SECURITY AGREEMENT
THIS
SECURITY AGREEMENT (the “Security
Agreement”)
is
made as of June __, 2008 by ProElite, Inc., a New Jersey corporation (the
“Company”),
each
of the subsidiaries of the Company listed on the signature pages hereto (the
“Subsidiary
Grantors”
and,
together with the Company, collectively, the “Grantors”),
and
Showtime Networks, Inc., a ______ corporation (“Secured
Party”),
with
reference to the following facts:
A. In
connection with the issuance by the Company to the Secured Party of a Senior
Secured Note dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, the "Note")
in the
principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000)
pursuant to the terms of that certain Senior Secured Note Purchase Agreement
dated as of the date hereof (as amended, supplemented or otherwise modified
from
time to time, the “Purchase
Agreement”),
each
of the Grantors wishes to grant to Secured Party a security interest in certain
Collateral as more particularly described herein.
B. Each
of
the Grantors also desires to provide collateral to secure payment of the amount
owed to the Secured Party pursuant to that certain promissory note dated
December 17, 2007 executed by the Company in the principal amount of $1,822,086,
the maturity date of which has been extended to March 31, 2009 (as amended,
supplemented or otherwise modified from time to time, the "Existing
Note")
as
more particularly described herein.
C.
Each
of
the Subsidiary Grantors will derive substantial direct and indirect benefits
from the transactions contemplated by the Note and the Existing Note and,
accordingly, desire to secure the Company’s obligations thereunder pursuant to
this Security Agreement.
NOW,
THEREFORE, in consideration of these promises and the mutual covenants contained
herein, the parties agree as follows:
1. Security
Interest; Priority; and Perfection.
1.1 Security
Interest.
Each of
the Grantors hereby assigns, conveys, mortgages, pledges, hypothecates,
transfers, grants and sets over to Secured Party a security interest in and
to
the Collateral (as defined in Section 2 hereof) to secure the due, punctual
and unconditional performance by the Company of its payment obligations under
the Note and the Existing Note (the “Obligations”).
1.2 Financing
Statement.
Each of
the Grantors agrees to participate in the preparation of and to execute one
or
more financing statements as required and to take any other acts as the Secured
Party may reasonably request, in order to evidence or to perfect the security
interest granted herein.
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1.3 Security
Interest Absolute.
All
rights of the Secured Party and the security interests granted to the Secured
Party hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of:
(a) any
lack
of validity, legality or enforceability of the Note, the Existing Note, the
Purchase Agreement, any other Related Agreement (as defined in the Purchase
Agreement) or any other agreement or instrument relating to any
thereof;
(b)
any
change in the time, manner or place of payment of, or in any other term of,
all
or any of the Obligations, or any compromise, renewal, extension, acceleration
or release with respect thereto, or any other amendment or waiver of or any
consent to departure from the Note, the Existing Note, the Purchase Agreement
or
any other Related Agreement, including, without limitation, any increase in
the
Obligations resulting from the extension of additional credit to the Company
or
otherwise;
(c)
any
taking, addition, exchange, release, surrender, impairment or non-perfection
of
any collateral, or any taking, release or amendment or waiver of or consent
to
departure from any other guaranty, for all or any of the Obligations;
(d)
the
failure of the Secured Party
(i)
to
assert
any claim or demand or to enforce any right or remedy against the Company,
any
other Grantor or any other person or entity (including, without limitation,
any
other guarantor) under the provisions of the Note, the Existing Note, the
Purchase Agreement, any other Related Agreement or otherwise, or
(ii)
to
exercise any right or remedy against any other guarantor of, or collateral
securing, any of the Obligations;
(e) any
amendment to, rescission, waiver, or other modification of, or any consent
to
departure from, any of the terms of the Note, the Existing Note, the Purchase
Agreement or any other Related Agreement;
(f)
any
defense, claim, set-off, counterclaim or other right which may at any time
be
available to or be asserted by the Company or any other Grantor against the
Secured Party or any other person or entity, whether in connection with this
Security Agreement, the transactions contemplated in the Note, the Existing
Note, the Purchase Agreement or any other Related Agreement, or any unrelated
transaction;
(g) any
reduction, limitation, impairment or termination of the Obligations for any
reason, including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and each Grantor hereby
waives any right to or claim of) any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise or unenforceability of, or any other
event or occurrence affecting, the Obligations or otherwise;
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(h) any
manner of application of collateral, or proceeds thereof, to all or any of
the
Obligations, or any manner of sale or other disposition of any collateral for
all or any of the Obligations or any other assets of the Company or any of
its
subsidiaries;
(i) any
change, restructuring or termination of the corporate structure or existence
of
the Company or any of its subsidiaries; or
(j) any
other
circumstance that might otherwise constitute a defense available to, or a legal
or equitable discharge of, any Grantor.
