Exhibit 10.19
SECURITY AGREEMENT
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THIS AGREEMENT, made as of the 1st day of May, 2002, by and among
Ruffnation Films LLC, a Pennsylvania limited liability company ("Ruffnation
Films"), Xxxxxx Productions, LLC, a Pennsylvania limited liability company
("Xxxxxx Productions"), Metropolitan Recording Inc, a Pennsylvania corporation
("Metropolitan Recording"), and Xxxxx Xxxxxxxx, an individual ("Secured Party"),
W I T N E S S E T H T H A T:
WHEREAS, Secured Party has lent money to Ruffnation Films, which loan
is evidenced by a note of even date herewith in the principal amount of One
Million One Hundred Thousand Dollars ($1,100,000) (the "Note"); and
WHEREAS, Xxxxxx Productions and Metropolitan Recording are affiliates
of Ruffnation Films and have benefited and will continue to benefit from Secured
Party`s making funds available to Ruffnation Films; and
WHEREAS, Xxxxxx Productions, Metropolitan Recording and Ruffnation
Films have agreed to give Secured Party a security interest in certain of their
assets to secure payment of all amounts owed by Ruffnation Films to Secured
Party (Xxxxxx Productions, Metropolitan Recording and Ruffnation Films being
referred to herein individually as a "Debtor" and collectively as the
"Debtors");
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions. The following terms shall have the following
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meanings:
"Account" shall mean any account as that term is defined in the Code,
including any right of any Debtor to payment for services rendered or for goods
sold or leased which such Debtor may now or hereafter acquire, whether or not
such right has been earned by performance.
"Account Debtor" shall mean the person or entity obligated on an
Account.
"Code" shall mean the Uniform Commercial Code as the same shall from
time to time be in effect in the Commonwealth of Pennsylvania.
"Debtors` Interest in the Picture" shall mean all of any Debtor`s
right, title and interest in and to (a) all common law and statutory copyrights
in and to the Picture, and all renewals and extensions of the copyrights, that
may be secured under the laws now or hereafter in force and effect in the United
States of America or in any other country or countries, (b) all common law and
statutory copyrights in and to all literary, musical, dramatic or other material
written for the Picture, or upon which the Picture is based, and acquired by any
Debtor, and all renewals and extensions of the copyrights, that may be secured
under the laws now or hereafter in force and effect in the United States of
America or in any other country or countries, (c) all stills, artwork and
designs used in connection with the Picture; all film clips, recordings,
trailers and soundtracks; and all tangible and intangible property relating to
the Picture, (d) all copies and physical properties of the Picture in whatever
medium, including film, positives, negatives, prints, answer prints, masters and
all versions thereof, (e) all rights and benefits pertaining to the Picture
actually acquired by any Debtor pursuant to any agreements with third parties,
(f) performing rights, publishing rights, merchandising and commercial tie-up
rights, syndication rights and all other ancillary, allied or subsidiary rights
in connection with the Picture, and the right to use the names, likenesses and
voices of all persons rendering services in connection with the Picture, and (g)
all Royalties.
"Equipment" shall mean any equipment as that term is defined in the
Code, including, without limitation, all machinery, appliances, furniture,
furnishings, fixtures, supplies and tangible personal property presently
existing or hereafter acquired, wherever located, whether or not the same shall
be deemed to be affixed to real property; additions, accessories and
improvements thereto and substitutions therefor; all parts which may be attached
to or which are necessary for the operation and use of such personal property or
fixtures; and all rights under or arising out of present or future contracts
relating to the foregoing.
"General Intangible" shall mean any general intangible as that term is
defined in the Code, whether presently existing or hereafter acquired or
created, wherever located, including, without limitation, all books,
correspondence, credit files, records and other documents, computer programs,
software, patents, patent applications, trademarks, licensing agreements,
copyrights, service names, service marks, logos, goodwill, and all claims,
choses in action and judgments.
"Instrument" shall mean any instrument as that term is defined in the
Code, whether presently existing or hereafter acquired or created.
"Picture" shall mean the motion picture entitled "Xxxxxx".
"Proceeds" shall mean that which is received when collateral is
collected, sold, exchanged or otherwise disposed of, and shall include, without
limitation, any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Debtor from time to time with respect to any of the
collateral pledged under this Agreement and any and all payments made or due and
payable to any Debtor in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any of such collateral by any
governmental body.
"Royalties" shall mean all monies and claims for monies due or to
become due to any Debtor as royalties or otherwise arising from the exploitation
of the Picture, or arising from the exploitation of the copyrights to the
Picture and the screenplay for the Picture, under agreements heretofore or
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hereafter entered into by any Debtor or any successor or assign of such Debtor.
