclusive of disbursements) payable by Borrower in connection with preparation, negotiation and
execution of this Agreement and the other Financing Agreements delivered in connection with the
transaction being consummated on the date hereof shall not exceed $40,000.



     9.17 Further Assurances. At the request of Lender at any time and from time to time,
Borrower shall, at its expense, duly execute and deliver, or cause to be duly executed and
delivered, such further agreements, documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or



45









 




purposes of this Agreement or any of the other Financing Agreements. Without limiting the
foregoing, Borrower agrees, upon Lenders’ request, to cause an appropriate financing statement
covering fixtures and other Collateral in
Calhoun County, Alabama, and to pay all taxes and post all bonds required in connection therewith.
Lender may at any time and from time to time request a certificate from an officer of Borrower
Representative representing that all conditions precedent to the making of Loans and providing
Letter of Credit Accommodations contained herein are satisfied. In the event of such request by
Lender, Lender may, at its option, cease to make any further Loans or provide any further Letter of
Credit Accommodations until Lender has received such certificate and, in addition, Lender has
determined that such conditions are satisfied or has waived such conditions in writing. Where
permitted by law, Borrower hereby authorizes Lender to execute and file one or more UCC financing
statements, as Lender deems necessary or appropriate and consistent with the terms of this
Agreement, signed only by Lender.




SECTION 10. EVENTS OF DEFAULT AND REMEDIES




     10.1 Events of Default. The occurrence or existence of any one or more of the
following events are referred to herein individually as an “Event of Default”, and collectively as
“Events of Default”:



          (a) Borrower (i) fails to pay when due any of the Obligations, (ii) fails to perform any of
the terms, covenants, conditions or provisions contained in Sections 9.1, 9.2, 9.3, 9.4 or 9.14 and
such failure is not cured within fifteen (15) days (iii) fails to perform any of the other terms,
covenants, or agreements contained in this Agreement;




          (b) any representation, warranty or statement of fact made by Borrower or Borrowers
Representative to Lender in this Agreement or the other Financing Agreements shall when made or
deemed made be false or misleading in any material respect;




          (c) any Obligor revokes, terminates or fails to perform within any applicable grace or cure
period any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Lender;




          (d) any final, non-appealable judgment for the payment of money is rendered against Borrower
or any Obligor the uninsured amount of which (including any amounts with respect to which the
insurance coverage is being disputed) is in excess of $400,000 in any one case or in excess of
$600,000 in the aggregate and shall remain undischarged or unvacated for a period in excess of
thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or execution is rendered
against Borrower or any Obligor or any of their assets which has or may reasonably be expected to
have a Material Adverse Effect;




          (e) any Obligor (being a natural person or a general partner of an Obligor which is a
partnership) dies or Borrower or any Obligor, which is a partnership, limited liability company,
limited liability partnership or a corporation, dissolves or suspends or discontinues doing
business other than as otherwise permitted hereunder;




46









 








          (f) Borrower or any Obligor becomes insolvent (however defined or evidenced), makes an
assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a
meeting of its creditors or principal creditors;




          (g) a case or proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at law or in equity) is filed against Borrower or any Obligor or all or any part of its properties
and such petition or application is not dismissed within sixty (60) days after the date of its
filing or Borrower or any Obligor shall file any answer admitting or not contesting such petition
or application or indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;




          (h) a case or proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at a law or equity) is filed by Borrower or any Obligor or for all or any part of its property; or




          (i) any default by Borrower or any Obligor under any agreement, document or instrument
relating to any indebtedness for borrowed money owing to any Person other than Lender, or any
capitalized lease obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any Person other than Lender, in any
case in an amount in excess of $500,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrower or any Obligor under any contract,
lease, license or other obligation to any Person other than Lender, which default continues for
more than the applicable cure period, if any, with respect thereto and the default has or may
reasonably be expected to have a Material Adverse Effect;




          (j) SSG shall cease to own and have voting control over 100% of the issued and outstanding
stock of ATEC, except pursuant to a merger permitted hereunder;




          (k) the indictment or threatened indictment of Borrower or any Obligor under any criminal
statute, or commencement or threatened commencement of criminal or civil proceedings against
Borrower or any Obligor, pursuant to which statute or proceedings the penalties or remedies sought
or available include forfeiture of any of the property of Borrower or such Obligor;




          (l) there shall be a change in the business or assets of Borrower or any Obligor after the
date hereof which has or may reasonably be expected to have a Material Adverse Effect; or




          (m) an event of default shall occur and be continuing beyond any applicable grace or cure
period under any of the other Financing Agreements.




47









 








     10.2 Remedies.



          (a) At any time an Event of Default exists or has occurred and is continuing, Lender shall
have all rights and remedies provided in this Agreement, the other Financing Agreements, the
Uniform Commercial Code and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by Borrower, Borrower Representative or any Obligor, except as such
notice or consent is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other Financing Agreements, the
Uniform Commercial Code or other applicable law, are cumulative, not exclusive and enforceable, in
Lender’s discretion, alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower of this Agreement or any of the other Financing
Agreements. Lender may, at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.




          (b) Without limiting the foregoing, at any time an Event of Default exists or has occurred and
is continuing, Lender may, in its discretion and without limitation, (i) accelerate the payment of
all Obligations and demand immediate payment thereof to Lender (provided, that,
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), all Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral, (iii) require
Borrower, at Borrower’s expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or all of the
Collateral from any premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose, (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into
contracts with respect thereto, public or private sales at any exchange, broker’s board, at any
office of Lender or elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to purchase the whole or any
part of the Collateral at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is hereby expressly waived
and released by Borrower and/or (vii) terminate this Agreement. If any of the Collateral is sold
or leased by Lender upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, ten (10) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof
and Borrower waives any other notice. In the event Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.




48









 








          (c) Lender may apply the cash proceeds of Collateral actually received by Lender from any
sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in
whole or in part and in such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement, including attorneys’
fees and legal expenses.




          (d) Without limiting the foregoing, upon the occurrence of an Event of Default or an event
which with notice or passage of time or both would constitute an Event of Default, Lender may, at
its option, without notice, (i) cease making Loans or arranging for Letter of Credit Accommodations
or reduce the lending formulas or amounts of Revolving Loans and Letter of Credit Accommodations
available to Borrower and/or (ii) terminate any provision of this Agreement providing for any
future Loans or Letter of Credit Accommodations to be made by Lender to Borrower.





			
	SECTION 11.	 	JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW








     11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.



          (a) The validity, interpretation and enforcement of this 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 Texas
(without giving effect to principles of conflicts of law).




          (b) Borrower, Borrower Representative and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the State of Texas and the United States District Court for the
Northern District of Texas and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this 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 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 agree that any dispute
with respect to any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower Representative,
Borrower or its property in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its rights against
Borrower Representative, Borrower or its property).




          (c) Each of Borrower and Borrower Representative 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 on the signature pages hereof or such other
address specified by Borrower pursuant to Section 12.2 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 Lender’s option, by service upon Borrower or Borrower Representative, as the




49









 







case may be, in any other manner provided under the rules of any such courts. Within thirty (30)
days after such service, Borrower or Borrower Representative, as the case may be, shall appear in
answer to such process, failing which Borrower or Borrower Representative, as the case may be,
shall be deemed in default and judgment may be entered by Lender against Borrower or Borrower
Representative, as the case may be, for the amount of the claim and other relief requested.




          (d) BORROWER, BORROWER REPRESENTATIVE AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS 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. BORROWER, BORROWER
REPRESENTATIVE AND LENDER EACH 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 BORROWER OR LENDER MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS 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) Lender shall not have any liability to Borrower or Borrower Representative (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower or Borrower Representative in
connection with, arising out of, or in any way related to the transactions or relationships
contemplated by this 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 Lender,
that the losses were the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender 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 Agreement.




     11.2 Waiver of Notices. Borrower hereby expressly waives demand, presentment, protest
and notice of intent to accelerate, notice of acceleration, notice of protest and notice of
dishonor with respect to any and all instruments and commercial paper, included in or evidencing
any of the Obligations or the Collateral, and any and all other demands and notices of any kind or
nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such
as are expressly provided for herein. No notice to or demand on Borrower or Borrower
Representative which Lender may elect to give shall entitle Borrower or Borrower Representative to
any other or further notice or demand in the same, similar or other circumstances.



     11.3 Amendments and Waivers. Neither this Agreement (including, without limitation,
the Information Certificate and any Schedule thereto) nor any provision hereof shall be amended,
modified, waived or discharged orally or by course of conduct, but only by a



50









 




written agreement
signed by an authorized officer of Lender, and as to amendments, as also signed by an authorized
officer of Borrower. Lender 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 Lender. Any such waiver shall be enforceable
only to the extent specifically set forth therein. A waiver by Lender 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 Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.




     11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any
action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating hereto or thereto.



     11.5 Indemnification. BORROWER SHALL INDEMNIFY AND HOLD LENDER, AND ITS DIRECTORS,
AGENTS, EMPLOYEES AND COUNSEL, HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES, COSTS OR EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY OF THEM IN
CONNECTION WITH ANY LITIGATION, INVESTIGATION, CLAIM OR PROCEEDING COMMENCED OR THREATENED RELATED
TO THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF
THIS AGREEMENT, ANY OTHER FINANCING AGREEMENTS, OR ANY UNDERTAKING OR PROCEEDING RELATED TO ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION, EVENT OR TRANSACTION RELATED OR
ATTENDANT THERETO, INCLUDING AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE FEES AND EXPENSES OF
COUNSEL AND INCLUDING LOSSES, CLAIMS, DAMAGES, LIABILITIES, COSTS AND EXPENSES ARISING FROM THE
ORDINARY OR CONTRIBUTORY NEGLIGENCE OF ANY PARTY INDEMNIFIED HEREBY, BUT EXCLUDING THOSE ARISING
SOLELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH AN INDEMNIFIED PARTY,
AS DETERMINED PURSUANT TO A FINAL NON-APPEALABLE ORDER OF A COURT OF COMPETENT JURISDICTION. TO
THE EXTENT THAT THE UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THIS SECTION MAY
BE UNENFORCEABLE BECAUSE IT VIOLATES ANY LAW OR PUBLIC POLICY, BORROWER SHALL PAY THE MAXIMUM
PORTION WHICH IT IS PERMITTED TO PAY UNDER APPLICABLE LAW TO LENDER IN SATISFACTION OF INDEMNIFIED
MATTERS UNDER THIS SECTION. THE FOREGOING INDEMNITY SHALL SURVIVE THE PAYMENT OF THE OBLIGATIONS
AND THE TERMINATION OR NON-RENEWAL OF THIS AGREEMENT.



