SECURITY AGREEMENT
(Purchased Assets)
THIS SECURITY AGREEMENT (the "Security Agreement") is made as of
____________, 2001 by Country Tonite Branson, LLC, a Nevada limited liability
company ("CTB"), whose address is 0000 Xxxx Xxxxx Xxxxx, Xxx Xxxxx, Xxxxxx
00000, to BounceBack Xxxxxxxxxxxx.xxx, Inc., a Minnesota corporation ("BBT"),
with its principal place of business at 000 Xxxxxxxxx Xxxx., Xxxxx Xxxxxxx,
Xxxxxxxxxxx 00000.
BACKGROUND
A. Pursuant to the terms and provisions of that certain Asset Purchase
Agreement by and among CTB, BBT, Country Tonite Enterprises, Inc., a Nevada
corporation ("CTE"), and CRC of Branson, Inc., a Missouri corporation ("CRC of
Branson"), dated as of the date hereof (the "Asset Purchase Agreement"), CTB
desires to purchase certain of the assets of CTE and CRC of Branson (the
"Purchased Assets") and CTE and CRC of Branson desire to sell, transfer and
convey certain the Purchased Assets to CTB.
B. BBT is the 100% owner of CTE and CRC of Branson.
C. Pursuant to the terms and conditions of the Asset Purchase Agreement,
CTB has delivered a $650,000 Secured Promissory Note (the "Short Term Note") and
a $2,800,000 Promissory Note (the "Note" and together with the Short Term Note,
the "Notes") payable to the order of BBT, as a part of the consideration for CTE
and CRC of Branson's sale of the Purchased Assets to CTB; and
D. Pursuant to the terms of the Asset Purchase Agreement, CTB is willing to
execute this Security Agreement to secure CTB's obligations to BBT under the
Notes; and
E. CTB and BBT intend that this instrument shall constitute a security
agreement within the meaning of the Uniform Commercial Code, as from time to
time in effect in the States of Missouri and Nevada (the "UCC").
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of all which is
acknowledged by CTB, the parties hereto agree as follows:
Section 1. Security Interest. As collateral security for the prompt and
unconditional payment of the principal and interest on the Notes (the "Debt"),
CTB hereby grants, assigns, pledges, transfers and sets over to BBT and grants
to BBT a first priority lien upon and security interest in and to the Purchased
Assets (including all of the CTB's right, title and interest in and to any and
all renewals, replacements, substitutions, additions, products and proceeds of
the Purchased Assets, including, without limitation, accounts receivable
generated by the sale of inventory which is part of the Purchased Assets). Items
referenced in this Section l are collectively hereinafter referred to as the
"Collateral".
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Section 2. CTB's Title; Liens and Encumbrances; CTB's Representations.
2.1 CTB represents and warrants that CTB is, or, to the extent that this
Security Agreement states that the Collateral is to be acquired after the date
hereof, will be, the owner of the Collateral, having good and marketable title
thereto, free from any and all liens, security interests, encumbrances or
claims. CTB will not create or assume or permit to exist any such prior lien,
security interest, encumbrance or claim on or against the Collateral and CTB
will promptly notify BBT of any such claim, lien, security interest or other
encumbrance made or asserted against the Collateral and will defend the
Collateral against any such claim, lien, security interest or other encumbrance.
2.2 This Security Agreement constitutes the legal, valid and binding
obligation of CTB enforceable against CTB in accordance with its terms, except
to the extent the enforceability thereof may be limited (1) by bankruptcy,
reorganization or similar laws limiting the enforceability of creditors' rights
generally or (2) by the availability of discretionary equitable remedies. No
consent or approval of any person, including, without limitation, stockholders,
officers or directors of CTB, no consent or approval of any landlord or
mortgagee, no waiver of any lien or right of distraint or other similar right
and no consent, license, approval, authorization or declaration of any
governmental authority, bureau or agency is or will be required in connection
with the execution, delivery, performance, validity, enforcement or priority of
this Security Agreement.
Section 3. Location of Collateral and Records. CTB represents and warrants
that there are no places where the Collateral is used, stored or located, except
as set forth on Exhibit A annexed hereto, unless otherwise agreed to by BBT in
writing, and covenants that CTB will promptly notify BBT of any change in the
foregoing representation. CTB shall at all times maintain its records as to the
Collateral, its books of account and other records at its principal place of
business shown above. CTB further covenants that except for Collateral delivered
to BBT or its duly authorized agent CTB will not store, use or locate any of the
Collateral at any place other than the location set forth on Exhibit A hereto
unless otherwise agreed to by BBT in writing.
