SECURITY AGREEMENT
1. Identification.
This
Security Agreement (the "Agreement"), dated for identification purposes only
May
____, 2006, is entered into by and between New World Entertainment Corp., a
Nevada corporation ("Debtor"), __________________________, _____________________
and ______________________ (referred to herein individually as a “Shareholder”
and collectively “Shareholders”) and Xxxx Xxxxxxxx, as collateral agent [acting
in the manner and to the extent described in the Collateral Agent Agreement
defined below] (the "Collateral Agent"), for the benefit of the parties
identified as Lenders pursuant to the Loan Agreement entered into among the
Debtor and the Lenders on May 3, 2006 (the "Lender").
2. Recitals.
2.1 The
Lenders have made loans to Debtor (the "Loan").
2.2 The
Loans
are evidenced by the Promissory Notes described on Schedule A hereto (the
“Notes”) and executed by Debtor as the "Borrower" thereof, for the benefit of
each individual Lender as the "Holder" thereof.
2.3 In
order
to induce the Lenders to make the Loans, and as security for Debtor's
performance of its obligations under the Note and as security for the repayment
of the Loan and any and all other sums due from Debtor to Lender whether arising
under the Note issued pursuant to the Loan Agreement entered into between Debtor
and the Lender relating to the Note, or pursuant to other written instruments
and agreements entered into by the Debtor and a Lender, whether before or after
the date hereof, and further specifically including all of the Debtor's
obligations arising under the Notes and the Loan Agreement relating thereto
(collectively, the "Obligations"), the Shareholders for good and valuable
consideration, receipt of which is acknowledged, have agreed to grant to the
Collateral Agent, for the benefit of the Lenders, a security interest in certain
property specified in this Agreement, on the terms and conditions hereinafter
set forth.
2.4 The
Lenders have appointed Xxxx Xxxxxxxx as Collateral Agent pursuant to that
certain Collateral Agent Agreement dated as of May ___, 2006, among the Lender
and the Collateral Agent.
1
Defined
Terms.
The
following defined terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
Instruments, Inventory and Proceeds.
3. Grant
of General Security Interest in Collateral.
3.1 As
security for the Obligations, Shareholders hereby grant the Collateral Agent,
for the benefit of the Lenders, a security interest in the Collateral.
3.2 “Collateral”
shall mean all of the following property of the
Shareholders:
2
The
Shareholders hereby grant the Collateral Agent, for the
benefit of the Lenders, a security interest
in and
deposits
with the
Collateral Agent, the common stock of the Debtor as set forth on Schedule B
hereto, together with notarized stock powers and corporate resolutions
acceptable to the Debtor’s transfer agent (“Security Shares”). Such Collateral
shall include, but not be limited to, all the Debtor’s right, title and interest
in and to the Security Shares, together with the proceeds of any sale, exchange,
liquidation or other disposition, whether voluntary or involuntary, and
including but not limited to any securities, instruments, and all benefits
and
entitlements evidenced by or arising out of the Security Shares and all other
securities, instruments and other property (whether real or personal, tangible
or intangible) issued or accepted in substitution for, or in addition to, the
foregoing, and all dividends, interest, cash, instruments, distributions,
income, securities and any other property (whether real or personal, tangible
or
intangible) at any time received, receivable or otherwise distributed in respect
of, or in exchange for, the foregoing, whether now owned or hereafter acquired,
and any and all improvements, additions, replacements, substitutions and any
and
all proceeds arising out of or derived from the foregoing. The Collateral Agent
is hereby specifically authorized to transfer any Security Shares into the
name
of the Collateral Agent and to take any and all action deemed advisable to
the
Collateral Agent to remove any transfer restrictions affecting the Security
Shares.
3.3 The
Collateral Agent is hereby specifically authorized to transfer any Collateral
into the name of the Collateral Agent and to take any and all action deemed
advisable to the Collateral Agent to remove any transfer restrictions affecting
the Collateral.
4. Perfection
of Security Interest.
Shareholders
shall execute and deliver to the Collateral Agent UCC-1 Financing Statements
("Financing Statements") assigning to the Collateral Agent security interests
in
Shareholders’ right, title and interest in and to the Collateral. Debtor and
Shareholders hereby authorize the Collateral Agent to file such Financing
Statements at the Debtor’s expense, in such filing locations as the Collateral
Agent deems appropriate.
5. Distribution
on Liquidation.
