RESTATED SECURITY AGREEMENT
THIS SECURITY AGREEMENT, is made as of the 30th day of June, 1995, by FIRST TEAM
SPORTS, INC., a Minnesota corporation (the "Debtor") in favor of MARQUETTE
CAPITAL BANK, a Minnesota banking association with its main banking house
located in Minneapolis, Minnesota ("Marquette"), LASALLE NATIONAL BANK, a
national banking association ("LaSalle") and FIRSTAR BANK MILWAUKEE, N.A., a
national banking association ("Firstar") (Marquette, LaSalle and Firstar are
referred to herein collectively and individually, as the context requires, as
the "Secured Party"), with Marquette being appointed as the Agent of the Secured
Party for the purposes of exercising any of the Secured Party's rights and
remedies hereunder (in such capacity the "Agent").
In order to secure the payment of the Term Notes which may be executed from time
to time by the Debtor and payable to the order of Marquette in the maximum
aggregate amount of $1,000,000 (the "Term Notes"), two separate $6,000,000
Amended and Restated Revolving Notes of even date herewith executed by the
Debtor and payable to the order of, respectively, Marquette and LaSalle, and a
$3,000,000 Revolving Note of even date herewith executed by the Debtor and
payable to the order of Firstar, as heretofore and hereinafter amended, (the
"Revolving Notes") (collectively, the Term Notes and the Revolving Notes are
referred to herein as the "Notes"), and each and every other debt, liability and
obligation of every type and description which Debtor may now or at any time
hereafter owe to Secured Party (whether such debt, liability or obligation now
exists or is hereafter created or incurred, whether it arises under or is
evidenced by this Agreement or any other present or future instrument or
agreement or by operation of law, and whether it is or may be direct or
indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or sole, joint, several or joint and several) (said
Notes and all such other debts, liabilities and obligations of Debtor to Secured
Party herein collectively referred to as the "Secured Obligations", Debtor
hereby agrees as follows:
1. SECURITY INTEREST AND COLLATERAL. In order to secure the payment and
performance of the Secured Obligations, Debtor hereby grants to Secured Party a
security interest (the "Security Interest") in and to the following property
(hereinafter collectively referred to as the "Collateral"):
any and all accounts, goods, machinery, equipment, furniture, improvements,
inventory, prepaid insurance, supplies, patents, patent rights, copyrights,
trademarks, trade names, royalty rights, contract rights, instruments,
chattel paper and general intangibles, now owned or hereafter acquired by
Debtor, and wherever located,
together with all substitutions and replacements for and products and proceeds
of any of the foregoing property and, in the case of all tangible Collateral,
together with (i) all accessories, attachments, parts, equipment, accessions and
repairs now or hereafter attached or affixed to or used in connection with any
such goods, and (ii) all warehouse receipts, bills of lading and other documents
of title now or hereafter covering such goods.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor hereby represents and
warrants to, and covenants and agrees with, Secured Party as follows:
(a) The Collateral will be used for business purposes. The Collateral which
constitutes inventory shall be located at the addresses described on
Exhibit A attached hereto.
(b) If any part or all of the tangible Collateral will become so related to
particular real estate as to become a fixture, the Debtor will promptly
advise Agent as to any real estate concerned and the record owner thereof
and execute and deliver any and all instruments necessary to perfect the
Security Interest therein and to assure that such Security Interest will be
prior to the interest therein of the owner of the real estate.
(c) Debtor's principal place of business and chief executive office is and
will continue to be located at the address specified on Exhibit A. Debtor's
records concerning its accounts are, and will continue to be, kept at such
address. During the preceding one (1) year Debtor has not changed its name
or operated or conducted business under any trade name or "d/b/a" which is
different from its corporate name. Debtor shall promptly notify the Agent
of any change in such name or if it operates or conducts business under any
trade name or "d/b/a" which is different from such name.
(d) Debtor has (or will have at the time Debtor acquires rights in
Collateral hereafter acquired or arising) and will maintain absolute title
to each item of Collateral free and clear of all security interests, liens
and encumbrances, except the Security Interest, and such other security
interests as are permitted under that certain restated revolving credit and
term loan agreement by and between Debtor and Secured Party of even date
herewith ("Credit Agreement") (the Security Interest and the security
interests permitted under the Credit Agreement are hereinafter collectively
referred to as the "Permitted Interests"), and will defend the Collateral
against all claims or demands of all persons other than Secured Party and
those holding Permitted Interests. Debtor will not sell or otherwise
dispose of the Collateral or any interest therein; provided, however, that
until demand for payment is made by Marquette, LaSalle or Firstar under the
Revolving Notes, or by Marquette under the Term Notes, Debtor may sell any
Inventory constituting Collateral to buyers in the ordinary course of its
business.
(e) The tangible Collateral is presently located in the state of Minnesota.
Debtor will not permit any tangible Collateral to be located in any state
(and, if county filing is required, in any county) in which a financing
statement covering such Collateral is required to be, but has not in fact
been, filed.