Section 4. CTB Name. CTB represents and warrants that it has not used or
conducted business under any name other than On Stage Entertainment, Inc. and
does not propose to use or conduct business under any name other than On Stage
Entertainment, Inc. and/or Country Tonite Branson, LLC or Country Tonite in the
future. Prior to use of any other names, CTB shall notify BBT in writing at
least 30 days prior to the use of any such proposed new, changed, modified or
assumed name.
Section 5. Perfection of Security Interest. CTB will join with BBT in
executing one or more financing statements pursuant to the UCC adopted by the
States of Nevada, Missouri and such other states in which BBT reasonably
believes a financing statement is necessary to protect its interests hereunder
or other notices appropriate under applicable law in forms satisfactory to BBT.
CTB hereby authorizes BBT to take all action (including, without limitation, the
filing of any UCC financing statements or amendments thereto without the
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signature of the CTB) which BBT may deem necessary or desirable to perfect or
otherwise protect the liens and security interests created hereunder and to
obtain the benefits of this Security Agreement.
All appropriate steps on the part of CTB requisite to the perfection of the
security interest of BBT in and to all property and interests which by the terms
hereof are to be subjected to the lien and security interest of this Security
Agreement have been or will be taken by CTB.
In the event that any state which now or hereafter has jurisdiction over
any collateral, enacts, in whole or in part, revised Article 9 of the Uniform
Commercial Code (1998 Official Text as approved by the American Law Institute
and the National Conference of Commissioners on uniform state laws)("Revised
Article 9"), the grant of security interest in this Security Agreement shall be
deemed to include all items or types of collateral reclassified by Revised
Article 9 into the items or types of collateral described therein, and with
respect to this Security Agreement shall specifically include all accounts,
deposit accounts, commercial tort claims, health-care-insurance receivables,
letter of credit rights, electronic chattel paper and all supporting
obligations, as such terms are defined in Revised Article 9. Borrower hereby
authorizes BBT to file any initial financing statement and amendment statement,
with or without Borrower's signature as permitted by Revised Article 9, in order
to perfect or maintain perfection of the security interests granted by this
Security Agreement.
Section 6. General Covenants. CTB shall:
6.1 upon the occurrence and continuation of an Event of Default
(hereinafter defined), furnish BBT from time to time, at its request, written
statements further identifying and describing the Collateral in such detail as
it may reasonably require;
6.2 advise BBT promptly, in sufficient detail, of any substantial change in
the Collateral, and of the occurrence of any event which would have an adverse
material effect on the value of the Collateral or on BBT's security interest
therein including, without limitation, any Event of Default or potential Event
of Default;
6.3 promptly execute and deliver to BBT such further agreements,
instruments, documents, certificates and assurances and take such further action
as BBT may from time to time reasonably deem necessary to perfect, protect or
enforce the security interests of BBT in the Collateral or otherwise to
effectuate the intent of this Security Agreement;
6.4 comply fully with the terms and provisions of the Notes and any other
agreements now or hereafter existing or entered into between CTB and BBT;
6.5 deliver to BBT promptly upon its request copies of all certificates,
schedules, lists, invoices, bills of lading, documents of title, original
purchase orders, receipts, chattel paper, instruments or other items relating to
any of the Collateral to the extent CTB has possession or control of same;
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6.6 make, stamp or record such entries or legends on any of the CTB's books
and records relating to the Collateral as BBT shall reasonably request from time
to time, including without limitation, notation of the security interest of BBT
on any certificates of title or other evidence of ownership outstanding with
respect thereto;
6.7 defend the Collateral at its own expense against any and all claims or
demands of third parties at any time claiming an interest in any of the
Collateral;
6.8 notify BBT in the event of a material loss or damage to the Collateral
or of any material adverse change in CTB's financial condition, business affairs
or with respect to any of the Collateral, or of any other occurrence which may
materially adversely affect the security interest of BBT therein;
6.9 all expenses incurred with respect to the purchase, delivery, use,
repair or other handling of the Collateral, as well as all taxes which will or
may become a lien on the Collateral, promptly when due; and
6.10 sell, exchange, lease or otherwise dispose of any of the Collateral
without the prior written consent of BBT except with respect to the sale of
inventory in the ordinary course of business; permit any liens or security
interests to attach to any of the Collateral; or permit any of the Collateral to
be levied upon under any legal process; or permit anything to be done that may
impair the security intended to be afforded by this Security Agreement. The
inclusion of proceeds in this Security Agreement does not authorize CTB to sell,
dispose of or otherwise use the Collateral in any manner not specifically
authorized by this Security Agreement.