5.1 If
any
sum is paid as a liquidating distribution on or with respect to the Collateral,
Shareholders shall accept same in trust for the Lenders and shall deliver same
to the Collateral Agent to be applied to the Obligations then due, in accordance
with the terms of the Notes.
3
5.2 Prior
to
any Event of Default (as defined herein), Debtor and Shareholders shall be
entitled to exercise all voting power pertaining to any of the Collateral,
provided such exercise is not contrary to the interests of the Lenders and
does
not impair the Collateral.
6. Further
Action By Debtor and Covenants and Warrants.
6.1 Collateral
Agent at all times shall have a perfected security interest in the Collateral
which shall be prior to any other unperfected interest therein. Shareholders
have and will continue to have full title to the Collateral free from any liens,
leases, encumbrances, judgments or other claims, Collateral Agent's security
interest in the Collateral constitutes and will continue to constitute a first,
prior and indefeasible security interest in favor of Collateral Agent.
Shareholders will do all acts and things, and will execute and file all
instruments (including, but not limited to, security agreements, financing
statements, continuation statements, etc.) reasonably requested by the
Collateral Agent to establish, maintain and continue the perfected security
interest of Collateral Agent in the Collateral, and Debtor will promptly on
demand, pay all costs and expenses of filing and recording, including the costs
of any searches deemed necessary by Collateral Agent from time to time to
establish and determine the validity and the continuing priority of the security
interest of Collateral Agent, and Debtor will also pay all other claims and
charges that in the opinion of Collateral Agent might prejudice, imperil or
otherwise affect the Collateral or its security interest therein.
6.2 Debtor
and Shareholders will not sell, transfer, assign or pledge those items of
Collateral (or allow any such items to be sold, transferred, assigned or
pledged), without the prior written consent of Collateral Agent. Although
proceeds of Collateral are covered by this Security Agreement, this shall not
be
construed to mean that Collateral Agent consents to any sale of the
Collateral.
6.3 Debtor
and Shareholders will, at all reasonable times, allow Collateral Agent or its
representatives free and complete access to all of Debtor 's records which
in
any way relate to the Collateral, for such inspection and examination as
Collateral Agent deems necessary.
6.4 Debtor
and Shareholders, at their sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Collateral Agent hereunder, and the
Collateral against the claims and demands of all other parties.
6.5 Debtor
and Shareholders will promptly notify Collateral Agent of any levy, distraint
or
other seizure by legal process or otherwise of any part of the Collateral,
and
of any threatened or filed claims or proceedings that might in any way affect
or
impair any of the rights of Collateral Agent under this Security
Agreement.
4
6.6 Debtor
and Shareholders, at their own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of Collateral which
constitute physical personal property. The insurance policies to be obtained
by
Debtor and Shareholders shall be in form and amounts reasonably acceptable
to
Collateral Agent. Debtor and Shareholders shall make the Collateral Agent a
loss
payee thereon. Collateral Agent is hereby irrevocably appointed Debtor's and
Shareholders’ attorney-in-fact to endorse any check or draft that may be payable
to Debtor or Shareholders, so that Collateral Agent may collect the proceeds
payable for any loss under such insurance. The proceeds of such insurance,
less
any costs and expenses incurred or paid by Collateral Agent in the collection
thereof, shall be applied either toward the cost of the repair or replacement
of
the items damaged or destroyed, or on account of any sums secured hereby,
whether or not then due or payable.
6.7 Collateral
Agent may, at its option, and without any obligation to do so, pay, perform
and
discharge any and all amounts, costs, expenses and liabilities herein agreed
to
be paid or performed by Debtor or Shareholders, and all amounts expended by
Collateral Agent in so doing shall become part of the Obligations secured
hereby, and shall be immediately due and payable by Debtor and Shareholders
to
Collateral Agent upon demand and shall bear interest at 18% per annum from
the
dates of such expenditures until paid.
6.8 Upon
the
request of Collateral Agent, Debtor and Shareholders will furnish within five
(5) days thereafter to Collateral Agent, or to any proposed assignee of this
Security Agreement, a written statement in form satisfactory to Collateral
Agent, duly acknowledged, certifying the amount of the principal and interest
then owing under the Obligations, whether any claims, offsets or defenses exist
against the Obligations or against this Security Agreement, or any of the terms
and provisions of any other agreement of Debtor or Shareholders securing the
Obligations. In connection with any assignment by Collateral Agent of this
Security Agreement, Shareholders hereby agree to cause the insurance policies
required hereby to be carried by Debtor and Shareholders, if any, to be endorsed
in form satisfactory to Collateral Agent or to such assignee, with loss payable
clauses in favor of such assignee, and to cause such endorsements to be
delivered to Collateral Agent within ten (10) calendar days after request
therefor by Collateral Agent.
