Contract
THIS
NOTE (AS DEFINED BELOW) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
SENIOR
SECURED
NOTE
FOR
VALUE
RECEIVED, PROELITE, INC., a New Jersey corporation (the “Company”)
hereby
promises to pay to Showtime Networks, Inc. (the “Holder”)
or its
registered assigns or successors in interest, the sum of One Million Dollars
($1,000,000), together with any accrued and unpaid interest hereon, on June
18,
2009 (the “Maturity
Date”)
if not
sooner indefeasibly paid in full.
ARTICLE
I
INTEREST
AND MATURITY; USE OF PROCEEDS
1.1 Interest
Rate.
Subject
to Section 5.10, interest payable on the outstanding principal amount of this
Note (the “Principal
Amount”)
shall
accrue at a rate per annum equal to ten percent (10.0%). Interest shall be
(i)
calculated on the basis of a 365 day year, and (ii) payable on the Maturity
Date.
1.2 Principal
Payments.
Any
outstanding Principal Amount together with any accrued and unpaid interest
and
any and all other unpaid amounts which are then owing by the Company to the
Holder under this Note shall be due and payable on the Maturity
Date.
1.3 Use
of
Proceeds.
The
Company agrees that it will use the proceeds of this Note loaned to the Company
by the Holder solely for general working capital purposes only. On each date
on
which the Company uses such proceeds, it shall send to the Holder a certificate
of an authorized officer of the Company certifying the specific use of such
proceeds.
1.4 Required
Approvals.
Without
the prior written consent of the Purchaser the Company shall not:
(a) (i)
directly or indirectly declare or pay any dividends, (ii) issue any preferred
stock that is mandatorily redeemable prior to the date that occurs 91 days
after
the Maturity Date (as defined in each Note) or (iii) redeem any of its preferred
stock or other Equity Interests;
(b) liquidate
or dissolve the Company;
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
(c) (i)
create, incur, assume or suffer to exist any Lien (other than Permitted
Encumbrances) or Indebtedness (exclusive of trade debt and debt incurred to
finance the purchase of equipment in each case incurred the ordinary course
of
business) whether secured or unsecured other than (w) the Company’s obligations
owed to Purchaser, (x) Indebtedness existing as of the date hereof and any
refinancings or replacements thereof on terms no less favorable to the
Purchasers than the Indebtedness being refinanced or replaced and in a principal
amount not in excess of the principal amount of the Indebtedness being
refinanced or replaced, (y) any Indebtedness incurred in connection with the
purchase of assets (other than equipment) in the ordinary course of business,
or
any refinancings or replacements thereof on terms no less favorable to the
Purchasers than the Indebtedness being refinanced or replaced, so long as any
lien relating thereto shall only encumber the fixed assets so purchased and
no
other assets of the Company or any of its subsidiaries and the principal amount
thereof shall not exceed the principal amount of the Indebtedness being
refinanced or replaced ; and (z) up to $3,500,000 of additional Indebtedness
(the “Additional
Indebtedness”),
provided that (A) Purchaser shall have the right to approve or disapprove,
in
its sole discretion, any prospective provider of Additional Indebtedness, and
(B) any and all Additional Indebtedness incurred shall be purchasable by
Purchaser or the Company at any time, regardless of maturity date or default
and
without any penalty or premium, at the outstanding amount of the Additional
Indebtedness plus any interest accrued thereon and shall provide that Purchaser
shall have the sole power to exercise remedies upon a default of any Additional
Indebtedness, or (ii) assume, guarantee, endorse or otherwise become directly
or
contingently liable in connection with any obligations of any other person
or
entity, except the endorsement of negotiable instruments by the Company thereof
for deposit or collection or similar transactions in the ordinary course of
business or guarantees of Indebtedness of subsidiaries of the Company otherwise
permitted to be outstanding pursuant to this clause (c);
As
used
in this Section 1.4, the following terms have the following
meanings:
“Capitalized
Lease Obligations”
means,
at any time, with respect to any Capital Lease, any lease entered into as part
of any sale/leaseback transaction of any Person or any synthetic lease, the
amount of all obligations of such Person that is (or that would be, if such
synthetic lease or other lease were accounted for as a Capital Lease)
capitalized on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles consistently applied (“GAAP”).
