STOCK PLEDGE AGREEMENT
EXHIBIT
10.3
This
STOCK PLEDGE AGREEMENT (this “Agreement”)
is
made and entered into as of September 11, 2007; by and between ProElite, Inc.,
a
New Jersey corporation (the “Pledgor”)
and
Xxxxx Xxxxxxxxxx and Xxxxxxxx Xxxxxxxxxx (the “Pledgees”)
with
reference to the following:
RECITALS
A. Concurrently
with the execution of this Agreement, Pledgor is purchasing from Pledgees all
of
the capital stock of King of the Cage, Inc. (the “Company”) pursuant to a Stock
Purchase dated as of September 7, 2007 among the Company, Pledgor and Pledgees
(the “Stock Purchase Agreement”). Defined terms not defined herein shall have
the meanings ascribed to them in the Purchase Agreement.
B. Under
the
Purchase Agreement, a certain portion of the Purchase Price consists of
contingent payments (the “Contingent Payments”).
C. As
security for the Contingent Payments, Pledgor has agreed to pledge the
Collateral (as defined below) to Pledgees.
NOW,
THEREFORE, it
is
hereby agreed as follows:
1. Grant
of Security Interest.
For
valuable consideration and to secure the Obligations (defined below), the
Pledgor hereby grants to the Pledgees a first priority security interest in
all
of the Company Shares (the “Pledged
Shares”)
(collectively, the “Collateral”).
The
security interest granted hereunder may be perfected by the filing of a UCC-1
financing statement in the state of New Jersey (and if necessary to perfect
such
security interest, in the State of California). The Pledgor hereby appoints
the
Pledgees as its attorney-in-fact to file such financing statement.
2. Obligations
Secured.
This
Agreement and the security interest created hereby are given for the purpose
of
securing the Pledgor’s obligations to make the Contingent Payments (the
“Obligations”).
3. Warranties.
The
Pledgor hereby warrants that upon the consummation of the Purchase Agreement
and
assuming the representations of the Pledgees thereunder are true and correct,
the Pledgor is the owner of the Collateral and has the right to pledge the
Collateral, and that the Collateral is free from all liens, adverse claims
and
other security interests, other than (i) those restrictions created hereby,
and
(ii) the restrictions on transfer imposed by applicable federal and state
securities laws. The security interest in the Pledged Shares granted by the
Pledgor hereunder is a first priority security interest.
4. Delivery
of Certificate(s).
Upon
the request of Pledgees, the Pledgor agrees to deliver to the Pledgees the
certificates, representing the Pledged Shares. Any new, additional or different
securities or other property which may now or hereafter become distributable
with respect to the Collateral by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Company’s common stock as a class shall, upon receipt by the
Pledgor, be part of the Collateral hereunder.
5. Payment
of Taxes and Other Charges.
The
Pledgor shall pay, prior to the delinquency date, all taxes, liens, assessments
and other charges against the Collateral, and in the event that the Pledgor
fails to do so, the Pledgees may at their election pay any or all of such taxes
and other charges without contesting the validity or legality thereof. The
payments so made shall become part of the Obligations secured hereunder, and
until paid shall bear interest at the minimum per annum rate, compounded
semi-annually, required to avoid the imputation of interest income to the
Pledgees and compensation income to the Pledgor under the Federal tax
laws.
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6. Shareholder
Rights.
So long
as there exists no Event of Default under Paragraph 10
of this
Agreement, the Pledgor may exercise all shareholder voting rights and be
entitled to receive any and all distributions on the Collateral and all proxy
statements and other shareholder materials pertaining to the
Collateral.
7. Rights
and Powers of Pledgees.
The
Pledgees may, without obligation to do so, perform such acts as are necessary
to
preserve and protect the Collateral and the rights, powers and remedies granted
with respect to such Collateral by this Agreement. Expenses reasonably incurred
in connection with such action shall be payable by the Pledgor and become part
of the Obligations secured hereunder.
8. Transfer
of Assets.
Pledgor
shall not sell the Collateral on the trademarks of the Company. Additionally,
Pledgor shall not enter into an exclusive license for the library or the
trademarks of the Company unless the Company receives substantially all of
the
benefits therefrom.
9. Release
of Collateral.
The
Collateral shall be released from the pledge and no longer subject to the terms
of this Agreement upon the earlier to occur of a sale of such Collateral in
accordance with Paragraph
10
hereof
or the payment in full of all Contingent Payments pursuant to the Purchase
Agreement.