6.9 The
Shareholders will, at their own expense, make, execute, endorse, acknowledge,
file and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports
and
other assurances or instruments and take further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, as the Collateral Agent may reasonable require.
5
6.10 Shareholders
represent and warrant that they are the true and lawful exclusive owners of
the
Collateral, free and clear of any liens and encumbrances.
6.11 Shareholders
hereby agree not to divest themselves of any right under the Collateral absent
prior written approval of the Collateral Agent.
6.12 Shareholders
will cooperate and provide such certificate, resolutions, representations,
legal
opinions and all other matters necessary to facilitate a sale of any part of
the
Collateral pursuant to Rule 144 under the Securities Act of 1933.
7. Power
of Attorney.
Debtor
and Shareholders hereby irrevocably constitute and appoint the Collateral Agent
as the true and lawful attorney of Debtor and Shareholders, with full power
of
substitution, in the place and stead of Debtor and Shareholders and in the
name
of Debtor and Shareholders or otherwise, at any time or times, in the discretion
of the Collateral Agent, to take any action and to execute any instrument or
document which the Collateral Agent may deem necessary or advisable to
accomplish the purposes of this Agreement which Debtor or Shareholders fail
to
take or fails to execute within five (5) business days of the Collateral Agent's
reasonable request therefor. This power of attorney is coupled with an interest,
is irrevocable and shall not be affected by any subsequent disability or
incapacity of Debtor or Shareholders.
8. Performance
By The Collateral Agent.
If
Debtor
or Shareholders fail to perform any material covenant, agreement, duty or
obligation of Debtor or Shareholders under this Agreement, the Collateral Agent
may, at any time or times in its discretion, take action to effect performance
of such obligation. All reasonable expenses of the Collateral Agent incurred
in
connection with the foregoing authorization shall be payable by Debtor and
Shareholders as provided in Paragraph 12.1 hereof. No discretionary right,
remedy or power granted to the Collateral Agent under any part of this Agreement
shall be deemed to impose any obligation whatsoever on the Collateral Agent
with
respect thereto, such rights, remedies and powers being solely for the
protection of the Collateral Agent.
9. Event
of Default.
An
event
of default ("Event of Default") shall be deemed to have occurred hereunder
upon
the occurrence of any event of default as defined in the Notes or the Loan
Agreement. Upon and after any Event of Default, after the applicable cure
period, if any, any or all of the Obligations shall become immediately due
and
payable at the option of the Collateral Agent, for the benefit of the Lenders,
and the Collateral Agent may dispose of Collateral as provided below. A default
by Debtor or Shareholders of any of their obligations pursuant to this Agreement
shall be deemed an Event of Default hereunder and an event of default as defined
in the Obligations.
6
10. Disposition
of Collateral.
Upon
and
after any Event of Default which is then continuing,
10.1 The
Collateral Agent may exercise its rights with respect to each and every
component of the Collateral, without regard to the existence of any other
security or source of payment for the Obligations. In addition to other rights
and remedies provided for herein or otherwise available to it, the Collateral
Agent shall have all of the rights and remedies of a lender on default under
the
Uniform Commercial Code ("Code") then in effect in the State of New
York.
10.2 If
any
notice to Shareholders of the sale or other disposition of Collateral is
required by then applicable law, five (5) days' prior notice (or, if longer,
the
shortest period of time permitted by then applicable law) to Shareholders of
the
time and place of any public sale of Collateral or of the time after which
any
private sale or any other intended disposition is to be made, shall constitute
reasonable notification.
10.3 The
Collateral Agent is authorized, at any such sale, if the Collateral Agent deems
it advisable to do so, in order to comply with any applicable securities laws,
to restrict the prospective bidders or purchasers to persons who will represent
and agree, among other things, that they are purchasing the Collateral for
their
own account for investment, and not with a view to the distribution or resale
thereof, or otherwise to restrict such sale in such other manner as the
Collateral Agent deems advisable to ensure such compliance. Sales made subject
to such restrictions shall be deemed to have been made in a commercially
reasonable manner.
10.4 All
cash
proceeds received by the Collateral Agent for the benefit of the Lenders in
respect of any sale, collection or other enforcement or disposition of
Collateral, shall be applied (after deduction of any amounts payable to the
Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations.
