SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 29, 1996
4KIDS ENTERTAINMENT, INC.
(Exact name of registrant as specified in charter)
New York 0-7843 13-2691380
(State or other juris- (Commission (IRS Employer
diction of Incorporation) File number) Identification No.)
1414 Avenue of the Americas, New York, New York 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (212) 758-7666
LEISURE CONCEPTS, INC.
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 29, 1996, Registrant's line of credit (the "Credit
Facility") with Chemical Bank, which was scheduled to expire on June 30, 1996
was renegotiated and renewed through June 30, 1997. Under the new terms,
Registrant may borrow, from time to time for general working capital purposes,
up to $2 million. The Credit Facility provides for an interest rate of 1% over
Chemical Bank's prime rate and an annual fee of 3/4% payable quarterly. To
secure the Credit Facility, Registrant's subsidiaries, Leisure Concepts, Inc.,
4Kids Productions, Inc. and The Summit Media Group, Inc., have guaranteed
payment and granted a security interest in their accounts receivable to Chemical
Bank.
Item 7. Exhibits.
See Index of Exhibits annexed hereto.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
4KIDS ENTERTAINMENT, INC.
By /S/
----------------------------
Joseph P. Garrity, Executive
Vice President and Chief
Financial Officer
Dated: June 10, 1996
3
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description Page No.
2. (a) Security Agreement, dated May 29, 1996, 5
by and between Leisure Concepts, Inc. and
Chemical Bank
(b) Security Agreement, dated May 29, 1996, 8
by and between 4Kids Productions, Inc.
and Chemical Bank
(c) Security Agreement, dated May 29, 1996, 11
by and between The Summit Media Group,
Inc. and Chemical Bank
4
<PAGE>
Exhibit 2(a)
SECURITY AGREEMENT
(General Purpose)
This Agreement made this 29th day of May, 1996, between
CHEMICAL BANK (herein called "Bank") and Leisure Concepts, Inc. (herein called
"Borrower").
1. DEFINITIONS OF TERMS USED HEREIN. (a) "Borrower" includes
all individuals executing this agreement as parties hereto and all members of a
partnership when Borrower is a partnership, each of whom shall be jointly and
severally liable individually and as partners hereunder. (b) "Liability" or
"liabilities" includes all liabilities (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that may be hereafter
contracted or acquired, of Borrower (including Borrower and any other person) to
Bank, including without limitation all liabilities arising under or from any
note, loan or credit agreement, letter of credit, guaranty, draft, acceptance,
interest rate or foreign exchange agreement or any other instrument or agreement
of (or the responsibility of) the Borrower or any loan, advance or other
extension of credit or financial accommodation to Borrower by Bank. (c)
"Proceeds" means whatever is received when Collateral is sold, exchanged,
leased, collected or otherwise disposed of an includes the account arising when
the right to payment is earned under a contract. (d) "Security interest" means a
lien or other interest in Collateral which secures payment of a liability or
performance of an obligation. (e) "Collateral" means the property described in
Section 2 hereof and the following described property of the Borrower:
ALL PRESENT AND FUTURE ACCOUNTS, CONTRACT RIGHTS, GENERAL INTANGIBLES,
INSTRUMENTS, DOCUMENTS, AND CHATTEL PAPER, ALL RETURNED AND REPOSSESSED GOODS
RELATING THERETO, ALL PROCEEDS THEREOF, AND ALL BOOKS, RECORDS AND OTHER
PROPERTY RELATING TO ANY OF THE FOREGOING.
All terms used herein which are also defined in the New York or any other
applicable Uniform Commercial Code shall also have at least the meanings herein
as therein defined.
2. SECURITY INTEREST. As security for the payment of all loans
and other extensions of credit or other financial accommodations now or in the
future made by Bank to Borrower and all other liabilities of Borrower to Bank,
Borrower hereby grants to Bank a security interest in the above described
Collateral and all and any Proceeds arising therefrom and all and any products
of the Collateral.
Borrower represents and warrants that it is the sole lawful
owner of the Collateral, free and clear of any liens and encumbrances, and has
the right and power to pledge, sell, assign and transfer absolute title thereto
to Bank and that no financing statement covering the Collateral, other than the
Bank's, is on file in any public office.
