EXHIBIT 4.1
EXECUTION COPY
STOCK PLEDGE AND REGISTRATION RIGHTS AGREEMENT
THIS STOCK PLEDGE AND REGISTRATION RIGHTS AGREEMENT (this "PLEDGE
AGREEMENT"), dated as of November 26, 2003, is made by iGAMES ENTERTAINMENT,
INC., ("PLEDGOR") and MERCANTILE CAPITAL, LP, as lender (the "LENDER"), under a
certain Loan and Security Agreement of even date herewith (the "LOAN
AGREEMENT"), among Pledgor and the Lender (capitalized terms used herein but not
defined herein have the meanings given to such terms in the Loan Agreement).
SECTION 1. PLEDGE. Pledgor hereby grants to the Lender a security
interest in the following property (collectively, the "PLEDGED SECURITIES"):
(a) the shares of stock described in Schedule 1 hereto and the
instruments representing such shares and all dividends, cash,
instruments, and other property from time to time received, receivable,
or otherwise distributed or distributable in respect of or in exchange
for any or all of such shares of stock; and
(b) all Proceeds of any of the foregoing.
SECTION 2. SECURITY FOR OBLIGATIONS. The security interest granted by
this Pledge Agreement secures the payment and performance of Pledgor's
Obligations under the Loan Agreement and/or any of the other Loan Documents and
the payment of all other liabilities of Pledgor to the Lender, whether absolute
or contingent, matured or unmatured, direct or indirect, similar or dissimilar,
due or to become due arising under the Loan Agreement, under any of the Loan
Documents, or in connection with any of the transactions described in the Loan
Agreement.
SECTION 3. DELIVERY OF PLEDGED SECURITIES.
(a) All instruments representing or evidencing the Pledged
Securities, including but not limited to a stock certificate for the
requisite number of shares in the name of Lender, shall be delivered to
and held by the Lender pursuant hereto and shall be duly endorsed to
the Lender or shall be otherwise in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory
to the Lender. Upon the occurrence of an Event of Default, the Lender
shall have the right, at any time in its discretion without further
notice to Pledgor, to transfer to or to register in the name of the
Lender or its nominees, any or all of the Pledged Securities. In
addition, upon the occurrence and during the continuance of an Event of
Default, the Lender shall have the right at any time to exchange
instruments representing or evidencing Pledged Securities for
instruments of smaller or larger denominations.
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(b) This Pledge Agreement shall terminate and all certificates
or instruments representing or evidencing the Pledged Securities shall
be delivered to Pledgor upon payment in full of all Obligations.
SECTION 4. FURTHER ASSURANCES. Pledgor agrees that at any time and from
time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action that
the Lender may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce the rights and remedies hereunder with respect to any of
the Pledged Securities.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents
and warrants that Pledgor has good title to the shares now constituting the
Pledged Securities, and will have good title to any property subsequently
constituting the Pledged Securities pursuant to the terms hereof, in each case
free and clear of any liens, claims, security interests, and other encumbrances
and free and clear of any warrants, options, and other rights except for the
lien of the Lender.
SECTION 6. CONSENSUAL RIGHTS; PAYMENTS.
(a) So long as no Event of Default shall have occurred and be
continuing: Pledgor shall be entitled to receive and retain free and
clear of the security interest of the Lender hereunder, any and all of
such dividends, interest and other distributions to be paid to Pledgor
in respect of the Pledged Securities or any part thereof, except that
(1) any and all dividends, interest or other distributions paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Securities shall also constitute
Collateral as part of the Pledged Securities and shall be promptly
delivered to the Lender in conformity with Section 3 hereof, and (2)
any and all dividends, interest, or other distributions paid or payable
in cash in respect of any Pledged Securities in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and cash
paid, payable or otherwise distributed in redemption of, or in exchange
for, any Pledged Securities received by Pledgor shall be so received in
trust for the benefit of the Lender, be segregated from the other
property or funds of Pledgor, and be forthwith delivered to the Lender
in the same form as so received (with any necessary endorsement) to be
held as Collateral as part of the Pledged Securities.