“Capital
Lease”
means,
with respect to any Person, any lease of, or other arrangement conveying the
right to use, any property (whether real, personal or mixed) by such Person
as
lessee that has been or should be accounted for as a capital lease on a balance
sheet of such Person prepared in accordance with GAAP.
“Contractual
Obligation”
means,
with respect to any Person, any provision of any indenture, mortgage, deed
of
trust, contract, undertaking, agreement or other instrument to which such Person
is a party or by which it or any of its property is bound or to which any of
its
property is subject.
“Equity
Interests”
shall
mean, with respect to any Person, any and all shares, rights to purchase,
options, warrants, general, limited or limited liability partnership interests,
member interests, units, participations or other equivalents of or interest
in
(regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities
or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC (or any successor thereto)
under the Exchange Act).
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
“Guaranty
Obligation”
means,
as applied to any Person, any direct or indirect liability, contingent or
otherwise, of such Person for any Indebtedness, lease, dividend or other
obligation (the “primary obligation”) of another Person (the “primary obligor”),
if the purpose or intent of such Person in incurring such liability, or the
economic effect thereof, is to guarantee such primary obligation or provide
support, assurance or comfort to the holder of such primary obligation or to
protect or indemnify such holder against loss with respect to such primary
obligation, including (a) the direct or indirect guaranty, endorsement (other
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of any primary
obligation, (b) the incurrence of reimbursement obligations with respect to
any
letter of credit or bank guarantee in support of any primary obligation, (c)
the
existence of any Lien, or any right, contingent or otherwise, to receive a
Lien,
on the property of such Person securing any part of any primary obligation
and
(d) any liability of such Person for a primary obligation through any
Contractual Obligation (contingent or otherwise) or other arrangement (i) to
purchase, repurchase or otherwise acquire such primary obligation or any
security therefor or to provide funds for the payment or discharge of such
primary obligation (whether in the form of a loan, advance, stock purchase,
capital contribution or otherwise), (ii) to maintain the solvency, working
capital, equity capital or any balance sheet item, level of income or cash
flow,
liquidity or financial condition of any primary obligor, (iii) to make
take-or-pay or similar payments, if required, regardless of non-performance
by
any other party to any Contractual Obligation, (iv) to purchase, sell or lease
(as lessor or lessee) any property, or to purchase or sell services, primarily
for the purpose of enabling the primary obligor to satisfy such primary
obligation or to protect the holder of such primary obligation against loss
or
(v) to supply funds to or in any other manner invest in, such primary obligor
(including to pay for property or services irrespective of whether such property
is received or such services are rendered); provided, however, that “Guaranty
Obligations” shall not include (x) endorsements for collection or deposit in the
ordinary course of business and (y) product warranties given in the ordinary
course of business. The outstanding amount of any Guaranty Obligation shall
equal the outstanding amount of the primary obligation so guaranteed or
otherwise supported or, if lower, the stated maximum amount for which such
Person may be liable under such Guaranty Obligation.
“Indebtedness”
of
any
Person means, without duplication, any of the following, whether or not matured:
(a) all indebtedness for borrowed money (including, without limitation, all
principal, interest, fees and charges relating thereto), (b) all obligations
evidenced by notes, bonds, debentures or similar instruments, (c) all
reimbursement and all obligations with respect to (i) letters of credit, bank
guarantees or bankers’ acceptances or (ii) surety, customs, reclamation or
performance bonds (in each case not related to judgments or litigation) other
than those entered into in the ordinary course of business, (d) all obligations
to pay the deferred purchase price of property or services, other than trade
payables incurred in the ordinary course of business, (e) all obligations
created or arising under any conditional sale or other title retention
agreement, regardless of whether the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or
sale
of such property, (f) all Capitalized Lease Obligations, and (g) all Guaranty
Obligations for obligations of any other Person constituting Indebtedness of
such other Person; provided, however, that the items in each of clauses (a)
through (g) above shall constitute “Indebtedness”
of
such
Person solely to the extent, directly or indirectly, (x) such Person is liable
for any part of any such item, (y) any such item is secured by a Lien on such
Person’s property or (z) any other Person has a right, contingent or otherwise,
to cause such Person to become liable for any part of any such item or to grant
such a Lien.
