Mortgage And Security Agreement

MORTGAGE
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT


THIS INDENTURE (hereinafter referred to as the "Mortgage"), made as of September 8, 1999, between FIRST TEAM SPORTS, INC., a Minnesota corporation (hereinafter collectively referred to as the "Mortgagor"), whose post office address is 1201 Lund Boulevard, Anoka, Minnesota 55303, and Norwest Bank Minnesota, National Association, a national banking association (hereinafter referred to as the "Mortgagee"), whose post office address is Norwest Center, Sixth and Marquette, Minneapolis, Minnesota 55479.


THIS MORTGAGE SECURES, AMONG OTHER THINGS, A REVOLVING NOTE, PURSUANT TO WHICH ADVANCES WILL BE MADE TO THE MORTGAGOR AND SUCH AMOUNTS MAY BE REPAID AND REBORROWED.


WITNESSETH, that the Mortgagor in consideration of the debt hereinafter described and the sum of One and 00/100 Dollars ($1.00) to the Mortgagor in hand paid by the Mortgagee, the receipt whereof is hereby acknowledged, does hereby MORTGAGE, GRANT, BARGAIN, SELL AND CONVEY unto the Mortgagee, its successors and assigns, forever, AND GRANTS TO THE MORTGAGEE A MORTGAGE LIEN AND SECURITY INTEREST IN the following properties (all of the following being hereafter collectively referred to as the "Premises"):


A. REAL PROPERTY


All the tracts or parcels of real property lying and being in the County of Anoka, State of Minnesota, all as more fully described in Exhibit "A" attached hereto and made a part hereof, together with all the estates and rights in and to the real property and in and to lands lying in streets, alleys and roads adjoining the real property and all buildings, structures, improvements, fixtures and annexations, access rights, easements, rights of way or use, servitudes, licenses, tenements, hereditaments and appurtenances now or hereafter belonging or pertaining to the real property and all proceeds derived therefrom; and


B. IMPROVEMENTS, FIXTURES


All buildings, equipment, fixtures, improvements, building supplies and materials and personal property now or hereafter attached to or necessary to the use, operation or maintenance of the improvements on the Premises including, but without being limited to, all machinery, fittings, fixtures, apparatus, equipment or articles used to supply heating, gas, electricity, air conditioning, water, light, waste disposal, power, refrigeration, ventilation, and fire and sprinkler protection, as well as all elevators, escalators, overhead cranes, hoists and assists, and the like, and all furnishings, supplies, draperies, maintenance and repair equipment, floor coverings, screens, storm windows, blinds, awnings, shrubbery and plants, stoves, ranges, ovens, refrigerators, air conditioners, dishwashers, clothes dryers, washing machines, disposals and compactors (it being understood that the enumeration of any specific articles of property shall in no way be held to exclude any items of property not specifically enumerated), as well as renewals, replacements, proceeds, additions, accessories, increases, parts, fittings, insurance payments, awards and substitutes thereof, together with all interest of the Mortgagor in any such items hereafter acquired, all of which personal property mentioned herein shall be deemed fixtures and accessory to the freehold and a part of the realty and not severable in whole or in part without material injury to the Premises, but excluding therefrom the trade fixtures, inventory, equipment and removable personal property of any tenant of the Premises; and


C. RENTS, LEASES AND PROFITS


All rents, issues, income, revenue, receipts, fees, and profits now due or which may hereafter become due under or by virtue of and together with all right, title and interest of the Mortgagor in and to any lease, license, sublease, contract or other kind of occupancy agreement, whether written or verbal, for the use or occupancy of the Premises or any part thereof; and


D. JUDGMENTS, CONDEMNATION AWARDS
AND INSURANCE PROCEEDS


All awards, compensation or settlement proceeds made by any governmental or other lawful authorities for the threatened or actual taking or damaging by eminent domain of the whole or any part of the Premises, including any awards for a temporary taking, change of grade of streets or taking of access, together with all insurance proceeds resulting from a casualty to any portion of the Premises; and


