NOTE PURCHASE AGREEMENT
Exhibit
10.4
NOTE
PURCHASE
AGREEMENT
This
Note
Purchase Agreement (the
“Agreement”)
is
entered into as of March 24, 2008 by and among Pokertek, Inc., a North Carolina
corporation (the “Company”),
and
the persons (such persons collectively, the “Purchasers”) listed on the attached
Annex
I
(the
“Schedule
of Purchasers”).
The
investment amounts of the Purchasers are referenced on the Schedule of
Purchasers.
WHEREAS,
the Company desires to enter into this Agreement with the Purchasers to sell
and
issue secured promissory notes in substantially the form attached hereto as
Exhibit
A
(the
“Notes”);
and
WHEREAS,
the Notes are to be secured by a Security Agreement substantially in the form
of
Exhibit
B
attached
hereto (the “Security
Agreement”);
and
WHEREAS,
the Purchasers desire to enter into this Agreement to acquire the Notes on
the
terms and conditions set forth herein;
NOW,
THEREFORE, in consideration of the mutual promises, covenants and conditions
set
forth in this Agreement, the parties to this Agreement mutually agree as
follows.
ARTICLE
I
PURCHASE,
SALE AND TERMS
Section
1.01. The
Notes.
The
Company has authorized the issuance and sale to the Purchasers of the Company’s
13% Notes in the aggregate principal amount of up to $3,000,000. The Purchasers
have agreed to purchase said Notes in the initial amount of $2,000,000. The
Purchasers are under no obligation to purchase and the Company is under no
obligation to issue additional Notes in excess of the initial $2,000,000 amount.
In the event the Company agrees to issue and the Purchasers agree to purchase
an
additional $1,000,000 in Notes at a subsequent date (the “Additional Notes”),
such Additional Notes will be subject to this Agreement, and the Additional
Notes shall be allocated in the same percentage amount as the initial $2,000,000
in Notes unless the Purchasers otherwise agree.
Section
1.02. Purchase
and Sale of Notes.
On the
date hereof, the Company agrees to issue and sell to the Purchasers, and the
Purchasers agree to purchase Notes in the aggregate principal amount set forth
opposite their name on the Schedule of Purchasers (the “Purchase
Amount”).
Each
Purchaser shall tender the Purchase Amount to the Company by wire transfer
and
execute and deliver a copy of this Agreement and the Security Agreement. The
Company shall execute and deliver to each Purchaser a copy of this Agreement,
the Security Agreement and the applicable Note.
Section
1.03. Registration
of Notes.
The
Company shall maintain a register of the Notes to record therein the name and
address of the registered holder thereof, instructions for notices and payments
of principal and interest, and other information for transfers or exchanges
of
the Notes. No transfer of a Note shall be valid unless made by the registered
holder and the registered holder shall be deemed the owner thereof for purposes
of this Agreement, including payment of principal and interest therein.
Notwithstanding anything in this Section 1.03, the transfer of any Note or
shall
be subject to the restrictions on transfer set forth therein.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE PURCHASERS
Each
Purchaser, severally and not jointly, hereby represents and warrants to the
Company, as of the date hereof and as of the date of the closing of its
respective purchase of Notes as follows:
Section
2.01. Investment
Representations.
It is
its present intention to acquire the Notes which it may receive pursuant to
this
Agreement, for its own account and that each such Note is being and will be
acquired by it for the purpose of investment and not with a view to distribution
or resale. The Purchaser warrants and agrees that he will not sell or transfer
any such Note without registration under applicable federal and state securities
laws, or the availability of appropriate exemptions therefrom. The Purchaser
agrees that each such Note will bear a restrictive legend or legends stating
that the same has not been registered under applicable federal and state
securities laws and referring to restrictions on its transferability and
sale.
Section
2.02. Knowledge,
Experience and Due Diligence.
The
Purchaser acknowledges that he is a sophisticated investor and has such
knowledge and experience in financial and business matters that he is capable
of
evaluating the merits and risks of this investment and has substantial
experience in making investment decisions of the type contemplated hereby.
