EXHIBIT
4.5
SECURITY AGREEMENT
SECURITY AGREEMENT (this “
Agreement ”), dated as of July 31, 2008, by and among
Camelot Entertainment Group, Inc., a Delaware corporation (“
Parent ”), and its Subsidiaries as listed on Schedules
A (collectively the “ Subsidiary ”) (hereinafter
the Parent and the Subsidiary shall collectively be referred to as
the “ Company ”) and the secured parties
signatory hereto and their respective endorsees, transferees and
assigns (collectively, the “ Secured Party
”).
W I T N E S S E T H:
WHEREAS, pursuant to a Securities
Purchase Agreement, dated the date hereof, between Parent and the
Secured Party (the “ Purchase Agreement ”),
Parent has agreed to issue to the Secured Party and the Secured
Party has agreed to purchase from Parent certain of Parent’s
10% Callable Secured Convertible Notes, due three years from the
date of issue (the “ Notes ”), which are
convertible into shares of Company’s Common Stock, par value
$.001 per share (the “ Common Stock
”). In connection therewith, Parent shall issue
the Secured Party certain Common Stock purchase warrants (the
“ Warrants ”); and
WHEREAS, the Parent and the
Subsidiary have been, and are now, engaged in the development,
production, marketing and distribution of entertainment media,
including, but not limited to, film, television and digital media
and the providing of certain services to the entertainment
industry, including, but not limited to, entertainment financial,
studio, technology, consulting, post production, event management,
education, sales and marketing, merchandising and web
services. In the past, as now, the Parent has provided
financing for the Subsidiary, and the Subsidiary has relied upon
the Parent to provide such financing. In addition, it is
anticipated that, if the Subsidiary executes and delivers this
Agreement, the Parent will continue to provide such financing to
the Subsidiary, and that the proceeds of the Purchase Agreement and
Notes will be used, in part, for the general working
capital purposes of the Subsidiary]; and
WHEREAS, the Subsidiary constitutes
all of the subsidiaries of the Parent and it is in the best
interest of the Subsidiary as subsidiaries of the Parent and the
indirect beneficiaries of the Purchase Agreement and Notes, that
the Secured Party enter into the Purchase Agreement and purchase
the Notes to the Company; and
WHEREAS, in order to induce the
Secured Party to purchase the Notes, Company has agreed to execute
and deliver to the Secured Party this Agreement for the benefit of
the Secured Party and to grant to it a first priority security
interest in certain property of Company to secure the prompt
payment, performance and discharge in full of all of
Company’s obligations under the Notes and exercise and
discharge in full of Company’s obligations under the
Warrants; and
WHEREAS, in light of the foregoing,
the Company expects to derive substantial benefit from the Purchase
Agreement and sale of the Notes and the transactions contemplated
thereby and, in furtherance thereof, has agreed to execute and
deliver this.
NOW, THEREFORE, in consideration of
the agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as
follows:
1.
Certain Definitions . As used in this Agreement,
the following terms shall have the meanings set forth in this
Section 1. Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as “
general intangibles ” and “ proceeds
”) shall have the respective meanings given such terms in
Article 9 of the UCC.
(a) “
Collateral ” means the collateral in which the Secured
Party is granted a security interest by this Agreement and which
shall include the following, whether presently owned or existing or
hereafter acquired or coming into existence, and all additions and
accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without
limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort
claims in connection therewith:
(i) All
Goods of the Company, including, without limitations, all
machinery, equipment, computers, motor vehicles, trucks, tanks,
boats, ships, appliances, furniture, special and general tools,
fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all
additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all
other items used and useful in connection with the Company’s
businesses and all improvements thereto (collectively, the “
Equipment ”); and
(ii) All
Inventory of the Company; and
(iii) All
of the Company’s contract rights and general intangibles,
including, without limitation, all partnership interests, stock or
other securities, licenses, distribution and other agreements,
computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill,
trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, deposit accounts, and income tax
refunds (collectively, the “ General Intangibles
”); and
(iv) All
Receivables of the Company including all insurance proceeds, and
rights to refunds or indemnification whatsoever owing, together
with all instruments, all documents of title representing any of
the foregoing, all rights in any merchandising, goods, equipment,
motor vehicles and trucks which any of the same may represent, and
all right, title, security and guaranties with respect to each
Receivable, including any right of stoppage in transit;
and
(v) All
of the Company’s documents, instruments and chattel paper,
files, records, books of account, business papers, computer
programs and the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(iv) above.
(vi) Notwithstanding
the above, the Company is not granting a security interest in its
two wholly owned subsidiaries, Camelot Film Group, Inc. and Camelot
Studio Group, Inc., which shall not be considered Collateral under
this Agreement.
(b) “
Company ” shall mean, collectively, Company and all of
the subsidiaries of Company, a list of which is contained in
Schedule A , attached hereto.
(c) “
Obligations ” means all of the Company’s
obligations under this Agreement and the Notes, in each case,
whether now or hereafter existing, voluntary or involuntary, direct
or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later decreased, created
or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from the
Secured Party as a preference, fraudulent transfer or otherwise as
such obligations may be amended, supplemented, converted, extended
or modified from time to time.
(d) “
UCC ” means the Uniform Commercial Code, as currently
in effect in the State of New York.
2.
