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Exhibit: 10.12FD
CONTINUING SECURITY AGREEMENT
Name of Borrower: Address of Borrower's
FUNDEX GAMES, LTD. Chief executive office:
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1. GRANT OF SECURITY INTEREST: The undersigned (the "Borrower") grants to
LIBERTY BIDCO INVESTMENT CORPORATION ("BIDCO"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, a continuing
security interest in the Collateral indicated below, to secure the payment
of Borrower's Business Loan Note with Covenants to BIDCO of even date
herewith in the amount of One Million Dollars ($1,000,000.00) ("Note") as
well as all other obligations to BIDCO of any kind including, but not
limited to, the Revenue Participation Agreement of even date, entered into
by Borrower and BIDCO (The Note, Revenue Participation Agreement and all
other obligations to BIDCO are referred to collectively as the
"Liabilities") whenever and however such Liabilities may arise or may have
arisen and whether they are several, joint or joint and several.
Liabilities shall also include all interest, and all reasonable costs,
expenses, and actual attorney fees accruing to or incurred by BIDCO in
collecting the Liabilities or in the protection, maintenance or
liquidation of the Collateral.
2. COLLATERAL: It is expressly agreed by Borrower that BIDCO is granted a
security interest in "All Assets" as defined below or as set forth on the
attached Exhibit "A".
3. DESCRIPTION OF COLLATERAL: The Collateral covered by this agreement is all
of the Borrower's property indicated above and defined below, now owned or
hereafter acquired, created or arising, and which may include, but shall
not be limited to, any items listed on any schedule or list attached. Also
included are all proceeds, including but not limited to stock rights,
subscription rights, dividends, stock dividends, stock splits, or
liquidated dividends, and all cash, accounts, chattel paper and general
intangibles arising from the sale, rent, lease, casualty loss or other
disposition of the Collateral, and any Collateral returned to,
repossessed by or stopped in transit by Borrower.
3.1 "All Assets" of Borrower shall include all tangible and intangible
property of Borrower of any kind, including but not limited to,
"Accounts Receivable", "Inventory", "Equipment," "Instruments" and
"Vehicles".
3.2 "Accounts Receivable" shall consist of Accounts, Chattel Paper and
General Intangibles as those terms are defined in the Uniform
Commercial Code. Also included is any right to a refund of taxes
paid at any time to any governmental entity. Also included are
letters of credit, and drafts under them, given in support of
Accounts Receivable.
3.3 "Inventory" shall consist of all property held at any location by or
for Borrower for sale, rent or lease, or furnished or to be
furnished by Borrower under any contract of service, or raw
materials or work in process and their products, or materials used
or consumed in its business and shall include containers and
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shelving useful for storing. Inventory is presently located at
Borrower's Chief executive office and as set forth on Exhibit "B."
3.4 "Equipment" shall consist of any goods at any time acquired, owned
or held by Borrower at any location primarily for use in its
business, including, but not limited to, machinery, fixtures,
furniture, furnishings and vehicles, and any accessions, parts,
attachments, accessories, additions, substitutions, replacements and
appurtenances to them or intended for use with them. Equipment is
presently located at Borrower's Chief executive office and as set
forth on Exhibit "B."
3.5 "Instruments" shall consist of Borrower's interest of any kind in
any negotiable instrument or security as defined in the Uniform
Commercial Code, or any other writing which evidences a right of
payment of money and is of a type which is, in the ordinary course
of business, transferred by delivery alone or by delivery with any
necessary endorsement or assignment.
3.6 "Vehicles" shall consist of all vehicles owned by Borrower.
4. WARRANTIES: Borrower represents and warrants to BIDCO, that:
4.1 Borrower will pay the Liabilities secured by this Agreement.
4.2 Borrower is the owner of the Collateral free from any liens,
encumbrances or security interests, except for this security
interest and existing liens disclosed to and accepted by BIDCO in
writing or as set forth in or attached to the Business Loan Note
with Covenants of even date executed by Borrower to BIDCO, and will
defend the Collateral against all claims and demands of all persons
at any time claiming any interest in it.
4.3 Except for liens and encumbrances accepted by BIDCO in writing or
referenced in or attached to the Business Loan Note with Covenants
of even date executed by Borrower to BIDCO, Borrower will keep the
Collateral free of liens, encumbrances and other security interests,
maintain it in good repair, not use it illegally and exhibit it to
BIDCO on demand during normal business hours and upon two (2)
business days notice.