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
“Person”
means
any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, governmental authority or other
entity.
ARTICLE
II
REDEMPTION;
MANDATORY PREPAYMENT
2.1 Optional
Redemption in Cash.
The
Company may prepay this Note in whole or in part (an “Optional
Redemption”)
without premium or penalty by paying to the Holder a sum of money equal to
one
hundred percent (100%) of the Principal Amount outstanding at such time together
with accrued but unpaid interest thereon (the “Redemption
Amount”)
outstanding on the Redemption Payment Date (as defined below). The Company
shall
deliver to the Holder a written notice of redemption (the “Notice
of Redemption”)
specifying the date for such Optional Redemption (the “Redemption
Payment Date”),
which
date shall be ten (10) business days after the date of the Notice of Redemption
(the “Redemption
Period”).
On
the Redemption Payment Date, the Redemption Amount must be paid in good funds
to
the Holder.
2.2 Mandatory
Prepayment.
On the
date on which any license fees are payable by the Holder to the Company pursuant
to Section 4(c) of that certain Exclusive Distribution Agreement, dated as
of
November 8, 2006 (as amended, supplemented or otherwise modified from time
to
time, the “Distribution
Agreement”),
between the Company and the Holder, solely with respect to the Showtime Event
(as defined in the Distribution Agreement) currently scheduled for November
16,
2008, the Company shall immediately prepay the outstanding Principal Amount
in
an amount equal to the amount of such license fees, together with all accrued
but unpaid interest on the Principal Amount prepaid. In furtherance of the
foregoing, and notwithstanding any provision to the contrary contained in the
Distribution Agreement, the Company hereby agrees that, in lieu of paying such
license fees to the Company, the Holder may (and is hereby authorized by the
Company to) setoff such license fees against the outstanding Principal Amount
(in which case the outstanding Principal Amount shall be reduced by the amount
of such license fees that are so applied as a setoff by the
Holder).
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
The
Company hereby represents and warrants to the Holder as follows:
3.1 Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. The Company has the
corporate power and authority to own and operate its properties and assets
and,
insofar as it is or shall be a party thereto, to (1) execute and deliver (i)
this Note and (ii) Amendment No. 1, dated as of the date hereof (“Amendment
No. 1”),
to
the Security Agreement, dated as of June 18, 2008, between the Company and
Holder (as so amended, and as further amended, supplemented or otherwise
modified from time to time, the “Security
Agreement”);
and
(2) carry out the provisions of this Note and the Security Agreement and to
carry on its business as presently conducted. The Company is duly qualified
and
is authorized to do business and is in good standing as a foreign corporation
in
all jurisdictions in which the nature or location of its activities and of
its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company (a “Material
Adverse Effect”).
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
3.2 Authorization;
Binding Obligations.
All
corporate action on the part of the Company necessary for the authorization
of
this Note and Amendment No. 1, the performance of all obligations of the Company
hereunder and under the Security Agreement, and the sale, issuance and delivery
of this Note has been taken. This Note and the Security Agreement constitute
the
valid and binding obligations of the Company, enforceable against the Company
in
accordance with their terms, except:
(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and
(b) as
limited by general principles of equity that restrict the availability of
equitable or legal remedies.
3.3 SEC
Reports.
The
Company has filed all proxy statements, reports and other documents required
to
be filed by it (the “Exchange
Act Filings”)
under
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
Each
Exchange Act Filing was, at the time of its filing, in substantial compliance
with the requirements of its respective form and none of the Exchange Act
Filings, nor the financial statements (and the notes thereto) included in the
Exchange Act Filings, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.4 Liabilities.
The
Company does not have any liabilities, except liabilities incurred in the
ordinary course of business and liabilities disclosed in any of the Exchange
Act
Filings made prior to the date of this Note.