1.4 Waiver
of
Subrogation. Each
Grantor hereby irrevocably waives any claim or other rights which it may now
or
hereafter acquire against the Company or any other Grantor that arise from
the
existence, payment, performance or enforcement of such Grantor’s obligations
under this Security Agreement, the Note, the Existing Note, the Purchase
Agreement or any other Related Agreement, including, without limitation, any
right of subrogation, reimbursement, assignment, exoneration, implied contract
or indemnification, any right to participate in any claim or remedy of the
Secured Party against the Company or any other Grantor or any collateral that
the Secured Party now has or hereafter acquires, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Company
or
any other Grantor, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights, until such time as the Obligations shall have been indefeasibly paid
in
full in cash and this Security Agreement has terminated. If any amount shall
be
paid to any Grantor in violation of the preceding sentence, such amount shall
be
deemed to have been paid to such Grantor for the benefit of, and held in trust
for, the Secured Parties, shall be segregated from other funds of such Grantor,
and shall forthwith be paid to the Secured Party to be credited and applied
against the Obligations, whether matured or unmatured, in such order as the
Secured Party may determine. Each Grantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
the
Note and the Existing Note and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.
2. Collateral.
“Collateral”
means
all of each Grantor’s right, title and interest in, to and under, whether now
owned or hereafter acquired by such Grantor, all present and after acquired
personal property of such Grantor, whether tangible or intangible, wherever
located and of whatever nature, including, without limitation, all present
and
future personal property of each Grantor conforming to the description of any
of
the following categories:
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2.1. Accounts.
All
“accounts”, as such term is defined in section 9-102 of the Uniform Commercial
Code as in effect from time to time in the State of California (the
“UCC”),
and
in any event, shall include all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced by Intangibles) now
owned or hereafter received or acquired by or belonging or owing to such
Grantor, arising out of goods sold or services rendered by such Grantor, and
all
of such Grantor’s rights to any goods represented by any of the foregoing, and
all moneys due or to become due to such Grantor under all contracts for the
sale
of goods or the performance of services or both by such Grantor (whether or
not
yet earned by performance on the part of such Grantor or in connection with
any
other transaction), and any and all refunds, equities, benefits and book
equities, now in existence or hereafter occurring (the foregoing referred to
herein, collectively, as “Accounts”);
2.2. Contracts.
All
contracts, undertakings, or other agreements (other than rights evidenced by
Intangibles) in or under which such Grantor may now or hereafter have any right,
title or interest, including, with respect to an Account, any agreement relating
to the terms of payment or the terms of performance thereof (the foregoing
referred to herein, collectively, as “Contracts”);
2.3. Deposit
Accounts.
All
“deposit accounts”, as such term is defined in section 9-102 of the
UCC;
2.4. Intangibles.
All
“general intangibles”, as such term is defined in section 9-102 of the UCC, and
in any event shall include any chattel paper, documents, instruments, Contract,
any payment intangible, any general or limited partnership interests, interests
in joint ventures, trademarks, rights in intellectual property, permits,
copyrights, technical information, procedures, designs, knowledge, software,
skill, expertise, experience, models and materials now owned or hereafter
acquired by such Grantor and all other assets which reflect the goodwill of
the
business of such Grantor, including but not limited to such Grantor’s customer
lists, trade secrets, business and other records, advertising materials,
operating manuals, methods, processes, know-how, sales literature, drawings,
specifications, descriptions, inventions (whether patented or patentable or
not), name plates, catalogues, dealer contracts, supplier contracts,
distribution agreements, proprietary information, consulting agreements, data
bases and all of the goodwill of the business of such Grantor associated with
the use of, and symbolized by, any of the foregoing and all rights corresponding
thereto, and including, without limitation, any and all rights, claims, choses
in action and any other intangible personal property of such Grantor against,
in
respect of or relating to any and all choses and things in action, goodwill,
customer lists, mailing lists and tax refunds (the foregoing referred to herein,
collectively, as “Intangibles”);
2.5. Inventory.
All
“inventory”, as such term is defined in section 9-102 of the UCC, and in any
event shall include all merchandise, goods and other personal property now
owned
or hereafter acquired by such Grantor which are held for sale or lease or are
furnished or are to be furnished under a contract of service or which constitute
raw materials, work in process or materials used or consumed or to be used
or
consumed in such Grantor’s business, or the processing, packaging, delivery or
shipping of the same, and all finished goods;
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2.6.Fixtures
and Equipment.
All
fixtures and equipment in all of their forms used by such Grantor in the conduct
of its business, and all attachments, accessories, accessions, replacements,
substitutions, additions and improvements to any of the foregoing;
2.7. Cash
and Cash Equivalents.
All
cash, cash equivalents, bank accounts, certificates of deposit and like
evidences of the right to receive money;
2.8. Technology.
All
patents, trademarks, trade names, service marks, copyrights, trade secrets,
know-how, designs, computer programs, source and object codes, ideas, concepts,
documentation, technology, drawings, flow charts and other proprietary rights
of
any kind or nature whatsoever, and all applications and registrations related
to
any of the above (the foregoing referred to herein, collectively, as
“Technology”);
2.9. Letter
of Credit Rights.
All
“letter of credit rights”, as such term is defined in section 9-102 of the
UCC;
2.10. Tort
Claims.