(f) All rights to payment and all instruments, documents, chattel papers
and other agreements constituting or evidencing Collateral are (or will be
when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, set-off or counterclaim (other than
those arising in the ordinary course of business) of each account debtor or
other obligor named therein or in Debtor's records pertaining thereto as
being obligated to pay such obligation. Debtor will not agree to any
modification, amendment or cancellation of any such obligation without the
Secured Party's prior written consent, and will not subordinate any such
right to payment to claims of other creditors of such account debtor or
other obligor.
(g) Debtor will (i) keep all tangible Collateral in good repair, working
order and condition, normal depreciation excepted, and will, from time to
time, replace any worn, broken or defective parts thereof; (ii) other than
taxes and other governmental charges contested in good faith and by
appropriate proceedings, promptly pay all taxes and other governmental
charges levied or assessed upon or against any Collateral or upon or
against the creation, perfection or continuance of the Security Interest;
(iii) keep all Collateral free and clear of all security interests, liens
and encumbrances except the Permitted Interests; (iv) at all reasonable
times, permit the Secured Party or their representatives to examine or
inspect any Collateral, wherever located, and to examine, inspect and copy
Debtor's books and records pertaining to the Collateral and its business
and financial condition; (v) keep accurate and complete records pertaining
to the Collateral and pertaining to Debtor's business and financial
condition and will submit to the Agent such periodic reports concerning the
Collateral and Debtor's business and financial condition as the Secured
Party may from time to time reasonably request; (vi) promptly notify the
Agent of any material loss of or material damage to any Collateral or of
any adverse change, known to Debtor, in the prospect of payment of any
material sums due on or under any instrument, chattel paper or account
constituting Collateral; (vii) if Agent at any time so requests promptly
deliver to Agent any instrument, document or chattel paper constituting
Collateral, duly endorsed or assigned by Debtor to Agent for the benefit of
the Secured Party; (viii) at alltimes keep all tangible Collateral insured
against risks of fire (including so called extended coverage), theft,
collision (in case of collateral consisting of motor vehicles) and such
other risks and in such amounts as Agent may reasonably request, and notify
the Bank in writing of any loss or damage to the Collateral or any part;
(ix) from time to time execute such financing statements as Secured Party
may reasonably deem required to be filed in order to perfect the Security
Interest and, if any Collateral is covered by a certificate of title,
execute such documents as may be required to have the Security Interest
properly noted on a certificate of title; (x) pay when due or reimburse
Marquette and/or LaSalle and/or Firstar, as the case may be, on demand for
all costs of collection of any of the Secured Obligations and all other
out-of-pocket expenses (including in each case all reasonable attorneys'
fees) incurred by such Secured Party in connection with the creation,
perfection, satisfaction or enforcement of the Security Interest or the
execution or creation, continuance or enforcement of this Agreement or any
or all of the Secured Obligations; (xi) execute, deliver or endorse any and
all instruments, documents, assignments, security agreements and other
agreements and writings which Secured Party may at any time reasonably
request in order to secure, protect, perfect or enforce the Security
Interest and Secured Party's rights under this Agreement; (xii) not use or
keep any Collateral, or permit it to be used or kept, for any unlawful
purpose or in violation of any federal, state or local law, statute or
ordinance; and (xiii) not permit any tangible Collateral to become part of
or to be affixed to any real property, without first assuring to the
reasonable satisfaction of Agent that the Security Interest will be prior
and senior to any interest or lien then held or thereafter acquired by any
mortgagee of such real property or the owner or purchaser of any interest
therein. If Debtor at any time fails to perform or observe any agreement
contained in this Section 2(g), and if such failure shall continue for a
period of ten (10) calendar days after Agent gives Debtor written notice
thereof (or, in the case of the agreements contained in clauses (viii) and
(ix) of this Section 2(g), immediately upon the occurrence of such failure,
without notice or lapse of time) Agent may (but need not) perform or
observe such agreement on behalf and in the name, place and stead of Debtor
(or, at Agent's option, in Agent's name for the benefit of Secured Party)
and may (but need not) take any and all other actions which Agent may
reasonably deem necessary to cure or correct such failure (including,
without limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances (other than Permitted Interests), the
performance of obligations under contracts or agreements with account
debtors or other obligors, the procurement and maintenance of insurance,
the execution of financing statements, the endorsement of instruments, and
the procurement of repairs, transportation or insurance); and, except to
the extent that the effect of such payment would be to render any loan or
forbearance of money usurious or otherwise illegal under any applicable
law, Debtor shall thereupon pay Agent on demand the amount of all moneys
expended and all costs and expenses (including reasonable attorneys' fees)
incurred by Agent in connection with or as a result of Agent's performing
or observing such agreements or taking such actions, together with interest
thereon from the date expended or incurred by Agent at the rate provided
for in the Notes. To facilitate the performance or observance by Agent of
such agreements of Debtor, Debtor hereby irrevocably appoints Agent for the
benefit of Secured Party, or its delegate, (which appointment is coupled
with an interest) as the attorney-in-fact of Debtor with the right (but not
the duty) from time to time to create, prepare, complete, execute, deliver,
endorse or file, in the name and on behalf of Debtor, any and all
instruments, documents, financing statements, applications for insurance
and other agreements and writings required to be obtained, executed,
delivered or endorsed by Debtor under this Section 2.