The
Purchaser can bear the economic risks of this investment, can afford a complete
loss of his investment and has no present need for liquidity in conjunction
with
the purchase of the Notes. During the course of this transaction and prior
to
the sale of the Notes hereunder, the Purchaser acknowledges that he has had
the
opportunity to ask questions of, and has received satisfactory answers from,
management of the Company concerning the terms and conditions of this investment
and the business and operations of the Company.
Section
2.03. Accredited
Investor.
The
Purchaser meets the criteria of an “accredited investor” as defined in Rule 501
of Regulation D adopted under the Securities Act of 1933, as
amended.
Section
2.04. Residency.
In
state of such Purchaser’s residency is correctly set forth on Annex I attached
hereto.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to each Purchaser as of the closing of each
sale
of Securities as follows:
Section
3.01. Organization
of the Company.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of North Carolina and has full corporate power
and
authority to conduct its business as currently conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the property owned or leased by it or the nature
of
the business conducted by it makes such qualification necessary, except to
the
extent that the failure to be so qualified or in good standing would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, operations, conditions (financial or otherwise),
properties, assets or results of operations of the Company (a “Material
Adverse Effect”).
Section
3.02. Corporate
Action.
The
Company has all corporate right, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and stockholders necessary
for
the (i) authorization, execution, delivery and performance of this Agreement
and
the Security Agreement by the Company; and (ii) authorization, sale, issuance
and delivery of the Securities contemplated hereby and the performance of the
Company's obligations hereunder has been taken. This Agreement and the Security
Agreement have been duly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The Notes, when issued and fully paid
for
in accordance with the terms of this Agreement, will be validly issued.
Section
3.03 Insurance.
The
Company maintains fire, casualty and liability, directors and officers and
other
insurance policies considered customary in the Company’s business and such
policies are in full force and effect.
Section
3.04. No
Conflict; Governmental Consents.
(a) Except
as
would not reasonably be expected to have a Material Adverse Effect, the
execution and delivery by the Company of this Agreement and the Security
Agreement and the consummation of the transactions contemplated hereby and
thereby will not result in the violation of any law, statute, rule, regulation,
order, writ, injunction, judgment or decree of any court or governmental
authority to or by which the Company is bound, or of any provision of the
articles of incorporation or by-laws of the Company, and will not conflict
with,
or result in a breach or violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of its properties or assets is subject, nor result in the
creation or imposition of any lien upon any of the properties or assets of
the
Company.
(b) No
consent, approval, authorization or other order of any governmental authority
or
other third party is required to be obtained by the Company in connection with
the authorization, execution and delivery of this Agreement or the Security
Agreement or with the authorization, issue and sale of the Notes, except as
has
been obtained or such filings as may be required to be made with the United
States Securities and Exchange Commission and with any state or foreign blue
sky
or securities regulatory authority relating to an exemption from registration
thereunder.
Section
3.05. Title
to Properties and Assets.
The
Company has good and marketable title to its properties and assets (except
properties and assets held under leases) in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (a) the lien of
current taxes not yet due and payable, and (b) possible minor liens and
encumbrances that do not in any case, either individually or in the aggregate,
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, or that have not arisen other than in
the
ordinary course of business. The property and assets held under any lease by
the
Company are held by each under leases that remain in force, and there exists
no
default or other occurrence or condition that could result in a default or
termination thereunder.
Section
3.06. Taxes.
The
Company has accurately prepared and timely filed all United States income tax
returns and all state and municipal tax returns that are required to be filed
by
it, if any, and has paid or made provision for the payment of all taxes, if
any,
that have become due pursuant to such returns. No deficiency assessment or
proposed adjustment of the Company’s United States income tax or state or
municipal taxes is pending and there is no liability as of the date hereof
for
any tax for which there is not an adequate reserve reflected in the Financial
Statements. All federal, state, local and foreign franchise, sales, use,
occupancy, excise, withholding and other taxes and assessments (including
interest and penalties) payable by, or due from, the Company have been fully
paid or adequately disclosed and fully provided for in the books and financial
statements of the Company. No examination of any tax return of the Company
is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any tax return of the Company.
Section
3.8. Disclosure.
No
representation or warranty made by the Company in this Agreement, nor any
financial statement, certificate, schedule, exhibit or other document prepared
and/or furnished by the Company or its representatives pursuant hereto or
pursuant to the Purchaser’s due diligence requests contains any untrue statement
of material fact, or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were furnished.
