EXHIBIT 10.1
EXECUTION COPY
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, including, without limitation, all
schedules and attachments hereto (this "LOAN AGREEMENT") is made and entered
into this 26th day of November, 2003 by and between iGAMES ENTERTAINMENT, INC. a
Nevada corporation ("BORROWER"), and MERCANTILE CAPITAL, L.P., a Pennsylvania
limited partnership ("LENDER").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender create a credit facility
(the "CREDIT FACILITY") for Borrower in the principal amount of Two Hundred
Fifty Thousand Dollars ($250,000) (the "CREDIT FACILITY AMOUNT"), to be drawn
down by Borrower from time to time, and to be used by Borrower for working
capital (each amount that is drawn from the Credit Facility and outstanding,
from time to time, the "LOAN AMOUNT, " and in the aggregate, the "LOAN
AMOUNTS"); and
WHEREAS, Lender has agreed to create the Credit Facility, subject to
the terms, conditions and covenants set forth in the Loan Agreement and in other
documents, instruments and agreements to be entered into in connection with the
Loan.
NOW, THEREFORE, in consideration of the mutual promises herein made and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. All capitalized terms in this Agreement shall have the
meanings ascribed to them in SCHEDULE 1 or where used, as the case may
be.
2. THE LOAN.
2.1 LOAN. On the date hereof, Lender shall create the Credit
Facility for the Credit Facility Amount. The parties agree
that the Credit Facility Amount shall be evidenced by a demand
note of even date herewith (the "NOTE"), in the form attached
hereto as EXHIBIT A, and that the lesser of the Credit
Facility Amount, or the Loan Amount, as the case may be, along
with all of the Obligations, shall be payable upon written
DEMAND of Lender after January 31, 2004, upon five days
written notice to the Borrower (the period from the Closing
Date through January 31, 2004, the "INITIAL TERM").
2.2 DISBURSEMENT OF THE LOAN. In connection with periodic
draw-downs of Loan Amounts from the Credit Facility, the
Borrower shall, from time to time, submit draw-down
certificates (each, a "DRAW DOWN CERTIFICATE"), in the form
attached hereto as EXHIBIT B. Each Draw-Down Certificate shall
state a Loan Amount (provided, however, that in no instance
shall the aggregate Loan Amounts exceed the Credit Facility
Amount), the purpose for which the Loan Amount shall be
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used and shall be counter-signed by both the Borrower and the
Surety. The Lender, in its sole and absolute discretion, shall
determine whether or not to lend the requested Loan Amount set
forth in the Draw-Down Certificate. In the event that the
requested Loan Amount is approved by the Lender, the Lender
will credit the proceeds of the Loan Amount in question to or
for the benefit of Borrower via wire transfer or ACH to
Borrower's operating account as Borrower shall designate by
written notice to Lender, except for the payment of amounts
due to or for the benefit of Lender hereunder which shall be
made directly to Lender.
2.3 INTEREST RATES AND PAYMENTS OF INTEREST. Interest (the
"INTEREST") shall accrue on the outstanding Loan Amounts from
the date of wire at a rate per annum equal to Wilmington Trust
of Pennsylvania's "prime rate" plus 10%, floating with daily
resets (the "INTEREST RATE"), calculated on the basis of a
360-day year counting the actual number of days elapsed
(provided, however, that such interest rate shall, in no
instance, be below 14.5%). Except in an Event of Default, as
set forth in Section 8, Obligations due and owing under the
Note shall be repayable in whole or part as set forth in
Section 2.1. Notwithstanding the foregoing, Interest along
with the Collateral Management Fee (as defined in Section 2.4)
with respect to the Loan Amount from the period from the
Closing Date through January 31, 2004, as set forth in the
Draw-Down Certificate tendered at Closing, along with any
unpaid expenses as set forth in Section 2.5, shall be due and
payable upon the Closing Date, and may be debited from such
initial Loan Amount. After the Initial Term, Interest payments
and Collateral Management Fee payments shall be received
monthly in arrears within five (5) Business Days after the end
of the previous calendar month.
2.4 COLLATERAL MANAGEMENT FEE. Borrower hereby agrees to pay to
Lender a non-refundable collateral management fee ("COLLATERAL
MANAGEMENT FEE") in an amount equal to One Percent (1%) of the
Loan Amount, each calendar month. The Collateral Management
Fee shall constitute an additional Obligation hereunder
secured by the Collateral.
2.5 EXPENSES. The Borrower shall promptly pay to or on behalf of
Lender, from time to time, the reasonable fees and expenses of
Lender's counsel, appraisers, auditors, all charges and fees
for recording or perfecting interests in the Collateral and
other expenses of Lender in connection with this Agreement and
the creation of the Credit Facility. Any expenses hereunder
shall constitute an additional Obligation hereunder secured by
the Collateral
3. COLLATERAL SECURITY.
3.1 GRANT OF SECURITY INTERESTS. As security for the timely
satisfaction of all Obligations, Borrower hereby assigns,
transfers and sets over to Lender all of its right, title and
interest in and to, and grants Lender a continuing lien on and
security interest in and to those of the Borrower's Assets
described in SCHEDULE 2 wherever located and whenever
acquired, together with all replacements therefor
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and all cash and non-cash Proceeds (including, but without
limitation, insurance Proceeds and Proceeds of Proceeds)
thereof, collectively called the "COLLATERAL" which shall
stand as one general, continuing collateral security for all
Obligations of the Borrower to Lender and may be retained by
Lender until all Obligations have been satisfied in full.
3.2 PRIORITY OF LIENS. Lender's Liens in and to the Collateral
shall be first and prior to all Liens against the property,
real and personal, of Borrower now existing or hereafter
arising ("LENDER'S PRIOR SECURITY INTEREST").
3.3 FINANCING STATEMENTS. Borrower hereby: (a) authorizes Lender
to file any financing statements (including amendments thereto
and continuation statements thereof) in form satisfactory to
Lender as Lender may specify; (b) agrees to take such other
steps as Lender may direct, including the noting of Lender's
lien on the Collateral and on any certificates or documents of
title therefor, all to perfect Lender's liens on and security
interests in the Collateral; and (c) agrees to pay or
reimburse Lender for all costs and taxes of filing or
recording the same in such public offices as Lender may
designate. In addition to the foregoing, and not in limitation
thereof, a carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement and may
be filed in any appropriate office in lieu thereof. Borrower
hereby irrevocably appoints Lender as its attorney-in-fact
(without requiring Lender to act as such) to execute any
financing statements, including amendments thereto and
continuation statements thereof in the name of Borrower, and
to perform all other acts and deeds that Lender deems
appropriate to perfect and continue its security inters in,
and to protect and preserve, the Collateral.
4. OTHER PROVISIONS.
4.1 POWER OF ATTORNEY. Borrower hereby irrevocably authorizes and
empowers Lender, grants Lender a power of attorney, coupled
with an interest in, and appoints Lender, or any officer,
director or employee of Lender, as attorney-in-fact for
Borrower, with full authority for and on behalf of Borrower,
and in its name, place and stead, to take any action which
Borrower or any officer or director of Borrower could do if
then present, as may, in the opinion of Lender, be necessary
or advisable, to perfect Borrower's interest in any of the
Collateral.
4.2 PAYMENTS. All payments of interest on and principal of the
Loans, all fees and all other sums payable to the Lender
hereunder shall be paid directly to the Lender in immediately
available funds, in such currency of the United States of
America as is, at the time of payment, legal tender for the
payment of public and private debts. Borrower shall make each
payment hereunder not later than 12:00 p.m., local time, on
the day when due, at the office of the Lender at 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxx
00000-0000. Should any payments of principal or interest or
fees become due and payable on a Saturday, Sunday or legal
holiday under the laws of the Commonwealth of Pennsylvania,
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the payment date thereof shall be extended to the next
succeeding Business Day and such extension of time shall in
such case be included in computing such interest or fees, as
the case may be. Any such payments or prepayments made shall
be applied, first to the payment of unpaid costs and charges
due including late fees, then to interest due and payable
under the Note and then to the reduction of the outstanding
principal balance thereof.
