SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as of October 31, 1996,
by and among Overseas Filmgroup, Inc., a Delaware corporation (the "Debtor"),
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little, an individual, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual
(each referred to herein individually as a "Secured Party" and collectively as
the "Secured Parties"), is made with reference to the following facts:
A. Concurrently herewith, in connection with the consummation of the
transactions contemplated pursuant to that certain Agreement of Merger dated as
of July 2, 1996 among the Debtor and the Secured Parties, among others, as
amended by that certain Amendment to Agreement of Merger, dated as of September
20, 1996, by and among the same parties (as so amended, the "Merger
Agreement"), the Debtor is executing one or more Secured Promissory Notes in
favor of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little in the aggregate principal
amount of $2,000,000 (collectively referred to herein as the "Note").
B. The Debtor has agreed to grant the Secured Parties a security
interest in the property hereinafter described as security for the prompt and
complete payment of all indebtedness of the Debtor to the Secured Parties under
the Note, and for the other obligations of the Debtor to the Secured Parties
under this Agreement and the Note (the "Obligations").
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and other agreements hereinafter contained, the Debtor hereby agrees
with Secured Parties for the benefit of Secured Parties as follows:
1. Grant of Security Interest.
The Debtor hereby grants to the Secured Parties a continuing security
interest in the following property of the Debtor, whether the same is now owned
or hereafter acquired (the "COLLATERAL"):
(a) All of the assets and property of every kind of the Debtor,
including all assets and property now owned and hereafter acquired by the
Debtor whether tangible or intangible, wherever located or situated and whether
or not in possession of the Debtor including but not limited to, all right,
title and interest of the Debtor in and to:
(i) All Film Assets (as defined in subparagraph (b) below);
(ii) All Securities (as defined in subparagraph (c) below),
including without limitation, the capital stock described on Schedule
1 attached hereto (the "PLEDGED STOCK") and the certificates
representing the Pledged Stock and any interest of Debtor in the
entries on the books of any financial intermediary pertaining to the
Pledged Stock, and all dividends, cash or proceeds from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Securities and the
Pledged Stock;
(iii) All tangible personal property, goods, machinery,
fixtures, equipment, furniture, furnishings, vehicles, trailers,
implements and other tangible personal property of every kind and
description, wherever the same may be located, (including, without
limitation, all video recording, transposition, duplication, viewing
and other electronic equipment, all cameras and other photographic,
sound recording and editing equipment, projectors, film developing
equipment and machinery), all goods of like kind or type hereafter
acquired in substitution or replacement thereof and all additions and
accessions thereto;
(iv) All intangible personal property, including, without
limitation, all inventions, processes, formulae, licenses, patents,
patent rights, trademarks, trademark rights, service marks, service
▇▇▇▇ rights, trade names, trade name rights, logos, indicia, corporate
and company names, business source or business identifiers and
renewals and extensions thereof, domestic and foreign, and the
accompanying goodwill and other like business property rights relating
to any aspect of the business of the Debtor, all rights (but not the
obligation) to register claims under trademark or patent and to renew
and extend such trademarks or patents and all rights (but not the
obligation) to ▇▇▇ in the name of the Debtor and/or in the name of
Secured Parties for past, present or future infringement of trademark
or patent;
(v) All accounts, chattel paper and/or other rights to
payment, including, without limitation, all tax refunds, all refunds
of fees, advances or royalties paid or prepaid and all accounts and/or
rights to payment due from third parties in connection with the
distribution of videocassettes and from the exploitation of any and
all Film Assets;
(vi) All inventory, including, without limitation, all
merchandise, raw materials, components, parts, supplies, unfinished
goods, work-in-process, finished products intended for sale, lease or
other disposition, and packing and shipping materials of every kind,
nature and description, wherever the same may be located;
(vii) All deposits, deposit accounts, cash and cash
equivalents, drafts, checks, certificates of deposit, notes, bills of
exchange and other writings which evidence a right to the payment of
money and all amounts from time to time in any collection accounts of
the Debtor, including, without limitation, the deposit accounts
identified on Schedule 1 attached hereto (the "PLEDGED DEPOSITS");
(viii) All insurance policies owned by the Debtor or in
which the Debtor is named as an insured or additional insured or loss
payee and all proceeds which may be derived therefrom;
(ix) All licenses, permits, franchises, certificates and
other governmental authorizations and approvals of any nature
whatsoever, to the extent assignable;
-2-
(x) All documents, documents of title, receipts and books
and records;
(xi) All causes of action, litigations, arbitrations and
claims, together with related judgments, settlements and recoveries,
whether in contract, tort or otherwise, and whether pending or
unasserted, known or unknown;
(xii) All general intangibles not elsewhere included in
this definition, including, without limitation, all general
intangibles consisting of any right to payment which may arise in the
distribution or exploitation of any of the rights set forth herein or
which may arise from the general intangible rights in favor of the
Debtor for services or other performance rendered to or by any third
parties; and
(xiii) All products, proceeds and income of any of the
foregoing and all substitutions and replacements of, and additions and
accessions to, any of the foregoing.