To further secure the Liabilities, the Borrower hereby grants,
pledges and assigns to the Bank a continuing lien, security interest and right
of set-off and to all money, securities and all other property of the Bank,
Chemical Securities, Inc. or any other affiliate of the Bank for any purpose,
including safekeeping, custody, pledge, transmission and collection, and in and
to all of the Borrower's deposits (general and special) and credits with the
Bank, Chemical Securities, Inc. or any other affiliate of the Bank. Borrower
authorizes Bank to deliver to others a copy of this Agreement as written
notification of the Borrower's transfer of security interest in the foregoing
property. The Bank is hereby authorized at any time and from time to time,
without notice, to apply all or part of such money, securities, property,
proceeds, deposits or credits to any of the Liabilities in such amounts as the
Bank may elect in its sole and absolute discretion, although the Liabilities may
then be contingent or unmatured and whether or not the collateral security may
be deemed adequate.
5
<PAGE>
3. USE OF COLLATERAL. Until default, Borrower may use the
Collateral in any lawful manner. If the Collateral is or is about to become
affixed to realty, Borrower will, at Bank's request, furnish the Bank a writing
executed by the mortgagee of the realty whereby the mortgagee subordinates its
rights and priorities to the Bank's security interest in the Collateral. If the
Collateral is or may become subject to a landlord's lien, the Borrower will at
Bank's request, furnish the Bank with a landlord's waiver satisfactory in form
to the Bank.
4. INSURANCE. Borrower will have and maintain insurance on the
Collateral until this Agreement is terminated against all expected risks to
which it is exposed, including fire, theft and collision, and those which the
Bank may designate, such insurance to be payable to Bank and Borrower as their
interest may appear; all policies shall provide for thirty (30) days' written
minimum cancellation notice to the Bank. Bank may act as attorney for Borrower
in obtaining, adjusting, settling and cancelling such insurance.
5. DEFAULT. Default shall exist hereunder (1) if the Borrower
shall fail to pay any amount of the Liabilities when due or if the Borrower
shall fail to keep, observe or perform any provision of this Agreement or of any
note, or other instrument or agreement between Borrower and Bank relating to any
Liabilities or if any default or Event of Default specified of defined in any
such note, instrument or agreement shall occur, (2) if the Borrower shall or
shall attempt to (a) remove or allow removal of the Collateral from the county
where the Borrower now resides or change the location of its chief executive
office or principal place of business (b) sell, encumber or otherwise dispose of
the Collateral or any interest therein or permit any lien or security interest
(other than the Bank's) to exist thereon or therein, (c) conceal, hire out or
let the Collateral, (d) misuse or abuse the Collateral, or (e) use or allow the
use of the Collateral in connection with any undertaking prohibited by law; (c)
if bankruptcy or insolvency proceedings shall be instituted by or against the
Borrower, or (4) if the Collateral shall be attached, levied upon, seized in any
legal proceedings, or held by virtue of any lien or distress, or (5) if the
Borrower shall make any assignment for the benefit of creditors, or (6) if the
Borrower shall fail to pay promptly all taxes and assessments upon the
Collateral or the use thereof, or (7) if the Borrower shall die, or (8) if the
Bank with reasonable cause determines that its interest in the Collateral is in
jeopardy, or (9) if Borrower should fail to keep the Collateral suitably
insured. In the event of default or the breach of any undertaking of or
conditions to be performed by the Borrower (1) all liabilities shall become
immediately due and payable, and (2) the Borrower agrees upon demand to deliver
the Collateral to the Bank, or the Bank may, with or without legal process, and
with or without previous notice or demand for performance, enter any premises
wherein the Collateral may be, and take possession of the same, together with
anything therein; and the Bank may make disposition of the Collateral subject to
any and all applicable provisions of the law. If the Collateral is sold at
public sale, Bank may purchase the Collateral at such sale. The Bank, provided
it has sent the statutory notice of default, may retain from the proceeds of
such sale all reasonable costs incurred in the said taking and sale and also,
all sums then owing by the Borrower, and any surplus of any such a sale shall be
paid to the Borrower.