"Royalty Debtor" shall mean each person or entity which owes Royalties
to any Debtor.
2. Grant of Security Interest. The Debtors hereby assign to
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Secured Party and grant to Secured Party a lien upon and security interest in
the Picture, Debtors` Interest in the Picture, Debtors` Accounts, Debtors`
Equipment, Debtors` General Intangibles, Debtors` Instruments and all cash and
non-cash Proceeds therefrom (the "Collateral") as security for the payment of
all amounts due under the Note (the "Obligations").
3. Covenants as to Collateral.
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(a) The Debtors will keep the Collateral in good condition
and insured against all hazards and liability arising from use of the Collateral
in accordance with Section 4(g) hereof. The Debtors will cause Secured Party`s
security interest as set forth in Section 2 hereof to be endorsed on all
policies of insurance in such a way that all payments for losses will be paid to
Secured Party as his interest may appear.
(b) The Debtors shall keep complete and accurate books and
records and make all necessary entries thereon to reflect the transactions and
facts giving rise to the Collateral and all payments, credits and adjustments
applicable thereto. The Debtors shall keep Secured Party informed as to the
location of all such books and records and shall permit Secured Party or its
agents to have access to all such books and records in accordance with Section
4(h) hereof.
(c) The Debtors will promptly notify Secured Party if there
is any adverse change in the status of the Collateral that materially impairs
its value or collectibility, or if any defenses, setoffs or counterclaims are
asserted by Account Debtors or Royalty Debtors which in the aggregate materially
impair the value or collectibility of the Accounts or the Royalties.
(d) The Debtors will permit Secured Party to inspect the
Collateral at such times during working hours as will not unduly interfere with
the operations of the Debtors.
4. Other Affirmative Covenants of Debtor. Each Debtor agrees that
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so long as this Agreement is in effect, it will:
(a) Upon request, provide Secured Party with a fiscal
year-end balance sheet and profit and loss statement which have been compiled or
reviewed by the Debtor`s independent accountant.
(b) Maintain proper and complete accounting books and records
in which shall be set forth accurately and in accordance with generally accepted
accounting principles all of its dealings and transactions;
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(c) Pay when due all taxes, assessments, charges and levies
which are imposed upon the Debtor or any of its properties or which the Debtor
is required to withhold and pay over, and provide evidence of such payment to
Secured Party if requested, except for those taxes, assessments, charges or
levies which are being contested in good faith by appropriate proceedings and
for which adequate reserves have been set aside on the Debtor`s books;
(d) Preserve and keep in full force and effect its corporate
or other entity existence, rights, permits, patents, franchises and licenses,
and remain in material compliance with all laws, regulations, rules or
requirements of any federal agency or of any state, local or municipal
government which may at any time be applicable to it;
(e) Maintain all of its property in good repair, working
order and condition, ordinary wear and tear excepted, and, from time to time,
make all appropriate and proper repairs, renewals, replacements, additions and
improvements thereto;
(f) Perform and comply in all material respects with the
provisions of all agreements to which it is a party and the noncompliance with
which would have a material, adverse effect on the Debtor`s business, finances
or prospects;
(g) Maintain at all times personal liability, casualty,
workers` compensation and property damage insurance in such amounts, against
such hazards and liabilities and with such companies as are reasonably
satisfactory to Secured Party, and pay all premiums on the policies for such
insurance when and as they become due, and do all other things necessary to
maintain such policies in full force and effect. Upon request by Secured Party
(but not more than once per calendar year), the Debtor shall promptly provide
Secured Party with evidence, in form and substance reasonably satisfactory to
Secured Party, of the maintenance of all such insurance;
(h) Permit Secured Party or his representative or
representatives to examine the books of account and other records and files of
the Debtor and to make copies thereof, and permit Secured Party to engage such
accountants and other professionals as Secured Party shall choose to perform, at
Secured Party`s expense, such level of review, audit and verification of the
Debtor`s books, records and financial statements as Secured Party may elect, all
at such reasonable times and as often as Secured Party may request (but not more
often than once per calendar year). Any examination, review, audit or
verification undertaken pursuant to this subsection shall not unreasonably
interfere with the normal operations of the Debtor;
(i) Pay all rent or other sums required by any lease to which
the Debtor is a party as the same becomes due and payable and duly perform and
comply with all other obligations under any such lease, except to the extent
that any such obligation is the subject of a good faith dispute and adequate
reserves have been set aside therefor;
(j) Give prompt notice to Secured Party of all litigation or
proceedings which, if adversely determined, might have a material, adverse
effect on the Debtor`s financial condition or operations or in which damages
exceeding one hundred thousand dollars ($100,000.) are claimed.