All
tort claims, including all commercial tort claims, as such term is defined
in
section 9-102 of the UCC;
2.11. Others.
All
other goods and personal property of such Grantor, whether tangible or
intangible, whether now owned or hereafter acquired by such Grantor and wherever
located;
2.12. Books.
All
books, accounting information and records, including computer programs and
software, pertaining to any property conforming to the descriptions in any
of
Sections 2.1
through
2.13,
inclusive, or to such Grantor’s business involving that property (collectively,
the “Records”),
and
the equipment containing the Records; and
2.13. Proceeds.
To the
extent not otherwise included, all proceeds and products of any property
conforming to the descriptions in any of Sections 2.1
through
2.12, inclusive, and all accessions to, substitutions and replacements for,
and
rents, profits and products of each of the foregoing, whether received upon
the
sale, lease, transfer, damage or destruction of such property or
otherwise
(the
foregoing referred to herein, collectively, as “Proceeds”).
3. Each
Grantor hereby represents and warrants that:
3.1. Except
for (i) the security interest granted to the Secured Party pursuant to this
Security Agreement; and (ii) a security interest granted in the stock of King
of
the Cage, Inc. to Xxxxx Xxxxxxxxxx and Xxxxxxxx Xxxxxxxxxx, such Grantor is
the
sole record and beneficial owner of each item of the Collateral in which it
purports to grant a security interest hereunder, having good and marketable
title thereto, free and clear of any and all liens. No material amounts payable
under or in connection with any of its Accounts, Intangibles or Contracts are
evidenced by Instruments (as such term is defined in section 9-102 of the UCC)
which have not been made available to the Secured Party;
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3.2. No
effective security agreement, collateral assignment, financing statement,
equivalent security or lien instrument or continuation statement covering all
or
any part of the Collateral is or will be on file or of record in any public
office, except such as may have been filed by such Grantor in favor of the
Secured Party pursuant to this Security Agreement;
3.3. This
Security Agreement is effective to create a valid and continuing and, after
appropriate UCC financing statements have been filed in the office of the
Secretary of State of the jurisdiction of organization of such Grantor, first
priority perfected Lien on and security interest in the Collateral in favor
of
the Secured Party, prior to all other liens, other than the lien in favor of
Xxxxx and Xxxxxxxx Xxxxxxxxxx referenced in Section 3.1 above;
3.4. The
Secured Party has received from such Grantor financing statements on Form UCC-1
which are in a satisfactory form to permit filing in such jurisdictions as
may
be necessary or desirable to perfect the Secured Party’s security interest in
the Collateral, to the extent the Secured Party’s security interest may be
perfected by filing under the Uniform Commercial Code of any
jurisdiction;
3.5. Such
Grantor is the type of entity indicated next to its name on the signature pages
hereto, duly organized, validly existing and in good standing under the laws
of
the jurisdiction indicated next to its name on the signature pages hereto,
has
the corporate or other power and authority to own its properties and to carry
on
its business as now being conducted, is qualified to engage in business and
is
in good standing in each jurisdiction in which the character of its properties,
the transaction of its business or the collection of any of its Accounts make
such qualification necessary and has the corporate or other power and authority
to execute, deliver and perform this Security Agreement;
3.6. Such
Grantor’s execution, delivery and performance of this Security Agreement and its
granting of the security interest in the Collateral (i) have been duly
authorized by all requisite corporate or other action; (ii) will not: (A)
violate any provision of law, any order of any court, tribunal or agency of
government or its certificate of incorporation, bylaws or other charter
documents; (B) violate, be in conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any indenture,
license, sublicense, agreement or other instrument to which it is a party or
by
which it or any of its properties are bound; (C) violate any governmental or
agency rule or regulation (including, but not limited to, Regulations U and
X of
the Board of Governors of the Federal Reserve System); or (D) result in the
creation or imposition of any lien, charge or encumbrance whatsoever upon any
of
the Collateral, except for the security interest created by this Security
Agreement; and (iii) do not require any filing or registration with, any permit,
license, consent or approval of, or any exemption by, any governmental or
regulatory authority, except filings of UCC financing statements;
3.7. This
Security Agreement has been duly executed and delivered by such Grantor and
is
its legal, valid and binding obligation, enforceable against it in accordance
with its terms, subject only to bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or affecting
the enforceability of rights of creditors generally and to general equitable
principles that may limit the right to obtain equitable remedies. No person
or
entity from which such Grantor leases any of its premises has filed any UCC
financing statement with respect to any contractual lien that would have
priority over the Secured Party’s security interest in the Collateral; and
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3.8. On
the
date hereof and at any time during the term of this Security Agreement during
which a security interest in favor of the Secured Party in the Collateral
exists, such Grantor is and will be the lawful owner of its Collateral and
has
and will have good right to grant to the Secured Party a security interest
therein. All documents and agreements held by such Grantor with respect to
the
Collateral are and will be true and correct and in all respects what they
purport to be; all signatures and endorsements that appear thereon are and
will
be genuine and such signatories and endorsers do and will have the full capacity
to contract; none of the transactions underlying or giving rise to the
Collateral nor any operation or use of any of the Collateral will violate any
applicable state, federal or foreign law or regulation; and all documents
relating to the Collateral will be legally sufficient under such laws and
regulations and will be legally enforceable in accordance with their terms.
