EX-3.9
LOAN AGREEMENT
APRIL 2004
This Loan Agreement ("Agreement") is made and entered into to be effective upon
execution by and among Utix Group, Inc., a Delaware Corporation with an address
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (the "Borrower"), Borrower's
wholly-owned subsidiary Corporate Sports Incentives, Inc., a New Hampshire
corporation with an address at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
("Corporate Sports"), as grantor of a security interest, and the lenders who are
signatories hereto, each with an address as set forth opposite their names on
SCHEDULE A attached hereto (each a "Lender" and collectively, the "Lenders").
WHEREAS, each Lender has agreed to lend to Borrower the Loan (as
defined hereinafter) pursuant to the terms of this Agreement and the Note (as
defined hereinafter).
NOW THEREFORE, for good and valuable consideration, the parties
hereto, intending to be legally bound, agree as follows
1. LOAN AGREEMENT. Borrower hereby agrees to borrow from each Lender, and
each Lender hereby agrees to lend to Borrower on the date hereof, the
amount set forth opposite each Lender's name in SCHEDULE A attached
hereto, subject to the terms and conditions set forth hereunder and in
the note that is substantially in the form attached hereto as EXHIBIT
A (the "Note"), in an aggregate amount of up to Five Hundred Fifty
Thousand Dollars ($550,000) (the "Loan"). The minimum Loan amount for
each Lender shall be $25,000.
a. FUNDING. The Loan will be funded within ten (10) business days of
execution of this Agreement. Each Lender shall either issue a
certified check made payable to "Utix Group, Inc." or wire their
respective Loan amount in immediately-available funds to
Borrower's account at Cambridge Savings Bank.
2. TERMS.
a. INTEREST RATE. The Loan shall bear interest at a rate of ten
percent (10%) per annum. Interest shall be paid semi-annually,
commencing on August 31, 2004 and on each February 28 and August
31 thereafter until the principal amount and all accrued but
unpaid interest has been paid.
b. MATURITY. The Loan shall mature on the earlier of (i) December
31, 2004, (ii) the occurrence of an Event of Default (as defined
in the Note) in accordance with the procedures set forth in the
Note or (iii) the receipt by the Borrower of net proceeds in
excess of $3,500,000 from any debt or equity financing completed
prior to December 31, 2004 (the "Maturity Date").
c. PREPAYMENT. The Loan may be prepaid by the Borrower at any time.
If a prepayment occurs, the Lender will be entitled to a
prepayment premium (the "Prepayment Premium") equal to 5% of the
Loan amount. In the event the Borrower receives net proceeds in
excess of $3.5 million from any debt or equity financing while
the Loan is outstanding, the Loan shall (1) mature as set forth
in Section 2(b) above and (2) be entitled to the Prepayment
Premium, which shall be paid within fifteen (15) days of
receiving the proceeds from such financing.
d. SECURITY. The Loan shall be secured (the "Security Interest") by
a second priority security interest in all of the assets of the
Borrower and Corporate Sports, including those acquired after the
date hereof but excluding selective receivable financing on
bundled retail products (the "Collateral"). The Borrower,
Corporate Sports and the Lenders shall enter into a security
agreement that is substantially in the form attached hereto as
EXHIBIT B (the "Security Agreement").
3. REPRESENTATIONS. As applicable, each of Borrower and Corporate Sports
represents and warrants to the Lenders as follows:
a. GOOD STANDING. Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, duly authorized to conduct business and in good
standing under the laws of each jurisdiction where such
qualification is material to the conduct of business. Corporate
Sports is a corporation duly organized, validly existing, and in
good standing under the laws of the State of New Hampshire, duly
authorized to conduct business and in good standing under the
laws of each jurisdiction where such qualification is material to
the conduct of business.
b. CORPORATE AUTHORITY. The Borrower has full power and authority to
enter into this Agreement, to borrow the funds, to execute and
deliver the Notes, and to incur the obligations provided for
herein, all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of
shareholders or of any public authority is required as a
condition to the validity of this Agreement. Corporate Sports has
full power and authority to enter into this Agreement, to grant a
security interest, and to incur the obligations provided for
herein, all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of
shareholders or of any public authority is required as a
condition to the validity of this Agreement.