10. Transfer
of Interests.
The
Pledgors hereby covenant that, until such time as the Obligations have been
fully paid, performed and satisfied, the Pledgor shall not sell, convey or
otherwise dispose of any of the Collateral or any interest therein, or create,
incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or
any
security interest whatsoever in or with respect to any of the Collateral, or
the
proceeds thereof, other than the security interest created hereby.
11. Events
of Default.
(a) The
occurrence of and continuance of the following events shall constitute an “Event
of Default” under this Agreement provided, however, that, if the Pledgor
disputes whether or not an Event of Default has occurred, it shall not be deemed
to be an Event of Default until such dispute has been conclusively resolved
by a
court of competent jurisdiction (after all appeals have been exhausted) in
favor
of the Pledgees.
(i) the
failure of the Pledgor to make any Contingent Payment within thirty days after
receipt by the Pledgor of written notice of failure to pay; or
(ii) the
failure of the Pledgor to perform any material obligation imposed upon the
Pledgor by reason of this Agreement, the Purchase Agreement or the Employment
Agreement within thirty days after receipt by the Pledgor of written notice
of
such failure.
(b) Upon
the
occurrence of any Event of Default, the Pledgees may exercise only the following
rights and remedies granted to a secured party under the provisions of the
California Uniform Commercial Code: (i) the power to dispose of the Collateral
by public or private sale, in which case the provisions of Section 14 shall
apply including the right of Pledgees to be paid the amount of the Obligations
in case of an overbid, or (ii) to accept the Collateral in full payment and
satisfaction of all Obligations then owed or thereafter arising under the
Purchase Agreement, in which case the Pledgees will concurrently pay to the
Pledgor all cash payments paid under Section 2.1(a) of the Purchase Agreement
which the Pledgees have received under the Purchase Agreement.
12. Other
Remedies.
Any
forbearance, failure or delay by the Pledgees in exercising any right, power
or
remedy under this Agreement shall not be deemed to be a waiver of such right,
power or remedy. Any single or partial exercise of any right, power or remedy
under this Agreement shall not preclude the further exercise thereof, and every
right, power and remedy of Pledgees under this Agreement shall continue in
full
force and effect unless such right, power or remedy is specifically waived
by an
instrument executed by the Pledgees.
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13. Costs
and Expenses.
All
costs and expenses (including reasonable attorneys fees) incurred by the
Pledgees in the exercise or enforcement of any right, power or remedy granted
it
under this Agreement shall become part of the Obligations secured hereunder
and
shall bear interest until paid at the minimum per annum rate, compounded
semi-annually, required to avoid the imputation of interest income to the
Pledgees and compensation income to the Pledgors under the Federal tax
laws.
14. Application
of Proceeds.
The
proceeds of sale of any of the Collateral pursuant to Paragraph
11
shall be
applied by the Pledgees in the following order of priority: (i) to the payment
of expenses (including all attorneys’ fees) incurred in connection with any such
sale, transfer or delivery of all or any portion of the Collateral; (ii) to
the
payment of any other reasonable costs, fees or expenses incurred or paid by
the
Pledgees in exercising any right, power or remedy conferred by this Agreement;
and (iii) to the satisfaction of the Obligations. Pledgees shall pay any balance
remaining to the Pledgor. In the event that the proceeds of any sale of all
or
any portion of the Collateral exceed the Obligations, Pledgees shall deliver
any
excess proceeds to the Pledgor. Notwithstanding the foregoing, solely for the
purposes of determining the amount of any credit bid by the Pledgees pursuant
to
Paragraph 11(b), Obligations shall include all unpaid Contingent Payments (as
defined in the Purchase Agreement) which the Pledgees would have earned but
for
the breach by Pledgor of its obligations under the Purchase Agreement, it being
understood that any shares of common stock issuance shall be valued as provided
in the Purchase Agreement.
15. Applicable
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of California, without resort to that State’s conflict-of-laws
rules.
16. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, this Agreement has been executed by the Pledgor and Pledgees
as
of the date first written above.
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“Pledgor”
By:
_____________________________________
Xxxxxxx
XxXxxx, Chief Executive Officer
|
|
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“Pledgees”
_____________________________________
Xxxxx
Xxxxxxxxxx
_____________________________________
_____________________________________
Xxxxx
Xxx Xxxxxxxxxx
|
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