SECOND AMENDMENT
TO REVOLVING LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT (together
with all appendices, exhibits, schedules and attachments hereto, collectively
this "Amendment") is made and entered into as of August 1, 1996, by and
between THE ▇▇▇▇▇ ORGANIZATION, INC., a Delaware corporation and TRO LEARNING
(CANADA), INC., a Canadian corporation (collectively, "Borrower") and SANWA
BUSINESS CREDIT CORPORATION, a Delaware corporation ("Lender").
RECITALS
WHEREAS, Borrower and Lender entered into that certain Revolving Loan
and Security Agreement (the "Loan Agreement") dated as of August 2, 1995, as
amended by that certain First Amendment to Revolving Loan and Security
Agreement dated as of April 26, 1996 (collectively, the "Loan and Security
Agreement") together with documents ancillary thereto; and
WHEREAS, Borrower has requested and Lender has agreed to increase the
Total Facility (defined in the Loan Agreement) by One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000.00) for the period commencing
August 1, 1996 and ending on October 31, 1996 to accommodate Borrower's
operating needs;
NOW THEREFORE, for and in consideration of the premises, the mutual
covenants hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which the parties hereby acknowledge, it
hereby is agreed as follows:
ARTICLE I
RECITALS AND DEFINITIONS
1.1 Borrower represents and warrants that the foregoing recitals are
true and correct and constitute an integral part of this Amendment and
Borrower and Lender hereby agree that all of the recitals of this Amendment
are hereby incorporated herein and made a part hereof.
1.2 Unless otherwise defined herein or the context otherwise requires,
all capitalized terms used herein shall have the same meanings as ascribed to
them in the Loan Agreement.
ARTICLE II
AMENDMENT OF THE LOAN AGREEMENT
2.1 Section 2.1 of the Loan Agreement hereby is deleted in its entirety
and replaced with the following:
"2.1 TOTAL FACILITY. Provided there does not then exist an Event of
Default or Default, and subject to the terms and conditions set
forth in this Agreement, Lender agrees to make available for
Borrower's use from time to time during the term of this Agreement,
upon Borrower's request therefor, certain loans and other financial
accommodations (the "Total Facility"). The Total Facility shall
consist of a revolving line of credit consisting of advances against
Eligible Accounts, Eligible Installment Accounts and Eligible
Inventory (the "Revolving Loan") evidenced by an Amended and
Restated Revolving Note, in the form attached hereto as Exhibit 2.1,
in an aggregate principal amount not to exceed, at any time
outstanding, (A) during the period commencing on August 1, 1996 and
ending on October 31, 1996, the lesser of (i) Eleven Million Five
Hundred Thousand and No/100 Dollars ($11,500,000.00), or (ii) the
Borrowing Base as reflected in a certificate executed by a duly
authorized officer of Borrower and delivered to Lender on the
Closing Date and by 11:00 a.m. (Chicago Time) on each Tuesday
thereafter during the Term as of the close of business on the
immediately preceding Friday, except to the extent provided in
Section 6.2 herein, and (B) during the period commencing on
November 1, 1996 and for all times thereafter during the Term the
lesser of (i) Ten Million Dollars ($10,000,000.00) or (ii) the
Borrowing Base as reflected in a certificate executed by a duly
authorized officer of Borrower and delivered to Lender on the
Closing Date and by 11:00 A.M. (Chicago time) on each Tuesday
thereafter during the Term as of the close of business on the
immediately preceding Friday, except to the extent provided in
Section 6.2 herein. As used in this Agreement, "Borrowing Base"
shall mean and, at any particular time and from time to time, be
equal to the sum of (a) eighty-five percent (85%) (or such lesser
percentage as the Lender may, at any time and from time to time,
determine in the exercise of its reasonable credit judgment) of
Eligible Accounts, as determined by Lender PLUS (b) seventy
percent (70%) (or such lesser percentage as the Lender may, at any
time and from time to time, determine in the exercise of its
reasonable credit judgment) of Eligible Installment Accounts, as
determined by Lender PLUS (c) sixty percent (60%) (or such lesser