(b) Upon the occurrence and during the continuance of an Event
of Default: (1) all rights of Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to and to
receive the principal, interest and other payments which it would
otherwise be authorized to receive and retain shall cease and all such
rights shall thereupon become vested in the Lender which shall
thereupon have the sole right to
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exercise such consensual rights and to receive such principal,
interest, and other payments; and (2) all principal, interest and other
payments which are received by Pledgor contrary to the provisions of
this Section 6(b) shall be received in trust for the benefit of the
Lender, shall be segregated from other funds of Pledgor, and shall be
forthwith paid over to the Lender in the same form as so received (with
any necessary endorsement) to be held as cash Collateral as part of the
Pledged Securities and applied as provided in Section 11(b) hereof.
(c) TRANSFERS AND LIENS. Except as permitted by the Loan
Agreement or hereunder, Pledgor will not (1) sell or otherwise dispose
of, or grant any option with respect to, any of the Pledged Securities,
or (2) create or permit to exist any lien, security interest, or other
charge or encumbrance upon or with respect to any of the Pledged
Securities.
(d) LENDER APPOINTED ATTORNEY-IN-FACT. Pledgor hereby appoints
the Lender as Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in the name of Pledgor or otherwise, and
from time to time in the Lender's discretion to take any action and to
execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement. In its capacity as
such attorney-in-fact, the Lender shall not be liable for any acts or
omissions, nor for any error of judgment or mistake of fact or law, but
only for bad faith, willful misconduct or gross negligence. This power,
being coupled with an interest, is irrevocable until all Obligations
have been fully satisfied. The Lender shall have the right, for and in
the name, place and stead of the Pledgor and acting as its
attorney-in-fact if necessary, following and during the continuance of
an Event of Default, to execute endorsements, assignments and other
instruments of conveyance or transfer with respect to all or any of the
Pledged Securities whenever any such execution is required or permitted
hereunder.
(e) LENDER MAY PERFORM. If Pledgor fails to perform any
agreement contained herein, the Lender may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the
Lender incurred in connection therewith shall be payable by Pledgor
under Section 12 hereof.
(f) LENDER'S DUTIES. The powers conferred on the Lender
hereunder are solely to protect its interests in the Pledged Securities
and shall not impose any duty to exercise any such powers. Except for
the safe custody of any Pledged Securities in its possession and the
accounting for moneys actually received by it hereunder, the Lender
shall not have any duty as to any Pledged Securities or as to the
taking of any necessary steps to preserve rights against any parties or
any other rights pertaining to any Pledged Securities. Without limiting
the generality of the foregoing, the Lender shall not have any
responsibility for ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating
to any Pledged Securities, whether or not the Lender has or is deemed
to have knowledge of such matters.
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SECTION 7. EVENTS OF DEFAULT; REMEDIES. If an Event of Default shall
occur and be continuing, then:
(a) The Lender may exercise in respect of the Pledged
Securities, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the UCC and other applicable laws and
agreements and also may, without notice except as specified below sell
the Pledged Securities, or any part thereof in one or more parcels at
public or private sale, at any exchange, brokers, board or at any of
the Lender's offices or elsewhere, for cash, on credit, or for future
delivery, and upon such other terms as the Lender may deem commercially
reasonable. Pledgor agrees that at least fifteen days' notice to
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall be given and shall
constitute reasonable notification. The Lender shall not be obligated
to make any sale of Pledged Securities regardless of notice of sale
having been given. The Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All cash proceeds received by the Lender in respect of any
collection from, or other realization upon all or any part of the
Pledged Securities in the discretion of the Lender, may be held by the
Lender as Collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Lender pursuant to Section
12 hereof) in whole or in part by the Lender against, all or any part
of the Obligations in such order as the Lender shall elect. Any surplus
of such cash or cash proceeds held by the Lender and remaining after
payment in full of all the Obligations shall be paid over to Pledgor or
to whosoever may be lawfully entitled to receive such surplus.