6. GENERAL AGREEMENTS. (a) Borrower agrees to pay the costs of
filing financing statements and of conducting searches in connection with this
Agreement. (b) Borrower agrees to allow the Bank through any of its officers or
agents, at all reasonable times, to examine or inspect any of the Collateral and
to examine, inspect and make extracts from the Borrower's books and records
relating the Collateral. (c) Borrower will promptly pay when due all taxes and
assessments upon the Collateral or for its use of operation or upon the proceeds
thereof or upon this Agreement or upon any note or other instrument or agreement
evidencing any of the liabilities. (d) At its option, the Bank may discharge
taxes, liens or security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for the maintenance and preservation of
the Collateral and the Borrower agrees
6
<PAGE>
to reimburse the Bank on demand for any payment made or any expense incurred by
the Bank pursuant to the foregoing authorization, including outside or in-house
counsel fees and disbursements incurred or expended by the Bank in connection
with this Agreement. (e) Borrower hereby authorizes the Bank to file financing
statements and any amendments thereto without the signature of Borrower. Such
authorization is limited to the security interest guaranteed by this Agreement.
(f) Borrower agrees that the Bank has the right to notify (on invoices or
otherwise) account debtors and other obligors or payors on any Collateral of its
assignment to the Bank and that all payments thereon should be made directly to
the Bank and that the Bank has full power and authority to collect, compromise,
endorse, sell or otherwise deal with the Collateral on its own name or that of
the Borrower at any time. (g) The Borrower agrees to pay or reimburse the Bank
on demand for all costs and expenses incurred by it in connection with the
administration and enforcement of this Agreement and the administration,
preservation, protection, collection or realization of any Collateral (including
outside or in-house attorney's fees and expenses). (h) The Bank shall not be
deemed to have waived any of its rights hereunder or under any other agreement,
instrument or paper signed by the Borrower unless such waiver is in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver thereof or of any other right. All of the
rights and remedies of the Bank, whether evidenced hereby or by any other
Agreement, instrument or paper, shall be cumulative and may be exercised singly
or concurrently. (i) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. (j) This Agreement, and the
security interests, obligations, rights and remedies created hereby, shall inure
to the benefit of the Bank and its successors and assigns and be binding upon
the Borrower and its heirs, executors, administrators, legal representatives,
successors and assigns.
7. EXECUTION BY BANK. This Agreement shall take effect
immediately upon execution by the Borrower, and the execution hereof by the Bank
shall not be required as a condition to the effectiveness of this Agreement. The
provision for execution of this Agreement by the Bank is only for purposes of
filing this Agreement as a Security Agreement under the Uniform Commercial Code,
if execution hereof by the Bank is required for purposes of such filing.
Leisure Concepts, Inc.
By /S/
------------------------------
Joseph P. Garrity
1414 Avenue of the Americas
New York, New York 10019
CHEMICAL BANK
By /S/
---------------------------
Walter Drury
633 Third Avenue
New York, New York 10017
7
<PAGE>
Exhibit 2(b)
SECURITY AGREEMENT
(General Purpose)
This Agreement made this 29th day of May, 1996, between
CHEMICAL BANK (herein called "Bank") and 4Kids Productions, Inc. (herein called
"Borrower").
1. DEFINITIONS OF TERMS USED HEREIN. (a) "Borrower" includes
all individuals executing this agreement as parties hereto and all members of a
partnership when Borrower is a partnership, each of whom shall be jointly and
severally liable individually and as partners hereunder. (b) "Liability" or
"liabilities" includes all liabilities (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that may be hereafter
contracted or acquired, of Borrower (including Borrower and any other person) to
Bank, including without limitation all liabilities arising under or from any
note, loan or credit agreement, letter of credit, guaranty, draft, acceptance,
interest rate or foreign exchange agreement or any other instrument or agreement
of (or the responsibility of) the Borrower or any loan, advance or other
extension of credit or financial accommodation to Borrower by Bank. (c)
"Proceeds" means whatever is received when Collateral is sold, exchanged,
leased, collected or otherwise disposed of an includes the account arising when
the right to payment is earned under a contract. (d) "Security interest" means a
lien or other interest in Collateral which secures payment of a liability or
performance of an obligation. (e) "Collateral" means the property described in
Section 2 hereof and the following described property of the Borrower:
ALL PRESENT AND FUTURE ACCOUNTS, CONTRACT RIGHTS, GENERAL INTANGIBLES,
INSTRUMENTS, DOCUMENTS, AND CHATTEL PAPER, ALL RETURNED AND REPOSSESSED GOODS
RELATING THERETO, ALL PROCEEDS THEREOF, AND ALL BOOKS, RECORDS AND OTHER
PROPERTY RELATING TO ANY OF THE FOREGOING.