51









 





SECTION 12.  TERM OF AGREEMENT; MISCELLANEOUS




     12.1 Term.



          (a) This Agreement and the other Financing Agreements shall become effective as of the date
set forth on the first page hereof and shall continue in full force and effect for a term ending on
the earlier of (i) the date three (3) years from the date hereof (the “Renewal Date”), and from
year to year thereafter, unless sooner terminated pursuant to the terms hereof or (ii) at Lender’s
option, the date on which any Person or group of Persons (as used within the context of the
definition of beneficial ownership described below), other than Emerson and its shareholders,
officers and directors, shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities Exchange Commission under the Securities Exchange Act of 1934, as
amended) of and having voting control over shares of capital stock of SSG in amount sufficient to
allow them to elect a majority of the board of directors of SSG (in which case, no renewals or
extensions shall apply). Lender or Borrower Representative may terminate this Agreement and the
other Financing Agreements effective on the Renewal Date or on the anniversary of the Renewal Date
in any year by giving to the other party at least ninety (90) days prior written notice;
provided, that, this Agreement and all other Financing Agreements must be
terminated simultaneously. Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations and shall
furnish cash collateral to Lender in such amounts as Lender determines are reasonably necessary to
secure Lender from loss, cost, damage or expense, including reasonable attorneys’ fees and legal
expenses, in connection with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or
as to which Lender has not yet received final and indefeasible payment. Such payments in respect
of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to such
bank account of Lender, as Lender may, in its discretion, designate in writing to Borrower
Representative for such purpose. Interest shall be due until and including the next Business Day,
if the amounts so paid by Borrower to the bank account designated by Lender are received in such
bank account later than 12:00 noon, Central Standard Time.




          (b) No termination of this Agreement or the other Financing Agreements shall relieve or
discharge Borrower of its respective duties, obligations and covenants under this Agreement or the
other Financing Agreements until all Obligations have been fully and finally discharged and paid,
and Lender’s continuing security interest in the Collateral and the rights and remedies of Lender
hereunder, under the other Financing Agreements and applicable law, shall remain in effect until
all such Obligations have been fully and finally discharged and paid.




          (c) If for any reason this Agreement is terminated pursuant to Section 12.1(a)(ii)
prior to the Renewal Date or is otherwise terminated prior to the end of the then current term or
renewal term of this Agreement, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender’s lost profits as a result thereof, Borrower agrees to pay to
Lender, upon the effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:





52









 








	 	 	 	 	 
	 	 	Amount	 	Period
	(i)

	 	2.0% of Maximum Credit
	 	From the date hereof to and including
March 26, 2002
	 
	 	 	 	 
	(ii)

	 	1.0% of Maximum Credit
	 	From March 27, 2002 to and including
March 26, 2003
	 
	 	 	 	 
	(iii)

	 	.25% of Maximum Credit
	 	From March 27, 2003 to and including
March 26, 2004





Such early termination fee shall be presumed to be the amount of damages sustained by Lender as a
result of such early termination and Borrower agrees that it is reasonable under the circumstances
currently existing. In addition, Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h)
hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, at its
option, to provide financing to Borrower or permit the use of cash collateral under the United
States Bankruptcy Code. The early termination fee provided for in this Section 12.1 shall
be deemed included in the Obligations. Notwithstanding anything contained herein to the contrary,
the early termination fee shall not apply to any early termination as the result of (i) a complete
refinancing of the Loans by an affiliate of Lender, or (ii) a complete refinancing pursuant to the
sale in the capital markets of debt obligations of, or equity interests in, Borrower, (iii) a
complete refinancing of the Loans by an affiliate of Borrower, or (iv) if Borrower merges with
Emerson.




     12.2 Notices. All notices, requests and demands hereunder shall be in writing and (a)
made to Lender at its address set forth below and to Borrower and Borrower Representative at
Borrower Representative’s chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with this provision, and
(b) deemed to have been 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 certified mail, return receipt
requested, five (5) days after mailing.



     12.3 Partial Invalidity. If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this 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.



     12.4 Successors. This Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon and inure to the benefit of and be
enforceable by Lender, Borrower and their respective successors and assigns, except that Borrower
may not assign its rights under this Agreement, the other Financing Agreements and



53









 




any other
document referred to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower Representative and, if no Event of Default has occurred and is continuing,
with Borrower Representative’s consent (which shall not be unreasonably withheld or delayed beyond
one week after request therefor), assign its rights and delegate its obligations under this
Agreement and the other Financing Agreements and further may assign, or sell participations in, all
or any part of the Loans, the Letter of Credit Accommodations or any other interest herein to
another financial institution or other Person, in which event, the assignee or participant shall
have, to the extent of such assignment or participation, the same rights and benefits as it would
have if it were the Lender hereunder, except as otherwise provided by the terms of such assignment
or participation. Notwithstanding the foregoing, in the case of any such assignment or
participation, (i) Borrower shall not be required to deliver financial statements or other reports
due hereunder to Persons in addition to Lender, (ii) representatives of such assignee or
participant may accompany representatives of Lender on inspections permitted hereunder, but shall
not be entitled to separate inspections, and (iii) Borrower shall not be obligated to pay any costs
or expenses paid or payable by such assignee or participant in connection with such transaction or
this Agreement.




     12.5 Confidentiality Agreement. For the purposes of this Section 12.5,
“Confidential Information” means information delivered (whether in writing or orally,
visually, electronically or by other means) to Lender or its representatives or agents by or on
behalf of Borrower in connection with the transactions contemplated by or otherwise pursuant to
this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by Lender as being confidential information of Borrower
provided that such term does not include information that (a) is or becomes publicly known or
available through no act or omission by Lender or any Person acting on Lender’s behalf, or (b)
otherwise becomes known to Lender on a nonconfidential basis other than through disclosure by
Borrower. Lender will keep the information confidential and will not disclose any information in
any manner whatsoever, provided that Lender may deliver or disclose Confidential Information to (i)
Lender’s directors, trustees, officers, employees, agents, attorneys and affiliates, financial
advisors and other professional advisors as Lender reasonably deems necessary or appropriate, who
agree to hold confidential the Confidential Information substantially in accordance with the terms
of this Section 12.5, (iii) any Person to which Lender sells or offers to sell its rights
under this Agreement or any part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the provisions of this
Section 12.5, (iv) any federal or state regulatory authority having jurisdiction over
Lender, or (v) any other Person to which such delivery or disclosure may be necessary or
appropriate, as reasonably determined by Lender, (A) to effect compliance with any law, rule,
regulation or order applicable to Lender, (B) in response to any subpoena or other legal process,
(C) in connection with any litigation to which Lender is a party, or (D) if any Event of Default
has occurred and is continuing to the extent Lender may reasonably determine such delivery and
disclosure to be
necessary or appropriate in the enforcement of, or for the protection of its rights and remedies
under, this Agreement.



     12.6 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to be delivered in
connection herewith or therewith represents the entire agreement and understanding concerning



54









 




the
subject matter hereof and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In
the event of any inconsistency between the terms of this Agreement and any schedule or exhibit
hereto, the terms of this Agreement shall govern.




     12.7 NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ BORROWER AND LENDER HEREBY AGREE
THAT, EXCEPT FOR SECTION 15.10(B) THEREOF, THE PROVISIONS OF TEX. REV. CIV. STAT. ANN. ART.
5069-15.01 ET SEQ. (VERNON 1987) (REGULATING CERTAIN REVOLVING CREDIT LOANS AND
REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS.



     12.8 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER FINANCING
AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND THE SAME MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



EACH BORROWER AND LENDER EACH

READ AND UNDERSTAND THIS

SECTION 12.8:



                                        (INITIALS OF AUTHORIZED OFFICER OF SSG)


                                        (INITIALS OF AUTHORIZED OFFICER OF ATEC)




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




55









 








     IN WITNESS WHEREOF, Lender, Borrower and Borrower Representative have caused these presents to
be duly executed as of the day and year first above written.



	 	 	 	 	 	 	 	 	 	 	 
	CONGRESS FINANCIAL	 	 	 	SPORT SUPPLY GROUP, INC., as	 	 
	CORPORATION (SOUTHWEST), as	 	 	 	Borrower and as Borrower Representative	 	 
	Lender	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/	 	 	 	By:	 	/s/	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Address:	 	 	 	Chief Executive Office:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	1201 Main Street, Suite 1625	 	 	 	1901 Diplomat Drive	 	 
	Dallas, Texas 75202	 	 	 	Farmers Branch, Texas 75234	 	 
	 	 	 	 	 	 	Attention:  President	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	with a copy to:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	1901 Diplomat Drive	 	 
	 	 	 	 	 	 	Farmers Branch, Texas 75234	 	 
	 	 	 	 	 	 	Attention: General Counsel	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ATHLETIC TRAINING EQUIPMENT	 	 
	 	 	 	 	 	 	COMPANY, INC., as Borrower	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Chief Executive Office:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	1901 Diplomat Drive	 	 
	 	 	 	 	 	 	Farmers Branch, Texas 75234	 	 
	 	 	 	 	 	 	Attention: President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	with a copy to:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	1901 Diplomat Drive	 	 
	 	 	 	 	 	 	Farmers Branch, Texas 75234	 	 
	 	 	 	 	 	 	Attention: General Counsel	 	 






 









 






EXHIBIT A




Information Certificate




 









 








SCHEDULE 1.5




Closing Date Availability Reserves





	•	 	Reserves in the amount of two months’ rent for each of Borrower’s
leased locations for which Lender has not received an executed
landlord’s waiver in form and substance satisfactory to Lender as
of the date hereof.
	 
	•	 	Reserves for slow moving Inventory equal to the sum of (i)
$500,000, plus (ii) the amount by which Borrower’s slow-moving
Inventory (as determined by Lender) exceeds $2,700,000.
	 
	•	 	Reserves for discontinued Inventory.




 









 











SCHEDULE 4.1(l)




Required Licensor Agreements




AMF

Huffy

MacGregor

Volt




 









 





SCHEDULE 8.3




Collateral Locations and Business Names




 









 








SCHEDULE 8.4




Existing Liens




 









 








SCHEDULE 8.7




Defaults




 









 








SCHEDULE 8.9




Environmental Disclosures




 









 








SCHEDULE 8.10




Bank Accounts




 









 








SCHEDULE 8.13




Subsidiaries Stock




 









 








SCHEDULE 9.9




Existing Indebtedness




 









 








SCHEDULE 9.10




Existing Liens, Advances and Guarantees





 









 






FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT




     THIS
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
“Amendment”) is made and
entered into this 1st day of October, 2002, by and among CONGRESS FINANCIAL CORPORATION
(SOUTHWEST), a Texas corporation (“Lender”), SPORT SUPPLY GROUP, INC., a Delaware corporation
(“SSG”), and ATHLETIC TRAINING EQUIPMENT COMPANY,
INC., a Delaware corporation (“ATEC”) (SSG and
ATEC, individually and/or collectively, jointly and severally,
“Borrower”).



PRELIMINARY STATEMENTS




     A. Lender and Borrower have entered into that certain Loan and Security Agreement,
dated March 27, 2001 (the “Loan Agreement”), pursuant to which Lender has entered into certain
financing arrangements with Borrower.



     B. The parties hereto have agreed to amend the Loan Agreement as hereinafter set
forth.



     NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:



AGREEMENT




ARTICLE I

Definitions




     1.01 Capitalized terms used in this Amendment are defined in the Loan Agreement, as amended
hereby, unless otherwise stated.



ARTICLE II

Amendments




     2.01
Amendment to Section 1.3. Section 1.3 of the Loan Agreement is hereby deleted in
its entirety and the following is replaced in lieu thereof:




“1.3 ‘Adjusted Net Worth’ shall mean as to any Person, at any time, in accordance
with GAAP (except as otherwise specifically set forth below), on a consolidated
basis for such Person and its subsidiaries (if any), 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 but not limited to 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 taxes payable and other
proper accruals, but excluding any one-time non-cash adjustments, any adjustments
caused fay a change in GAAP or due to an adoption of an existing accounting policy
different from that currently in existence) 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.”