ARTICLE
IV
GENERAL
PROVISIONS
Section
4.01. Miscellaneous.
No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder or under the Notes shall operate as a waiver thereof. The
waiver by any party of a breach of any provision of this Agreement, the Security
Agreement, or the Notes shall not operate or be construed as a waiver of any
subsequent breach. This Agreement, the Security Agreement, and the Notes
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all proposals and agreements, whether written or
oral, and all other communications between the parties relating to the subject
matter of this Agreement, the Security Agreement, and the Notes. The invalidity,
illegality or unenforceability of any provision of this Agreement, the Security
Agreement, or the Notes shall in no way affect the validity, legality or
enforceability of any other provision. This Agreement, the Security Agreement,
and the Notes shall be binding upon and inure to the benefit of the Company
and
the Purchasers and their respective successors and assigns. All notices
hereunder shall be in writing and shall be deemed given when sent by certified
or registered mail, postage prepaid, return receipt requested, at the addresses
set forth in the Company’s records. This Agreement, the Security Agreement, and
the Notes shall be governed by and construed in accordance with the internal
laws of the State of North Carolina, without regard to conflict of laws
provisions. This Agreement may be amended by the written agreement of the
Company and the holders of Notes representing at least three-fourths (3/4)
note
holders.
[Signature
Pages Follow.]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as an
instrument under seal and as of the date first above written.
|
March
24, 2008
|
By:
|
/s/
Xxxxx
Xxxxxxxx
|
|
Name:
|
Xxxxx
Xxxxxxxx
|
|
|
Title:
|
Chief
Executive Officer
|
|
| PURCHASERS: | ||
/s/ Xxxx Xxxxxx
Xxxx
Xxxxxx
/s/
Gehrig
White
Gehrig
White
/s/
Xxxxx
Xxxxxxxx
Xxxxx
Xxxxxxxx
/s/
Xxxxxx
Xxxxx
Xxxxxx
Xxxxx
{Signature
Page to Note Purchase Agreement}
Annex
I
Schedule
of Purchasers
|
Name
and Address of Purchaser
|
Initial
Commitment Amount
|
|
Xxxx
Xxxxxx
|
$500,000
|
|
Gehrig
White
|
$500,000
|
|
Xxxxx
Xxxxxxxx
|
$500,000
|
|
Xxx
Xxxxx
|
$500,000
|
|
TOTAL
|
$2,000,000
|
Exhibit
A
[FORM
OF NOTE]
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT
AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE. THIS NOTE MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE
SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS.
THIS
NOTE
HAS BEEN ISSUED UNDER AND IS SUBJECT TO THE TERMS AND PROVISIONS OF THE NOTE
PURCHASE AGREEMENT DATED AS OF MARCH [XX], 2008, AMONG POKERTEK, INC. (THE
“COMPANY”)
AND
THE INVESTORS PARTY THERETO, AS IT MAY BE AMENDED, SUPPLEMENTED AND/OR RESTATED
FROM TIME TO TIME.
|
$2,000,000.00
|
March
[xx], 2008
|
1. Principal.
POKERTEK INC., a North Carolina corporation (the “Company”),
for
value received, hereby promises to pay to the order of Xxxx Xxxxxx, Xxxxxx
Xxxxx, Xxxxx Xxxxxxxx, and Xxxxxx Xxxxx (collectively, and in equal proportion,
“Holder”)
in
lawful money of the United States of America at the address for notices to
Holder set forth below, the principal amount of 2,000,000, together with
interest as set forth below.
2. Interest
and Maturity.
The
Company promises to pay interest on the unpaid principal amount from the
date
hereof until such principal amount is paid in full at the rate of thirteen
percent (13%) per annum. Interest from the date hereof shall be computed
on the
basis of a 365-day year, compounded annually. Unless prepaid earlier as set
forth below, all unpaid principal and unpaid accrued interest on this Note
shall
be due and payable on March 21, 2010 (the “Maturity
Date”).
This
Note is being issued pursuant to, and is subject to the terms of, that certain
Note Purchase Agreement among the Company, the Holder and the Purchasers
listed
on Exhibit
A
thereto,
dated as of March 21, 2008 (the “Purchase
Agreement”),
and
that certain Security Agreement between the Company and the Secured Parties
(as
defined therein) dated March 21, 2008 (the “Security
Agreement”).
