SECURITY AGREEMENT
THIS
SECURITY AGREEMENT (“Agreement”) is made and entered into as of the ___ day of
September, 2008, by and among Diamond Sports & Entertainment, Inc., a
Delaware corporation (“Bridge Loan Borrower”), Diamond Concessions, LLC, a
California limited liability company (“Subsidiary”), and the Buyers (as defined
below).
RECITALS:
WHEREAS,
Federal
Sports & Entertainment, Inc. (the “Borrower”) will issue and deliver to each
party listed as a buyer (the “Buyers”) on the Schedule of Buyers attached to
that certain Securities Purchase Agreement dated of even date herewith
(“Securities Purchase Agreement”) its 0% Secured Convertible Promissory Note
(each, a “Note” and together, the “Notes”) in the aggregate principal amount of
up to One Million Dollars ($1,000,000), the first of which Notes shall be dated
as of the date of this Agreement;
WHEREAS,
pursuant to that certain bridge loan agreement dated as of even date herewith
between Borrower and Bridge Loan Borrower (the “Bridge Loan Agreement”),
Borrower has agreed to lend the proceeds of the Notes to Bridge Loan Borrower
(the “Bridge Loan”) to meet working capital needs of Bridge Loan Borrower;
WHEREAS,
pursuant to the Bridge Loan Agreement, the Bridge Loan Borrower has agreed
to
grant a security interest in and to the Collateral (as defined in this
Agreement) to the Buyers on the terms and conditions set forth in this
Agreement.
WHEREAS,
in connection with the Securities Purchase Agreement, the Borrowers will execute
an Intercreditor Agreement, dated as of the date hereof (“Intercreditor
Agreement”), and all provisions herein are subject to that agreement.
NOW,
THEREFORE,
for and
in consideration of the Bridge Loan, and of the premises and intending to be
legally bound, the parties covenant and agree as follows:
1. Definitions.
In
addition to the words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, unless the context
otherwise clearly requires:
“Accounts”
shall have the meaning given to that term in the Code and shall include without
limitation all rights of the Bridge Loan Borrower or the Subsidiary, whenever
acquired, to payment for goods sold or leased or for services rendered, whether
or not earned by performance.
“Agent”
shall mean Xxxx Xxxxxx Bridge & Opportunity Fund
“Chattel
Paper” shall have the meaning given to that term in the Code and shall include
without limitation all writings owned by the Bridge Loan Borrower or the
Subsidiary, whenever acquired, which evidence both a monetary obligation and
a
security interest in or a lease of specific goods.
“Code”
shall mean the Uniform Commercial Code as in effect on the date of this
Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the Collateral from time
to
time.
“Collateral”
shall mean (i) all tangible and intangible assets of Bridge Loan Borrower and
the Subsidiary, including, without limitation, collectively the Accounts,
Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General
Intangibles, Instruments, Intellectual Property, Inventory, Investment Property,
and Proceeds of each of them.
“Deposit
Accounts” shall have the meaning given to that term in the Code and shall
include a demand, time, savings, passbook or similar account maintained with
a
bank, savings bank, savings and loan association, credit union, trust company
or
other organization that is engaged in the business of banking.
“Documents”
shall have the meaning given to that term in the Code and shall include without
limitation all warehouse receipts (as defined by the Code) and other documents
of title (as defined by the Code) owned by the Bridge Loan Borrower or the
Subsidiary, whenever acquired.
“Equipment”
shall have the meaning given to that term in the Code and shall include without
limitation all goods owned by the Bridge Loan Borrower or the Subsidiary,
whenever acquired and wherever located, used or brought for use primarily in
the
business or for the benefit of the Bridge Loan Borrower or the Subsidiary and
not included in Inventory of the Bridge Loan Borrower or the Subsidiary,
together with all attachments, accessories and parts used or intended to be
used
with any of those goods or Fixtures, whether now or in the future installed
therein or thereon or affixed thereto, as well as all substitutes and
replacements thereof in whole or in part.
“Event
of
Default” shall mean (i) any of the Events of Default described in the Notes or
the Loan Documents, or (ii) any default by the Bridge Loan Borrower in the
performance of its obligations under this Agreement.
“Fixtures”
shall have the meaning given to that term in the Code, and shall include without
limitation leasehold improvements.
“General
Intangibles” shall have the meaning given to that term in the Code and shall
include, without limitation, all leases under which the Bridge Loan Borrower
or
the Subsidiary now or in the future leases and or obtains a right to occupy
or
use real or personal property, or both, all of the other contract rights of
the
Bridge Loan Borrower or the Subsidiary, whenever acquired, and customer lists,
choses in action, claims (including claims for indemnification), books, records,
patents, copyrights, trademarks, blueprints, drawings, designs and plans, trade
secrets, methods, processes, contracts, licenses, license agreements, formulae,
tax and any other types of refunds, returned and unearned insurance premiums,
rights and claims under insurance policies, and computer information, software,
records and data, and oil, gas, or other minerals before extraction now owned
or
acquired after the date of this Agreement by the Bridge Loan Borrower or the
Subsidiary.
