Exhibit 10.3
SUBORDINATION AGREEMENT
(ARTURO TORRES)
THIS SUBORDINATION AGREEMENT ("Agreement") is dated effective as of June
20, 1996, and is by and among ARTURO TORRES ("Subordinate Creditor"), of Bexar
County, Texas, PLAY BY PLAY TOYS & NOVELTIES, INC. ("Play By Play"), a Texas
corporation, and CHEMICAL BANK, a New York banking corporation, as Agent (the
"Agent") for the financial institutions (collectively the "Lenders") which are
now or may hereafter become parties to that certain Credit Agreement dated as of
June 20, 1996, by and among Play By Play, Ace Novelty Acquisition Co., Inc.
("Ace"), a Texas corporation, Newco Novelty, Inc. ("Newco"), a Texas
corporation, Agent and Lenders (said Credit Agreement, as amended, extended,
supplemented and restated from time to time, being hereinafter referred to as
the "Credit Agreement").
RECITALS:
1. Reference is hereby made to that certain Asset Purchase Agreement (the
"Asset Purchase Agreement") dated as of May 1, 1996, executed by and among
Subordinate Creditor, Borrowers, Specialty Manufacturing Ltd., a British
Columbia, Canada corporation, Acme Acquisition Corp., a Washington corporation,
Benjamin H. Mayers, Lois E. Mayers, Ronald S. Mayers, Karen Gamoran and Beth
Weisfield. In connection with consummating the transactions contemplated by the
Asset Purchase Agreement, (a) Subordinate Creditor has advanced and loaned to
Play By Play the amount of $3,000,000 and (b) Play By Play has executed and
delivered to Subordinate Creditor a promissory note of even date herewith
(which, as it may have been or may be renewed, extended, modified or rearranged
with the prior written consent of Agent, is called the "Subordinate Note") in
the original principal sum of $3,000,000 in order to evidence Ace's repayment
obligations to Subordinate Creditor with respect to such loan (a copy of the
Subordinate Note being attached hereto as EXHIBIT A). The Asset Purchase
Agreement, the Subordinate Note, and all other documents and instruments now or
hereafter executed in connection with the Asset Purchase Agreement are sometimes
hereinafter collectively referred to as the "Asset Purchase Documents."
2. Lenders have agreed, subject to the terms and conditions of the Credit
Agreement, to make certain loans to Borrowers (as defined in the Credit
Agreement), including without limitation, Ace, Play By Play and Newco, as
evidenced by various promissory notes (which, as they may hereafter be renewed,
extended, rearranged or replaced, being herein collectively called "Senior
Notes") now or hereafter executed by Borrowers, payable to the order of the
applicable Lenders. Pursuant to the terms of the Credit Agreement, Borrowers
shall also incur certain other indebtedness and become responsible for the
performance of certain other obligations to Agent and Lenders in accordance with
the terms thereof.
3. As a condition to their advancing funds or otherwise extending credit
to Borrowers under the Credit Agreement, Agent and Lenders have required Ace,
Play By Play and Subordinate Creditor to execute and deliver this Agreement to
Agent for the benefit of Lenders.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, Ace, Play By Play, Subordinate Creditor and Agent hereby agree as
follows:
1. As used in this Agreement, the following terms shall have the
respective meanings indicated:
(a) SENIOR INDEBTEDNESS shall mean (a) all indebtedness and
obligations of any and all Borrowers and Guarantors (as defined in the Credit
Agreement) incurred under the terms of the Credit Agreement and all other
documents executed or delivered to Agent or any of the Lenders in connection
therewith, including without limitation, the indebtedness evidenced by the
Senior Notes and any and all Applications (as defined in the Credit Agreement),
and (b) all renewals, extensions, rearrangements, refundings and modifications
of any and all of such indebtedness and obligations. The Senior Indebtedness
shall include amounts accruing subsequent to the filing by any Borrower, any
Guarantor or any other obligors under the Credit Agreement of any bankruptcy,
receivership, insolvency or like petition. Without limiting the generality of
the foregoing, Senior Indebtedness shall include all obligations for fees, for
enforcement and collection costs, to indemnify, to reimburse for expenses and to
reimburse for protective advances (whether for the payment of taxes, insurance
premiums, the preservation or protection of property or the title thereto or for
any other reason) arising under or incurred pursuant to the Credit Agreement or
any other documents executed or delivered to Agent or any of the Lenders in
connection therewith.