SECTION 8. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION. If an Event of Default shall occur
and be continuing, then the Pledgor shall, within fifteen (15) days of
receipt of written demand from the Lender, use its best efforts to
effect as soon as practicable, the registration under the Securities
Xxx 0000 (the "SECURITIES ACT") of the Pledged Securities. If the
Lender intends to distribute the Pledged Securities covered by the
foregoing demand by means of an underwriting, it shall so advise the
Pledgor as a part of the demand. The underwriter will be selected by
the Lender and shall be reasonably acceptable to the Pledgor. The
Pledgor and the Lender shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting.
(b) PIGGY-BACK REGISTRATION. If an Event of Default shall
occur and be continuing, then, if the Pledgor proposes to register
(including for this purpose a registration effected by the Pledgor for
other stockholders) any of its stock under the
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Securities Act in connection with the public offering of such
securities, the Pledgor shall, at such time, promptly give the Lender
written notice of such registration. Upon the written request of the
Lender given within twenty (20) days after mailing of such notice by
the Pledgor, the Pledgor shall cause to be registered under the
Securities Act all of the Pledged Securities that the Lender has
requested to be registered.
(c) OBLIGATIONS OF THE PLEDGOR. Whenever required under this
Pledge Agreement to effect the registration of any Pledged Securities,
the Pledgor shall, as expeditiously as reasonably possible:
(1) Prepare and file with the SEC a registration
statement with respect to such Pledged Securities and use its
best efforts to cause such registration statement to become
effective, and, upon the request of the Lender, keep such
registration statement effective for up to one hundred twenty
(120) days.
(2) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
such registration statement for up to one hundred twenty (120)
days.
(3) Furnish to the Lender such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to
facilitate the disposition of Pledged Securities.
(4) Use its best efforts to register and qualify the
Pledged Securities covered by such registration statement
under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Lender;
provided, however, that the Pledgor shall not for any such
purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in
any such jurisdiction, unless the Pledgor is already subject
to service in such jurisdiction.
(5) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form with the managing
underwriter of such offering, and the Lender shall also enter
into and perform its obligations under such an agreement.
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(6) Notify the Lender at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing,
such obligation to continue until the earlier of the sale of
all Pledged Securities registered pursuant to the registration
statement of which such prospectus forms a part OR withdrawal
of such registration statement.
(7) Cause all such Pledged Securities registered
pursuant to this Pledge Agreement to be listed on each
securities exchange on which similar securities issued by the
Pledgor are then listed.
(8) Provide a transfer agent and registrar for all
Pledged Securities registered pursuant hereunder, in each case
not later than the effective date of such registration.
(9) Use its best efforts to furnish, at the request
of Lender, on the date that such Pledged Securities are
delivered to the underwriters for sale in connection with a
registration, if such securities are being sold through
underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration
statement with respect to such securities becomes effective,
(i) an opinion, dated such date, of the counsel representing
the Pledgor for the purposes of such registration, in form and
substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters,
and (ii) a letter dated such date, from the independent
certified public accountants of the Pledgor, in form and
substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the
Lender.
(d) EXPENSES OF REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications, including (without
limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Lender,
and the reasonable fees and disbursements shall be borne by the
Pledgor.
(e) INDEMNIFICATION FOR REGISTRATION AND SALE OF PLEDGED
SECURITIES. In the event any Pledged Securities are included in a
registration statement: to the extent permitted by law, the Pledgor
will indemnify and hold harmless the Lender, any "underwriter" (as
defined in the Securities Act) for the Lender and each person, if any,
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who controls the Lender or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION"): (1)
any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained in such registration statement
or any amendments or supplements thereto, (2) the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading,
(3) the omission or alleged omission to state in any preliminary
prospectus or final prospectus a material fact necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, or (4) any violation or alleged violation by the
Pledgor of the Securities Act, the Exchange Act, any state securities
law or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any state securities law; and the Pledgor will pay to
the Lender, underwriter or controlling person, as incurred, any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in
this subsection shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Pledgor (which consent shall not be
unreasonably withheld), nor shall the Pledgor be liable to the Lender,
underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by Lender, underwriter or controlling person.