None
of the Collateral of such Grantor is or will be affixed to real estate unless
such Grantor has furnished to the Secured Party such consents, waivers or
disclaimers as are necessary to make the Secured Party’s security interest in
such of the Collateral a valid first priority lien against persons or entities
holding an interest in such real estate.
4. Rights
of the Secured Party; Limitations on the Obligations of the Secured
Party.
The
Secured Party shall not have any obligation or liability under any Contract
by
reason of or arising out of this Security Agreement or the granting to the
Secured Party of a security interest in any Contract or the receipt by the
Secured Party of any payment relating to any Contract pursuant hereto, nor
shall
the Secured Party be required or obligated in any manner to perform or fulfill
any of the obligations of any Grantor under or pursuant to any Contract, or
to
make any payment, or to make any inquiry as to the nature or the sufficiency
of
any payment received by it or the sufficiency of any performance by any party
under any Contract, or to present or file any claim, or to take any action
to
collect or enforce any performance or the payment of any amounts which may
have
been assigned to it or to which it may be entitled at any time or times. The
Secured Party may at any time during the occurrence of an Event of Default
(as
defined herein) notify any or all account debtors, parties to the Contracts
of
any Grantor or in respect of Intangibles of any Grantor that the Accounts and
the right, title and interest of such Grantor in and under such Contracts and/or
Intangibles, have been assigned to the Secured Party and that payments shall
be
made directly to the Secured Party. Upon the request of the Secured Party,
each
Grantor will so notify such account debtors parties to such Contracts and/or
Intangibles.
5. Protection
of Collateral.
During
the term of this Security Agreement, each Grantor agrees:
5.1. Maintenance.
To
maintain and preserve the Collateral in good repair and condition; provided,
however,
that
such Grantor may sell, transfer or otherwise deal with its Collateral in the
ordinary course of business to the extent permitted under the terms of the
Purchase Agreement.
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5.2. Further
Documentation.
At any
time and from time to time, upon the written request of the Secured Party,
and
at the sole expense of such Grantor, to promptly execute and deliver any and
all
such further instruments and documents and take such further action as the
Secured Party may deem reasonably necessary or desirable to obtain the full
benefits of this Security Agreement and of the rights and powers herein granted,
including (i) using best efforts to secure all consents and approvals necessary
or appropriate for the assignment to the Secured Party of any Contract held
by
such Grantor, (ii) filing any financing, continuation or similar statements
under the UCC or any federal or foreign law with respect to the Liens and
security interests granted hereby that the Secured Party deems necessary or
desirable, and such Grantor authorizes the Secured Party to file any such
statement, (iii) transferring Collateral to the Secured Party’s possession,
(iv) causing to be done all other recordings, filings and giving of public
notice under any applicable law or ordinance that the Secured Party deems
necessary or desirable to comply fully with such law or ordinance, including
any
notices to the United States government under the Federal Assignment of Claims
Act, (v) doing whatever the Secured Party may request by way of obtaining,
executing and/or delivering control agreements, bailee acknowledgments and
other
notices of any kind, and amendments and renewals thereto, (vi) paying all
costs for searches and filings in connection with any of the foregoing, and
(vii) using best efforts to obtain waivers of liens from warehousemen, carriers,
landlords and mortgagees. All certificates (including stock certificates and
certificates of title or ownership), Instruments (other than checks representing
payments received in the ordinary course of business), chattel paper, letters
of
credit or negotiable documents constituting, representing, evidencing or
otherwise relating to any of the Collateral shall promptly be delivered to
the
Secured Party or its agent and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer
or
assignment in blank, all in form and substance as may be satisfactory to the
Secured Party.
5.3. Indemnification.
In any
suit, proceeding or action brought by the Secured Party relating to Collateral
for any sum owing thereunder, or to enforce any provision of any Collateral,
to
save, indemnify and keep the Secured Party, its affiliates and their respective
directors, officers, agents and employees harmless from and against all expense
(including all reasonable fees and disbursements of the Secured Party’s legal
counsel (including counsel who are the Secured Party’s employees)), loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment
or
reduction of liability whatsoever of the obligor thereunder, arising out of
a
breach by such Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of,
such
obligor or its successors from such Grantor, and all such obligations of such
Grantor shall be and remain enforceable against and only against such Grantor
and shall not be enforceable against the Secured Party. In addition, neither
the
Secured Party nor any of its affiliates nor any of their respective directors,
officers, agents or employees shall be liable to any person or entity for any
action taken or omitted by the Secured Party, its affiliates or any of their
respective directors, officers, agents or employees under this Security
Agreement, the Purchase Agreement or any other Related Agreement or with respect
to any transaction contemplated by this Security Agreement, the Purchase
Agreement or any other Related Agreement, except for the Secured Party’s, such
affiliate’s or such director’s, officer’s, agent’s or employee’s own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Secured Party shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the
Collateral, wherever it may be located and regardless of the cause thereof,
unless due to the Secured Party’s own gross negligence or willful misconduct.