(b) SUBORDINATED INDEBTEDNESS shall mean all indebtedness evidenced
by the Subordinate Note, including without limitation, all interest, principal,
fees and premiums, if any, and all renewals, extensions, increases,
rearrangements, refundings and modifications of the Subordinate Note consented
to in writing by Agent and the Required Lenders (as defined in the Credit
Agreement).
2. Unless and until all Senior Indebtedness shall have been fully paid and
satisfied in cash and the obligation of Lenders to make any further extensions
of credit to any Borrower or any other party under the Credit Agreement shall
have ceased and terminated, Subordinate Creditor will not (except as otherwise
provided in SECTIONS 3 and 4 hereof) do any of the following without the prior
written consent of Agent: (a) ask, demand, sue for, take or receive, or retain,
from any Borrower or any other person or entity, by setoff or in any other
manner, payment of all or any part of the Subordinated Indebtedness; (b)
forgive, cancel or discharge, or permit to be converted into any evidence of
equity or ownership, any of the Subordinated Indebtedness; (c) ask, demand or
receive any security for the Subordinated Indebtedness; (d) amend or modify the
Subordinate Note, the Guaranty or any other document now or hereafter existing
in connection with the Subordinated Indebtedness, except with the prior written
consent of Agent and Required Lenders; or (e) declare the Subordinated
Indebtedness due and payable by reason of any default or for any other reason,
or bring or join with
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any creditor in bringing any proceeding against any Borrower or any Guarantor
under any bankruptcy, reorganization, readjustment or arrangement of debt,
suspension of payments, receivership, liquidation or insolvency or similar law
or statute now or hereafter in effect ("Proceedings"). Subordinate Creditor
hereby directs Play By Play and all other Borrowers to make, and Play By Play
hereby agrees to make, such prior payment of the Senior Indebtedness to Agent
for the ratable benefit of the Lenders.
3. Notwithstanding any provisions to the contrary contained in this
Agreement, Play By Play may pay, and Subordinate Creditor may accept and apply,
regularly scheduled payments of accrued interest only (but not principal) on the
Subordinated Indebtedness evidenced by the Subordinate Note attached hereto as
EXHIBIT A, as it may be renewed, extended or modified with the prior written
consent of Agent and the Required Lenders, so long as no Default or Event of
Default shall have occurred under the Credit Agreement (after giving effect to
such regularly scheduled interest payment or payments) which has not been cured
to the reasonable satisfaction of Agent and the Required Lenders at the time of
the applicable regularly scheduled payment of interest. Agent acknowledges and
agrees that if any regularly scheduled payment of interest on the Subordinated
Indebtedness was not paid by Play By Play to Subordinate Creditor when due or
when otherwise allowed hereby as a result of the occurrence of any Default or
Event of Default at the time such regularly scheduled payment of interest was
originally due, Play By Play shall thereafter be entitled to promptly pay to
Subordinate Creditor any such regularly scheduled payments of interest then
owing on the Subordinated Indebtedness once such Default or Event of Default has
been cured to the reasonable satisfaction of Agent and the Required Lenders and
no other Defaults or Events of Default have occurred which are then continuing.
4. Notwithstanding any provisions to the contrary contained in this
Agreement, at any time after Agent and Lenders have (i) received from Borrowers
the Monthly Unaudited Financial Statements for the month ending November 30,
1996 pursuant to SECTION 6.3(B) of the Credit Agreement, and (ii) had five (5)
business days to review such Monthly Unaudited Financial Statements to
reasonably confirm compliance with subparagraph (a) below, Play By Play may
prepay, and Subordinate Creditor may demand, accept and apply, any full or
partial prepayments of principal and accrued interest on the Subordinated
Indebtedness, so long as all of the following conditions have been fully
satisfied at the time of such prepayment or prepayments (after giving effect to
such prepayment or prepayments):
(a) No Default or Event of Default shall have occurred under the
Credit Agreement, including without limitation, any violation of SECTION 6.3 and
SECTIONS 7.12 through 7.16 thereof, which has not been cured to the reasonable
satisfaction of Agent and the Required Lenders;
(b) Availability (as defined in the Credit Agreement) as of the date
of such prepayment or prepayments, calculated after giving effect to such
prepayment or prepayments, shall be greater than or equal to the level of
projected Availability set forth for the end of the calendar month in which such
prepayment is being made according to Borrowers' financial projections attached
hereto as EXHIBIT B;
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(c) The ratio of (i) the sum of accounts payable and documentary
Letters of Credit (as defined in the Credit Agreement) then outstanding to (ii)
inventory for Borrowers and their Subsidiaries (as defined in the Credit
Agreement), on a consolidated basis, as of the end of the calendar month ending
immediately prior to the date of such prepayment or prepayments (as determined
on the basis of accounts payable agings, Letters of Credit status reports and
inventory designations for the Borrowers and their Subsidiaries, on a
consolidated basis, as of the end of the calendar month ending immediately prior
to the date of such prepayment or prepayments) shall not exceed by more than
four percent (4%) the projected ratio of (i) the sum of accounts payable and
documentary Letters of Credit then outstanding to (ii) inventory for Borrowers
and their Subsidiaries, on a consolidated basis, as determined by reference to
Borrowers' financial projections attached hereto as EXHIBIT B;
(d) The amount of such prepayment shall be in a minimum amount of
$500,000.00 or the outstanding principal balance of the Subordinated
Indebtedness, whichever is less; and
(e) Contemporaneously with the receipt of such prepayment or
prepayments by Subordinate Creditor, written notice confirming the amount and
receipt of such prepayment or prepayments is provided to Agent by Subordinate
Creditor.