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5. Negative Covenants of Debtor. Each Debtor agrees that so long
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as this Agreement is in effect, it will not, without the prior written consent
of Secured Party:
(a) Change the Debtor`s principal place of business to a
location that is not in the Commonwealth of Pennsylvania;
(b) Wind up, liquidate or dissolve its business affairs;
(c) Convey, sell, lease or otherwise dispose of, or enter
into an agreement to convey, sell, lease or otherwise dispose of, whether in one
transaction or in a series of transactions, all or substantially all of its
properties or assets;
(d) Enter into any transaction involving a merger,
consolidation or other reorganization of the Debtor, unless the Debtor is the
surviving entity of a merger;
(e) Create or permit to exist any security interest, lien,
charge or other encumbrance on any of its properties or assets, except for (i) a
security interest in favor of Secured Party, (ii) security interests of which
Secured Party has knowledge and has granted his consent, and (iii) liens for
taxes, assessments or other similar charges which are being properly contested
in good faith and by appropriate proceedings promptly initiated and diligently
conducted for which a reserve shall have been made;
(f) Make loans or extend credit (other than loans or
extensions of credit in the ordinary course of business to clients and temporary
advances to employees) or guarantee or otherwise become liable on the obligation
of any other entity or person.
6. Debtor`s Representations and Warranties. Each Debtor
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represents and warrants that it has full corporate or other power and authority
to enter into and perform this Agreement and the transactions contemplated
hereby and all requisite corporate or other action has been taken by the Debtor
to authorize this Agreement. This Agreement constitutes the valid, legal and
binding obligation of the Debtor enforceable in accordance with its terms,
except to the extent that enforceability may be limited by (i) bankruptcy,
moratorium, insolvency, fraudulent conveyance, reorganization or other similar
laws relating to or affecting the enforceability of creditors` rights generally,
or (ii) general principles of equity.
7. Default. The Debtors shall be in default hereunder upon the
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occurrence of any of the following (each hereinafter referred to as an "Event of
Default"):
(a) Failure of a Debtor to pay any Obligation when due;
(b) Any Debtor`s applying for or consenting to the
appointment of a receiver, trustee or liquidator of itself or any of its
property; admitting in writing its inability to pay its debts as they mature;
making a general assignment for the benefit of creditors; being adjudicated a
bankrupt or insolvent; filing a voluntary petition in bankruptcy or a petition
or answer seeking reorganization or an arrangement with creditors; or otherwise
taking advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute;
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(c) The commencement against any Debtor of any bankruptcy or
reorganization proceeding which shall remain undismissed for a period of sixty
(60) days;
(d) A default by any Debtor, taking into account applicable
grace and cure periods, under any other obligation for borrowed money.
8. Remedies. Upon the occurrence of an Event of Default, all
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amounts owed under the Obligations shall, at Secured Party`s option, become
immediately due and payable, and:
(a) Secured Party may, at its option, exercise from time to
time any or all rights and remedies available to it under the Code or otherwise
available at law or in equity, including the right to collect, settle,
compromise, adjust, xxx for, foreclose or otherwise realize upon any of the
Collateral. Upon written notice to the Debtors, the Debtors shall, at their
expense, promptly deliver any or all of the Collateral to such place as Secured
Party may designate, or Secured Party may enter upon the premises where any of
the Collateral is located and take immediate possession of and remove the
Collateral without Secured Party`s being liable to the Debtors, except for such
liability as is occasioned by the gross negligence of Secured Party, its
employees or agents. In the event Secured Party obtains possession of the
Collateral, Secured Party may sell any or all of the Collateral at public or
private sale, either for cash, credit or for future delivery, in bulk or in
parcels, and/or lease or retain the repossessed Collateral. Notice of any sale
or other disposition shall be given to the Debtors at least three (3) days
before the time of any intended sale or disposition of the Collateral. The
Debtors hereby agree that such three-day notice of such sale or other
disposition constitutes reasonable notice. The Debtors agree that Secured Party
or its nominee may become the purchaser at any such sale or may elect to retain
the Collateral or any part thereof in satisfaction of the Obligations. The
proceeds of any Collateral received by Secured Party shall be applied to
satisfaction of the Obligations in such order and in such manner as Secured
Party may elect.