4.3 STATEMENTS OF AMOUNT DUE. At least once each month, Lender
shall render to Borrower a statement of Borrower's Obligations
to Lender hereunder, which statements shall be considered
correct and accepted by Borrower and conclusively binding upon
Borrower unless Borrower notifies Lender to the contrary
within ten (10) days from the date such statement is delivered
setting forth any error claimed by Borrower.
5. CONDITIONS PRECEDENT.
Any obligation of Lender to lend any Loan Amount under the Credit
Facility is subject to the following conditions precedent:
5.1 PAYMENTS. On or before the Closing Date, Borrower shall have
paid: (a) the expenses accrued to date described in Section
2.5.
5.2 DOCUMENTS REQUIRED FOR THE CLOSING. On or before the Closing
Date, Borrower shall have delivered to Lender duly executed
original counterparts of the following, all in form and
substance acceptable to Lender, in its sole discretion:
5.2.1 This Agreement;
5.2.2 The Note;
5.2.3 A stock certificate for 1,000,000 (one million)
shares of the Borrower's common stock (the "STOCK")
with the corresponding Pledge Agreement, in the form
attached hereto as EXHIBIT C, and such other
documents and agreements as are required to cause
such Stock to become part of the Collateral;
5.2.4 A Surety Agreement with respect to the Credit
Facility Amount, executed by the Surety., in the form
attached hereto as EXHIBIT D;
5.2.5 The Assignment Agreement, in the form attached hereto
as EXHIBIT E, with respect to the $1,000,000 (One
Million Dollars) "TERMINATION AMOUNT," as that term
is used and defined in Section 11(e)(ii) of the Stock
Purchase Agreement between Borrower, Chex Services,
Inc. and Equitex, Inc. dated November 3, 2003,
5.2.6 An opinion of counsel, in the form attached hereto as
EXHIBIT F, which includes an opinion, in form and
substance satisfactory to the Lender, in
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its sole discretion, that the pledge of the Stock
does not violate federal and/or state securities laws
or the regulations of any stock exchange;
5.2.7 The UCC-1 financing statements as required by Lender;
5.2.8 UCC-3 Termination Statements with respect to any
security interest of record in any of the Collateral
prior to the date hereof in favor of any Person other
than Lender.
5.2.9 A certified (as of the date of the Closing) copy of
resolutions of Borrower's board of directors or other
governing agency authorizing the execution, delivery
and performance of this Agreement, the Note, the
Stock, the Collateral and Loan Documents and each
other document to be delivered pursuant hereto;
5.2.10 Such other agreements, documents or instruments
required by Lender, or its counsel, to evidence the
transactions described in this Agreement and perfect
the Liens and security interests of Lender in the
Collateral.
5.3 MISCELLANEOUS CONDITIONS.
5.3.1 The audit of Borrower's Collateral shall have been
performed by Lender the results of which shall be
satisfactory to Lender, in its sole discretion.
5.3.2 Lender shall have received UCC, Lien, tax, judgment
and other searches required by Lender.
5.3.3 Lender shall have received copies of all filing
receipts and acknowledgments issued by any
governmental authority to evidence any recordation or
filing necessary to perfect the Lien of the Lender on
the Collateral and evidence in a form acceptable to
the Lender that such Lien constitutes the Lender's
Prior Security Interest and is a valid an perfected
first lien.
5.4 LEGAL MATTERS. At the time of Closing, all legal matters
incidental thereto shall be reasonably satisfactory to Lender
and its counsel.
6. REPRESENTATIONS AND WARRANTIES.
6.1 CORPORATE EXISTENCE, ETC. To induce Lender to enter into this
Agreement, Borrower represents and warrants to Lender as
follows:
6.1.1 Borrower is duly organized and validly existing, and
in good standing under the laws of the State of
Nevada, has the lawful power to own, lease, encumber
and operate its Assets and properties and to engage
in the business it conducts, and is duly qualified
and in good standing as a foreign corporation in the
jurisdictions wherein the nature of the business
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transacted by it or property owned by it makes such
qualification necessary. Borrower has no subsidiaries
or other entities constituent of Borrower. Borrower,
except as disclosed to Lender, has not changed its
name, been the surviving entity in a merger, acquired
any business, or changed its principal executive
offices within five (5) years and one (1) month prior
to the date hereof;
6.1.2 Borrower has the requisite corporate power and
authority, to enter into and perform this Agreement,
the Note and the Loan Documents to which it is a
party and to incur the Obligations herein and therein
provided for and has taken all proper and necessary
action to authorize the execution, delivery and
performance of this Agreement, the Note and the Loan
Documents which are duly and validly executed and
constitute legal, valid and binding obligations of
borrower enforceable in accordance with their
respective terms;
6.1.3 Borrower is not in default with respect to any of its
existing Indebtedness or under any agreement,
commitment, lease, contract, deed of trust, mortgage,
note or other Instrument and the making and
performance of this Agreement, the Note and the Loan
Documents will not immediately, with the passage of
time, with the giving of notice or both (a) violate
the charter or by-laws or other organizational
documents of Borrower or, in any material respect,
violate any Laws, rule, regulation, order, writ,
judgment, injunction, decree, determination or award
applicable to Borrower; or (b) result in a default
under any contract, agreement, indenture, note, loan
or credit agreement, license, lease or instrument to
which Borrower is a party or by which it or its
property is bound; or result in the creation or
imposition of any security interest in or Lien or
encumbrance upon any of the Assets of Borrower except
such as are in favor of Lender.
6.1.4 No holder of any Indebtedness of Borrower has given
notice of any asserted default thereunder. No
liquidation or dissolution of Borrower and no
receivership, insolvency, bankruptcy, reorganization
or other similar proceeding relative to Borrower or
their properties is pending or, to the knowledge of
Borrower, threatened against them;
6.1.5 There are no pending orders, notices, litigation,
actions, claims, suits, proceedings or investigations
pending, or, to the knowledge of Borrower, threatened
or reasonably anticipated against or affecting
Borrower at law or in equity or before or by any
governmental instrumentality or agency (domestic or
foreign), commission, board, bureau, arbitrator or
arbitration panel which may be expected to result in
any Material Adverse Change in the business,
operations, prospects, properties or Assets
(including, without limitation, the Collateral), or
condition (financial or otherwise) of Borrower. There
is no judgment, liability or award, which may be
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expected to result in any Material Adverse Change in
the business, operations, prospects, properties or
Assets (including, without limitation, the
Collateral), or condition (financial or otherwise) of
Borrower. Borrower is not in default with respect to
any judgments, order, writ, injunction, decree, rule
aware or regulation of any court, governmental
instrumentality or agency, commission, board, bureau,
or arbitrator or arbitration panel;
6.1.6 Borrower does not know of, or anticipate any Material
Adverse Change in its Assets, Liabilities,
properties, business, or condition (financial or
otherwise);
6.1.7 Borrower has good and marketable title to all of its
properties and Assets, subject to no security
interest, encumbrance or Lien, or the claim of any
third person.