3.5 Changes.
Except
as disclosed in any Exchange Act Filings:
(a) Since
June 30, 2008 (the “Balance
Sheet Date”),
the
Company has not: (i) declared or paid any dividends, or authorized or made
any
distribution upon or with respect to any class or series of its capital stock;
(ii) incurred any indebtedness for money borrowed or any other liabilities
(other than ordinary course obligations) individually in excess of $50,000
or in
excess of $100,000 in the aggregate; (iii) made any loans or advances to any
person or entity not in excess, individually or in the aggregate, of $100,000,
other than in the ordinary course of business; or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
assets in the ordinary course of business.
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
(b) Since
the
Balance Sheet Date, there has not been any change in the business, assets,
liabilities, condition (financial or otherwise), properties, operations or
prospects of the Company, which individually or in the aggregate has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.6 Title
to Properties and Assets; Liens, Etc.
The
Company has good and marketable title to its properties and assets, and good
title to its leasehold interests, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge (each for the foregoing, a “Lien”),
other
than the following (each a “Permitted
Encumbrance”):
(a) those
in
favor of the Holder;
(b) those
resulting from taxes which have not yet become delinquent;
(c) minor
Liens which do not materially detract from the value of the property subject
thereto or materially impair the operations of the Company, so long as in each
such case, such Liens have no effect on the Lien priority of the Holder, in
such
property;
(d) those
that have otherwise arisen in the ordinary course of business of the Company,
so
long as they have no effect on the Lien priority of the Holder in any of the
Collateral (as defined in the Security Agreement); and
(e) Liens
on
all or any portion of the Collateral (as defined in the Security Agreement)
which secure Additional Indebtedness; provided, however, that (i) any such
Lien
shall be granted pursuant to a security agreement in form and substance
satisfactory to the Holder and (ii) prior to the granting of any such Lien,
each
holder of such Additional Indebtedness shall enter into an intercreditor
agreement with the Holder, in form and substance satisfactory to the
Holder.
All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company which are material to the business of the Company
or any of its subsidiaries are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it
is a
party or is otherwise bound.
3.7 Patriot
Act.
The
Company certifies that, to the best of Company’s knowledge, the Company has not
been designated, and is not or shall not be owned or controlled, by a “suspected
terrorist” as defined in Executive Order 13224. The Company hereby acknowledges
that the Holder seeks to comply with all applicable laws concerning money
laundering and related activities. In furtherance of those efforts, the Company
hereby represents, warrants and covenants that, to the best of the Company’s
knowledge: (i) none of the cash or property that the Company will pay to the
Holder or will contribute to the Holder has been or shall be derived from,
or
related to, any activity that is deemed criminal under United States law; and
(ii) no contribution or payment by the Company to the Holder, to the extent
that
they are within the Company’s control shall cause the Holder to be in violation
of the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company
shall
promptly notify the Holder if any of these representations, warranties or
covenants ceases to be true and accurate regarding the Company or any of its
subsidiaries. The Company shall provide the Holder all additional information
regarding the Company that the Holder reasonably determines to be necessary
to
ensure compliance with all applicable laws concerning money laundering and
similar activities.
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
ARTICLE
IV
EVENTS
OF DEFAULT
4.1 Events
of Default.
The
occurrence of any of the following events set forth in this Section 4.1 shall
constitute an event of default (an “Event
of Default”)
hereunder:
(a) Failure
to Pay.
The
Company fails to pay when due any installment of principal, interest or any
other amount payable hereunder in accordance herewith, or the Company fails
to
pay any of the other Obligations (under and as defined in the Security
Agreement) when due, and, in any such case, such failure shall continue for
a
period of fifteen (15) business days following the date upon which any such
payment was due;
(b) Breach
of Covenant.
The
Company materially breaches any covenant or any other term or condition (other
than an Event of Default pursuant to subsection (a) above) of (i) this Note,
(ii) the Senior Secured Note Purchase Agreement, dated as of June 18, 2008
(as
amended, supplemented or otherwise modified from time to time, the “Purchase
Agreement”),
among
the Company and the Holder, or (iii) the Security Agreement;
(c) Other
Obligations.
