SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of March 21, 2005, by and between HEADLINERS ENTERTAINMENT
GROUP, INC., a Delaware corporation (the "Company"), and CORNELL CAPITAL
PARTNERS, LP (the "Secured Party") at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx
Xxxx, Xxx Xxxxxx 00000.
WHEREAS, the Company has issued to the Secured Party a twelve percent
(12%) secured Promissory Note (the "Note") dated the date hereof;
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Note, the Company hereby grants to the Secured Party a
security interest in and to the pledged property identified on Exhibit "A"
hereto (collectively referred to as the "Pledged Property") until the
satisfaction of the Obligations, as defined herein below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration,
the adequacy and receipt of which are hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
The above recitals are true and correct and are incorporated herein,
in their entirety, by this reference.
Section 1.2. Interpretations.
Nothing herein expressed or implied is intended or shall be construed
to confer upon any person other than the Secured Party any right, remedy or
claim under or by reason hereof.
Section 1.3 Obligations Secured.
The obligations secured hereby are any and all obligations of the
Company to the Secured Party, whether oral or written and whether arising
before, on or after the date hereof including, without limitation, those
obligations of the Company to the Secured Party under the Note, and the
principal amounts thereof outstanding from time to time, and any other
amounts payable by or chargeable to the Company thereunder or hereunder
(collectively, the "Obligations").
ARTICLE 2.
PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL AND TERMINATION OF
SECURITY INTEREST
Section 2.1. Pledged Property.
(a) The Company hereby pledges to the Secured Party, and
creates in the Secured Party for its benefit, a security interest for such
time until the Obligations are paid in full, in and to all of the Pledged
Property:
The Pledged Property, as set forth in Exhibit "A" attached hereto,
and the products thereof and the proceeds of all such items are hereinafter
collectively referred to as the "Pledged Collateral."
(b) Simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge and deliver to the
Secured Party a UCC-1 financing statement as well as such documents and
instruments, including, without limitation, financing statements,
certificates, affidavits and forms as may, in the Secured Party's
reasonable judgment, be necessary to effectuate, complete or perfect, or to
continue and preserve, the security interest of the Secured Party in the
Pledged Property, and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and conditions contained
herein.
Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter
defined) shall have occurred and be continuing:
(i) the Company shall be entitled to exercise any
and all rights pertaining to the Pledged Property or any part thereof for any
purpose not inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and
retain any and all payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) All rights of the Company to exercise the
rights which it would otherwise be entitled to exercise pursuant to
Section 2.2(a)(i) hereof and to receive payments which it would otherwise
be authorized to receive and retain pursuant to Section 2.2(a)(ii) hereof
shall be suspended, and all such rights shall thereupon become vested in
the Secured Party who shall thereupon have the sole right to exercise such
rights and to receive and hold as Pledged Collateral such payments;
provided, however, that if the Secured Party shall become entitled and
shall elect to exercise its right to realize on the Pledged Collateral
pursuant to Article 5 hereof, then all cash sums received by the Secured
Party, or held by Company for the benefit of the Secured Party and paid
over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and
(ii) All interest, dividends, income and other
payments and distributions which are received by the Company contrary to the
provisions of Section 2.2(b)(i) hereof shall be received in trust for the
benefit of the Secured Party, shall be segregated from other property of
the Company and shall be forthwith paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall
be authorized to sell any or all of the Pledged Property at public or private
sale in order to recoup all of the outstanding principal plus accrued
interest owed pursuant to the Note as described herein
(c) Each of the following events shall constitute a default
under this Agreement (each an "Event of Default"):
(i) any default, whether in whole or in part, shall
occur in the payment to the Secured Party of principal, interest or any
other item comprising the Obligations as and when due or with respect to
any other debt or obligation of the Company to a party other than the
Secured Party;
(ii) any default, whether in whole or in part, shall
occur in the due observance or performance of any obligations or other
covenants, terms or provisions to be performed under this Agreement, the