percentage as Lender may at any time and from time to time,
determine in the exercise of its reasonable credit judgment) of
Eligible Inventory, as determined by Lender. Notwithstanding the
foregoing, the following limitations shall apply: (1) the aggregate
amount of advances against Eligible Installment Accounts shall not
exceed, at any time, the lesser of (x) Five Million and No/100
Dollars ($5,000,000.00) or (y) fifty percent (50%) of the Maximum
Amount then in effect, and (2) the aggregate amount of advances
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against Eligible Inventory shall not exceed, at any time, the
lesser of (x) One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00) or (y) fifteen percent (15%) of the Maximum Amount
then in effect. In addition to the foregoing, Lender shall make
available to Borrower an over advance facility (the "Over Advance
Facility") in an amount not to exceed Five Hundred Thousand and
No/100 Dollars ($500,000.00), provided that there shall be no
outstanding indebtedness under the Over Advance Facility for a
period of not less than thirty (30) consecutive days during each
Contract Year. In addition to the foregoing, Lender shall also
make available to Borrower a seasonal overadvance facility (the
"Seasonal Overadvance Facility") in an amount not to exceed Two
Million and No/100 Dollars ($2,000,000.00) for the period of time
commencing on April 1 and ending on July 31 of each calendar year
during the Term and One Million and No/100 Dollars ($1,000,000.00)
for the period of time commencing on August 1 and ending on
October 31 of each calendar year during the Term.
In the event Lender decreases the advance percentages to be applied
to Eligible Accounts, Eligible Installment Accounts and Eligible
Inventory which are contained in this Section 2.1, such decrease
shall become effective immediately for the purpose of calculating
the amount which Lender agrees to advance, or allow to remain
outstanding, against Eligible Accounts, Eligible Installment
Accounts and Eligible Inventory."
2.2 Section 2.3(A)(i) of the Loan Agreement hereby is deleted in its
entirety and replaced with the following:
"(A)(i) So long as no Event of Default has occurred and is
continuing, the Borrower shall pay to the Lender interest on the
Total Facility as follows: (w) Borrower shall pay interest on the
principal balance of the amount outstanding under the Over Advance
Facility equal to two hundred (200) basis points in excess of the
Prime Rate; (x) Borrower shall pay interest on the principal balance
of the amount outstanding under the Seasonal Over Advance Facility
equal to two hundred (200) basis points in excess of the Prime Rate;
(y) Borrower shall pay interest on that portion outstanding of the
principal balance of the Revolving Loan which exceeds Ten Million
and No/100 Dollars ($10,000,000.00) pursuant to Section 2.1 equal
to two hundred (200) basis points in excess of the Prime Rate; and
(z) Borrower shall pay interest on the outstanding principal balance
of the Revolving Loan which does not exceed Ten Million Dollars
($10,000,000.00) at the applicable Designated Rate; provided,
however, that upon the occurrence and during the continuation of an
Event of Default, Lender may, at its option, raise the interest rate
charged on the Liabilities to the Default Rate with respect to the
Liabilities from the date of the occurrence of
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the Default until the earlier of (1) the Default is cured or waived
by Lender or (2) the Liabilities are paid in full. Notwithstanding
the provisions of the previous sentences, Borrowers shall receive a
ten (10) day period (commencing on the date of the occurrence of
such application of the Default) to cure any non-monetary Default
before Lender shall have the right to raise the interest rate
charged on the Liabilities to the Default Rate. The applicable basis
for determining the rate of interest with respect to the Revolving
Loan shall be selected by the Borrower initially at the time a
request for an advance is given pursuant to Section 12.3(J). The
basis for determining the interest rate with respect to the
Revolving Loan may be charged from time to time by Borrower pursuant
to subsection 2.3(E)."
