Contract
THIS
NOTE (AS DEFINED BELOW) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
THIS
NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR THE PURPOSES OF SECTION 1271
ET
SEQ. OF THE INTERNAL REVENUE CODE. THE COMPANY WILL PROMPTLY MAKE AVAILABLE
TO
THE HOLDERS, UPON REQUEST, THE ISSUE PRICE, THE AMOUNT OF THE OID, THE ISSUE
DATE, AND THE YIELD TO MATURITY OF THE NOTE.
SENIOR
SECURED
NOTE
FOR
VALUE
RECEIVED, PROELITE, INC., a New Jersey corporation (the “Company”)
hereby
promises to pay to Showtime Networks, Inc. (the “Holder”)
or its
registered assigns or successors in interest, the sum of Three Million Five
Hundred Thousand Dollars ($3,500,000), together with any accrued and unpaid
interest hereon, on June __, 2009 (the “Maturity
Date”)
if not
sooner indefeasibly paid in full.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Senior Secured Note Purchase Agreement, dated as of June
__, 2008 (the “Purchase
Agreement”),
among
the Company and the Holder.
ARTICLE
I
CONTRACT
RATE AND AMORTIZATION
1.1 Interest
Rate.
Subject
to Section 5.10, interest payable on the outstanding principal amount of this
Note (the “Principal
Amount”)
shall
accrue at a rate per annum equal to ten percent (10.0%). Interest shall be
(i)
calculated on the basis of a 365 day year, and (ii) payable on the Maturity
Date.
1.2 Principal
Payments.
Any
outstanding Principal Amount together with any accrued and unpaid interest
and
any and all other unpaid amounts which are then owing by the Company to the
Holder under this Note shall be due and payable on the Maturity
Date.
ARTICLE
II
REDEMPTION
2.1 Optional
Redemption in Cash.
The
Company may prepay this Note in whole or in part (an “Optional
Redemption”)
without premium or penalty by paying to the Holder a sum of money equal to
one
hundred percent (100%) of the Principal Amount outstanding at such time together
with accrued but unpaid interest thereon (the “Redemption
Amount”)
outstanding on the Redemption Payment Date (as defined below). The Company
shall
deliver to the Holder a written notice of redemption (the “Notice
of Redemption”)
specifying the date for such Optional Redemption (the “Redemption
Payment Date”),
which
date shall be ten (10) business days after the date of the Notice of Redemption
(the “Redemption
Period”).
On
the Redemption Payment Date, the Redemption Amount must be paid in good funds
to
the Holder.
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ARTICLE
III
EVENTS
OF DEFAULT
3.1 Events
of Default.
The
occurrence of any of the following events set forth in this Section 3.1 shall
constitute an event of default (an “Event
of Default”)
hereunder:
(a) Failure
to Pay.
The
Company fails to pay when due any installment of principal, interest or other
fees hereon in accordance herewith, or the Company fails to pay any of the
other
Obligations (under and as defined in that certain Security Agreement dated
of
even date herewith between the Company and Holder (the “Security
Agreement”))
when
due, and, in any such case, such failure shall continue for a period of fifteen
(15) business days following the date upon which any such payment was
due;
(b) Breach
of Covenant.
The
Company materially breaches any covenant or any other term or condition (other
than an Event of Default pursuant to subsection (a) above) of this Note, the
Purchase Agreement or the Security Agreement and such breach shall continue
for
a period of three (3) business days;
(c) Other
Obligations.
The
Company shall have failed to pay when due any amounts required to be paid (i)
to
Showtime Network, Inc. pursuant to that certain promissory note dated December
17, 2007 in the principal amount of $1,822,086 or (ii) under any Additional
Indebtedness (as defined in the Purchase Agreement) and, in either case, such
failure shall continue for a period of three (3) business days;
(d) Breach
of Representations and Warranties.