4.4 Borrower will keep the Collateral insured at Borrower's expense
against substantial risk of damage, destruction or theft in an
amount at least equal to the lesser of the value of the Collateral
or the unpaid balance of the Liabilities, with loss payable to BIDCO
as its interest may appear, and Borrower will deliver copies of all
such insurance policies to BIDCO upon request.
4.5 Borrower will not sell or offer to sell or otherwise transfer the
Collateral, nor change the location of the Collateral, without the
written consent of BIDCO, except in the ordinary course of business
or except in an amount not exceeding $50,000 in any calendar year.
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4.6 Borrower will maintain its existence and business operations as
presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under normal
terms, and timely pay all taxes, assessments, fees and other
governmental monetary obligations, except as they may be contested
in good faith if they have been properly reflected on its books and,
at BIDCO's request, provide evidence of adequate funds or security
has been pledged to insure payment.
4.7 No financing statement or other security instrument covering all or
any part of the Collateral or any proceeds is on file in any public
office, unless BIDCO has approved that filing, and at BIDCO's
request, Borrower will execute one or more financing statements or
other security instruments in form satisfactory to BIDCO and will
pay the cost of filing them in all public offices wherever filing is
deemed by BIDCO to be desirable.
4.8 Borrower will provide any information that BIDCO may reasonably
request, and will permit BIDCO to inspect and copy its books and
records during normal business hours upon at least two (2) business
days advance notice.
4.9 Borrower's Chief executive office is at the address shown above.
5. DEFAULT: Borrower shall be in default under this security agreement upon
the occurrence of any of the following events:
5.1 Default in the payment of any of the Liabilities or other
obligations owing to BIDCO or any other creditor, other than
unsecured debt incurred during the ordinary course of business, and
such default continues for a period of ten (10) days without cure.
5.2 Failure to observe and perform any of the terms and conditions of
this security agreement and such default continues without cure for
a period of ten (10) days.
5.3 Any warranty, representation, or statement made or furnished to
BIDCO by Borrower is untrue in any material respect.
5.4 If any "reportable event" (as defined in the Employee Retirement
Income Security Act of 1974, as amended) occurs.
5.5 The dissolution, termination of existence, suspension of business,
or insolvency of Borrower; or the appointment of a receiver for any
part of the property of Borrower; or the making of an assignment for
the benefit of creditors by Borrower; or the commencement of
bankruptcy or insolvency proceedings by Borrower; or the
commencement of bankruptcy or insolvency proceedings against
Borrower which are not dismissed within sixty (60) days; or the
Borrower admits in writing its inability to pay its debts as they
mature.
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5.6 The loss, theft, damage or destruction, without insurance, or the
encumbrance, to or of any material part or all of the Collateral.
5.7 The entry, placement or issuance of any judgment, levy, lien, writ
of attachment, writ of garnishment, writ of execution or similar
process, against Borrower or any of Borrower's property unless they
do not have a material adverse impact on Borrower's financial
condition.
5.8 The sale of a material part of the Borrower's assets or business,
outside the ordinary course of business, without BIDCO's written
consent which shall not be unreasonably withheld.
5.9 BIDCO shall deem itself insecure in reasonable good faith believing
that the prospect of payment of Liabilities or performance under
this security agreement is materially impaired.
5.10 Any event which results in the acceleration of the maturity of any
debt of Borrower to BIDCO or a material debt to others under any
notice, indenture, agreement or undertaking.
5.11 Failure to observe and perform any of the terms and condition of the
Revenue Participation Agreement, of even date, entered into with
BIDCO.
5.12 Upon default, the Liabilities shall become due and payable
immediately, without notice, unless BIDCO shall otherwise elect.
BIDCO shall have the rights and remedies provided by law or this
agreement, including but not limited to the right to require
Borrower to assemble the Collateral and make it available to BIDCO
at a place to be designated by BIDCO which is reasonably convenient
to both parties, the right to take possession of the Collateral with
or without demand and with or without process of law, and the right
to sell and dispose of it and distribute the proceeds according to
law. In connection with the right of BIDCO to take possession of the
Collateral, BIDCO may take possession of any other items of property
in or on the Collateral at the time of taking possession of the
Collateral, and hold such other items of property temporarily for
Borrower without liability on the part of BIDCO. Any requirement of
reasonable notice shall be met if BIDCO sends notice to Borrower at
least ten (10) days prior to the date of sale, disposition or other
event giving rise to the required notice. Borrower shall be liable
for any deficiency remaining after disposition of the Collateral.