E. LICENSES, PERMITS, EQUIPMENT LEASES
AND SERVICE AGREEMENTS


All right, title and interest of the Mortgagor in and to any licenses, permits regulatory approvals, government authorizations, franchise agreements and equipment or chattel leases, service contracts or agreements and all proceeds therefrom, arising from, issued in connection with or in any way related to the use, occupancy, operation, maintenance or security of the Premises, together with all replacements, additions, substitutions and renewals thereof, which may be assigned pursuant to agreement or law; and


F. ACCOUNTS RECEIVABLE AND GENERAL INTANGIBLES


All accounts receivable, chattel paper, general intangibles, instruments, and all proceeds therefrom, whether cash or noncash, derived by the Mortgagor from the use, occupancy or operation of the Premises, including, without limitation, all third party payments, but excepting the proceeds of any borrowed funds, and reserving to the Mortgagor a license to collect the same unless and until an Event of Default occurs under this Mortgage.


AND THE MORTGAGOR for the Mortgagor, the Mortgagor's heirs, administrators, personal representatives, successors and assigns, covenant with the Mortgagee, its successors and assigns, that the Mortgagor is lawfully seized of the Premises and has good right to sell and convey the same; that the Premises are free from all encumbrances except as may be set forth in Exhibit "B" attached hereto and made a part hereof (hereinafter referred to as the "Permitted Encumbrances"); that the Mortgagee, its successors and assigns, shall quietly enjoy and possess the Premises; and that the Mortgagor will WARRANT AND DEFEND the title to the same against all lawful claims not specifically excepted in this Mortgage.


TO HAVE AND TO HOLD THE SAME, together with the possession and right of possession of the Premises, unto the Mortgagee, its successors and assigns, forever.


PROVIDED NEVERTHELESS, that if the Mortgagor, the Mortgagor's heirs, administrators, personal representatives, successors or assigns, shall pay to the Mortgagee, its successors or assigns, the sum of Six Million Dollars ($6,000,000), according to the terms of that certain Term Note dated of even date herewith in the principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000) and that certain Revolving Note dated of even date herewith in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (hereinafter collectively referred to herein as the "Note"), the


terms and conditions of which are incorporated herein by reference and made a part hereof, together with any extensions or renewals thereof, due and payable with interest thereon at the variable rate set forth therein, executed by the Mortgagor and payable to the Mortgagee, the balance of said principal sum together with interest thereon being due and payable in any event on September 30, 2002, and shall repay to the Mortgagee, its successors or assigns, at the times demanded and with interest thereon at the same rate as specified in the Note, all sums advanced in protecting the lien of this Mortgage, including taxes, assessments, charges, claims, fines, impositions, insurance premiums, amounts due upon prior or superior mortgages and other prior or superior liens, encumbrances and interests, and legal expenses and attorney's fees and all sums advanced for any other purpose authorized herein (the Note and all such sums, together with interest thereon, being hereinafter collectively referred to as the "Indebtedness Secured Hereby"), and shall keep and perform all of the covenants and agreements herein contained, then this Mortgage shall become null and void, and shall be released at the Mortgagor's expense.


AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:


1.


1. GENERAL REPRESENTATIONS AND WARRANTIES


1.1 REPRESENTATIONS AND WARRANTIES. The Mortgagor represents and warrants as follows:


The Mortgagor is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota, is duly qualified to do business in the State of Minnesota and has all requisite power and authority to own and operate the Premises, to enter into the Note, this Mortgage, the Credit and Security Agreement dated of even date herewith (together with all amendments, supplements and restatements, the "Credit Agreement"), and any other document securing the Note and to borrow the monies and otherwise assume and perform as contemplated thereunder, and is in compliance with all laws, regulations, ordinances and orders of public authorities applicable to it.


Neither the borrowing of the monies nor the execution, delivery of the Note, this Mortgage, the Credit Agreement, or any other document securing the Note nor the performance or the provisions of the agreements therein contained on the part of the Mortgagor will contravene, violate or constitute a default under the Articles of Incorporation or By-Laws of the Mortgagor, or any agreement with the shareholders of the Mortgagor, or any creditors of the Mortgagor, or any law, ordinance, governmental regulation, agreement or indenture to which the Mortgagor is a party or by which the Mortgagor or the Mortgagor's properties are bound.