c. BINDING AGREEMENT. This Agreement and the Notes, when issued and
delivered pursuant hereto for value received, shall constitute,
the legal, valid, and binding obligation of the Borrower in
accordance with its terms subject to bankruptcy and insolvency
laws and any other laws of general
application affecting the rights and remedies of creditors. This
Agreement shall constitute the legal, valid, and binding
obligation of Corporate Sports in accordance with its terms,
subject to bankruptcy and insolvency laws and any other laws of
general application affecting the rights and remedies of
creditors.
d. COLLATERAL. Borrower has, and will have upon acquisition, good
and marketable title to the Collateral. Corporate Sports has, and
will have upon acquisition, good and marketable title to the
Collateral. Borrower and Corporate Sports shall not in any way
further encumber the Collateral from the day and year first
written above until all of the obligations created hereby are
fully satisfied. Borrower and Corporate Sports shall assist and
cooperate with Lender in filing the requisite Uniform Commercial
Code financing statements with respect to the Collateral.
4. AFFIRMATIVE COVENANTS. Until the payment in full of the Loan and
performance of all obligations of the Borrower and Corporate Sports
hereunder, unless otherwise indicated, each of the Borrower and
Corporate Sports shall:
a. TAXES. Pay and discharge all taxes, assessments, and governmental
charges upon it, its incomes, and its properties prior to the
date on which penalties are attached thereto, unless and to the
extent only that such taxes shall be contested in good faith and
by appropriate proceedings by the Borrower or Corporate Sports,
as applicable.
b. INSURANCE. Maintain insurance with insurance companies acceptable
to the Lender on such properties, in such amounts and against
such risks as is customarily maintained by similar businesses
operating within the same industry.
c. MAINTENANCE. Maintain, preserve, and keep the Collateral in good
repair and working order and condition.
d. NOTICE OF CLAIMS. Notify Lender of any claims made or legal
processes instituted against the properties or other assets of
Borrower or Corporate Sports, as applicable, within fifteen (15)
days of Borrower becoming aware of the existence of such claim or
legal process. Agree to diligently work to resolve, in an
efficient and cost effective manner, such claims.
5. NEGATIVE COVENANTS. Until payment in full of the Loan and the
performance of all other obligations of the Borrower and Corporate
Sports hereunder, each of the Borrower and Corporate Sports shall not,
except with the prior written consent of the majority (51%) of the
Lenders:
a. Make loans or advances to a person, firm or corporation, except
loans or advances made in the ordinary course of business.
b. Issue, incur or assume any indebtedness, nor become liable,
whether as an endorser, guarantor, surety, or otherwise, for any
debt or obligation of any other person, firm, or corporation
beyond the $550,000 Loan amount stated in this Agreement,
selective receivable financing and any bridge financing related
to raising approximately $3.5 million of debt or equity
financing.
6. EVENTS OF DEFAULT. The amounts due hereunder shall become immediately
due and payable in full upon the occurrence of any one or more of the
following events of default (the "Events of Default").