Note, the Irrevocable Transfer Agent Instructions, and the Form UCC-1
executed as of the date hereof in favor of the Secured Party (collectively
referred to as the "Transaction Documents");
(iii) the Company shall: (1) make a general assign-
ment for the benefit of its creditors; (2) apply for or consent to the
appointment of a receiver, trustee, assignee, custodian, sequestrator,
liquidator or similar official for itself or any of its assets and
properties; (3) commence a voluntary case for relief as a debtor under the
United States Bankruptcy Code; (4) file with or otherwise submit to any
governmental authority any petition, answer or other document seeking:
(A) reorganization, (B) an arrangement with creditors or (C) to take
advantage of any other present or future applicable law respecting
bankruptcy, reorganization, insolvency, readjustment of debts, relief of
debtors, dissolution or liquidation; (5) file or otherwise submit any
answer or other document admitting or failing to contest the material
allegations of a petition or other document filed or otherwise submitted
against it in any proceeding under any such applicable law, or (6) be
adjudicated a bankrupt or insolvent by a court of competent jurisdiction;
or
(iv) any case, proceeding or other action shall be
commenced against the Company for the purpose of effecting, or an order,
judgment or decree shall be entered by any court of competent jurisdiction
approving (in whole or in part) anything specified in
Section 2.2(c)(iii) hereof, or any receiver, trustee, assignee, custodian,
sequestrator, liquidator or other official shall be appointed with respect
to the Company, or shall be appointed to take or shall otherwise acquire
possession or control of all or a substantial part of the assets and
properties of the Company, and any of the foregoing shall continue unstayed
and in effect for any period of thirty (30) days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Company hereby
appoints the Secured Party as its attorney-in-fact, with full authority in
the place and stead of the Company and in the name of the Company or
otherwise, from time to time in the Secured Party's discretion to take any
action and to execute any instrument which the Secured Party may reasonably
deem necessary to accomplish the purposes of this Agreement, including,
without limitation, to receive and collect all instruments made payable to
the Company representing any payments in respect of the Pledged Collateral
or any part thereof and to give full discharge for the same. The Secured
Party may demand, collect, receipt for, settle, compromise, adjust, xxx
for, foreclose, or realize on the Pledged Property as and when the Secured
Party may determine. To facilitate collection, the Secured Party may
notify account debtors and obligors on any Pledged Property or Pledged
Collateral to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of,
such agreement, and the expenses of the Secured Party incurred in
connection therewith shall be included in the Obligations secured hereby
and payable by the Company under Section 8.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Authorization; Enforceability.
Each of the parties hereto represents and warrants that it has taken
all action necessary to authorize the execution, delivery and performance
of this Agreement and the transactions contemplated hereby; and upon
execution and delivery, this Agreement shall constitute a valid and binding
obligation of the respective party, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights or by the principles governing the availability of
equitable remedies.
Section 4.2. Ownership of Pledged Property.
The Company warrants and represents that it is the legal and
beneficial owner of the Pledged Property free and clear of any lien,
security interest, option or other charge or encumbrance except for the
security interests identified on Exhibit A hereto and the security interest
created by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. Default and Remedies.
(a) If an Event of Default described in Section 2.2(c)(i)
and (ii) occurs, then in each such case the Secured Party may declare the
Obligations to be due and payable immediately, by a notice in writing to
the Company, and upon any such declaration, the Obligations shall become
immediately due and payable. If an Event of Default described in
Sections 2.2(c)(iii) or (iv) occurs and is continuing for the period set
forth therein, then the Obligations shall automatically become immediately
due and payable without declaration or other act on the part of the Secured
Party.
(b) Upon the occurrence of an Event of Default, the Secured
Party shall,: (i) be entitled to receive all distributions with respect to
the Pledged Collateral, (ii) to cause the Pledged Property to be
transferred into the name of the Secured Party or its nominee, (iii) to
dispose of the Pledged Property, and (iv) to realize upon any and all
rights in the Pledged Property then held by the Secured Party.
Section 5.2. Method of Realizing Upon the Pledged Property: Other
Remedies.