(b) "Film Assets" shall mean, with respect to each film acquired,
developed, produced, owned, distributed and/or exploited by the Debtor, all
rights and interests therein or pertaining thereto, including, without
limitation, all rights and interests of every kind and nature, present and
future, direct and indirect, in and to:
(i) the underlying literary property;
(ii) all worldwide copyrights, rights and interests in
copyrights, renewals and extensions of copyrights, domestic and
foreign, obtained upon the film or the underlying literary property or
any part thereof, the right (but not the obligation) to make
publication thereof for copyright purposes and to register claims
under copyright, the right (but not the obligation) to renew and
extend such copyright and the right (but not the obligation) to ▇▇▇ in
the name of any person for past, present and future infringements of
copyright;
(iii) all music and musical compositions created for, used
in or to be used in connection with the film, including, without
limitation, all copyrights therein and all rights to perform, copy,
record, rerecord, produce, publish, reproduce or synchronize any or
all of said music and musical compositions as well as all other rights
to exploit such music including record, soundtrack recording and music
publishing rights;
(iv) all collateral, allied, ancillary and subsidiary
rights of every kind and nature whatsoever derived from, appurtenant
to or related to the film or the underlying literary property,
including, without limitation, all production, exploitation, reissue,
remake, sequel, serial or series production rights by any means and in
any medium now known or hereafter devised, whether based upon, derived
from or inspired by the film, the underlying literary property or any
part thereof; all rights to use, exploit and license others to use or
exploit any and all novelization, publishing, commercial tie-ups and
merchandising rights of every kind and nature whatsoever, including
those arising out of or connected with or inspired by the film or the
underlying literary property, the title or titles of the film or the
underlying literary property, the characters
-3-
appearing in the film or the underlying literary property and/or the
names or characteristics of said characters, and including further,
without limitation, any and all commercial exploitation in connection
with or related to the film, all remakes, sequels or other derivative
works thereof and/or said literary property (collectively the
"ANCILLARY RIGHTS");
(v) all rights to develop, produce, acquire, reacquire,
finance, release, sell, distribute, subdistribute, lease, sublease,
market, license, sublicense, exhibit, broadcast, transmit, reproduce,
publicize or otherwise exploit the film, the underlying literary
property and the Ancillary Rights in perpetuity, without limitation,
in any manner and in any media whatsoever throughout the universe,
whether now known or hereafter developed, including, without
limitation, by projection, radio, all forms of television (including,
without limitation, free, pay, toll, cable, sustaining subscription,
sponsored and direct satellite broadcast), in theatres,
nontheatrically, on cassettes, cartridges and discs and by any and all
other means, methods, processes or devices now known or hereafter
conceived, devised or created;
(vi) all underlying literary properties and all Ancillary
Rights relating to the film, including, without limitation, (A) all
rights to receive moneys due and to become due under or pursuant to
all applicable distribution agreements (whether or not earned by
performance), (B) all rights to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to all applicable
distribution agreements, (C) all claims for damages arising out of or
for breach of or default under all applicable distribution agreements,
(D) the right to terminate all applicable distribution agreements, to
perform thereunder and to compel performance and otherwise to exercise
all remedies thereunder, (E) all accounts, chattel paper, instruments,
general intangibles, contract rights, letters of credit and other
obligations of any kind or nature relating to, arising out of or in
connection with all applicable distribution agreements, and (F) all
rights now or hereafter existing in and to all security agreements,
leases and other contracts securing or otherwise relating to all
applicable distribution agreements;
(vii) all acquisition and distribution agreements relating
to the film, including, without limitation, all agreements for (A)
acquisition of rights in any film or any literary property and all
rights under distribution and license agreements, (B) personal
services, including the services of writers, directors, performers,
producers, special effects personnel, production personnel, animators,
cameramen and other creative, artistic and technical staff and (C) the
use of studio space, equipment, facilities, locations, production
services, special effects services and laboratory services;
(viii) all physical properties relating to the film,
including all access rights and rights to use the same, all
pledgeholder, laboratory, access or film warehousing agreements
relating to the film or any physical properties thereof and any and
all books and records, including, without limitation, documents or
receipts of any kind or nature issued by any pledgeholder,
warehouseman or bailee with respect to the film and any physical
properties thereof;
-4-
(ix) all insurance placed upon the film or the insurable
properties thereof and/or any person or persons engaged in the
development, acquisition, production, completion, delivery or
exploitation of the film, and all rights of any kind or nature
whatsoever in and to all completion guarantees and all other
agreements and documents relating to production, completion and
delivery of the film and the proceeds thereof;
(x) the title or titles of the film including rights
protected pursuant to trademark, service ▇▇▇▇, unfair competition
and/or other laws, rules or principles of law or equity and all
inventions, processes, formulae, licenses, copyrights, patents, patent
rights, trademarks, trademarks rights, service marks, service ▇▇▇▇
rights, trade names, trade name rights, logos, indicia, corporate and
company names, business source or business identifiers and renewals
and extensions thereof, domestic and foreign, and the accompanying
goodwill and other like business property rights relating to the film,
the right (but not the obligation) to register claims under trademark,
patent or copyright and to renew and extend such trademarks, patents
or copyrights and the right (but not the obligation) to ▇▇▇ in the
name of any person for past, present or future infringement of
trademark, copyright or patents; and
(xi) any and all tangible and intangible personal property,
including, without limitation, any and all accounts, general
intangibles, chattel paper, documents, instruments, goods and books
and records, including inventory and contract rights, not elsewhere
included in this definition, but otherwise constituting or relating to
the film or any of the foregoing.