a. Default in the payment of the principal and unpaid accrued
interest of the Loan when due and payable, whether at maturity or
otherwise, that is not cured within 10 days; or
b. Failure of a representation of Borrower or Corporate Sports to be
true that is not cured within 30 days; or
c. Failure of Borrower or Corporate Sports to observe or perform any
material term, covenant, or agreement contained in this Agreement
that is not cured within 30 days, or the dissolution, termination
of existence, or business failure of the Borrower or Corporate
Sports; or
d. The institution by the Borrower or Corporate Sports of
proceedings to be adjudicated as bankrupt or insolvent, or the
consent by it to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or
answer or consent seeking reorganization or release under the
federal Bankruptcy Act, or any other applicable federal or state
law, or the consent by it to the filing of any such petition or
the appointment of a receiver, liquidator, assignee, trustee or
other similar official of the Borrower or Corporate Sports, or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of
corporate action by the Borrower or Corporate Sports in
furtherance of any such action; or
e. If, within sixty (60) days after the commencement of an action
against the Borrower or Corporate Sports (and service of process
in connection therewith on the Borrower or Corporate Sports)
seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation, such action shall not have been
resolved in favor of the Borrower or Corporate Sports, as
applicable, or all orders or proceedings thereunder affecting the
operations or the business of the Borrower or Corporate Sports,
as applicable, stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if, within sixty
(60) days after the appointment without the consent or
acquiescence of the Borrower or Corporate Sports of any trustee,
receiver or liquidator of the Borrower or Corporate Sports, as
applicable, or of all or any substantial part of the properties
of the Borrower or Corporate Sports, as applicable, such
appointment shall not have been vacated; or
f. The cessation of Borrower's or Corporate Sports' business for
more than thirty (30) days.
7. ASSIGNMENT. No portion of the Loan shall be assignable to a third
party without the express written consent of the Borrower.
8. MISCELLANEOUS
a. This Agreement constitutes the entire agreement between the
Borrower, the Corporate Sports and the Lenders. No delay or
failure on the part of any Lender in the exercise of any power or
right shall operate as a waiver thereof nor shall any single or
partial exercise of the same preclude any other or further
exercise thereof or the exercise of any other power or right, and
the rights and remedies of Lenders are cumulative to and not
exclusive of remedies which they would otherwise have. No waiver,
consent or modification, or amendment of this Agreement shall be
effective as against the Lenders unless the same is in writing
and signed by the holders of at least a majority of the face
amount of all then outstanding Notes issued pursuant to this
Agreement. No such amendment, modification, wavier or consent
shall extend to or affect any obligation or right except to the
extent expressly provided for therein. All computations and
determinations of the assets and liabilities of Borrower or
Corporate Sports for the purpose of this Agreement shall be made
in accordance with generally accepted accounting principles
consistently applied, except as may be otherwise specifically
provided herein. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be
deemed to have been duly given on the date of service if
personally served on the party to whom such notice is to be
given, on the date of transmittal of service via telecopy to the
party to whom notice is to be given (with a confirming copy
delivered within 24 hours thereafter), or on the third day after
mailing if mailed to the party to whom notice is to be given, by
first class mail, registered or certified mail, postage prepaid,
or via a recognized overnight courier providing a receipt for
delivery and properly addressed to the parties at the respective
addresses of the parties as set forth herein . Any party hereto
may by notice so given change its address for future notice
hereunder.
b. Borrower agrees to pay and reimburse Lender for all expenses and
damages paid or incurred by Lender, including court costs and
reasonable attorney's fees, arising out of a default hereunder
and/or the collection of the Loan or any other liability, or in
preserving or protecting the right of
Lender hereunder or with respect to any collateral or security
for the Loan or other liabilities, including all of the foregoing
incurred in any bankruptcy arrangement or reorganization
proceeding involving Borrower. Any or all indebtedness owing by
Lender to Borrower may at any time without notice or demand be
offset and applied to any indebtedness or liability of Borrower
to Lender, whether or not the due.
c. This Agreement shall be binding upon Borrower and Corporate
Sports and their respective successors and assigns, and shall
inure to the benefit of the Lenders and the benefit of their
respective successors and assigns, including any subsequent
holder or holders of the Notes or any interest therein.
d. Borrower herby expressly waives any presentment, demand, protest
or other notice of any kind.
9. GOVERNING LAW. The laws of the State of New York shall govern this
Agreement.
10. SURVIVABILITY. Should any portion of this Agreement be voided by a
court of competent jurisdiction, all remaining clauses in the
Agreement shall remain in full force and effect.
Executed on the day and year below written. This Agreement may be executed in
any number of counterparts, each constituting an original, but altogether one
agreement. A facsimile or other copy of this Agreement shall be considered as
having the same effect and be equivalent to an original signed document.