2
“Instruments”
shall have the meaning given to that term in the Code and shall include, without
limitation, all negotiable instruments (as defined in the Code), all
certificated securities (as defined in the Code) and all other writings which
evidence a right to the payment of money now or after the date of this Agreement
owned by the Bridge Loan Borrower or the Subsidiary.
“Inventory”
shall have the meaning given to that term in the Code and shall include without
limitation all goods owned by the Bridge Loan Borrower or the Subsidiary,
whenever acquired and wherever located, held for sale or lease or furnished
or
to be furnished under contracts of service, and all raw materials, work in
process and materials owned by the Bridge Loan Borrower or the Subsidiary and
used or consumed in the Bridge Loan Borrower’s or the Subsidiary’ business,
whenever acquired and wherever located.
“Investment
Property,” “Securities Intermediary” and “Commodities Intermediary” each shall
have the meaning set forth in the Code.
“Know-How”
means all documented and undocumented research, ideas, data, theories,
conclusions, reports, drawings, designs, blueprints, schematics, exhibits,
models, prototypes, source code, object code, flow charts, manuals, processes,
specifications, formulae, product configurations, notes, inventions (whether
or
not patentable and whether or not reduced to practice) and any other information
of any kind developed, in development or maintained by the Bridge Loan Borrower
or the Subsidiary or any of their respective employees, agents or
representatives relating to any goods or services sold or licensed or offered
for sale or license by the Bridge Loan Borrower or the Subsidiary or goods
or
services which the Bridge Loan Borrower or the Subsidiary have a present
intention to sell or license.
“Loan
Documents” shall mean collectively, this Agreement, the Notes, the Bridge Loan
Agreement, the Securities Purchase Agreement and all other agreements, documents
and instruments executed and delivered in connection therewith, as each may
be
amended, supplemented or modified from time to time.
“Permitted
Liens” shall mean all (i) all existing liens on the assets of the Bridge Loan
Borrower and the Subsidiary which have been disclosed to the Borrower by the
Bridge Loan Borrower in the Bridge Loan Agreement, and (ii) all purchase money
security interests hereinafter incurred by the Bridge Loan Borrower in the
ordinary course of business to the extent permitted by the Bridge Loan
Agreement.
3
“Proceeds”
shall have the meaning given to that term in the Code and shall include without
limitation whatever is received when Collateral or Proceeds are sold, exchanged,
collected or otherwise disposed of, whether cash or non-cash, and includes
without limitation proceeds of insurance payable by reason of loss of or damage
to Collateral.
“Trade
Secret Rights” means all documentation, Know-How and other materials owned by
the Bridge Loan Borrower or the Subsidiary that is considered to be proprietary
to the Bridge Loan Borrower or the Subsidiary, is maintained on a confidential
or secret basis, and is generally not known to other persons or entities who
are
not subject to confidentiality restrictions.
2. Security
Interest.
(a) As
security for the full and timely payment of the Notes in accordance with the
terms of the Securities Purchase Agreement and the performance of the
obligations of the Borrower under the Notes and the Bridge Loan Agreement,
the
Bridge Loan Borrower and the Subsidiary agree that the Buyers shall have, and
the Bridge Loan Borrower and the Subsidiary shall grant and convey to and create
in favor of the Buyers, a security interest under the Code in and to such of
the
Collateral as is now owned by the Bridge Loan Borrower or the Subsidiary. The
security interest granted to the Buyers in this Agreement shall be a first
priority security interest, prior and superior to the rights of all third
parties existing on or arising after the date of this Agreement, subject to
the
Permitted Liens.
(b) All
of
the Equipment, Inventory and Goods owned by Bridge
Loan Borrower or the Subsidiary
is
located in the states as specified on Schedule
I
attached
hereto (except to the extent any such Equipment, Inventory or Goods is in
transit or located at a Bridge
Loan Borrower or the Subsidiary’s
job
site in the ordinary course of business). Except as disclosed on Schedule
I,
none of
the Collateral is in the possession of any bailee, warehousemen, processor
or
consignee. Schedule
I
discloses such Bridge Loan Borrower and the Subsidiary’s names as of the date
hereof as it appears in official filings in the state or province, as
applicable, of its incorporation, formation or organization, the type of entity
of both the Bridge Loan Borrower and the Subsidiary (including corporation,
partnership, limited partnership or limited liability company), organizational
identification number issued by both Bridge Loan Borrower and the Subsidiary
state of incorporation, formation or organization (or a statement that no such
number has been issued), both Bridge Loan Borrower and the Subsidiary state
or
province, as applicable, of incorporation, formation or organization and
the
chief
place of business, chief executive officer and the office where both
Bridge
Loan Borrower and the Subsidiary
keep
their respective books and records. Both Bridge
Loan Borrower and the Subsidiary have
only
one state or
province, as applicable, of
incorporation, formation or organization. Bridge
Loan Borrower and the Subsidiary do
not do
business and have not done business during the past five (5) years under any
trade name or fictitious business name except as disclosed on Schedule
I
attached
hereto.
