Document:

Exhibit 10.03

 

COMMERCIAL SECURITY AGREEMENT

 

	
  Principal

  $5,000,000.00

  	
   

  	
  Loan
  Date

  12-15-2009

  	
   

  	
  Maturity

  12-15-2010

  	
   

  	
  Loan No.

  15525121115

  	
   

  	
  Call /
  Coll

  1C1 / 599

  	
   

  	
  Account

  	
   

  	
  Officer

  BORES

  	
   

  	
  Initials

  

 

References in the boxes above
are for Lender’s use only and do not limit the applicability of this document
to any particular loan or item.

Any item above containing “***” has been omitted due to text length
limitations.

 

	
  Borrower:

  	
  New Frontier Media Inc

  	
  Lender:

  	
  GREAT WESTERN BANK

  
	
   

  	
  7007 Winchester Circle,
  Suite 200

  	
   

  	
  Lakewood

  
	
   

  	
  Boulder, CO 80301

  	
   

  	
  215 Union Blvd.

  
	
   

  	
   

  	
   

  	
  Suite 150

  
	
   

  	
   

  	
   

  	
  Lakewood, CO 80228

  

 

THIS
COMMERCIAL SECURITY AGREEMENT dated December 15, 2009, is made and
executed between New Frontier Media Inc (“Grantor”) and GREAT WESTERN BANK (“Lender”).

 

GRANT OF SECURITY
INTEREST.  For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.

 

COLLATERAL
DESCRIPTION.  The
word “Collateral” as used in this Agreement means the following described
property, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located, in which Grantor is giving to Lender a
security interest for the payment of the Indebtedness and performance of all
other obligations under the Note and this Agreement:

 

All Accounts

 

In addition,
the word “Collateral” also includes all the following, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located:

 

(A)  All accessions, attachments, accessories,
replacements of and additions to any of the collateral described herein,
whether added now or later.

 

(B)   All products and produce of any of the
property described in this Collateral section.

 

(C)   All accounts, general intangibles,
instruments, rents, monies, payments, and all other rights, arising out of a
sale, lease, consignment or other disposition of any of the property described
in this Collateral section.

 

(D)  All proceeds (including insurance proceeds)
from the sale, destruction, loss, or other disposition of any of the property
described in this Collateral section, and sums due from a third party who has
damaged or destroyed the Collateral or from that party’s insurer, whether due
to judgment, settlement or other process.

 

(E)   All records and data relating to any of the
property described in this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together with all of
Grantor’s right, title, and interest in and to all computer software required
to utilize, create, maintain, and process any such records or data on
electronic media.

 

RIGHT OF
SETOFF.  To the
extent permitted by applicable law, Lender reserves a right of setoff in all
Grantor’s accounts with Lender (whether checking, savings, or some other
account).  This includes all accounts
Grantor holds jointly with someone else and all accounts Grantor may open in
the future.  However, this does not
include any IRA or Keogh accounts, or any trust accounts for which setoff would
be prohibited by law.  Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on the Indebtedness against any and all such accounts.

 

GRANTOR’S
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.  With respect to the Collateral, Grantor
represents and promises to Lender that:

 

Perfection of Security Interest.  Grantor agrees to take whatever actions are
requested by Lender to perfect and continue Lender’s security interest in the
Collateral.  Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender’s interest upon any
and all chattel paper and instruments if not delivered to Lender for possession
by Lender.  This is a
continuing Security Agreement and will continue in effect even though all or
any part of the Indebtedness is paid in full and even though for a period of
time Grantor may not be indebted to Lender.

 

Notices to Lender.  Grantor will promptly notify Lender in
writing at Lender’s address shown above (or such other addresses as Lender may
designate from time to time) prior to any (1) change in Grantor’s name; (2) change
in Grantor’s assumed business name(s); (3) change in the management of the
Corporation Grantor; (4) change in the authorized signer(s); (5) change
in Grantor’s principal office address; (6) change in Grantor’s state of
organization; (7) conversion of Grantor to a new or different type of
business entity; or (8) change in any other aspect of Grantor that
directly or indirectly relates to any agreements between Grantor and Lender.  No change in Grantor’s name or state of
organization will take effect until after Lender has received notice.