6.1.8 The Financial Statements presented and to be
presented to Lender, including any related schedules
and notes appended thereto, have been and will be
prepared in accordance with GAAP and fully and fairly
present in all material respects the financial
condition of Borrower at the dates thereof and the
results of operations for the periods covered
thereby. There have been no Material Adverse Changes
in the financial condition or business of Borrower
from the date such Financial Statements were
presented to Lender to the date hereof:
6.1.9 As of the date hereof, and excluding the Credit
Facility, except as set forth on Schedule 6.1.9,
Borrower does not have any direct or contingent
liability or material Indebtedness of any nature,
including, without limitation, liabilities for taxes
and any interest or penalties relating thereto,
except to the extent reflected (in a footnote or
otherwise) and reserved against in the Financial
Statements of Borrower delivered to Lender prior to
the date hereof. Borrower does not know and has no
reasonable grounds to now of any basis for the
assertion against Borrower of any material
Indebtedness of any nature not fully reflected and
reserved against in its Financial Statements;
6.1.10 Borrower has filed or caused to be filed all federal,
state and local tax returns and other reports it is
required by Law to file prior to the date hereof and
which are material to the conduct of its business, or
has timely filed requests for extensions to file the
same as permitted by Law, and has paid or caused to
be paid all taxes, assessments and other governmental
charges due and payable prior to the date hereof, and
has made adequate provision for the payment of such
taxes, assessments or other charges accruing but not
yet payable. Borrower does not have any knowledge of
any deficiency or additional assessment in a material
amount in
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connection with any taxes, assessments or charges not
provided for on its books and Records;
6.1.11 Borrower has complied in all material respects with
all applicable Laws with respect to: (a) any
restrictions, specifications or other requirements
pertaining to products that Borrower imports,
manufactures or sells or to the services it performs;
(b) the conduct of its business and (c) the use,
maintenance and operation of the real and personal
properties owned or leased by it in the operation of
its business;
6.1.12 No representation, warranty or statement by Borrower
contained herein or in any certificate or other
documents furnished pursuant hereto contains any
untrue statement of material fact or omits to state a
material fact necessary to make such representation
or warranty not misleading in light of the
circumstances under which it was made;
6.1.13 No recording, filing, registration, notice or other
similar action is required in order to insure the
legality, validity, binding effect or enforceability
of this Agreement or the Note or the other documents
and instruments executed hereunder as against all
persons other than such filings as may be required
under the UCC and mortgages to perfect Lender's
interest in all real property owned by Borrowers;
6.1.14 There are no Liens or security interest in any of the
Borrower's Assets and Borrower does not know of any
circumstances which might lead to the imposition of
any Lien;
6.1.15 Borrower is in compliance in all material respects
with all applicable provisions of ERISA;
6.1.16 Borrower does not have any Defined Benefit Pension
Plan, as that term is defined in ERISA.
6.1.17 No Event of Default has occurred and is continuing or
is about to occur;
6.1.18 The Obligations and Indebtedness of Borrower under
this Agreement, the Note and any other Loan Document
are not subordinated in right of payment or otherwise
to any other obligation of Borrower or to the rights
of others;
6.1.19 Borrower shall not pay any commission or finder's fee
payable in connection with the Loans;
6.1.20 Borrower does not know of any activity at any real
property or facility owned or operated by Borrower
(each a "PROPERTY") which has been conducted, or is
being conducted, except in compliance with all
environmental laws, statutes, ordinances,
regulations, order, and
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requirements of common law concerning (a) those
activities, (b) repairs or construction of any
improvements, (c) handling or storing of any
materials, (d) discharges to the air, soil, surface
water or ground water, and (e) storage, treatment or
disposal of any waste at or connected with any
activity at any Property.
6.1.21 Borrower does not know of the presence of any
contamination on the Property. As used in this
Agreement, the term "contamination" shall mean the
uncontained presence of hazardous substances at the
Property, or arising form the Property, which may
require remediation under any applicable law; and the
term "hazardous substances" shall mean "hazardous
substances" or "contaminants" or "regulated
substances" as defined pursuant to any applicable
environmental laws, if such presence would require
removal or remediation thereof under such
Environmental Law.
6.1.22 Borrower does not know of any investigation of any
Property for the presence of radon or radon gas or
the presence of the radioactive decay products or
radon.
6.1.23 No tanks presently or formerly used for the storage
of any liquid or gas above or below ground are
present on any Property.
6.2 SOLVENCY. Borrower has sufficient capital to carry on all
businesses and transactions in which it now engages or is
about to engage, is solvent and will continue to be solvent
after incurring the Loan and creating security interests of
Lender in the Collateral.
6.3 INVESTMENT COMPANY. Borrower is not an "investment company,"
or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
6.4 SURVIVAL. All of the representations and warranties set forth
in Section 6.1 shall survive until all Obligations are
satisfied in full.
7. BORROWERS' COVENANTS.
7.1 AFFIRMATIVE COVENANTS. Borrower does hereby covenant and agree
with Lender that, so long as any of the Obligations remain
unsatisfied, it will:
7.1.1 Maintain or cause to be maintained, take out, pay for
and keep in effect or cause to be taken out, paid
for, and kept in effect, so long as the Obligations
remain unsatisfied, such insurance against risks,
including without limitation, commercial general
liability and property damage, business interruption,
fire and extended coverage with respect to the
Collateral owned by any Borrower (to the extent of
its full insurable replacement value), vandalism and
malicious mischief and sprinkler
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leakage coverage and coverage against such other
hazards, as are customarily insured against by
companies in the same or similar businesses, and such
other hazards as Lender may, from time to time
reasonably require, including flood hazard to the
extent any Property is located in an area designated
or identified as an area having specified flood
hazards, all in amounts and with such insurance
carriers as may be satisfactory to Lender, and will
deliver to Lender, upon their issuance, insurance
policies for all insurance then in force. All renewal
and substitute policies of insurance shall be
delivered to Lender, premium paid, at least fifteen
(15) days prior to the termination of the policies
previously delivered to Lender. All such insurance
policies will name Lender as loss payee and/or
additional insured, as required by Lender, and
contain a provision whereby they may not be canceled
or amended except upon thirty (30) days written
notice to Lender and shall be endorsed with a
standard mortgagee or loss payee clause, as
applicable, in favor of Lender and not subject to
contribution.
7.1.2 Pay or cause to be paid when due, all taxes,
assessments and charges or levies imposed upon them
or on any of their property or which they are
required to withhold and pay over, except where
contested in good faith by appropriate proceedings
with adequate reserves therefor having been set aside
on their books; but Borrower shall pay or cause to be
paid all such taxes, assessments, charges or levies
forthwith whenever foreclosure on any lien that
attaches (or security therefor) appears imminent;
7.1.3 Keep accurate and complete in all material respects,
books and Records relating to Accounts, receivables,
other Collateral, and business affairs consistent
with sound accounting practices; keep complete and
accurate Records (including all books of original and
final entry, computer programs, software, stored
material and data banks associated with or arising
out of their business, operations and/or record
keeping) and make all necessary entries therein to
reflect the transactions and facts giving rise to
Accounts, Chattel Paper, receivables and other
Collateral, and all payments, debits, credits and
adjustments applicable thereto;
7.1.4 Give prompt notice to Lender of: (a) any litigation
in which Borrower is a party to the extent the
liability of Borrower in respect of such litigation
is reasonably expected to exceed $10,000, and (b) the
institution of any other suit or any administrative
proceeding against Borrower that might materially and
adversely affect its individual operations, financial
condition, property or business;
7.1.5 Maintain financial records in accordance with GAAP
and, upon reasonable notice by Lender, permit any
authorized representative designed by Lender to visit
at reasonable times and inspect any of the Properties
of Borrower (including, without limitation, their
books of
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account, Records, correspondence and other papers and
to make extracts therefrom) and to discuss its
affairs, finances and accounts with its officers and
its independent certified public accountants or other
parties preparing statements for or on behalf of
Borrower;
7.1.6 Make no material change in the nature or character of
its business and not engage in any business which is
materially different from the business in which it is
currently engaged; maintain and keep in full force
and effect all licenses and permits necessary to the
proper conduct of its business; and operate its
business strictly in accordance with applicable
federal, state and local laws;
7.1.7 Except as expressly prohibited by Reg FD, permit
Lender, its officers, employees, designees and
agents, without hindrance or delay, at such times as
Lender deems reasonably appropriate and without prior
notice to Borrower, to have access to, audit,
inspect, and make copies of or extracts from all of
Borrower's books and Records including, without
limitation, all journals, orders, receipts and
correspondence and any other books and Records
pertaining to Borrower's business which Lender may
request, wherever located;
7.1.8 Cause all persons, including computer service
bureaus, bookkeeping services, accountants, auditors
and the like, to make all such books and Records in
their possession available to Lender, its officers,
employees, designees and agents. If deemed necessary
by Lender, in Lender's sole discretion, upon the
occurrence of an Event of Default, Lender may remove
them from any Borrower's place of business or any
other place where the same may be found for the
purposes of examining, auditing or reproducing the
same. Any books or Records so removed by Lender shall
be returned by Lender as soon as Lender shall have
completed its inspection, audit or reproduction
thereof;
7.1.9 Take all necessary steps to preserve its corporate
entity existence and comply with all present and
future Laws applicable to it in the operation of its
business, and all material agreements to which it is
subject except those with respect to which the
failure to do so would not have a Material Adverse
Effect on Borrower;
7.1.10 Do all acts and make all such filings as may be
necessary to ensure that Borrower is duly qualified
to do business in all jurisdictions in which the
conduct of its business or the ownership of its
properties makes such qualification necessary.