Upon the occurrence of an Event of Default, in addition to any rights
and remedies available at law or in equity, the following provisions shall
govern the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or
other value in any number of lots at brokers board, public auction or
private sale and may be sold without demand, advertisement or notice
(except that the Secured Party shall give the Company ten (10) days' prior
written notice of the time and place or of the time after which a private
sale may be made (the "Sale Notice")), which notice period shall in any
event is hereby agreed to be commercially reasonable. At any sale or sales
of the Pledged Property, the Company may bid for and purchase the whole or
any part of the Pledged Property and, upon compliance with the terms of
such sale, may hold, exploit and dispose of the same without further
accountability to the Secured Party. The Company will execute and deliver,
or cause to be executed and delivered, such instruments, documents,
assignments, waivers, certificates, and affidavits and supply or cause to
be supplied such further information and take such further action as the
Secured Party reasonably shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged
Collateral and all cash proceeds received by the Secured Party in respect
of, sale of, collection from, or other realization upon all or any part of
the Pledged Collateral shall be applied as follows:
(i) to the payment of all amounts due the Secured
Party for the expenses reimbursable to it hereunder or owed to it pursuant to
Section 8.3 hereof;
(ii) to the payment of the Obligations then due and
unpaid.
(iii) the balance, if any, to the person or persons
entitled thereto, including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the
Secured Party may have pursuant to this Agreement, the Secured Party shall
have all of the rights and remedies provided by law, including, without
limitation, those under the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due
upon the occurrence of an Event of Default which is continuing, then the Secured
Party may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree
and may enforce the same against the Company and collect the monies
adjudged or decreed to be payable in the manner provided by law out of the
property of Company, wherever situated.
(ii) The Company agrees that it shall be liable for
any reasonable fees, expenses and costs incurred by the Secured Party in
connection with enforcement, collection and preservation of the Transaction
Documents, including, without limitation, reasonable legal fees and
expenses, and such amounts shall be deemed included as Obligations secured
hereby and payable as set forth in Section 8.3 hereof.
Section 5.3. Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relating to the Company or the
property of the Company or of such other obligor or its creditors, the
Secured Party (irrespective of whether the Obligations shall then be due
and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Secured Party shall have made any demand on the
Company for the payment of the Obligations), shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount
of the Obligations and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Secured Party
(including any claim for the reasonable legal fees and expenses and other
expenses paid or incurred by the Secured Party permitted hereunder and of
the Secured Party allowed in such judicial proceeding), and
(ii) to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by the Company to make such payments to the Secured Party and, in the event
that the Secured Party shall consent to the making of such payments
directed to the Secured Party, to pay to the Secured Party any amounts for
expenses due it hereunder.
Section 5.4. Duties Regarding Pledged Collateral.
The Secured Party shall have no duty as to the collection or
protection of the Pledged Property or any income thereon or as to the
preservation of any rights pertaining thereto, beyond the safe custody and
reasonable care of any of the Pledged Property actually in the Secured
Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until
the Obligations have been fully paid and satisfied, unless the Secured
Party shall consent otherwise in writing (as provided in Section 8.4
hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company shall do, or cause to be done, all things,
or proceed with due diligence with any actions or courses of action, that may
be reasonably necessary (i) to maintain Company's due organization, valid
existence and good standing under the laws of its state of incorporation,
and (ii) to preserve and keep in full force and effect all qualifications,
licenses and registrations in those jurisdictions in which the failure to
do so could have a Material Adverse Effect (as defined below); and (b) the
Company shall not do, or cause to be done, any act impairing the Company's
corporate power or authority (i) to carry on the Company's business as now
conducted, and (ii) to execute or deliver this Agreement or any other
document delivered in connection herewith, including, without limitation, a
UCC-1 Financing Statement required by the Secured Party to which it is or
will be a party, or perform any of its obligations hereunder or thereunder.
For purpose of this Agreement, the term "Material Adverse Effect" shall
mean any material and adverse affect as determined by Secured Party in its
sole discretion, whether individually or in the aggregate, upon (a) the
Company's assets, business, operations, properties or condition, financial
or otherwise; (b) the Company's ability to make payment as and when due of
all or any part of the Obligations; or (c) the Pledged Property.
Section 6.2 Financial Statements and Reports.