 

No Violation. 
The execution and delivery of this Agreement will not violate any law or
agreement governing Grantor or to which Grantor is a party, and its certificate
or articles of incorporation and bylaws do not prohibit any term or condition
of this Agreement.

 

Enforceability of Collateral.  To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the Uniform
Commercial Code, the Collateral is enforceable in accordance with its terms, is
genuine, and fully complies with all applicable laws and regulations concerning
form, content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the Collateral.  At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
previously shipped or delivered pursuant to a contract of sale, or for services
previously performed by Grantor with or for the account debtor.  So long as this Agreement remains in effect,
Grantor shall not, without Lender’s prior written consent, compromise, settle,
adjust, or extend payment under or with regard to any such Accounts.  There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made under
which any deductions or discounts may be claimed concerning the Collateral
except those disclosed to Lender in writing.

 

Location of the Collateral.  Except in the ordinary course of Grantor’s
business, Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor’s address shown
above or at such other locations as are acceptable to Lender.  Upon Lender’s request, Grantor will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor’s operations, including without
limitation the following:  (1) all
real property Grantor owns or is purchasing; (2) all real property Grantor
is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may
be located.

 

Removal of the Collateral.  Except in the ordinary course of Grantor’s
business, Grantor shall not remove the Collateral from its existing location
without Lender’s prior written consent.  Grantor
shall, whenever requested, advise Lender of the exact location of the
Collateral.

 

Transactions Involving Collateral.  Except for inventory sold or accounts
collected in the ordinary course of Grantor’s business, or as otherwise
provided for in this Agreement, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral.  Grantor shall not pledge, mortgage, encumber
or otherwise permit the Collateral to be subject to any lien, security
interest, encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender.  This includes security interests even if
junior in right to the security interests granted under this Agreement.  Unless waived by Lender, all proceeds from
any disposition of the Collateral (for whatever reason) shall be held in trust
for Lender and shall not be commingled with any other funds; provided however,
this requirement shalt not constitute consent by Lender to any sale or other
disposition.  Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.

 

Title.  Grantor
represents and warrants to Lender that Grantor holds good and marketable title
to the Collateral, free and clear of all liens and encumbrances except for the
lien of this Agreement.  No financing
statement covering any of the Collateral is on file in any public office other
than those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. 
Grantor shall defend Lender’s rights in the Collateral against the
claims and demands of all other persons.

 

 

Repairs and Maintenance.  Grantor agrees to keep and maintain, and to
cause others to keep and maintain, the Collateral in good order, repair and
condition at all times while this Agreement remains in effect.  Grantor further agrees to pay when due all
claims for work done on, or services rendered or material furnished in
connection with the Collateral so that no lien or encumbrance may ever attach
to or be filed against the Collateral.

 

Inspection of Collateral.  Lender and Lender’s designated
representatives and agents shall have the right at all reasonable times to
examine and inspect the Collateral wherever located.

 

Taxes, Assessments and Liens.  Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. 
Grantor may withhold any such payment or may elect to contest any lien
if Grantor is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender’s interest in the Collateral is not
jeopardized in Lender’s sole opinion.  If
the Collateral is subjected to a lien which is not discharged within fifteen
(15) days, Grantor shall deposit with Lender cash, a sufficient corporate
surety bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs, attorneys’ fees
or other charges that could accrue as a result of foreclosure or sale of the
Collateral.  In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral.  Grantor
shall name Lender as an additional obligee under any surety bond furnished in
the contest proceedings.  Grantor further
agrees to furnish Lender with evidence that such taxes, assessments, and
governmental and other charges have been paid in full and in a timely manner.  Grantor may withhold any such payment or may
elect to contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized.

 

Compliance with Governmental Requirements.  Grantor shall comply promptly with all laws,
ordinances, rules and regulations of all governmental authorities, now or
hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral, including all laws or regulations relating to the undue
erosion of highly-erodible land or relating to the conversion of wetlands for
the production of an agricultural product or commodity.  Grantor may contest in good faith any such
law, ordinance or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Lender’s interest in the Collateral,
in Lender’s opinion, is not jeopardized.

