SECOND AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN, GUARANTY AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN, GUARANTY AND
SECURITY AGREEMENT (the "Amendment"), dated September 6, 2002, is among the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns (provided
such assignees satisfy the conditions set forth in Section 13.3 of the Loan
Agreement (defined below)), are referred to hereinafter each individually as a
"Lender" and collectively as the "Lenders"), Bank America, N.A., a national
banking association, as successor in interest to Bank of America National Trust
and Savings Association, a national banking association ("Bank of America") with
an office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent for the
Lenders (in its capacity as agent), together with its successors in its capacity
as agent (the "Agent"), Varsity Brands, Inc., a Delaware corporation (f/k/a
"▇▇▇▇▇▇▇ Sports Inc."), with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Parent Guarantor"), and each of Varsity Spirit
Corporation, a Tennessee corporation ("Spirit"), with offices at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Varsity Spirit Fashions & Supplies,
Inc., a Minnesota corporation ("Fashions"), with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Varsity USA, Inc., a Tennessee corporation
("USA"), with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Varsity/Intropa Tours, Inc., a Tennessee corporation ("Intropa"), with offices
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and International
Logos, Inc., a Tennessee corporation ("Logos"), with offices at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (Spirit, Fashions, USA, Intropa and
Logos are collectively referred to as the "Borrower").
W I T N E S S E T H
WHEREAS, the Lenders, the Agent, the Parent Guarantor, and the Borrower
entered into a Second Amended and Restated Loan, Guaranty and Security Agreement
dated as of July 23, 2001, as previously amended by that certain First Amendment
to Second Amended and Restated Loan, Guaranty and Security Agreement dated
November 20, 2001 (the "LOAN AGREEMENT"); and
WHEREAS, the Lenders, the Agent, the Parent Guarantor, and the Borrower
desire to amend the Loan Agreement to extend the Stated Termination Date to
September 15, 2003, to secure the Credit Card Facility with the Collateral, and
to reduce the interest rate on Base Rate Loans and to eliminate certain fees,
all on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Amendment, and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Lenders, the Agent,
the Parent Guarantor and the Borrower hereby agree as follows:
1. AMENDED DEFINITIONS. (a) Section 1.1 of the Loan Agreement,
"Definitions", is hereby amended to delete the definitions of "Applicable
Margin", "Maximum Revolver Amount", "Obligations", and "Stated Termination Date"
in their entirety and to substitute the following in lieu thereof:
"'Applicable Margin' means, for the period from the date hereof to and
including the Stated Termination Date, negative one-quarter percent
(negative .25%) for Base Rate Loans and positive two and one-half percent
(2 1/2 %) for Letter of Credit Fees."
"'Fee Letter' means the letter dated as of the date of this Amendment
by and between Bank of America and Borrower with respect to the Agent's
Fee."
"'Maximum Revolver Amount' means $15,000,000.00 (or such lesser amount
to which the Total Facility may be permanently reduced by the Borrower
pursuant to SECTION 4.2 hereof); provided, however, that during the term of
the Credit Card Facility, and for so long as any sums remain outstanding
thereunder, the Maximum Revolver Amount shall not exceed $14,900,000.00
notwithstanding anything in this Agreement to the contrary."
"'Obligations' means without duplication all present and future loans,
advances, liabilities, obligations, covenants, duties, and debts owing by
the Borrower or any other Loan Party to the Agent and/or any Lender,
arising under or pursuant to this Agreement or any of the other Loan
Documents, or any Hedge Agreement, or the Credit Card Facility, whether or
not evidenced by any note, or other instrument or document, whether arising
from an extension of credit, opening of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment from others),
absolute or contingent, due or to become due, primary or secondary, as
principal or guarantor, and including, without limitation, all principal,
interest, charges, expenses, fees, attorneys' fees, filing fees and any
other sums chargeable to the Borrower or any other Loan Party hereunder or
under any of the other Loan Documents. "Obligations" includes, without
limitation or duplication, all debts, liabilities, and obligations now or
hereafter owing from the Borrower to the Agent and/or any Lender under or
in connection with the Letters of Credit and includes, without limitation,
all interest that would have accrued but for the commencement of any
Insolvency Proceeding with respect to any Person."
"'Stated Termination Date' means September 15, 2003."
(b) Section 1.1 of the Loan Agreement is hereby further amended to add the
following definition thereto:
"'Credit Card Facility' means that certain credit card facility
maintained by Spirit with Bank of America designated by account number
#▇▇▇▇-▇▇▇▇-▇▇▇▇-▇▇▇▇ and having a maximum principal indebtedness limit of
$100,000.00. Notwithstanding anything in the Loan Agreement to the
contrary, the Credit Card Facility shall bear interest and be payable as
set forth in the Bank of America, N.A. (USA) Business Card Agreement set
forth on EXHIBIT A to the Second
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Amendment to Second Amended and Restated Loan, Guaranty and Security
Agreement which is hereby incorporated herein by reference.'"
2. AMENDMENT OF SECTION 2.1. Section 2.1 of the Loan Agreement, "Total
Facility", is hereby amended to delete the last sentence thereof and to
substitute the following in lieu thereof.
"The Total Facility shall be comprised of a revolving line of credit
consisting of revolving loans and letters of credit up to the Maximum
Revolver Amount, as described on SECTIONS 2.2 and 2.4, and the Credit Card
Facility."
3. AMENDMENT OF SECTION 3.7. Section 3.7 of the Loan Agreement, "Agent's
Fee", is hereby amended to delete the words "plus an asset based monitoring fee
of $17,000 per year" in the second line thereof.