3. ASSIGNMENT OF INSURANCE. Debtor hereby assigns to Agent for the benefit of
Secured Party, as additional security for the payment of the Secured
Obligations, any and all proceeds derived from, or due or to become due under,
any and all policies of insurance in connection with any loss or damage to any
of the Collateral, and Debtor hereby directs the issuer of any such policy to
pay any such moneys to the Agent. Provided no Event of Default has occurred and
is then continuing under the Credit Agreement or the Notes, the Debtor shall
have the right to use the proceeds of the insurance to repair or replace any of
its damaged or destroyed Collateral. Agent may (but need not), in its own name
or in Debtor's name, execute and deliver proofs of claim, receive all such
moneys (subject to Debtor's rights), endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
4. COLLECTION OF ACCOUNTS. Pursuant to Minn. Stat. Section 336.9-502, Agent may,
after the occurrence of an Event of Default under the Credit Agreement or the
Notes, notify any account debtor or any obligor on an instrument to make payment
directly to a post office box specified by and under the sole control of Agent,
whether or not Agent was theretofore making collections with respect thereto,
and Agent shall be entitled to take control of any proceeds thereof, for the
benefit of the Secured Party. If so requested by Agent, Debtor shall insert
appropriate language on each invoice directing its customers to make payment to
such post office box.
5. REMEDIES. Agent, for the benefit of the Secured Party, may exercise any one
or more of the following rights or remedies if any or all of the Secured
Obligations are not paid when due: (i) exercise and enforce any or all rights
and remedies available after default to a secured party under the Uniform
Commercial Code, including but not limited to the right to take possession of
any Collateral, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which Debtor hereby expressly
waives), and the right to sell, lease or otherwise dispose of or use any or all
of the Collateral; (ii) Agent may require Debtor to assemble the Collateral and
make it available to Agent at a place to be designated by Agent which is
reasonably convenient to both parties; and (iii) exercise or enforce any or all
other rights or remedies available to Agent by law or agreement against the
Collateral, against Debtor or against any other person or property. If notice to
Debtor of any intended disposition of Collateral or any other intended action is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in Section 6 hereof)
at least ten (10) calendar days prior to the date of intended disposition or
other action.
6. MISCELLANEOUS. This Agreement does not contemplate a sale of accounts or
chattel paper, and, as provided by law, Debtor is entitled to any surplus and
shall remain liable for any deficiency. This Agreement may be waived, modified,
amended, terminated or discharged, and the Security Interest may be released,
only explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the purpose
given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Agent's option, and the exercise or enforcement of any one such
right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. All notices to be given to Debtor shall be deemed
sufficiently given if deposited in the United States mails, registered or
certified, postage prepaid, or personally delivered to Debtor at its address set
forth in the Credit Agreement. Agent's duty of care with respect to Collateral
in its possession (as imposed by law) shall be deemed fulfilled if Agent
exercises reasonable care in physically safe keeping such Collateral or, in the
case of Collateral in the custody or possession of a bailee or other third
person, exercises reasonable care in the selection of the bailee or other third
person, and Marquette need not otherwise preserve, protect, insure or care for
any Collateral. Secured Party shall not be obligated to preserve any rights
Debtor may have against any other party, to realize on the Collateral at all or
in any particular manner or order, or to apply any cash proceeds of Collateral
in any particular order of application. This Agreement shall be binding upon and
inure to the benefit of Debtor and Secured Party and their respective heirs,
representatives, successors and assigns and shall take effect when signed by
Debtor and delivered to Secured Party, and Debtor waives notice of Secured
Party's acceptance hereof. Secured Party may execute this Agreement if
appropriate for the purpose of filing, but the failure of Secured Party to
execute this Agreement shall not affect or impair the validity or effectiveness
of this Agreement. Except to the extent otherwise required by law, this
Agreement shall be governed by the laws of the State of Minnesota and, unless
the context otherwise requires, all terms used herein which are defined in
Articles 1 and 9 of the Uniform Commercial Code, as in effect in said state
(including but not limited to the terms "inventory" and "account") shall have
the meanings therein stated and all capitalized terms used herein which are
defined in the Credit Agreement (including but not limited to "Event of Default"
and "Notes") shall have the meanings therein stated. If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect, and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Secured
Obligations.
7. RESTATEMENT. This Restated Security Agreement constitutes a restatement of
and amendment to, and not a release of, that certain Security Agreement dated
March 6, 1995, executed by Debtor in favor of the Secured Party.
IN WITNESS WHEREOF, Debtor has executed and delivered to Secured Party this
Security Agreement as of the day and year first above written.
FIRST TEAM SPORTS, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
Its: VP/CFO
EXHIBIT A
(Business Locations)
Chief Executive Office:
0000 Xxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxxx 00000
Other Locations:
