STATE OF NORTH CAROLINA )
)
COUNTY OF MECKLENBURG )
SECURITY AGREEMENT
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Security Agreement between SPORTS IMAGE, INC., a North Carolina
corporation (herein referred to as "Secured Party") and SII ACQUISITION, INC.
(herein referred to as "Debtor").
W I T N E S S E T H:
1. Collateral. The collateral of this Security Agreement is all of
Debtor's right, title, and interest in the assets, properties, rights and
goodwill transferred by Secured Party to Debtor pursuant to an Asset Purchase
Agreement dated November 7, 1996 (the "Asset Purchase Agreement") among Debtor,
Secured Party, and ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, including but not limited to, (i)
all assets and properties, tangible or intangible, real, personal or mixed, (ii)
notes and accounts receivable; (iii) computer equipment; (iv) office and
warehouse equipment; (v) vehicles; (vi) reserves; (vii) prepayments; (viii)
inventories; (ix) deposits; (x) bank accounts; (xi) cash and securities; (xii)
claims and rights under contracts, agreements, licenses, and leases; (xiii) all
computer programs, data bases, records, systems, processes, and all know how,
information, and trade secrets relating thereto; (xiv) the name "Sports Image"
and (xv) and all books and records; together with any additions, replacements,
proceeds, and proceeds of proceeds thereof (the "Collateral").
2. Debtor's Obligations.
A. Obligation to Pay. This Agreement secures the payment and
performance of Debtor's obligations under the Promissory Note for the purchase
of such Collateral described in paragraph 1 above pursuant to this Security
Agreement and in accordance with the terms of the Asset Purchase Agreement. The
obligations to pay money as set forth herein and the additional obligations in
paragraph B below are hereinafter referred to as "Debtor's Obligations."
B. Additional Obligations.
(1) Protection of Collateral. The Collateral:
(a) Will be used or sold in the ordinary
course of business by Debtor unless Secured
Party consents in writing to another use,
and
(b) Will not be misused or abused, wasted or
allowed to deteriorate, except for the
ordinary wear and tear, and
(c) Will be insured until this Security
Agreement is terminated under such insurance
policies and in such amounts as Secured
Party may reasonably require and with said
policies indicating insurance proceeds
payable to both Secured Party and Debtor as
their interests may appear. In the event of
a loss, the Secured Party may, at its
discretion, use the proceeds therefrom to
replace the Collateral or
apply said proceeds against the Debtor's
obligation arising from the transaction
contemplated herein.
(d) Will be kept at Debtor's or Secured
Party's present business location where
Secured Party may inspect it at reasonable
times after 48 hours prior notice except for
its temporary removal in connection with its
ordinary use or unless Debtor notifies
secured party in writing and Secured Party
consents in writing in advance of its
removal to another location.
(2) Protection of Security Interest.
(a) The noninventory Collateral will not be
sold, leased, transferred, conveyed,
assigned, or otherwise disposed of except in
the ordinary course (i.e. obsolescence) or
be subject to any unpaid charge, including
but not limited to, taxes, assessments,
governmental charges, except liens in favor
of Secured Party or to which the Collateral
was subject when transferred to Debtor, or
to any subsequent interest of a third party
created or suffered by Debtor voluntarily or
involuntarily, unless the Secured Party
consents in advance in writing to such
charge, transfer, disposition or subsequent
interest;
(b) Debtor will sign and execute along with
Secured Party such financing statements or
other documents or procure such documents,
and pay all reasonable connected costs as
may be reasonably necessary to protect or
defend title and the security interest
created under this Security Agreement
against the rights or interest of third
persons, and
(c) Debtor will reimburse Secured Party for
reasonable costs associated with any action
to remedy a default which Secured Party
elects pursuant to the terms hereof,
including but not limited to reasonable
attorneys' fees, costs of retaking, holding
and preparing the Collateral for sale,
insurance, and such other expenses as
Secured Party may reasonably incur in the
liquidation of said Collateral in a
commercially reasonable manner. Should the
proceeds from the sale of the Collateral be
insufficient to cover the obligations of the
Debtor and the costs incurred in such
liquidation, the Debtor shall forthwith pay
any deficiency. Should the proceeds from
such liquidation exceed the liabilities of
the Debtor, then, in any event, the Debtor
shall be entitled to any surplus funds
arising from said liquidation.
(d) Debtor will give Secured Party full and
prompt written notice of any default or any
situation, which would constitute a default
but for a lapse of time. Debtor will also
serve Secured Party promptly notice of any
legal, condemnation, forfeiture, or
foreclosure
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proceeding against or regarding said Debtor,
its property or the Collateral.
