SECURITIES PURCHASE AGREEMENT
Ladies
and Gentlemen:
Showtime
Networks, Inc. (“SNI”) hereby confirms its agreement with you as
follows:
1. This
Securities Purchase Agreement, including Annex I hereto, and the exhibits and
schedule thereto, each of which Annex, exhibit and schedule are hereby expressly
incorporated as an integral part of this agreement (collectively, the
“Agreement”)
is
made as of January 3, 2007 between Pro Elite, Inc. (the “Company”)
and
SNI with respect to (a) the sale of 1,666,667 units (the “Units”) to SNI, each
Unit consisting of three shares of the Company’s Common Stock (the “Shares”) and
one three-year warrant to purchase one Share at an exercise price of $2.00
per
Share (the “Investor
Warrant”),
and
(b) warrants to purchase five million Shares of which (i) warrants to
purchase 2,500,000 Shares shall be issued to SNI (the “Vested
Warrants”)
and be
exercisable as of the date of the closing of the purchase of the Units and
(ii) warrants to purchase 2,500,000 Shares shall be issued to SNI (the
“SNI
Warrants”)
and be
exercisable at any time upon the earlier of (x) November 8, 2009 and
(y) the date when the Exclusive Distribution Agreement dated
November 8, 2006 between the Company and SNI is terminated (if at all) due
to a breach of the Company. The form of the Investor Warrants, the Vested
Warrants and the SNI Warrants are attached hereto as Exhibits A, B and C,
respectively.
2. SNI
shall
purchase from the Company, and the Company will sell to the SNI, 1,666,667
Units, at a purchase price per Unit of $3.00 and the Company shall issue to
SNI
the Investor Warrants, the Vested Warrants and the SNI Warrants, all pursuant
to
the Terms and Conditions for Purchase of Securities attached hereto as Annex
I
and incorporated herein by reference as if fully set forth herein. Unless
otherwise requested, certificates representing the Shares and Investor Warrants
included within the Units and the Vested Warrants and the SNI Warrants will
be
registered in SNI’s name and address as set forth below.
The
next page is the signature page.
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Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.
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AGREED
AND ACCEPTED:
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COMPANY:
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PRO
ELITE, INC.
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By:_________________________________________
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INVESTOR:
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SHOWTIME
NETWORKS, INC.
______________________________________
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By:_________________________________________
Signature
of investor or authorized person
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Its:_________________________________________
Title
of authorized person
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Address:____________________________________
___________________________________________
___________________________________________
Contact
Name:________________________________
Facsimile
Number:_____________________________
Email
Address:_______________________________
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Name
in which warrant certificates should be
registered
(if different):
______________________________________
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Tax
I.D. No: __________________________________
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ANNEX
I
TERMS
AND CONDITIONS FOR PURCHASE OF SECURITIES
1. Agreement
to Sell and Purchase the Units, the Vested Warrants and the SNI Warrants;
Subscription Date.
1.1 At
the
Closing (as defined in Section 2), the Company will sell to SNI, and SNI
will purchase from the Company, upon the terms and conditions hereinafter set
forth, 1,666,667 Units (“Investor’s
Units”)
at a
purchase price per Unit of $3.00, and the Company will issue to SNI the Vested
Warrants and the SNI Warrants, pursuant to the Terms and Conditions set forth
herein.
2. Delivery
of the at Closing.
The
completion of the purchase and sale of the Investor’s Units (the “Closing”)
shall
occur no later than January 6, 2007, as such date may be extended by the Company
and SNI (the “Closing
Date”),
at
the offices of Xxxx & Xxxxx, Professional Corporation, the Company’s
counsel, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
At
the Closing, the Company shall deliver to SNI certificates representing the
Shares and Investor Warrants included with the Investor’s Units and the Vested
Warrants and the SNI Warrants, each such certificate to be registered in the
name of SNI, or, if so indicated on the signature page of the Securities
Purchase Agreement, in the name of a nominee designated by such party. If
neither SNI nor a representative of SNI is present at the Closing to take
physical delivery of the certificates, then delivery shall be deemed made at
Closing by the transmission of a facsimile of the certificates to the Investor
(or nominee designated by the Investor) followed by delivery of the original
certificates by a nationally recognized overnight express courier.