With respect to Borrowers' delivery of accounts payable agings and inventory
reports for calendar months ending as of or after November 30, 1996, the parties
hereto acknowledge and agree that Play By Play may not pay, and Subordinate
Creditor may not accept and apply, any prepayments in accordance with the terms
of this SECTION 4 unless and until Agent and Lenders have received from
Borrowers at the time of the proposed prepayment or prepayments accounts payable
agings and inventory reports for the end of the immediately preceding calendar
month as of the date of such proposed prepayment or prepayments AND Agent and
Lenders have had three (3) business days to review such accounts payable agings
and inventory reports to reasonably confirm compliance with subparagraph (c)
above.
5. (a) Upon any distribution of the assets of any Borrower or any
Guarantor in connection with any dissolution, winding up, liquidation or
reorganization of such Borrower or such Guarantor (whether in Proceedings or
upon an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of such Borrower or such Guarantor, or otherwise), Agent
shall first be entitled to receive, for the ratable benefit of Lenders, full
payment in cash of all Senior Indebtedness before Subordinate Creditor shall be
entitled to receive any payment in respect of the Subordinated Indebtedness.
Upon any such dissolution, winding up, liquidation or reorganization, any
payment or distribution of assets of any Borrower or any Guarantor of any kind
or character, whether in cash, property or securities, to which Subordinate
Creditor would be entitled except for the provisions of this Agreement
(including any such payment or distribution which may be payable or deliverable
by virtue of the provisions of any securities which are subordinated as junior
in right of payment to the Subordinated Indebtedness) shall be made by the
liquidating trustee or agent or other persons making such payment or
distribution (whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise) (a "Paying Party"), or if received by Subordinate Creditor, by
Subordinate Creditor, directly to Agent, to the extent
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necessary to fully pay in cash the Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to Agent. Subordinate
Creditor hereby authorizes and directs each Paying Party to pay over to Agent
upon demand by Agent, all such payments or distributions without the necessity
of any inquiry as to the status or balance of the Senior Indebtedness, and
without further notice to or consent of Subordinate Creditor. In furtherance of
the foregoing, but not by way of limitation thereof, in the event any Borrower
or any Guarantor is subject to any Proceeding, with the result that such
Borrower or such Guarantor is excused from the obligation to pay all or part of
the interest otherwise payable in respect of the Senior Indebtedness during the
period subsequent to the commencement of any such Proceeding, Subordinate
Creditor agrees that all or such part of such interest, as the case may be,
shall be payable out of, and to that extent diminish and be at the expense of,
reorganization dividends or distributions in respect of the Subordinated
Indebtedness.
(b) Subordinate Creditor hereby irrevocably authorizes and empowers
Agent to demand, sue for, collect and receive every such payment or distribution
and give acquittance therefor, to execute, sign, endorse, transfer and deliver
any and all receipts and instruments, and to file claims and take such other
proceedings, all in the name of Subordinate Creditor, or otherwise, as Agent may
deem necessary or advisable for the enforcement of this Agreement, but Agent has
no obligation to do so.