There are no (i) bankruptcy proceedings involving the Mortgagor; (ii) dissolution proceedings involving the Mortgagor; (iii) unsatisfied judgments of record against the Mortgagor; or (iv) tax liens filed against the Mortgagor.


The Note, this Mortgage, the Credit Agreement and all other documentation executed in connection with the loan evidenced by the Note have been duly executed and delivered by the Mortgagor and constitute the legal, valid and binding obligations of the Mortgagor, enforceable in accordance with their terms, except as to enforcement of remedies, as may be limited by bankruptcy, insolvency or similar laws affecting generally the enforcement of creditor's remedies.


There are no judgments, suits, actions or proceedings at law or in equity or by or before any governmental instrumentality or agency now pending against or, to the best of Mortgagor's knowledge, threatened against the Mortgagor or its properties, or both, nor has any judgment, decree or order been


issued against the Mortgagor or its properties, or both, which would have a material adverse effect on the Premises or the financial condition of the Mortgagor or Mortgagor's properties.


No consent or approval of any regulatory authority having jurisdiction over Mortgagor is necessary or required by law as a prerequisite to the execution, delivery and performance of the terms of the Note, this Mortgage, the Credit Agreement or any other document securing the Note.


The Premises is free from any mechanics' or materialmen's liens or claims. There has been no labor or materials furnished to the Premises that has not been paid for in full.


The Mortgagor has no notice, information or knowledge of any change contemplated in any applicable law, ordinance, regulation or restriction, or any judicial, administrative, governmental or quasi-governmental action, or any action by adjacent land owners, or natural or artificial condition existing upon the Premises which would limit, restrict, or prevent the contemplated or intended use and purpose of the Premises.


There is no pending condemnation or similar proceeding affecting the Premises, or any portion thereof nor, to the best knowledge of the Mortgagor, is any such action being presently contemplated.


No part of the Premises is being used for agricultural purposes.


The Premises is undamaged by fire, windstorm or other casualty.


The Mortgagor is not, as of the date hereof, in default in the payment of any of the Mortgagor's obligations.


The Premises complies with all zoning ordinances, energy and environmental codes, building and use restrictions and codes, and any requirements with respect to licenses, permits and agreements necessary for the lawful use and operation of the Premises.


The heating, electrical, sanitary sewer plumbing, storm sewer plumbing, potable water plumbing and other building equipment, fixtures and fittings are in good condition and working order, are adequate in quantity and quality for normal and usual use, and are fit for the purposes intended and the use contemplated.


1.2 CONTINUING OBLIGATION. All statements made hereunder are true and correct and all information provided to Mortgagee by the Mortgagor relating to this transaction has not and does not contain any statement which, at the time and in the light of the circumstances under which it was made, would be false and misleading with respect to any material fact, or would omit any material fact necessary in order to make any such statement contained therein not false or misleading in any material respect. Should the Mortgagor subsequently obtain knowledge that such representation was or is untrue, the Mortgagor shall immediately notify Mortgagee as to the untrue nature of said representation and agree to take such action as may be necessary to cause such representation to become true.


2. COVENANTS AND AGREEMENTS


2.1 PAYMENT OF INDEBTEDNESS: OBSERVANCE OF COVENANTS. The Mortgagor will duly and punctually pay each and every installment of principal and interest on the Note and all other Indebtedness Secured Hereby, as and when the same shall become due, and shall duly and punctually perform and observe all of the covenants, agreements and provisions contained herein, in the Note and any other instrument given as security for the payment of the Note.