Section 7. Affirmative Covenants.
Until payment in full of the Debt to BBT, CTB covenants and agrees that,
unless BBT consents in writing:
7.1 Repayment of Obligations. CTB will repay the Debt according to the
terms of this Security Agreement and the Notes.
7.2 Performance Under this Agreement, the Asset Purchase Agreement and the
Notes. CTB will perform all obligations required to be performed by it under the
terms of this Security Agreement, the Asset Purchase Agreement and the Notes and
any other agreements now or hereafter existing or entered into between CTB and
BBT.
7.3 Information. Upon BBT's written request, CTB shall provide BBT with
such information about the Collateral or the financial condition and operations
of CTB as BBT may from time to time reasonably request.
7.4 Corporate Existence and Maintenance of Properties. CTB shall maintain
and preserve its corporate existence and all rights, privileges and franchises
now enjoyed; and CTB shall conduct its business in an orderly, efficient and
customary manner, keep its properties in good working order and condition, and
from time to time make all needed repairs to, renewals of
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or replacements of its properties (except to the extent that any of such
properties is obsolete or is being replaced) so that the efficiency of such
property shall be fully maintained and preserved. CTB shall file or cause to be
filed in a timely manner all reports, applications, estimates and licenses which
shall be required by any governmental authority and which, if not timely filed,
would have a material adverse effect on CTB or the Collateral.
7.5 Payment of Indebtedness; Performance of Other Obligations. CTB shall
pay all indebtedness for borrowed money at maturity, all taxes, assessments and
other governmental charges which may be levied or assessed upon CTB or the
Collateral when due and all other obligations in accordance with customary trade
practices, and comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official applicable to the
Collateral, or any part thereof or to the operation of CTB's business. CTB shall
also observe and remain in compliance with all laws, ordinances, governmental
rules and regulations to which it is subject and obtain all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or the conduct of its business, and all covenants and conditions
of all agreements and instruments to which CTB is a party, which failure to
comply or failure to obtain would materially and adversely affect the business,
prospects, profits, properties or condition (financial or otherwise) of CTB.
7.6 Maintenance of Insurance. CTB shall maintain and pay for insurance upon
all Collateral, wherever located, covering casualty, hazard, public liability
and such other risks and in such amounts and with such insurance companies as
shall be reasonably satisfactory to BBT, and deliver such certificates of
insurance to BBT, naming BBT as loss payee and additional insured thereunder.
Each policy of insurance shall contain a clause requiring the insurer to give
not less than thirty days prior written notice to BBT before any cancellation of
the policy for any reason whatsoever. CTB hereby directs all insurers under such
policies of insurance on the Collateral to pay all proceeds payable thereunder
directly to BBT. CTB hereby irrevocably makes, constitutes and appoints BBT (and
all officers, employees or agents designated by BBT) as CTB's true and lawful
attorney (and agent-in-fact) for the purpose of making, settling, and adjusting
claims under such policies of insurance, endorsing the name of CTB on any check,
draft, instrument or other item or payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance. If CTB fails to obtain and maintain any of the policies
of insurance or to pay any premium in whole or in part, then BBT may, at CTB's
expense, without waiving or releasing any obligation or default by CTB
hereunder, procure the same, but shall not be required to do so. Not less than
thirty days prior to the expiration date of the insurance policies required to
be maintained by CTB hereunder, CTB shall deliver to BBT one or more
certificates of insurance evidencing renewal of the insurance coverage required
hereunder plus such other evidence of payment of premiums therefore as BBT may
reasonably request.
7.7 Inspection. CTB shall permit employees or agents of BBT at any
reasonable time to inspect CTB's properties, and to examine or audit CTB's
books, accounts and records and make copies and memoranda of them and to discuss
the affairs, finances and accounts of CTB with its officers, employees and
independent public accountants (and by this provision CTB authorizes said
accountants to discuss the finances and affairs of CTB), all at such reasonable
times and as often as may be reasonably requested.
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Section 8. Fixtures. It is the intent of CTB and BBT that none of the
Collateral is or shall be fixtures, as that term is used or defined in Article 9
of the UCC adopted by the States of Missouri and Nevada. Nevertheless, if the
Collateral or any part thereof is or is to become attached or affixed to any
real estate, CTB will, upon request, furnish BBT with a disclaimer or
subordination in form satisfactory to BBT from all persons having an interest in
the real estate to which the Collateral is attached or affixed, together with
the names and addresses of the record owners of, and all other persons having an
interest in, and a general description of, such real estate.