 

Hazardous Substances.  Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement remains
a lien on the Collateral, used in violation of any Environmental Laws or for
the generation, manufacture, storage, transportation, treatment, disposal,
release or threatened release of any Hazardous Substance.  The representations and warranties contained
herein are based on Grantor’s due diligence in investigating the Collateral for
Hazardous Substances.  Grantor hereby (1) releases
and waives any future claims against Lender for indemnity or contribution in
the event Grantor becomes liable for cleanup or other costs under any Environmental
Laws, and (2) agrees to indemnify, defend, and hold harmless Lender
against any and all claims and losses resulting from a breach of this provision
of this Agreement.  This obligation to
indemnify and defend shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.

 

Maintenance of Casualty Insurance.  Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.  Grantor, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days’ prior written
notice to Lender and not including any disclaimer of the insurer’s liability
for failure to give such a notice.  Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person.  In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss payable
or other endorsements as Lender may require. 
If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if Lender so
chooses “single interest insurance,” which will cover only Lender’s interest in
the Collateral.

 

Application of Insurance Proceeds.  Grantor shall promptly notify Lender of any
loss or damage to the Collateral, whether or not such casualty or loss is
covered by insurance.  Lender may make
proof of loss if Grantor fails to do so within fifteen (15) days of the
casualty.  All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral.  If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor
from the proceeds for the reasonable cost of repair or restoration.  If Lender does not consent to repair or
replacement of the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the balance to Grantor.  Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has not
committed to the repair or restoration of the Collateral shall be used to
prepay the Indebtedness.

 

Insurance Reserves.  Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due date,
amounts at least equal to the insurance premiums to be paid.  If fifteen (15) days before payment is due,
the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender.  The reserve funds
shall be held by Lender as a general deposit and shall constitute a
non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due.  Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment of the
insurance premiums required to be paid by Grantor.  The responsibility for the payment of
premiums shall remain Grantor’s sole responsibility.

 

Insurance Reports.  Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:  (1) the name of the insurer; (2) the
risks insured; (3) the amount of the policy; (4) the property
insured; (5) the then current value on the basis of which insurance has
been obtained and the manner of determining that value; and (6) the
expiration date of the policy.  In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements.  Grantor authorizes Lender to file a UCC
financing statement, or alternatively, a copy of this Agreement to perfect
Lender’s security interest.  At Lender’s
request, Grantor additionally agrees to sign all other documents that are
necessary to perfect, protect, and continue Lender’s security interest in the
Property.  Grantor will pay all filing
fees, title transfer fees, and other fees and costs involved unless prohibited
by law or unless Lender is required by law to pay such fees and costs.  Grantor irrevocably appoints Lender to
execute documents necessary to transfer title if there is a default.  Lender may file a copy of this Agreement as a
financing statement.  If Grantor changes
Grantor’s name or address, or the name or address of any person granting a
security interest under this Agreement changes, Grantor will promptly notify
the Lender of such change.

 

GRANTOR’S
RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.  Until default and except as otherwise
provided below with respect to accounts, Grantor may have possession of the tangible
personal property and beneficial use of all the Collateral and may use it in
any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor’s right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender’s security interest in such Collateral.  Until otherwise notified by Lender, Grantor
may collect any of the Collateral consisting of accounts.  At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness.  If Lender at any time
has possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose as
Grantor shall request or as Lender, in Lender’s sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise reasonable
care.  Lender shall not be required to
take any steps necessary to preserve any rights in the Collateral against prior
parties, nor to protect, preserve or maintain any security interest given to
secure the Indebtedness.

 

LENDER’S
EXPENDITURES.  If
any action or proceeding is commenced that would materially affect Lender’s
interest in the Collateral or if Grantor fails to comply with any provision of
this Agreement or any Related Documents, including but not limited to Grantor’s
failure to discharge or pay when due any amounts Grantor is required to
discharge or pay under this Agreement or any Related Documents, Lender on
Grantor’s behalf may (but shall not be obligated to) take any action that
Lender deems appropriate, including but not limited to discharging or paying
all taxes, liens, security interests, encumbrances and other claims, at any
time levied or placed on the Collateral and paying all costs for insuring,
maintaining and preserving the Collateral. 
All such expenditures incurred or paid by Lender for such purposes will
then bear interest at the rate charged under the Note from the date incurred or
paid by Lender to the date of repayment by Grantor.  All such expenses will become a part of the
Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be
added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note’s
maturity.  The Agreement also will secure
payment of these amounts.  Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

 

DEFAULT.  Each of the following shall constitute an
Event of Default under this Agreement:

 

Payment Default.  Grantor fails to make any payment when due
under the Indebtedness.

