Exhibit 10.114
SUBORDINATED SECURITY AGREEMENT
SUBORDINATED SECURITY AGREEMENT dated as of November 11, 1998, by and
between PLAY CO. TOYS & ENTERTAINMENT CORP., a Delaware corporation (the
"Debtor") and XXXXXXXX INDUSTRIES, LTD. (hereinafter called the "Secured
Party").
RECITALS
This Subordinated Security Agreement is executed and delivered by
Debtor to Secured Party for the purpose of securing all Obligations of Debtor to
Secured Party for any sums due or to become due to Secured Party from Debtor,
now or hereafter under a certain 5% Secured Subordinated Debenture dated of even
date hereof in the principal sum of $500,000 (the "Debenture") and granting a
security interest to Secured Party in the Collateral Security (as hereafter
defined). Capitalized terms not otherwise defined herein shall have the meanings
given to them under the Note.
AGREEMENT
In consideration of the foregoing and the mutual promises, covenants, terms
and conditions contained herein, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. Grant of Security Interest. As security for the full payment and
performance of Debtor to Secured Party of all Obligations arising out of the
Debenture (the "Obligation"), Debtor hereby grants to Secured Party a lien upon
and a continuing security interest subject and subordinate only to Permitted
Senior Liens including the lien of Finova Capital Corporation in:
(a) All inventory now owned or hereafter acquired by Debtor, wherever
located (as defined in the Finova Loan and Security Agreement);
(b) All accounts, including accounts receivable, contract rights and other
rights to the payment of money, now or hereafter existing, now owned or
hereafter acquired by Debtor ("Accounts"), all cash and deposit accounts
including deposits with Banks in connection with credit card accounts;
(c) All furniture, fixtures, equipment and other tangible personal property
in all of its forms, wherever located, now or hereafter existing, now owned or
hereafter acquired by Debtor;
(d) All right, title and interest of Debtor as licensee under any license
agreements now existing or hereafter acquired subject to the terms thereof;
(e) To the extent not otherwise included in the Collateral, all books,
correspondence, credit files, customer lists, computer software, data bases,
records and other documents relating to the above-described types of property,
including, without limitation, all tapes, cards, runs and other papers,
documents and computer storage media in the possession or control of any of the
undersigned, or any affiliate or subsidiary of the undersigned, or any computer
service bureau, wherever any of the foregoing may be located and whether the
same are owned by the undersigned on the date hereof or are hereafter acquired
or created by the undersigned;
(f) To the extent not otherwise included in the Collateral, all rights in,
to and under policies of insurance of every kind and nature covering any
Collateral, including, without limitation, claims or rights to payment and
proceeds heretofore or hereafter arising therefrom with respect to the
above-described types of property, whether the same are owned by the undersigned
on the date hereof or are hereafter acquired or created;
(g) To the extent not otherwise included in the Collateral, including
general intangibles (as defined in the Delaware Uniform Commercial Code)
including trademarks, tradenames, tax refunds, contract rights, trade secrets,
licensing agreements, royalty payments, copyrights, service marks, logos,
goodwill, rights of indemnification, and all other personal property, of any
kind or nature of any of the undersigned, now or hereafter existing, now owned
or hereafter acquired or created;
(h) To the extent not otherwise included in the Collateral, all real
property fixtures and rental income, wherever located, now or hereafter
existing, now owned or hereafter acquired; and
(i) To the extent permitted under any leases under which the Debtor is a
tenant, all interest of the Debtor in such leases and the proceeds of the sale
thereof;
(j) All substitutions, proceeds and products of any and all of the
foregoing Collateral (including leases, subleases and license agreements),
proceeds from the sale thereof, cash and non-cash, and all cash collateral now
owned or hereafter acquired by Debtor and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the payee
thereof), all payment paid pursuant to settlements, judgments, or compromises
entered or entered into as a result of disputes or causes of action to which
Debtor is a party, or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing Collateral.
All of the above described property (a-j) whether now owned, now due, or in
which the Debtor has an interest, or hereafter, at any time in the future,
acquired, arising, to become due, or in which the Debtor obtains an interest.
All products, proceeds, and accessions of all of the above described
property.
The property described in paragraphs (a) through (j) above and the proceeds
thereof are hereinafter referred to as the "Collateral Security".
2. Representations. The Debtor hereby represents and warrants to Secured
Party as follows:
(a) To the best of its knowledge, there are no liens, pledges, security
interests or other encumbrances on any of the Collateral Security which are
prior to the security interests granted hereunder, except as set forth on
Exhibit A-1 (Permitted Senior Liens).