All terms used herein which are also defined in the New York or any other
applicable Uniform Commercial Code shall also have at least the meanings herein
as therein defined.
2. SECURITY INTEREST. As security for the payment of all loans
and other extensions of credit or other financial accommodations now or in the
future made by Bank to Borrower and all other liabilities of Borrower to Bank,
Borrower hereby grants to Bank a security interest in the above described
Collateral and all and any Proceeds arising therefrom and all and any products
of the Collateral.
Borrower represents and warrants that it is the sole lawful
owner of the Collateral, free and clear of any liens and encumbrances, and has
the right and power to pledge, sell, assign and transfer absolute title thereto
to Bank and that no financing statement covering the Collateral, other than the
Bank's, is on file in any public office.
To further secure the Liabilities, the Borrower hereby grants,
pledges and assigns to the Bank a continuing lien, security interest and right
of set-off and to all money, securities and all other property of the Bank,
Chemical Securities, Inc. or any other affiliate of the Bank for any purpose,
including safekeeping, custody, pledge, transmission and collection, and in and
to all of the Borrower's deposits (general and special) and credits with the
Bank, Chemical Securities, Inc. or any other affiliate of the Bank. Borrower
authorizes Bank to deliver to others a copy of this Agreement as written
notification of the Borrower's transfer of security interest in the foregoing
property. The Bank is hereby authorized at any time and from time to time,
without notice, to apply all or part of such money, securities, property,
proceeds, deposits or credits to any of the Liabilities in such amounts as the
Bank may elect in its sole and absolute discretion, although the Liabilities may
then be contingent or unmatured and whether or not the collateral security may
be deemed adequate.
8
<PAGE>
3. USE OF COLLATERAL. Until default, Borrower may use the
Collateral in any lawful manner. If the Collateral is or is about to become
affixed to realty, Borrower will, at Bank's request, furnish the Bank a writing
executed by the mortgagee of the realty whereby the mortgagee subordinates its
rights and priorities to the Bank's security interest in the Collateral. If the
Collateral is or may become subject to a landlord's lien, the Borrower will at
Bank's request, furnish the Bank with a landlord's waiver satisfactory in form
to the Bank.
4. INSURANCE. Borrower will have and maintain insurance on the
Collateral until this Agreement is terminated against all expected risks to
which it is exposed, including fire, theft and collision, and those which the
Bank may designate, such insurance to be payable to Bank and Borrower as their
interest may appear; all policies shall provide for thirty (30) days' written
minimum cancellation notice to the Bank. Bank may act as attorney for Borrower
in obtaining, adjusting, settling and cancelling such insurance.
5. DEFAULT. Default shall exist hereunder (1) if the Borrower
shall fail to pay any amount of the Liabilities when due or if the Borrower
shall fail to keep, observe or perform any provision of this Agreement or of any
note, or other instrument or agreement between Borrower and Bank relating to any
Liabilities or if any default or Event of Default specified of defined in any
such note, instrument or agreement shall occur, (2) if the Borrower shall or
shall attempt to (a) remove or allow removal of the Collateral from the county
where the Borrower now resides or change the location of its chief executive
office or principal place of business (b) sell, encumber or otherwise dispose of
the Collateral or any interest therein or permit any lien or security interest
(other than the Bank's) to exist thereon or therein, (c) conceal, hire out or
let the Collateral, (d) misuse or abuse the Collateral, or (e) use or allow the
use of the Collateral in connection with any undertaking prohibited by law; (c)
if bankruptcy or insolvency proceedings shall be instituted by or against the
Borrower, or (4) if the Collateral shall be attached, levied upon, seized in any
legal proceedings, or held by virtue of any lien or distress, or (5) if the
Borrower shall make any assignment for the benefit of creditors, or (6) if the
Borrower shall fail to pay promptly all taxes and assessments upon the
Collateral or the use thereof, or (7) if the Borrower shall die, or (8) if the
Bank with reasonable cause determines that its interest in the Collateral is in
jeopardy, or (9) if Borrower should fail to keep the Collateral suitably
insured. In the event of default or the breach of any undertaking of or
conditions to be performed by the Borrower (1) all liabilities shall become
immediately due and payable, and (2) the Borrower agrees upon demand to deliver
the Collateral to the Bank, or the Bank may, with or without legal process, and
with or without previous notice or demand for performance, enter any premises
wherein the Collateral may be, and take possession of the same, together with
anything therein; and the Bank may make disposition of the Collateral subject to
any and all applicable provisions of the law. If the Collateral is sold at
public sale, Bank may purchase the Collateral at such sale. The Bank, provided
it has sent the statutory notice of default, may retain from the proceeds of
such sale all reasonable costs incurred in the said taking and sale and also,
all sums then owing by the Borrower, and any surplus of any such a sale shall be
paid to the Borrower.