The
Company shall have failed to pay when due any amounts required to be paid (i)
to
Showtime Networks, Inc. pursuant to that certain promissory note dated December
17, 2007 in the principal amount of $1,822,086, (ii) to Showtime Networks,
Inc.
pursuant to that certain Senior Secured Note dated June 18, 2008 in the
principal amount of $3,500,000 or (iii) under any Additional Indebtedness (as
defined in the Purchase Agreement);
(d) Breach
of Representations and Warranties.
Any
representation, warranty or statement made or furnished by the Company in this
Note, the Purchase Agreement or any other Related Agreement (as defined in
the
Purchase Agreement) relating to any matter which individually or in the
aggregate is material to the business of the Company taken as a whole shall
at
any time be false or misleading in any material respect on the date as of which
made or deemed made;
(e) Bankruptcy.
The
Company shall (i) apply for, consent to or suffer to exist the appointment
of,
or the taking of possession by, a receiver, custodian, trustee or liquidator
of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
as bankrupt or insolvent, (v) file a petition seeking to take advantage of
any
other law providing for the relief of debtors, (vi) acquiesce to, without
challenge within ten (10) business days of the filing thereof, or failure to
have dismissed, within sixty (60) days, an involuntary case or other proceeding
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, or (vii) take any action
for the purpose of effecting any of the foregoing (each of the foregoing (i)
through (vii), a “Bankruptcy
Event”);
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
(f) Insolvency.
The
Company or any of its subsidiaries shall admit in writing its inability, or
be
generally unable, to pay its debts as they become due or cease operations of
its
present business; or
(g) Minimum
Cash Balance.
The
Company shall have failed to maintain at least $550,000 of unrestricted funds
with a nationally recognized financial institution.
4.2 Acceleration.
Following the occurrence and during the continuance of an Event of Default,
the
Holder may demand repayment in full of all obligations and liabilities owing
by
the Company to the Holder under this Note, the Purchase Agreement and/or the
Security Agreement. Notwithstanding any provision of this Agreement, upon the
occurrence of any Bankruptcy Event, the Obligations (as defined in the Security
Agreement) shall immediately and automatically become due and payable in full,
without any demand, notice, request or other action being taken by the Holder.
ARTICLE
V
MISCELLANEOUS
5.1 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
5.2 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. All rights
and remedies existing hereunder are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
5.3 Information.
The
Company shall, promptly upon learning thereof, report to the Holder any Event
of
Default.
5.4 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;
(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:
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
|
If
to the Company, to:
|
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
|
|
with
a copy to:
|
Xxxxxxxxxxx,
Xxxxxx, Xxxx, Xxxxxx,
Xxxx
& Xxxxxxx, LLP
00000
Xxxxxxxxxxxxx Xxxx., 00xx
Xxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxx
Xxxxxxxxx:
(000) 000-0000
|
|
If
to the Holder:
|
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 the Company or the Holder may designate by written notice
to the other party hereto given in accordance herewith.
5.5 Amendment
Provision.
The
term “Note”
and
all
references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then
as
so amended or supplemented, and any successor instrument as such successor
instrument may be amended or supplemented.
5.6 Assignability.
This
Note shall be binding upon the Company and its successors and assigns, and
shall
inure to the benefit of the Holder and its successors and assigns; provided,
however, that this Note may be assigned by the Holder only in accordance with
all applicable laws. The Company may not assign any of its obligations under
this Note without the prior written consent of the Holder, any such purported
assignment without such consent being null and void.
5.7 Cost
of Collection.
In case
of the occurrence of an Event of Default under this Note, the Company shall
pay
the Holder the Holder’s reasonable costs of collection, including reasonable
attorneys’ fees.
Exhib
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Sr Secured Note Pro Elite - $1M Promissory Note
5.8 Governing
Law; Consent to Jurisdiction.
This
Agreement shall be governed by, construed and enforced in accordance with,
the
laws of the State of California, without regard to the conflict of laws rules
of
the State of California or any other jurisdiction that would call for the
application of the laws of any jurisdiction other than the State of California.
