1
EXHIBIT 4.9
DSL ENTERTAINMENT, INC.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dated as of January 22, 1996
VIA FACSIMILE 000 000-0000
AMAE Ventures
Xxx Xxxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Xx. Xxxxxxx:
This will confirm the terms pursuant to which you ("Lender") have
agreed to make an investment in the Company.
1. Sale of Securities.
We have agreed to sell to you and you have agreed to purchase, for the
sum of $322,000, the following:
(a) The convertible secured promissory note in substantially the
form attached hereto as Exhibit 1 (the "Note"), which Note is convertible into
3% (subject to adjustment as set forth in the Note) of the Company's outstanding
common stock (the "Common Stock"), on a fully diluted basis (i.e., including any
shares which may be issued under any outstanding options, warrants or other form
of convertible security) (the "Conversion Shares"). The Note will be secured by
certain assets of the Company (the "Collateral") pursuant to the terms of the
Security Agreement and Pledge as well as the related assignment agreements,
attached hereto as Exhibit 2.
(b) 40 shares of the Company's common stock (the "Placement
Shares"), representing 4% of the Company's issued and outstanding Common Stock,
on a fully diluted basis. The Placement Shares and the Conversion Shares are
hereinafter referred to as the "Shares". The Shares and the Note are hereinafter
referred to as the "Securities".
2. Representations and Warranties of the Company: Covenants. The Company
hereby represents and warrants to Lender that:
2
AMAE Ventures
As of January 22, 1996
Page 2
2.1 Organization, Corporate Powers.
2.1.1 Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California;
2.1.2 Company has the power and authority to own its
properties and assets; and
2.1.3 Company has the power to execute and deliver the Note,
to execute, deliver and perform this Agreement, the Note, and the Collateral
Security Documents (as defined below) and any other documents or instruments
furnished pursuant thereto and hereto, and to grant the security interests
contemplated hereby and by the Collateral Security Documents. For purposes of
this agreement, the term "Collateral Security Documents" shall mean the UCC-1
financing statements with respect to the Collateral, the Security Agreement, and
all assignments which are being executed and delivered concurrently herewith.
2.1.4 The Company currently has 1,000 shares of Common Stock
issued and outstanding. Other than the commitment to grant 50,000 options (which
options have not yet been formally issued), the Company currently does not have
any outstanding options, warrants or other securities convertible into Common
Stock. The Company has no outstanding preferred stock.
2.2 Authorization of Borrowing.
2.2.1 The execution, delivery and performance of this
Agreement, the Collateral Security Documents and any other documents or
instruments furnished pursuant thereto and hereto by Company, the borrowings
hereunder, the execution and delivery of the Note, and the grant by Company of
the security interests contemplated hereby and by the Collateral Security
Documents have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of the
United States, or of any state thereof, the Articles of Incorporation or Bylaws
of Company, or any provision of any indenture, agreement or other instrument to
which Company is a party or by which it or any of its properties or assets is
bound, or be in conflict with, result in a breach of, or constitute (with due
notice and/or lapse of time) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien, charge,
or encumbrance of any nature whatsoever upon any of the properties or assets of
Company.
2.2.2 Except as set forth in Section 2.7 below, all
authorizations, approvals, registrations or filings from or with any
governmental or public regulatory body or authority of the United States, or of
any state thereof required for the execution and delivery of the Note by
Company, and for the execution, delivery and performance by Company of this
Agreement, or the Collateral Security Documents and any other documents or
instruments furnished pursuant thereto
3
AMAE Ventures
January 22, 1996
Page 3
and hereto have been duly obtained or made, or duly applied for and are in full
force and effect, and if any such further authorizations, approvals,
registrations or filings should hereafter become necessary, Company will use its
best efforts to obtain or make all such authorizations, approvals, registrations
or filings.
2.3 Validity and Binding Nature. This Agreement, the Note, the
Collateral Security Documents and each other document and instrument when duly
executed by Company and delivered to Lender hereunder will constitute legal,
valid and binding obligations of Company, enforceable against Company in
accordance with their respective terms.
2.4. Security Interests. This Agreement and the Collateral Security
Documents to be delivered on or prior to the date of the payment hereunder will
create and grant to Lender a valid and perfected first priority security
interest in the Collateral. Other than with respect to Permitted Encumbrances,
which must be junior in priority to the lien granted to Lender pursuant to the
Collateral Security Documents, no other lien shall be permitted on such
Collateral. For purposes of this agreement, "Permitted Encumbrances" shall mean
(i) SAG, DGA or other guild liens, and (ii) liens, if any, imposed by any
sub-licensee of sub-distributor only to secure rights licensed to any such
distributor. The Company will file all appropriate documents necessary to
effectuate the creation of such security interest granted to Lender.
2.5 Principal Place of Business. The principal place(s) of
administration and of the business of Company and the records relating to the
respective accounts and contract rights of Company are located at the address
set forth above.
2.6 Other Instruments. Except for this Agreement and the other
agreements contemplated hereby, Company is not a party to any agreement or
instrument materially and adversely affecting its ability to cause the
production and delivery of any of the Collateral described in the Collateral
Security Agreements, and Company is not in default in the performance,
observance or fulfillment of any material instrument or agreement to which it is
a party.