(c) In the event any payment or distribution of assets of any
Borrower or any Guarantor of any kind or character, whether in cash, property or
securities, and whether or not pursuant to any dissolution, winding up,
liquidation or reorganization, not permitted by or in accordance with the
provisions of this Agreement shall be received by Subordinate Creditor, such
payment or distribution to Subordinate Creditor shall not be commingled with
other funds and shall be held in trust for the benefit of, and shall be paid
over or delivered to, Agent, or to its representative, in precisely the form
received (except for the endorsement or assignment of Subordinate Creditor where
necessary). In the event of any failure by Subordinate Creditor to make any such
endorsement or assignment, Agent is hereby irrevocably authorized to make same.
(d) Notwithstanding the terms and provisions of this Agreement,
Subordinate Creditor shall not be entitled to be subrogated to any of the rights
of Agent or any Lender against any Borrower, any Guarantor or any other person
or entity or with respect to any collateral security or rights of offset held by
Agent or any Lender for the payment of the Senior Indebtedness unless and until
the Senior Indebtedness has been fully paid and satisfied in cash and the
obligation of Lenders to make any further extensions of credit under the Credit
Agreement to Borrowers or any other person or entity shall have ceased and
terminated. Once the Senior Indebtedness has been fully and finally paid in cash
and Lenders have no further obligation to make any additional extensions of
credit under the Credit Agreement to Borrowers or any other person or entity,
Subordinate Creditor shall be subrogated to the rights of Agent or any Lender
against any Borrower, any Guarantor or any other person or entity or with
respect to any collateral security as a result of any payment by Subordinate
Creditor of all or any portion of the Senior Indebtedness.
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(e) The provisions of this Agreement are solely for the purpose of
defining the relative rights of Subordinate Creditor, Lenders and Agent, and are
solely for the benefit of Agent and Lenders and may not be relied upon or
enforced by any party other than Agent and Lenders, and nothing contained in
this Agreement is intended to or shall impair the obligations of Ace and Play By
Play, which are unconditional and absolute, to pay to Subordinate Creditor the
principal of and interest on the Subordinated Indebtedness as and when the same
shall become due and payable in accordance with its terms, or to affect the
relative rights of Subordinate Creditor and creditors of Borrowers or Guarantors
other than Agent and Lenders.
(f) Agent (and if required by SECTION 10.11 of the Credit Agreement,
Lenders) may, at any time and from time to time, without the consent of or
notice to Subordinate Creditor, and without impairing or releasing the
obligations of Subordinate Creditor hereunder (i) change the manner, place or
terms of payment or change or extend the time of payment of, or renew, increase
or alter, the Senior Indebtedness or the security therefor, or otherwise amend
in any manner the Credit Agreement or any document executed in connection
therewith; (ii) exercise or refrain from exercising any rights against Borrowers
and Guarantors; (iii) apply any sums by whomsoever paid or however realized to
the Senior Indebtedness; (iv) sell, exchange, release, surrender, realize upon
or otherwise deal with in any manner and in any order any property whatsoever
and by whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, any Senior Indebtedness; (v) release anyone liable in any manner for
the payment or collection of any Senior Indebtedness; and (vi) settle or
compromise all or any part of the Senior Indebtedness, and subordinate the
payment of any part of the Senior Indebtedness to the payment of any other
indebtedness (including any other part of the Senior Indebtedness). No
invalidity, irregularity or unenforceability of all or any part of the Senior
Indebtedness or of any collateral security shall affect, impair or be a defense
to this Agreement.
6. Subordinate Creditor represents and warrants that no liens, security
interests or assignments exist to secure any Subordinated Indebtedness, and
Subordinate Creditor agrees that no liens, security interests or assignments
will arise or will be taken in the future to secure any Subordinated
Indebtedness.
7. Subordinate Creditor, its successors or assigns or any other legal
holder of the Subordinated Indebtedness shall not acquire by subrogation,
contract or otherwise with respect to any Subordinated Indebtedness any lien
upon or other estate, right or interest in any property (including but not
limited to any which may arise in respect to real estate taxes, assessments or
other governmental charges) which is or may be prior in right to any collateral
security for the Senior Indebtedness or any renewal, extension, refinancing,
consolidation, modification or supplement thereof.
8. Subordinate Creditor represents to Agent that the Subordinated
Indebtedness is in good standing and in full force and effect and no breaches or
defaults exist thereunder which have not been cured or waived, and that the
outstanding principal balance of the Subordinate Note on this date is
$3,000,000.
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9. This Agreement extends to and covers all amounts due on the Senior
Indebtedness both before and after the filing of any Proceeding by or against
any Borrower or any Guarantor, and Agent and Lenders shall be entitled to
amounts accruing on the Senior Indebtedness from the date of filing of said
Proceeding to the date of full and final payment in cash of the Senior
Indebtedness.