(b) As to the Collateral Security: (i) the Collateral Security is presently
located at Debtor's locations as set forth on Exhibit B and Debtor will notify
Secured Party in writing thirty (30) days prior to the movement of the
Collateral Security to any new location; (ii) Debtor will at its own cost and
expense keep the Collateral Security in good repair (reasonable wear and tear
excepted); (iii) Debtor will not sell, exchange, lease, or otherwise dispose of
the Collateral Security except in the ordinary course of business; (iv) Debtor
will insure the Collateral Security and if Debtor fails to do so, Secured Party
may procure such insurance and charge the cost to Debtor; and (v) Debtor shall
comply in all material respects with the terms and conditions of any leases
covering the premises where the Collateral Security is located and any orders,
ordinances, laws or statutes of any state or municipal or governmental
department having jurisdiction with respect to such premises or the conduct of
business thereon; the failure to comply with which would have an Adverse Effect.
(c) The Debtor's places of business are presently located as set forth on
Exhibit B, and Debtor will notify Secured Party promptly of any change in the
location of the Debtor's places of business.
3. Covenants.
3.1 Debtor agrees to take such further action and to execute such
additional agreements, documents and instruments as Secured Party shall
reasonably request to effectuate or confirm the security interests granted
hereunder. Secured Party will at its own expense from time to time execute, file
and record such financing statements and documents and take such action,
including without limitation segregation of records, as Secured Party shall
reasonably determine to create and maintain the priority and status of the
security interests created hereunder. Debtor will defend the Collateral Security
against dilution and all claims and demands of all persons and will keep the
Collateral Security free and clear of all attachments, levies, taxes, liens,
security interests and encumbrances of any kind and nature except for Permitted
Senior Liens.
3.2 During the term of this agreement and until the Obligations have been
paid in full pursuant to the Note, the Debtor shall not grant any security
interest in any Collateral to anyone other than Secured Party, FINOVA or other
Permitted Senior Liens nor permit any liens to be outstanding except as
aforesaid. The Debtor will not change its name, identity or structure without
giving Secured Party thirty (30) days prior written notice thereof, and shall,
in connection with any such change, execute and deliver to Secured Party all
such additional agreements, financing statements and other documents as Secured
Party shall reasonably require. This provision shall not be deemed to constitute
consent to any change of identity or structure.
4. Remedies. If the Obligations have become due and payable in full under
this Agreement or the Debenture, and all notice periods have expired, the
Secured Party itself or by its attorney may exercise with respect to the
Collateral Security all of the rights and remedies set forth in clauses (a)
through (f) below or elsewhere herein or otherwise available to a secured party
under the applicable provisions of the Uniform Commercial Code or any other
applicable law (including, without limitation, the right to appoint a receiver
to take possession of the Collateral Security and, without notice to or demand
upon any Debtor, to make such payments and do such acts as Secured Party
considers necessary or reasonable to protect its security interest in the
Collateral Security) and (in conjunction with or in addition to such rights and
remedies) may, to the extent permitted by applicable law, with or without
process of law and without liability for loss or damage, sell or dispose of all
or any part of the Collateral Security, free and clear of all claims, as
hereinafter provided. The following provisions shall govern the right of Secured
Party to so realize upon the Collateral Security, in addition to any rights and
remedies available at law or in equity or otherwise provided under this
agreement:
(a) Marshaling, etc. Secured Party shall not be required to make any demand
upon or pursue any of its rights or remedies against Debtor or others with
respect to the payment or performance of the Obligations secured hereby, or to
pursue or exhaust any of its rights or remedies with respect to any of the
Collateral Security. Secured Party shall not be required to marshal the
Collateral Security or secured obligations or to resort to the Collateral
Security in any particular order and all of its rights hereunder shall be
cumulative. To the extent not prohibited by applicable law, Debtor hereby agrees
to waive and relinquish the benefit and advantage of, and hereby covenants not
to assert against Secured Party, any present or future valuation, stay,
appraisement, extension or redemption laws which, but for this provision, might
be applicable to any sale or assignment made under any judgment, order or decree
of any court, or privately under the power of sale and assignment conferred by
this agreement or in respect of any of the Collateral Security. Without limiting
the generality of the foregoing, Debtor hereby agrees that it will not invoke or
utilize and hereby waives any law which may delay or impede the enforcement of
Secured Party's rights under this agreement. In addition, to the extent not
prohibited by applicable law, Debtor hereby waives any right to prior notice
(except to the extent expressly provided in this agreement) or judicial hearing
in connection with the taking possession or the disposition of any of the
Collateral Security. Debtor waives any obligation of Secured Party to post any
bond or security in order to enforce any rights or remedies required hereunder
notwithstanding any provisions of law to the contrary.