2.7 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transaction contemplated by this Agreement except for the filing pursuant to
Section 25102(f) of the California Corporation Securities Law of 1968, as
amended and the rule thereunder, which filing will be effected within 15 days of
the date hereof.
2.8 Delivery. The Company will deliver the Shares and any additional
shares which may be issued to Lender as a result of the provisions hereof, as
soon as practicable.
4
AMAE Ventures
January 22, 1996
Page 4
2.9 Collateral The receivables constituting the Collateral are,
subject to completion and delivery of the applicable program related to each
such receivable, good and collectible in the ordinary course of business of the
Company in amounts equal to those at which such receivables were or are
reflected on Collateral Security Documents.
3. Representations and Warranties of the Investor. Lender hereby represents
and warrants that:
3.1. Authorization. This Agreement is made with Lender in reliance
upon Lender's representation to the Company that the Shares which are being (and
may be acquired in the future) pursuant to this Agreement will be acquired for
investment for Lender's own account not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Lender has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Lender further represents
that Lender does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participation's to such person or to
any third person, with respect to any of the Securities. Lender represents that
Lender has full power and authority to enter into this Agreement.
3.2. Disclosure of Information. Lender has had an opportunity to ask
questions and receive answers from the Company regarding the its business
prospects and financial condition. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of Lender to rely thereon.
3.3. Investment Experience. Lender is an investor in securities of
companies in the development stage and acknowledges that Lender can bear the
economic risk of this investment, including the risk of the loss of the entire
investment, and has such knowledge and experience in financial or business
matters that Lender is capable of evaluating the merits and risks of the
investment in the Securities.
3.4. Restricted Securities. Lender understands that the Securities
which are (and may in the future be) acquired hereunder will be characterized as
a "restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, Lender
represents that Lender is familiar with SEC Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Act.
3.5. Legends. It is understood that the Shares which may be acquired
hereunder and issuable upon exercise, if ever, of Lender's option pursuant to
this Agreement may bear one or all of the following legends:
5
AMAE Ventures
January 22, 1996
Page 5
(i) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(ii) Any legend required by the laws of the State of
California.
4. Dilution Protection. The number and kind of Shares issuable (or to be
issued hereunder)shall be subject to adjustment from time to time upon the
happening of certain events ("Adjustment Event"), as follows:
4.01 Additional Stock Issuances If the Company shall, at any time
through the completion of an underwritten offering of the Company's securities,
issue any shares of Common Stock, declare or pay to the holders of its
outstanding shares of Common Stock, a dividend payable in any kind of shares of
stock or other securities of the Company, or in property, or otherwise than in
cash, Lender shall be entitled to receive such additional share or shares of
stock or scrip representing fractions of a share or other securities or property
as such that Lender retains the same percentage interest in the Company as
provided for by this Agreement and the Note.
4.02 Recapitalization If the Company shall effect a recapitalization
of such character that the Common Shares covered hereby shall be changed into or
become exchangeable for a larger or smaller number of shares, then thereafter,
the number of Placement Shares issued hereunder, and the number of Conversion
Shares which Lender shall be entitled to purchase hereunder, shall be increased
or decreased, as the case may be, in direct proportion to the increase or
decrease in the number of Common Shares of the Company on a fully diluted basis
by reason of such recapitalization.
4.03 Reorganizations In case of any reorganization of the Company or
in case the Company (or any such other corporation) shall merge into or with or
consolidate with another corporation or convey all or substantially all of its
assets to another corporation or enter into a business combination of any form
as a result of which the shares of Common Stock are converted into other stock
or securities of the same or another corporation, then and in each such case,
the Lender shall be entitled to receive in lieu of the Shares or other
securities which Lender has, and/or would have been entitled to receive had he
exercised the conversion right, immediately prior thereto, such stock and
securities which such Lender would have owned immediately after such event with
respect to the Shares before such event.
6
AMAE Ventures
January 22, 1996
Page 6
4.04 Notice The Company shall mail to the holder of this Certificate
at least twenty (20) days prior to any Adjustment Event a notice specifying the
date on which any such Adjustment Event is to occur together with a description
thereof. In each case of an adjustment in the Shares, the Company shall promptly
notify the Lender of such adjustment. Such notice shall set forth the facts upon
which such adjustment is based and state the number of additional shares to be
issued to Lender with respect to both the Placement Shares and the Conversion
Shares.
4.05 Intent It is the intent of the foregoing that the Shares issued
(or to be issued) hereunder are subject to "full ratchet" dilution protection
such that the Placement Shares shall represent 4% and the Conversion Shares
shall represent 3%, respectively, of the Company's outstanding Common Stock, on
a fully diluted basis, through the consummation of any Initial Public Offering
("IPO") of the Company's securities (including the shares issued in such IPO).
The Company shall, as appropriate, issue such additional shares of Common Stock
to Lender as may be necessary to effectuate the foregoing intent. After
consummation of such IPO, such Shares will be subject to dilution under the same
terms as all other shares of Common Stock.