Any
representation, warranty or statement made or furnished by the Company in this
Note, the Purchase Agreement or any other Related Agreement relating to any
matter which individually or in the aggregate is material to the business of
the
Company taken as a whole shall at any time be false or misleading in any
material respect on the date as of which made or deemed made;
(e) Bankruptcy.
There
shall have occurred a Bankruptcy Event. “Bankruptcy
Event”
shall
be deemed to occur if (i) an involuntary case or other proceeding shall be
commenced against the Company seeking liquidation, reorganization or other
relief with respect to it under any applicable U.S. Federal or State or non-U.S.
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar law now or hereafter in effect or seeking the appointment of a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed, or an order
or
decree approving or ordering any of the foregoing shall be entered and continued
unstayed and in effect, in any such event, for a period of 60 days; or (ii)
the
Company shall commence a voluntary case or proceeding under any applicable
U.S.
Federal or State or non-U.S. bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar law or any other case or proceeding
to be adjudicated a bankrupt or insolvent, or shall consent to the entry of
a
decree or order for relief in an involuntary case or proceeding under any
applicable U.S. Federal or State or non-U.S. bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy
or
insolvency case or proceeding against it, or if it shall file a petition or
answer or consent seeking reorganization or relief under any applicable U.S.
Federal or State or non-U.S. bankruptcy, insolvency, reorganization or other
similar law, or consent to the filing of any such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or any substantial part of
its
property, or shall make an assignment for the benefit of creditors, or admit
in
writing its inability to pay its debts generally as they become due, or shall
take corporate, partnership or comparable action in furtherance of the
foregoing;
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(f) Insolvency.
The
Company or any of its subsidiaries shall admit in writing its inability, or
be
generally unable, to pay its debts as they become due or cease operations of
its
present business; or
(g) Minimum
Cash Balance.
The
Company shall have failed to maintain at least $550,000 of unrestricted funds
with a nationally recognized financial institution and such failure shall
continue for at least three (3) business days.
3.2 Acceleration.
Following the occurrence and during the continuance of an Event of Default,
the
Holder may demand repayment in full of all obligations and liabilities owing
by
the Company to the Holder under this Note, the Purchase Agreement and/or the
Security Agreement. Notwithstanding any provision of this Agreement, upon the
occurrence of any Bankruptcy Event, the Obligations shall immediately and
automatically become due and payable in full, without any demand, notice,
request or other action being taken by the Holder.
ARTICLE
IV
MISCELLANEOUS
4.1 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
4.2 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. All rights
and remedies existing hereunder are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
4.3 Information.
The
Company shall, promptly upon learning thereof, report to the Holder any Event
of
Default.
4.4 Notices.
Any
notice herein required or permitted to be given shall be given in writing in
accordance with the terms of the Purchase Agreement.
4.5 Amendment
Provision.
The
term “Note”
and
all
references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented, and any successor instrument as such successor
instrument may be amended or supplemented.
4.6 Assignability.
This
Note shall be binding upon the Company and its successors and assigns, and
shall
inure to the benefit of the Holder and its successors and assigns; provided,
however, that the Note may be assigned by the Holder only in accordance with
the
requirements of the Purchase Agreement and only in compliance with all
applicable. The Company may not assign any of its obligations under this Note
without the prior written consent of the Holder, any such purported assignment
without such consent being null and void.
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4.7 Cost
of Collection.
In case
of the occurrence of an Event of Default under this Note, the Company shall
pay
the Holder the Holder’s reasonable costs of collection, including reasonable
attorneys’ fees.
4.8 Governing
Law; Consent to Jurisdiction.
This
Agreement shall be governed by, construed and enforced in accordance with,
the
laws of the State of California, without regard to the conflict of laws rules
of
the State of California or any other jurisdiction that would call for the
application of the laws of any jurisdiction other than the State of California.