Each party hereto hereby irrevocably consents, for itself and its legal
representatives, partners, successors and assigns, to the exclusive jurisdiction
of the Courts of the State of California for the limited purpose of any action
or proceeding to interpret or enforce this Agreement, and further agrees that
any action arising solely from or relating solely this Agreement shall be
instituted and prosecuted only in the courts of the State of California located
in the County of Los Angeles, and hereby waives any rights it may have to
personal service of summons, complaint or other process in connection therewith,
and agrees that service may be made by registered or certified mail to such
party at its principal headquarters.
5.9 Severability.
In the
event that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Note.
5.10 No
Usury Intended.
The
parties to this Note represent and warrant that they qualify for exemption
from
the usury restrictions of Section 1 of Article XV of the California Constitution
in that both the Company and the Holder have been represented by counsel, are
sophisticated in business and financial transactions and have the capacity
to
protect their own interests in the context of the transactions contemplated
by
this Note, the Purchase Agreement, the Security Agreement and the other Related
Agreements (as defined in the Purchase Agreement). All agreements between the
Company and the Holder are expressly limited so that in no contingency or event
whatsoever, whether by reason of: error of fact or law; payment, prepayment
or
advancement of the proceeds hereof; acceleration of maturity of the Obligations
(as defined in the Security Agreement), or otherwise, shall the amount paid
or
agreed to be paid to the Holder for the use, forbearance or retention of the
money to be advanced hereunder, including any charges collected or made in
connection with the indebtedness evidenced by this Note which may be treated
as
interest under applicable law, if any, exceed the maximum legal limit (if any
such limit is applicable) under United States federal law or state law (to
the
extent not preempted by federal law, if any), now or hereafter governing the
interest payable in connection with such agreements. If, from any circumstances
whatsoever, fulfillment of any provision hereof at the time performance of
such
provision shall be due shall involve transcending the limit of validity (if
any)
prescribed by law which a court of competent jurisdiction may deem applicable
hereto, then ipso facto, the obligation to be fulfilled shall be reduced to
the
limit of such validity, and if from any circumstances, the Holder shall ever
receive as interest an amount which would exceed the maximum legal limit (if
any
such limit is applicable), such amount which would be excessive interest shall
be applied to the reduction of the outstanding principal balance of this Note
and not to the payment of interest or, if necessary, rebated to the Company.
This provision shall control every other provision of all agreements between
the
Company and the Holder.
5.11 Security
Interest.
The
Holder has been granted a security interest in certain assets of the Company
as
more fully described in the Security Agreement.
Exhib
2 6
Sr Secured Note Pro Elite - $1M Promissory Note
5.12 Pari
Passu Standing with Existing Notes and Additional Indebtedness.
The
Holder agrees that this Note is executed on a pari passu basis with the existing
promissory note dated December 17, 2007 executed by the Company in favor of
Showtime Networks, Inc. in the principal amount of $1,822,086, the existing
Senior Secured Note dated June 18, 2008 executed by the Company in favor of
Showtime Networks, Inc. in the principal amount of $3,500,000, and any
Additional Indebtedness incurred pursuant to the terms of the Purchase
Agreement.
5.13 Construction;
Counterparts.
Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the other. This
Note may be executed by the parties hereto in one or more counterparts, each
of
which shall be deemed an original and all of which when taken together shall
constitute one and the same instrument. Any signature delivered by a party
by
facsimile or electronic transmission shall be deemed to be an original signature
hereto.
5.14 Registered
Obligation.
Notwithstanding any document, instrument or agreement relating to this Note
to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Company of this Note to the new holder
or
the issuance by the Company of a new instrument to the new holder.
[Balance
of page intentionally left blank; signature page follows]
Exhib
2 6
Sr Secured Note Pro Elite - $1M Promissory Note
IN
WITNESS WHEREOF,
the
Company has caused this Senior Secured Note to be signed in its name effective
as of this 10th
day of
September, 2008.
|
By:__________________________________
Name:
Title:
|
|
|
WITNESS:
______________________________
Name:______________________________
|
|
|
Agreed
to as to Section 5.10
|
|
|
SHOWTIME
NETWORKS, INC.,
as Holder
By:_______________________________
Name:
Title:
|