5. Registration Rights
5.01 Piggyback Registration Right. In the event that the Company
files a Registration Statement under the Securities Act of 1933, as amended (the
"Act"), which relates to a current offering of securities of the Company, either
for the account of the Company or for the account of any other person or entity
(except a Registration Statement on Form S-8 solely for the purpose of
registering options, such Registration Statement and the prospectus included
therein shall also include the Shares, and any additional shares issued pursuant
to Section 4 above (which shall for all purposes be deemed to be included in the
Shares). The Company shall give written notice to Lender of its intention to
file such Registration Statement 30 or more days prior to the filing of such
Registration Statement. The delivery of such notice by the Company shall not in
any way obligate the Company to file such Registration Statement. The Company
may, at any time prior to the effective date thereof, determine not to offer the
securities to which such Registration Statement relates without liability to
Lender. Upon receipt of such notice, Lender may thereafter demand in writing
that the Company include is such Registration Statement the Shares owned by
Lender; provided that Lender agrees to any restrictions or cut-backs that the
underwriter may reasonably impose. In no event will Lender be subject to any
restriction more onerous than applied to any other shareholder.
5.02. Demand Registration. In the event that the Company does not file
a Registration Statement under the Securities Act of 1933 Statement within
twelve (12) months after the date of maturity of the Note executed pursuant to
this agreement that would effect the automatic piggyback registration of the
Shares issued or to be issued under this Agreement, or in the event that a
Registration Statement is filed but the Company was not able to include all of
the Shares issued (or
7
AMAE Ventures
January 22, 1996
Page 7
to be issued) to Lender hereunder, then Lender may thereafter, on one occasion
only, demand in writing that the Company file a Registration Statement that will
include all or a portion thereof of the securities issued to Lender under this
Agreement. The Company will be obligated to effect such registration,
qualification or compliance within ninety (90) days after receipt of such
written notice.
6. Miscellaneous.
6.01 Consultation Regarding Underwriter Lender shall have the right
to approve, such approval not to be unreasonably withheld, the Company's
selection of an underwriter for its IPO. Approval will be deemed given unless
the Lender notifies the Company by the earlier of five business days from
receipt by the Company of a letter notifying the Lender of the Company's
proposed selection of an underwriter.
6.02 Entire Agreement This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein. The parties hereby agree that this Agreement has
been executed and delivered in the State of New York and shall be construed,
enforced and governed by the laws thereof. Each party to this Agreement agrees
to perform any further acts and execute, acknowledge and deliver any documents
that may be reasonably required to carry out the intent and provisions of this
Agreement. This Agreement shall be binding on, and shall inure to the benefit
of, the parties to it and their respective heirs, legal representatives,
successor and assigns. In the event of a dispute hereunder, the prevailing party
shall be entitled to recover its attorneys' fees and costs.
8
AMAE Ventures
January 22, 1996
Page 8
If the foregoing accurately sets forth our agreement, please sign in
the signature blank below.
Very truly yours,
DSL ENTERTAINMENT, INC.
By:
------------------------------
Its:
-----------------------------
AGREED AND ACCEPTED:
----------------------------
AMAE Ventures
9
CONVERTIBLE SECURED PROMISSORY NOTE
THIS CONVERTIBLE SECURED PROMISSORY NOTE (THE "NOTE") HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS NOTE,
WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
NOTE MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE
MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.
THIS NOTE IS SECURED AS PROVIDED HEREIN.
DSL ENTERTAINMENT GROUP, INC.
AS OF JANUARY 22, 1996
$322,000 PRINCIPAL AMOUNT LOS ANGELES, CALIFORNIA
DSL ENTERTAINMENT GROUP, INC. a California corporation (the
"Company"), for value received, hereby promises to pay to AMAE Ventures, with an
address at Xxx Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
registered assigns (the "Holder"), the principal amount of Three Hundred
Twenty-Two Thousand Dollars ($322,000) on the Maturity Date (as such term is
defined below), or such earlier date as may be provided herein, together with
interest on the unpaid principal balance hereof at the rate (calculated on the
basis of a 360-day year consisting of twelve 30-day months) of 12% per annum,
compounding quarterly. In no event shall any interest to be paid hereunder
exceed the maximum rate permitted by law. In any such event, this Note shall
automatically be deemed amended to permit interest charges (including the
default rate set forth in Section 2 below) at an amount equal to, but no greater
than, the maximum rate permitted by law.
This is the Note referred to in that certain letter agreement (the
"Letter Agreement"), by and between Holder and Company dated as of January 22,
1996. Capitalized terms not otherwise defined herein shall have the meaning set
forth in the Letter Agreement.
10
SECTION 1 PAYMENTS.
(a) Subject to Section 5 below, interim payments shall be
due upon the receipt by the Company of any of the payments indicated in Schedule
1 hereto, which amounts are payable to the Company by the parties indicated on
such schedule, and which amounts, pursuant to the Security Agreement, shall be
paid directly to Lender. Notwithstanding the foregoing, any unpaid principal and
interest shall be due and payable on earlier to occur of (i) an Initial Public
Offering of the Company's outstanding Common Stock, or (ii) December 31, 1996,
(the "Maturity Date").at which time all interest and unpaid principal shall be
due and payable.
(a) Interest on this Note shall accrue from the date of
issuance hereof. Payments shall be applied first to any accrued interest and
then to principal.
(c) If the Maturity Date falls on a day that is not a
Business Day (as defined below), the payment due on such date will be made on
the next succeeding Business Day with the same force and effect as if made on
the Maturity Date. "Business Day" means any day which is not a Saturday or
Sunday and is not a day on which banking institutions are generally authorized
or obligated to close in the City of New York, New York.