(c) "Securities" shall mean any stock, shares, partnership interests,
voting trust certificates, bonds, debentures, notes or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates
of interest, depository trust receipts, shares or participations in temporary
or interim certificates, and any options or warrants for the purchase or
acquisition of, or any other right to subscribe to, purchase or acquire, any of
the foregoing.
(d) Notwithstanding the foregoing provisions of this Section 1, the
security interest granted in this Agreement shall not extend to, and the term
"Collateral" shall not include, any general intangibles of the Debtor (whether
owned or held as licensee or lessee, or otherwise), to the extent that there
exists a prohibition on encumbering such general intangibles either (i) as a
matter of law or (ii) under the terms of the license, lease or contract
creating such general intangible (but solely to the extent that any such
prohibition is enforceable under applicable law); provided, however, that the
security interest granted in this Agreement shall extend to, and the term
"Collateral" shall include, (A) any general intangible which is an account,
which is a proceed of, or otherwise related to the enforcement or collection
of, any account, or which are goods which are the subject of any account, (B)
any and all proceeds of general intangibles to the extent that encumbrance of
such proceeds is not so prohibited, and (C) general intangibles previously
excluded from the definition of "Collateral" by this Section 1(d), upon
obtaining the consent of any such licensor, lessor or other applicable party.
-5-
Nothing in this Agreement shall be deemed to constitute an assumption
by either of the Secured Parties of any liability or obligation of Debtor with
respect to any of the Collateral.
2. Security for Obligations.
This Agreement secures and the Collateral is collateral security for
the prompt payment or performance in full when due, whether at stated maturity,
by acceleration or otherwise (including the payment of amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. ss. 362(a)), to each Secured Party of Debtor's
Obligations now existing or hereafter arising to such Secured Party, whether
for principal or interest (including, without limitation, interest which, but
for the filing of a petition in bankruptcy, would accrue on such obligations)
or payments of fees, expenses or otherwise (all such obligations being the
"SECURED OBLIGATIONS").
3. Representations and Warranties.
Debtor represents and warrants as follows:
(a) Status of Debtor. The Debtor is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware and is duly qualified or licensed to conduct
business in each jurisdiction in which the nature of its business or
assets requires such qualification or licensing under applicable law.
The Debtor has the requisite power and authority to own its assets and
to transact the business in which it is presently engaged and in which
it proposes to engage and to grant to Secured Parties the security
interests in the Collateral as herein provided.
(b) Binding Agreement. This Agreement has been duly
authorized and constitutes the legal, valid and binding obligation of
the Debtor enforceable against the Debtor in accordance with its
terms.
(c) Title to Collateral. The Debtor has good and marketable
title to all and every part of the Collateral, free and clear of any
mortgage, pledge, lien, security interest, encumbrance, conditional
sale contract or other title retention agreement, or any other adverse
claim of any nature whatsoever (collectively, "LIEN") except for (i)
the security interest granted to each of the Secured Parties hereby,
(ii) the security interests in favor of the lenders pursuant to that
certain Syndication Agreement dated as of May 9, 1994 among ▇▇▇▇▇▇ &
Co., Berliner Bank AG London Branch and Overseas Filmgroup, Inc., as
amended and restated in accordance with the Merger Agreement (as so
amended and restated, the "CREDIT AGREEMENT"), (iii) Permitted
Encumbrances (as defined in the Credit Agreement on the date of this
Agreement) and (iv) Liens existing on the date of the merger as set
forth in the Overseas Disclosure Schedule to the Merger Agreement (the
Liens listed in clauses (i) through (iv) are hereinafter referred to
as "Permitted Liens"). No effective financing statement or other
instrument similar in effect covering all or any part of the Debtor's
Collateral is on file in any recording office, except such as may have
been filed in favor of the Secured Parties and holders of the security
interests permitted under this Section 3(c).
-6-
(d) No Default or Required Consent. Neither the execution and
delivery of this Agreement by the Debtor nor the effectuation by the
Secured Parties of any of their rights and remedies hereunder, whether
upon default or otherwise, will result in a breach of or constitute a
default under any charter provision or bylaw of the Debtor or any
other agreement or instrument to which the Debtor is a party or by
which any of the Debtor's Collateral is bound, nor violate any law or
any rule or regulation of any administrative agency or any order,
writ, injunction or decree of any court or administrative agency, nor
does any of the foregoing require the consent of any person, entity or
governmental agency or any notice or filing with any governmental or
regulatory body, except as shall have been previously obtained, given
or made.