3. Default. The occurrence of any of the following shall constitute an
event of default:
A. Any representation or warranty made herein shall, at the
time made, be false or misleading in any material respect;
B. Failure to pay any principal or interest under the
Promissory Note when the same shall be due and payable or within three days
thereafter.
C. Debtor shall voluntarily file a petition under the Federal
Bankruptcy Act, as such Act may from time to time be amended, or under any
similar or successor Federal statute relating to bankruptcy, insolvency,
arrangements or reorganizations, or under any state bankruptcy or insolvency
act, or file an answer in an involuntary proceeding admitting insolvency or
inability to pay debts, or if Debtor shall fail to obtain a vacation or stay or
voluntary proceedings brought for the reorganization, dissolution, or
liquidation of Debtor, or if Debtor shall be adjudged a bankrupt, or if a
trustee or receiver shall be appointed for Debtor or a property, or if the
property shall become subject to the jurisdiction of a Federal bankruptcy court
or similar state court, or if Debtor shall make an assignment for the benefit of
Debtor's creditors, or if there is an attachment, execution, or other judicial
seizure of any portion of Debtor's assets and such seizure is not discharged
within thirty (30) days;
D. Final judgment for the payment of money in excess of
$10,000 shall be rendered against the Debtor, and the same shall remain
undischarged and shall not have been effectively stayed for a period of thirty
(30) days.
4. Secured Party's Rights and Remedies.
A. Secured Party may assign this Security Agreement only if
the indebtedness under the Promissory Note is assigned simultaneously to the
same person or entity, and
(1) If Secured Party does assign this Security
Agreement, the Assignee shall be entitled, upon
notifying the Debtor, to performance of all of
Debtor's obligations and agreements hereunder, and
Assignee shall be entitled to all of the rights and
remedies of Secured Party under this paragraph, and
B. Upon Debtor's default, Secured Party may exercise its
rights of enforcement under the Uniform Commercial Code in force in North
Carolina at the date of this Security Agreement.
5. Rights and Remedies of Debtor. Debtor shall have all of the rights
and remedies before or after default provided in Article 9 of the Uniform
Commercial Code in force in North Carolina at the date of this Security
Agreement. Debtor shall not, however, assign any and all of its interest in the
Security Agreement without the prior written consent of the Secured Party, which
consent shall not be unreasonably withheld.
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6. Additional Agreements and Affirmations.
A. Debtor Agrees and Affirms.
(1) That information supplied and statements made by
it in the negotiation of the purchase and sale of
Collateral and any financial or credit statement
prepared by it or on its behalf or application for
credit prior to this Security Agreement are true and
accurate, and
(2) That the address of Debtor's place of business is
that appearing below.
(3) That the Secured Party shall have a valid
security interest in the Collateral.
B. Mutual Agreements.
(1) "Debtor" and "Secured Party" as used in this
Security Agreement include the heirs, executors and
administrators, successors or assigns of those
parties.
(2) Except as herein otherwise provided the law
governing this Secured Transaction shall be that of
the State of North Carolina in force at the date of
this Security Agreement.
(3) Neither failure or delay on the part of the
Secured Party nor partial exercise of any power,
right or privilege granted hereunder shall be
construed as a waiver of the same power, right or
privilege held by the Secured Party. This Agreement
shall not be modified except by written consent of
the parties hereto. Debtor hereby waives protest of
all instruments included or evidencing any liability
by the Debtor, and any and all other demands
whatsoever, whether or not relating specifically to
such instruments.
(4) If any part, term or condition of this Agreement
shall be determined by the Court to be invalid or
unenforceable, all other provisions nevertheless
shall remain valid and effective as it is the
intention of the parties that each provision hereof
is being agreed upon separately.
(5) This Agreement may not be changed or terminated
orally. Any attempt to change, terminate or waive any
provision hereof shall not be binding unless reduced
to writing and executed by the parties against whom
the same is sought to be enforced. All notices
required by the provisions of this Agreement shall be
delivered to the parties by certified mail, return
receipt requested, at the addresses as set forth
below, or such other addresses as the parties may
hereafter designate:
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To Secured Party: Sports Image, Inc.
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Gray, Layton, Drum, Kersh,
Solomon, ▇▇▇▇▇▇ & ▇▇▇▇, P.A.
P.O. Box 2636
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To Debtor: Action Performance Companies, Inc.
SSI Acquisition, Inc.
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the 7th day of November, 1996.
SPORTS IMAGE, INC.
By:_______________________________
Title:____________________________
SSI ACQUISITION, INC.
By:_______________________________
Title:____________________________
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