(b) Secured Party shall have the right, acting if it so
chooses in any Debtor`s name, to collect Accounts itself; to sell, assign,
compromise, discharge or extend the time for payment of any Accounts; to
institute legal action for the collection of any Account; and to do all acts and
things necessary or incidental thereto, and the Debtors hereby ratify all such
acts. Secured Party may further notify any Account Debtor or guarantor thereof
that the Account payable by such Account Debtor has been assigned to Secured
Party and is to be paid directly to Secured Party. At Secured Party`s request,
the Debtors shall notify their Account Debtors that payments are to be made to
Secured Party and shall so indicate on all xxxxxxxx to Account Debtors. At such
time as the Account Debtors are instructed to make payments directly to Secured
Party, the Debtors shall not compromise, discharge, extend the time for payment
or otherwise grant any indulgence or allowance with respect to any Account
without the prior written consent of Secured Party. All payments received by the
Debtors in connection with any of the Accounts shall be held by the Debtors in
trust for Secured Party, shall be segregated from other funds of the Debtors and
immediately upon receipt be turned over to Secured Party in the same form as
received by the Debtors (duly endorsed by the Debtors to Secured Party, if
required).
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(c) Secured Party shall have the right to notify any Royalty
Debtor that the Royalties payable by such Royalty Debtor have been assigned to
Secured Party and that such Royalties are to be paid directly to Secured Party.
At Secured Party`s request, the Debtors shall notify their Royalty Debtors that
payments are to be made directly to Secured Party. At such time as the Royalty
Debtors are instructed to make payments directly to Secured Party, the Debtors
shall not compromise, discharge, extend the time for payment or otherwise grant
any indulgence or allowance with respect to any of the Royalties without the
prior written consent of Secured Party. All payments received by the Debtors in
connection with any of the Royalties shall be held by the Debtors in trust for
Secured Party, shall be segregated from other funds of the Debtors and
immediately upon receipt be turned over to Secured Party in the same form as
received by the Debtors.
(d) The Debtors agree to pay all reasonable costs of Secured
Party, including attorneys` fees, incurred in collecting any of the Obligations
and enforcement of any of its rights hereunder.
(e) Each Debtor appoints Secured Party as the Debtor`s true
and lawful attorney-in-fact with power to endorse the name of the Debtor upon
any notes, checks, drafts, money orders or other instruments of payment or upon
any other Collateral which may come into the possession of Secured Party; to
sign and endorse the name of the Debtor upon any invoices, verifications and
notices in connection with Accounts or Royalties; and to give written notice to
the United States Postal Service to deliver all mail addressed to the Debtor
directly to Secured Party (Secured Party to return all mail not related to the
Collateral), granting unto the Debtor`s said attorney full power to do any and
all things necessary to be done with respect to the Collateral as fully and
effectively as the Debtor might or could do, and hereby ratifying all its said
attorney shall lawfully do or cause to be done by virtue hereof.
10. Waiver by Debtor. Each Debtor hereby waives presentment for
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payment, notice of demand, notice of nonpayment or dishonor, protest, notice of
protest and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of payment of the Obligations, except for
those notices specifically provided for herein.
11. No Waiver by Secured Party; Cumulative Remedies.
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(a) Secured Party shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder and
no waiver shall be valid unless in writing signed by Secured Party. A waiver by
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Secured Party would otherwise
have had on any future occasion.
(b) Rights and remedies provided hereunder are cumulative and
may be exercised singly or concurrently as Secured Party may elect.
12. Further Assurances. The Debtors will execute and deliver
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financing and
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continuation statements for filing and recording under the Code or other
applicable law, landlord waivers, mortgagee waivers and any other papers which
Secured Party may request in order to perfect, preserve or enforce Secured
Party`s security interest in the Collateral or to enable Secured Party to
exercise any of its rights hereunder.
13. Miscellaneous.
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(a) Amendment. This Agreement may be amended only by a
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written instrument duly executed by the parties.
(b) Severability. The invalidity or unenforceability of any
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particular provision of this Agreement shall not affect its other provisions and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were modified or omitted so that the intent of the
parties is adhered to.
(c) No Assignment and Binding on Successors. No party shall
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assign this Agreement without the prior written consent of the other parties
hereto. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, executors, administrators, successors and
assigns.
(d) Governing Law. This Agreement shall be interpreted
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under, and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania.
(e) Joint and Several Obligations. The obligations and
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liabilities of the Debtors arising hereunder shall be joint and several.
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement
as of the day and year first above written.
RUFFNATION FILMS LLC
By: ____________________
XXXXXX PRODUCTIONS, LLC
By:_______________________
METROPOLITAN RECORDING INC.
By:_____________________________
_________________________________
Xxxxx Xxxxxxxx
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