Upon payment in full of all Obligations, Shareholders shall be entitled to
the
return of all Collateral, including cash, which has not been used or applied
toward the payment of Obligations or used or applied to any and all costs or
expenses of the Collateral Agent incurred in connection with the liquidation
of
the Collateral (unless another person is legally entitled thereto). Any
assignment of Collateral by the Collateral Agent to Shareholders shall be
without representation or warranty of any nature whatsoever and wholly without
recourse. The Lenders may purchase the Collateral and pay for such purchase
by
offsetting any sums owed to Lender by Debtor arising under the Obligations
or
any other source.
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10.5 No
exercise by the Collateral Agent of any right hereby given it, no dealing by
the
Collateral Agent with Debtor, Shareholders or any other person, and no change,
impairment or suspension of any right or remedy of the Collateral Agent shall
in
any way affect any of the obligations of Debtor or Shareholders hereunder or
any
Collateral furnished by Debtor or Shareholders or give Debtor or Shareholders
any recourse against the Collateral Agent.
11. Waiver
of Automatic Stay.
The
Debtor and Shareholders acknowledge and agree that should a proceeding under
any
bankruptcy or insolvency law be commenced by or against the Debtor or
Shareholders, or if any of the Collateral (as defined in the Security Agreement)
should become the subject of any bankruptcy or insolvency proceeding, then
the
Collateral Agent should be entitled to, among other relief to which the
Collateral Agent may be entitled under the Note, Security Agreement, the Loan
Agreement and any other agreement to which the Debtor, Shareholders, Lenders
or
Collateral Agent are parties, (collectively "Loan Documents") and/or applicable
law, an order from the court granting immediate relief from the automatic stay
pursuant to 11 U.S.C. Section 362 to permit the Collateral Agent to exercise
all
of its rights and remedies pursuant to the Loan Documents and/or applicable
law.
THE DEBTOR AND SHAREHOLDERS EXPRESSLY WAIVE THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, THE DEBTOR AND SHAREHOLDERS
EXPRESSLY ACKNOWLEDGE AND AGREE THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY
OTHER
SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT
LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE
OR
INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS
RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. The Debtor
and Shareholders hereby consent to any motion for relief from stay which may
be
filed by the Collateral Agent in any bankruptcy or insolvency proceeding
initiated by or against the Debtor and Shareholders, further, agree not to
file
any opposition to any motion for relief from stay filed by the Collateral Agent.
The Debtor and Shareholders represent, acknowledge and agree that this provision
is a specific and material aspect of this Agreement, and that the Collateral
Agent would not agree to the terms of this Agreement if this waiver were not
a
part of this Agreement. The Debtor and Shareholders further represent,
acknowledge and agree that this waiver is knowingly, intelligently and
voluntarily made, that neither the Collateral Agent nor any person acting on
behalf of the Collateral Agent has made any representations to induce this
waiver, that the Debtor and Shareholders have been represented (or has had
the
opportunity to be represented) in the signing of this Agreement and in the
making of this waiver by independent legal counsel selected by the Debtor and
Shareholders and that the Debtor and Shareholders have had the opportunity
to
discuss this waiver with counsel. The Debtor and Shareholders further agree
that
any bankruptcy or insolvency proceeding initiated by the Debtor or Shareholders
and will only be brought in courts within the geographic boundaries of New
York
State.
8
12. Miscellaneous.
12.1 Expenses.
Debtor
and Shareholders shall severally pay to the Collateral Agent, on demand, the
amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any
or
all of the Obligations; or (c) failure by Debtor or Shareholders to perform
and
observe any agreements of Debtor or Shareholders contained herein which are
performed by the Collateral Agent.
12.2 Waivers,
Amendment and Remedies.
No
courses of dealing by the Collateral Agent and no failure by the Collateral
Agent to exercise, or delay by the Collateral Agent in exercising, any right,
remedy or power hereunder shall operate as a waiver thereof, and no single
or
partial exercise thereof shall preclude any other or further exercise thereof
or
the exercise of any other right, remedy or power of the Collateral Agent. No
amendment, modification or waiver of any provision of this Agreement and no
consent to any departure by Debtor or Shareholders therefrom, shall, in any
event, be effective unless contained in a writing signed by the Collateral
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. The rights, remedies
and
powers of the Collateral Agent, not only hereunder, but also under any
instruments and agreements evidencing or securing the Obligations and under
applicable law are cumulative, and may be exercised by the Collateral Agent
from
time to time in such order as the Collateral Agent may elect.