(d) Subject to Section 5, the Company may, at its option,
prepay all or any part of the principal of this Note, without payment of any
premium or penalty, upon 10 days prior written notice to the Holder. All
payments on this Note shall be applied first to accrued and unpaid interest
hereon and the balance to the payment of principal hereof.
(e) Payments of principal of, and interest on, this Note
shall be made by check sent to the Holder's address set forth above or to such
other address as the Holder may designate for such purpose from time to time by
written notice to the Company, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
(f) The obligations to make the payments provided for in
this Note are absolute and unconditional and not subject to any defense,
set-off, counterclaim, rescission, recoupment, or adjustment whatsoever. The
Company hereby expressly waives demand and presentment for payment, notice of
non-payment, notice of dishonor, protest, notice of protest, bringing of suit,
and diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereon, regardless of, and without any notice, diligence, act or
omission with respect to, the collection of any amount called for hereunder.
- 2 -
11
SECTION 2 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute
an event of default (an "Event of Default"):
(a) A default in the payment of the principal on the Note,
when and as the same shall become due and payable.
(b) A default in the payment of any interest accrued on the
Note, when and as the same shall become due and payable, which default shall
continue for five business days after the date fixed for the making of such
interest payment.
(c) A final judgment or judgments for the payment of money
in excess of $100,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals, or other bodies having jurisdiction
against the Company and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and the Company shall
not, within such 60-day period, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(d) The entry of a decree or order by a court having
jurisdiction adjudging the Company a bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment, or composition of, or
in respect of, the Company, under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency, or
other similar law, and the continuance of any such decree or order unstayed and
in effect for a period of 60 days; or the commencement by the Company of a
voluntary case under federal bankruptcy law, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency, or other similar
law, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under federal bankruptcy law or any other
applicable federal or state law, or the consent by it to the filing of such
petition or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, or similar official of the Company or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in furtherance
of any such action.
(e) A default is declared under the terms of the Letter
Agreement or Collateral Security Agreements.
(f) A sale of all or substantially all of the assets of the
Company, or a sale of common stock such that Xxxx X. Xxxxx does not own in
excess of 30% of the Company's outstanding stock.
- 3 -
12
then, and in every such case, during the continuance of the Event of Default,
the Holder may, without presentment, demand or notice declare the principal of
this Note, together with all unpaid accrued interest thereon, to be immediately
due and payable, and upon any such declaration the same shall become and be
immediately due and payable, anything in this Note to the contrary
notwithstanding. The Holder, if not paid promptly at maturity or acceleration of
this Note, shall be entitled to, and the Borrowers covenant and agree to pay to
the Holder, such additional amount as shall be sufficient to cover the cost and
expenses of collection of this Note, including, without limitation, reasonable
attorneys' fees and costs. Upon an Event of Default, the Holder may take such
action as it deems desirable for the enforcement and collection of the principal
of, and unpaid accrued interest on, this Note, as well as all additional sums to
which the Holder may be entitled as aforesaid. The Holder's rights hereunder
shall be in addition to any other rights the Holder may have at law or in
equity. If an Event of Default has occurred under the Agreement, or this Note in
addition to any agreed upon charges, the principal balance of this Note shall
thereafter, at Holder's option, bear interest at five percent (5.00%) in
addition to the rate set forth in above, calculated over a year of 360 days.
SECTION 3 REMEDIES UPON DEFAULT.
(a) Upon the occurrence of an Event of Default, the
principal amount then outstanding of, and the accrued and unpaid interest on,
this Note shall automatically become immediately due and payable without
presentment, demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Company.
(b) The Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims against all assets of the Company, and in
connection with any such action or proceeding shall be entitled to receive from
the Company payment of the principal amount of this Note plus accrued interest
to the date of payment plus reasonable expenses of collection, including,
without limitation, attorneys' fees and expenses.
SECTION 4 SECURITY. This note shall be secured by the Collateral
described in those certain Collateral Security Agreements dated as of even date
hereof.
SECTION 5 CONVERSION.
(a) Subject to the adjustments provided in this Section 5,
at the Holder's election and anytime, Holder may convert the Note into an amount
of shares of the Company's Common Stock equal to 3% of the Company's Common
Stock, on a fully diluted basis, and shall be subject to the anti-dilution
protections set forth in the Letter Agreement of even date herewith. To the
extent that any principal payments are made in respect of the Note and retained
by the Holder, the right of Holder to convert the principal amount into the
Conversion Shares shall be reduced proportionately
- 4 -
13
based on the ratio between the amount of principal repayed to the original
principal amount of this Note. It is intended by the foregoing that to the
extent the principal amount has not been retired, that the Holder shall be
entitled to the dilution protection set forth in Section 4 of the Letter
Agreement including without limitation, such that Holder receives an appropriate
amount of Conversion Shares up to 3% of the Company's outstanding Common Stock,
computed on a fully diluted basis, upon the conclusion of an Initial Public
Offering.
(b) Notwithstanding anything in this Agreement to the
contrary, in order to preserve for Holder the conversion rights set forth above,
the following additional provisions shall apply:
(i) Prior to any optional prepayment of this Note,
Company will provide Lender 10 days written notice of such intent, in which case
Holder may notify Company in writing that it is electing to convert all (or the
portion subject to prepayment) of this Note into Shares of Common Stock as set
forth herein;
(ii) In the event of any payment associated with the
Collateral Security Agreements, the Company will use its best efforts (including
requiring any obligors with respect to the Collateral) to notify Holder that a
payment has been (or will be) made. In such event, Holder shall have 10 days
after receipt of such payment to return the like amount of cash to Company so as
to maintain the conversion rights set forth herein.