The Company shall furnish to the Secured Party such financial data as
the Secured Party may reasonably request. Without limiting the foregoing,
the Company shall furnish to the Secured Party (or cause to be furnished to
the Secured Party) the following:
(a) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year of the Company, the balance
sheet of the Company as of the close of such fiscal year, the statement of
earnings and retained earnings of the Company as of the close of such
fiscal year, and statement of cash flows for the Company for such fiscal
year, all in reasonable detail, prepared in accordance with generally
accepted accounting principles consistently applied, certified by the chief
executive and chief financial officers of the Company as being true and
correct and accompanied by a certificate of the chief executive and chief
financial officers of the Company, stating that the Company has kept,
observed, performed and fulfilled each covenant, term and condition of this
Agreement and the Transaction Documents during such fiscal year and that
no Event of Default hereunder has occurred and is continuing, or if an
Event of Default has occurred and is continuing, specifying the nature of
same, the period of existence of same and the action the Company proposes
to take in connection therewith; and
(b) promptly upon receipt thereof, copies of all
accountants' reports and accompanying financial reports submitted to the Company
by independent accountants in connection with each annual examination of the
Company.
Section 6.3 Accounts and Reports.
The Company shall maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently
applied and provide, at its sole expense, to the Secured Party the
following:
(b) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default,
or any foreclosure or other action respecting any material portion of its
assets and properties, received respecting any of the indebtedness of the
Company in excess of $15,000 (other than the Obligations), or any demand or
other request for payment under any guaranty, assumption, purchase
agreement or similar agreement or arrangement respecting the indebtedness
or obligations of others in excess of $15,000, including any received from
any person acting on behalf of the Secured Party or beneficiary thereof;
and
(c) within fifteen (15) days after the making of each
submission or filing, a copy of any report, financial statement, notice or
other document, whether periodic or otherwise, submitted to the
shareholders of the Company, or submitted to or filed by the Company with
any governmental authority.
Section 6.4 Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in
accordance with generally accepted accounting principles consistently
applied, and permit the Secured Party, its officers and employees and any
professionals designated by the Secured Party in writing, at any time to
visit and inspect any of its properties (including but not limited to the
collateral security described in the Transaction Documents, corporate books
and financial records, and to discuss its accounts, affairs and finances
with any employee, officer or director thereof.
Section 6.5 Maintenance and Insurance.
(d) The Company shall maintain or cause to be maintained, at
its own expense, all of its assets and properties in good working order and
condition, making all necessary repairs thereto and renewals and
replacements thereof.
(e) The Company shall maintain or cause to be maintained, at
its own expense, insurance in form, substance and amounts (including
deductibles), which the Company deems reasonably necessary to the Company's
business, (i) adequate to insure all assets and properties of the Company,
which assets and properties are of a character usually insured by persons
engaged in the same or similar business against loss or damage resulting
from fire or other risks included in an extended coverage policy;
(ii) against public liability and other tort claims that may be incurred by
the Company; (iii) as may be required by the Transaction Documents or
applicable law and (iv) as may be reasonably requested by Secured Party,
all with adequate, financially sound and reputable insurers.
Section 6.6 Contracts and Other Collateral.
The Company shall perform all of its obligations under or with
respect to each instrument, receivable, contract and other intangible
included in the Pledged Property to which the Company is now or hereafter
will be party on a timely basis and in the manner therein required,
including, without limitation, this Agreement.
Section 6.7 Defense of Collateral, Etc.
The Company shall defend and enforce its right, title and interest in
and to any part of: (a) the Pledged Property; and (b) if not included
within the Pledged Property , those assets and properties whose loss could
have a Material Adverse Effect. The Company shall defend the Secured
Party's right, title and interest in and to each and every part of the
Pledged Property, each against all manner of claims and demands on a timely
basis to the full extent permitted by applicable law.
Section 6.8 Payment of Debts, Taxes, Etc.
The Company shall pay, or cause to be paid, all of its indebtedness
and other liabilities and perform, or cause to be performed, all of its
obligations in accordance with the respective terms thereof, and pay and
discharge, or cause to be paid or discharged, all taxes, assessments and
other governmental charges and levies imposed upon it, upon any of its
assets and properties on or before the last day on which the same may be
paid without penalty, as well as pay all other lawful claims (whether for
services, labor, materials, supplies or otherwise) as and when due.
Section 6.9 Taxes and Assessments; Tax Indemnity.
The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the
date of delinquency, (b) pay and discharge all taxes, assessments and
governmental charges or levies imposed upon the Company, upon its income
and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (c) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or
charge upon any of its properties; provided, however, that the Company in
good faith may contest any such tax, assessment, governmental charge or
levy described in the foregoing clauses (b) and (c) so long as appropriate
reserves are maintained with respect thereto.