4
3. Provisions
Applicable to the Collateral.
The
parties agree that the following provisions shall be applicable to the
Collateral:
(a)
The
Bridge Loan Borrower and the Subsidiary each covenants and agrees that at all
times during the term of this Agreement it shall keep accurate and complete
books and records concerning the Collateral that is now owned by the Bridge
Loan
Borrower and the Subsidiary.
(b)
The
Buyers or their representatives shall have the right, upon reasonable prior
written notice to the Bridge Loan Borrower and during the regular business
hours
of the Bridge Loan Borrower, to examine and inspect the Collateral and to review
the books and records of the Bridge Loan Borrower or the Subsidiary concerning
the Collateral that is now owned or acquired after the date of this Agreement
by
the Bridge Loan Borrower or the Subsidiary and to copy the same and make
excerpts therefrom; provided, however, that from and after the occurrence of
an
Event of Default, the rights of inspection and entry shall be subject to the
requirements of the Code.
(c)
The
Bridge Loan Borrower and the Subsidiary shall at all times during the term
of
this Agreement keep the Equipment, Inventory and Fixtures that are now owned
by
the Bridge Loan Borrower or the Subsidiary in the states set forth on Schedule
I
or, upon written notice to the Buyers, at such other locations for which the
Buyers have filed financing statements, and in no other states without 20 days’
prior written notice to the Buyers, except that the Bridge Loan Borrower or
the
Subsidiary shall have the right until one or more Events of Default shall occur
to sell or otherwise dispose of Inventory and other Collateral in the ordinary
course of business.
(d)
The
Bridge Loan Borrower shall not move the location of its principal executive
offices without prior written notification to the Buyers.
(e)
Without the prior written consent of the Buyers, the Bridge Loan Borrower and
the Subsidiary shall not sell, lease or otherwise dispose of any Equipment
or
Fixtures, except in the ordinary course of their business.
(f)
Promptly upon request of the Buyers from time to time, the Bridge Loan Borrower
or the Subsidiary shall furnish the Buyers with such information and documents
regarding the Collateral and the Bridge Loan Borrower’s or the Subsidiary’s
financial condition, business, assets or liabilities, at such times and in
such
form and detail as the Buyers may reasonably request.
(g)
During the term of this Agreement, the Bridge Loan Borrower or the Subsidiary
shall deliver to the Buyers, upon their reasonable, written request from time
to
time, without limitation,
5
(i)
all
invoices and customer statements rendered to account debtors, documents,
contracts, chattel paper, instruments and other writings pertaining to the
Bridge Loan Borrower’s or the Subsidiary’s contracts or the performance of the
Bridge Loan Borrower’s or the Subsidiary’s contracts,
(ii)
evidence of the Bridge Loan Borrower’s or the Subsidiary’s accounts and
statements showing the aging, identification, reconciliation and collection
thereof, and
(iii)
reports as to the Bridge Loan Borrower’s or the Subsidiary’s inventory and
sales, shipment, damage or loss thereof, all of the foregoing to be certified
by
authorized officers or other employees of the Bridge Loan Borrower or the
Subsidiary, and Bridge Loan Borrower or the Subsidiary shall take all necessary
action during the term of this Agreement to perfect any and all security
interests in favor of Bridge Loan Borrower or the Subsidiary and to assign
to
Buyers all such security interests in favor of Bridge Loan Borrower or the
Subsidiary.
(h)
Notwithstanding the security interest in the Collateral granted to and created
in favor of the Buyers under this Agreement, the Bridge Loan Borrower or the
Subsidiary shall have the right until one or more Events of Default shall occur,
at their own cost and expense, to collect the Accounts and the Chattel Paper
and
to enforce their contract rights.
(i)
After
the occurrence of an Event of Default, subject to the terms of the Intercreditor
Agreement, the Agent shall have the right, in its sole discretion, to give
notice of the Buyers’ security interest to account debtors obligated to the
Bridge Loan Borrower or the Subsidiary and to take over and direct collection
of
the Accounts and the Chattel Paper, to notify such account debtors to make
payment directly to the Buyers and to enforce payment of the Accounts and the
Chattel Paper and to enforce the Bridge Loan Borrower’s or the Subsidiary’s
contract rights. It is understood and agreed by the Bridge Loan Borrower and
the
Subsidiary that Agent shall have no liability whatsoever under this subsection
(i) except for their own gross negligence or willful misconduct.