The Secured Party shall not, under any circumstances or in any event whatsoever,
have any liability for any error or omission or delay of any kind occurring
in
the settlement, collection or payment of any of the Accounts or any instrument
received in payment thereof or for any damage resulting therefrom. Such Grantor
assumes all responsibility and liability arising from the use of the Collateral
and will pay, and indemnify and hold the Secured Party, its affiliates and
their
respective directors, officers, agents and employees harmless from and against,
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including all reasonable fees and disbursements of the Secured
Party’s legal counsel (including counsel who are the Secured Party’s employees))
with respect to such Grantor’s right, title and interest in, to and under the
Collateral, including claims of trademark infringement.
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5.4. Continuous
Perfection.
Not to
change its principal place of business or remove its records therefrom, change
the location of any Collateral, change its legal name, use any other name nor
change the form of its organization nor the jurisdiction in which it is
organized unless, in each case (i) it has taken such action that the Secured
Party deems necessary or desirable to cause the security interest of the Secured
Party in the Collateral to continue to be perfected and (ii) it has given at
least thirty (30) days’ prior written notice thereof to the Secured Party. Such
Grantor also will not make any changes in any manner which might make any
financing statement, registration, continuation statement or any assignment
form
filed in connection herewith seriously misleading or no longer correctly filed
within the meaning of section 9-506 or 9-507 of the UCC (or any other then
applicable provision of the UCC) or any other applicable law unless such Grantor
shall have given the Secured Party at least thirty (30) days’ prior written
notice thereof and shall have taken all action that the Secured Party deems
necessary or desirable to amend such financing statement, continuation statement
or assignment form so that it is not seriously misleading.
5.5. Conduct
of Business.
To
conduct and carry on its business in a proper and efficient manner so as to
protect and preserve the Collateral and, if so requested by the Secured Party,
such Grantor will xxxx each of its ledger cards, books of account and other
records relating to the Collateral with appropriate notations, satisfactory
to
the Secured Party, disclosing that such Collateral has been assigned and/or
transferred to the Secured Party and that such Grantor has granted to the
Secured Party a security interest therein.
5.6. Adverse
Information.
To,
promptly upon learning thereof, report to the Secured Party: (i) any material
adverse change relating to such Grantor, its business or the Collateral; (ii)
the details of any material, adverse claim or litigation affecting such Grantor
or the Collateral; (iii) any material loss of or damage to the Collateral;
(iv)
any reclamation, return or repossession of any material portion of the
Collateral, all material delays in performance, notices of default, claims
made
or disputes asserted by any account debtor or other obligor and any other
matters materially adversely affecting the value, enforceability or
collectibility of any of the Collateral; (vi) the failure of the Company at
any
time to maintain at least $550,000 of unrestricted funds with a nationally
recognized financial institution and (v) any use by any person or entity of
any
term or design likely to cause confusion with any trademark of such Grantor
and
of any use by any person or entity of any other process or product that
infringes upon any such trademark.
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5.7. Insurance.
To
purchase and maintain insurance on the Collateral consistent with sound industry
practice; provided
that,
with respect to insurance regarding the Collateral, all such insurance policies
shall, at the written request of the Secured Party, contain loss payable and
additional insured clauses satisfactory to the Secured Party naming the Secured
Party as a loss payee and additional insured. Such Grantor will deliver, or
cause to be delivered, to the Secured Party from time to time promptly upon
request of the Secured Party, copies of all policies and certificates of
insurance relating to the Collateral;
5.8. Books
and Records.
To keep
full and accurate Records marked in such manner as may be reasonably required
by
Secured Party to reflect the security interest granted by this
Agreement;
5.9. Inspection.
To
permit representatives of Secured Party to inspect and make abstracts from
the
Records and to inspect the Collateral upon reasonable notice during normal
business hours;
5.10. Taxes.
To pay
in a timely manner federal, state and local taxes owed by it, whose nonpayment
could result in the imposition of a lien on any of the Collateral, unless such
taxes are being contested by such Grantor in good faith; and
5.11. No
Other Liens.
To keep
the Collateral free of all liens and security interests, other than Permitted
Encumbrances (as defined in the Purchase Agreement).
6. Event
of Default.
6.1. Event
of Default; Remedies.
Upon
the occurrence and continuation of an Event of Default under, and as
defined in, the Note or the Existing Note (an “Event
of Default”),
Secured Party shall have the right to exercise any or all available legal and
equitable rights and remedies either directly or through an agent or agents.
Without limiting the generality of the foregoing, upon the occurrence and
continuation of any Event of Default, the Secured Party, upon at least three
(3)
business days notice, may (but need not), without any further demand of
performance, which is hereby expressly waived: (a) exercise any and all
rights as beneficial and legal owner of the Collateral; (b) sell or assign
or cause to be sold or assigned the Collateral, in whole or in part, in any
commercially reasonable manner, for cash or upon credit as Secured Party may
deem appropriate, at public or private sale; (c) grant a license or franchise
or
cause to be granted a license or franchise to use the Collateral in whole or
in
part; (d) xxx, demand, collect or receive in its own name or otherwise any
money or property payable or receivable on account of, or in exchange for,
any
of the Collateral; or (e) exercise all voting, consensual or other powers
of ownership pertaining to the Collateral as if Secured Party were the sole
and
absolute owner thereof.