6. GENERAL AGREEMENTS. (a) Borrower agrees to pay the costs of
filing financing statements and of conducting searches in connection with this
Agreement. (b) Borrower agrees to allow the Bank through any of its officers or
agents, at all reasonable times, to examine or inspect any of the Collateral and
to examine, inspect and make extracts from the Borrower's books and records
relating the Collateral. (c) Borrower will promptly pay when due all taxes and
assessments upon the Collateral or for its use of operation or upon the proceeds
thereof or upon this Agreement or upon any note or other instrument or agreement
evidencing any of the liabilities. (d) At its option, the Bank may discharge
taxes, liens or security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for the maintenance and preservation of
the Collateral and the Borrower agrees
9
<PAGE>
to reimburse the Bank on demand for any payment made or any expense incurred by
the Bank pursuant to the foregoing authorization, including outside or in-house
counsel fees and disbursements incurred or expended by the Bank in connection
with this Agreement. (e) Borrower hereby authorizes the Bank to file financing
statements and any amendments thereto without the signature of Borrower. Such
authorization is limited to the security interest guaranteed by this Agreement.
(f) Borrower agrees that the Bank has the right to notify (on invoices or
otherwise) account debtors and other obligors or payors on any Collateral of its
assignment to the Bank and that all payments thereon should be made directly to
the Bank and that the Bank has full power and authority to collect, compromise,
endorse, sell or otherwise deal with the Collateral on its own name or that of
the Borrower at any time. (g) The Borrower agrees to pay or reimburse the Bank
on demand for all costs and expenses incurred by it in connection with the
administration and enforcement of this Agreement and the administration,
preservation, protection, collection or realization of any Collateral (including
outside or in-house attorney's fees and expenses). (h) The Bank shall not be
deemed to have waived any of its rights hereunder or under any other agreement,
instrument or paper signed by the Borrower unless such waiver is in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver thereof or of any other right. All of the
rights and remedies of the Bank, whether evidenced hereby or by any other
Agreement, instrument or paper, shall be cumulative and may be exercised singly
or concurrently. (i) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. (j) This Agreement, and the
security interests, obligations, rights and remedies created hereby, shall inure
to the benefit of the Bank and its successors and assigns and be binding upon
the Borrower and its heirs, executors, administrators, legal representatives,
successors and assigns.
7. EXECUTION BY BANK. This Agreement shall take effect
immediately upon execution by the Borrower, and the execution hereof by the Bank
shall not be required as a condition to the effectiveness of this Agreement. The
provision for execution of this Agreement by the Bank is only for purposes of
filing this Agreement as a Security Agreement under the Uniform Commercial Code,
if execution hereof by the Bank is required for purposes of such filing.
4Kids Productions, Inc.
By /S/
------------------------
Joseph P. Garrity
1414 Avenue of the Americas
New York, New York 10019
CHEMICAL BANK
By /S/
-------------------------------
Walter Drury
633 Third Avenue
New York, New York 10017
10
<PAGE>
Exhibit 2(c)
SECURITY AGREEMENT
(General Purpose)
This Agreement made this 29th day of May, 1996, between
CHEMICAL BANK (herein called "Bank") and The Summit Media Group, Inc. (herein
called "Borrower").