10. No part of the Subordinated Indebtedness or any instrument evidencing
the same has been heretofore transferred or assigned, and Subordinate Creditor
will not transfer or assign any part of the Subordinated Indebtedness nor any
instrument evidencing the same while the Senior Indebtedness remains unpaid,
unless such transfer or assignment is made subject to the provisions of this
Agreement. Any instrument evidencing the Subordinated Indebtedness will contain
provisions referring specifically to this Agreement.
11. In the event of a breach by any party hereto of any of the provisions
of this Agreement, or in the event any representation or warranty contained
herein or furnished to Agent by any party hereto shall prove to have been false
when made, Agent shall have all rights provided to it under law or equity,
including without limitation, the right to sue the breaching party or parties to
recover damages suffered by Agent as a result of such breach, and the right to
obtain injunctive relief.
12. Subordinate Creditor shall stamp or type in a conspicuous place on the
Subordinate Note and any other instrument evidencing any of the Subordinated
Indebtedness the following notation:
The payment of the indebtedness evidenced hereby has been
subordinated to the payment of certain indebtedness owing to
Chemical Bank, Agent, pursuant to the terms of that certain
Subordination Agreement dated effective June 20, 1996, between Play
By Play Toys & Novelties, Inc., Arturo Torres and Chemical
Bank, Agent.
Subordinate Creditor also hereby agrees to hereafter supplement or modify any
such notation previously stamped or typed upon any instrument evidencing any of
the Subordinated Indebtedness in order to properly reflect any subsequent
modification of this Agreement pursuant to a written agreement by Subordinate
Creditor and Agent, and consented to in writing by the Required Lenders.
13. This Agreement is a continuing one, and all Senior Indebtedness to
which it applies or may apply under the terms hereof shall conclusively be
presumed to have been created in reliance hereon.
14. Ace and Play By Play hereby jointly and severally agree to pay upon
demand all attorneys' fees and expenses reasonably incurred by Agent in
connection with the enforcement of its rights under this Agreement.
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15. Subordinate Creditor, and Play By Play agree that, if at any time all
or any part of any payment previously applied by Agent to the Senior
Indebtedness is or must be returned by Agent or any Lender--or recovered from
Agent or any Lender--for any reason (including the order of any bankruptcy
court), this Agreement shall automatically be reinstated to the same effect, as
if the prior application had not been made, and, in addition, Ace and Play By
Play hereby jointly and severally agree to indemnify Agent and Lenders against,
and to save and hold Agent and the Lenders harmless from any required return by
Agent or any Lender--or recovery from Agent or any Lender--of any such payments
because of its being deemed preferential under applicable bankruptcy,
receivership or insolvency laws, or for any other reason.
16. Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering it against receipt for
it, by depositing it with an overnight delivery service or by depositing it in a
receptacle maintained by the United States Postal Service, postage prepaid,
registered or certified mail, return receipt requested, addressed to the
respective parties at the following addresses (and if so given, shall be deemed
given when mailed):
If to Subordinate Creditor:
Arturo Torres
R.R. 1, Box 112T
Karnes City, Texas 78118
If to Borrowers:
Ace Novelty Acquisition Co., Inc.
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
Play By Play Toys & Novelties, Inc.
4400 Tejasco
San Antonio, Texas 78218
Attention: Mr. Mark A. Gawlik
If to Agent:
Chemical Bank
633 Third Avenue, Seventh Floor
New York, New York 10017
Attention: Credit Deputy
Subordinate Creditor's, Ace's, Play By Play's and Agent's respective addresses
for notice may be changed at any time and from time to time, but only after ten
(10) days' advance written notice of such address change has been given to the
other parties hereto, and each such party's address for notice shall be the most
recent such address furnished in writing by such party. Actual notice, however
and from whomever given or received, shall always be effective when received.
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17. This Agreement shall not be changed orally but shall be changed only
by agreement in writing signed by Subordinate Creditor and Agent (without any
necessity for notice to or consent by Play By Play and Ace, which are expressly
WAIVED by Play By Play and Ace), with any such amendment to be consented to in
writing by the Required Lenders to be effective. No course of dealing between
the parties, no usage of trade and no parole or extrinsic evidence of any nature
shall be used to supplement or modify any of the terms or provisions of this
Agreement.
18. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby, and this Agreement shall be liberally construed so as to carry
out the intent of the parties to it.