2.3 Section 2.1(E)(i) of the Loan Agreement is deleted in its entirety
and replaced with the following:
"(i) convert at any time all or any part of any outstanding Base
Rate Revolving Loan (except for loans pursuant to (x) the Seasonal
Over Advance Facility; (y) the Over Advance Facility; and (z) the
Revolving Loan to the extent of advances in excess of Ten Million
Dollars; each of which bear interest at the Prime Rate plus Two
Hundred (200) basis points; and may not be converted to LIBOR Rate
Loans) equal to Five Hundred Thousand and No/100 Dollars
($500,000.00) and integral multiples of One Hundred Thousand and
No/100 Dollars ($100,000.00) in excess of that amount from a Base
Rate Revolving Loan to a LIBOR Rate Revolving Loan or to convert a
LIBOR Rate Revolving Loan in amounts equal to Five Hundred Thousand
and No/100 Dollars ($500,000.00) and integral multiples of One
Hundred Thousand and No/100 Dollars ($100,000.00) in excess of that
amount from a LIBOR Rate Revolving Loan to a Base Rate Revolving
Loan; or"
2.4 Section 2.8 of the Loan Agreement is deleted in its entirety and
replaced with the following:
"2.8 NON-USE FEE: (A) During the period commencing on August 1, 1996
and ending on October 31, 1996, Borrower shall pay to Lender a
Non-Use Fee equal to one-half of one percent (0.50%) per annum of
the amount, if any, by which Eleven Million Five Hundred Thousand
Dollars ($11,500,000.00) has exceeded the average daily closing
balance of the Revolving Loan during each calendar quarter or
partial quarter during said period. The Non-Use Fee shall be
payable in arrears on the first day of each calendar quarter and
shall be calculated on the basis of a 360-day year for the actual
days elapsed.
(B) During the period commencing on November 1, 1996 and for
all times thereafter during the Term, Borrowers shall pay to
Lender a Non-Use Fee
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equal to one-half of one percent (0.50%) per annum of the amount,
if any, by which Ten Million Dollars ($10,000,000.00) has exceeded
the average daily closing balance of the Revolving Loan during
each calendar quarter or partial quarter during said period. The
Non-Use Fee shall be payable in arrears on the first day of each
calendar quarter and shall be calculated on the basis of a
360-day year for actual days elapsed."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Borrower hereby makes the following representations and
warranties to Lender, which representations and warranties shall constitute
the continuing covenants of Borrower and shall remain true and correct until
all of Borrower's Liabilities are paid and performed in full:
a. The representations and warranties of Borrower contained in
the Loan Agreement and the Ancillary Agreements are true and correct on and
as of the date hereof as though made on and as of such date;
b. No Event of Default or event which, but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default
under the Loan Agreement has occurred and is continuing or would result from
the execution and delivery of this Amendment;
c. Borrower is in full compliance with all of the terms,
conditions and all provisons of the Loan Agreement and the Ancillary
Agreements;
d. This Amendment and all Ancillary Agreements required
hereunder to be executed by Borrower and delivered to Lender, have been duly
authorized, executed and delivered on Borrower's behalf pursuant to all
requisite corporate authority and this Amendment and each of the Ancillary
Agreements required hereunder to be executed and delivered by Borrower to
Lender constitute the legal, valid and binding obligations of Borrower
enforceable in accordance with their terms, except as enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights; and
e. Borrower hereby acknowledges and agrees that Borrower has
no defense, offset or counterclaim to the payment of said principal,
interest, fees or other Liabilities and hereby waives and relinquishes any
such defense, offset or counterclaim and Borrower hereby releases Lender and
its respective officers, directors, agents, affiliates, successors and
assigns from any claim, demand or cause of action, known or unknown,
contingent or liquidated, which may exist or hereafter be known to exist
relating to any matter prior to the date hereof.