(e) Perfection. Upon the execution and delivery of this
Agreement by Debtor, the filing of appropriate financing statements
with the appropriate governmental agencies and the filing of a
Copyright Mortgage in the form of Exhibit A attached hereto in the
U.S. Copyright Office, the Secured Parties will have a perfected
security interest in and to the Collateral of the Debtor that can be
perfected by such filing, subject only to the Permitted Liens.
(f) Financial Information. Any and all financial or other
information heretofore furnished to either of the Secured Parties by
the Debtor in connection with the Secured Obligations or the Debtor's
financial condition or the value or condition of the Debtor's
Collateral was true and correct as of the date it was so furnished.
(g) No Litigation. There are no legal, administrative or
other proceedings pending or, to the best of Debtor's knowledge,
threatened against, the Debtor's title to the Collateral or against
Debtor's grant of a security interest therein hereunder, nor does the
Debtor know of any basis for the assertion of any such claim.
No event of default under Section 8(g) of this Agreement shall occur
if the representations made by Debtor in Section 3(c), 3(g) or 3(f) are
incorrect, if they are incorrect as a result of the status of, or actions taken
regarding, the Collateral held by Overseas Filmgroup, Inc. prior to its merger
with Entertainment/Media Acquisition Corporation ("EMAC") pursuant to the
Merger Agreement or as a result of information which Overseas Filmgroup, Inc.
furnished or failed to furnish pursuant to the Merger Agreement prior to its
merger with EMAC.
4. Affirmative Covenants.
Debtor covenants and agrees that until such time as all of the Secured
Obligations are indefeasibly paid or otherwise satisfied in full, unless the
Secured Parties shall otherwise consent in writing:
(a) Conduct of Business and Maintenance of Assets and
Licenses. The Debtor shall do or cause to be done all things necessary to
preserve in full force and effect its existence, its corporate powers and
authority, its qualifications to carry on business in all applicable
jurisdictions, and all rights, interests and assets necessary to the conduct of
its business, except
-7-
where the failure to do so does not have a material adverse effect on the
financial condition or operations of the Debtor.
(b) Delivery of Collateral. With respect to any Collateral as
to which the Secured Parties' security interest must be perfected by, or the
priority thereof must be assured by, possession of the Collateral, subject to
and in accordance with the subordination agreement to be entered into pursuant
to the Credit Agreement and which shall be by and among the Secured Parties,
the Debtor and lenders under the Credit Agreement (the "Subordination
Agreement"), the Debtor shall deliver possession of same in pledge to the
Secured Parties or their agents appointed to hold such Collateral on behalf of
the Secured Parties, endorsed or accompanied by such instruments of assignment
or transfer as Secured Parties may specify and stamped or marked in such manner
as the Secured Parties may specify.
(c) Protection of Security and Legal Proceedings. The Debtor
shall, at its own expense, take any and all actions necessary to preserve,
protect and defend the security interests of the Secured Parties in the
Collateral and the perfection and priority thereof against any and all adverse
claims, including appearing in and defending all actions and proceedings which
purport to affect any of the foregoing. The Debtor shall promptly reimburse a
Secured Party for any and all sums, including costs, expenses and actual
attorneys' fees, which such Secured Party may pay or incur in defending,
protecting or enforcing his or her security interest in the Collateral or the
perfection or priority thereof.
(d) Payment of Taxes. The Debtor shall pay or cause to be
paid all taxes and other levies with respect to the Collateral when the same
become due and payable, except for any taxes which are being diligently
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established.
(e) Use and Maintenance of Collateral. The Debtor shall
comply with all laws, statutes and regulations pertaining to its use and
ownership of the Collateral and its conduct of its business; maintain all of
the Collateral in good condition, reasonable wear and tear excepted, and keep
accurate and complete books and records pertaining to the Collateral in
accordance with generally accepted accounting principles, except where the
failure to do any of the foregoing does not have a material adverse affect on
the Collateral or the Secured Parties' rights therein.
(f) Insurance. The Debtor shall, at its own expense, maintain
insurance on all of its properties and assets of an insurable character to the
extent and for the time periods consistent with normal industry standards
pursuant to policies issued or underwritten by financially sound and reputable
insurers.
(g) Inspection. The Debtor shall give the Secured Parties
such information as may be reasonably requested concerning the Collateral and
shall during regular business hours and upon reasonable notice, permit the
Secured Parties and their agents and representatives to have full access to and
the right to examine, audit and make copies and abstracts from any and all of
the Debtor's books and records pertaining to the Collateral, to confirm and
verify the value of the Collateral and to do whatever else the Secured Parties
reasonably may deem
-8-
necessary or desirable to protect their interests.
