EXHIBIT 10.7
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT dated as of April 12, 2004 (this "Agreement") by
and between MME, Inc., a New Jersey corporation (the "Secured Party") and
PARADISE MUSIC & ENTERTAINMENT, INC., a Delaware corporation having an office at
PMB 300 1630 A 00xx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the "Debtor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a certain loan agreement dated as of (the "Loan
Agreement") Secured Party loaned the principal sum of $880,000.00 (the "Loan")
to Debtor;
WHEREAS, pursuant to a certain promissory note dated as of the date
hereof (the "Promissory Note") issued by Debtor to Secured Party, Debtor has
agreed to pay to Secured Party the Loan in accordance with the terms thereof;
WHEREAS, in connection with the execution, delivery and performance of
the Loan Agreement and Promissory Note, Debtor has agreed to provide to Secured
Party security for its obligations under the Loan Agreement and Promissory Note
in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions and promises herein contained,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. GRANT OF SECURITY INTEREST. As collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations (as hereinafter
defined) and to induce Secured Party to make the Loan to Debtor contemplated
under the Promissory Note in accordance with the terms thereof, Debtor hereby
assigns, conveys, mortgages, pledges, hypothecates and transfers to Secured
Party, and hereby grants to Secured Party, a security interest in, all of
Debtor's assets, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof (all of the same being
hereinafter called the "Collateral"), including without limitation, all personal
and fixture property of every kind and nature, goods (including inventory,
equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts, chattel paper (whether tangible or electronic), deposit
accounts, letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing), commercial tort claims, securities and all other
investment property, supporting obligations, any other contract rights or rights
to the payment of money, insurance claims and proceeds, tort claims, software,
copyrights, trademarks and all general intangibles (including all payment
intangibles).
2. PROTECTION OF COLLATERAL. (i) For so long as the Promissory Note
remains unpaid, Debtor shall:
(a) timely pay all taxes levied upon all or any part of the
Collateral;
(b) keep the Collateral in good repair and condition;
(c) not suffer or permit the Collateral to be attached or
seized and defend title to the Collateral against third
parties; and
(d) not use the Collateral in violation of any applicable
statute or ordinance.
3. DEBTOR'S RECORDS. Debtor shall keep at all times reasonably
available for inspection by Secured Party, accurate and complete records of the
status of the Collateral.
4. LOCATION AND INSPECTION OF COLLATERAL. Debtor shall maintain the
Collateral on the premises where it is now located at the office of Debtor at
the address set forth above. Secured Party or its agent shall have the right at
any time during normal business hours to inspect the Collateral and the records
of Debtor relating thereto.
5. FINANCING STATEMENTS. Debtor hereby agrees to do all such acts and
things, and to execute and deliver to Secured Party from time to time such
financing statements, certificates and any additional agreements, documents and
instruments and obtain all such consents and approvals considered necessary by
Secured Party or its counsel to effectuate, finalize, record or perfect the
transactions contemplated under the Promissory Note, the Loan Agreement and this
Agreement and to secure the rights of Secured Party thereunder and hereunder.
Debtor hereby irrevocably authorizes Secured Party, or its designee, at Debtor's
expense, to do any of the foregoing acts and to execute any and all agreements,
documents and instruments, including without limitation, to file such financing
statements with or without Debtor's signature, as Secured Party deems necessary
or desirable, and, to irrevocably appoint (which appointment is coupled with an
interest) Secured Party as the attorney-in-fact of Debtor to execute such
agreements, documents, instruments and financing statements.
