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.
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:
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.
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
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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.
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
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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.
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
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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.
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.
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
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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.
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
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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.
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.
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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]
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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.
SECURITY AGREEMENT - SCHEDULE A
------------------------------------------------------------ --------------------------------
LENDER PRINCIPAL AMOUNT OF SECURED
CONVERTIBLE NOTES
------------------------------------------------------------ --------------------------------
Global Developments Inc. $2,000,000.00
c/o 000-000 X. Xxxxxxxx Xx.
Xxxxxxxxx, XX X0X 0X0
Attn: Xxxx Xxxxxx
------------------------------------------------------------ --------------------------------
555 Holdings LLC $1,250,000.00
c/o 000-000 X. Xxxxxxxx Xx.
Xxxxxxxxx, XX X0X 0X0
Attn: Xxxx Xxxxxx
------------------------------------------------------------ --------------------------------
TOTAL $3,250,000.00
------------------------------------------------------------ --------------------------------
SECURITY AGREEMENT - SCHEDULE B
SECURITY SHARES
_________________________________________ ________________________________________________________
DEPOSITOR DEPOSITED SHARES COMPRISING A PORTION OF THE COLLATERAL
__________________________________________ _______________________________________________________
________________________ ________________ common shares ($.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.
[SHAREHOLDER'S NAME]
__________________________________________ _______________________________________________________