In
the event of any conflict between this Note and the Purchase Agreement, the
terms of this Note will control. The assets of the Company defined as
“Collateral” in the Security Agreement shall serve as security for repayment of
this Note, as further described in the Security Agreement. Terms not otherwise
defined herein shall have the meanings given to them in the Purchase
Agreement.
3. Prepayment. All
unpaid principal and unpaid accrued interest of this Note may be prepaid,
in
whole or in part, at any time in the discretion of the Company without any
prepayment penalty or charge. Any prepayment of this Note will be credited
first
against accrued interest, then principal. Upon payment in full of the amount
of
all principal and interest payable hereunder, this Note shall be surrendered
to
the Company for cancellation.
4. Notices.
Any
notice, other communication or payment required or permitted hereunder shall
be
given in writing and shall be deemed effectively given as provided in the
Purchase Agreement.
6. Defaults
and Remedies.
6.1 Events
of Default.
An
“Event
of Default”
shall
occur hereunder if:
(i) the
Company shall default in the payment of any interest or principal on this
Note,
when and as the same shall become due and payable (and such default is not
cured
within 15 business days); or
(ii) the
Company shall default in the due observance or performance of any covenant,
representation, warranty, condition or agreement on the part of the Company
to
be observed or performed pursuant to the terms hereof or pursuant to the
terms
of the Purchase Agreement or Security Agreement, and such default is not
remedied or waived within the time periods permitted therein, or if no cure
period is provided therein, within thirty (30) days after the Company receives
notice of such default; or
(iii) any
representation, warranty, certification or statement made by or on behalf
of the
Company in the Purchase Agreement or Security Agreement shall have been
incorrect in any material respect when made; or
(iv) if
the
Company shall commence any proceeding in bankruptcy or for dissolution,
liquidation, winding-up, composition or other relief under state or federal
bankruptcy laws; or
(v) if
such
proceedings are commenced against the Company, or a receiver or trustee is
appointed for the Company or a substantial part of its property, and such
proceeding or appointment is not dismissed or discharged within sixty (60)
days
after its commencement.
6.2 Acceleration.
If an
Event of Default occurs under Section 6.1(iv) or (v), then the outstanding
principal of and accrued and unpaid interest on this Note shall automatically
become immediately due and payable, without presentment, demand, protest
or
notice of any kind, all of which are expressly waived. If any other Event
of
Default occurs and is continuing, the Holder, by written notice to the Company,
may declare the principal of and interest on this Note to be due and payable
immediately. Upon any such declaration of acceleration, the Maturity Date
shall
be deemed to be the date of such acceleration and such principal and interest
shall become immediately due and payable and the Holder shall be entitled
to
exercise all of its rights and remedies hereunder and under the Purchase
Agreement and Security Agreement whether at law or in equity. The failure
of the
Holder to declare the Note due and payable shall not be a waiver of its right
to
do so, and the Holder shall retain the right to declare the Note due and
payable
unless it shall execute a written waiver.
7. Waiver
of Notice of Presentment.
The
Company hereby waives presentment, demand for performance, notice of
non-performance, protest, notice of protest and notice of dishonor. No delay
on
the part of Holder in exercising any right hereunder shall operate as a waiver
of such right or any other right.
8. Non-Waiver.
The
failure of the Holder to enforce or exercise any right or remedy provided
in
this Note or at law or in equity upon any default or breach shall not be
construed as waiving the rights to enforce or exercise such or any other
right
or remedy at any later date. No exercise of the rights and powers granted
in or
held pursuant to this Note by the Holder, and no delays or omissions in the
exercise of such rights and powers shall be held to exhaust the same or be
construed as a waiver thereof, and every such right and power may be exercised
at any time and from time to time.
9. Governing
Law.
This
Note is being delivered in and shall be construed in accordance with the
laws of
the State of North Carolina, without regard to the conflicts of laws or choice
of law provisions thereof.
10. Amendment.
Any
term of this Note may be amended only with the written consent of the Company
and at least three-quarters of the holders of the Notes (3/4). Any amendment
or
waiver effected in accordance with this Section 10 shall be binding upon
each
holder of Notes, each future holder of all such Notes and the Company, and
the
Company shall promptly give notice to all holders of outstanding Notes of
any
amendment or waiver effected in accordance with this Section 10.