2.2 MAINTENANCE: REPAIRS. The Mortgagor agrees that it will keep and maintain the Premises in good condition, repair and operating condition free from any waste or misuse, and will comply with all requirements of law, municipal ordinances and regulations, restrictions and covenants affecting the Premises and their use, and will promptly repair or restore any buildings, improvements or structures now or hereafter on the Premises which may become damaged or destroyed to their condition prior to any such damage or destruction subject to the provisions of Article 5 hereof. The Mortgagor further agrees that without the prior written consent of the Mortgagee it will not expand any improvements on the Premises, erect any new improvements or make any material alterations in any improvements which will alter the basic structure, adversely affect the market value or change the existing architectural character of the Premises, and will complete within a reasonable time any buildings now or at any time in the process of erection on the Premises. The Mortgagor agrees not to acquiesce in any rezoning classification, modification or restriction affecting the Premises without the written consent of the Mortgagee. The Mortgagor agrees that it will not abandon or vacate the Premises. The Mortgagor agrees that it will provide, improve, grade, surface and thereafter maintain, clean, repair and adequately light all parking areas within the Premises, together with any sidewalks, aisles, streets, driveways and sidewalk cuts and sufficient paved areas for ingress and right-of-way to and from the adjacent public thoroughfare necessary or desirable for the use thereof.


2.3 PAYMENT OF OPERATING COSTS; LIENS; AND PRIOR INDEBTEDNESS. The Mortgagor agrees that it will pay all operating costs and expenses of the Premises; keep the Premises free from mechanics' liens, materialmen's liens, judgment liens and other liens, executions, attachments or levies (hereinafter collectively referred to as "Liens"); and will pay when due all permitted indebtedness which may be secured by mortgage, lien or charge on the Premises and upon request will exhibit to the Mortgagee satisfactory evidence of such payment and discharge.


2.4 PAYMENT OF IMPOSITIONS. The Mortgagor will pay when due and before any penalty all taxes, installments of assessments, water charges, sewer charges and other fees, taxes, charges and assessments of every kind and nature whatsoever assessed or charged against or constituting a lien on the Premises or any interest therein or the Indebtedness Secured Hereby (hereinafter referred to as the "Impositions"); and will upon demand furnish to the Mortgagee proof of the payment of any such Impositions. In the event of a court decree or an enactment after the date hereof by any legislative authority of any law imposing upon a mortgagee the payment of the whole or any part of the Impositions herein required to be paid by the Mortgagor, or changing in any way the laws relating to the taxation of mortgages or debts secured by mortgages or a mortgagee's interest in mortgaged premises, so as to impose such Imposition on the Mortgagee or on the interest of the Mortgagee in the Premises, then, in any such event, the Mortgagor shall bear and pay the full amount of such Imposition, provided that if for any reason payment by the Mortgagor of any such Imposition would be unlawful, or if the payment thereof would constitute usury or render the Indebtedness Secured Hereby wholly or partially usurious, the Mortgagee, at its option, may declare the whole sum secured by this Mortgage with interest thereon to be immediately due and payable, without prepayment premium, or the Mortgagee, at its option, may pay that amount or portion of such Imposition as renders the Indebtedness Secured Hereby unlawful or usurious, in which event the Mortgagor shall concurrently therewith pay the remaining lawful and non-usurious portion or balance of said Imposition.


2.5 CONTEST OF LIENS AND IMPOSITIONS. The Mortgagor shall not be required to pay, discharge or remove any Liens or Impositions so long as the Mortgagor shall in good faith contest the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection of the Liens or Impositions so contested and the sale of the Premises, or any part thereof to satisfy the same, provided that the Mortgagor shall, prior to any such contest, have given such security as may be demanded by the Mortgagee to insure such payments and prevent any sale or forfeiture of the Premises by


reason of such nonpayment. Any such contest shall be prosecuted with due diligence and the Mortgagor shall promptly after final determination thereof pay the amount of any such Liens or Impositions so determined, together with all interest and penalties, which may be payable in connection therewith. Notwithstanding the provisions of this Section, the Mortgagor shall (and if the Mortgagor shall fail so to do, the Mortgagee, may but shall not be required to) pay any such Liens or Impositions notwithstanding such contest if in the reasonable opinion of the Mortgagee, the Premises shall be in jeopardy or in danger of being forfeited or foreclosed.