Utix Group, Inc.
By:
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and CEO
Date:
------------------------------
Corporate Sports Incentives, Inc.
By:
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and CEO
Date:
------------------------------
LENDERS:
By:
--------------------------------
Name:
SS#:
Date:
------------------------------
SCHEDULE A
----------
LENDERS ADDRESS LOAN AMOUNT
------- ------- -----------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇/▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, $25,000
Wolf & Marcus, LLP
▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇,▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ Financial Group $200,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 5 Foxwood Cove $25,000
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇/▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, $25,000
Wolf & Marcus, LLP
▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
EXHIBIT A
NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), NOR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNLESS (I) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II) UTIX GROUP,
INC. RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO UTIX GROUP, INC.
THAT EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND
THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES
LAWS ARE AVAILABLE.
No. _____ $_________
UTIX GROUP, INC.
SECURED SUBORDINATED PROMISSORY NOTE
April __, 2004
UTIX GROUP, INC., a Delaware corporation (the "Company") with an address
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, for value received hereby
promises to pay to _____________________________________ (the "Holder"), or its
registered assigns, the sum of ______________ Dollars ($_______), or such lesser
amount as shall then be outstanding hereunder. The principal amount hereof and
any unpaid accrued interest hereon, as set forth below, shall be due and payable
on the earlier to occur of (i) December 31, 2004, (ii) when declared due and
payable by the Holder upon the occurrence of an Event of Default (as defined
below), or (iii) the receipt by the Company of net proceeds to the extent that
the same shall be in excess of $3,500,000 from any debt or equity financing
completed prior to December 31, 2004 (the "Maturity Date"). Payment for all
amounts due hereunder shall be made by mail to the registered address of the
Holder. This Note is issued in connection with the Loan Agreement between the
Company, Corporate Sports Incentives, Inc., a New Hampshire corporation, as
grantor of a security interest ("Corporate Sports"), and the Lenders who are
signatories thereto, dated April 2004, as the same may from time to time be
amended, modified or supplemented (the "Loan Agreement"). The holder of this
Note is subject to certain restrictions set forth in the Loan Agreement and
shall be entitled to certain rights and privileges set forth in the Loan
Agreement. This Note is one of the Notes referred to as the "Notes" in the Loan
Agreement. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Loan Agreement.
The following is a statement of the rights of the Holder of this Note and
the conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of this Note, agrees:
1. DEFINITIONS. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
(i) "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Note.
(ii) "Holder," when the context refers to a holder of this Note,
shall mean any person who shall at the time be the registered holder of
this Note.
2. INTEREST. Commencing on August 31, 2004, and on each February 28
and August 31 thereafter until all outstanding principal and interest on this
Note shall have been paid in full, the Company shall pay interest at the rate of
ten percent (10%) per annum (the "Interest Rate") on the principal of this Note
outstanding during the period beginning on the date of issuance of this Note and
ending on the date that the principal amount of this Note becomes due and
payable.
3. EVENTS OF DEFAULT. If any of the events specified in this Section
3 shall occur (herein individually referred to as an "Event of Default"), the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable.
(i) Default in the payment of the principal and unpaid accrued
interest of this Note when due and payable, whether at maturity or
otherwise, that is not cured within 10 days;
(ii) Failure of a representation of the Company or Corporate
Sports in the Loan Agreement to be true that is not cured within 30 days;
(iii) Failure of the Company or Corporate Sports to observe or
perform any material term, covenant, or agreement contained in the Loan
Agreement that is not cured within 30 days, or the dissolution,
termination of existence, or business failure of the Company or Corporate
Sports;
(iv) The institution by the Company or Corporate Sports of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by
it to institution of bankruptcy or insolvency proceedings against it or
the filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or any other
applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Company or Corporate Sports, or
of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate
action by the Company or Corporate Sports in furtherance of any such
action; or
(v) If, within sixty (60) days after the commencement of an
action against the Company or Corporate Sports (and service of process in
connection therewith on the Company or Corporate Sports) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
such action shall not have been resolved in favor of the Company or
Corporate Sports, as applicable, or all orders or proceedings thereunder
affecting the operations or the business of the Company or Corporate
Sports, as applicable, stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if, within sixty (60) days
after the appointment without the consent or acquiescence of the Company
or Corporate Sports of any trustee, receiver or liquidator of the Company
or Corporate Sports, as applicable, of all or any substantial part of the
properties of the Company or Corporate Sports, as applicable, such
appointment shall not have been vacated; or
(vi) The cessation of the Company's or Corporate Sports'
business for more than thirty (30) days.