     2.02 Amendment to Section 9.15. Section 9.15 of the Loan Agreement is hereby
deleted in its entirety and the following is replaced in lieu thereof:




“9.15 Adjusted Net Worth. SSG and its subsidiaries, on a consolidated
basis, shall, at all times during the periods set forth below, maintain Adjusted Net
Worth of not less than the amount set forth below for each such period:



	 	 	 	 	 
	Period	 	Minimum Adjusted Net Worth
	From
October 1, 2002 through December 31,2002
	 	$	33,000,000	 
	 
	 	 	 	 
	From
January 1, 2003 through March 31,2003
	 	$	34,000,000	 
	 
	 	 	 	 
	From
April 1, 2003 through June 30, 2003
	 	$	34,500,000	 
	 
	 	 	 	 
	July 1,
2003 through September 30, 2003
	 	$	34,500,000	 
	 
	 	 	 	 
	From
October 1, 2003 through December 31, 2003
	 	$	34,000,000	 
	 
	 	 	 	 
	Each fiscal year of SSG thereafter
	 	$	35,000,000	”






ARTICLE III

Conditions Precedent




     3.01 Conditions to Effectiveness. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent, unless specifically waived in writing by
Lender:




	 	(a)	 	Lender shall have received, in form and substance satisfactory to Lender
and its legal counsel:






	 	(i)	 	this Amendment, duly executed by Borrower;
	 
	 	(ii)	 	a certificate of the Secretary of Borrower dated as
of the date of this Amendment, in form and substance satisfactory to
Lender,




- 2 -









 






	 	 	 	certifying among other things, (i) that Borrower’s Board of
Directors has met and has adopted, approved, consented to and
ratified resolutions which authorize the execution, delivery and
performance by Borrower of this Amendment and all such other
Financing Agreements to which Borrower is or is to be a party, and
(ii) the names of the officers of Borrower authorized to sign this
Amendment and each of such other Financing Agreements to which
Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures
of such officers;
	 
	 	(iii)	 	such additional documents, instruments and
information as Lender or its legal counsel may request; and
	 
	 	(iv)	 	an amendment fee in the aggregate principal amount of
$5,000.00, which shall be deemed fully earned and non-refundable as of
the date hereof.






	 	(b)	 	The representations and warranties contained herein, in the Loan Agreement
and
in the other Financing Agreements, shall be true and correct as of the date hereof,
as if made on the date hereof.
	 
	 	(c)	 	No Event of Default or event or condition which, with notice or passage of
time or
both, would constitute an Event of Default, shall have occurred and be continuing,
unless such event, condition or Event of Default has been specifically waived in
writing by Lender.
	 
	 	(d)	 	All corporate proceedings taken in connection with the transactions
contemplated
by this Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Lender and its legal counsel.





ARTICLE IV

No Waiver




     Nothing contained in this Amendment shall be construed as a waiver by Lender of any covenant
or provision of the Loan Agreement or the other Financing Agreements or of any other contract or
instrument among Borrower and Lender, and the failure of Lender at any time or times hereafter to
require strict performance by Borrower of any provision thereof shall not waive, affect or diminish
any right of Lender to thereafter demand strict compliance therewith. Lender hereby reserves all
rights granted under the Loan Agreement, the other Financing Agreements and any other contract or
instrument among Borrower and Lender.



- 3 -









 





ARTICLE V

Ratifications, Representations and Warranties




     5.01
Ratifications, The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the
other Financing Agreements, and, except as expressly modified and superseded by this Amendment, the
terms and provisions of the Loan Agreement and the other Financing Agreements are ratified
and confirmed and shall continue in full force and effect. Borrower and Lender agree that (a)
the Loan Agreement, as amended hereby, and the other Financing Agreements shall continue to
be legal, valid, binding and enforceable in accordance with their respective terms, and (b)
the security interests in the Collateral are in full force and effect.



     5.02 Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this Amendment and any
and all other Financing Agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Financing Agreement are
true and correct on and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Event of Default or event or condition which,
with notice or passage of time or both, would constitute an Event of Default under the Loan
Agreement, as amended hereby, has occurred and is continuing; (d) Borrower is in full
compliance with all covenants and agreements contained in the Loan Agreement and the other
Financing Agreements, as amended hereby, and (e) Borrower has not amended, modified or in
any way altered its Certificate of Incorporation or Bylaws since March 27, 2001.



ARTICLE VI

Miscellaneous Provisions




     6.01 Survival of Representations and Warranties. All representations and warranties
made in the Loan Agreement or any other Financing Agreement, including, without limitation,
any document furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Financing Agreements, and no investigation by Lender
or any closing shall affect the representations and warranties or the right of Lender to rely
upon them.



     6.02
Reference to Loan Agreement. Each of the Loan Agreement and the other
Financing Agreements, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement
and such other Financing Agreements to the Loan Agreement shall mean a reference to the Loan
Agreement and the other Financing Agreements as amended hereby.



     6.03
Expenses of Lender. As provided in Section 9.16 of the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender in connection with



- 4 -









 




the preparation, negotiation and execution of this Amendment and the other Financing
Agreements executed pursuant hereto, and any and all amendments, modifications, and supplements
thereto, including, without limitation, all costs and expenses of filing or recording and the
reasonable costs and fees of Lender’s legal counsel (including legal assistants).




     6.04 Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of
this Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.



     6.05 Successors and Assigns. This Amendment is binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights or obligations hereunder without the prior
written consent of Lender.



     6.06
Counterparts. This Amendment may be executed in one or more counterparts,
each of which when so executed shall be deemed to be an original, but all of which when taken
together shall constitute one and the same instrument.



     6.07
Effect of Waiver. No consent or waiver, express or implied, by Lender to or for
any breach of or deviation from any covenant or condition by Borrower shall be deemed a
consent to or waiver of any other breach of the same or any other covenant, condition or duty.



     6.08 Headings. The headings, captions, and arrangements used in this Amendment are
for convenience only and shall not affect the interpretation of this Amendment.



     6.09
Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO
BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).



     6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND
THE OTHER FINANCING AGREEMENTS, AS AMENDED, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE
MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND
LENDER.



- 5 -









 





     6.11 Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE “OBLIGATIONS” OR TO
SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY -KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY
AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY,
ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER
MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT,
TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING
INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES
UNDER THE LOAN AGREEMENT OR OTHER FINANCING AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.



- 6 -









 





     IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date
first above-written.



	 	 	 	 	 
	 

	LENDER:	 	 
	 
	 	 	 	 
	 

	CONGRESS FINANCIAL CORPORATION	 	 
	 

	(SOUTHWEST)	 	 
	 
	 	 	 	 
	 

	By:  	
/s/ 	 	 
	 

	Name: 	 	 
	 

	Title: V. P.	 	 
	 
	 	 	 	 
	 

	BORROWERS:	 	 
	 
	 	 	 	 
	 

	SPORT SUPPLY GROUP, INC.	 	 
	 
	 	 	 	 
	 

	By:  	/s/ Kenneth A. Corby	 	 
	 

	Name: Kenneth A. Corby	 	 
	 

	Title: V. P. Corp. Development	 	 
	 
	 	 	 	 
	 

	ATHLETIC TRAINING EQUIPMENT	 	 
	 

	COMPANY, INC.	 	 
	 
	 	 	 	 
	 

	By:  	/s/ John P. Walker	 	 
	 

	Name: John P. Walker	 	 
	 

	Title: Chief Executive Officer,	 	 
	 

	          Chief Operating Officer and	 	 
	 

	          Chief Financial Officer	 	 






	 	 	 	 	 



First Amendment to Loan and Security Agreement

 









 






	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 



SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT





     THIS
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
“Amendment”) is made and
entered into as of the 27th day of June, 2003, by and among CONGRESS FINANCIAL CORPORATION
(SOUTHWEST), a Texas corporation (“Lender”), SPORT SUPPLY GROUP, INC., a Delaware
corporation (“SSG”), and ATHLETIC TRAINING EQUIPMENT COMPANY, INC., a Delaware corporation
(“ATEC”) (SSG and ATEC, individually and/or collectively, jointly and severally,
“Borrower”).



PRELIMINARY STATEMENTS




     A. Lender
and Borrower have entered into that certain Loan and Security
Agreement, dated March 27, 2001, as amended by that certain First Amendment to Loan and Security
Agreement dated October 1, 2002 (the “Loan Agreement”), pursuant to which Lender
has entered
into certain financing arrangements with Borrower.



     B. The parties hereto have agreed to amend the Loan Agreement as hereinafter set
forth.



     NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:



AGREEMENT




ARTICLE I

Definitions




     1.01 Capitalized terms used in this Amendment are defined in the Loan Agreement, as
amended hereby, unless otherwise stated.



ARTICLE II

Amendments




     2.01 Amendments to Section 12.1. (a) The first sentence of Paragraph
(a) of Section 12.1 of the Loan Agreement is hereby amended and restated to read
as follows:




“This Agreement and the other Financing Agreements shall become effective as
of the date set forth on the first page hereof and shall continue in full
force and effect for a term ending on the earlier of (i) August 1,
2004 (the “Renewal Date”), and from year to year thereafter, unless sooner
terminated pursuant to the terms hereof or (ii) at Lender’s option, the date on
which any Person or group of Persons (as used within the context of the
definition of beneficial ownership described



 









 






below), other than Emerson and its shareholders, officers and directors, shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities Exchange Commission under the Securities Exchange Act of 1934, as
amended) of and having voting control over shares of capital stock of SSG in amount
sufficient to allow them to elect a majority of the board of directors of SSG (in
which case, no renewals or extensions shall apply).”


(b)
Paragraph (c) of Section 12.1 of the Loan Agreement is hereby amended
by deleting the reference to “March 26, 2004” set forth in said Paragraph and inserting
“July 31, 2004” in lien thereof.




     2.02
Addition of New section 3.6. Section 3 of the Agreement is hereby amended by
adding the following Section 3.6 thereto:




     “3.6 Second Amendment Fee, Borrower shall pay to Lender on September 1,
2003, a fee in respect of the Second Amendment to Loan and Security Agreement dated
as of June 27, 2003, in an amount equal to $5,000, which fee shall be fully earned
and non-refundable as of such date, provided. however, that (i) if before
September 1, 2003, Borrower and Leader have agreed in writing to extend the Renewal
Date to April 1,2005 or later, payment of such fee shall be automatically waived,
and (ii) if Borrower pays such fee in full when due and Borrower and Lender
thereafter agree in writing to so extend the Renewal Date to April 1, 2006 or later,
any fee charged by Lender to Borrower in connection with such extension shall be
reduced by $5,000.”



ARTICLE III

Conditions Precedent




     3.01
Conditions to Effectiveness. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent, unless specifically waived in writing by
Lender:




	 	(a)	 	Lender shall have received, in form and substance satisfactory to Lender
and its legal counsel:






	 	(i)	 	this Amendment, duly executed by Borrower;
	 
	 	(ii)	 	a certificate of the Secretary of Borrower dated as of
the date of this Amendment, in form and substance satisfactory to
Lender, certifying among other things, (i) that Borrower’s Board of
Directors has met and has adopted, approved, consented to and ratified
resolutions which authorize the execution, delivery and performance by
Borrower of this Amendment and all such other Financing Agreements to
which Borrower is or is to be a party, and (ii) the names of the
officers of Borrower authorized to sign this




- 2 -









 






	 	 	 	Amendment and each of such other Financing Agreements to which
Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures
of such officers; and
	 
	 	(iii)	 	such additional documents, instruments and
information as Lender or its legal counsel may request.






	 	(b)	 	The representations and warranties contained herein, in the Loan Agreement
and in the other Financing Agreements, shall be true and correct as
of the date hereof,
as if made on the date hereof.
	 
	 	(c)	 	No Event of Default or event or condition which, with notice or passage of
time or
both, would constitute an Event of Default, shall have occurred and be continuing,
unless such event, condition or Event of Default has been specifically waived in
writing by Lender.
	 
	 	(d)	 	All corporate proceedings taken in connection with the transactions
contemplated
by this Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Lender and its legal counsel.





ARTICLE IV

No Waiver




     Nothing contained in this Amendment shall be construed as a waiver by Lender of any
covenant or provision of the Loan Agreement or the other Financing Agreements or of any other
contract or instrument among Borrower and Lender, and the failure of Lender at any time or times
hereafter to require strict performance by Borrower of any provision thereof shall not waive,
affect or diminish any right of Lender to thereafter demand strict compliance therewith. Lender
hereby reserves all rights granted under the Loan Agreement, the other Financing Agreements and
any other contract or instrument among Borrower and Lender.



ARTICLE V

Ratifications. Representations and Warranties




     5.01
Ratifications. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other
Financing Agreements, and, except as expressly modified and superseded by this Amendment, the
terms and provisions of the Loan Agreement and the other Financing Agreements are ratified and
confirmed and shall continue in full force and effect. Borrower and Lender agree that (a) the Loan
Agreement, as amended hereby, and the other Financing Agreements shall continue to be legal,
valid, binding and enforceable in accordance with their respective terms, and (b) the security
interests in the Collateral are in full force and effect.




- 3 -










 






     5.02 Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this Amendment and any and
all other Financing Agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Financing Agreement are true and
correct on and as of the date hereof and on and as of the date of execution hereof as though made
on and as of each such date; (c) so Event of Default or event or condition which, with notice or
passage of time or both, would constitute an Event of Default under the loan Agreement, as amended
hereby, has occurred and is continuing; (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Financing Agreements, as amended hereby;
and (e) Borrower has not amended, modified or in any way altered its Certificate of Incorporation
or Bylaws since March 27, 2001.



ARTICLE VI

Miscellaneous Provisions




     6.01 Survival of Representations and Warranties. All representations and warranties
made in the Loan Agreement or any other Financing Agreement, including, without limitation,
any document furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Financing Agreements, and no investigation by Lender
or any closing shall affect the representations and warranties or the right of Lender to rely
upon
them.



     6.02 Reference to Loan Agreement. Each of the Loan Agreement and the other
Financing Agreements, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the
Loan
Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement
and such other Financing Agreements to the Loan Agreement shall mean a reference to the Loan
Agreement and the other Financing Agreements as amended hereby.



     6.03 Expenses of Lender. As provided in Section 9.16 of the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender in connection with
the preparation, negotiation and execution of this Amendment and the other Financing
Agreements executed pursuant hereto, and any and all amendments, modifications, and
supplements thereto, including, without limitation, all costs and expenses of filing or
recording
and the reasonable costs and fees of Lender’s legal counsel (including legal assistants).



     6.04 Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of
this
Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.



     6.05 Successors and Assigns. This Amendment is binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors and assigns, except that
Borrower



Second Amendment to Loan and Security Agreement




- 4 -









 







may not assign or transfer any of its rights or obligations hereunder without the prior written
consent of Lender.




     6.06 Counterparts. This Amendment may be executed in one or more counterparts, each
of which when so executed shall be deemed to be an original, but all of winch when taken together
shall constitute one and the same instrument.



     6.07 Effect of Waiver. No consent or waiver, express or implied, by Lender to or for
any breach of or deviation from any covenant or condition by Borrower shall be deemed a consent to
or waiver of any other breach of the same or any other covenant, condition or duty.



     6.08 Headings. The headings, captions, and arrangements used in this Amendment are
for convenience only and shall not affect the interpretation of this Amendment.



     6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO
BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).



     6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER FINANCING AGREEMENTS, EACH AS
AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS, AS AMENDED, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND LENDER.



     6.11
 Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN
BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE “OBLIGATIONS” OR
TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER BORROWER HEREBY
VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW
OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS



Second Amendment to Loan and Security Agreement




- 5 -









 







AMENDMENT IS EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR
REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR
OTHER FINANCING AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.





Second Amendment to Loan and Security Agreement





- 6 -









 








     IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date
first above-written.



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	CONGRESS FINANCIAL CORPORATION (SOUTHWEST)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/
 

	 	 
	 

	 	Name:
	 	 	 	 
	 

	 	Title:
	 	V.P.	 	 
	 
	 	 	 	 	 	 
	 	 	BORROWERS:	 	 
	 
	 	 	 	 	 	 
	 	 	SPORT SUPPLY GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ 
	 	 
	 

	 	Name:	 	  
	 	 
	 

	 	Title:	 	  
	 	 
	 
	 	 	 	 	 	 
	 	 	ATHLETIC TRAINING EQUIPMENT COMPANY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert K. Mitchell	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Robert K. Mitchell	 	 
	 

	 	Title:
	 	V P Finance	 	 






Second Amendment to Loan and Security Agreement




 









 








THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT




     THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and
entered into as of the 6th day of November, 2003 (“Effective Date”), by and among CONGRESS
FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation (“Lender”), SPORT SUPPLY GROUP, INC., a
Delaware corporation (“SSG”), and ATHLETIC TRAINING EQUIPMENT COMPANY, INC., a Delaware
corporation (“ATEC”) (SSG and ATEC, individually and/or collectively, jointly and severally,
“Borrower”),



PRELIMINARY STATEMENTS




     A. Lender and Borrower have entered into that certain Loan and Security Agreement,
dated March 27, 2001, as amended by that certain First Amendment to Loan and Security
Agreement dated October 1, 2002, as further amended by that certain Second Amendment to
Loan and Security Agreement dated June 27, 2003 (as amended, modified or supplemented from
time to time, the “Loan Agreement”), pursuant to which Lender has entered into certain
financing arrangements with Borrower.



     B. The parties hereto have agreed to amend the Loan. Agreement as hereinafter set
forth.



     NOW, THEREFORE, in consideration of the premises herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:



AGREEMENT




ARTICLE I

Definitions




     1.01 Capitalized terms used in this Amendment arc defined in the Loan Agreement, as amended
hereby, unless otherwise stated.



ARTICLE II

Amendments




     2.01 Amendment to 1.5. Effective as of the Effective Date, Section 1.5 of the Loan
Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:



     “‘Availability Reserves’ shall mean, as of any date of determination, such
amounts as Lender may from time to time establish and revise in good faith
reducing me amount of Revolving Loans and Letter of Credit Accommodations
which would otherwise be available to Borrower under the lending formula(s)



3rd amendment to lsa 




 









 









provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith, do or may affect either (i) the
Collateral or any other property which is security for the Obligations or its value,
(ii) the assets, business or prospects of Borrower or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender’s good
faith belief that any collateral report or financial information furnished by or on
behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding Letter
of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect
of any state of facts which Lender determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of
Default. Without limiting the foregoing, (i) Lender may establish Availability
Reserves with respect to Borrower’s personal property taxes relating to any property
located in the state of Texas immediately upon Borrower’s receipt of a notice from
the taxing authority that such taxes are payable and until Lender receives
verification, satisfactory to it that such taxes have been paid in full, (ii) the
Availability Reserves established by Lender as of the date hereof set forth on
Schedule 1.5 and (iii) Lender may establish Availability Reserves with
respect to dilution of Borrower’s Accounts in excess of five percent (5%) (as
determined by Lender in its discretion).”



     2.02 Amendment to Section 1.15(b). Effective as of the Effective Date,
Section 1.15(b) of the Loan Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:




     “(b) (i) with respect to SSG, such Accounts are not unpaid more than one
hundred twenty (120) days after the date of the original invoice for them and (ii)
with respect to ATEC, such Accounts are not unpaid more than one hundred eighty
(180) days after the date of the original invoice for them and do not exceed
$1,250,000 in the aggregate at any time;”



     2.03 Amendment to Section 1. 15(n). Effective as of the Effective Date,
Section 1.15(n) of the Loan Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:




     “(n) (i) with respect to SSG, such Accounts are not owed by an account debtor
who has Accounts unpaid one hundred twenty (120) days after the date of the original
invoice for them and (ii) with respect to ATEC, such Accounts are not owned by an
account debtor who has Accounts paid one hundred eighty (180) days after the date of
the original invoice for them, which, in each case, unpaid Accounts constitute more
than fifty percent (50%) of the total Accounts of such account debtor; and”



3rd amendment to lsa 




2









 








     2.04 Amendment to Section 1.28. Effective as of the Effective Date, Section 1.28 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:




     “1.28 ‘Finished Goods Inventory Advance Rate’ shall mean, with respect to
Eligible Inventory constituting finished goods, the lesser of (a) eighty-five
percent (85%) of net orderly liquidation value, or (b) sixty-five percent (65%) of
Cost”.



     2.05 Amendment to Section 1.34. Effective as of the Effective Date, Section 1.34 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “1.34 ‘Interest Rate’ shall mean, as to Prime Rate Loans, a rate equal to the
Prime Rate and, as to Eurodollar Rate Loans, a rate equal to the sum of (a) the
Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the Interest
Period selected by Borrower Representative as in effect three (3) Business Days
after the date of receipt by Lender of the request of Borrower Representative for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is
higher or lower than any rate previously quoted to Borrower Representative),
plus 2.25%.




     Notwithstanding the above, the Interest Rate shall mean the rate equal to the
sum of the two percent (2.00%) per annum plus the otherwise applicable Interest
Rate, at Lender’s option, with notice, (a) for the period (i) from and after the
effective date of termination or non-renewal hereof until Lender has received full
and final payment of all obligations (notwithstanding entry of a judgment against
Borrower) and (ii) from and after the date of the occurrence of an Event of Default
for so long as such Event of Default is continuing as determined by Lender, and (b)
on the Revolving Loans at any time outstanding in excess of the amounts available
to Borrower under Section 2 (whether or not such excess(es), arise or are
made with or without Lender’s knowledge or consent and whether made before or after
an Event of Default), provided, however, that if any such excess
arises as a direct and immediate result of the imposition of additional
Availability Reserves, the reduction of any lending formula or the creation of
additional criteria for Eligible Accounts or Eligible Inventory by Lender, then the
Interest Rate shall not increase as a result of such excess as provided in this
paragraph until and unless such excess continues to exist thirty (30) days after
the commencement of such action by Lender.”



     2.06 Amendment to Section 1.43. Effective as of the Effective Date, Section 1.43 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “‘Maximum Credit’ shall mean the amount of $20,000,000.”



     2.07 Amendment to Section 2.1(a)(i). Effective as of the Effective Date, the reference
to “eighty percent (80%)” contained in Section 2.1(a)(i) of the Loan Agreement is hereby
deleted
in its entirety, and the reference to “eighty-five percent (85%)” is inserted in lieu thereof.



3rd amendment to lsa 




3









 








     2.08 Amendment to Section 2.1(a)(ii)(A)(2). Effective as of the Effective Date,
Section 2.1(a)(ii)(A)(2) of the Loan Agreement is hereby deleted in its entirety and the
following
is inserted in lieu thereof:




     “(2) the lesser of (a) twenty-five percent (25%) of foe Value of Eligible
Inventory consisting of raw materials for such finished goods or (b) eighty-five
percent (85%) of net orderly liquidation value, as determined by Lender in good
faith, plus”



     2.09 Amendment to Section 3.1. Effective as of the Effective Date, the reference to
“eighty percent (80%)” contained in Section 3.1 of the Loan Agreement is hereby deleted in its
entirety, and the reference to “ninety percent (90%)” is inserted in lieu thereof.



     2.10 Amendment to Section 3.3. Effective as of the Effective Date, the reference to
“$3,000” contained in Section 3.3 of the Loan Agreement is hereby deleted in its entirety and
the reference to “$2,500” is inserted in lieu thereof.



     2.11 Amendment to Section 3.6. Effective as of the Effective Date, Section 3.6 of the
Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “3.6 Third Amendment Closing Fee. Borrower shall pay to Lender an amendment fee
with respect to the Third Amendment to Loan and Security Agreement dated as of
November 6, 2003, in an amount equal to $62,500.00 which fee shall be fully earned
and non-refundable as of November 6, 2003 and payable in installments in the amount
of $520,833.33, each of which shall be due and payable on each of November 6, 2003,
November 1, 2004 and November 1, 2005. If Borrower terminates this Agreement
pursuant to Section 12.l(e)(ii) prior to November 1, 2005, Borrower shall pay the
outstanding amount of such amendment fee (in addition to other amounts due
hereunder) to Lender on such termination date.”



     2.12 Deletion of Section 7.4 (e). Effective as of the Effective Date, Section 7.4(e) of
the Loan Agreement is hereby deleted in its entirety, and subsections (f), (g), (h), (i) and
(j) of Section 7.4 shall be re-lettered to (e), (f), (g), (h) and (i), respectively.



     2.13 Amendment to Section 9.15. Effective as of the Effective Date, Section 9.15 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “9.15 Adjusted Net Worth. SSG and its subsidiaries, on a consolidated basis,
shall, at all times during the periods set forth below, maintain Adjusted Net Worth
of not less than the amount set forth below for each such period:



3rd amendment to lsa 





4









 







	 	 	 	 	 
	 	 	Minimum Adjusted
	Period	 	Net Worth
	 
	At all times during the period from
October 1, 2003 through March 31,
2004
	 	$	25,000,000	 
	At all times thereafter
	 	$	27,500,000”	 






     2.14 Amendments to Section 12.1. Effective as of the Effective Date, (a) the
first sentence of Paragraph (a) of Section 12.1 of the Loan Agreement is hereby deleted in its
entirety and the following is inserted in lieu thereof:




     “This Agreement and the other Financing Agreements shall become effective as of
the date set forth on the first page hereof and shall continue in full force and
effect for a team ending on the earlier of (i) October 31, 2007 (the “Renewal
Date”), and from year to year thereafter, unless sooner terminated pursuant to the
terms hereof or (ii) at lender’s option, the date on which any Person or group of
Persons (as used within the context of the definition of beneficial ownership
described below), other than Emerson and its shareholders, officers and directors,
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities Exchange Commission under the Securities Exchange Act
of 1934, as amended) of and having voting control over shares of capital stock of
SSG in amount sufficient to allow them to elect a majority of the board of directors
of SSG (in which case, no renewals or extensions shall apply).”



     and (b) Paragraph (c) of Section 12.1 of the Loan Agreement is hereby deleted in its entirety
and the following is inserted in lieu thereof:




     “(c) If for any reason this Agreement is terminated pursuant to Section
12.1(a)(ii) prior to the Renewal Date or is otherwise terminated prior to the end of
the then current term or renewal term of this Agreement; in view of the
impracticality and extreme difficulty of ascertaining actual damages and by mutual
agreement of the parties as to a reasonable calculation of Lender’s lost profits as
a result thereof, Borrower agrees to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:



	 	 	 	 	 
	 	 	Amount	 	Period
	 
	(i)

	 	0.25%    of
Maximum Credit
	 	From November 6, 2003 to
and including October 31, 2005
	 
	 	 	 	 
	(ii)

	 	0.125%    of
Maximum Credit
	 	From November 1, 2005 to
and including October 31, 2006
	 
	 	 	 	 
	(iii)

	 	0.00%    of
Maximum Credit
	 	From November 1, 2006 to
and including October 31, 2007






3rd amendment to lsa 




5









 









Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees that
it is reasonable under the circumstance currently existing. In addition, Lender
shall be entitled to such early termination fee upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h) hereof, even if Lender does not
exercise its right to terminate this Agreement, but elects, at its option, to
provide financing to Borrower or permit the use of cash collateral under the United
States Bankruptcy Code. The early termination fee provided for in this Section 12.1
shall be deemed included in the Obligations. Notwithstanding anything contained
herein to the contrary, the early termination fee shall not apply to any early
termination as the result of (i) a complete refinancing of the Loans by an affiliate
of Lender, or (ii) a complete refinancing pursuant to the sale in the capital
markets of debt obligations of, or equity interests in, Borrower, (iii) a complete
refinancing of the Loans by an affiliate of Borrower, or (iv) if Borrower merges
with Emerson.”



ARTICLE III

Conditions Precedent




     3.01 Conditions to Effectiveness. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent, unless specifically waived in writing by
Lender:




     (a) Lender shall have received, in form and substance satisfactory to Lender and its
legal counsel:




     (i) this Amendment, duly executed by Borrower;




     (ii) a certificate of the Secretary of Borrower dated as of the date of this
Amendment, in form and substance satisfactory to Lender, certifying among other
things, (i) that Borrower’s Board of Directors has met and has adopted, approved,
consented to and ratified resolutions which authorize the execution, delivery and
performance by Borrower of this Amendment and all such other Financing Agreements to
which Borrower is or is to be a party, and (ii) the names of the officers of
Borrower authorized to sign this Amendment and each of such other Financing
Agreements to which Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures of such
officers; and




     (iii) such additional documents, instruments and information as Lender or its
legal counsel may request.



3rd amendment to lsa 




6









 









     (b) The representations and warranties contained herein, in the Loan Agreement
and in the other Financing Agreements, shall be true and correct as of the date hereof,
as if made on the date hereof (unless otherwise made on a specific date as set forth
therein, in which case, such representations and warranties shall be true and correct as
of such date).




     (c) No Event of Default or event or condition which, with notice or passage of time
or both, would constitute an Event of Default, shall have occurred and be continuing,
unless such event, condition or Event of Default has been specifically waived in writing
by Lender.




     (d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Lender and its legal counsel.




     (e) Borrower shall have paid the portion of the amendment fee due on the
Effective Date of this Amendment as required pursuant to Section 3.6 of the Loan
Agreement, as amended hereby.



ARTICLE IV

No Waiver




     Nothing contained in this Amendment shall be construed as a waiver by Lender of any
covenant or provision of the Loan Agreement or the other Financing Agreements or of any other
contract or instrument among Borrower and Lender, and the failure of Lender at any time or times
hereafter to require strict performance by Borrower of any provision thereof shall not waive,
affect or diminish any right of Leader to thereafter demand strict compliance therewith. Lender
hereby reserves all rights granted under the Loan Agreement, the other Financing Agreements and
any other contract or instrument among Borrower and Lender.



ARTICLE V

Ratifications, Representations and Warranties




     5.01
Ratifications. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the
other Financing Agreements, and, except as expressly modified and superseded by this Amendment,
the terms and provisions of the Loan Agreement and the other Financing Agreements are ratified
and confirmed, and shall continue in full force and effect. Borrower and Lender agree that (a)
the Loan Agreement, as amended hereby, and the other Financing Agreements shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms, and (b) the
security interests in the Collateral are in full force and effect.



     5.02 Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this Amendment and any



3rd amendment to lsa 




7









 







and all other Financing Agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Financing Agreement are true and
correct on and as of the date hereof and on and as of the date of execution hereof as though made
on and as of each such date (unless otherwise made on a specific date as set forth therein, in
which case, such representations and warranties shall be true and
correct as of such date); (c) no
Event of Default or event or condition which, with notice or passage
of time or both, would
constitute an Event of Default under the Loan Agreement, as amended hereby, has occurred and is
continuing; (d) Borrower is in full compliance with all covenants and agreements contained in the
Loan Agreement and the other Financing Agreements, as amended hereby; and (e) Borrower has not
amended, modified or in any way altered its Certificate of Incorporation or Bylaws since March 27,
2001.




ARTICLE VI

Miscellaneous Provisions




     6.01 Survival of Representations and Warranties. All representations and warranties
made in the Loan Agreement or any other Financing Agreement including, without limitation,
any document furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Financing Agreements, and no investigation by Lender
or any closing shall affect the representations and warranties or the right of Lender to rely
upon them.



     6.02 Reference to Loan Agreement. Each of the Loan Agreement and the other
Financing Agreements, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement
and such other Financing Agreements to the Loan Agreement shall mean a reference to the Loan
Agreement and the other Financing Agreements as amended hereby.



     6.03 Expenses of Lender. As provided in Section 9.16 of the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender in connection with
the preparation, negotiation and execution of this Amendment and the other Financing
Agreements executed pursuant hereto, and any and all amendments, modifications, and
supplements thereto, including, without limitation, all costs and expenses of filing or
recording and the reasonable costs and fees of Lender’s legal counsel (including legal assistants).



     6.04 Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of
this Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.



     6.05 Successors and Assigns. This Amendment is binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors and assigns, except that
Borrower



3rd
amendment to lsa 




8









 








may not assign, or transfer any of its rights or obligations hereunder without the prior
written consent of Lender.




     6.06 Counterparts. This Amendment may be executed in one or more counterparts,
each of which when so executed shall be deemed to be an original, but all of which when taken
together shall constitute one and the same instrument.



     6.07 Effect of Waiver. No consent or waiver, express or implied, by Lender to or for
any breach of or deviation from any covenant or condition by Borrower shall be deemed a
consent to or waiver of any other breach of the same or any other
covenant, condition or duty.



     6.08 Headings. The headings, captions, and arrangements used in this Amendment are
for convenience only and shall not affect the interpretation of this Amendment.



     6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO
BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).



     6.10 Final Agreement THE LOAN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND
THE OTHER FINANCING AGREEMENTS, AS AMENDED, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE
MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND
LENDER.



     6.11 Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO
DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND
OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO
REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE
“OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY
KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER,
KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR
UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS
AMENDMENT IS EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER



3rd
amendment to lsa




9









 







HAVE AGAINST LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION,
ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR
OTHER FINANCING AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.




3rd
amendment to lsa




10









 








     IN
WITNESS WHEREOF, this Amendment has been executed and is effective as of the date
first above-written.