(b) Sales and Assignments of the Collateral Security. Any item of
Collateral Security may be sold or assigned for cash or other value in any
number of lots at public or private sale without demand, advertisement or notice
(excepting only that Secured Party shall give Debtor ten (10) days' prior
written notice of the time and place of any public sale or of the time after
which a private sale may be made, which notice Debtor hereby agrees is
reasonable). At any sale or sales of the Collateral Security (except at private
sale) Secured Party may bid for and purchase the whole or any part of the
property and rights so sold and upon compliance with the terms of such sale may
hold, exploit and dispose of such property and rights without further
accountability to Debtor except for the proceeds of such sale or sales. Debtor
will execute and deliver, or cause to be executed and delivered, such
instruments, documents, assignments, waivers, certificates and affidavits and
supply or cause to be supplied such further information and take such further
action as Secured Party shall require in connection with such sale or
assignment.
(c) Application of Proceeds. The proceeds of all sales and collections, and
any other monies the application of which is not otherwise herein provided for,
shall be applied, at the election of the Secured Party, as follows:
i) First, to the payment of the costs and expenses of such sale or sales
and collections and the reasonable expenses of Secured Party and of its counsel;
ii) Second, any surplus then remaining to principal then due and payable;
iii) Third, to the payment of any other amounts required by applicable law,
including without limitation, Section 9.504(1) (c) of the Uniform Commercial
Code; and
iv) Fourth, any surplus then remaining shall be paid over (subject to the
rights of third parties) to the Debtor or for its account.
(d) (Omitted Intentionally).
(e) Possession and Assembly. Secured Party shall have the right without
posting any bond to take possession of the Collateral Security (and of the
indicia of the Collateral Security, in the case of intangibles) and maintain
such possession on Debtor's premises, or to remove the Collateral Security or
any part thereof to such other premises as Secured Party may desire. Upon
Secured Party's request, Debtor shall assemble the Collateral Security and make
it available to Secured Party. All costs and expenses incurred by Secured Party
in connection with the foregoing shall be charged to Debtor's account, shall be
added to the Obligations and shall be secured by the Collateral Security.
(f) Secured Party's rights and remedies under this agreement and all other
agreements shall be cumulative. Secured Party shall have all other rights and
remedies not inconsistent here with as provided under the Uniform Commercial
Code, by law, or in equity. No exercise by Secured Party of one right or remedy
shall be deemed an election, and no waiver by Secured Party of any default on
Debtor's part shall be deemed a continuing waiver. No delay by Secured Party
shall constitute a waiver, election or acquiescence by it.
Each of the following shall constitute an "Event of Default" hereunder (if
the same is continuing when the event of default declaration notice specified
below is given and when the notice period, if any, specified below expires): the
occurrence or existence of an Event of Default under Debtor's Loan and Security
Agreement with Finova or if (a) the Debtor shall fail to pay when due or
punctually perform any of the Obligations; or (b) any warranty, representation,
or material statement made or furnished to Secured Party by Debtor or on
Debtor's behalf was false in any material respect when made or furnished or
deemed made; or (c) any event shall occur which results in the acceleration of
the maturity of any debt of any Debtor to others,and such event shall have an
Adverse Effect; or (d) any of the Collateral Security shall be lost, stolen or
damaged and such occurrence shall have an Adverse Effect; or (e) there shall be
a levy upon, seizure or attachment of any of the Collateral Security; or (f)
Debtor shall cease operations, be dissolved or terminate its existence; or (g)
the entry of any judgment in excess of $250,000 against the Debtor, which
judgment is not satisfied (if a money judgment) or appealed from (with execution
or similar process stayed) within sixty (60) days of its entry; or (h) any act
by, against, or relating to the Debtor, or its property or assets, which act
constitutes the application for, consent to, or sufferance of the appointment of
a receiver, trustee, or other similar fiduciary, pursuant to Court action or
otherwise, over all, or any part of the Debtor's property; the granting of any
trust mortgage or execution of an assignment for the benefit of the creditors of
the Debtor, or the occurrence of any other voluntary or involuntary liquidation
or extension of debt agreement for the Debtor; or the offering by or entering
into by the Debtor of any composition, extension, or any other arrangement
seeking relief from or extension of the debts of the Debtor, or the initiation
of any other judicial or non-judicial proceeding or agreement by, against, or
including the Debtor which seeks or intends to accomplish a reorganization or
arrangement generally with creditors; or (i) the entry of an order for relief or
similar order with respect to the Debtor in any proceeding pursuant to the
Bankruptcy Code or any other federal bankruptcy law; the filing of any
complaint, application or petition against the Debtor initiating any matter in
which the Debtor is or may be granted any relief from the debts of the Debtor
pursuant to the Bankruptcy Code or any other insolvency statute or procedure,
which complaint, application, or petition is not timely contested by the Debtor
or, if so timely contested, is not dismissed within sixty (60) days of when
filed; or (j) failure to perform under and/or committing any breach of this
agreement, the Reimbursement Agreement; or (k) change of control of Debtor; or
(m) sale of all or substantially all of the assets of the Debtors.