(j)
At
all times during the term of this Agreement, Bridge Loan Borrower and the
Subsidiary shall promptly deliver to the Agent, upon their written request,
all
existing leases, and all other leases entered into by Bridge Loan Borrower
or
the Subsidiary from time to time, covering any Equipment or Inventory (“Leased
Inventory”) which is leased to third parties.
(l)
Bridge Loan Borrower and the Subsidiary shall not change its name, entity
status, federal taxpayer identification number, or provincial organizational
or
registration number, or the state under which it is organized without the prior
written consent of the Buyers, which consent shall not be unreasonably withheld.
6
(m)
Bridge Loan Borrower and the Subsidiary shall not close any of its Deposit
Accounts or open any new or additional Deposit Accounts without first giving
the
Buyers at least fifteen (15) days prior written notice thereof.
(n)
The
Bridge Loan Borrower and the Subsidiary shall cooperate with the Buyers, at
Bridge Loan Borrower’s expense, in perfecting Buyers’ security interest in any
of the Collateral.
(o)
Agent
may file any necessary financing statements and other documents Agent deems
necessary in order to perfect Buyers’ security interest without Bridge Loan
Borrower’s or the Subsidiary’s signature. Bridge Loan Borrower and the
Subsidiary grant to Agent a power of attorney for the sole purpose of executing
any documents on behalf of Bridge Loan Borrower or the Subsidiary which Agent
deems necessary to perfect Buyers’ security interest. Such power, coupled with
an interest, is irrevocable.
4. Actions
with Respect to Accounts.
Subject
to the Intercreditor Agreement, the Bridge Loan Borrower and the Subsidiary
irrevocably makes, constitutes and appoints Agent its true and lawful
attorney-in-fact with power to sign its name and to take any of the following
actions after the occurrence and prior to the cure of an Event of Default,
at
any time without notice to the Bridge Loan Borrower or the Subsidiary and at
the
Bridge Loan Borrower’s expense:
(a)
Verify the validity and amount of, or any other matter relating to, the
Collateral by mail, telephone, telegraph or otherwise;
(b)
Notify all account debtors that the Accounts have been assigned to the Buyers
and that the Buyers has a security interest in the Accounts;
(c)
Direct all account debtors to make payment of all Accounts directly to the
Buyers;
(d)
Take
control in any reasonable manner of any cash or non-cash items of payment or
proceeds of Accounts;
(e)
Receive, open and dispose of all mail addressed to the Bridge Loan Borrower
or
the Subsidiary;
(f)
Take
control in any manner of any rejected, returned, stopped in transit or
repossessed goods relating to Accounts;
(g)
Enforce payment of and collect any Accounts, by legal proceedings or otherwise,
and for such purpose the Buyers may:
(1)
Demand payment of any Accounts or direct any account debtors to make payment
of
Accounts directly to the Buyers;
7
(2)
Receive and collect all monies due or to become due to the Bridge Loan Borrower
or the Subsidiary pursuant to the Accounts;
(3)
Exercise all of the Bridge Loan Borrower’s or the Subsidiary’s rights and
remedies with respect to the collection of Accounts;
(4)
Settle, adjust, compromise, extend, renew, discharge or release Accounts in
a
commercially reasonable manner;
(5)
Sell
or assign Accounts on such reasonable terms, for such reasonable amounts and
at
such reasonable times as the Buyers reasonably deems advisable;
(6)
Prepare, file and sign the Bridge Loan Borrower’s or the Subsidiary’s name or
names on any Proof of Claim or similar documents in any proceeding filed under
federal or state bankruptcy, insolvency, reorganization or other similar law
as
to any account debtor;
(7)
Prepare, file and sign the Bridge Loan Borrower’s or the Subsidiary’s name or
names on any notice of lien, claim of mechanic’s lien, assignment or
satisfaction of lien or mechanic’s lien or similar document in connection with
the Collateral;
(8)
Endorse the name of the Bridge Loan Borrower or the Subsidiary upon any chattel
papers, documents, instruments, invoices, freight bills, bills of lading or
similar documents or agreements relating to Accounts or goods pertaining to
Accounts or upon any checks or other media of payment or evidence of a security
interest that may come into the Buyers possession;
(9)
Sign
the name or names of the Bridge Loan Borrower or the Subsidiary to verifications
of Accounts and notices of Accounts sent by account Bridge Loan ors to the
Bridge Loan Borrower or the Subsidiary; or
(10)
Take
all other actions that the Buyers reasonably deems to be necessary or desirable
to protect the Bridge Loan Borrower’s or the Subsidiary’s interest in the
Accounts.