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	CONGRESS FINANCIAL CORPORATION (SOUTHWEST)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/	 	 
	 

	 	Name:
	 	 


	 	 
	 

	 	Title:
	 	V. P.	 	 
	 
	 	 	 	 	 	 
	 	 	BORROWERS:	 	 
	 
	 	 	 	 	 	 
	 	 	SPORT SUPPLY GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Terry M. Babilla	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Terry M. Babilla	 	 
	 

	 	Title:
	 	COO General Council	 	 
	 
	 	 	 	 	 	 
	 	 	ATHLETIC TRAINING EQUIPMENT COMPANY,
INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Terry M. Babilla	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Terry M. Babilla	 	 
	 

	 	Title:
	 	General Council	 	 






3rd
amendment to lsa




 









 








FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT




     THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and
entered into as of the 29th day of December, 2003 (“Effective Date”), by and among CONGRESS
FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation (“Lender”) and SPORT SUPPLY GROUP, INC., a
Delaware corporation (hereinafter referred to as “Borrower” or “SSG”).



PRELIMINARY STATEMENTS




     A. Lender, SSG and Athletic Training Equipment Company, Inc., a Delaware
corporation (“ATEC”) have entered into that certain Loan and Security Agreement, dated
March 27, 2001, as amended by that certain First Amendment to Loan and Security Agreement
dated October 1, 2002, as further amended by that certain Second Amendment to Loan and
Security Agreement dated June 27, 2003, as further amended by that certain Third Amendment
to Loan and Security Agreement dated November 6, 2003 (as amended, modified or
supplemented from time to time, the “Loan Agreement”), pursuant to which Lender has entered
into certain financing arrangements with SSG and ATEC.



     B. SSG has informed Lender that it has sold all of the issued and outstanding capital
stock of ATEC on November 18, 2003 pursuant to that certain Stock Purchase Agreement by and
between SSG and Amer Sports Company (“ATEC Sale”).



     C. In connection with the ATEC Sale, ATEC was released from its obligations as a
Borrower under the Loan Agreement.



     D. The parties hereto have agreed to amend the Loan Agreement to evidence the
release of ATEC thereunder, among other things, as hereinafter set forth.



     NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:



AGREEMENT




ARTICLE I

Definitions




     1.01 Capitalized terms used in this Amendment are defined in the Loan Agreement, as amended
hereby, unless otherwise stated.



 


 









 





ARTICLE II

Amendments




     2.01
Amendment to Preamble. Effective as of the Effective Date, the preamble of the
Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “‘This Loan and Security Agreement dated March 27, 2001 is entered into by and
between CONGRESS FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation (“Lender”)
and SPORT SUPPLY GROUP, INC., a Delaware corporation (hereinafter referred to as
“SSG” or “Borrower”).”



     2.02
Amendment to 1.3. Effective as of the Effective Date, Section 1.3 of the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:




     ‘“Adjusted Net Worth’ shall mean as to any Person, at any time, in accordance
with GAAP (except as otherwise specifically set forth below), on a consolidated
basis for such Person and its subsidiaries (if any), 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;
provided, however, that (i) the one-time non-cash charges taken by SSG in
its fiscal year ending September 30, 2001 up to an aggregate amount of $300,000 and
(ii) any gains or losses incurred in accordance with GAAP reported by SSG in
connection with its sale of all of the outstanding capital stock of ATEC or
disposition of its Team Dealer Division, each of which has been consented to by
Lender shall be excluded from the calculation of the Adjusted Net Worth of SSG”



     2.03 Amendment to Section 1.4. Effective as of the Effective Date, Section 1.4 of the
Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “‘ATEC’ shall mean Athletic Training Equipment Company, Inc., a Delaware
corporation.”



     2.04 Amendment to Section 1.7. Effective as of the Effective Date, Section 1.7 of the
Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “‘Borrower’ shall have the meaning set forth in the preamble hereto.”



 




2









 









     2.05 Amendment to Section 1.8. Effective as of the Effective Date, Section 1.8 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:



     “[Intentionally Omitted.]”



     2.06 Amendment to Section 1.15(b). Effective as of the Effective Date,
Section 1.15(b) of the Loan Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:




     “(b) such Accounts are not unpaid more than one hundred twenty (120) days
after the date of the original invoice for them;”



     2.07 Amendment to Section 1.15(n). Effective as of the Effective Date,
Section 1.15 (n) of the Loan Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:




     “(n) such Accounts are not owed by an account debtor who has Accounts unpaid
one hundred twenty (120) days after the date of the original invoice for them, which
unpaid Accounts constitute more than fifty percent (50%) of the total Accounts of
such account debtor; and”



     2.08 Amendment to Section 1.27. Effective as of the Effective Date, Section 1.27 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “‘Financing Agreements’ shall mean, collectively, this Agreement, that certain
Release Agreement, dated as of November 18, 2003, executed by Lender and agreed and
acknowledged by Amer Sports Company, SSG and ATEC, and all notes, guarantees,
security agreements, negative pledge agreements, collateral reports and other
agreements, documents, information and instruments now or at any time hereafter
executed and/or delivered by Borrower or any Obligor in connection with this
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.”



     2.09 Amendment to Section 1.29. Effective as of the Effective Date, the reference to
“Section 9.15” contained in Section 1.29 of the Loan Agreement is hereby deleted and replaced
with the references to “Sections 9.15 and 9.18”.



     2.10 Amendment to Section 1.46. Effective as of the Effective Date, Section 1.46 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “‘Obligations’ shall mean any and all Revolving Loans and Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise arising



 





3









 









under this Agreement and the other Financing Agreements, whether now
existing or hereafter arising, whether arising before, during or after the initial
or any renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and become
due but for the commencement of such case, whether or not such amounts are allowed
or allowable in whole or in part in 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. The term Obligations shall
include, without limitation, all obligations, liabilities and indebtedness of
Borrower, to Lender, whether such obligations, liabilities and indebtedness shall
be joint, several, joint and several or individual.”



     2.11 Amendment to Section 2.5. Effective as of the Effective Date, Section 2.5 of the
Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:



          “[Intentionally Omitted.]”




     2.12
Amendment to Section 2.6. Effective as of the Effective Date, Section 2.6 of the
Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:



          “[Intentionally Omitted.]”




     2.13
Amendment to Section 3.1(b)(v). Effective as of the Effective Date,
Section 3.1(b)(v) of the Loan Agreement is hereby deleted in its entirety and the following is
inserted in lieu thereof:




     “(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $2,000,000 or an integral multiple of $500,000 in excess thereof.”



     2.14 Amendment to Section 3.4. Effective as of the Effective Date, the reference to
“$20,000,000” contained in Section 3.4 of the Loan Agreement is hereby deleted in its
entirety and replaced with the reference to “$15,000,000.”



     2.15 Amendment to Section 9.15. Effective as of the Effective Date, Section 9.15 of
the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:




     “Borrower and its subsidiaries, on a consolidated basis, shall, at all times
during the periods set forth below, maintain Adjusted Net Worth of not less than the
amount set forth below for each such period:



 





4










 






	 	 	 	 	 
	 	 	Minimum Adjusted	 
	Period	 	Net Worth	 
	 
	At all times during the period from
	 	$	22,000,000	 
	October 1, 2003 through March 31,
2004
	 	 	 	 
	At all times thereafter
	 	$	24,000,000”	 






     2.16 Amendment to Section 9, Addition of Section 9.18. Effective as of the Effective
Date, a new Section 9.18 shall be added to Section 9 of the Loan Agreement in its proper numerical
order to read as follows:




     “9.18 Minimum Excess Availability. Borrower shall maintain at all times Excess
Availability, as determined by Lender, in an amount equal to or in excess of $1,500,000.”



     2.17 Amendment to Article 9; Addition of Section 9.19. Effective as of the Effective
Date, Section 9.19 is hereby added to Section 9 of the Loan Agreement in its proper numerical order
to read as follows:




     “9.19
Exhibits and Schedules. On or before January 22, 2003, Borrower shall deliver to
Lender a revised Exhibit A, Schedule 1.5,
Schedule 4.1(1), Schedule 8.3,
Schedule 8.4, Schedule
8.7, Schedule 8.9, Schedule 8.10,
Schedule 8.13, Schedule 9.9 and Schedule 9.10, which
shall be in form and substance acceptable to Lender in its sole discretion.”



     2.18
Amendment to Section 10.1(j). Effective as of the Effective Date, Section 10.1(j)
of the Loan Agreement is hereby deleted in its entirety and the following is inserted in lieu
thereof:



     “[Intentionally Omitted.]”



     2.19 Miscellaneous Amendments, (i) Effective as of the Effective Date, (a) each reference
to the term “Borrower Representative” contained in the Loan Agreement shall be deleted in its
entirety and replaced with the term “Borrower”; provided, however, if the term “Borrower
Representative” is immediately preceded by the phrase “Borrower and” or “Borrower or” in this Loan
Agreement, then such phrases shall be deleted in their entirety in each instance, and (b) each
reference to the term “Borrowers” contained in the Loan Agreement shall be deleted in its entirety
and replaced with the term “Borrower”; (ii) effective as of the January 22, 2003, Exhibit A,
Schedule 1.5. Schedule 4.1(1),
Schedule 8.3, Schedule 8.4,
Schedule 8.7, Schedule 8.9, Schedule
8.10, Schedule 8.13, Schedule 9.9 and Schedule 9.10 attached to the



5









 




Loan
Agreement shall be amended and restated and replaced with “Exhibit A, Schedule 1.5,
Schedule 4.1(1), Schedule 8.3,
Schedule 8.4, Schedule 8.7,
Schedule 8.9, Schedule 8.10, Schedule
8.13, Schedule 9.9 and Schedule 9.10”, respectively, upon delivery thereof to the
Lender by Borrower pursuant to Section 9.18 of the Loan Agreement; and (iii) effective as
of the Effective Date, each reference to “Borrowers” and each reference to “ATEC” contained in the
other Financing Agreements shall be deleted in its entirety and replaced with the term “Borrower”.




ARTICLE III

Conditions Precedent




     3.01
Conditions to Effectiveness. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent, unless specifically waived in writing by
Lender:




     (a) Lender shall have received, in form and substance satisfactory to Lender and its legal
counsel:




     (i) this Amendment, duly executed by Borrower;




     (ii) evidence satisfactory to Lender of the consummation of the ATEC Sale;




     (iii) a certificate of the Secretary of Borrower dated as of the date of this Amendment, in form
and substance satisfactory to Lender, certifying among other things, (i) that Borrower’s Board of
Directors has met and has adopted, approved, consented to and ratified resolutions which authorize
the execution, delivery and performance by Borrower of this Amendment and all such other Financing
Agreements to which Borrower is or is to be a party, and (ii) the names of the officers of Borrower
authorized to sign this Amendment and each of such other Financing Agreements to which Borrower is
or is to be a party hereunder (including the certificates contemplated herein) together with
specimen signatures of such officers; and




     (iv) such additional documents, instruments and information as Lender or its legal counsel may
request.




     (b) The representations and warranties contained herein, in the Loan Agreement and in
the other Financing Agreements, shall be true and correct as of the date hereof, as if made on the
date hereof (unless otherwise made on a specific date as set forth therein, in which case, such
representations and warranties shall be true and correct as of such date).