The
Company’s obligation to issue the Shares, the Investor Warrants, the Vested
Warrants and the SNI Warrants shall be subject to the following conditions,
any
one or more of which may be waived by the Company:
(a) receipt
by the Company of a certified or official bank check or wire transfer of funds
in the full amount of the aggregate purchase price for the Investor’s Units;
and
(b) the
accuracy of the representations and warranties made by the SNI and the
fulfillment of those undertakings of SNI (the “Investor”)
to be
fulfilled prior to the Closing.
3. Representations,
Warranties and Covenants of the Company.
The
Company hereby represents and warrants to, and covenants with, the Investor,
as
follows:
3.1 Due
Authorization and Valid Issuance.
The
Company has all requisite power and authority to execute, deliver and perform
its obligations under the Purchase Agreement and the Investor Rights Agreement
referred to in Section 7 (collectively, the “Transaction
Documents”),
and
the Transaction Documents have been duly authorized and validly executed and
delivered by the Company and constitute legal, valid and binding agreements
of
the Company enforceable against the Company in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
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3.2 Non-Contravention.
The
execution and delivery of the Transaction Documents by the Company, the issuance
and sale of the Units, the Shares, and the Investor Warrants, Vested Warrants
and SNI Warrants (collectively, the “Warrants”) to be sold by the Company
hereunder, the fulfillment of the terms of the Agreement by the Company and
the
consummation by the Company of the transactions contemplated hereby and thereby
will not (A) conflict with or constitute a violation of, or default (with
the passage of time or otherwise) under (i) any material bond, debenture,
note or other evidence of indebtedness, or under any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which the Company
or its properties are bound, (ii) the charter, by-laws or other
organizational documents of the Company, or (iii) any material law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or its
properties, or (B) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of
the
material properties or assets of the Company or an acceleration of indebtedness
pursuant to any obligation, agreement or condition contained in any material
bond, debenture, note or any other evidence of indebtedness or any material
indenture, mortgage, deed of trust or any other agreement or instrument to
which
the Company is a party or by which it is bound or to which any of the property
or assets of the Company is subject. No consent, approval, authorization or
other order of, or registration, qualification or filing with, any regulatory
body, administrative agency, or other governmental body in the United States
is
required for the execution and delivery of the Transaction Documents by the
Company and the valid issuance and sale of the Units, Shares and Warrants to
be
sold by the Company pursuant to the Agreements, other than such as have been
made or obtained, and except for any post-closing securities filings or
notifications required to be made under federal or state securities
laws.
3.3 Most
Favored Nations.
If, at
any time and from time to time during the period commencing on October 3, 2006
(the “Effective
Date”)
and
ending on the first anniversary of the Effective Date, the Company issues
additional shares of Common Stock or options, warrants or other securities
which
would entitle the holder thereof to acquire (whether by exercise, exchange,
conversion or otherwise) at any time Common Stock (the “Additional
Shares”)
at a
price or exercise, exchange, conversion or other price per share of Common
Stock
less than $2.00 (subject to adjustment for splits, recapitalizations,
reorganizations), then the Company shall provide notice thereof to SNI, and
within ten business days, from receipt of notice, SNI shall have the right
to
purchase at the par value thereof such number of additional shares of Common
Stock so that the “effective purchase price per share” payable by SNI shall be
the same per share purchase price of the Additional Shares. As used herein,
the
“effective price per share” shall mean the product of (i) the total
consideration paid for all shares purchased by SNI (both those purchased at
the
Closing under this Agreement and those which may be purchased under this
Section 3.3), divided by (ii) the total number of shares described in
clause (i). Notwithstanding the foregoing, no adjustment will be made in respect
of (a) shares of Common Stock or options to employees, consultants officers
or directors of the Company pursuant to any stock or option plan, other
arrangement or agreement duly adopted by the Board of Directors of the Company,
(b) securities upon the exercise of or conversion of any securities issued
at the Closing, or convertible securities, options or warrants issued and
outstanding on the Closing, (c) securities issued pursuant to strategic
transactions with an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in addition
to the investment of funds or pursuant to acquisitions or equipment leases,
but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities, and (d) securities issued in connection
with any other antidilution or price protection provisions.