(h)
Negotiate and endorse any Document in favor of the Buyers or its designees,
covering Inventory which constitutes Collateral, and related documents for
the
purpose of carrying out the provisions of this Agreement and taking any action
and executing in the name(s) of Bridge Loan Borrower or the Subsidiary any
instrument which the Buyers may reasonably deem necessary or advisable to
accomplish the purpose hereof. Without limiting the generality of the foregoing,
the Agent shall have the right and power to receive, endorse and collect checks
and other orders for the payment of money made payable to the Bridge Loan
Borrower or the Subsidiary representing any payment or reimbursement made under,
pursuant to or with respect to, the Collateral or any part thereof and to give
full discharge to the same. The Bridge Loan Borrower and each Subsidiary does
hereby ratify and approve all acts of said attorney and agrees that said
attorney shall not be liable for any acts of commission or omission, nor for
any
error of judgment or mistake of fact or law, except for said attorney’s own
gross negligence or willful misconduct. This power, being coupled with an
interest, is irrevocable until the Notes are paid in full (at which time this
power shall terminate in full) and the Bridge Loan Borrower and the Subsidiary
shall have performed all of their obligations under this Agreement. The Bridge
Loan Borrower and the Subsidiary each further agrees to use its reasonable
efforts to assist the Agent in the collection and enforcement of the Accounts
and will not hinder, delay or impede the Buyers in any manner in its collection
and enforcement of the Accounts.
8
5. Preservation
and Protection of Security Interest.
Each of
the Bridge Loan Borrower and the Subsidiary represents and warrants that it
has,
and covenants and agrees that at all times during the term of this Agreement,
it
will have, good and marketable title to the Collateral now owned by it free
and
clear of all mortgages, pledges, liens, security interests, charges or other
encumbrances, except for the Permitted Liens and those junior in right of
payment and enforcement to that of the Buyers or in favor of the Buyers, and
shall defend the Collateral against the claims and demands of all persons,
firms
and entities whomsoever. Assuming Buyers has taken all required action to
perfect a security interest in the Collateral as provided by the Code, each
of
the Bridge Loan Borrower and the Subsidiary represents and warrants that as
of
the date of this Agreement the Buyers have, and that all times in the future
the
Buyers will have, a first priority perfected security interest in the
Collateral, prior and superior to the rights of all third parties in the
Collateral existing on the date of this Agreement or arising after the date
of
this Agreement, subject to the Permitted Liens. Except as permitted by this
Agreement, each of the Bridge Loan Borrower and the Subsidiary covenants and
agrees that it shall not, without the prior written consent of the Buyers (i)
borrow against the Collateral or any portion of the Collateral from any other
person, firm or entity, except for borrowings which are subordinate to the
rights of the Buyers, (ii) grant or create or permit to attach or exist any
mortgage, pledge, lien, charge or other encumbrance, or security interest on,
of
or in any of the Collateral or any portion of the Collateral except those in
favor of the Buyers or the Permitted Liens, (iii) permit any levy or attachment
to be made against the Collateral or any portion of the Collateral, except
those
subject to the Permitted Liens, or (iv) permit any financing statements to
be on
file with respect to any of the Collateral, except financing statements in
favor
of the Buyers or those with respect to the Permitted Liens. The Bridge Loan
Borrower and the Subsidiary shall faithfully preserve and protect the Buyers’
security interest in the Collateral and shall, at their own cost and expense,
cause, or assist the Buyers to cause that security interest to be perfected
and
continue perfected so long as the Notes or any portion of the Notes are
outstanding, unpaid or executory. For purposes of the perfection of the Buyers’
security interest in the Collateral in accordance with the requirements of
this
Agreement, the Bridge Loan Borrower and the Subsidiary shall from time to time
at the request of the Buyers file or record, or cause to be filed or recorded,
such instruments, documents and notices, including assignments, financing
statements and continuation statements, as the Buyers may reasonably deem
necessary or advisable from time to time in order to perfect and continue
perfected such security interest. The Bridge Loan Borrower and the Subsidiary
shall do all such other acts and things and shall execute and deliver all such
other instruments and documents, including further security agreements, pledges,
endorsements, assignments and notices, as the Buyers in their discretion may
reasonably deem necessary or advisable from time to time in order to perfect
and
preserve the priority of such security interest as a first lien security
interest in the Collateral prior to the rights of all third persons, firms
and
entities, subject to the Permitted Liens and except as may be otherwise provided
in this Agreement. The Bridge Loan Borrower and the Subsidiary agree that a
carbon, photographic or other reproduction of this Agreement or a financing
statement is sufficient as a financing statement and may be filed instead of
the
original.