SECTION 6 MISCELLANEOUS.
(a) Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail, or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex, or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, at its address at 00000 Xxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 Attention: President, (ii)
if to the Holder, at its address set forth on the first page hereof, or (iii) in
either case, to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 6(a). Any notice or other
communication given by certified mail shall be deemed given at the time of
receipt. Any notice given by other means permitted by this Section 6(a) shall be
deemed given at the time of receipt thereof.
(b) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Note (and upon surrender of
this Note if mutilated), the Company shall execute and deliver to the Holder a
new Note of like date, tenor, and denomination.
(c) No course of dealing and no delay or omission on the
part of the Holder in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Holder's rights, powers, or remedies. No
right, power, or remedy conferred by this Note upon the Holder shall be
exclusive of any other right, power, or remedy referred to herein or now or
hereafter
- 5 -
14
available at law, in equity, by statute or otherwise, and all such
remedies may be exercised singly or concurrently.
- 6 -
15
(d) This Note may be amended only by a written instrument
executed by the Company and the Holder hereof. Any amendment shall be endorsed
upon this Note, and all future Holders shall be bound thereby.
(e) This Note has been negotiated and consummated in the
State of New York and shall be governed by, and construed in accordance with,
the laws of the State of New York, without giving effect to principles governing
conflicts of law.
(f) The Holder irrevocably consents to the jurisdiction of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of, or relating
to, this Note, any document or instrument delivered pursuant to, in connection
with, or simultaneously with this Note, or a breach of this Note or any such
document or instrument. In any such action or proceeding, the Company waives
personal service of any summons, complaint, or other process and agrees that
service thereof may be made in accordance with Section 4(a). Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the Company shall
appear or answer such summons, complaint, or other process. Should the Company
fail to appear or answer within such 30-day period or such extended period, as
the case may be, the Company shall be deemed in default and judgment may be
entered against the Company for the amount as demanded in any summons,
complaint, or other process so served.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
dated the day and year first above written.
DSL ENTERTAINMENT GROUP, INC.
BY:
---------------------------------------------
XXXX XXXXX
PRESIDENT AND CHIEF EXECUTIVE OFFICER
- 7 -
16
SECURITY AGREEMENT AND PLEDGE
SECURITY AGREEMENT, dated as of January 22, 1996, made by DSL
Entertainment Group , Inc. ("Company" or "Debtor"), in favor of Xxxxxx Xxxxxxx
("Secured Party").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Letter Agreement, dated as
of the date hereof, between Company and Secured Party (the "Letter Agreement"),
as well as the related Convertible Securred Promissory Note (as such agreements
may from time to time be amended, modified or supplemented) (collectively the
"Financing Agreement"), Secured Party has agreed to advance to the Company the
summ of $322,000 for use by the Company as working capital (collectively, such
sums are referred to herein as the "Advances"); and
WHEREAS, Secured Party is willing to make the Advances but
only upon the condition, among others, that Company shall have executed and
delivered to Secured Party, for its benefit, this Security Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Financing Agreement are used herein as therein defined, and the
following terms shall have the following meanings (such meanings being equally
applicable to both the singular and plural forms of the terms defined):
"Affiliated Person" shall mean any Person which directly or indirectly
controls, is controlled by or is under common control with Company. For the
purposes of this definition, "control" (including with corresponding meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, if the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract or otherwise.
"Collateral" shall have the meaning assigned to such term in Section 2
of this Security Agreement.
"Collateral Documents" shall mean all present and future notes
(including, without limitation, the Notes), security agreements, assignments,
pledge agreements,, consents and other documents granting liens or other
security interests to the Secured Party pursuant to this Agreement.
"Event of Default" shall have the meaning set forth in Section 7.
17
"hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Security Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
"Proceeds" shall mean "proceeds," as such term is defined in section
9-306(1) of the UCC and, in any event, shall include, without limitation, (i)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to Company from time to time with respect to any of the Collateral, and (ii) any
and all payments (in any form whatsoever) made or due and payable to Company
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority).
"Secured Obligations" shall mean (i) all of the unpaid principal amount
of, and accrued interest on, amounts owing by Company to Secured Party under the
Financing Agreement or this Security Agreement.
"Security Agreement" shall mean this Security Agreement anf Pledge, as
the same may from time to time be amended, modified or supplemented and shall
refer to this Security Agreement as in effect of the date such reference becomes
operative.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of California; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Secured Party's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of California, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
2. 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 and to
induce Secured Party to enter into the Financing Agreement and to make the
Advances (as that term is defined in the Financing Agreement) in accordance with
the terms thereof, Company hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Secured Party, for its benefit, and hereby grants
to Secured Party, for its benefit, a security interest in, all of Company's
right, title and interest in, to the license agreements and receivables more
fully identified on Exhibit 1 attached hereto (all of which being hereinafter
collectively called the "Collateral").