Section 6.10 Compliance with Law and Other Agreements.
The Company shall maintain its business operations and property owned
or used in connection therewith in compliance with (a) all applicable
federal, state and local laws, regulations and ordinances governing such
business operations and the use and ownership of such property, and (b) all
agreements, licenses, franchises, indentures and mortgages to which the
Company is a party or by which the Company or any of its properties is
bound. Without limiting the foregoing, the Company shall pay all of its
indebtedness promptly in accordance with the terms thereof.
Section 6.11 Notice of Default.
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other agreement of the Company for the payment
of money, promptly upon the occurrence thereof.
Section 6.12 Notice of Litigation.
The Company shall give notice, in writing, to the Secured Party of
(a) any actions, suits or proceedings wherein the amount at issue is in
excess of $50,000, instituted by any persons against the Company, or
affecting any of the assets of the Company, and (b) any dispute, not
resolved within fifteen (15) days of the commencement thereof, between the
Company on the one hand and any governmental or regulatory body on the
other hand.
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not,
unless the Secured Party shall consent otherwise in writing:
Section 7.1. Indebtedness.
The Company shall not directly or indirectly permit, create, incur,
assume, permit to exist, increase, renew or extend on or after the date
hereof any indebtedness on its part, including commitments, contingencies
and credit availabilities, or apply for or offer or agree to do any of the
foregoing.
Section 7.2. Liens and Encumbrances.
The Company shall not directly or indirectly make, create, incur,
assume or permit to exist any assignment, transfer, pledge, mortgage,
security interest or other lien or encumbrance of any nature in, to or
against any part of the Pledged Property or of the Company's capital stock,
or offer or agree to do so, or assign, pledge or in any way transfer or
encumber its right to receive any income or other distribution or proceeds
from any part of the Pledged Property or the Company's capital stock; or
enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of
any of the foregoing.
Section 7.3. Articles, By-Laws, Mergers, Consolidations,
Acquisitions and Sales.
Without the prior express written consent of the Secured Party, which
consent may be withheld by the Secured Party in its sole discretion, the
Company shall not: (a) Amend its Articles of Incorporation or By-Laws; (b)
issue or sell its stock, stock options, bonds, notes or other corporate
securities or obligations; (c) be a party to any merger, consolidation or
corporate reorganization, (d) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor
(e) create any subsidiaries nor convey any of its assets to any subsidiary.
Section 7.4. Management, Ownership.
The Company shall not change its ownership, executive staff or
management without the prior written consent of the Secured Party, which
consent may be withheld by the Secured Party in its sole discretion. The
ownership, executive staff and management of the Company are material
factors in the Secured Party's willingness to institute and maintain a
lending relationship with the Company.
Section 7.5. Dividends, Etc.
The Company shall not declare or pay any dividend of any kind, in
cash or in property, on any class of its capital stock, nor purchase,
redeem, retire or otherwise acquire for value any shares of such stock, nor
make any distribution of any kind in respect thereof, nor make any return
of capital to shareholders, nor make any payments in respect of any
pension, profit sharing, retirement, stock option, stock bonus, incentive
compensation or similar plan (except as required or permitted hereunder),
without the prior written consent of the Secured Party.
Section 7.6. Guaranties; Loans.
The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of
this Agreement in connection with the obligations or indebtedness of any
person or persons. The Company shall not make any loan, advance or
extension of credit to any person other than in the normal course of its
business.
Section 7.7. Debt.
The Company shall not create, incur, assume or suffer to exist any
additional indebtedness of any description whatsoever in an aggregate
amount in excess of $25,000 (excluding any indebtedness of the Company to
the Secured Party, trade accounts payable and accrued expenses incurred in
the ordinary course of business and the endorsement of negotiable
instruments payable to the Company, respectively for deposit or collection
in the ordinary course of business).
Section 7.8. Conduct of Business.
The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the
date of this Agreement.
Section 7.9. Places of Business.