Section 9. Events of Default. Any one or more of the following events shall
constitute an Event of Default hereunder:
9.1 CTB fails to observe and perform any monetary covenant, condition or
agreement of this Security Agreement, the Asset Purchase Agreement or the Notes
as and when the same is due and payable;
9.2 CTB fails to observe and perform any non-monetary covenant, condition
or agreement of this Security Agreement and continuance of such failure for more
than twenty days after written notice of such failure has been given to CTB by
BBT;
9.3 any default or event of default under the Notes shall occur and be
continuing;
9.4 any default or event of default under the Asset Purchase Agreement
shall occur and be continuing and shall not have been cured within any
applicable cure period;
9.5 any warranty, representation or other statement by or on behalf of CTB
contained in this Security Agreement, the Asset Purchase Agreement or the Notes
is false, misleading or incorrect in any material respect as of the date made or
during the term hereof;
9.6 any direct or indirect, voluntary or involuntary mortgage, pledge,
hypothecation, encumbrance, sale, lease, assignment or other transfer of the
Collateral or any portion thereof or any interest therein made or suffered by
CTB, unless made with the prior written consent of BBT or expressly permitted by
the terms of this Security Agreement;
9.7 CTB shall suspend or discontinue its business, or shall make an
assignment for the benefit of creditors or a composition with creditors, shall
be unable or admit in writing its inability to pay its debts as they mature,
shall file a petition in bankruptcy, shall become insolvent (howsoever such
insolvency may be evidenced), shall be adjudicated insolvent or bankrupt, shall
petition or apply to any tribunal for the appointment of any receiver,
liquidator or trustee of or for it or any substantial part of its property or
assets, shall commence any proceedings under any bankruptcy, reorganization,
arrangement, readjustment of debt, receivership, dissolution or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect; or there
shall be commenced against CTB any such proceeding which shall remain
undismissed for a period of sixty days or more, or any order, judgment or decree
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approving the petition in any such proceeding shall be entered; or CTB shall by
any act or failure to act indicate its consent to, approval of or acquiescence
in, any such proceeding or in the appointment of any receiver, liquidator or
trustee of or for it or any substantial part of its property or assets, or shall
suffer any such appointment to continue undischarged or unstayed for a period of
sixty days or more; or CTB shall take any action for the purpose of effecting
any of the foregoing; or
9.8 there shall occur any material uninsured damage to or loss, theft, or
destruction of any of the Collateral.
Section 10. Rights and Remedies on Default. In the event of the occurrence
and continuation of any Event of Default hereunder, BBT shall at any time
thereafter have the right, with or without notice to CTB, as to any or all of
the Collateral, by any available judicial procedure, or without judicial
process, to take possession of the Collateral and without liability for trespass
to enter any premises where the Collateral may be located for the purposes of
taking possession of or removing the Collateral, and generally, to exercise any
and all rights afforded to a secured party under the UCC adopted by the States
of Missouri or Nevada or other applicable law. Without limiting the generality
of the foregoing, CTB agrees that BBT shall have the right to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, either at public or
private sale, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such terms and conditions, all as BBT in
its sole discretion may deem commercially reasonable, and it shall have the
right to purchase all or any part of the Collateral at any such public sale;
and, if any Collateral shall require rebuilding, repairing, maintenance,
preparation, or is in process or other unfinished state, BBT shall have the
right to do such rebuilding, repairing, preparation, processing or completion of
manufacturing, for the purpose of putting the Collateral in such saleable or
disposable form as it shall deem reasonably appropriate and the costs and
expenses of the same shall be and become part of the Debt. At BBT's request, CTB
shall assemble the Collateral and make it available to BBT at reasonable places
which BBT shall select, whether at CTB's premises or elsewhere, and make
available to BBT without rent, all of CTB's premises and facilities for the
purpose of BBT's taking possession of, removing or putting the Collateral in
saleable or disposable form. The proceeds of any such sale, lease or other
disposition of the Collateral shall be applied first, to the expenses of
retaking, holding, storing, processing and preparing for sale, selling, and the
like, and to the reasonable attorneys' fees and legal expenses incurred by BBT
and then to the satisfaction of amounts due under the Notes, the Asset Purchase
Agreement and this Security Agreement and to the payment of any other amounts
required by applicable law, and any surplus proceeds shall be paid or delivered
by BBT to whomever is legally entitled to them. If, upon the sale, lease or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which BBT is entitled hereunder, CTB will be liable for the
deficiency, together with interest thereon, at the rate prescribed in the Notes
and the reasonable fees of any attorneys employed by BBT to collect such
deficiency. To the extent permitted by applicable law, CTB waives all claims,
damages and demands against BBT arising out of the repossession, removal,
retention or sale of the Collateral.