3. Representations and Warranties
The Company hereby represents and warrants that:
2
18
(a) Except for the security interest granted to Secured
Party pursuant to this Security Agreement and other Permitted
Encumbrances, Company is the sole owner of each item of the Collateral
in which it purports to grant a security interest hereunder, having good
and marketable title thereto, free and clear of any and all Liens. No
material amounts payable under or in connection with any of its accounts
receivable or contracts are evidenced by Instruments which have not been
delivered to Secured Party.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by Company in
favor of Secured Party, pursuant to this Security Agreement or such as
relate to other Permitted Liens.
(c) Appropriate financing statements having been filed in
all jurisdictions in which the Collateral is located, this Security
Agreement is effective to create a valid and continuing first priority
lien on and first priority perfected security interest in the Collateral
with respect to which a security interest may be perfected by filing
pursuant to the UCC in favor of Secured Party, prior to all other Liens
except Permitted Liens, and is enforceable as such as against creditors
of and purchasers from Company (other than purchasers of Inventory in
the ordinary course of business) and as against any purchaser of real
property where any of the Equipment is located and any present or future
creditor obtaining a Lien on such real property. All action necessary or
desirable to protect and perfect such security interest in each item of
the Collateral has been duly taken.
(d) Company's principal place of business and the place
where its records concerning the Collateral are kept is located at the
address of Company set forth on the Financing Agreement, and Company
will not change such principal place of business or remove such records
unless it has taken such action as is necessary to cause the security
interest of Secured Party in the Collateral to continue to be perfected.
Company will not change its principal place of business or the place
where its records concerning the Collateral is kept without giving
thirty (30) days' prior written notice thereof to Secured Party.
4. Covenants. Company covenants and agrees with Secured
Party that from and after the date of this Security Agreement and until the
Secured Obligations are fully satisfied:
(a) Financing Statements and Further Documentation.
Company will join with Secured Party in the execution and filing
of such financing statement or statements in the form and
content reasonably required by Secured Party. Company will pay
all costs of filing any financing, continuation or termination
statements with respect to the security interest created by this
Agreement, together with costs and expenses of any lien search
required by Secured Party, during the term hereof, either as a
condition precedent to any Advance made by Secured Party to
Company hereunder. At any time and from time to time, upon the
written request of Secured Party, and at the sole expense of
Company, Company will promptly and duly execute
3
19
and deliver any and all such further instruments and documents
and take such further action as Secured Party may reasonably
deem desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted. Company
also hereby authorizes Secured Party to file any such financing
or continuation statement without the signature of Company to
the extent permitted by applicable law.
(b) Maintenance of Records. Company will keep and
maintain at its own cost and expense satisfactory and complete
records of the Collateral, including, without limitation, a
record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the
Collateral. Company will xxxx its books and records pertaining
to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For Secured Party's further
security, Company agrees that Secured Party, shall have a
special property interest in all of Company's books and records
pertaining to the Collateral and, upon the occurrence and during
the continuation of any Default or Event of Default, Company
shall deliver and turn over any such books and records to
Secured Party or to its representatives at any time on demand of
Secured Party. Prior to the occurrence of a Default or an Event
of Default and upon reasonable notice from Secured Party,
Company shall permit any representative of Secured Party to
inspect such books and records and will provide photocopies
thereof to Secured Party.
(c) Indemnification. In any suit, proceeding or
action brought by Secured Party relating to the Collateral,
Company will save, indemnify and keep Secured Party and Secured
Party harmless from and against all expense, loss or damage
suffered by reason of any defense, set off, counterclaim,
recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Company of any obligation
thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to, or in favor of, such obligor
or its successors from Company, and all such obligations of
Company shall be and remain enforceable against and only against
Company and shall not be enforceable against Secured Party.
(d) Compliance with Laws, etc. Company will comply,
in all material respects, with all acts, rules, regulations,
orders, decrees and directions of any governmental authority,
applicable to the Collateral or any part thereof or to the
operation of Company's business; provided, however, that Company
may contest any act, regulation, order, decree or direction in
any reasonable manner which shall not in the sole opinion of
Secured Party, adversely affect Secured Party's rights hereunder
or adversely affect the first priority of its security interest
in the Collateral.
(e) Payment of Obligations. Company will pay
promptly when due all charges imposed upon the Collateral or in
respect of its income or profits therefrom and all claims of any
kind (including, without limitation, claims for labor, material
and supplies) except as otherwise provided in the Financing
Agreement.
4
20
(f) Continuous Perfection. Company will not change
its name, identity or corporate structure in any manner which
might make any financing or continuation statement filed in
connection herewith seriously misleading within the meaning of
section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless Company shall have given Secured
Party at least thirty (30) days' prior written notice thereof
and shall have taken all action (or made arrangements to take
such action substantially simultaneously with such change if it
is impossible to take such action in advance) necessary or
reasonably requested by Secured Party to amend such financing
statement or continuation statement so that it is not seriously
misleading.