7.1.11 Instruct Borrower's outside compute service company
and accounts that Lender is irrevocably empowered to
have full access to and to have printouts and all
information respecting Borrower's financial records
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maintained by Borrower's outside computer service
company and/or accountants respecting any and all
financial Records now or hereafter maintained by the
same on account of Borrower at Borrower's expense and
Lender will notify Borrower of any such contact.
7.1.12 Execute and deliver to Lender any instrument,
document, assignment or other writing which Lender
deems necessary or desirable to carry out the terms
of this Agreement or to enable Lender to perfect or
enforce its Liens and security interests in the
Collateral;
7.1.13 Indemnify and agree to protect, defend and hold
harmless Lender, any entity which "controls" Lender,
within the meaning of Section 15 of the Securities
Act of 1933, as amended, or is under common control
with Lender and any member, partner, officer,
director, official, agent, employee or attorney of
Lender, and their respective heirs, administrators,
executors, member, partner, officer, director,
official, agent, employee or attorney of Lender, and
their respective heirs, administrators, executors,
successors and assigns (collectively, the
"INDEMNIFIED PARTIES"), from and against any and all
losses, damages, expenses or liabilities of any kind
or nature and from any suits, claims or demands,
including reasonable attorneys' fees incurred in
defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting
from, or in any way connected with this Agreement,
the Loan Documents, the handling of the Collateral or
the transactions contemplated herein and therein
(unless determined by a final judgment of a court of
competent jurisdiction to have been caused by the
gross negligence or willful misconduct of the
Indemnified Parties).
7.1.14 In case any action shall be brought against Lender or
any other Indemnified Party in respect to which
indemnity may be sought against Borrower, Lender or
such other Indemnified Party shall promptly notify
Borrower and Borrower shall assume the defense
thereof, including the employment of counsel selected
by Borrower and satisfactory to Lender (unless to do
so represents a clear conflict of interest, in which
case Lender shall choose with or without the consent
of Borrower), the payment of all reasonable costs and
expenses and the right to negotiate and consent to
settlement. The failure of Lender to so notify
Borrower shall not relieve Borrower of any liability
they may have under the foregoing indemnification
provisions from any liability which Borrower may
otherwise have to Lender, or any of the Other
Indemnified Parties, except to the extent materially
prejudiced by such delay or failure of notice. In the
event that Borrower shall not be proceeding
diligently to defend such claim, Lender shall have
the right, at its sole option, to employ separate
counsel in any such action and to participate in the
defense thereof, all at Borrower's sole cost and
expense. Borrower shall not be liable for any
settlement of any such action effected without the
12
applicable Person's consent (unless Borrower fails to
defend such claim), but if settled with Borrower's
consent, or if there be a final judgment for the
claimant in any such action, Borrower agrees to
indemnify and save harmless Lender from and against
any loss or liability by reason of such settlement or
judgment.
7.2 NEGATIVE COVENANTS. Without the prior written consent of
Lender, Borrower shall not:
7.2.1 Change its name, its place of business, or, if more
than one, chief executive office or its mailing
address, organizational identification number, if it
has one, change its type of organization,
jurisdiction of organization or other legal structure
or enter into any acquisition, merger, consolidation,
reorganization or recapitalization (except for the
impending purchase of Money Centers of America, Inc.
and, subsequently, of Chex Services, Inc. by
Borrower, with respect to which Lender hereby
consents, provided that such purchases do not,
separately and in the aggregate, have a Material
Adverse Effect);
7.2.2 Create, incur or assume or permit to exist any
liability for borrowed money or lease except for
borrowings from Lender; the purchase money loans or
leases incurred to purchase or Lease Equipment used
in the ordinary course of Borrower's business;
7.2.3 Wind up, liquidate or dissolve its affairs, enter
into any merger, consolidation, reorganization or
recapitalization, reclassify its capital stock or
make any change to its formation documents;
7.2.4 Sell, transfer, assign, lease or otherwise dispose of
all or (except in the ordinary course of business)
any material part of its Assets, nor permit the
transfer of any Collateral or Property or any
interest of Borrower therein;
7.2.5 Factor any of its Accounts, nor grant, create, incur
or permit to exist any mortgage, pledge, a security
interest in or Lien upon, or for any other purpose
assign or transfer, either absolutely or as
collateral security, any of the Collateral except in
favor of Lender;
7.2.6 Request an Account Debtor to withhold or stop any
payment;
7.2.7 Become liable, directly or indirectly, as guarantor,
surety, endorser or otherwise for any obligation of
any other person, firm, or corporation except for
endorsement of commercial paper for deposit or
collection in the ordinary course of business.
7.2.8 Make or furnish Lender any financial statement,
representation, warranty, certificate or other
document, statement or information that will contain
any untrue, incorrect or incomplete statement of
material fact or that will
13
omit to state a material fact necessary to make it
not misleading in light of the circumstances under
which it was furnished;
7.2.9 Directly or indirectly apply any part of the proceeds
of the Loan to the purchasing or carrying of any
"margin stock" within the meaning of Regulation G, T,
X or U of the Board of Governors of the Federal
Reserve Systems, or any regulations, interpretations
or rulings thereunder;