Each party hereto hereby irrevocably consents, for itself and its legal
representatives, partners, successors and assigns, to the exclusive jurisdiction
of the Courts of the State of California for the limited purpose of any action
or proceeding to interpret or enforce this Agreement, and further agrees that
any action arising solely from or relating solely this Agreement shall be
instituted and prosecuted only in the courts of the State of California located
in the County of Los Angeles, and hereby waives any rights it may have to
personal service of summons, complaint or other process in connection therewith,
and agrees that service may be made by registered or certified mail to such
party at its principal headquarters.
4.9 Severability.
In the
event that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Note.
4.10 No
Usury Intended.
The
parties to this Note represent and warrant that they qualify for exemption
from
the usury restrictions of Section 1 of Article XV of the California Constitution
in that both the Company and the Holder have been represented by counsel, are
sophisticated in business and financial transactions and have the capacity
to
protect their own interests in the context of the transactions contemplated
by
this Note, the Purchase Agreement, the Security Agreement and the other Related
Agreements. All agreements between the Company and the Holder are expressly
limited so that in no contingency or event whatsoever, whether by reason of:
error of fact or law; payment, prepayment or advancement of the proceeds hereof;
acceleration of maturity of the Obligations, or otherwise, shall the amount
paid
or agreed to be paid to the Holder for the use, forbearance or retention of
the
money to be advanced hereunder, including any charges collected or made in
connection with the indebtedness evidenced by this Note which may be treated
as
interest under applicable law, if any, exceed the maximum legal limit (if any
such limit is applicable) under United States federal law or state law (to
the
extent not preempted by federal law, if any), now or hereafter governing the
interest payable in connection with such agreements. If, from any circumstances
whatsoever, fulfillment of any provision hereof at the time performance of
such
provision shall be due shall involve transcending the limit of validity (if
any)
prescribed by law which a court of competent jurisdiction may deem applicable
hereto, then ipso facto, the obligation to be fulfilled shall be reduced to
the
limit of such validity, and if from any circumstances, the Holder shall ever
receive as interest an amount which would exceed the maximum legal limit (if
any
such limit is applicable), such amount which would be excessive interest shall
be applied to the reduction of the outstanding principal balance of this Note
and not to the payment of interest or, if necessary, rebated to the Company.
This provision shall control every other provision of all agreements between
the
Company and the Holder, including, without limitation, the Purchase
Agreement.
4
4.11 Security
Interest.
Purchaser has been granted a security interest in certain assets of the Company
as more fully described in the Security Agreement.
4.12 Pari
Passu Standing with Existing Notes and Additional Indebtedness.
The
Holder agrees that this Note is executed on a pari passu basis with the existing
promissory note dated December 17, 2007 executed by the Company in favor of
Showtime Network, Inc. in the principal amount of $1,822,086, and any Additional
Indebtedness incurred pursuant to the terms of the Purchase Agreement.
4.13 Construction;
Counterparts.
Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the other. This
Note may be executed by the parties hereto in one or more counterparts, each
of
which shall be deemed an original and all of which when taken together shall
constitute one and the same instrument. Any signature delivered by a party
by
facsimile or electronic transmission shall be deemed to be an original signature
hereto.
4.14 Registered
Obligation.
Notwithstanding any document, instrument or agreement relating to this Note
to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Company of this Note to the new holder
or
the issuance by the Company of a new instrument to the new holder.
[Balance
of page intentionally left blank; signature page follows]
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IN
WITNESS WHEREOF,
the
Company has caused this Senior Secured Note to be signed in its name effective
as of this ___ day of June, 2008.
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By:
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/s/
Xxxxxxx Xxxxxxxx
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Name:
Xxxxxxx Xxxxxxxx
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Title:CEO
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WITNESS:
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/s/
Xxxxx Xxxxxx
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Name:
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Xxxxx
Xxxxxx
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Agreed
to as to Section 4.10
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SHOWTIME
NETWORKS, INC., as Holder
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By:
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Signature
Page for Senior Secured Note