 

Other Defaults.  Grantor fails to comply with or to perform
any other term, obligation, covenant or condition contained in this Agreement
or in any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Grantor.

 

2

 

False Statements.  Any warranty, representation or statement
made or furnished to Lender by Grantor or on Grantor’s behalf under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.

 

Defective Collateralization.  This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien)
at any time and for any reason.

 

Insolvency. 
The dissolution or termination of Grantor’s existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.

 

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any collateral securing the Indebtedness. 
This includes a garnishment of any of Grantor’s accounts, including
deposit accounts, with Lender.  However,
this Event of Default shall not apply if there is a good faith dispute by
Grantor as to the validity or reasonableness of the claim which is the basis of
the creditor or forfeiture proceeding and if Grantor gives Lender written
notice of the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve or
bond for the dispute.

 

Events Affecting Guarantor.  Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of any of
the Indebtedness or guarantor, endorser, surety, or accommodation party dies or
becomes incompetent or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness.

 

Adverse Change.  A material adverse change occurs in Grantor’s
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired.

 

Cure Provisions.  If any default, other than a default in payment
is curable and if Grantor has not been given a notice of a breach of the same
provision of this Agreement within the preceding twelve (12) months, it may be
cured if Grantor, after Lender sends written notice to Grantor demanding cure
of such default:  (1) cures the
default within fifteen (15) days; or (2) if the cure requires more than
fifteen (15) days, immediately initiates steps which Lender deems in Lender’s
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

 

RIGHTS AND
REMEDIES ON DEFAULT. 
If an Event of Default occurs under this Agreement, at any time
thereafter, Lender shall have all the rights of a secured party under the
Colorado Uniform Commercial Code.  In
addition and without limitation, Lender may exercise any one or more of the
following rights and remedies:

 

Accelerate Indebtedness.  Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice of any kind to Grantor.

 

Assemble Collateral.  Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral.  Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender.  Lender also shall have full
power to enter upon the property of Grantor to take possession of and remove
the Collateral.  If the Collateral
contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.

 

Sell the Collateral.  Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s
own name or that of Grantor.  Lender may
sell the Collateral at public auction or private sale.  Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor, and other persons as required by law, reasonable
notice of the time and place of any public sale, or the time after which any
private sale or any other disposition of the Collateral is to be made.  However, no notice need be provided to any
person who, after Event of Default occurs, enters into and authenticates an
agreement waiving that person’s right to notification of sale.  The requirements of reasonable notice shall
be met if such notice is given at least ten (10) days before the time of
the sale or disposition.  All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.

 

Appoint Receiver.  Lender shall have the right to have a
receiver appointed to take possession of all or any part of the Collateral,
with the power to protect and preserve the Collateral, to operate the
Collateral preceding foreclosure or sale, and to collect the Rents from the
Collateral and apply the proceeds, over and above the cost of the receivership,
against the Indebtedness.  The receiver
may serve without bond if permitted by law. 
Lender’s right to the appointment of a receiver shall exist whether or
not the apparent value of the Collateral exceeds the Indebtedness by a
substantial amount.  Employment by Lender
shall not disqualify a person from serving as a receiver.  Receiver may be appointed by a court of competent
jurisdiction upon ex parte application and without notice, notice being
expressly waived.

 

Collect Revenues, Apply Accounts.  Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.  Lender may at any time in Lender’s discretion
transfer any Collateral into Lender’s own name or that of Lender’s nominee and
receive the payments, rents, income, and revenues therefrom and hold the same
as security for the Indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine.  Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due.  For these purposes, Lender may, on behalf of
and in the name of Grantor, receive, open and dispose of mail addressed to
Grantor; change any address to which mail and payments are to be sent; and
endorse notes, checks, drafts, money orders, documents of title, instruments
and items pertaining to payment, shipment, or storage of any Collateral.  To facilitate collection, Lender may notify
account debtors and obligors on any Collateral to make payments directly to
Lender.

 

Obtain Deficiency.  If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement.  Grantor shall be liable for a deficiency even
if the transaction described in this subsection is a sale of accounts or
chattel paper.