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4. Representations,
Warranties and Covenants of the Investor.
4.1 The
Investor represents and warrants to, and covenants with, the Company that:
(i) the Investor is an “accredited investor” as defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the
“Securities
Act”)
OR is
a “Qualified Institutional Buyer” within the meaning of Rule 144A of the
Act and, in any such case the Investor is also knowledgeable, sophisticated
and
experienced in making, and is qualified to make decisions with respect to,
investments in securities presenting an investment decision like that involved
in the purchase of the Investor’s Units, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Investor’s Units; (ii) the
Investor is acquiring the Investor’s Units, Shares and Warrants in the ordinary
course of its business and for its own account for investment only and with
no
present intention of distributing any of such Investor’s Units, Shares and
Warrants or any arrangement or understanding with any other persons regarding
the distribution of such Investor’s Units, Shares and Warrants; (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Investor’s Units, Shares and Warrants
except in compliance with the Securities Act, applicable state securities laws
and the respective rules and regulations promulgated thereunder, except that
the
Investor may pledge the Shares in connection with a bona fide margin account
or
other loan or financing; (iv) the Investor and the Investor’s
representatives, if any, have been solely responsible for the Investor’s own
“due diligence” investigation of the Company and its management and business,
for its own analysis of the merits and risks of this investment, and for the
Investor’s own analysis of the fairness and desirability of the terms of the
investment; and (v) the Investor has, in connection with its decision to
purchase the Investor’s Units, Shares and Warrants, relied only upon the
Company’s Confidential Private Offering Memorandum dated September 28, 2006 (the
“Memorandum”)
and
the representations and warranties of the Company contained herein. The Investor
understands that its acquisition of the Shares and Warrants has not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of the Investor’s
investment intent as expressed herein.
4.2 The
Investor hereby covenants with the Company not to make any sale of the
Investor’s Units, Shares and Warrants without complying with the provisions of
this Agreement, and the Investor acknowledges that the certificates evidencing
the Shares and Warrants will be imprinted with a legend that prohibits their
transfer except in accordance therewith.
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4.3 The
Investor further represents and warrants to, and covenants with, the Company
that (i) the Investor has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and (ii) this Agreement constitutes a valid
and binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
4.4 The
Investor understands that nothing in this Agreement or any other materials
presented to the Investor in connection with the purchase and sale of the Shares
and Warrants constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Shares and Warrants.
4.5 The
Investor hereby acknowledges that it has received, read and understands the
Memorandum. Without limiting the generality of the foregoing, Investor
understands and acknowledges that there are substantial risks incident to the
investment in and ownership of the Units, Shares and Warrants including, without
limitation, each of the matters discussed in the Memorandum under the heading
“Risk Factors.”
4.6 Investor
and Investor’s representatives, if any, have had a reasonable opportunity to ask
questions of and receive answers from the management of the Company, or a person
or persons acting on behalf of the Company, concerning the Company and its
proposed activities and business, the Company’s capitalization, the Company’s
management, and the offering and sale of the Units, and otherwise to investigate
the Company’s business, operations, management, financial condition and
prospects. Investor has adequate means of providing for Investor’s current needs
and possible personal contingencies, has no need for liquidity in this
investment and could afford to lose the entire amount of this investment.
Investor’s commitment to all investments and investments, which are not readily
marketable, is reasonable in relation to Investor’s net worth and an investment
in the Units will not cause Investor’s overall commitment to be excessive.
Investor is acquiring the Units for Investor’s own account, as a principal,
without a view to the resale or distribution of all or any part of the Units
and
has no present intention, agreement or arrangement to divide Investor’s
participation with others or to resell, assign, transfer or otherwise dispose
of
all or any part of the Units for which Investor has subscribed. If Investor
is a
corporation, partnership, limited liability company, trust or other entity,
it
is authorized and otherwise duly qualified to purchase and hold a membership
interest in the Company and has not been formed for the specific purpose of
acquiring Units.
5. Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made herein by the Company
and the Investor shall survive the execution of this Agreement, the delivery
to
the Investor of the Units, Shares and Warrants being purchased and the payment
therefore.