10
6.2. Bankruptcy
Event.
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 Secured Party. For the purposes of this Agreement, a “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.
6.3. Notice
of Sale; Restrictions.
Notice
of any sale or other disposition of the Collateral of any Grantor shall be
given
to such Grantor at least ten (10) calendar days prior to time of any intended
public or private sale or other disposition of such Collateral is to be made,
which each Grantor hereby agrees shall be reasonable notice of such sale or
other disposition. The Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of said Collateral so sold, free
of
any right of any Grantor or equity of redemption, which equity of redemption
each Grantor hereby waives and releases. In connection with any such sale,
Secured Party shall have the right to impose such limitations and restrictions
on the sale or assignment of the Collateral as Secured Party may believe to
be
necessary or appropriate to protect Secured Party’s interests in and to the
Collateral or to comply with any law, rule or regulation (federal, state or
local) having applicability to the sale or with any requirements for any
necessary governmental approvals.
6.4. Remedies
Cumulative and Not Exclusive.
The
rights, remedies and benefits of Secured Party herein expressly specified shall
be cumulative and not exclusive of any other rights, remedies or benefits which
Secured Party may have under this Security Agreement, the Purchase Agreement,
the other Related Agreements or at law, in equity, by statute or otherwise.
The
exercise of one right or remedy shall not affect Secured Party’s other rights,
remedies or benefits.
11
6.5. Limitation
of Liability.
The
powers conferred on the Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise
any
such powers. Except for the accounting for moneys actually received by it
hereunder, in the absence of gross negligence or willful misconduct under no
circumstance shall the Secured Party be liable to any Grantor or any other
person or entity for any matter or action in connection with this Security
Agreement, and shall have no duty as to any Collateral or as to the taking
of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. Without limitation of the foregoing, the Secured
Party shall not have any responsibility or liability for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Accounts or Collateral, whether or not the
Secured Party has or is deemed to have knowledge of such matters, or (ii) taking
any necessary steps to preserve rights against any parties with respect to
any
Accounts or Collateral, or (iii) the collection of any Proceeds of any
Collateral or any invalidity, lack of value, improper payment or
uncollectability of any Proceeds.
6.6. Expenses
of Secured Party.
The
Grantors jointly and severally agree to pay to Secured Party all of Secured
Party’s reasonable out-of-pocket expenses, including reasonable expenses for
legal services, incident to the enforcement of any of the provisions of this
Agreement, or for the care or insurance of the Collateral or for defending
rights and claims of Secured Party, whether litigation is commenced or
not.
6.7. Application
of Proceeds; Full Recourse.
If
Secured Party realizes any proceeds as a result of the exercise of its rights
with respect to the occurrence of an Event of Default, the proceeds shall be
applied by Secured Party in the following order:
(a) To
the
payment of costs and expenses of Secured Party under Section 6.6.
(b) To
the
payment of the Obligations in such order as may be selected by Secured
Party.
(c) To
the
applicable Grantor(s) or its successors or assigns, unless otherwise directed
by
court order.
The
Company acknowledges that Secured Party need not proceed against any or all
of
the Collateral before proceeding against the Company for its other assets and
acknowledges that as long as the proceeds actually received from the Collateral
or otherwise are insufficient to cover the Obligations, the Company remains
fully liable on the Obligations.
7. Attorney-In-Fact.
Each
Grantor hereby irrevocably appoints Secured Party and any officer or agent
of
Secured Party, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in its own name, from
time to time in the Secured Party’s discretion, for the purpose of carrying out
the terms of the Security Agreement, to take all actions and execute and
acknowledge all documents with respect to the Collateral that Secured Party
may
deem necessary or advisable to secure any of Secured Party’s rights as provided
herein upon the occurrence of an Event of Default. This appointment as
attorney-in-fact is irrevocable as it is coupled with an interest. Without
limiting the generality of this power, at any time when Secured Party is
entitled to make collection in respect of the Collateral, Secured Party shall
have the right and power to receive, endorse and collect all checks made payable
to the order of any Grantor representing any dividend payment or other
distribution or receipt in respect of the Collateral and to give full discharge
for the same. Each Grantor hereby ratifies, to the extent permitted by law,
all
that said attorneys shall lawfully do or cause to be done in accordance with
this Section 7. The powers conferred on the Secured Party hereunder are
solely to protect the Secured Party’s interests in the Collateral and shall not
impose any duty upon it to exercise any such powers.
12
8. Termination
of this Agreement.
This
Agreement shall terminate upon the complete and unconditional performance of
the
Obligations. Upon such termination, Secured Party shall execute and deliver
to
each Grantor, at the sole cost and expense of such Grantor, any instruments
reasonably requested by such Grantor to terminate the security interest hereby
created.
9. Cooperation.
Each
party hereto agrees to execute any and all further documents and writings and
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out this Agreement.
10. General
Provisions.
10.1. Complete
Agreement; Modifications.