1. DEFINITIONS OF TERMS USED HEREIN. (a) "Borrower" includes
all individuals executing this agreement as parties hereto and all members of a
partnership when Borrower is a partnership, each of whom shall be jointly and
severally liable individually and as partners hereunder. (b) "Liability" or
"liabilities" includes all liabilities (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that may be hereafter
contracted or acquired, of Borrower (including Borrower and any other person) to
Bank, including without limitation all liabilities arising under or from any
note, loan or credit agreement, letter of credit, guaranty, draft, acceptance,
interest rate or foreign exchange agreement or any other instrument or agreement
of (or the responsibility of) the Borrower or any loan, advance or other
extension of credit or financial accommodation to Borrower by Bank. (c)
"Proceeds" means whatever is received when Collateral is sold, exchanged,
leased, collected or otherwise disposed of an includes the account arising when
the right to payment is earned under a contract. (d) "Security interest" means a
lien or other interest in Collateral which secures payment of a liability or
performance of an obligation. (e) "Collateral" means the property described in
Section 2 hereof and the following described property of the Borrower:
ALL PRESENT AND FUTURE ACCOUNTS, CONTRACT RIGHTS, GENERAL INTANGIBLES,
INSTRUMENTS, DOCUMENTS, AND CHATTEL PAPER, ALL RETURNED AND REPOSSESSED GOODS
RELATING THERETO, ALL PROCEEDS THEREOF, AND ALL BOOKS, RECORDS AND OTHER
PROPERTY RELATING TO ANY OF THE FOREGOING.
All terms used herein which are also defined in the New York or any other
applicable Uniform Commercial Code shall also have at least the meanings herein
as therein defined.
2. SECURITY INTEREST. As security for the payment of all loans
and other extensions of credit or other financial accommodations now or in the
future made by Bank to Borrower and all other liabilities of Borrower to Bank,
Borrower hereby grants to Bank a security interest in the above described
Collateral and all and any Proceeds arising therefrom and all and any products
of the Collateral.
Borrower represents and warrants that it is the sole lawful
owner of the Collateral, free and clear of any liens and encumbrances, and has
the right and power to pledge, sell, assign and transfer absolute title thereto
to Bank and that no financing statement covering the Collateral, other than the
Bank's, is on file in any public office.
To further secure the Liabilities, the Borrower hereby grants,
pledges and assigns to the Bank a continuing lien, security interest and right
of set-off and to all money, securities and all other property of the Bank,
Chemical Securities, Inc. or any other affiliate of the Bank for any purpose,
including safekeeping, custody, pledge, transmission and collection, and in and
to all of the Borrower's deposits (general and special) and credits with the
Bank, Chemical Securities, Inc. or any other affiliate of the Bank. Borrower
authorizes Bank to deliver to others a copy of this Agreement as written
notification of the Borrower's transfer of security interest in the foregoing
property. The Bank is hereby authorized at any time and from time to time,
without notice, to apply all or part of such money, securities, property,
proceeds, deposits or credits to any of the Liabilities in such amounts as the
Bank may elect in its sole and absolute discretion, although the Liabilities may
then be contingent or unmatured and whether or not the collateral security may
be deemed adequate.
11
<PAGE>
3. USE OF COLLATERAL. Until default, Borrower may use the
Collateral in any lawful manner. If the Collateral is or is about to become
affixed to realty, Borrower will, at Bank's request, furnish the Bank a writing
executed by the mortgagee of the realty whereby the mortgagee subordinates its
rights and priorities to the Bank's security interest in the Collateral. If the
Collateral is or may become subject to a landlord's lien, the Borrower will at
Bank's request, furnish the Bank with a landlord's waiver satisfactory in form
to the Bank.
4. INSURANCE. Borrower will have and maintain insurance on the
Collateral until this Agreement is terminated against all expected risks to
which it is exposed, including fire, theft and collision, and those which the
Bank may designate, such insurance to be payable to Bank and Borrower as their
interest may appear; all policies shall provide for thirty (30) days' written
minimum cancellation notice to the Bank. Bank may act as attorney for Borrower
in obtaining, adjusting, settling and cancelling such insurance.