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ARTICLE IV
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RATIFICATION
-------------
Except as expressly amended hereby, the Loan Agreement and all Ancillary
Agreements executed in connection therewith shall remain in full force and
effect. The Loan Agreement, as amended hereby, and all rights and powers
created thereby and thereunder or under such Ancillary Agreements, are in all
respects ratified and confirmed. From and after the date hereof, the Loan
Agreement shall be deemed amended and modified as herein provided but, except
as so amended and modified, the Loan Agreement shall continue in full force
and effect and the Loan Agreement and this Amendment shall be read, taken and
construed as one and the same instrument. On and after the date hereof, the
term "Agreement" as used in the Loan Agreement and all other references to
the Loan Agreement therein, in any other instrument, document or writing
executed by Borrower or any guarantor or furnished to Lender by Borrower or
any guarantor in connection therewith or herewith shall mean the Loan
Agreement as amended by this Amendment.
ARTICLE V
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MISCELLANEOUS
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5.1 Borrower agrees to promptly pay or reimburse all out-of-pocket
costs and expenses of Lender, including without limitation, reasonable
attorneys' and paralegals' fees, costs, expenses, search fees, title
insurance fees, costs and expenses, filing and recording fees incurred by
Lender in connection with the negotiation, preparation, execution, delivery
and enforcement of this Amendment and all other matters pertaining hereto.
Borrower also agrees to pay to Lender, contemporaneously herewith, a fee of
$25,000 in consideration for Lender's agreements contained herein.
5.2 This Amendment may be signed in any number of counterparts,
each of which shall be deemed to be an orignal, but all of which together
shall constitute one and the same instrument.
5.3 Except as otherwise specified herein, this Amendment embodies
the entire agreement and understanding between Lender and Borrower with
respect to the subject matter hereof and supersedes all prior agreements,
consents and understandings relating to such subject matter.
5.4 The headings in this Amendment have been inserted for
convenience only and shall be given no substantive meaning or significance in
construing the terms of this Amendment.
5.5 This Amendment shall inure to the benefit of Lender and its
successors and assigns and shall be binding upon and inure to the successors
and assigns of Borrower, except that Borrower may not assign any of its
rights in and to this Amendment.
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IN WITNESS WHEREOF, Borrower and Lender have caused this Second Amendment
to Revolving Loan and Security Agreement to be executed and delivered as of
the day and year written above.
THE ▇▇▇▇▇ ORGANIZATION, INC.
By:________________________________
Name:________________________
Title:_______________________
TRO LEARNING (CANADA), INC.
By:________________________________
Name:________________________
Title:_______________________
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Chester Zara
________________________________
Name: ▇▇▇▇▇▇▇ ▇. ZARA
________________________
Title: V.P.
_______________________
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IN WITNESS WHEREOF, Borrower and Lender have caused this Second Amendment
to Revolving Loan and Security Agreement to be executed and delivered as of
the day and year written above.
THE ▇▇▇▇▇ ORGANIZATION, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________
Title: SR VP & CFO
_______________________
TRO LEARNING (CANADA), INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________
Title: SR VP & CFO
_______________________
SANWA BUSINESS CREDIT CORPORATION
By:________________________________
Name:________________________
Title:_______________________
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REAFFIRMATION OF GUARANTY
THE UNDERSIGNED PARTY, as a guarantor of the above Borrower pursuant to
its Guaranty of Payment and Performance made as of August 2, 1995, as
reaffirmed by that Reaffirmation of Guaranty dated as of April 26, 1996,
acknowledges the terms and conditions set forth in this Second Amendment To
Revolving Loan And Security Agreement and ratifies and reaffirms its guaranty
obligation as set forth in the foregoing guaranty agreement, as reaffirmed.
DATED: As of August 1, 1996
TRO LEARNING, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
________________________
Title: SR VP & CFO
_______________________
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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