8. DEFAULT.
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT"
hereunder:
8.1.1 Borrower shall fail to pay any installment of
principal or interest or fee payable hereunder or any
Obligation when due;
8.1.2 Borrower shall fail to observe or perform any other
obligation or covenant required to be observed or
performed by it hereunder, under any of the Loan
Documents, or under any other agreement between
Borrower and Lender or the occurrence of an Event of
Default under any other agreement between Borrower
and Lender;
8.1.3 Borrower shall make or furnish to Lender any
representation, warranty, statement or certificate in
connection with this Agreement, the Loan Documents or
the Obligations which is not true and correct when
made or furnished, or shall be false, incorrect or
incomplete when made;
8.1.4 Borrower shall admit its inability to pay its debts
as they mature, or shall make an assignment for the
benefit of its creditors;
8.1.5 Proceedings in bankruptcy, or for reorganization of
Borrower, or for the readjustment of any of its debts
under Bankruptcy Code, as amended, or any part
thereof, or under any other laws, whether state or
federal, for the relief of debtors, now or hereafter
existing, shall be commenced by or against Borrower
and, if commenced against Borrower, shall not be
discharged within ten (10) days of their
commencement;
8.1.6 A receiver or trustee shall be appointed for Borrower
or for any substantial part of its Assets, or any
proceedings shall be instituted for the dissolution
or the full or partial liquidation of Borrower, and
such receiver or trustee shall not be discharged
within ten (10) days of its appointment, or Borrower
shall discontinue business or materially change the
nature of its business;
8.1.7 The entry of any judgment against Borrower which, if
adversely decided, would have a Material Adverse
Effect, which remains unsatisfied for ten
14
(10) days unless being contested by Borrower in good
faith with appropriate proceedings and with execution
stayed;
8.1.8 If, in Lender's judgment, the value of the Collateral
so substantially deteriorates or diminishes that
Lender reasonably deems the Obligations to be
inadequately secured, and Borrower neither reduced
the amount of the Obligations, nor provides
additional Collateral;
8.1.9 The validity or enforceability of this Agreement, the
Note or any of the Loan Documents, shall be contested
by Borrower or Borrower shall deny that it has any or
further liability or obligation hereunder or
therewith;
8.1.10 The occurrence of any Material Adverse Change in the
financial condition of Borrower;
8.1.11 Except for Borrower's impending purchase of Money
Centers of America, Inc. and, subsequently, of Chex
Services, Inc. (with respect to which Lender hereby
consents, provided that such purchases, separately
and in the aggregate, do not have a Material Adverse
Effect), a Change in Control of Borrower.
8.2 ACCELERATION. Immediately and without notice upon the
occurrence and during the continuation of any Event of
Default, all Obligations, whether hereunder or otherwise,
shall immediately become due and payable without further
action of any kind; and, notwithstanding any outstanding
commitment of Lender to Borrower to make additional and
further loans to Borrower, upon the occurrence of any Event of
Default, any such commitments shall immediately become null
and void and of no force and effect whatsoever.
8.3 REMEDIES. After any acceleration due to an Event of Default,
interest on the principal balance of the Obligations
outstanding from time to time shall accrue and is payable at
the Interest Rate plus five percent (5%) per annum from the
date of such acceleration until all such Obligations are
satisfied in full and whether or not any judgment is entered
hereon (the sum of both rates, the "DEFAULT RATE"). In
addition to the rights and remedies given it by this Agreement
and the Loan Documents, Lender shall have all those allowed by
all applicable laws, including, but without limitation, the
Uniform Commercial Code as enacted in any jurisdiction in
which it might apply to any Collateral and Lender may enforce
such rights and pursue such remedies without demand of
performance and without other notice. Without limiting the
generality of the foregoing, Lender may immediately, without
demand of performance and without other notice (except as
specifically required by this Agreement or the Loan Documents)
or demand whatsoever to Borrower, all of which are hereby
expressly waived, and without advertisement, take possession
of the Collateral, exercise the Confession of Judgment
contained in Section 9.20 herein, retain all of Borrower's
Records. After deducting from the Proceeds of sale or other
disposition of the Collateral all
15
expenses (including all expenses for legal services), Lender
shall apply such Proceeds toward the satisfaction of the
Obligations. Any remainder of the Proceeds after satisfaction
in full of the Obligations shall be distributed as required by
applicable Laws. Notice of any sale or other disposition shall
be given to Borrower at least ten (10) days before the time of
any intended public sale or of the time after which any
intended private sale or other disposition of the Collateral
is to be made, which Borrower hereby agrees shall be
reasonable notice of such sale or other disposition. Borrower
agrees to tender, or to cause to be tendered at its expense,
the Collateral at such place or places, as Lender shall
designate. Without limiting the generality of any of the
rights and remedies conferred upon Lender under this
paragraph, Lender may, to the full extent permitted by
applicable Laws: (a) enter upon the premises of Borrower,
exclude therefrom Borrower, and take immediate possession of
any Collateral, either personally or by means of a receiver
appointed by a court of competent jurisdiction; (b) at
Lender's option, use, operate, manage and control the
Collateral in any lawful manner; (c) collect and receive all
rents, income, revenue, earnings, issues and profits
therefrom; and (d) maintain, repair, renovate, alter or remove
the Collateral as Lender may determine in its discretion.
9. MISCELLANEOUS
9.1 CONSTRUCTION. The provisions of this Agreement shall be in
addition to those of any guaranty, surety, hypothecation,
pledge or security agreement, note, or other evidence of
liability held by Lender, and any other agreement between
Borrower and any entity constituent of Borrower as guarantor,
surety or otherwise, and Lender, all of which shall be
construed as complementary to each other. Nothing herein
contained shall prevent Lender from enforcing any or all other
notes, guaranty, surety, hypothecation, pledge or security
agreements in accordance with their respective terms.
9.2 TERM OF AGREEMENT. This Agreement shall terminate after
payment in full of the Note and discharge of all obligations
and undertakings of Borrower to Lender, whether arising
hereunder or otherwise. The termination of this Agreement
shall not affect the rights, liabilities and obligations of
the parties with respect to the Obligations as of the date of
termination, or the Collateral which secures and is to secure
the Obligations, which Collateral shall remain subject to the
liens and security interests granted hereunder until all of
the Obligations are satisfied in full. The failure of Lender
to enforce any of the terms and provisions hereof or failure
to declare default hereunder shall apply only in a particular
instance, and shall not operate as a continuing waiver.
9.3 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP,
except as otherwise stated herein.
9.4 FURTHER ASSURANCE. From time to time, Borrower will execute
and deliver to Lender such additional documents and will
provide such additional information as
16
Lender may reasonably require to carry out the terms of this
Agreement, including those provisions of this Agreement with
respect to the Collateral and Lender's perfection of its
security interest therein, and be Informed of Borrower's
status and affairs.
9.5 ENFORCEMENT AND WAIVER BY LENDER. Lender shall have the right
at all times to enforce the provisions of this Agreement and
the Loan Documents in strict accordance with the terms hereof
and thereof no withstanding any conduct or custom on the part
of Lender in refraining from so doing at any time or times.
The failure of Lender at any time or times to enforce its
rights under such provisions strictly in accordance with the
same shall not be construed as having created a custom in any
way or manner contrary to specific provisions of this
Agreement or as having in any way or manner modified or waived
the same. All rights and remedies of Lender are cumulative and
the occurrence and the exercise of one right or remedy shall
not be deemed a waiver or release of any other right or
remedy.
9.6 NOTICE. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be sent by certified
mail, return receipt requested, postage prepaid, by reputable
overnight carrier, or by fax, as follows, unless such address
is changed by written notice hereunder:
9.7 If to Borrower:
iGames Entertainment, Inc.
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxx, President & CEO
Facsimile No. (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
0000 Xxxxxxxx Xxx
Xxxx Xxxxx, XX 00000
Facsimile No. (000) 000-0000
If to Lender
Mercantile Capital, LP
000 X. Xxxxxxxxx Xxx.
Xxxxx 000, Xxxxxxxxx, XX 00000-0000
Attention: Xxx X. Xxxxx
Facsimile No. (000) 000-0000
9.8 WAIVER AND RELEASE BY BORROWER. To the maximum extent
permitted by applicable Laws, Borrower waives notice after
acceleration in the manner herein
17
provided before exercise by Lender of the remedies of
self-help, set-off, or of other summary procedures permitted
by any applicable laws, or by any agreement with Borrower,
and, except where required hereby or by any applicable laws,
notice of any other action taken by Lender; and releases
Lender and its officers, attorneys, agents and employees from
any and all claims for loss or damages caused by any act or
omission on the part of any of them except willful misconduct.
9.9 APPLICABLE LAW. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth
of Pennsylvania applicable to agreements made, delivered and
to be performed entirely within such Commonwealth without
regard to its conflict of laws principles.