4. SECURITY. The Note shall be secured (the "Security Interest") by a
second priority security interest in all of the assets of the Company and
Corporate Sports, including those acquired after the date hereof but excluding
selective receivable financing on bundled retail products (the "Collateral").
The Company, Corporate Sports and the Lenders shall enter into a security
agreement of even date herewith (the "Security Agreement").
5. PREPAYMENT. The Note may be prepaid by the Company at any time. If
a prepayment occurs, the Lender will be entitled to a prepayment premium (the
"Prepayment Premium") equal to 5% of the Note amount. In the event the Company
receives net proceeds in excess of $3.5 million from any debt or equity
financing while the Note is outstanding, the Note shall (1) mature as set forth
above and (2) be entitled to the Prepayment Premium, which shall be paid within
fifteen (15) days of receiving the proceeds from such financing.
6. ASSIGNMENT. Subject to the restrictions on transfer described in
Section 8 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
7. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and the Lender.
8. TRANSFER OF THIS NOTE. With respect to any offer, sale or other
disposition of this Note, the Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such Holder's counsel reasonably acceptable to the Company, to the
effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company shall notify such Holder that such Holder may sell
or otherwise dispose of this Note, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this Section 8 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Company, the Company shall so notify the Holder promptly
after such determination has been made. Each Note thus transferred and each
certificate representing the securities thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
9. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given on the date of service if personally served on the party to whom such
notice is to be given, on the date of transmittal of service via telecopy to the
party to whom notice is to be given (with a confirming copy delivered within 24
hours thereafter), or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified mail,
postage prepaid, or via a recognized overnight courier providing a receipt for
delivery and properly addressed at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder.
10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, excluding that body of law
relating to conflict of laws.
11. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
_____ day of April, 2004.
UTIX GROUP, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
EXHIBIT B
SECURITY AGREEMENT
SECURITY AGREEMENT
AGREEMENT made the ____ day of April, 2004, by and among UTIX GROUP,
INC., a Delaware corporation (the "Company"), CORPORATE SPORTS INCENTIVES, INC.,
a New Hampshire corporation and wholly-owned subsidiary of the Company
("Corporate Sports"), and the undersigned lenders (the "Lenders") pursuant to a
loan agreement by and among the Company, Corporate Sports and the Lenders, dated
April 2004 (the "Loan").
W I T N E S S E T H:
- - - - - - - - - -
1. GRANT OF SECURITY INTEREST. To secure the payment of indebtedness
to the Lenders evidenced by the 10% Secured Subordinated Promissory Notes of
even date herewith in the aggregate principal amount of up to Five Hundred Fifty
Thousand Dollars ($550,000) (the "Notes"), it being understood and agreed to by
all parties hereto that all obligations under the Notes or hereunder are subject
to the final determination of a court of competent jurisdiction, the Company
hereby grants and conveys to each of the Lenders a continuing security interest
in and to all property and assets of the Company and its subsidiaries (as
hereinafter used, "Debtor" shall be deemed to include the Company and all of its
subsidiaries) of every kind and description, whether now existing or hereafter
acquired, produced or created, including without limitation:
(a) all accounts receivable, chattel paper, instruments, stock
certificates, notes, drafts, acceptances and other forms of instruments or
obligations, now or hereafter owing to the Debtor, whether arising from the sale
of goods or rendition of services by the Debtor; all of the Debtor's rights in,
to and under all purchase orders, now or hereafter received by the Debtor for
goods or services, and all monies due or to become due to the Debtor under all
contracts for the sale of goods or the performance of services by the Debtor
(whether or not yet earned by performance), or in connection with any other
transaction (including, without limitation, the right to receive the proceeds of
said purchase orders and contracts), and all collateral security and guarantees
of any kind given by any obligor with respect to any of the foregoing; all
equipment and fixtures; all motor vehicles; all general intangibles; all
documents (all of the foregoing hereinafter referred to collectively as the
"Collateral").