(h) Notification. The Debtor shall notify Secured Parties in
writing within ten (10) business days of the occurrence of (i) an Event of
Default (as defined in Section 8) or of the occurrence of an event which, with
notice or lapse of time, or both, would constitute an Event of Default, or (ii)
any event which materially adversely affects the value of the Collateral, the
ability of the Debtor or the Secured Parties to dispose of the Collateral or
the rights and remedies of the Secured Parties in relation thereto; provided,
however, that the notice shall not be required so long as the Secured Parties
are executive officers of the Debtor.
(i) Further Assurances. The Debtor agrees that at any time
and from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that either Secured Party may request, in order to
perfect and to protect any security interest granted or purported to be granted
hereby or to enable the Secured Parties to exercise and to enforce their rights
and remedies hereunder with respect to any Collateral. In addition, Debtor
shall maintain the Pledged Deposits with banks or other financial institutions
within the State of California (except as otherwise set forth on Schedule 1
hereto). Furthermore, the Debtor agrees to furnish promptly to the Secured
Parties such information regarding the financial condition or business of the
Debtor or the Collateral as either Secured Party may request, and all such
information hereafter furnished to either of the Secured Parties by the Debtor
will be true and correct when furnished.
5. Negative Covenants.
The Debtor covenants and agrees that until such time as all of the
Secured Obligations are indefeasibly paid or otherwise satisfied in full,
without the prior written consent of the Secured Parties:
(a) Incurrence of Indebtedness. From and after the date of a
Change in Control (as defined below), the Debtor shall not create, incur,
guaranty, or otherwise become liable for, any indebtedness for borrowed money
or for the deferred purchase price of property under capital leases
("Indebtedness") that is senior to the prior and indefeasible payment in full
of the Secured Obligations ("Senior Indebtedness") or Indebtedness that is pari
passu with the Secured Obligations, unless all of such Indebtedness from time
to time outstanding is in an aggregate principal amount equal to or less than
the sum of (x) the aggregate principal amount of all of Indebtedness
outstanding immediately preceding the Change in Control plus (y) amounts
committed and available to the Debtor for borrowing immediately preceding the
Change in Control. Nothing in this Section 5(a) shall be deemed to be a consent
or agreement by the Secured Parties to subordinate the Secured Obligations to
any indebtedness of the Debtor. The Debtor shall not create, incur, guaranty or
otherwise become liable for Senior Indebtedness, whether before or after a
Change in Control, unless the holder of such Indebtedness shall have entered
into an intercreditor agreement with the Secured Parties in form and substance
reasonably satisfactory to the Secured Parties. The term "Change in Control"
shall have the meaning assigned to such term in the Employment Agreement dated
as of October 31, 1996 between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little and Debtor (the "EDL
Agreement") or the Employment
-9-
Agreement dated as of October 31, 1996 between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Debtor (the
"RBL Agreement").
(b) Sale or Hypothecation of Collateral. The Debtor shall not
directly or indirectly, whether voluntarily, involuntarily, by operation of law
or otherwise (i) sell, assign, license, transfer, exchange, lease, lend, grant
any option with respect to or dispose of any of the Collateral or any of the
Debtor's rights therein, except for sales, assignments, licenses, transfers,
exchanges, leases or loans in the ordinary course of the Debtor's business, nor
(ii) create or permit to exist any Lien on or with respect to any of the
Collateral, except for the Permitted Liens. The inclusion of "proceeds" as a
component of the Collateral shall not be deemed a consent by the Secured
Parties to any sale, assignment, transfer, exchange, lease, loan, granting of
an option with respect to or disposition of all or any part of the Collateral.
(c) Change of Location or Name. The Debtor shall not, without
giving to the Secured Parties at least thirty (30) days' prior written notice
(i) move its principal place of business or the location of its books or
records; (ii) change its name, its trade or fictitious business name(s) or its
form of doing business, or (iii) establish any deposit accounts other than
those set forth on Schedule 1 attached hereto; provided, however, that such
notice shall not be required so long as the Secured Parties are executive
officers of the Debtor.
(d) Preservation of Collateral. The Debtor shall use
reasonable efforts to preserve the value of the Collateral and the security
interests of the Secured Parties therein.
6. Secured Party Appointed Attorney-in-Fact.
Debtor hereby appoints the Secured Parties as the Debtor's
attorney-in-fact with full authority in the place and stead of the Debtor and
in the name of the Debtor or otherwise, from time to time after an Event of
Default has occurred and is continuing, in the Secured Parties' sole and
absolute discretion, to take any action and to execute any instrument which the
Secured Parties may deem necessary or advisable to accomplish the purposes of
this Agreement. Debtor acknowledges that the foregoing grant of power of
attorney is coupled with an interest and is irrevocable. In addition, the
Secured Parties shall have the right, at any time in its discretion upon five
(5) Business Days' notice to Debtor, to transfer to or to register in the name
of the Secured Parties or any of its nominees any or all of the Pledged Stock.
In addition, the Secured Parties shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Stock for
certificates or instruments evidencing smaller or larger denominations. The
rights granted pursuant to Secured Parties pursuant to this Section 6 shall be
subject to and exercised in accordance with the Subordination Agreement.