9.10 CONSENT TO JURISDICTION, SERVICE AND VENUE. For the purpose of
any suit, action or proceeding arising out of or relating to
this Agreement or any of the Loan Documents, Guarantor hereby
irrevocably consents and submits to the exclusive jurisdiction
and venue of either the Court of Common Pleas of Xxxxxxxxxx
County, Pennsylvania or the United States District Court for
the Eastern District of Pennsylvania, regardless of the
convenience of either such forum. Borrower further agrees and
consents to accept and acknowledge all service of process
carried out by means of registered mail, return receipt
requested, in connection with any such matter. The provisions
of this Section shall not limit or otherwise affect the right
of Lender to institute and conduct action in any other
appropriate manner, jurisdiction or court.
9.11 ENTIRE UNDERSTANDING. This Agreement, including all of the
Schedules and Exhibits attached hereto, constitutes the entire
understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior and
contemporaneous oral and written communications and agreements
with respect thereto.
9.12 HEADINGS. Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
9.13 SEVERABILITY. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable, such
determination shall not affect the remaining provisions of
this Agreement, all of which shall remain in full force and
effect, and shall be enforceable without regard thereto.
9.14 PARTIES BOUND. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and
be enforceable by, each of the parties hereto, their
respective legal representatives, heirs and, as permitted
hereunder, assigns. Nothing in this Agreement is intended to
or shall be construed to grant or confer upon any person,
other than the parties hereto and their respective successors
and assigns, as permitted, any rights or remedies under or by
reason of this Agreement.
18
9.15 FURTHER ASSURANCES. At any time and from time to time, each of
the parties hereto, at the request of any other party hereto
and without further consideration, will promptly execute and
deliver all such further documents or perform such acts as
such party reasonably may request in order to more fully
consummate the transactions contemplated herein.
9.16 NO THIRD PARTY BENEFICIARY RIGHTS. Except as set forth below,
this Agreement is not intended to and shall not be construed
to give any person or entity other than the parties signatory
hereto any interests or rights (including, without limitation,
any third party beneficiary rights) with respect to or in
connection with any agreement or provision contained herein or
contemplated hereby except as otherwise expressly stated
herein
9.17 ASSIGNABILITY. Borrower understands that Lender may from time
to time transfer and assign its rights under this Agreement,
including but not limited to the Note, in whole or in part, to
one or more assignees. Borrower hereby consents to these
transfers and assignments by Lender to one or more assignees.
Borrower hereby consents that any such assignee may exercise
the rights of the Lender hereunder. Borrower further hereby
consents and acknowledges that any and all defenses, claims or
counterclaims that it may have against the Lender shall be
limited to, and may only be brought against, Lender, its
successors and assigns, and may not extend to any assignee of
this Agreement. Borrower and Lender intend that any and all
direct or indirect assignees of the Lender of the type set
forth above shall be the third party beneficiaries of this
Agreement.
9.18 SEAL. This Agreement is intended to take effect as an
instrument under seal.
9.19 TIME OF THE ESSENCE. Time is of the essence in this Agreement.
9.20 CONFESSION OF JUDGMENT.
THE FOLLOWING SECTION SETS FORTH A POWER OF AUTHORITY FOR ANY ATTORNEY TO
CONFESS JUDGMENT AGAINST BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO
CONFESS JUDGMENT AGAINST BORROWER, THE BORROWER, FOLLOWING CONSULTATION WITH (OR
DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR BORROWER AND WITH KNOWLEDGE OF THE
LEGAL EFFECT HEREOF, HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY, INTELLIGENTLY
AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE BORROWER HAS OR MAY HAVE TO
PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS
AND LAWS OF THE UNITED STATES OF AMERICA, COMMONWEALTH OF PENNSYLVANIA, OR
ELSEWHERE. BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT BY ENTERING INTO THIS
AGREEMENT CONTAINING A CONFESSION OF JUDGMENT CLAUSE THAT BORROWER IS
VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL RIGHTS, INCLUDING
CONSTITUTIONAL RIGHTS, THAT BORROWER HAS OR MAY HAVE TO NOTICE AND A HEARING
BEFORE
19
JUDGMENT CAN BE ENTERED AGAINST BORROWER AND BEFORE THE BORROWER'S ASSETS MAY BE
GARNISHED, LEVIED, EXECUTED UPON AND/OR ATTACHED. IT IS SPECIFICALLY
ACKNOWLEDGED BY BORROWER THAT THE LENDER HAS RELIED ON THIS WARRANT OF ATTORNEY
AND THE RIGHTS WAIVED BY BORROWER HEREIN IN RECEIVING THIS NOTE AND AS AN
INDUCEMENT TO GRANT FINANCIAL ACCOMMODATIONS TO THE BORROWER.
IF A DEFAULT OCCURS UNDER THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, BORROWER
HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD OR THE
PROTHONOTARY OR CLERK OF ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA, OR IN
ANY JURISDICTION WHERE PERMITTED BY LAW OR THE CLERK OF ANY UNITED STATES
DISTRICT COURT, TO APPEAR FOR BORROWER IN ANY AND ALL ACTIONS WHICH MAY BE
BROUGHT HEREUNDER AND ENTER AND CONFESS JUDGMENT AGAINST THE BORROWER IN FAVOR
OF THE LENDER FOR SUCH SUMS AS ARE DUE OR MAY BECOME DUE HEREUNDER OR UNDER ANY
OTHER LOAN DOCUMENTS, TOGETHER WITH COSTS OF SUIT AND ACTUAL COLLECTION COSTS
INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES EQUAL TO 10% OF THE
OBLIGATIONS THEN DUE AND OWING BUT IN NO EVENT LESS THAN $10,000.00, WITH OR
WITHOUT DECLARATION, WITHOUT PRIOR NOTICE, WITHOUT STAY OF EXECUTION AND WITH
RELEASE OF ALL PROCEDURAL ERRORS AND THE RIGHT TO ISSUE EXECUTIONS FORTHWITH. TO
THE EXTENT PERMITTED BY LAW, BORROWER WAIVES THE RIGHT OF INQUISITION ON ANY
REAL ESTATE LEVIED ON, VOLUNTARILY CONDEMNS THE SAME, AUTHORIZES THE
PROTHONOTARY OR CLERK TO ENTER UPON THE WRIT OF EXECUTION THIS VOLUNTARY
CONDEMNATION AND AGREES THAT SUCH REAL ESTATE MAY BE SOLD ON A WRIT OF
EXECUTION; AND ALSO WAIVES ANY RELIEF FROM ANY APPRAISEMENT, STAY OR EXEMPTION
LAW OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED. BORROWER FURTHER WAIVES THE
RIGHT TO ANY NOTICE AND HEARING PRIOR TO THE EXECUTION, LEVY, ATTACHMENT OR
OTHER TYPE OF ENFORCEMENT OF ANY JUDGMENT OBTAINED HEREUNDER, INCLUDING, WITHOUT
LIMITATION, THE RIGHT TO BE NOTIFIED AND HEARD PRIOR TO THE GARNISHMENT, LEVY,
EXECUTION UPON AND ATTACHMENT OF BORROWER'S BANK ACCOUNTS AND OTHER PROPERTY. IF
A COPY OF THIS NOTE SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE
NECESSARY TO FILE THE ORIGINAL THEREOF AS A WARRANT OF ATTORNEY, ANY PRACTICE OR
USAGE TO THE CONTRARY NOTWITHSTANDING. THE AUTHORITY HEREIN GRANTED TO CONFESS
JUDGMENT SHALL NOT BE EXHAUSTED BY ANY SINGLE EXERCISE THEREOF, BUT SHALL
CONTINUE AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE LENDER SHALL
FIND IT NECESSARY AND DESIRABLE AND AT ALL TIMES UNTIL FULL PAYMENT OF ALL
AMOUNTS DUE HEREUNDER AND UNDER ANY OTHER LOAN DOCUMENTS. THE LENDER MAY CONFESS
ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR
20
ANY PART OF THE OBLIGATIONS ARISING HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENTS
TO WHICH BORROWER IS A PARTY, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE
BEEN CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME OBLIGATIONS. IN THE EVENT
THAT ANY JUDGMENT CONFESSED AGAINST THE BORROWER IS STRICKEN OR OPENED UPON
APPLICATION BY OR ON BEHALF OF BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY
REASON, THE LENDER IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND
CONFESS JUDGMENT AGAINST BORROWER FOR ANY PART OR ALL OF THE OBLIGATIONS OWING
UNDER THIS NOTE AND/OR FOR ANY OTHER LIABILITIES, AS HEREIN PROVIDED.