 

Other Rights and Remedies.  Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time.  In
addition, Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.

 

Election of Remedies.  Except as may be prohibited by applicable
law, all of Lender’s rights and remedies, whether evidenced by this Agreement,
the Related Documents, or by any other writing, shall be cumulative and may be
exercised singularly or concurrently.  Election
by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation
of Grantor under this Agreement, after Grantor’s failure to perform, shall not
affect Lender’s right to declare a default and exercise its remedies.

 

MISCELLANEOUS
PROVISIONS.  The
following miscellaneous provisions are a part of this Agreement:

 

Amendments. 
This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth
in this Agreement.  No alteration of or
amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration
or amendment.

 

Attorneys’ Fees; Expenses.  Grantor agrees to pay upon demand all of
Lender’s reasonable costs and expenses, including Lender’s attorneys’ fees and
Lender’s legal expenses, incurred in connection with the enforcement of this
Agreement.  Lender may hire or pay
someone else to help enforce this Agreement, and Grantor shall pay the
reasonable costs and expenses of such enforcement.  Costs and expenses include Lender’s attorneys’
fees and legal expenses whether or not there is a lawsuit, including attorneys’
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services.  Grantor
also shall pay all court costs and such additional fees as may be directed by
the court.

 

Caption Headings.  Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.

 

Governing Law. 
This Agreement will be governed by federal law
applicable to Lender and, to the extent not preempted by federal law, the laws
of the State of Colorado without regard to its conflicts of law provisions.  This Agreement has been accepted by Lender in
the State of Colorado.

 

Choice of Venue.  If there is a lawsuit, Grantor agrees upon
Lender’s request to submit to the jurisdiction of the courts of Jefferson
County, State of Colorado.

 

3

 

No Waiver by Lender.  Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and signed
by Lender.  No delay or omission on the
part of Lender in exercising any right shall operate as a waiver of such right
or any other right.  A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a waiver of
Lender’s right otherwise to demand strict compliance with that provision or any
other provision of this Agreement.  No
prior waiver by Lender, nor any course of dealing between Lender and Grantor,
shall constitute a waiver of any of Lender’s rights or of any of Grantor’s
obligations as to any future transactions. 
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and
in all cases such consent may be granted or withheld in the sole discretion of
Lender.

 

Notices. 
Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.  Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party’s address.  For notice purposes, Grantor agrees to keep
Lender informed at all times of Grantor’s current address.  Unless otherwise provided or required by law,
if there is more than one Grantor, any notice given by Lender to any Grantor is
deemed to be notice given to all Grantors.

 

Power of Attorney.  Grantor hereby appoints Lender as Grantor’s
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect, amend, or to continue the security interest granted in
this Agreement or to demand termination of filings of other secured parties.  Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other reproduction
of any financing statement or of this Agreement for use as a financing
statement.  Grantor will reimburse Lender
for all expenses for the perfection and the continuation of the perfection of
Lender’s security interest in the Collateral.

 

Severability. 
If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. 
If feasible, the offending provision shall be considered modified so
that it becomes legal, valid and enforceable. 
If the offending provision cannot be so modified, it shall be considered
deleted from this Agreement.  Unless
otherwise required by law, the illegality, invalidity, or unenforceability of
any provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.

 

Successors and Assigns.  Subject to any limitations stated in this
Agreement on transfer of Grantor’s interest, this Agreement shall be binding
upon and inure to the benefit of the parties, their successors and assigns.  If ownership of the Collateral becomes vested
in a person other than Grantor, Lender, without notice to Grantor, may deal
with Grantor’s successors with reference to this Agreement and the Indebtedness
by way of forbearance or extension without releasing Grantor from the
obligations of this Agreement or liability under the Indebtedness.

 

Survival of Representations and Warranties.  All representations, warranties, and
agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid
in full.

 

Time is of the Essence.  Time is of the essence, in the performance of
this Agreement.

 

DEFINITIONS.  The following capitalized words and terms
shall have the following meanings when used in this Agreement.  Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America.  Words and terms
used in the singular shall include the plural, and the plural shall include the
singular, as the context may require.  Words
and terms not otherwise defined in this Agreement shall have the meanings
attributed to such terms in the Uniform Commercial Code:

 

Agreement. 
The word “Agreement” means this Commercial Security Agreement, as this
Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.