19. This Agreement (a) shall be binding upon and inure to the benefit of
the parties hereto and their respective personal representatives, heirs,
successors and assigns; (b) may be modified or amended only by a writing and
signed by each party hereto; (c) may be executed in several counterparts, and by
the parties hereto on separate counterparts and each counterpart when so
executed and delivered shall constitute an original agreement, and all such
separate counterparts shall constitute but one and the same agreement; and (d)
embodies the entire agreement and understanding between the parties with respect
to the subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter.
20. EXCEPT AS PROHIBITED BY APPLICABLE LAW, EACH PARTY HERETO WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.
21. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE APPLICABLE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS
PRINCIPLES THEREOF) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
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EXECUTED as of the date first above written.
"SUBORDINATE CREDITOR":
/s/ ARTURO TORRES
ARTURO TORRES
"PLAY BY PLAY": PLAY BY PLAY TOYS & NOVELTIES, INC.,
a Texas corporation
By: /s/ MARK A. GAWLIK
Name: MARK A. GAWLIK
Title: PRESIDENT
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"AGENT": CHEMICAL BANK, AGENT
By: /s/ WINSTON CHANG
Name: WINSTON CHANG
Title: VICE PRESIDENT
EXHIBIT A - Instrument Evidencing Subordinated Indebtedness
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EXHIBIT A
PROMISSORY NOTE
June 20, 1996 $3,000,000
San Antonio, Texas
FOR VALUE RECEIVED, Play by Play Toy & Novelties, Inc., a Texas
corporation ("Maker"), promises to pay to the order of Arturo G. Torres the sum
of Three Million Dollars ($3,000,000), with interest thereon from the date
hereof until paid at a per annum rate equal to the lesser of (x) the Alternate
Base Rate (as defined in that certain Credit Agreement of even date herewith
(the "Credit Agreement") among the Company, Ace Novelty Acquisition Co., Inc., a
Texas corporation, Newco Novelty, Inc., a Texas corporation, each of the
financial institutions which is a signatory thereto (collectively, the
"Lenders") and Chemical Bank, as agent ("Chemical")) and (y) the maximum rate of
nonusurious interest which, under applicable law, may be charged, collected or
received by Lender from time to time with respect to the Loan (the "Maximum
Lawful Rate"). Said interest shall be payable monthly in arrears with principal
payable upon demand or, if no demand is sooner made, on June 21, 1998. Any
amount of principal and, to the extent permitted by applicable law, interest
that is not paid on the day when the same first became due and payable shall
bear interest, payable on demand, at a per annum rate equal to the lesser of (x)
the Alternate Base Rate plus two percent (2%) and (y) the Maximum Lawful Rate.
No liability shall arise against any holder or holders hereof from any
act, or the omission of any act, pertaining to the collection of, or failure to
collect, any collateral which said holder or holders may hold to secure this
obligation.
No act or omission of any kind on the part of the holder hereof shall in
any way whatsoever affect or impair this Promissory Note. This Promissory Note
shall extend to, and be binding upon Maker and its respective heirs, personal
representatives, successors and permitted assigns. Maker shall have the
privilege of prepaying this Promissory Note at any time, in whole or in part
without premium or other penalty.
Maker hereby waives demand for payment, presentment, notice of
presentment, notice of acceleration, notice of intent to accelerate, protest,
notice of protest, and notice of dishonor, and hereby consents to any renewal or
extension of time of payment of this Promissory Note, without notice, and
without affecting or releasing the liability of Maker.
Maker hereby agrees to pay all reasonable fees and expenses (including,
without limitation, attorneys' fees) incurred by any holder of this Promissory
Note in connection with any proceedings to enforce this Promissory Note or
collect the indebtedness evidenced hereby.
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This Promissory Note shall be governed by and construed in accordance with
the internal laws of the State of Texas.
The payment of the indebtedness evidenced hereby has been subordinated to
the payment of certain indebtedness owing to Chemical Bank, Agent, pursuant to
the terms of that certain Subordination Agreement dated effective June 20, 1996,
between Play By Play Toys & Novelties, Inc., Arturo Torres and Chemical Bank,
Agent.
IN WITNESS WHEREOF, this Promissory Note has been duly executed this 20th
day of June, 1996.
PLAY BY PLAY TOYS & NOVELTIES, INC.
By ___________________
Mark A. Gawlik
President
Attest:
By ___________________
Joe Guerra
Secretary
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