7. Secured Parties May Perform.
If Debtor fails to perform any agreement or covenant contained herein
at such time as either Secured Party is not an executive officer of Debtor,
then the Secured Parties may perform or cause the performance of such agreement
or covenant, and the expenses of each of the Secured Parties incurred in
connection therewith (as provided in Section 11), plus interest from the date
of such advance to the date of reimbursement at the lesser of (a) 12% per annum
or (b)
-10-
the maximum rate permitted by law, shall be payable by Debtor. However, nothing
in this Agreement shall obligate either Secured Party to act.
8. Events of Default.
The occurrence of any of the following shall constitute an event of
default ("Event of Default") hereunder:
(a) Failure to Pay. The failure of Debtor to pay any
installment of principal or interest under the Note within five (5) days after
such payment is due;
(b) Other Defaults Under Note or this Agreement. The failure
of Debtor to perform any material term, condition or covenant in favor of
either of the Secured Parties contained in the Note or this Agreement or to pay
any amounts due to Secured Parties pursuant to the Note or this Agreement
(other than as set forth in Section 8(a)) if such default is not cured within
30 days after receiving notice of such default;
(c) Other Indebtedness. The occurrence of any breach by
Debtor of the Credit Agreement or the occurrence of any material breach of any
note, loan agreement, indenture or debt instrument of the Debtor evidencing or
representing indebtedness in an aggregate principal amount in excess of
$1,000,000, in each case where such default is not cured within any grace
period provided for in such agreement;
(d) Default Under Other Agreements. The termination by Debtor
of the EDL Agreement or the RBL Agreement without "Cause" (as defined in such
agreements), the termination of the EDL Agreement or the RBL Agreement for
"Good Reason" (as defined therein), or from and after the date of a Change in
Control, the occurrence of any material breach by Debtor of (i) the EDL
Agreement, (ii) the RBL Agreement, (iii) the Lock-Up and Registration Rights
Agreement (as defined in the Merger Agreement), or (iv) the Tax Reimbursement
Agreement (as defined in the Merger Agreement), in each case of (i) through
(iv) where such breach is not cured within any grace period as provided in the
applicable agreement or, if no grace period is provided, within 30 days of the
occurrence of such breach;
(e) Bankruptcy Events. Debtor shall admit in writing its
inability to, or shall fail generally or be generally unable to, pay its debts
(including its payrolls) as such debts become due, or shall make a general
assignment for the benefit of creditors; or Debtor shall file a voluntary
petition in bankruptcy or a petition or answer seeking reorganization, to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act of 1978, as amended or recodified from time to time (the
"Bankruptcy Code") or under any other state or federal law relating to
bankruptcy or reorganization granting relief to debtors, whether now or
hereafter in effect, or shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition filed against
Debtor pursuant to the Bankruptcy Code or any such other state or federal law;
or Debtor shall be adjudicated a bankrupt, or shall make an assignment for the
benefit of creditors, or there shall be applied for or appointed any custodian,
receiver or trustee for all or any substantial part of Debtor's property, or
shall take any action to authorize any of the actions set forth above in this
paragraph; or an involuntary
-11-
petition seeking any of the relief specified in this paragraph shall be filed
against Debtor and shall not be dismissed within 60 days; or any order for
relief shall be entered against Debtor in any involuntary proceeding under the
Bankruptcy Code or any such other state or federal law referred to in this
subsection (e);
(f) Liens on Collateral. The initiation of steps by any third
party to obtain a levy or writ of attachment or garnishment upon Collateral in
excess of $1,000,000 or to affect any of such Collateral by other legal
process, unless the same is dismissed within sixty (60) days after the
initiation thereof;
(g) Misrepresentation. Should any representation made by
Debtor to either Secured Party concerning the financial condition or credit
standing of Debtor prove to be materially false or misleading or should any
representation or warranty of Debtor contained in this Agreement or in any
document, certificate or instrument delivered pursuant thereto or hereto prove
to be materially false or misleading; or
(h) Adverse Judgments. The rendering of a final judgment for
the payment of money the uninsured portion of which is in excess of $1,000,000
by any court of competent jurisdiction against Debtor, and the same is not
discharged or execution thereunder stayed, whether pursuant to appeal or
otherwise, within sixty (60) days of the entry thereof.
9. Remedies upon Default.
If any Event of Default shall have occurred and be continuing and
subject to and in accordance with the Subordination Agreement:
(a) Acceleration of Indebtedness. The Secured Parties may
declare any or all Secured Obligations, or any part thereof, to be immediately
due and payable without demand or notice (and upon the occurrence of any Event
of Default specified in Section 8(e), all Secured Obligations shall without
further action by the Secured Parties become immediately due and payable), and
the Secured Parties may proceed to collect the same.
(b) Notification to Third Parties. The Secured Parties may
notify any account debtor obligated on any of the receivables included in the
Collateral, any purchaser of the Collateral or any other person of the Secured
Parties' interest in the Collateral and instruct any such persons to make
payments thereon directly to the Secured Parties.