 

Borrower. 
The word “Borrower” means New Frontier Media Inc and includes all
co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. 
The word “Collateral” means all of Grantor’s right, title and interest
in and to all the Collateral as described in the Collateral Description section
of this Agreement.

 

Default. 
The word “Default” means the Default set forth in this Agreement in the
section titled “Default”.

 

Environmental Laws.  The words “Environmental Laws” mean any and
all state, federal and local statutes, regulations and ordinances relating to
the protection of human health or the environment, including without limitation
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.

 

Event of Default.  The words “Event of Default” mean any of the
events of default set forth in this Agreement in the default section of this
Agreement.

 

Grantor. 
The word “Grantor” means New Frontier Media Inc.

 

Guaranty. 
The word “Guaranty” means the guaranty from guarantor, endorser, surety,
or accommodation party to Lender, including without limitation a guaranty of
all or part of the Note.

 

Hazardous Substances.  The words “Hazardous Substances” mean
materials that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or potential hazard
to human health or the environment when improperly used, treated, stored,
disposed of, generated, manufactured, transported or otherwise handled.  The words “Hazardous Substances” are used in
their very broadest sense and include without limitation any and all hazardous
or toxic substances, materials or waste as defined by or listed under the
Environmental Laws.  The term “Hazardous
Substances” also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.

 

Indebtedness. 
The word “Indebtedness” means the indebtedness evidenced by the Note or
Related Documents, including all principal and interest together with all other
indebtedness and costs and expenses for which Grantor is responsible under this
Agreement or under any of the Related Documents.

 

Lender. 
The word “Lender” means GREAT WESTERN BANK, its successors and assigns.

 

Note.  The
word “Note” means the Note executed by New Frontier Media Inc in the principal
amount of $5,000,000.00 dated December 15, 2009, together with all
renewals of, extensions of, modifications of, refinancings of, consolidations
of, and substitutions for the note or credit agreement.

 

Property. 
The word “Property” means all of Grantor’s right, title and interest in
and to all the Property as described in the “Collateral Description” section of
this Agreement.

 

Related Documents.  The words “Related Documents” mean all
promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.

 

GRANTOR
HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS.  THIS
AGREEMENT IS DATED DECEMBER 15, 2009.

 

	
  GRANTOR:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NEW
  FRONTIER MEDIA INC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Michael Weiner

  	
   

  	
  By:

  	
  /s/
  Grant Williams

  
	
   

  	
  Michael
  Weiner, CEO of New Frontier Media Inc

  	
   

  	
  Grant
  Williams, CFO of New Frontier Media Inc

  
					

 

4

 

	
  LENDER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GREAT
  WESTERN BANK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  X /s/
  Samantha Borelli

  	
   

  	
   

  
	
  Authorized
  Signer

  	
   

  
			

 

Laser PRO Lending, Ver. 5.46.00.003 Copr. Harland Financial Solutions, Inc.
1997, 2009.  All Rights Reserved.

 

5Exhibit
10.1

 

Summer
Infant, Inc.

1275
Park East Drive

Woonsocket,
RI 02895

 

February 5, 2010

 

Steven Gibree

83 Franklin Road

Foster, RI  02825

 

Dear Steve:

 

Reference is made to that
certain Employment Agreement dated on or about September 1, 2006 between
Summer Infant, Inc. (the “Company”) and
you (the “Officer”) (the “Employment
Agreement”).  In consideration
of entering into that certain Change of Control Agreement between the Officer
and the Company on the date hereof, the Officer and Company hereby agree that
effective immediately the Employment Agreement is terminated.

 

This letter agreement may be
executed in two or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.  Counterparts executed and exchanged by
facsimile or electronic mail transmission shall be fully enforceable.

 

 

	
   

  	
   

  	
  SUMMER
  INFANT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Jason Macari

  
	
   

  	
   

  	
  Name:

  	
  Jason
  Macari

  
	
   

  	
   

  	
  Title:

  	
  President
  and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED
  AND AGREED TO:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/
  Steven Gibree

  	
   

  	
   

  	
   

  
	
  Steven
  Gibree

  	
   

  	
   

  	
   

  
	
  Date:  February 5, 2010

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