Grant of Security Interest . As an inducement for
the Secured Party to purchase the Notes and to secure the complete
and timely payment, performance and discharge in full, as the case
may be, of all of the Obligations, the Company hereby,
unconditionally and irrevocably, pledges, grants and hypothecates
to the Secured Party, a continuing security interest in, a
continuing first lien upon, an unqualified right to possession and
disposition of and a right of set-off against, in each case to the
fullest extent permitted by law, all of the Company’s right,
title and interest of whatsoever kind and nature in and to the
Collateral (the “ Security Interest
”).
3.
Representations, Warranties, Covenants and Agreements of the
Company . The Company represents and warrants to,
and covenants and agrees with, the Secured Party as
follows:
(a) The
Company has the requisite corporate power and authority to enter
into this Agreement and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by
the Company of this Agreement and the filings contemplated therein
have been duly authorized by all necessary action on the part of
the Company and no further action is required by the
Company. This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditor’s rights generally.
(b) The
Company represents and warrants that it has no place of business or
offices where its respective books of account and records are kept
(other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto;
(c) The
Company is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Company in the ordinary
course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized
to grant the Security Interest in and to pledge the Collateral,
except as set forth on Schedule C. There is not on file
in any governmental or regulatory authority, agency or recording
office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other
than those that have been filed in favor of the Secured Party
pursuant to this Agreement) covering or affecting any of the
Collateral, except as set forth on Schedule C. So long
as this Agreement shall be in effect, the Company shall not execute
and shall not knowingly permit to be on file in any such office or
agency any such financing statement or other document or instrument
(except to the extent filed or recorded in favor of the Secured
Party pursuant to the terms of this Agreement), except as set forth
on Schedule C.
(d) No
part of the Collateral has been judged invalid or
unenforceable. No written claim has been received that
any Collateral or the Company’s use of any Collateral
violates the rights of any third party. There has been no adverse
decision to the Company’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to
the Company’s right to keep and maintain such Collateral in
full force and effect, and there is no proceeding involving said
rights pending or, to the best knowledge of the Company, threatened
before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(e) The
Company shall at all times maintain its books of account and
records relating to the Collateral at its principal place of
business and its Collateral at the locations set forth on
Schedule A attached hereto and may not relocate such books
of account and records or tangible Collateral unless it delivers to
the Secured Party at least 30 days prior to such relocation (i)
written notice of such relocation and the new location thereof
(which must be within the United States) and (ii) evidence
that appropriate financing statements and other necessary documents
have been filed and recorded and other steps have been taken to
perfect the Security Interest to create in favor of the Secured
Party valid, perfected and continuing first priority liens in the
Collateral.
(f)
This Agreement
creates in favor of the Secured Party a valid security interest in
the Collateral securing the payment and performance of the
Obligations and, upon making the filings described in the
immediately following sentence, a perfected first priority security
interest in such Collateral. Except for the filing of
financing statements on Form-1 under the UCC with the jurisdictions
indicated on Schedule B , attached hereto, no authorization
or approval of or filing with or notice to any governmental
authority or regulatory body is required either for the grant
by the Company of, or the effectiveness of, the Security Interest
granted hereby or for the execution, delivery and performance of
this Agreement by the Company or for the perfection of or
exercise by the Secured Party of its rights and remedies
hereunder.
(g) On
the date of execution of this Agreement, the Company will deliver
to the Secured Party one or more executed UCC financing statements
on Form-1 with respect to the Security Interest for filing
with the jurisdictions indicated on Schedule B ,
attached hereto and in such other jurisdictions as may be requested
by the Secured Party.
(h) Except
as set forth on Schedule C, the execution, delivery and performance
of this Agreement does not conflict with or cause a breach or
default, or an event that with or without the passage of time or
notice, shall constitute a breach or default, under any agreement
to which the Company is a party or by which the Company is
bound. No consent (including, without limitation, from
stock holders or creditors of the Company) is required for the
Company to enter into and perform its obligations
hereunder.
(i)
The Company shall
at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security
interests in the Collateral in favor of the Secured Party until
this Agreement and the Security Interest hereunder shall terminate
pursuant to Section 11. The Company hereby agrees to
defend the same against any and all persons. The Company
shall safeguard and protect all Collateral for the account of the
Secured Party. At the request of the Secured Party, the
Company will sign and deliver to the Secured Party at any time or
from time to time one or more financing statements pursuant to the
UCC (or any other applicable statute) in form reasonably
satisfactory to the Secured Party and will pay the cost of filing
the same in all public offices wherever filing is, or is deemed by
the Secured Party to be, necessary or desirable to effect the
rights and obligations provided for herein. Without limiting the
generality of the foregoing, the Company shall pay all fees, taxes
and other amounts necessary to maintain the Collateral and the
Security Interest hereunder, and the Company shall obtain and
furnish to the Secured Party from time to time, upon demand, such
releases and/or subordinations of claims and liens which may be
required to maintain the priority of the Security Interest
hereunder.
(j)
The Company will not transfer,
pledge, hypothecate, encumber, license (except for non-exclusive
licenses granted by the Company in the ordinary course of
business), sell or otherwise dispose of any of the Collateral
without the prior written consent of the Secured Party.
(k) The
Company shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order and shall
not operate or locate any such Collateral (or cause to be operated
or located) in any area excluded from insurance
coverage.
(l)
The Company shall, within ten (10) days of
obtaining knowledge thereof, advise the Secured Party promptly, in
sufficient detail, of any substantial change in the Collateral, and
of the occurrence of any event which would have a material adverse
effect on the value of the Collateral or on the Secured
Party’s security interest therein.
(m) The
Company shall promptly execute and deliver to the Secured Party
such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates
and assurances and take such further action as the Secured Party
may from time to time request and may in its sole discretion deem
necessary to perfect, protect