(c) Compromise of Claims. The Secured Parties may grant
extensions, compromise claims and settle the Collateral for less than face
value, all without prior notice to Debtor.
(d) Use of Trade Names, Etc. The Secured Parties may use in
connection with any disposition of the Collateral, any trademark, trade name,
trade style, copyright, patent right, technical process or other proprietary
right used or utilized by Debtor.
(e) Other Rights Against Debtor Hereunder. The Secured
Parties may exercise
-12-
in respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to them, all the rights and remedies of a
secured party under the Uniform Commercial Code as then in effect in the State
of California, and the Secured Parties may also without notice except as
specified below sell the Collateral or any part thereof in one or more parcels
at public or private sale, for cash, on credit or for future delivery, and upon
such other terms as the Secured Parties in their sole and absolute discretion
may deem commercially reasonable. Debtor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to the Debtor of the
time and place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification. The Secured Parties shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Secured Parties may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which
it was so adjourned. Debtor hereby waives any claims against either of the
Secured Parties arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if the Secured Parties
accepts the first offer received and does not offer such Collateral to more
than one offeree, and in all events such sale shall be deemed to be
commercially reasonable. At any such public or private sale, the Secured
Parties may be the purchasers of the Collateral.
(f) Application of Proceeds. Any cash held by the Secured
Parties as Collateral and all cash proceeds received by either of the Secured
Parties in respect of any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of the Secured
Parties, be held by the Secured Parties as collateral for, and/or then or at
any time thereafter applied (after payment of any amounts payable to Secured
Parties pursuant to Section 10 and 11) in whole or in part by the Secured
Parties against all or any part of the Secured Obligations in such order as the
Secured Parties shall elect. Any surplus of such cash or cash proceeds held by
either of the Secured Parties and remaining after payment in full of all the
Secured Obligations shall be paid over to Debtor or to whomsoever may be
lawfully entitled to receive such surplus. In a like manner, Debtor agrees to
pay to the Secured Parties, without demand, whatever amount of the Secured
Obligations remains unpaid after the Collateral has been sold and the proceeds
applied as aforesaid, together with interest thereon from the date of demand at
the highest rate specified in the Note, which interest shall also constitute a
part of the Secured Obligations.
(g) Other Rights. The Secured Parties shall not be obligated
to resort to their rights or remedies with respect to any other security for or
guaranty or payment of the Secured Obligations before resorting to their rights
and remedies against Debtor hereunder. All rights and remedies of the Secured
Parties shall be cumulative and not in the alternative.
10. Liability and Indemnification.
Neither of the Secured Parties shall be liable to Debtor for any act
(including, without limitation, any act of active negligence) or omission by
the Secured Parties under this Agreement unless the Secured Parties' conduct
constitutes willful misconduct or gross negligence. Debtor agrees to indemnify
and to hold each of the Secured Parties harmless from and against all losses,
-13-
liabilities, claims, damages, costs and expenses (including actual attorneys'
fees and disbursements) with respect to (a) any action taken (including,
without limitation, any act of active negligence) or any omission by either of
the Secured Parties with respect to the Note or this Agreement, provided that
Secured Parties' conduct does not constitute willful misconduct or gross
negligence, and (b) any claims arising out of Debtor's ownership of the
Collateral or Secured Parties' security interest therein.
11. Expenses.
Debtor agrees to pay upon demand to the Secured Parties any and all
reasonable expenses, including the reasonable fees and expenses of their
counsel and of any experts and agents, plus interest at the lesser of (a) the
maximum rate permitted by law or (b) 12% per annum, from the date such expenses
were incurred to the date of reimbursement, which the Secured Parties may incur
in connection with (a) the amendment, waiver or modification of the Note, this
Agreement and/or the Subordination Agreement, if initiated or requested by
Debtor, (b) the custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (c) the exercise or enforcement
of any of the rights of the Secured Parties under the Note and/or this
Agreement, and (iv) the failure by Debtor to perform or observe any of the
provisions of the Note and/or this Agreement.
12. Security Interest Absolute.
All rights of the Secured Parties and security interests hereunder,
and all Secured Obligations of Debtor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Note;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Note; or
(c) any furnishing, exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations.
13. Amendments, Waiver.
No amendment or waiver of any provision of this Agreement nor consent
to any departure by Debtor herefrom shall in any event be effective unless the
same shall be in writing and signed by the Secured Parties and Debtor, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose any party for which given.
14. Notices.
All notices, demands and requests of any kind which any party may be
required or desires to serve upon the other hereunder shall be in writing and
shall be deemed to have been
-14-
received by such party and be effective on the day on which delivered to such
party at the address set forth below (or at such other address as such party
shall specify to the other party in writing):
If to Debtor: Overseas Filmgroup, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Secured
Parties: To each Secured Party at the address for such
Secured Party maintained at the office of Debtor.