9
6. Insurance.
Risk of
loss of, damage to or destruction of the Equipment, Inventory and Fixtures
is on
the Bridge Loan Borrower and the Subsidiary. The Bridge Loan Borrower and the
Subsidiary shall insure the Equipment, Inventory and Fixtures against such
risks
and casualties and in such amounts and with such insurance companies as is
ordinarily carried by corporations or other entities engaged in the same or
similar businesses and similarly situated or as otherwise reasonably required
by
the Buyers in their sole discretion. In the event of loss of, damage to or
destruction of the Equipment, Inventory or Fixtures during the term of this
Agreement, the Bridge Loan Borrower and the Subsidiary shall promptly notify
Buyers of such loss, damage or destruction. At the reasonable request of the
Buyers, each of the Bridge Loan Borrower’s and the Subsidiary’s policies of
insurance shall contain loss payable clauses in favor of the Bridge Loan
Borrower or the Subsidiary and the Buyers as their respective interests may
appear and shall contain provision for notification of the Buyers thirty (30)
days prior to the termination of such policy. At the request of the Buyers,
copies of all such policies, or certificates evidencing the same, shall be
deposited with the Buyers. If the Bridge Loan Borrower or the Subsidiary fail
to
effect and keep in full force and effect such insurance or fail to pay the
premiums when due, the Buyers may (but shall not be obligated to) do so for
the
account of the Bridge Loan Borrower or the Subsidiary and add the cost thereof
to the Bridge Loan . The Buyers are irrevocably appointed attorney-in-fact
of
the Bridge Loan Borrower and the Subsidiary to endorse any draft or check which
may be payable to the Bridge Loan Borrower in order to collect the proceeds
of
such insurance. Unless an Event of Default has occurred and is continuing,
the
Buyers will turn over to the Bridge Loan Borrower or the Subsidiary the proceeds
of any such insurance collected by it on the condition that the Bridge Loan
Borrower or the Subsidiary apply such proceeds either (i) to the repair of
damaged Equipment, Inventory or Fixtures, or (ii) to the replacement of
destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or Fixtures
of the same or similar type and function and of at least equivalent value (in
the sole judgment of the Buyers), provided such replacement Equipment, Fixtures
or Inventory is made subject to the security interest created by this Agreement
and constitutes a first lien security interest in the Equipment, Inventory
and
Fixtures subject only to Permitted Liens and other security interests permitted
under this Agreement, and is perfected by the filing of financing statements
in
the appropriate public offices and the taking of such other action as may be
necessary or desirable in order to perfect and continue perfected such security
interest. Any balance of insurance proceeds remaining in the possession of
the
Buyers after payment in full of the Bridge Loan shall be paid over to the Bridge
Loan Borrower or the Subsidiary or their order.
10
7. Maintenance
and Repair.
The
Bridge Loan Borrower and the Subsidiary shall maintain the Equipment, Inventory
and Fixtures, and every portion thereof, in good condition, repair and working
order, reasonable wear and tear alone excepted, and shall pay and discharge
all
taxes, levies and other impositions assessed or levied thereon as well as the
cost of repairs to or maintenance of the same. If the Bridge Loan Borrower
and
the Subsidiary fail to do so, the Buyers may (but shall not be obligated to)
pay
the cost of such repairs or maintenance and such taxes, levies or impositions
for the account of the Bridge Loan Borrower or the Subsidiary and add the amount
of such payments to the Notes.
8. Preservation
of Rights Against Third Parties; Preservation of Collateral in Buyers’s
Possession.
Until
such time as the Buyers exercise their right to effect direct collection of
the
Accounts and the Chattel Paper and to effect the enforcement of the Bridge
Loan
Borrower’s or the Subsidiary’s contract rights, the Bridge Loan Borrower and the
Subsidiary assume full responsibility for taking any and all commercially
reasonable steps to preserve rights in respect of the Accounts and the Chattel
Paper and their contracts against prior parties. The Buyers shall be deemed
to
have exercised reasonable care in the custody and preservation of such of the
Collateral as may come into its possession from time to time if the Buyers
take
such action for that purpose as the Bridge Loan Borrower or the Subsidiary
shall
request in writing, provided that such requested action shall not, in the
judgment of the Buyers, impair the Buyers’ security interest in the Collateral
or its right in, or the value of, the Collateral, and provided further that
the
Buyers receive such written request in sufficient time to permit the Buyers
to
take the requested action.
9. Events
of Default and Remedies.
(a)
If
any one or more of the Events of Default shall occur or shall exist, the Agent
may then or at any time thereafter, so long as such default shall continue,
foreclose the lien or security interest in the Collateral in any way permitted
by law, or upon fifteen (15) days prior written notice to the Bridge Loan
Borrower or the Subsidiary, sell any or all Collateral at private sale at any
time or place in one or more sales, at such price or prices and upon such terms,
either for cash or on credit, as the Agent, in its sole discretion, may elect,
or sell any or all Collateral at public auction, either for cash or on credit,
as the Agent, in its sole discretion, may elect, and at any such sale, the
Agent
may bid for and become the purchaser of any or all such Collateral. Pending
any
such action the Agent may liquidate the Collateral.