6









 






     (c) No Event of Default or event or condition which, with notice or passage of time or both,
would constitute an Event of Default, shall have occurred and be continuing, unless such event,
condition or Event of Default has been specifically waived in writing by Lender.




     (d) All corporate proceedings taken in connection with the transactions contemplated by this
Amendment and all documents, instruments and other legal matters incident thereto shall be
satisfactory to Lender and its legal counsel.




     (e) Borrower shall have paid the portion of the amendment fee due on the Effective Date of
this Amendment as required pursuant to Section 3.6 of the Loan
Agreement, as amended hereby.



ARTICLE IV

No Waiver




     Nothing contained in this Amendment shall be construed as a waiver by Lender of any covenant or
provision of the Loan Agreement or the other Financing Agreements or of any other contract or
instrument among Borrower and Lender, and the failure of Lender at any time or times hereafter to require strict performance by Borrower of any provision thereof shall
not waive, affect or diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Loan Agreement, the other Financing Agreements
and any other contract or instrument among Borrower and Lender.



ARTICLE V

Ratifications, Representations and Warranties




     5.01 Ratifications. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other
Financing Agreements, and, except as expressly modified and superseded by this Amendment, the terms
and provisions of the Loan Agreement and the other Financing Agreements are ratified and confirmed
and shall continue in full force and effect. Borrower and Lender agree that (a) the Loan Agreement,
as amended hereby, and the other Financing Agreements shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms, and (b) the security interests in the
Collateral are in full force and effect.



     5.02
Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this Amendment and any and
all other Financing Agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Financing Agreement are true and
correct on and as of the date hereof and on and as of the date of execution hereof as



7









 




though made on and as of each such date (unless otherwise made on a specific date as set forth
therein, in which case, such representations and warranties shall be true and correct as of such
date); (c) no Event of Default or event or condition which, with notice or passage of time or both,
would constitute an Event of Default under the Loan Agreement, as amended hereby, has occurred and
is continuing; (d) Borrower is in full compliance with all covenants and agreements contained in
the Loan Agreement and the other Financing Agreements, as amended hereby; and (e) Borrower has not
amended, modified or in any way altered its Certificate of Incorporation or Bylaws since March 27,
2001.




ARTICLE VI

Miscellaneous Provisions




     6.01 Survival of Representations and Warranties. All representations and warranties
made in the Loan Agreement or any other Financing Agreement, including, without limitation, any
document furnished in connection with this Amendment, shall survive the execution and delivery of
this Amendment and the other Financing Agreements, and no investigation by Lender or any closing
shall affect the representations and warranties or the right of Lender to rely upon them.



     6.02
Reference to Loan Agreement. Each of the Loan Agreement and the other
Financing Agreements, and any and all other agreements, documents or instruments now or hereafter
executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement,
as amended hereby, are hereby amended so that any reference in the Loan Agreement and such other
Financing Agreements to the Loan Agreement shall mean a reference to the Loan Agreement and the
other Financing Agreements as amended hereby.



     6.03
Expenses of Lender. As provided in Section 9.16 of the Loan Agreement, Borrower
agrees to pay on demand all costs and expenses incurred by Lender in connection with the
preparation, negotiation and execution of this Amendment and the other Financing Agreements
executed pursuant hereto, and any and all amendments, modifications, and supplements thereto,
including, without limitation, all costs and expenses of filing or recording and the reasonable
costs and fees of Lender’s legal counsel (including legal assistants).



     6.04
Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this
Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.



     6.05
Successors and Assigns. This Amendment is binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors and assigns, except that Borrower
may not assign or transfer any of its rights or obligations hereunder without the prior written
consent of Lender.



8









 





     6.06 Counterparts. This Amendment may be executed in one or more counterparts, each
of which when so executed shall be deemed to be an original, but all of which when taken together
shall constitute one and the same instrument.



     6.07
Effect of Waiver. No consent or waiver, express or implied, by Lender to or for
any breach of or deviation from any covenant or condition by Borrower shall be deemed a consent to
or waiver of any other breach of the same or any other covenant, condition or duty.



     6.08
Headings. The headings, captions, and arrangements used in this Amendment are for
convenience only and shall not affect the interpretation of this Amendment.



     6.09
Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED PURSUANT HERETO
SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW).



     6.10
Final Agreement. THE LOAN AGREEMENT AND THE OTHER FINANCING AGREEMENTS, EACH
AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND THE
OTHER FINANCING AGREEMENTS, AS AMENDED, MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN
AGREEMENT SIGNED BY BORROWER AND LENDER.



     6.11
Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM,
OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED
TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE “OBLIGATIONS” OR TO SEEK
AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT
LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, OFFICERS,



9









 




DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER
ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER FINANCING AGREEMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.




 




10




 









 








     IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first
above-written.



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	CONGRESS FINANCIAL CORPORATION	 	 
	 	 	(SOUTHWEST)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	V.P.	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	SPORT SUPPLY GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Terrence M. Babilla	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Terrence M. Babilla	 	 
	 

	 	Title:
	 	Chief Operating Officer, Executive Vice	 	 
	 

	 	 	 	President, Secretary and General Counsel	 	 







 










 






FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT




     THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and entered
into as of the 9th day of February, 2004 (“Effective Date”), by and among CONGRESS
FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation (“Lender”) and SPORT SUPPLY GROUP, INC., a
Delaware corporation (hereinafter referred to as “Borrower” or “SSG”).



PRELIMINARY STATEMENTS




     A. Lender, SSG and Athletic Training Equipment Company, Inc., a Delaware
corporation (“ATEC”) have entered into that certain Loan and Security Agreement, dated
March 27, 2001, as amended by that certain First Amendment to Loan and Security Agreement
dated October 1, 2002, that certain Second Amendment to Loan and Security Agreement dated
June 27, 2003, that certain Third Amendment to Loan and Security Agreement dated
November 6, 2003, and as further amended by that certain Fourth Amendment to Loan and
Security Agreement dated December 29, 2003 (as amended, modified or supplemented from time
to time, the “Loan Agreement”), pursuant to which Lender has entered into certain financing
arrangements with SSG and ATEC.



     B. SSG has since sold all of the issued and outstanding capital stock of ATEC and
ATEC has been released from its obligations as a Borrower under the Loan Agreement.



     C. The parties hereto have agreed to further amend the Loan Agreement as
hereinafter set forth.



     NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:



AGREEMENT




ARTICLE I

Definitions




     1.01 Capitalized terms used in this Amendment are defined in the Loan Agreement, as amended
hereby, unless otherwise stated.



ARTICLE II

Amendments




     2.01
Amendment to Various Sections.



5th amendment to lsa




 









 









     (i)
Amendment to Section 1.42. Effective as of the Effective Date,
Section 1.42 of the Loan Agreement is hereby amended by deleting the
definition of “Material Adverse Effect” in its entirety and replacing it with the
following:




     “Material Adverse Effect” shall mean a material adverse effect
upon the business, operations, properties, assets, goodwill or
condition (financial or otherwise) of Borrower on a consolidated
basis. In determining whether any individual event would have a
Material Adverse Effect, notwithstanding that such event does not of
itself have such effect, a Material Adverse Effect shall be deemed
to have occurred if the cumulative effect of such event and all
other then existing events would have a Material Adverse Effect.
Notwithstanding the foregoing, no Material Adverse Effect shall be
deemed to have occurred, unless, at the time of determination, a
Default or Event of Default has occurred and is continuing or the
Excess Availability, as determined by Lender, is less than
$5,000,000.”




     (ii)
Amendment to Section 7.2. Effective as of the Effective Date,
Section 7.2 of the Loan Agreement is hereby amended by inserting the following
phrase immediately after the words “material adverse information” therein:




     “at a time when a Default or Event of Default has occurred and
is continuing or when the Excess Availability, as determined by
Lender, is less than $5,000,000”;




     (iii) Effective as of the Effective Date, each of Sections 8.1, 8.9(a),
8.9(b), 8.9(c) and 8.9(d) of the Loan Agreement is hereby amended by inserting the
following phrase immediately after the words “material adverse effect” therein:




     “at a time when a Default or Event of Default has occurred and
is continuing or when the Excess Availability, as determined by
Lender, is less than $5,000,000”.



ARTICLE III

Conditions Precedent




     3.01
Conditions to Effectiveness. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless specifically waived in
writing by Lender:




     (a) Lender shall have received, in form and substance satisfactory to Lender and
its legal counsel:



5th amendment to lsa




2









 









     (i) this Amendment, duly executed by Borrower;




     (ii) a certificate of the Secretary of Borrower dated as of the date of this
Amendment, in form and substance satisfactory to Lender, certifying among other
things, (i) that Borrower’s Board of Directors has met and has adopted, approved,
consented to and ratified resolutions which authorize the execution, delivery and
performance by Borrower of this Amendment and all such other Financing Agreements to
which Borrower is or is to be a party, and (ii) the names of the officers of
Borrower authorized to sign this Amendment and each of such other Financing
Agreements to which Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures of such
officers; and




     (iii) such additional documents, instruments and information as Lender or its
legal counsel may request.




     (b) The representations and warranties contained herein, in the Loan
Agreement and in the other Financing Agreements, shall be true and correct as of the
date
hereof, as if made on the date hereof (unless otherwise made on a specific date as set
forth therein, in which case, such representations and warranties shall be true and
correct
as of such date).




     (c) No Event of Default or event or condition which, with notice or passage of
time or both, would constitute an Event of Default, shall have occurred and be
continuing, unless such event, condition or Event of Default has been specifically
waived
in writing by Lender.




     (d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Lender and its legal counsel.



ARTICLE IV

No Waiver




     Nothing contained in this Amendment shall be construed as a waiver by Lender of any covenant
or provision of the Loan Agreement or the other Financing Agreements or of any other contract or
instrument among Borrower and Lender, and the failure of Lender at any time or times hereafter to
require strict performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith. Lender hereby
reserves all rights granted under the Loan Agreement, the other Financing Agreements and any other
contract or instrument among Borrower and Lender.



5th amendment to lsa




3









 








ARTICLE V

Ratifications, Representations and Warranties




     5.01
Ratifications. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the
other
Financing Agreements, and, except as expressly modified and superseded by this Amendment,
the terms and provisions of the Loan Agreement and the other Financing Agreements are ratified
and confirmed and shall continue in full force and effect. Borrower and Lender agree that (a)
the
Loan Agreement, as amended hereby, and the other Financing Agreements shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms, and (b) the
security interests in the Collateral are in full force and effect.



     5.02
Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this Amendment and any
and all other Financing Agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Financing Agreement are
true and correct on and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date (unless otherwise made on a specific date as set forth
therein, in which case, such representations and warranties shall be true and correct as of
such
date); (c) no Event of Default or event or condition which, with notice or passage of time or
both,
would constitute an Event of Default under the Loan Agreement, as amended hereby, has
occurred and is continuing; (d) Borrower is in full compliance with all covenants and
agreements
contained in the Loan Agreement and the other Financing Agreements, as amended hereby; and
(e) Borrower has not amended, modified or in any way altered its Certificate of Incorporation
or
Bylaws since March 27, 2001.



ARTICLE VI

Miscellaneous Provisions




     6.01
Survival of Representations and Warranties. All representations and warranties
made in the Loan Agreement or any other Financing Agreement, including, without limitation,
any document furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Financing Agreements, and no investigation by Lender
or any closing shall affect the representations and warranties or the right of Lender to rely
upon
them.