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6. Indemnification.
Investor
hereby agrees to indemnify the Company and its agents and representatives,
and
hold the Company and its agents and representatives harmless from and against,
any and all liability, damage, cost or expense incurred on account of, relating
to or arising out of or in connection with: (i) any inaccuracy in Investor’s
declarations, representations, and warranties set forth herein or in any other
communications to the Company or any of the foregoing parties; and/or (ii)
the
disposition of any of the Units, Shares or Warrants for which Investor has
subscribed herein contrary to the foregoing declarations, representations and
warranties.
7. Registration
of the Shares; Compliance with the Securities Act.
Pursuant to an Investor Rights Agreement entered into concurrently with this
Agreement, the Company agrees to file a registration statement with the SEC
on
the later to occur of (a) 45 days from the date that SNI notifies the Company
to
so file, or (b) sixty days from the effective date of a registration statement
covering the resale of securities issued by the Company on October 3, 2006
in a
private placement.
8. Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed (A) if within the United States by first-class
registered mail, Express Mail or nationally recognized overnight express
courier, postage prepaid, or by facsimile, or (B) if delivered from outside
the United States, by International Federal Express or facsimile, and shall
be
deemed given (i) if delivered by first-class registered mail, three
business days after so mailed, (ii) if delivered by Express Mail or a
nationally recognized overnight carrier, one business day after so mailed,
(iii) if delivered by International Federal Express, two business days
after so mailed, (iv) if delivered by facsimile, upon electronic
confirmation of receipt and shall be delivered as addressed as
follows:
| (a) | if to the Company, to: | ||
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Pro
Elite, Inc.
Santa
Xxxxxx Capital Partners
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxx Xxxxxxxx
Phone:
(000) 000-0000
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with
a copy to:
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Xxxx
& Xxxxx, Professional Corporation
Attn:
Xxxxx Xxxxxxxx
Phone:
(000) 000-0000
Facsimile:
(000) 000-0000
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(b) if
to the
Investor, at its address on the signature page hereto, or at such other address
or addresses as may have been furnished to the Company in writing
9. Changes.
This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor.
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10. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
11. Severability.
In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
12. Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of California, without giving effect to the principles of
conflicts of law. All actions arising out of or relating to this Agreement
shall
be heard and determined exclusively in any California federal court sitting
in
the City of Los Angeles.
13. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter hereof, and any and all other written or oral agreements
relating to such subject matter are expressly cancelled.
14. Finders’
Fees.
Neither
the Company nor the Investor nor any affiliate thereof has incurred any
obligation which will result in the obligation of the other party to pay any
finder’s fee or commission in connection with this transaction, except for fees
payable by the Company to the Placement Agent.
15. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other
parties.
16. Successors
and Assigns.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
permitted assigns of the Company and the Investor, including without limitation
and without the need for an express assignment, affiliates of the Investor.
With
respect to transfers that are not made pursuant to the Investor Rights
Agreement, the rights and obligations of an Investor under this Agreement shall
be automatically assigned by the Investor to any transferee of all or any
portion of the Investor’s Shares who is a Permitted Transferee (as defined
below); provided, however, that within two business days prior to the transfer,
(i) the Company is provided notice of the transfer including the name and
address of the transferee and the number of Shares and Warrants transferred;
and
(ii) that such transferee agrees in writing to be bound by the terms of
this Agreement. (For purposes of this Agreement, a “Permitted Transferee” shall
mean any person who (a) is an “accredited investor,” as that term is
defined in Rule 501(a) of Regulation D under the Securities Act and
(b) is a transferee of at least 25% of the Investor’s Shares received in a
transaction permitted under the securities laws of the United States), or (c)
with respect to SNI, is CBS Corporation or is a person controlled by CBS
Corporation. Upon any transfer permitted by the second sentence of this
Section 16, the Company shall be obligated to such transferee to perform
all of its covenants under this Agreement as if such transferee were an
Investor.
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17. Press
Release.
Except
as required by applicable law or regulation, the Company shall not issue any
press release, which refers to CBS Corporation, SNI or their respective
subsidiaries without the express prior written consent of CBS
Corporation.
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