15. Continuing Security Interest; Assignment of Obligations.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until indefeasible
payment or other satisfaction in full of the Secured Obligations, (b) be
binding upon Debtor, and the Debtor's successors and assigns, (c) inure,
together with the rights and remedies of the Secured Parties hereunder, to the
benefit of the Secured Parties and their successors, transferees and assigns,
(d) constitute, along with the Note, the entire agreement between Debtor and
the Secured Parties with respect to the subject matters covered hereby, and (e)
be severable in the event that one or more of the provisions herein is
determined to be illegal or unenforceable. Without limiting the generality of
the foregoing clause (c), the Secured Parties may assign or otherwise transfer
any Secured Obligation to any other person or entity, and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to the Secured Parties herein or otherwise, but the Secured Parties may
not assign this Agreement or the benefits in respect hereof except to
assignee(s) of the Secured Obligations. Upon the indefeasible payment or other
satisfaction in full of the Secured Obligations, the Secured Parties, at the
request and expense of Debtor, shall release the security interests in the
Collateral granted herein and execute such termination statements as may be
necessary therefor, to the extent that such Collateral shall not have been sold
or otherwise applied pursuant to the terms hereof.
16. Return of Collateral.
Subject to any duty imposed by law or otherwise to the holder of any
subordinate lien on the Collateral known to the Secured Parties, and subject to
the direction of a court of competent jurisdiction, upon payment in full of the
Secured Obligations, Debtor shall be entitled to the return of all Collateral
belonging to the Debtor in the possession of the Secured Parties; provided,
however, that the Secured Parties shall not be obligated to return to the
Debtor or deliver to the holder of any subordinate lien any such Collateral
until it is satisfied that all amounts with respect to the Secured Obligations
are no longer subject to being recaptured under applicable bankruptcy or
insolvency laws or otherwise. The return of Collateral, however effected, shall
be without recourse to either of the Secured Parties and the Secured Parties
shall be entitled to receive appropriate documentation to such effect. The
return of Collateral shall be effected without representation or warranty and
shall not entitle Debtor to any right to any endorsement.
-15-
17. Governing Law; Terms.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
Overseas Filmgroup, Inc., a Delaware corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little
------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-16-
EXHIBIT A
COPYRIGHT MORTGAGE
(COMPLETED PRODUCT)
KNOW ALL MEN BY THESE PRESENTS that for good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned,
Overseas Filmgroup, Inc., a Delaware corporation (the "Mortgagor"), does hereby
mortgage, assign, grant, convey and transfer for security to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Little and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Mortgagees") and their respective successors
and assigns, throughout the universe in perpetuity, all of Mortgagor's right,
title and interest of every kind and nature, without limitation, in and to all
copyrights and rights and interests of every kind or nature in copyrights and
works protectable by copyright, whether now owned or hereafter created or
acquired, and all renewals and extensions thereof, and all accounts receivable
related thereto and all other cash and non-cash proceeds therefrom and all of
the collateral related thereto or derived therefrom, including, without
limitation, such rights in all items of product set forth in Schedule "1"
attached hereto and incorporated herein by reference (the "Works").
Mortgagor agrees that if any person, firm of corporation shall do or
perform any acts which the Mortgagees believe to constitute a copyright
infringement of the Works or constitute a plagiarism, or violate or infringe
any rights of the Mortgagor or the Mortgagees therein or if any person, firm or
corporation shall do or perform any acts which the Mortgagees believe to
constitute an unauthorized or unlawful distribution, exhibition, or use
thereof, then and in any such event, the Mortgagees may and shall have the
right to take such steps and institute such suits or proceedings as the
Mortgagees may deem advisable or necessary to prevent such acts and conduct and
to secure damages and other relief by reason thereof, and to generally take
such steps as may be advisable or necessary or proper for the full protection
of the rights of the parties. The Mortgagees may take such steps or institute
such suits or proceedings in its own name or in the names of the parties
jointly.
Mortgagor hereby irrevocably constitutes and appoints the Mortgagees
its lawful attorneys-in-fact to do all acts and things permitted or
contemplated by the terms hereof and pursuant to the Security Agreement
referred to below. Without limiting the generality of the foregoing, the
aforesaid conveyance and assignment includes all prior choses-in-action, at
law, in equity and otherwise, the right to recover all damages and other sums,
and the right to other relief allowed or awarded at law, in equity, by statute
or otherwise.
Mortgagor and Mortgagees have entered into that certain Security
Agreement dated as of October 31, 1996 (the "Security Agreement"), relating to
the mortgage and assignment for security in and to the aforesaid rights and
this Copyright Mortgage is expressly made subject to the terms and conditions
contained in the Security Agreement, as it may be amended, amended and
restated, modified, supplemented, renewed or replaced.
Dated: October 31, 1996 Overseas Filmgroup, Inc, a Delaware corporation
By: ________________________
Its: _______________________
▇-▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ |
| SS
COUNTY OF LOS ANGELES |
On ______________ before me, (here insert name and title of the officer),
personally appeared ____________________________________________________________
________________________________________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS by hand and official seal.
Signature ___________________________________ (Seal)
A-2