5. DEFAULT. Default shall exist hereunder (1) if the Borrower
shall fail to pay any amount of the Liabilities when due or if the Borrower
shall fail to keep, observe or perform any provision of this Agreement or of any
note, or other instrument or agreement between Borrower and Bank relating to any
Liabilities or if any default or Event of Default specified of defined in any
such note, instrument or agreement shall occur, (2) if the Borrower shall or
shall attempt to (a) remove or allow removal of the Collateral from the county
where the Borrower now resides or change the location of its chief executive
office or principal place of business (b) sell, encumber or otherwise dispose of
the Collateral or any interest therein or permit any lien or security interest
(other than the Bank's) to exist thereon or therein, (c) conceal, hire out or
let the Collateral, (d) misuse or abuse the Collateral, or (e) use or allow the
use of the Collateral in connection with any undertaking prohibited by law; (c)
if bankruptcy or insolvency proceedings shall be instituted by or against the
Borrower, or (4) if the Collateral shall be attached, levied upon, seized in any
legal proceedings, or held by virtue of any lien or distress, or (5) if the
Borrower shall make any assignment for the benefit of creditors, or (6) if the
Borrower shall fail to pay promptly all taxes and assessments upon the
Collateral or the use thereof, or (7) if the Borrower shall die, or (8) if the
Bank with reasonable cause determines that its interest in the Collateral is in
jeopardy, or (9) if Borrower should fail to keep the Collateral suitably
insured. In the event of default or the breach of any undertaking of or
conditions to be performed by the Borrower (1) all liabilities shall become
immediately due and payable, and (2) the Borrower agrees upon demand to deliver
the Collateral to the Bank, or the Bank may, with or without legal process, and
with or without previous notice or demand for performance, enter any premises
wherein the Collateral may be, and take possession of the same, together with
anything therein; and the Bank may make disposition of the Collateral subject to
any and all applicable provisions of the law. If the Collateral is sold at
public sale, Bank may purchase the Collateral at such sale. The Bank, provided
it has sent the statutory notice of default, may retain from the proceeds of
such sale all reasonable costs incurred in the said taking and sale and also,
all sums then owing by the Borrower, and any surplus of any such a sale shall be
paid to the Borrower.
6. GENERAL AGREEMENTS. (a) Borrower agrees to pay the costs of
filing financing statements and of conducting searches in connection with this
Agreement. (b) Borrower agrees to allow the Bank through any of its officers or
agents, at all reasonable times, to examine or inspect any of the Collateral and
to examine, inspect and make extracts from the Borrower's books and records
relating the Collateral. (c) Borrower will promptly pay when due all taxes and
assessments upon the Collateral or for its use of operation or upon the proceeds
thereof or upon this Agreement or upon any note or other instrument or agreement
evidencing any of the liabilities. (d) At its option, the Bank may discharge
taxes, liens or security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for the maintenance and preservation of
the Collateral and the Borrower agrees
12
<PAGE>
to reimburse the Bank on demand for any payment made or any expense incurred by
the Bank pursuant to the foregoing authorization, including outside or in-house
counsel fees and disbursements incurred or expended by the Bank in connection
with this Agreement. (e) Borrower hereby authorizes the Bank to file financing
statements and any amendments thereto without the signature of Borrower. Such
authorization is limited to the security interest guaranteed by this Agreement.
(f) Borrower agrees that the Bank has the right to notify (on invoices or
otherwise) account debtors and other obligors or payors on any Collateral of its
assignment to the Bank and that all payments thereon should be made directly to
the Bank and that the Bank has full power and authority to collect, compromise,
endorse, sell or otherwise deal with the Collateral on its own name or that of
the Borrower at any time. (g) The Borrower agrees to pay or reimburse the Bank
on demand for all costs and expenses incurred by it in connection with the
administration and enforcement of this Agreement and the administration,
preservation, protection, collection or realization of any Collateral (including
outside or in-house attorney's fees and expenses). (h) The Bank shall not be
deemed to have waived any of its rights hereunder or under any other agreement,
instrument or paper signed by the Borrower unless such waiver is in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver thereof or of any other right. All of the
rights and remedies of the Bank, whether evidenced hereby or by any other
Agreement, instrument or paper, shall be cumulative and may be exercised singly
or concurrently. (i) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. (j) This Agreement, and the
security interests, obligations, rights and remedies created hereby, shall inure
to the benefit of the Bank and its successors and assigns and be binding upon
the Borrower and its heirs, executors, administrators, legal representatives,
successors and assigns.
7. EXECUTION BY BANK. This Agreement shall take effect
immediately upon execution by the Borrower, and the execution hereof by the Bank
shall not be required as a condition to the effectiveness of this Agreement. The
provision for execution of this Agreement by the Bank is only for purposes of
filing this Agreement as a Security Agreement under the Uniform Commercial Code,
if execution hereof by the Bank is required for purposes of such filing.
The Summit Media Group, Inc.
By /S/
------------------------
Joseph P. Garrity
1414 Avenue of the Americas
New York, New York 10019
CHEMICAL BANK
By /S/
--------------------------------
Walter Drury
633 Third Avenue
New York, New York 10017
13