No Event of Default shall be deemed to have occurred for items described in
clause (b) above unless and until Secured Party delivers (during the continuance
of such default) a written notice declaring an Event of Default to Debtor. No
Event of Default shall be deemed to have occurred for any other items described
above unless and until Secured Party delivers (during the continuance of such
default) a written notice declaring an Event of Default to the Debtor and such
default is not remedied within five (5) business days thereafter, unless a
longer period is specified above.
5. Miscellaneous.
5.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be effective only if
delivered by hand, or overnight courier, or mailed by prepaid registered or
certified mail, return receipt requested, to the parties at their addresses set
forth herein, or to such other addresses as each party may specify by written
notice to the other from time to time in accordance with the provisions of this
paragraph. Such notices, requests, demands and other communications will be
deemed to have been duly given upon such personal delivery, on the next business
day after being sent by overnight courier or on the date three (3) business days
after the date postmarked by the United States Post Office, as the case may be.
Notices to Play Co.: Play Co. Toys & Entertainment Corp.
000 Xxxxxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxx
Notices to Xxxxxxxx: Xxxxxxxx Industries, Ltd.
X.X. Xxx 000
Xxxxxx, Xxxxxxxxxxx 0000
With Copies to: Todtman, Nachamie, Spizz & Xxxxx, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
5.2 Performance. If the Debtor is in default in the performance or
fulfillment of any of the terms, conditions, covenants or provisions on its part
to be performed or fulfilled hereunder, Secured Party may, at its option,
without waiving its right to enforce this agreement according to its terms
immediately or at any time thereafter and without notice to the Debtor, perform
or fulfill the same or cause the performance or fulfillment of same for the
Debtor's account, and the cost and expense thereof (including reasonable
attorneys fees) shall be added to the Obligations secured hereby and shall be
payable on demand with interest thereon at the Regular Rate.
5.3 Assignment. The terms and provisions of this agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.4 Governing Law. This agreement and all rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware.
5.5 Waiver. No delay or failure on the part of Secured Party in exercising
any right, privilege or option hereunder shall operate as a waiver of such or of
any other right, privilege, remedy or option, and no waiver whatever shall be
valid unless in writing, signed by Secured Party and then only to the extent
therein set forth. No waiver by Secured Party of any Event of Default shall
operate as a waiver of any other Event Of Default or of the same Event of
Default on a future occasion. THE UNDERSIGNED HEREBY WAIVE ANY AND ALL RIGHTS TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED HEREON.
5.6 Termination. At such time as required in the Purchase Agreement the
Debtor shall completely and finally satisfy the Obligations, this Security
Agreement shall terminate and Secured Party shall execute and deliver to Debtor
all assignments, UCC termination statements and other instruments as may be
required to reflect the termination of Secured Party's interest in the
Collateral Security.
5.8 Modification. This agreement cannot be changed or terminated orally.
5.9 Subordination. This Subordinated Security Agreement is subject to that
certain Intercreditor and Subordination Agreement dated as of ________________,
1998 between Secured Party and FINOVA Capital Corporation, as amended from time
to time.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By________________________________________
Its:________________________
XXXXXXXX INDUSTRIES, LTD.
By________________________________________
Its:________________________
90885-1
EXHIBIT "A-1"
PERMITTED SENIOR LIENS
1. FINOVA Capital Corporation.
2. The Xxxxxxx Corporation
3. Multimedia Concepts International, Inc.
4. Amir Overseas Capital Corp.
90885-1