The location of the Company's chief place of business is 000
Xxxxxxxxxx Xxxxxx Xxxxxxxxx, XX 00000. The Company shall not change the
location of its chief place of business, chief executive office or any
place of business disclosed to the Secured Party or move any of the Pledged
Property from its current location without thirty (30) days' prior written
notice to the Secured Party in each instance.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as
duly given on: (a) the date of delivery, if delivered in person, by
nationally recognized overnight delivery service or (b) five (5) days after
mailing if mailed from within the continental United States by certified
mail, return receipt requested to the party entitled to receive the same:
If to the Company, to:
Headliners Entertainment Group, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx Xxxxxxxxx, Chairman and CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx, Esq,
000 0xx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Investor(s):
Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx -Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to:
Xxxxx Xxxxxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the
giving of such notice, such newly designated address shall be such party's
address for the purpose of all notices or other communications required or
permitted to be given pursuant to this Agreement.
Section 8.2. Severability.
If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to
such provision and shall not in any manner affect or render invalid or
unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
Section 8.3. Expenses.
In the event of an Event of Default, the Company will pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may
incur in connection with: (i) the custody or preservation of, or the sale,
collection from, or other realization upon, any of the Pledged Property;
(ii) the exercise or enforcement of any of the rights of the Secured Party
hereunder; (iii) the failure by the Company to perform or observe any of
the provisions hereof; or (iv) the collection or enforcement of any
judgment.
Section 8.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times hereafter
to require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured
Party under this Agreement to demand strict compliance and performance
herewith. Any waiver by the Secured Party of any Event of Default shall
not waive or affect any other Event of Default, whether such Event of
Default is prior or subsequent thereto and whether of the same or a
different type. None of the undertakings, agreements and covenants of the
Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Secured Party, nor may this Agreement be
amended, changed or modified, unless such waiver, amendment, change or
modification is evidenced by an instrument in writing specifying such
waiver, amendment, change or modification and signed by the Secured Party.
Section 8.5. Continuing Security Interest.
This Agreement shall create a continuing security interest in the
Pledged Property and shall: (i) remain in full force and effect until
payment in full of the Obligations; and (ii) be binding upon the Company
and its successors and heirs and (iii) inure to the benefit of the Secured
Party and its successors and assigns. Upon the payment or satisfaction in
full of the Obligations, the Company shall be entitled to the return, at
its expense, of such of the Pledged Property as shall not have been sold in
accordance with Section 5.2 hereof or otherwise applied pursuant to the
terms hereof.
Section 8.6. Independent Representation.
Each party hereto acknowledges and agrees that it has received or has
had the opportunity to receive independent legal counsel of its own choice
and that it has been sufficiently apprised of its rights and
responsibilities with regard to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction/Venue.
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of
the State of New Jersey, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New Jersey or
any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of New Jersey. Each party hereby
irrevocably submits to the exclusive jurisdiction of the New Jersey State
Superior Court sitting in Xxxxxx County, New Jersey and United States
Federal District Court for the District of New Jersey sitting in Newark,
New Jersey, for the adjudication of any dispute hereunder or in connection
herewith or therewith, or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.
Section 8.8. Waiver of Jury Trial.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS
AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE
COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS
RELATED TO THIS TRANSACTION.
Section 8.9. Entire Agreement.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
COMPANY:
HEADLINERS ENTERTAINMENT GROUP INC.
By: /s/ Xx Xxxxxxxxx
------------------------------------------
Name: Xx Xxxxxxxxx
Title: Chairman & Chief Executive Officer
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance
by the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest
in and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company or in which the Company may have or may
hereafter acquire any interest, and all replacements, additions, accessions,
substitutions and proceeds thereof, arising from the sale or disposition
thereof, and where applicable, the proceeds of insurance and of any tort
claims involving any of the foregoing;
(b) all inventory of the Company, including, but not limited
to, all goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily out of
Company's custody or possession and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing;
(c) all contract rights and general intangibles of the
Company, including, without limitation, goodwill, trademarks, trade styles,
trade names, leasehold interests, partnership or joint venture interests,
patents and patent applications, copyrights, deposit accounts whether now owned
or hereafter created;
(d) all documents, warehouse receipts, instruments and
chattel paper of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other
forms of obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all
of which the Company represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by
the Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights
under all present and future authorizations, permits, licenses and franchises
issued or granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without
limitation, insurance proceeds) from the above-described Pledged Property.