2.6 PROTECTION OF SECURITY. The Mortgagor agrees to promptly notify the Mortgagee of and appear in and defend any suit, action or proceeding that affects the value of the Premises, the Indebtedness Secured Hereby or the rights or interest of the Mortgagee hereunder. The Mortgagee may elect to appear in or defend any such action or proceeding and the Mortgagor agrees to indemnify and reimburse the Mortgagee from any and all loss, damage, expense or cost arising out of or incurred in connection with any such suit, action or proceeding, including costs of evidence of title and reasonable attorney's fees.


2.7 REPORTING REQUIREMENTS. During the term of this Mortgage, the Mortgagor will deliver, or cause to be delivered, to the Mortgagee all information and reports required pursuant to section 6.1 of the Credit Agreement.


2.8 ADDITIONAL ASSURANCES. The Mortgagor agrees upon reasonable request by the Mortgagee to execute and deliver such further instruments, financing statements under the Uniform Commercial Code and assurances and will do such further acts as may be necessary or proper to carry out more effectively the purposes of this Mortgage and, without limiting the foregoing, to make subject to the lien hereof any property agreed to be subjected hereto or covered by the granting clause hereof, or intended so to be. The Mortgagor agrees to pay any recording fees, filing fees, stamp taxes or other charges arising out of or incident to the filing, the issuance and delivery of the Note, the filing or recording of the Mortgage or the delivery of such further assurances and instruments as may be required pursuant to the terms of this Section.


2.9 DUE ON SALE OR MORTGAGING, ETC. In the event:


(a) the Mortgagor sells, conveys, transfers, further mortgages,
changes the form of ownership or encumbers or disposes of the
Premises, or any part thereof, or any interest therein; or


(b) any corporate ownership interest in the Mortgagor is sold,
conveyed, transferred, pledged or encumbered, whether
voluntarily or involuntarily, or there is an agreement so to do
(except as disclosed in the Credit Agreement);


without the written consent of the Mortgagee being first obtained, then at the sole option of the Mortgagee, the Mortgagee may declare the entire principal and interest evidenced by the Note due and payable in full and call for payment of the same at once, together with the prepayment premium then in effect under the terms of the Note.


2.10 UPDATED APPRAISALS. Mortgagor agrees that upon request of Mortgagee, it shall pay the costs of any updated appraisal of the Premises in form and content acceptable to Mortgagee at any time that either (a) an Event of Default shall have occurred hereunder, or (b) Mortgagee determines in its commercially reasonable judgment that the security for the loan evidenced by the Note has been physically or financially impaired in any material manner.


3. INSURANCE


3.1 INSURANCE. The Mortgagor shall obtain and keep in full force and effect during the term of this Mortgage at its sole cost and expense the following insurance:


(a) insurance against loss by fire, lightning and risk customarily
covered by standard extended coverage endorsement, including the
cost of debris removal, together with a vandalism and malicious
mischief endorsement, or all perils endorsements, all in the
amount of not less than the full replacement cost of the
improvements on the Premises, and together with an
inflation-guard endorsement, an agreed-amount endorsement, a
replacement cost endorsement and a waiver of subrogation
endorsement;


(b) Broad Form Boiler and Machinery Insurance on all equipment and
pressure-fired vehicles or apparatus situate on the Premises,
and providing for full repair and replacement cost coverage;


(c) Flood Insurance in such minimal amounts and with such minimal
limits as the Mortgagee may require unless evidence is provided
that the Premises are not within a flood plain as defined by the
Federal Insurance Administration and the Premises is not
designated as being within a flood plain during the term of this
Mortgage;


(d) Comprehensive General Public Liability Insurance covering the
legal liability of the Mortgagor against claims for bodily
injury, death or property damage occurring on, in or about the
Premises in such minimal amounts and with such minimal limits as
the Mortgagee may require;


(e) Sprinkler Insurance, if applicable;


(f) Contingent Liability Insurance and Worker's Compensation
Insurance during the making of any alterations or improvements
to t ...