(b)
If
any one or more of the Events of Default shall occur or shall exist, the Agents
may then, or at any time thereafter, so long as such default shall continue,
grant extensions to, or adjust claims of, or make compromises or settlements
with, debtors, guarantors or any other parties with respect to Collateral or
any
securities, guarantees or insurance applying thereon, without notice to or
the
consent of the Bridge Loan Borrower or the Subsidiary, without affecting the
Bridge Loan Borrower’s or the Subsidiary’s liability under this Agreement or the
Notes. Each of the Bridge Loan Borrower and the Subsidiary waives notice of
acceptance, of nonpayment, protest or notice of protest of any Accounts or
Chattel Paper, any of its contract rights or Collateral and any other notices
to
which the Bridge Loan Borrower or the Subsidiary may be
entitled.
11
(c)
If
any one or more of the Events of Default shall occur or shall exist and be
continuing, then in any such event, the Agent shall have such additional rights
and remedies in respect of the Collateral or any portion thereof as are provided
by the Code and such other rights and remedies in respect thereof which it
may
have at law or in equity or under this Agreement, including without limitation
the right to enter any premises where Equipment, Inventory and/or Fixtures
are
located and take possession and control thereof without demand or notice and
without prior judicial hearing or legal proceedings, which the Bridge Loan
Borrower and the Subsidiary expressly waive.
(d)
Subject to the terms of the Intercreditor Agreement, the Agent shall apply
the
Proceeds of any sale or liquidation of the Collateral, and, subject to Section
5, any Proceeds received by the Agent from insurance, first to the payment
of
the reasonable costs and expenses incurred by the Agent in connection with
such
sale or collection, including without limitation reasonable attorneys’ fees and
legal expenses, second to the payment of the Notes, pro rata , whether on
account of principal or interest or otherwise as the Agent, in its sole
discretion, may elect, and then to pay the balance, if any, to the Bridge Loan
Borrower or the Subsidiary or as otherwise required by law. If such Proceeds
are
insufficient to pay the amounts required by law, the Bridge Loan Borrower shall
be liable for any deficiency.
(e)
Upon
the occurrence of any Event of Default, the Bridge Loan Borrower or the
Subsidiary shall promptly upon written demand by the Agent assemble the
Equipment, Inventory and Fixtures and make them available to the Buyers at
a
place or places to be designated by the Agent The rights of the Agent under
this
paragraph to have the Equipment, Inventory and Fixtures assembled and made
available to it is of the essence of this Agreement and the Agent may, at its
election, enforce such right by an action in equity for injunctive relief or
specific performance, without the requirement of a bond.
(f)
Upon
the occurrence of any Event of Default, the Bridge Loan Borrower shall assign
all of its rights, title and interests in the leases listed on Schedule 9(f)
hereto (the “Leases”) to the Buyers, and shall use its reasonable best efforts
to cause each of the landlords under each of the Leases to consent to such
assignment, to the extent such consent is required under the Leases. If the
Bridge Loan Borrower is not permitted to assign any or all of the Leases
pursuant to the terms of the Leases, the Bridge Loan Borrower shall sublet
such
Leases to the Buyers on the same terms and conditions as the
Leases.
12
10. Defeasance.
Notwithstanding anything to the contrary contained in this Agreement upon
payment and performance in full of the Notes, this Agreement shall terminate
and
be of no further force and effect and the Buyers shall thereupon terminate
their
security interest in the Collateral. Until such time, however, this Agreement
shall be binding upon and inure to the benefit of the parties, their successors
and assigns, provided that, without the prior written consent of the Buyers,
the
Bridge Loan Borrower and the Subsidiary may not assign this Agreement or any
of
its rights under this Agreement or delegate any of its duties or obligations
under this Agreement and any such attempted assignment or delegation shall
be
null and void. This Agreement is not intended and shall not be construed to
obligate the Buyers to take any action whatsoever with respect to the Collateral
or to incur expenses or perform or discharge any obligation, duty or disability
of the Bridge Loan Borrower.
11. Miscellaneous.
(a)
The
provisions of this Agreement are intended to be severable. If any provision
of
this Agreement shall for any reason be held invalid or unenforceable in whole
or
in part in any jurisdiction, such provision shall, as to such jurisdiction,
be
ineffective to the extent of such invalidity or unenforceability without in
any
manner affecting the validity or enforceability of such provision in any other
jurisdiction or any other provision of this Agreement in any jurisdiction.
(b)
No
failure or delay on the part of the Buyers in exercising any right, remedy,
power or privilege under this Agreement and the Notes shall operate as a waiver
thereof or of any other right, remedy, power or privilege of the Buyers under
this Agreement, the Notes or any of the other Loan Documents; nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other right, remedy, power or privilege or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges of the Buyers under this Agreement, the Notes
and the other Loan Documents are cumulative and not exclusive of any rights
or
remedies which they may otherwise have.