This
Agreement and any documents referred to herein or executed contemporaneously
herewith constitute the parties’ entire agreement with respect to the subject
matter hereof and supersede all agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof. This Agreement may not be amended, altered or
modified except by a writing signed by each party hereto.
10.2. Additional
Documents.
Each
party hereto agrees to execute any and all further documents and writings and
to
perform such other actions which may be or become necessary or expedient to
effectuate and carry out this Agreement.
10.3. Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:
(a)
upon
personal delivery to the party to be notified;
(b)
when
sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day;
13
(c)
three
(3) business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or
(d)
one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt.
All
communications shall be sent as follows:
|
If
to any Grantor, to:
|
c/o
ProElite, Inc.
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx0000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
|
|
|
With
a copy to:
|
Christensen,
Glaser, Fink, Jacobs,
Weil
& Xxxxxxx, LLP
00000
Xxxxxxxxxxxxx Xxxx., 00xx
Xxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxx
Facsimile:
(000) 000-0000
|
|
|
If
to Secured Party:
|
Showtime
Networks, Inc.
0000
Xxxxxxxx
Xxx
Xxxx, XX 00000
Attention:
General Counsel
Facsimile:
(000) 000-0000
|
|
|
With
a copy to:
|
CBS
Corporation
00
X. 00xx
Xx. Xxx Xxxx, XX 00000
Attention:
General Counsel
Facsimile:
(000) 000-0000
|
or
at
such other address as any Grantor or Secured Party may designate by written
notice to the other parties hereto given in accordance herewith.
10.4. No
Third-Party Benefits.
None of
the provisions of this Agreement shall be for the benefit of, or enforceable
by,
any third-party beneficiary.
10.5. Assignment.
This
Agreement may be assigned in the same manner and under the same conditions
as
the Note and the Existing Note.
10.6. Successors
and Assigns.
Except
as provided herein to the contrary, this Agreement shall be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns.
14
10.7.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.
10.8. Waivers
Strictly Construed.
With
regard to any power, remedy or right provided herein or otherwise available
to
any party hereunder (i) no waiver or extension of time shall be effective
unless expressly contained in a writing signed by the waiving party; and
(ii) no alteration, modification or impairment shall be implied by reason
of any previous waiver, extension of time, delay or omission in exercise, or
by
any other indulgence. A waiver by the Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right
or
remedy which the Secured Party would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of the Secured
Party of any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege.
10.9. Costs
and Expenses.
The
Grantors jointly and severally agree to pay, on demand, whether or not any
Grantor is in default under this Security Agreement and whether or not any
proceeding to enforce this Security Agreement or the Obligations has been
commenced, all of the Secured Party’s reasonable costs and expenses, including
all reasonable fees and disbursements of the Secured Party’s legal counsel
(including counsel who are the Secured Party’s employees), incurred in
connection with the preparation and enforcement of this Security Agreement,
the
security interest granted by this Security Agreement, the receipt of proceeds
of
any Grantor’s Accounts or other Collateral under this Security Agreement, the
care and preservation of the Collateral or the preparation of any requested
amendments to this Security Agreement, modifications of this Security Agreement
or waivers or consents in connection with this Security Agreement, or any
intercreditor agreement negotiated with respect to any Additional Indebtedness
incurred by the Company, up to a maximum of $30,000 in the case of amounts
paid
to outside counsel in connection with the negotiation, execution and delivery
of
this Security Agreement, the Purchase Agreement, the other Related Agreements,
or any other agreements with respect to the issuance of Additional Indebtedness.
Any such expenses so incurred by the Secured Party shall be charged to the
Company’s account, shall be part of the Obligations and shall be secured by the
Collateral. If any tax, assessment, charge, lien or claim is claimed or made
with respect to the Collateral that in the Secured Party’s opinion may possibly
create a valid obligation having priority over the security interest granted
to
the Secured Party by this Security Agreement, the Secured Party may, in its
sole
discretion and without notice to any Grantor, pay such taxes, assessments,
charges, liens or claims, and the amount thereof shall be charged to the
Company’s account, shall be part of the Obligations and shall be secured by the
Collateral. Upon any Grantor’s failure to perform any of its duties under this
Security Agreement, the Secured Party may, but shall not be obligated to,
perform any or all of such duties, and such Grantor will pay to the Secured
Party on its written demand an amount equal to the cash or out-of-pocket expense
incurred by the Secured Party in so doing plus interest thereon from the date
such expense is incurred until it is paid at a rate per annum equal to the
highest rate of interest payable from time to time on the Obligations, and
such
amount shall be charged to the Company’s account, shall be part of the
Obligations and shall be secured by the Collateral.
15
10.10. Amendments,
Modifications and Waivers with Respect to Obligations.