6. DEFAULT. Debtor shall be in default under this Agreement upon the
happening of any of the following events or conditions:
(a) Debtor defaults in the payment of principal or interest on
the Promissory Note when and as the same shall become due
and payable whether by acceleration thereof or otherwise;
(b) Debtor defaults in the performance or observance of any of
the covenants and agreements contained in the Promissory
Note (other than those relating to payment) and same shall
remain unremedied for a period ending on the first to occur
of five (5) business days
-2-
after Debtor shall receive written notice of such default
from Secured Party, unless such cure cannot reasonably be
completed within said period, then if a remedy is not
commenced within said time period and diligently and
continuously prosecuted to completion within thirty (60)
days following the default;
(c) Debtor makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally
as they become due; or Debtor files any petition for relief
under the federal Bankruptcy Code; or any order, judgment
or decree is entered adjudicating Debtor bankrupt or
insolvent;
(d) Debtor petitions or applies to any tribunal for the
appointment of a trustee, receiver or liquidator of Debtor,
or of any substantial part of the assets of or any
proceedings for the voluntary liquidation and dissolution
of Debtor under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction, whether now or
hereafter in effect;
(e) any such petition or application is filed, or any such
proceedings are commenced, against Debtor and Debtor by any
act indicates its approval thereof, consent thereto or
acquiescence therein, or any order, judgment or decree is
entered appointing any such trustee, receiver or
liquidator, or approving the petition in any such
proceedings and such order, judgment or decree remains
unstayed and in effect for more than thirty (30) days; or
(f) any order, judgment or decree is entered in any proceeding
against Debtor decreeing the dissolution of Debtor and such
order, judgment or decree remains unstayed and in effect
for more than thirty (30) days.
7. REMEDIES. Upon the occurrence of any event of default by Debtor
hereunder, as described more fully in Section 6 hereof, Secured Party shall be
entitled to realize upon the Collateral to satisfy any and all of the Secured
Obligations. Upon such occurrence, Secured Party:
(a) may, at its option, accelerate and declare the whole of the
unpaid balance of the Promissory Note immediately due and
payable;
(b) may, after first notifying Debtor of its intention to do
so, notify account debtors of Debtor that the Collateral
and the right, title and
-3-
interest of Debtor in and to the Collateral have been
assigned to Secured Party and that payment thereunder shall
be made directly to Secured Party. In addition and upon the
request of Secured Party, Debtor will so notify such
account debtors;
(c) may, in its own name or in the name of others, communicate
with such account debtors in respect of the Collateral to
verify with such persons to Secured Party's satisfaction
the existence, amount and terms of the Collateral;
(d) shall have and may exercise all the rights and remedies
available to a secured party for the foreclosure of a
security interest under the Uniform Commercial Code; and
(e) shall have the right to do all things necessary or
convenient to realize upon all or any portion of the
Collateral.
All remedies of Secured Party hereunder shall be cumulative. In
the event of Secured Party's realization on the sale of the Collateral exceeds
the sum due to Secured Party under the Promissory Note and this Agreement,
Debtor shall be entitled to any surplus; otherwise, Debtor shall, jointly and
severally, remain liable to Secured Party for any deficiency. Secured Party
shall give Debtor reasonable notice of the time and place of any public sale of
the Collateral or of the time after which any private sale or any other intended
disposition of the Collateral is to be made. Any requirements of reasonable
notice under this Section 7 shall be met if such notice is mailed, postage
prepaid, to the address of Debtor set forth herein at least thirty (30) days
before the time of the sale or disposition. Secured Party shall be entitled to
recover from Debtor its expense of retaking, holding, preparing for sale, or
selling the Collateral which expenses shall include reasonable attorneys' fees
incurred by Secured Party.
8. REPRESENTATIONS OF DEBTOR. Debtor represents that the execution,
delivery and performance of this Security Agreement are within Debtor's
corporate powers, have been duly authorized, are not in contravention of the
terms of Debtor's Certificate of Incorporation, By-Laws or any agreement to
which Debtor is a party or by which it is bound.
9. TERMINATION. This Agreement shall automatically terminate and
shall be null and void and of no force and effect, when the Secured Obligations
are fully satisfied.
Upon satisfaction in full of the Secured Obligations, Secured
Party, if so requested by Debtor, agrees to execute and cause to be filed with
the appropriate governmental authorities such termination statements under the
Uniform Commercial Code, or such other documents, as shall be necessary to
release the lien created by this Agreement against the Collateral and to
terminate any security interest of Secured Party created hereby.