(c)
Unless otherwise provided herein, all demands, notices, consents, service of
process, requests and other communications hereunder shall be in writing and
shall be delivered in person or by overnight courier service, or mailed by
certified mail, return receipt requested, addressed:
If
to
Bridge Loan Borrower or the Subsidiary:
Diamond
Sports & Entertainment, Inc.
0000
Xxxxxx Xxx, Xxx. 000
Xxxxxx,
XX 00000
Attn:
Xxxxx Xxxxx, President
Facsimile:
(
with
a
copy to:
13
Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx
000
Xxxx
Xxxx Xxxx
Xxxx
Xxxx, XX 00000
Attention:
Xxxx Xxxxxxxx
Facsimile:
(
and
a
copy to:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to
Agent:
[Name].
[insert
address]
Attn:
[insert], President and Chief Executive Officer
Facsimile:
[insert]
with
a
copy to:
[Name].
[insert
address]
Attn:
[insert]
Facsimile:
[insert]
Any
such
notice shall be effective (a) when delivered, if delivered by hand delivery
or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.
(d)
The
section headings contained in this Agreement are for reference purposes only
and
shall not control or affect its construction or interpretation in any respect.
(e)
Unless the context otherwise requires, all terms used in this Agreement which
are defined by the Code shall have the meanings stated in the Code.
(f)
The
Code shall govern the settlement, perfection and the effect of attachment and
perfection of the Buyers’ security interest in the Collateral, and the rights,
duties and obligations of the Buyers, the Bridge Loan Borrower and the
Subsidiary with respect to the Collateral. This Agreement shall be deemed to
be
a contract under the laws of the State of New York and the execution and
delivery of this Agreement and, to the extent not inconsistent with the
preceding sentence, the terms and provisions of this Agreement shall be governed
by and construed in accordance with the laws of that State.
14
(g)
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same instrument.
All
of such counterparts shall be read as though one, and they shall have the same
force and effect as though all the signers had signed a single
page.
[SIGNATURE
PAGE FOLLOWS]
15
IN
WITNESS WHEREOF, and intending to be legally bound, the parties have executed
and delivered this Security Agreement as of the day and year set forth at the
beginning of this Security Agreement.
|
BUYER:
[Insert
Name]
By:______________________
Name: [insert]
Title:
Chief Executive Officer
BUYER:
[Insert
Name]
By:______________________
Name: [insert]
Title:
Chief Executive Officer
BUYER:
[Insert
Name]
By:______________________
Name: [insert]
Title:
Chief Executive Officer
|
BRIDGE
LOAN BORROWER:
DIAMOND
SPORTS & ENTERTAINMENT, INC.
By:______________________
Name: Xxxxx
Xxxxx
Title:
Chairman and Chief Executive Officer
SUBSIDIARY
DIAMOND
CONCESSIONS, LLC
By:______________________
Name: Xxxxx
Xxxxx
Title:
Chief Executive Officer
|
Agreed
and Accepted by:
Agent
By:______________________
Name: [insert]
Title:
Chief Executive Officer
[SIGNATURE
PAGE TO SECURITY AGREEMENT]
16
Schedule
I
|
1.
|
States
in which Collateral is located:
|
Diamond
Sports & Entertainment, In-. - Arizona, California and Nevada.
Diamond
Concessions, LLC - Arizona and California.
|
2.
|
Bridge
Loan Borrower and Subsidiary
Information:
|
|
Bridge
Loan Borrower
|
Subsidiary
|
|
Diamond
Sports & Entertainment, Inc.
a
Delaware corporation
DE
ID No.: 4533737
Executive
Offices Address:
0000
Xxxxxx Xxx, Xxx. 000
Xxxxxx,
XX 00000
Chief
Executive Officer: Xxxxx Xxxxx
Foreign
Corporation Qualification Numbers:
-A
- C3096997
-Z
- F-1446159-9
-V
- E0270222008-4
|
Diamond
Concessions, LLC
a
California limited liability company
CA
ID No.: 200432810173
Executive
Offices Address:
0000
Xxxxxx Xxx, Xxx. 000
Xxxxxx,
XX 00000
Chief
Executive Officer: Xxxxx Xxxxx
Foreign
LLC Qualification Numbers:
-Z
- R11712783
|
Schedule
9(f)
Sublease
Agreement dated as of July 22, 2004, as amended or supplemented to date, with
the California State University, Chico Research Foundation.
Use
Permit for Xxxxx Field dated as of March 23, 2005, as amended or supplemented
to
date, with the Parks and Recreation Commission of the City of Long Beach,
CA.
Agreement
dated as of April 5, 2006, as amended or supplemented to date, with the City
of
Yuma, Arizona for use of the Xxx Xxxx Baseball Complex.
Agreement
dated as of December 9, 2005, as amended or supplemented to date, with the
Board
of Regents of the Nevada System of Higher Education..