(b) Subject in its entirety to the prior payment in full by the
Company of the outstanding notes payable to the lenders (the "July Lenders") who
are signatories to the loan agreement, dated July 2003, between Corporate Sports
and the July Lenders in the aggregate amount of Four Hundred Seventy Thousand
Dollars ($470,000) (the "July Loan"), which was assumed by the Company pursuant
to the Share Exchange Agreement, dated October 31, 2003, by and among the
Company, Corporate Sports, ▇▇▇▇ ▇▇▇▇▇▇▇, as the principal stockholder of the
Company, and the stockholders of Corporate Sports (referred to hereinafter as
the "Prior Encumbrances").
2. COVENANTS OF DEBTOR. The Debtor covenants and agrees as follows:
(a) The lien granted by the Debtor to the Lenders in the
Collateral is a first priority security interest, subject to the prior interest
represented by the Prior Encumbrances referred to in Section 1(b) hereinabove.
There are no other mortgages, pledges, liens, security interests, claims,
encumbrances or changes of any kind ("Encumbrances") on any of the property of
the Debtor, with the exception of the Prior Encumbrances referred to in Section
1(b) hereinabove, and the Debtor shall not intentionally grant any Encumbrances
without the Lenders' written consent;
(b) To pay and perform all of the obligations secured by this
Agreement according to their terms;
(c) To defend the title to the Collateral against all persons
and against all claims and demands whatsoever, which Collateral the Debtor
hereby represents is lawfully owned by the Debtor and is now free and clear of
any and all liens, security interests, claims, charges, encumbrances, taxes and
assessments, with the exception of the Prior Encumbrances referred to in Section
1(b) hereinabove;
(d) To keep the Collateral, at the Debtor's expense, in good
repair and condition (reasonable wear and tear excepted);
(e) To retain possession of the Collateral at its current
locations, and not to remove, sell, exchange, assign, loan, deliver, lease,
license, mortgage or otherwise dispose of same (other than inventory sold or
receivables collected or cash disbursements made in the ordinary course of
business so long as an Event of Default (as defined in the Notes) has not
occurred and is not continuing hereunder) without the prior written consent of
the Lenders;
(f) To keep the Collateral free and clear of all further liens,
charges and encumbrances;
(g) To pay all taxes, assessments and license fees relating to
the Collateral except as same may be contested by the Debtor in good faith by
proper proceedings and providing adequate reserves for the accrual of same are
maintained if required by generally accepted accounting principles;
(h) To keep the Collateral and records relating to the
Collateral available for inspection by the Lenders at all reasonable times;
(i) To keep the Collateral fully insured against loss by fire,
theft and other casualties. The Debtor shall give immediate written notice to
the Lenders and to insurers of loss or damage to the Collateral and shall
promptly file proofs of loss with insurers; and
(j) To comply with the material terms and conditions of any
leases covering the premises wherein the Collateral is located and any material
orders, ordinances, laws or statutes applicable to the Debtor of any city, state
or governmental department having jurisdiction with respect to such premises or
the conduct of business thereon, if the failure to comply therewith results in
the termination of any such lease or the inability of the Debtor to operate its
business thereon.
3. FINANCING STATEMENTS. The Debtor agrees to execute and deliver
such documents, including UCC-1 Financing Statements, as shall
reasonably be requested by the Lenders to perfect the security
interest in the Collateral granted herein to the Lenders.