9.21 USURY. If the applicable interest rate from time to time shall
exceed the maximum rate of interest permitted by applicable
law, then the applicable interest rate during such time shall
be reduced so as to equal the maximum rate of interest
permitted by applicable law, and, in the event a payment is
made by Borrower or received by Lender in excess of the
applicable legal limits, the amount of such excess payment
shall be credited to the account of Borrower as a payment of
principal.
9.22 SIGNATURES BY FACSIMILE. Any facsimile signature of any party
hereto shall constitute a legal, valid and binding execution
hereby by such party.
9.23 LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. BOTH OF
THE PARTIES HERETO AGREE THAT IN ANY JUDICIAL, MEDIATION OR
ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN
THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH
THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR
DOCUMENT BETWEEN THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR
RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF,
OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES.
EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM
TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY
ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING,
CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY
ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE.
9.24 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BOTH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE, THE LOAN DOCUMENTS OR
ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH
THIS
21
NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH
RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO
LENDER TO ENTER INTO THIS AGREEMENT. THE PARTIES AGREE THAT
THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR
AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE
PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT
OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED
TO OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY,
THIS NOTE.
(SIGNATURES APPEAR ON THE FOLLOWING PAGE)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
ATTEST: IGAMES ENTERTAINMENT, INC.
By:_______________________ By: _____________________________ (SEAL)
Xxxxxx Xxxxx
Its: President and CEO
MERCANTILE CAPITAL, LP
By: _____________________________
Xxx Xxxxx
Its: CEO
SURETY ACKNOWLEDGEMENT:
Money Centers of America, Inc., under a Corporate Surety Agreement in favor of
Lender effective the 26th day of November, 2003 hereby acknowledges receipt of
this Agreement and consents to its terms and conditions.
By: ____________________________
Xxxxxxxxxxx X. Xxxxxxxxxx
Its: Chairman and CEO
22
Schedule 1
1. "ACCOUNTS", "CHATTEL PAPER", "CONTRACTS", "CONTRACT RIGHTS", "DOCUMENTS",
"EQUIPMENT", "GENERAL INTANGIBLES", "GOODS", "INVENTORY", "INSTRUMENTS",
"LETTER-OF-CREDIT RIGHTS", "DEPOSIT ACCOUNTS", "PAYMENT INTANGIBLES", "HEALTH
CARE INSURANCE RECEIVABLES", "RECORDS", "PROMISSORY NOTES", "SUPPORTING
OBLIGATIONS" and "PROCEEDS" shall have the same respective meanings as are given
to those terms in the Uniform Commercial Code except that the term "ACCOUNTS"
shall also include all amounts due under any lease of real property, a note
receivable, any right to payment under a note receivable, any right to payment
which ahs been earned under an Account, a Contract Right, HealthCare Insurance
Receivable, or credit card receivable, Letter-of-Credit Right, Payment
Intangibles and all rights to payment arising out of or related to any and all
personal property lease agreements, personal property rental agreements and
consignment agreements in which Borrower is the lessor, renter or consignor and
this Agreement shall also be considered an assignment of all such lease, rental
and consignment agreements. "INVENTORY" shall include the property described in
this Schedule 1.
2. "ACCOUNT DEBTOR" shall mean the Person with respect to any Account, and/or
the prospective purchaser with respect to any Contract Right, and/or any party
who enters into or proposes to enter into any contract or other arrangement with
Borrower pursuant to which Borrower is to deliver any personal property or
perform any service.
3. "ASSETS" means all assets that should, in accordance with GAAP, consistently
applied, be classified as assets on a balance sheet of the Borrower.
4. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day
on which banking institutions in the Commonwealth of Pennsylvania are either
authorized or required to be and remain closed to the general public.
5. "CLOSING" means the receipt or waiver by Lender of all the agreements,
documents and instruments required hereunder in form and content acceptable to
Lender, and the satisfaction by Borrower or waiver or extension by Lender of all
or part of the Conditions Precedent set forth herein.
6. "CLOSING DATE", means the date upon which Lender has elected to make
disbursement of the Loan to Borrower. The Closing Date shall be November 26,
2003 unless otherwise extended by Lender.
7. "DEBT" shall mean all of Borrower's Liabilities (determined in accordance
with GAAP).
8. "FINANCIAL STATEMENTS" means the consolidated and consolidating balance
sheet, statements of income and retained earnings and statements of cash flow of
the Borrower and the Guarantor and all other financial statements of Borrower
and the Guarantor, prepared in accordance with GAAP, submitted and to be
submitted to lender hereunder, and in form and content acceptable to Lender.
1
9. "GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally
accepted accounting principles applied on a consistent basis, in accordance with
the Statement of Auditing Standards No. 69.
10. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
11. "INDEBTEDNESS" means, as to Borrower, all Liabilities, indebtedness or
obligations of Borrower to any Person of any kind or nature, now or hereafter
arising, due and payable, or to become due and payable, matured or unmatured,
liquidated or unliquidated, direct, secondary or contingent, fixed or otherwise,
joint or several.
12. "LAWS" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any Governmental Authority or agency thereof or
any court or similar entity established by any thereof.
13. "LIABILITIES" means all Indebtedness that, in accordance with GAAP, should
be classified as liabilities on a balance sheet of Borrower.
14. "LIEN" means:
a) Any interest in real, personal and intangible property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including a security interest, charge, claim, or lien arising from
a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes;
b) To the extent not included under clause (a), any reservation,
exception, encroachment, easement, right-of-way, covenant, condition,
restriction, lease or other title exception or encumbrance affecting property;
and
c) Any contingent or other agreement to provide any of the foregoing.
15. "LOAN DOCUMENTS" shall mean this Loan Agreement, the Note, the Surety
Agreement and/or any deed of trust, mortgage, assignment of lease, note,
contract, security instrument, encumbrance, financing statement, certificate,
assignment, pledge, report, subordination, conditional sale, other title
retention agreement, or other document related to or delivered in connection
with the transactions contemplated by this Agreement.
16. "MATERIAL ADVERSE CHANGE" shall mean any changes that could result in a
Material Adverse Effect.
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17. "MATERIAL ADVERSE EFFECT" shall mean any set of circumstances or events
which
a) Has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement or any
other Loan Document,
b) Is or could reasonably be expected to be material and adverse to the
properties, Assets, condition (financial or otherwise) or business operations,
results of operations of the Borrower or to the prospects of Borrower.
c) Impairs materially or could reasonably be expected to impair
materially the ability of Borrower to duly and punctually pay or perform its
Obligations or
d) Materially impairs or could reasonably be expected to materially
impair the ability of the Lender to enforce its legal remedies pursuant to this
Agreement or any other Loan Document.