6. ACCOUNTS RECEIVABLE: Borrower acknowledges that if the Collateral includes
"Accounts Receivable" the following shall apply:
6.1 Until BIDCO gives notice to Borrower of a default hereunder,
Borrower will, in the usual course of its business and at its own
cost and expense, but as the agent of BIDCO, demand and receive and
use its best efforts to collect all moneys due or to become due on
the Accounts Receivable. Until BIDCO gives notice to
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Borrower that it is in default, Borrower may use the funds collected
in the ordinary course of its business. Upon such notice from BIDCO,
the Borrower agrees that all sums of money it receives on the
account of or in payment or settlement of the Accounts Receivable
shall be held by it as trustee for BIDCO without commingling with
any of its funds, and be forthwith delivered to BIDCO with
endorsement to BIDCO's order of any check or similar instrument. It
is agreed that, upon a default by Borrower and upon Borrower's
failure to cure such default within ten (10) days after notice
thereof, BIDCO shall be entitled, in its own name or in the name of
the Borrower or otherwise, but at the expense and cost of Borrower,
to collect, demand, receive, ▇▇▇ for or compromise any and all
Accounts Receivable, and to give good and sufficient releases, to
endorse any checks, drafts, or other orders for the payment of money
payable to the Borrower in payment and, in its discretion, to file
any claims or take any action or proceeding, either in its own name
or in the name of Borrower or otherwise, which BIDCO may deem
necessary or advisable. It is expressly understood and agreed,
however, that BIDCO shall not be required to present or file any
claim or take any other action to collect or enforce the payment of
any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
7. MISCELLANEOUS:
7.1 Where a material portion of the Collateral is located at, used in or
attached to a facility leased by Borrower, Borrower will obtain from
the Lessor a consent to the granting of this security interest and a
subordination of the Lessor's interest in any of the Collateral, in
form acceptable to BIDCO.
7.2 No delay on the part of BIDCO in the exercise of any right or remedy
shall operate as a waiver, no single or partial exercise by BIDCO of
any right or remedy, and no waiver or indulgence by BIDCO of any
default shall be effective unless in writing and signed by BIDCO,
nor shall a waiver on one occasion be construed as a waiver of any
such right on any future occasion.
7.3 All rights of BIDCO shall inure to the benefit of BIDCO's
successors and assigns; and all obligations of Borrower shall bind
Borrower's successors and assigns.
7.4 The terms and provisions of this agreement shall be governed by
Michigan law without giving effect to any choice or conflict of law
provision or rule (whether of Michigan or any other jurisdiction)
that would cause the application of the laws of any other
jurisdiction other than Michigan to apply.
7.5 Each of the parties submits to the exclusive jurisdiction of the
United States District Courts for the Southern and Eastern Districts
of Michigan, and if subject matter jurisdiction is not available the
Oakland County Circuit Court, in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in
respect of the action or proceeding may be heard and determined
through such courts. Each party also agrees not to bring any such
action or proceeding
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arising out of or relating to this Agreement in any other court.
Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought.
7.6 Until payment of the Liabilities, Borrower grants BIDCO, its
officers, employees or agents, the right, upon at least two (2)
business days advance notice, to inspect the Collateral and
Borrower's books and records. Borrower will furnish BIDCO, at its
demand, reports regarding the Collateral in such form and detail as
are reasonably satisfactory to BIDCO.
7.7 Time is of the essence of this agreement.
7.8 If any provision of this agreement is invalid, it shall be
ineffective only to the extent of its invalidity, and the remaining
provisions shall be valid and effective.
7.9 At its option BIDCO may, but shall be under no duty or obligation
to, discharge taxes, liens, security interests or other encumbrances
at any time levied or placed on the Collateral, pay for insurance on
the Collateral if BIDCO is reasonably insecure with Borrower's
current insurer and after notice to Borrower, and pay for the
maintenance and preservation of the Collateral, and Borrower agrees
to reimburse BIDCO on demand for any payment made or any expense
incurred by BIDCO, with interest at the Note Rate (as such term is
defined in the Note).
7.10 Where notice is required, it shall be in writing and personally
delivered, sent by certified mail, return receipt requested or a
reliable overnight delivery service, to the respective address
above, or to any other address required by the respective party, or
by facsimile transmission with confirmation of receipt, and notice
shall be deemed given on the earlier of: a) three (3) business days
after notice is mailed as set forth above; or b) upon actual
receipt.
7.11 This Agreement may be amended only in a writing signed by Borrower
and BIDCO.
Dated: August 27, 1998 BORROWER:
WITNESS: FUNDEX GAMES, LTD.
/s/ [Illegible] By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, President
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