-4-
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all prior arrangements or
understandings with respect thereto.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
(c) NOTICES. All notices, requests, demands, instructions and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) upon hand
delivery, (ii) upon receipt by facsimile, (iii) the next business day after
delivery to a reputable overnight courier which provides for acknowledgement of
receipt, or (iv) three (3) days after deposit in the United States mail by
first-class, postage prepaid, registered or certified mail, return receipt
requested, as follows:
(i) If to Secured Party, at:
MME, Inc.
000 Xxxxxxx Xxxx, Xxx. 000
Xxxxxxxxxx, XX 00000
(ii) If to Debtor, to:
Xx. Xxxxx X. Xxxxxx, President
Paradise Music & Entertainment, Inc.
PMB 300 1630 A 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax No. (000) 000-0000
With a copy to:
Xx. Xxxxxxx Xxxxx
Xxxxx & Schloss
00 X. 00xx. Xx.
XX,XX 00000
Fax No. (000) 000-0000
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut (other than
the choice of law principles
-5-
thereof). Any action, suit or other proceeding initiated by any either party
hereto against the other party hereto under or in connection with this Agreement
may be brought in any Federal or state court in the State of Connecticut, as the
party bringing such action, suit or proceeding shall elect, having jurisdiction
over the subject matter thereof. Secured Party and Debtor hereby submit
themselves to the jurisdiction of any such court and agree that service of
process on them in any such action, suit or proceeding may be effected by the
means by which notices are to be given to them under this Agreement.
(e) REMEDIES. The parties hereto acknowledge that the remedy at
law for any breach of the obligations undertaken by the parties hereto is and
will be insufficient and inadequate and that the parties hereto shall be
entitled to equitable relief, in addition to remedies at law. In the event of
any action to enforce the provisions of this Agreement, the parties hereto shall
waive the defense that there is an adequate remedy at law. The parties hereto
acknowledge that the benefits to be obtained by the parties hereto are unique
and cannot be readily obtainable on the open market. Without limiting any
remedies any party may otherwise have, in the event any party refuses to perform
its obligations under this Agreement, the other party shall have, in addition to
any other remedy at law or in equity, the right to specific performance.
(f) ILLEGALITIES. In the event that any provision contained in
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and the remaining provisions of this
Agreement shall not, at the election of the party for whose benefit the
provision exists, be in any way impaired.
(g) ASSIGNABILITY. This Agreement shall not be assignable by
either party hereto, and any purported assignment by any party shall be void;
PROVIDED, HOWEVER, that Secured Party may assign this Agreement to any person to
whom Secured Party has negotiated or assigned all or part of its rights under
any of the Secured Obligations.
(h) THIRD PARTY RIGHTS. Notwithstanding any other provision of
this Agreement, this Agreement shall not create benefits on behalf of any third
party, and this Agreement shall be effective only as between the parties hereto
and their respective successors, heirs and permitted assigns.
(i) AMENDMENTS AND WAIVERS. Any term or provision of this
Agreement may be waived at any time by the party which is entitled to the
benefits thereof, and any term or provision of this Agreement may be amended or
supplemented at any time by the mutual consent of the parties hereto, except
that any waiver of any term or condition, or any amendment or supplementation,
of this Agreement shall be effective only if in writing.
(j) EXPENSES. Debtor shall be responsible for Secured Party's
legal fees and other costs and expenses with respect to the negotiation,
execution and the delivery of this Agreement. Additionally, Debtor shall pay on
demand all costs and expenses (including, without
-6-
limitation, reasonable legal fees) incurred by the Secured Party in connection
with the enforcement of the Promissory Note and/or this Agreement.
(k) FURTHER ACTIONS. From time to time subsequent to the date
hereof, as and when requested by Secured Party, Debtor shall execute and
deliver, or cause to be executed and delivered, such documents and instruments
and shall take, or cause to be taken, such further or other actions as may be
reasonably necessary to consummate and to effect the transactions expressly
required to be performed by Debtor hereunder.
(l) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
-7-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
SECURED PARTY:
MME, Inc.
By: [SIGNATURE ILLEGIBLE]
------------------------------
DEBTOR:
PARADISE MUSIC & ENTERTAINMENT, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and President
-8-