(f) ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Pledgor to register the Pledged Securities may be assigned (but only
with all related obligations) by the Lender to a transferee or
assignee.
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SECTION 9. PRIVATE SALE. Pledgor acknowledges and recognizes that the
Lender may be unable to effect a public sale of all or a part of the Pledged
Securities and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire the Pledged Securities for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor acknowledges
that any such private sales may be at prices and on terms less favorable to the
Lender than those of public sales, and agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the Lender
has no obligation to delay sale of any Pledged Securities to permit the Pledgor
to register them for public sale under the Securities Act, even if the Pledgor
is willing to do so.
SECTION 10. GENERAL INDEMNITY AND EXPENSES. Pledgor agrees to indemnify
the Lender from and against any and all claims, losses and liabilities growing
out of or resulting from this Pledge Agreement (including, without limitation,
enforcement of this Pledge Agreement), whether or not arising in connection with
the registration and sale of the Pledged Securities, except claims, losses, or
liabilities resulting from the Lender's bad faith, willful misconduct or gross
negligence. After and during the continuance of an Event of Default, Pledgor
will upon demand pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and expenses of counsel and of any
experts and agents, which the Lender may incur in connection with (a) the
administration and enforcement of this Agreement, (b) the custody or
preservation of, collection from, or other realization upon, any of the Pledged
Securities, (c) the exercise or enforcement of any of the rights of the Lender
hereunder, or (d) the failure by Pledgor to perform or observe any of the
provisions hereof.
SECTION 11. AMENDMENTS, INDULGENCES. No amendment or waiver of any
provision of this Pledge Agreement nor consent to any departure by Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Lender, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No failure
or delay on the part of the Lender in the exercise of any right, power, or
remedy under this Pledge Agreement shall constitute a waiver thereof, or prevent
the exercise thereof in that or any other instance.
SECTION 12. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing and shall be delivered in accordance
with the Loan Agreement.
SECTION 13. CONTINUING SECURITY INTEREST. This Pledge Agreement creates
a continuing security interest in the Pledged Securities and shall (a) be
binding upon Pledgor, and its successors and assigns and (b) inure to the
benefit of the Lender and its respective successors, transferees and assigns.
The execution and delivery of this Pledge Agreement shall in no manner impair or
affect any other security (by endorsement or otherwise) for the payment or
performance of the Obligations and no security taken hereafter as security for
payment or performance of the Obligations shall impair in any manner or affect
this Pledge Agreement or
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the security interest granted hereby, all such present and future additional
security to be considered as cumulative security. Any of the Pledged Securities
may be released from this Pledge Agreement without altering, varying, or
diminishing in any way this Pledge Agreement or the security interest granted
hereby as to the Pledged Securities not expressly released, and this Pledge
Agreement and such security interest shall continue in full force and effect as
to all of the Pledged Securities not expressly released.
SECTION 14. GOVERNING LAW, CONSENT TO JURISDICTION, SERVICE AND VENUE.
This Pledge 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. For the purpose of any suit, action or
proceeding arising out of or relating to this Pledge Agreement, Pledgor 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. Pledgor 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
SECTION 15. SEVERABILITV. If any provision of this Pledge Agreement
shall be determined to be invalid, illegal or unenforceable, such determination
shall not affect the remaining provisions of this Pledge Agreement, all of which
shall remain in full force and effect, and shall be enforceable without regard
thereto.
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IN WITNESS WHEREOF, Pledgor and Lender, intending to be legally bound, have
executed this Pledge Agreement, or caused this Pledge Agreement to be executed
by duly authorized representatives, as of the date first above written.
IGAMES ENTERTAINMENT, INC.
By: _______________________________
Name: Xxxxxx Xxxxx
Title: President and CEO
MERCANTILE CAPITAL, LP
By: _______________________________
Name: Xxx Xxxxx
Title: CEO
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SCHEDULE 1
Description of Pledged Securities
1. 1,000,000 shares of common stock, $0.001 par value, of iGAMES
ENTERTAINMENT, INC. a Nevada corporation, represented by certificate no.
__________.
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