12.3 Notices.
Any
notice or other communications under the provisions of this Agreement shall
be
given in writing and delivered in person, by reputable overnight courier or
delivery service, by facsimile machine (receipt conformed) with a copy sent
by
first class mail on the date of transmissions, or by registered or certified
mail, return receipt requested, directed to its addresses set forth below (or
to
any new address of which either party hereto shall have informed the other
by
the giving of notice in the manner provided herein):
To
Debtor:
New
World
Entertainment Corp.
0000
Xxxx
Xxxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Fax:
(000) 000-0000
With
a
copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx Xxx Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxxx Xxxxxxxx, Esq.
Fax:
(212) 93-9725
To
Shareholders:
____________________
____________________
____________________
____________________
Fax: ( ) -
To
Lenders:
To
the
addresses and telecopier numbers
Set
forth
on Schedule A hereto
To
the
Collateral Agent:
Xxxx
Xxxxxxxx
______________________
______________________
______________________
Telephone:
Fax:
Any
party
may change its address by written notice in accordance with this
paragraph.
9
12.4 Term:
Binding Effect.
This
Agreement shall (a) remain in full force and effect until payment and
satisfaction in full of all of the Obligations; (b) be binding upon Debtor
and
Shareholders, and their successors and assigns; and (c) inure to the benefit
of
the Collateral Agent, for the benefit of the Lenders and their heirs, legal
representatives, successors in title and assigns.
12.5 Captions.
The
captions of Paragraphs, Articles and Sections in this Agreement have been
included for convenience of reference only, and shall not define or limit the
provisions hereof and have no legal or other significance
whatsoever.
12.6 Governing
Law; Venue; Severability.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to principles of conflicts or choice of law,
except to the extent that the perfection of the security interest granted hereby
in respect of any item of Collateral may be governed by the law of another
jurisdiction. Any legal action or proceeding against the Debtor and Shareholders
with respect to this Agreement may be brought in the courts of the State of
New
York or of the United States for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the Debtor and Shareholders
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The Debtor and
Shareholders hereby irrevocably waive any objection which they may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in
the
aforesaid courts and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. If any provision of this
Agreement, or the application thereof to any person or circumstance, is held
invalid, such invalidity shall not affect any other provisions which can be
given effect without the invalid provision or application, and to this end
the
provisions hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect.
12.7 Counterparts/Execution.
This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
10
IN
WITNESS WHEREOF, the
undersigned have executed and delivered this Security Agreement, as of the
date
first written above.
"DEBTOR"
NEW
WORLD
ENTERTAINMENT CORP.
a
Nevada
corporation
By:
_________________________________
Xxxxxxxx
Xxxxxx
President
and Director
“SHAREHOLDERS”
___________________________________
Name:
___________________________________
Name:
___________________________________
Name:
"THE
COLLATERAL AGENT"
___________________________________
Xxxx
Xxxxxxxx
This
Security Agreement may be executed by facsimile signature and delivered by
confirmed facsimile transmission.
11
SECURITY
AGREEMENT - SCHEDULE A
|
LENDER
|
PRINCIPAL
AMOUNT OF SECURED CONVERTIBLE NOTES
|
|
c/o
000-000 X. Xxxxxxxx Xx.
Xxxxxxxxx,
XX X0X 0X0
Attn:
Xxxx Xxxxxx
|
$2,000,000.00
|
|
555
Holdings LLC
c/o
000-000 X. Xxxxxxxx Xx.
Xxxxxxxxx,
XX X0X 0X0
Attn:
Xxxx Xxxxxx
|
$1,250,000.00
|
|
TOTAL
|
$3,250,000.00
|
12
SECURITY
AGREEMENT - SCHEDULE B
SECURITY
SHARES
|
DEPOSITOR
|
DEPOSITED
SHARES COMPRISING A PORTION OF THE COLLATERAL
|
|
________________________
________________________
[SHAREHOLDER’S
NAME]
|
________________
common shares ($.001 par value per share) of New World Entertainment
Corp.
|
|
________________________
________________________
[SHAREHOLDER’S
NAME]
|
________________
common shares ($.001 par value per share) of New World Entertainment
Corp.
|
|
________________________
________________________
[SHAREHOLDER’S
NAME]
|
________________
common shares ($.001 par value per share) of New World Entertainment
Corp.
|