4. AMENDMENT OF SECTION 9.25. Section 9.25 of the Loan Agreement, "Net
Worth," is hereby amended to delete the same in its entirety and to substitute
the following in lieu thereof:
"The Parent Guarantor will maintain a consolidated Net Worth,
determined as of the last day of each calendar quarter, of not less than
the amount set forth below for such calendar quarter.
The calendar quarter ending 6/30/02 and $8,500,000 plus (i) 75%
each subsequent calendar quarter of Parent Guarantor's
thereafter. net income, determined
in accordance with
GAAP, and (ii) 100% of
any equity capital
contributions to Parent
Guarantor, in both
cases for the period
from 1/01/02 through
and including 6/30/02."
5. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. As an inducement to
the Agent and Lenders to enter into this Amendment, the Borrower and the Parent
Guarantor hereby confirm and affirm to the Agent and the Lenders that except as
set forth on EXHIBIT B, which is hereby attached hereto and incorporated herein
by reference, the representations and warranties of the Borrower and the Parent
Guarantor contained in the Loan Agreement (including without limitation in
Articles 6 and 8 thereof) are true and correct in all respects on and as of the
date hereof as to each Loan Party with the same effect as though such
representations and warranties are made on and as of the date hereof.
6. CONDITIONS TO AMENDMENT. The obligation of the Agent and Lenders to
enter into this Amendment renewing the loan facility pursuant to the Loan
Agreement and making certain other modifications thereto is subject to the
following conditions precedent having been satisfied in a manner satisfactory to
the Agent and each Lender as of the date hereof:
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(a) This Amendment has been executed by each party thereto and each
Loan Party shall have performed and complied with all covenants, agreements and
conditions contained herein and the other Loan Documents which are required to
be performed or complied with by the Borrower before or on the date hereof.
(b) Except as set forth on EXHIBIT B, all representations and
warranties made under the Loan Agreement and in the other Loan Documents shall
be true and correct in all material respects as of the date hereof as if made on
the date hereof.
(c) No Default or Event of Default shall exist on the date hereof, or
would exist after giving effect to the Loans to be made on such date.
(d) The Agent and the Lenders shall have received such opinions of
counsel for the Loan Parties as the Agent or any Lender shall request, each such
opinion to be in a form, scope, and substance satisfactory to the Agent, the
Lenders, and their respective counsel.
(e) The Borrower shall have paid all fees and expenses of the Agent
and the Attorney Costs incurred in connection with this Amendment and any of the
Loan Documents and the transactions contemplated thereby to the extent invoiced.
(f) The Agent shall have received evidence, in form, scope, and
substance, reasonably satisfactory to the Agent, of all insurance coverage as
required by this Agreement.
(g) The Agent and the Lenders shall have had an opportunity, if they
so choose, to examine the books of account and other records and files of the
Borrower and to make copies thereof, and to conduct a pre-closing audit which
shall include, without limitation, verification of Inventory, Accounts, and
Availability, and the results of such examination and audit shall have been
satisfactory to the Agent and the Lenders in all respects.
(h) The Agent and the Lenders shall have received copies certified as
being correct and complete of all documentation related to the Senior Notes, the
Subordinated Debt and the Material License Agreements and such documentation
shall be satisfactory to the Agent and the Lenders in all respects.
(i) All proceedings taken in connection with the execution of this
Amendment, all other Loan Documents and all documents and papers relating
thereto shall be satisfactory in form, scope, and substance to the Agent and the
Lenders.
(j) No Material Adverse Effect shall have occurred since the
Financial Statements dated June 30, 2002.
7. Execution and delivery to the Agent by a Lender of a counterpart of
this Amendment shall be deemed confirmation by such Lender that (i) all
conditions precedent in this SECTION 7 have been fulfilled to the satisfaction
of such Lender and (ii) the decision of such Lender to execute and deliver to
the Agent an executed counterpart of this Agreement was made
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by such Lender independently and without reliance on the Agent or any other
Lender as to the satisfaction of any condition precedent set forth in this
SECTION 7.
8. FULL FORCE AND EFFECT; AFFIRMATION OF SECURITY INTERESTS; DEFINED
TERMS. Except as expressly modified and amended by this Amendment, all of the
terms, covenants and conditions of the Loan Agreement and other Loan Documents
are hereby ratified and confirmed and shall continue to be and remain in full
force and effect as originally executed. The parties to this Amendment
acknowledge and agree that the security interests created pursuant to the Loan
Agreement and/or any other Loan Document shall remain in full force and effect
and shall constitute the legal, valid, binding and enforceable obligations of
each Loan Party, as applicable. Without limiting the foregoing in any way, the
parties expressly do not intend to extinguish any security interests created
pursuant to the Loan Agreement and/or any other Loan Document. Instead, it is
the express intention of the parties to affirm each and every security interest
created thereby. Any capitalized term used but not defined in this Amendment
shall have the meaning ascribed to it in the Loan Agreement.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"PARENT GUARANTOR"
VARSITY BRANDS, INC. (F/K/A "▇▇▇▇▇▇▇ SPORTS INC.")
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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"BORROWERS"
VARSITY SPIRIT CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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VARSITY USA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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VARSITY/INTROPA TOURS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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INTERNATIONAL LOGOS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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"AGENT"
BANK OF AMERICA, N.A., AS THE AGENT
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
"LENDERS"
BANK OF AMERICA, N.A., AS A LENDER
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
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EXHIBIT A
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BANK OF AMERICA, N.A. (USA)
BUSINESS CARD AGREEMENT
SEE ATTACHED.
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EXHIBIT B
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CHANGES TO REPRESENTATIONS AND WARRANTIES
SEE ATTACHED.