Each
Grantor hereby consents that, without the necessity of any reservation of rights
against it and without notice to or further assent by it, the liability of
any
other person or entity on or for any part of the Obligations, or any collateral
security or guaranty therefor or right of offset with respect thereto, may
from
time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released and any other
collateral security document or guaranty or document delivered in connection
therewith to which the Company or any other Grantor is not a party may be
amended, modified, supplemented, restated or terminated, in whole or in part,
as
the Secured Party may deem advisable from time to time, and any collateral
security or guaranty or right of offset at any time held for payment of the
Obligations may be sold, waived, surrendered or released, all without the
necessity of any reservation of rights against such Grantor and without notice
to or further assent by such Grantor, and such Grantor will remain bound
hereunder notwithstanding any such renewal, extension, modification,
acceleration, compromise, amendment, supplement, restatement, termination,
sale,
exchange, waiver, surrender or release. Each Grantor waives any and all notice
of or proof of reliance by the Secured Party on this Security Agreement, and
the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Security Agreement, and all
dealings between the Secured Party and the Company shall likewise be
conclusively presumed to have been had or consummated in reliance on this
Security Agreement. Each Grantor’s liability hereunder shall not be limited,
diminished or affected by, and each Grantor hereby waives any defense based
upon, the happening from time to time of any event, action or circumstance
that
would result in the release or discharge, under suretyship laws or otherwise,
of
a guarantor from the performance or observance of any obligation, covenant
or
agreement contained herein.
10.11. No
Usury.
Notwithstanding anything to the contrary contained herein, no provisions of
this
Security Agreement shall require the payment by or permit the collection of
interest from the Company in excess of the Maximum Rate. If any excess of
interest in such respect is herein provided for, or shall be adjudicated to
be
so provided, in this Security Agreement, or otherwise in connection with the
transactions contemplated thereby, the provisions of this paragraph shall govern
and prevail, and neither the Company nor the sureties, guarantors, successors
or
assigns of the Company shall be obligated to pay the excess amount of such
interest, or any other excess sum paid for the use, forbearance or detention
of
sums loaned pursuant thereto. If for any reason interest in excess of the
Maximum Rate shall be deemed charged, required or permitted by any court of
competent jurisdiction, any such excess shall be applied as a payment and
reduction of the principal of indebtedness evidenced by the Related Agreements;
and, if the principal amount has been paid in full, any remaining excess shall
forthwith be paid to the Company. In determining whether or not the interest
paid or payable exceeds the Maximum Rate, the Company and the Secured Party
shall, to the extent permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by the Obligations so that the interest for the entire term does not exceed
the
Maximum Rate. For the purposes of this Agreement, the “Maximum
Rate”
shall
mean the maximum nonusurious interest rate from time to time allowed by
applicable law as now, or to the extent allowed by law as may hereafter be,
in
effect in any jurisdiction in which the interest rate or laws are mandatorily
applicable to the Company.
16
10.12. Rules
of Construction.
10.12.1. Headings.
The
Article and Section headings in this Agreement are inserted only as a matter
of
convenience, and in no way define, limit, or extend or interpret the scope
of
this Agreement or of any particular Article or Section.
10.12.2. Tense
and Case.
Throughout this Agreement, as the context may require, references to any word
used in one tense or case shall include all other appropriate tenses or
cases.
10.12.3. Severability.
The
validity, legality or enforceability of the remainder of this Agreement will
not
be affected even if one or more of the provisions of this Agreement will be
held
to be invalid, illegal or unenforceable in any respect.
10.12.4. Agreement
Negotiated.
The
parties hereto are sophisticated and have been represented throughout this
transaction by lawyers who have carefully negotiated the provisions hereof.
As a
consequence, the parties do not believe that the presumptions of laws or rules
relating to the interpretation of contracts against the drafter of any
particular clause should be applied in this case and therefore waive the effect
of such laws and rules.
10.13. Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Balance
of page intentionally left blank; signature page follows]
17
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as
of the day and year first above written.
|
Secured
Party: Showtime Networks, Inc.
|
|
|
By
|
/s/
Xxx Xxxxxxxxx
|
|
Name:
Xxx Xxxxxxxxx
|
|
|
Title:
Senior Vice President and Treasurer
|
|
|
The
Company: ProElite, Inc.,
a
New Jersey corporation
|
|
|
By
|
/s/
Xxxxxxx Xxxxxxxx
|
|
Name:
Xxxxxxx Xxxxxxxx
|
|
|
Title:
CEO
|
|
|
SUBSIDIARY
GRANTORS:
|
|
|
Real
Sport, Inc.,
a
California corporation
|
|
|
By
|
/s/
Xxxx Xxxxxxxxxxx
|
|
Name:
Xxxx Xxxxxxxxxxx
|
|
|
Title:
Secretary
|
|
|
XxxXxxxx.xxx,
a
California corporation
|
|
|
By
|
/s/
Xxxx Xxxxxxxxxxx
|
|
Name:
Xxxx Xxxxxxxxxxx
|
|
|
Title:
Secretary
|
|
|
EliteXC
Live,
a
California corporation
|
|
|
By
|
/s/
Xxxx Xxxxxxxxxxx
|
|
Name:
Xxxx Xxxxxxxxxxx
|
|
|
Title:
Secretary
|
|
Signature
Page to Security Agreement
|
By
|
/s/
Xxxxxxx Xxxxx
|
|
Name:
Xxxxxxx Xxxxx
|
|
|
Title:
CEO
|
|
Signature
Page to Security Agreement