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Section 11. Costs and Expenses. Any and all fees, costs and expenses, of
whatever kind or nature, including the reasonable attorneys' fees and legal
expenses incurred by BBT in connection with the enforcing, foreclosing,
retaking, holding, storing, processing, selling or otherwise realizing upon the
Collateral and BBT's security interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or related to the transactions to which this Security
Agreement relates, shall borne and paid by CTB on demand by BBT and until so
paid shall be added to the principal amount of the Debt and shall bear interest
at the applicable rates provided in the Notes.
Section 12. Power of Attorney. CTB authorizes BBT upon the occurrence and
continuation of an Event of Default hereunder, and does hereby make, constitute
and appoint BBT and any officer or agent of BBT with full power of substitution,
as CTB's true and lawful attorney-in-fact, with power, in its own name or in the
name of CTB, to endorse any notes, checks, drafts, money orders, or other
instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into possession
of BBT; to pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or against the Collateral; to
demand, collect, receipt for, compromise, settle and xxx for monies due in
respect of the Collateral; and, generally, to do, at BBT's option and at CTB's
expense, at any time, or from time to time, all acts and things which BBT deems
reasonably necessary to protect, preserve and realize upon the Collateral and
BBT's security interests therein in order to effect the intent of this Security
Agreement and the Notes, all as fully and effectually as CTB might or could do;
and CTB hereby ratifies all that said attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney shall be irrevocable for the term
of this Security Agreement and thereafter as long as any of the Debt shall be
outstanding.
Section 13. Notices. Any notice required hereunder shall be deemed duly
given if deposited in the mails, postage prepaid and sent by certified or
registered mail or delivered by a nationally recognized overnight delivery
service, addressed to BBT and to CTB at the respective addresses specified
herein or at such other address as such party shall have specified by notice
given in the same manner.
Section 14. Other Security. To the extent that the Debt is now or hereafter
secured by property other than the Collateral or by the guaranty, endorsement or
property of any other person, firm, corporation or other entity, then BBT shall
have the right in its sole discretion to pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way modifying or
affecting any of its rights and remedies hereunder.
Section 15. Modifications to Notes. CTB acknowledges that the Notes may be
extended and/or modified from time to time. Any such extension or modification
shall not require an amendment to this Security Agreement. All references in
this Security Agreement to the Notes shall be deemed to refer to such documents
as they may be modified or extended from time to time.
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Section 16. Miscellaneous.
16.1 Beyond the safe custody thereof, BBT shall have no duty as to the
collection of any Collateral in its possession or control or in the possession
or control of any agent or nominee of BBT or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.
16.2 No course of dealing between CTB and BBT nor any failure to exercise,
nor any delay in exercising, on the part of BBT any right, power or privilege
hereunder, under the Notes or under any other document or agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
16.3 All of BBT's rights and remedies with respect to the Collateral,
whether established hereby, by the Notes or by any other agreements, instruments
or documents or by law shall be cumulative and may be exercised singly or
concurrently.
16.4 The provisions of this Security Agreement are severable, and if any
clause or provisions shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Security Agreement in any jurisdiction.
16.5 This Security Agreement is subject to modification only by a writing
signed by the parties hereto.
16.6 The benefits and burdens of this Security Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties.
16.7 This Security Agreement may be executed in any number of counterparts,
each of which, when so executed and delivered, shall be an original; but such
counterparts shall together constitute but one and the same Security Agreement.
16.8 This Security Agreement shall be governed as to validity, construction
and performance by the laws of the State of Missouri.
16.9 Any capitalized term which is not specifically defined in this
Security Agreement shall have the meaning ascribed to such term in the Asset
Purchase Agreement.
16.10 This Security Agreement contains the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior or contemporaneous agreements with respect to such
subject matter.
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Section 17. Term of Agreement. This Security Agreement shall continue in
full force and effect, and be binding upon CTB, until all of the Debt has been
fully paid and performed and such payment and performance has been acknowledged
in writing by BBT whereupon this Security Agreement shall terminate.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Security Agreement as of the day and year first above written.
Country Tonite Branson, LLC
By:________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
BounceBack Xxxxxxxxxxxx.xxx, Inc.
By:________________________________
Name: Xxxx X. Xxxxxx
Title: President
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EXHIBIT A
Location of Collateral
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