5. Secured Party's Appointment as Attorney-in-Fact.
(a) Upon the occurrence of an Event of Default (as defined
below) Company hereby irrevocably constitutes and appoints Secured Party
and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Company and in the name of Company
or in its own name, from time to time in Secured Party's discretion, for
the purpose of carrying out the terms of this Security Agreement, to
take any and all appropriate action and to execute and deliver any and
all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement and, without limiting
the generality of the foregoing, hereby gives Secured Party the power
and right, upon the occurrence of an Event of Default, on behalf of
Company, without notice to or assent by Company to do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral and, in the name of Company or
its own name or otherwise, to take possession of and endorse and
collect any checks, drafts, Financing Agreement, acceptances or
other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by Secured Party for the purpose of collecting any
and all such moneys due under any Collateral whenever payable
and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by
Secured Party for the purpose of collecting any and all such
moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Security Agreement and
to pay all or any part of the premiums therefor and the costs
thereof; and
(iii) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to
5
21
Secured Party or as Secured Party shall direct; (B) to receive
payment of and receipt for any and all moneys, claims and other
amounts due, and to become due at any time, in respect of or
arising out of any Collateral; (C) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court
of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any
Collateral; (D) to defend any suit, action or proceeding brought
against Company with respect to any Collateral; (E) to settle,
compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or
releases as Secured Party may deem appropriate; and (F)
generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner
thereof for all purposes, and to do, at Secured Party's option
and Company's expense, at any time, or from time to time, all
acts and things which Secured Party reasonably deems necessary
to protect, preserve or realize upon the Collateral and Secured
Party's Lien therein, in order to effect the intent of this
Security Agreement, all as fully and effectively as Company
might do.
(b) Secured Party agrees that, except upon the occurrence
and during the continuation of a Default or an Event of Default, it will
not exercise the power of attorney or any rights granted to Secured
Party pursuant to this Section 5. Company hereby ratifies, to the extent
permitted by law, all that said attorney shall lawfully do or cause to
be done by virtue hereof. The power of attorney granted pursuant to this
Section 5 is a power coupled with an interest and shall be irrevocable
until the Secured Obligations are indefeasibly paid in full.
(c) The powers conferred on Secured Party hereunder are
solely to protect Secured Party's interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. Secured Party
shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers and neither it nor any of its
officers, directors, employees or agents shall be responsible to Company
for any act or failure to act, except for its own gross negligence or
willful misconduct.
(d) Company also authorizes Secured Party, at any time and
from time to time upon the occurrence and during the continuation of any
Default or Event of Default, (i) to communicate in its own name with any
party to any contract with regard to the assignment of the right, title
and interest of Company in and under the contracts hereunder and other
matters relating thereto and (ii) to execute, in connection with the
sale provided for in Section 7 hereof, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the
Collateral.
6. Performance by Secured Party of Company's Obligation. If Company
fails to perform or comply with any of its agreements contained herein and
Secured Party, as provided for by the terms of this Security Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the reasonable expenses of Secured Party incurred in connection
6
22
with such performance or compliance, together with interest thereon at the rate
then in effect in respect of the Loans, shall be payable by Company to Secured
Party on demand and shall constitute Secured Obligations secured hereby.
7. Events of Default. The following conditions or events shall
constitute an Event of Default:
(a) the failure to pay when due any amounts due under the
Financing Agreement: or
(b) The rejection, termination or disaffirmance or the
attempted rejection, termination or disaffirmance by Company (or any
person or entity acting on Company's behalf or in Company's place and
stead) of the Financing Agreement or this Agreement; or
(c) Any representation or warranty which materially
adversely affects the rights of Secured Party in connection with this
Agreement or the Financing Agreement shall be false in any material
respect on the date as of which made; or
(d) Company shall fail, breach or default in the performance
of any of the Secured Obligations which failure, breach or default
materially adversely affects Secured Party's rights therein (subject to
any express cure rights provided for in the Financing Agreement; or
(e) (i) A court having jurisdiction in the premises shall enter
a decree or order for relief in respect of Company in an
involuntary case under any applicable bankruptcy, insolvency or
any other similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be
granted under any applicable federal or state law; or
(ii) An involuntary case shall be commenced against
Company under any applicable bankruptcy, insolvency or similar
law now or hereafter in effect; or a decree or order of any
court having jurisdiction in the premises for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or over all or
over a substantial part of its property, shall have been
entered; or there shall have been an involuntary appointment of
an interim receiver, trustee or other custodian of Company for
all or a substantial part of its property; or there shall have
been issued a warrant of attachment, execution or similar
process against any substantial part of the property of Company
and any such event in this clause (ii) shall have continued for
thirty (30) days unless dismissed, bonded or discharged; or
(f) Company shall have an order for relief entered with
respect to it or commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or shall consent to the entry of an order for relief in an involuntary
case,
7
23
or to the conversion of an involuntary case to a voluntary case, under
any such law, or shall consent to the appointment of or taking
possession by a receiver or other custodian for all or a substantial
part of its property; or Company shall make any assignment for the
benefit of creditors; or Company shall fail or be unable or shall admit
in writing its inability to pay its debts a such debts become due; or
the Board of Directors of Company (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the
foregoing; or
(g) Company shall be dissolved or shall file a petition for
dissolution, unless Company's successor executes and delivers to Secured
Party a security agreement substantially similar in all respects to this
Agreement.
8. Remedies, Rights Upon Default.
(a) If any Default or Event of Default shall occur and be
continuing, Secured Party may exercise in addition to all other rights
and remedies granted to it in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, Company expressly
agrees that in any such event Secured Party, without demand of
performance or other demand, advertisement or notice of any kind (except
the notice specified below of time and place of public or private sale)
to or upon Company or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived to the maximum
extent permitted by the UCC and other applicable law), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option
or options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's
board or at any of Secured Party's offices or elsewhere at such prices
as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. Secured Party shall have the
right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or
any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption Company hereby releases. Company
further agrees, at Secured Party's request, to assemble the Collateral
and make it available to Secured Party at places which Secured Party
shall reasonably select, whether at Company's premises or elsewhere.