4. EVENTS OF DEFAULT AND REMEDIES.
(a) The following shall constitute an "Event of Default" by the
Debtor hereunder:
(1) An Event of Default (as defined therein) shall occur
under the Note, after giving effect to all notice provisions and cure periods
provided for therein;
(2) Failure by the Debtor to comply with or perform any
provision of this Agreement, PROVIDED, however, that with respect to a failure
by the Debtor to comply with any of the provisions of Section 2(c), (e), (i) and
(j) of this Agreement, such failure is not remedied within thirty (30) days
after the Debtor's receipt of written notice of same;
(3) Any representation of Debtor set forth herein shall
have been false or misleading in any material respect; or
(4) Subjection of any of the Collateral to levy of
execution or other judicial process, which is not released, discharged,
dismissed, stayed or fully bonded for a period of thirty (30) days or more after
its entry, issue or stay, as the case may be.
(b) Upon any default by the Debtor hereunder, the Lenders shall
have all the rights, remedies and privileges with respect to repossession,
retention and sale of any or all of the Collateral of the Debtor and disposition
of the proceeds as are accorded by the applicable sections of the Uniform
Commercial Code, as from time to time in effect in the State of New York (the
"Uniform Commercial Code").
(c) Upon any default by the Debtor hereunder and upon demand of
the Lenders, the Debtor shall assemble the Collateral and make it available to
the Lenders at the place and at the time designated in the demand.
(d) If the Debtor shall default in the performance of any of
the provisions of this Agreement on the Debtor's part to be performed, the
Lenders may perform same for the Debtor's accounts and any monies expended in so
doing shall be chargeable with interest to the Debtor and added to the
indebtedness to the Lenders secured hereby.
6. LIABILITY FOR DEFICIENCY. The Debtor shall remain liable for any
deficiency under the Notes resulting from a sale of the Collateral and shall pay
any such deficiency forthwith on demand.
7. WAIVER. Waiver of or acquiescence in any default by the Debtor, or
failure of the Lenders to insist upon strict performance by the Debtor of any
warranties or covenants in this Agreement, shall not constitute a waiver of any
subsequent or other default or failure.
8. NOTICES. All notices to any party hereof shall be in writing and
shall be sufficiently given at the time of delivery if delivered to such party
in person, by Federal Express or similar receipted delivery, or on the fifth
(5th) business day after mailing if mailed, postage prepaid, by certified mail,
return receipt requested, addressed to such party at his address herein set
forth or to such other address as he, by notice to the others, may designate
from time to time.
9. CAPTIONS. The captions are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Agreement nor the intent of any provision thereof.
10. SUCCESSORS AND ASSIGNS. The terms, warranties and agreements
herein contained shall bind and inure to the benefit of the respective parties
hereto, and their respective legal representatives, successors and assigns.
11. GENDER AND NUMBER. The gender and number used in this Agreement
are used as a reference term only and shall apply with the same effect whether
the parties are of the masculine or feminine gender, corporate or other form,
and the singular shall likewise include the plural.
12. MODIFICATION OF AGREEMENT. This Agreement may not be changed
orally.
13. GOVERNING LAW. This Agreement shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York. The Debtor (1) agrees that any legal suit, action
or proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York, (2) waives any
objection to the venue of any such suit, action or proceeding and the right to
assert that such forum is not a convenient forum, and (3) irrevocably consents
to the jurisdiction of the New York State Supreme Court, County of New York, and
the United States District Court for the Southern District of New York in any
such suit, action or proceeding, and the Debtor further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in New York State Supreme Court, County of New York, or in
the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding.
14. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or counterparts thereof, individually or taken together, shall
bear the signature of all of the parties reflected hereon as signatories.
IN WITNESS WHEREOF, the parties have signed this agreement on the day and
year first above written.
DEBTOR:
UTIX GROUP, INC.
By:
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Name:
----------------------------
Title:
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CORPORATE SPORTS INCENTIVES, INC.
By:
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Name:
----------------------------
Title:
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LENDER:
By:
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Name:
----------------------------
Title:
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