     6.02
Reference to Loan Agreement. Each of the Loan Agreement and the other
Financing Agreements, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the
Loan
Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement
and such other Financing Agreements to the Loan Agreement shall mean a reference to the Loan
Agreement and the other Financing Agreements as amended hereby.



5th amendment to lsa




4









 








     6.03 Expenses of Lender. As provided in Section 9.16 of the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender in connection with
the preparation, negotiation and execution of this Amendment and the other Financing
Agreements executed pursuant hereto, and any and all amendments, modifications, and
supplements thereto, including, without limitation, all costs and expenses of filing or
recording
and the reasonable costs and fees of Lender’s legal counsel (including legal assistants).



     6.04 Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of
this
Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.



     6.05 Successors and Assigns. This Amendment is binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors and assigns, except that
Borrower
may not assign or transfer any of its rights or obligations hereunder without the prior
written
consent of Lender.



     6.06 Counterparts. This Amendment may be executed in one or more counterparts,
each of which when so executed shall be deemed to be an original, but all of which when taken
together shall constitute one and the same instrument.



     6.07 Effect of Waiver. No consent or waiver, express or implied, by Lender to or for
any breach of or deviation from any covenant or condition by Borrower shall be deemed a
consent to or waiver of any other breach of the same or any other covenant, condition or duty.



     6.08 Headings. The headings, captions, and arrangements used in this Amendment are
for convenience only and shall not affect the interpretation of this Amendment.



     6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO
BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).



     6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND
THE OTHER FINANCING AGREEMENTS, AS AMENDED, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE
MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND
LENDER.



5th amendment to lsa




5









 








     6.11
Release.  BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE “OBLIGATIONS” OR TO
SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY
AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY,
ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER
MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT,
TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING
INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES
UNDER THE LOAN AGREEMENT OR OTHER FINANCING AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.



5th amendment to lsa




6









 








     IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date
first above-written.



	 	 	 	 	 
	 	LENDER:





CONGRESS FINANCIAL CORPORATION (SOUTHWEST)

 	 
	 	By:  	/s/	 
	 	Name:  	 	 
	 	Title:  	V.P.	 
	 



	 	 	 	 	 
	 	BORROWER:





SPORT SUPPLY GROUP, INC.

 	 
	 	By:  	/s/ Robert K. Mitchell
 	 
	 	Name:  	Robert K. Mitchell 	 
	 	Title:  	CEO 	 
	 



5th amendment to lsa




 









 








SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT





     THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and entered
into as of the 20 day of October, 2004 (“Effective Date”), by and among CONGRESS FINANCIAL
CORPORATION (SOUTHWEST), a Texas corporation (“Lender”) and SPORT SUPPLY GROUP, INC., a Delaware
corporation (hereinafter referred to as “Borrower” or “SSG”).



PRELIMINARY STATEMENTS




     A. Lender, SSG and Athletic Training Equipment Company, Inc., a Delaware
corporation (“ATEC”) have entered into that certain Loan and Security Agreement, dated
March 27, 2001, as amended by that certain First Amendment to Loan and Security Agreement
dated October 1, 2002, that certain Second Amendment to Loan and Security Agreement dated
June 27, 2003, that certain Third Amendment to Loan and Security Agreement dated
November 6, 2003, as further amended by that certain Fourth Amendment to Loan and Security
Agreement dated on or about December, 2003, and as further amended by
that certain Fifth
Amendment to Loan and Security Agreement dated as of
February             , 2004 (as amended,
modified or supplemented from time to time, the “Loan Agreement”), pursuant to which Lender has
entered into certain financing arrangements with SSG and ATEC.



     B. SSG has since sold all of the issued and outstanding capital stock of ATEC and
ATEC has been released from its obligations as a Borrower under the Loan Agreement.



     C. The parties hereto have agreed to further amend the Loan Agreement as
hereinafter set forth.



     NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:



AGREEMENT




ARTICLE I

Definitions




     1.01 Capitalized terms used in this Amendment are defined in the Loan Agreement, as amended
hereby, unless otherwise stated.



ARTICLE II

Amendments




     2.01
Amendment to Various Sections.



5th amendment to lsa




 









 








ARTICLE II

Amendments




     2.01 Amendment to Various Sections.




     (i) Amendment to Section 1.42. Effective as of the Effective Date,
Section 1.42 of the Loan Agreement is hereby amended by deleting the
definition of “Adjusted Net Worth” in its entirety and replacing it with the
following:




     ’“Adjusted Net Worth’ shall mean as to any Person, at any time,
in accordance with GAAP (except as otherwise specifically set forth,
below), on a consolidated basis for such Person and its subsidiaries
(if any), 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), plus the amount of treasury shares
owned by any Person in excess of $3,801,282 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;
provided, however, that (i) the one-time non-cash charges taken by
SSG in its fiscal year ending September 30, 2001 up to an aggregate
amount of $300,000 and (ii) any gains or losses incurred in
accordance with GAAP reported by SSG in connection with its sale of
all of the outstanding capital stock of ATEC or disposition of its
Team Dealer Division, each of which has been consented to by Lender
shall be excluded from the calculation of the Adjusted Net Worth of
SSG.”



ARTICLE III

Conditions Precedent




     3.01 Conditions to Effectiveness. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent, unless specifically waived in writing by
Lender:




     (a) Lender shall have received, in form and substance satisfactory to Lender and
its legal counsel:



6th amendment to lsa




2









 









     (i)
this Amendment, duly executed by Borrower;




     (ii) a certificate of the Secretary of Borrower dated as of the date of this
Amendment, in form and substance satisfactory to Lender, certifying among other
things, (i) that Borrower’s Board of Directors has met and has adopted, approved,
consented to and ratified resolutions which authorize the execution, delivery and
performance by Borrower of this Amendment and all such other Financing Agreements
to which Borrower is or is to be a party, and (ii) the names of the officers of
Borrower authorized to sign this Amendment and each of such other Financing
Agreements to which Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures of such
officers; and




     (iii) such additional documents, instruments and information as Lender or its
legal counsel may request.




     (b) The representations and warranties contained herein, in the Loan
Agreement and in the other Financing Agreements, shall be true and correct as of the
date
hereof, as if made on the date hereof (unless otherwise made on a specific date as set
forth therein, in which case, such representations and warranties shall be true and
correct
as of such date).




     (c) No Event of Default or event or condition which, with notice or passage of
time or both, would constitute an Event of Default, shall have occurred and be
continuing, unless such event, condition or Event of Default has been specifically
waived
in writing by Lender.




     (d) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Lender and its legal counsel.



ARTICLE IV

No Waiver




     Nothing
contained in this Amendment shall be construed as a waiver by Lender of any covenant
or provision of the Loan Agreement or the other Financing Agreements or of any other contract or
instrument among Borrower and Lender, and the failure of Lender at any time or times hereafter to
require strict performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith. Lender hereby
reserves all rights granted under the Loan Agreement, the other Financing Agreements and any other
contract or instrument among Borrower and Lender.



6th amendment to lsa





3









 








ARTICLE V

Ratifications, Representations and Warranties




     5.01 Ratifications. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other
Financing Agreements, and, except as expressly modified and superseded by this Amendment, the terms
and provisions of the Loan Agreement and the other Financing Agreements are ratified and confirmed
and shall continue in full force and effect. Borrower and Lender agree that (a) the Loan Agreement,
as amended hereby, and the other Financing Agreements shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms, and (b) the security interests in the
Collateral are in full force and effect.



     5.02 Representations and Warranties of Borrower. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this Amendment and any and
all other Financing Agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Financing Agreement are true and
correct on and as of the date hereof and on and as of the date of execution hereof as though made
on and as of each such date (unless otherwise made on a specific date as set forth therein, in
which case, such representations and warranties shall be true and correct as of such date); (c) no
Event of Default or event or condition which, with notice or passage of time or both, would
constitute an Event of Default under the Loan Agreement, as amended hereby, has occurred and is
continuing; (d) Borrower is in full compliance with all covenants and agreements contained in the
Loan Agreement and the other Financing Agreements, as amended hereby; and (e) Borrower has not
amended, modified or in any way altered its Certificate of Incorporation or Bylaws since March 27,
2001.



ARTICLE VI

Miscellaneous Provisions




     6.01 Survival of Representations and Warranties. All representations and warranties
made in the Loan Agreement or any other Financing Agreement, including, without limitation,
any document furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Financing Agreements, and no investigation by Lender
or any closing shall affect the representations and warranties or the right of Lender to rely
upon
them.



     6.02 Reference to Loan Agreement.  Each of the Loan Agreement and the other
Financing Agreements, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan
Agreement and such other Financing Agreements to the Loan Agreement shall mean a reference
to the Loan Agreement and the other Financing Agreements as amended hereby.



6th amendment to lsa





4









 








     6.03
Expenses of Lender. As provided in Section 9.16 of the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender in connection with
the preparation, negotiation and execution of this Amendment and the other Financing
Agreements executed pursuant hereto, and any and all amendments, modifications,
and
supplements thereto, including, without limitation, all costs and expenses of filing or
recording
and the reasonable costs and fees of Lender’s legal counsel (including legal assistants).



     6.04
Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of
this
Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.



     6.05
Successors and Assigns. This Amendment is binding upon and shall inure to the
benefit of Lender and Borrower and their respective successors and assigns, except that
Borrower
may not assign or transfer any of its rights or obligations hereunder without the prior
written
consent of Lender.



     6.06
Counterparts. This Amendment may be executed in one or more counterparts,
each of which when so executed shall be deemed to be an original, but all of which when taken
together shall constitute one and the same instrument.



     6.07
Effect of Waiver. No consent or waiver, express or implied, by Lender to or for
any breach of or deviation from any covenant or condition by Borrower shall be deemed a
consent to or waiver of any other breach of the same or any other covenant, condition or duty.



     6.08
Headings. The headings, captions, and arrangements used in this Amendment are
for convenience only and shall not affect the interpretation of this Amendment.



     6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND
TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).



     6.10
Final Agreement. THE LOAN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND
THE OTHER FINANCING AGREEMENTS, AS AMENDED, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER,
RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE
MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND
LENDER.


6th amendment to lsa





5









 









     6.11 Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO
DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND
OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO
REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE
“OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY
KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER,
KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR
UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE
THIS AMENDMENT IS EXECUTED, WHICH BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT,
TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR
RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE
APPLICABLE; THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE
LOAN AGREEMENT OR OTHER FINANCING AGREEMENTS, AND NEGOTIATION
FOR AND EXECUTION OF THIS AMENDMENT.



6th amendment to lsa




6









 








     IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first
above-written.



	 	 	 	 	 
	 	LENDER: 



CONGRESS FINANCIAL CORPORATION (SOUTHWEST) 

 	 
	 	By:  	/s/	 
	 	Name:  	 	 
	 	Title:  	V.P.	 
	 



	 	 	 	 	 
	 	BORROWER: 



SPORT SUPPLY GROUP, INC. 

 	 
	 	By:  	/s/ Terrence M. Babilla
 	 
	 	Name:  	Terrence M. Babilla  	 
	 	Title:  	Chief Operating Officer 	 
	 



6th amendment to lsa



7