18. "OBLIGATIONS" means the obligations of Borrower:
a) To pay the principal of and all interest on all present and future
Loan Amounts and advances made hereunder in accordance with the terms hereof or
otherwise to or for the benefit of Borrower and to satisfy all of its other
Indebtedness, obligations, liabilities, covenants, duties and Debts to Lender
for payment or performance, whether hereunder or otherwise, whether now existing
or hereafter incurred or arising, matured and unmatured, due or to become due,
absolute, direct or contingent, joint or several, primary or secondary,
including any extensions, modifications, renewals thereof and substitutions
therefor, whether or not evidenced by any note, agreement or other instrument or
document, whether arising from an extension of credit, opening of a Letter of
Credit, acceptance, loan, guaranty, indemnification, overdraft or otherwise
including all Indebtedness, liabilities or obligations arising from any obligor
to others which the Lender may have obtained by purchase, negotiations,
discount, assignment or otherwise;
b) To repay to Lender all amounts advanced by Lender hereunder or under
the Loan Documents or otherwise on behalf of (or for the benefit of) any obligor
including, without limitation, advances for principal or interest payments to
prior to subordinate secured parties, mortgages, or lienors, or for taxes,
levies, insurance, rent, repairs to, maintenance or storage of any of the
Collateral; and
c) To pay all of Lender's expenses and costs including without
limitation, all filing, recording and satisfaction fees, or taxes, and the fees
and expenses of its counsel in connection with the preparation, administration,
amendment, modification or enforcement of this Agreement and the documents
required hereunder, the perfection or maintenance of Lender's Liens on and
security interests in the Collateral, or any proceedings brought or threatened
to enforce payment of any of the Obligations referred to in the foregoing.
19. "PERSON" means any individual, sole proprietorship, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, limited liability company, court, Governmental
Authority, governmental or political subdivision or agency thereof or any other
entity.
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20. "PLEDGE AGREEMENT" means an agreement in favor of Lender, in form and
content acceptable to Lender executed by any Person maintaining any property on
behalf of the Borrower, acknowledging Lender's control over and rights in and to
the pledged property.
21. "RECORDS" means correspondence, memoranda, tapes, discs, CD-ROMS, papers,
books and other documents, or transcribed information of any type, whether
expressed in ordinary, computer, machine or electronic language and the
Equipment in which such information is stored or by which it is retrieved.
22. "SURETY" means Money Centers of America, Inc.
23. "UNIFORM COMMERCIAL CODE" OR "UCC" shall mean the Uniform Commercial Code as
in effect in the Commonwealth of Pennsylvania or of any other state in which any
Collateral is located from time to time, (or any successor statute) the laws of
which are required, as a result thereof, to be applied in connection with the
perfection of security interest in the Collateral.
24. OTHER DEFINITIONAL PROVISIONS AND INTERPRETIVE PROVISIONS.
a) Unless otherwise expressly provided herein, (a) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (b) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
b) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Lender merely because of the Lender's
involvement in their preparation.
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SCHEDULE 2
1. 1,000,000 shares of the Borrower's Common Stock and the corresponding demand
and piggy-back registration rights, as more fully set forth in the Pledge
Agreement in the form attached hereto as EXHIBIT C;
2. All rights of Borrower to the payment of the $1,000,000 "Termination Amount,"
as that term is used and more specifically defined in Section 11(e)(ii) of the
Stock Purchase Agreement between Borrower, Chex Services, Inc. and Equitex, Inc.
dated November 3, 2003, as more fully set forth in The Assignment Agreement with
respect to the "Termination Amount," in the form attached hereto as EXHIBIT E;
3. All money and cash of Borrower and all property of Borrower which at any time
Lender shall have in its possession, or which is in transit to it, all amounts
that may be owing form time to time by Lender to Borrower, and any balance or
share belonging in whole or in part, to Borrower, in any deposit, agency, trust,
escrow or other account or accounts with any bank or other financial institution
(excluding all XXX, Xxxxxx and any trust, pension, profit sharing and similar
accounts subject to ERISA), including any certificate of deposit;
4. All Assets, including without limitation, all now owned or hereafter acquired
present and future Accounts (including Ineligible Accounts), Contract Rights,
Contracts, Chattel Paper, accounts receivable, notes receivable, Documents,
machinery, Equipment, Fixtures, furniture, Instruments, Inventory, Investment
Property, Letter-of-Credit Rights, Deposit Accounts, Payment Intangibles, Health
Care Insurance Receivables, Promissory Notes, Supporting Obligations, General
Intangibles, Goods, including any returned ore repossessed Goods and all rights
of stoppage in transit and similar rights, Proceeds, all lease or consignment
agreements in which Borrower is lessor, consignor or consignee and all rights of
payment related to any of the foregoing, and all liens and security instruments,
books and Records evidencing, securing or relating to the foregoing including,
all data processing cards, tapes, tabulating runs, programs software and similar
materials.
5. All guarantees, sureties and endorsements of Borrower's existing and future
Accounts, Chattel Paper, Documents, Instruments, accounts receivable Investment
Property, Letter-of-Credit Rights, Deposit Accounts, Payment Intangibles, Health
Care Insurance Receivables, Promissory Notes, Supporting Obligations, or
Inventory, including any returned or repossessed Goods.
6. All security or collateral held or taken by Borrower to secure the payment
and/or satisfaction of any Account, Chattel Paper, Contract, Contract Rights,
Document, Instrument, account receivable, Investment Property, Letter-of-Credit
Rights, Deposit Accounts, Payment Intangibles, health Care Insurance
Receivables, Promissory Notes, Supporting Obligations, or Inventory, including
any returned or repossessed Goods.
7. All notes, drafts, acceptances, documents or certificates of title, including
bills of lading, warehouse receipts, policies and certificates of insurance
(including without limitation credit insurance), and securities (domestic and
foreign) now or hereafter owned by Borrower or in
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which Borrower has or acquires an interest in connection with its Accounts,
Contracts, Contract Rights, Chattel Paper, Documents, Instruments, accounts
receivable, Investment Property, Letter-of-Credit Rights, Deposit Accounts,
Payments Intangibles, Health Care Insurance Receivables, Promissory Notes,
Supporting Obligations, and Inventory.
8. All other rights of Borrower to the payment of money, including, without
limitation, tax refunds and amounts due form Affiliates, and rights under any
Letter of Credit;
9. All rights in connections with the residual value of any Goods or Inventory
sold, leased, consigned or otherwise disposed of, including but not limited to,
the proceeds of any third party's option to purchase such Inventory;
10. All of Borrower's rights in sale agreements, rental agreements, lease
agreements, bills of lading, documents of title, warehouse receipts, charters,
charter parties, bills of sale and other agreements arising out of or relating
to purchase of goods or Inventory by or to Borrower, or the sale, rental, lease,
consignment or other disposition of the such property or any portion thereof;
11. All patents, processes, trade names, trademarks, copyrights, licenses, now
or hereafter affixed thereto, arising therefrom, used in connection therewith,
or related to the possession, use, manufacture, processing, advertisement, sale,
consignment, lease, other disposition or operation thereof;
12. The Real Estate, the improvements, all materials, supplies, equipment,
apparatus and other items now or hereafter attached to, installed on or in the
Real Estate or any improvements thereon, or which in some fashion are deemed to
be Fixtures to the Real Estate or improvements:
13. Any and all replacements and substitutions of all or any of the property
described in subparagraphs 1. through 10.;
14. All insurance and all rights of payment or other rights of Borrower arising
out of, related to, or in connection with any of the foregoing.
15. All General Intangibles now or hereafter related to or arising from, used in
connection with or related to the possession, use, sale, lease, consignment or
other disposition of any of the foregoing and all insurance and all rights of
payment or other rights of Borrower arising out of, related to, or in connection
with any of the foregoing;
16. All Records pertaining to any of the foregoing.
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Schedule 6.1.9
Indebtedness
iGames Entertainment, Inc. indebtedness is as follows:
$150,000 Secured Loan held at First Southern Bank.
$25,000 Unsecured Loan held at American Express.
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SCHEDULE OF EXHIBITS
A. Note
B. Draw-Down Certificate
C. Stock Pledge and Registration Rights Agreement
D. Corporate Surety Agreement
E. Assignment Agreement
F. Opinion of Counsel
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