Secured Party shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, as provided in
Section 8(d) hereof, Company remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over
such net proceeds and after the payment by Secured Party of any other
amount required by any provision of law, including Section 9-504(1)(c)
of the UCC, need Secured Party account for the surplus, if any, to
Company. To the maximum extent permitted by applicable law, Company
waives all claims, damages, and demands against Secured Party arising
out of the repossession, retention or sale of the Collateral except such
as arise out of the gross negligence or wilful misconduct of Secured
Party. Company agrees that Secured Party need not give more than ten
(10) days'
8
24
notice (which notification shall be deemed given when mailed or
delivered on an overnight basis, postage prepaid, addressed to Company
at its address referred to in Section 12 hereof) of the time and place
of any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters.
Company shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all
amounts to which Secured Party, for its benefit and the ratable benefit
of Secured Party, is entitled, Company also being liable for the fees of
any attorneys employed by Secured Party to collect such deficiency.
(b) Company also agrees to pay all costs of Secured Party,
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies
hereunder.
(c) Company hereby waives presentment, demand, protest or
any notice (to the maximum extent permitted by applicable law) of any
kind in connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed
by Secured Party in the following order of priorities:
first, to Secured Party in an amount sufficient to pay
in full the reasonable expenses of Secured Party in connection
with such sale, disposition or other realization, including all
expenses, liabilities and advances incurred or made by Secured
Party in connection therewith, including, without limitation,
reasonable attorney's fees;
second, to Secured Party in an amount equal to the then
unpaid principal of and accrued interest and prepayment
premiums, if any, on the Financing Agreement; and
finally, upon payment in full of all of the obligations
outstanding under the Financing Agreement, to pay to Company, or
its representatives or as a court of competent jurisdiction may
direct, any surplus then remaining from such Proceeds.
9. Limitation on Secured Party's Duty in Respect of
Collateral. Secured Party shall use reasonable care with respect to the
Collateral in its possession or under its control. Secured Party shall not have
any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of it or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. Upon request of Company, Secured Party shall account for any
moneys received by it in respect of any foreclosure on or disposition of the
Collateral.
10. Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Company for liquidation or
9
25
reorganization, should Company become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Company's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Secured Obligations, whether as a "voidable preference",
"fraudulent conveyance", or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
11. Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be delivered in person with
receipt acknowledged, or telecopied and confirmed immediately in writing by a
copy mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed as hereafter set forth, or mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to Secured Party, at
Xxxxxx Xxxxxxx
Xxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) If to Company, at
DSL Entertainment Group, Inc.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xx. 00000
With a copy to:
Xxxxx & Lytton
1900 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval,
10
26
declaration or other communication hereunder shall be deemed to
have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or the date of the
telecopy transmission, or three (3) Business Days after the same
shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
12. Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. 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 and then only to the extent therein set forth. 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. No failure to exercise nor any delay in
exercising on the part of Secured Party, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Security Agreement may
be waived, altered, modified or amended except by an instrument in writing, duly
executed by Secured Party and, where applicable by Company.
14. Successor and Assigns. This Security Agreement and all
obligations of Company hereunder shall be binding upon the successors and
assigns of Company, and shall, together with the rights and remedies of Secured
Party hereunder, inure to the benefit of Secured Party, and all future holders
of instruments or agreements evidencing the Secured Obligations and their
respective successors and assigns. No sales of participation, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or interest
therein shall in any manner affect the security interest granted to Secured
Party hereunder.
15. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH
11
27
STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. AGENT, EACH SECURED PARTY
AND COMPANY AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY OBJECTION
AS TO VENUE IN THE COUNTY OF LOS ANGELES, STATE OF NEW YORK. SERVICE OF PROCESS
ON COMPANY, AGENT OR ANY SECURED PARTY IN ANY ACTION ARISING OUT OF OR RELATING
TO ANY OF THE LOAN DOCUMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE
ADDRESS LISTED IN SECTION 11 HEREOF. COMPANY HEREBY IRREVOCABLY APPOINTS CT
CORPORATION SYSTEM AS COMPANY'S AGENT FOR THE PURPOSE OF ACCEPTING THE SERVICE
OF ANY PROCESS WITHIN THE STATE OF CALIFORNIA. COMPANY AGREES NOTHING HEREIN
SHALL PRECLUDE AGENT, ANY SECURED PARTY OR COMPANY FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION.
16. Conflict of Terms. Except as otherwise explicitly
provided in this Security Agreement, a conflict or inconsistency, if any,
between the terms and provisions of this Security Agreement and the terms and
provisions of the Financing Agreement shall be controlled by the terms and
provisions of the Financing Agreement to the extent of such conflict or
inconsistency.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
on the date first set forth above.
DSL ENTERTAINMENT GROUP, INC.
By:
-------------------------------
Name:
---------------------------
Title:
--------------------------
Accepted and acknowledged by:
-------------------------------
Xxxxxx Xxxxxxx
"Secured Party"
12