[THE
NEXT
PAGE IS THE SIGNATURE PAGE]
This
Note
is hereby issued by the Company as of the year and date first above
written.
| |
|
|
| By: | /s/ | |
|
Name: Xxxxx Xxxxxxxx |
||
| Title: Chief Executive Officer | ||
Xxxx Xxxxxx
Gehrig White
Xxxxx Xxxxxxxx
Xxxxxx Xxxxx
Exhibit
B
SECURITY
AGREEMENT
This
SECURITY AGREEMENT (this “Agreement”)
is
dated as of March 24, 2008 and entered into between Pokertek, Inc., a North
Carolina corporation (“Grantor”),
and
the entities set forth on the Schedule of Secured Parties attached hereto
(each
a “Secured
Party”
and
collectively, the “Secured
Parties”).
PRELIMINARY
STATEMENTS
A. Pursuant
to the terms of that certain Note Purchase Agreement between Grantor and
the
Secured Parties (the “Purchase
Agreement”;
the
terms defined therein and not otherwise defined herein being used herein
as
therein defined), the Secured Parties have agreed initially to lend an aggregate
of $2,000,000 to the Grantor, and may, but are not obligated to, loan an
additional $1,000,000 to the Grantor (collectively, the “Loan”).
B. The
Loan
is to be evidenced by Secured Promissory Notes, executed by Grantor and made
payable to each of the respective Secured Parties (the “Notes”
and,
together with this Agreement, the Purchase Agreement, and each of the other
agreements and documents contemplated herein and therein, the “Loan
Documents”).
C.
As a
condition precedent to the Closing under the Purchase Agreement, the Secured
Parties have required Grantor to grant, and Grantor has agreed to grant,
the
Secured Parties a continuing security interest (subject to Permitted Liens
(as
hereinafter defined)) in and to the Collateral (as hereinafter defined) of
Grantor to secure Grantor’s obligations to the Secured Parties under the
Purchase Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and in order to induce the Secured
Parties to enter into the Loan Documents, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Grantor hereby agrees with the Secured Parties as follows.
SECTION
1. Grant
of
Security.
Grantor
hereby assigns to the Secured Parties, and hereby grants to the Secured Parties,
a security interest in, all of Grantor’s right, title and interest in and to all
of those items set forth on Exhibit
A
attached
hereto and incorporated herein by reference (collectively, the “Collateral”),
in
each case whether now or hereafter existing, whether tangible or intangible,
or
in which Grantor now has or hereafter acquires an interest and wherever the
same
may be located.
SECTION
2. Security
for Obligations.
This
Agreement is given to secure the due and punctual payment of the principal
of
and interest on the Notes (along with any penalties and/or adjustments to
the
amounts owed under the Notes thereunder) and the due and punctual performance
of
all other obligations under the Loan Documents, together with any extensions
and
renewals of the foregoing obligations (collectively the “Secured
Obligations”).
SECTION
3. Grantor
Remains Liable.
Anything
contained herein to the contrary notwithstanding, (a) Grantor shall remain
liable under any contracts and agreements included in the Collateral, to
the
extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed,
(b) the exercise by the Secured Parties of any of their rights hereunder
shall not release Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) except in the
roles as officers and/or directors of the Grantor, the Secured Parties shall
not
have any obligation or liability under any contracts, licenses, and agreements
included in the Collateral by reason of this Agreement, nor shall the Secured
Parties be obligated to perform any of the obligations or duties of Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION
4. Representations
and Warranties; Covenants.
Grantor
represents and warrants and covenants as follows:
(a) Except
for the security interest created by this Agreement and the Permitted Liens
(as
defined below), Grantor owns the Collateral free and clear of any encumbrance.
No effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any filing or recording
office.
For
purposes of this Agreement, “Permitted
Liens”
means
(i) any liens arising under this Security Agreement or any other Loan Documents;
(ii) liens for taxes or other governmental charges not at the time delinquent
or
thereafter payable without penalty or being contested in good faith; (iii)
materialmen’s, mechanics’, warehousemen’s, carriers’, repairmen’s, artisans’,
landlords’ or other similar liens arising in the ordinary course of business or
by operation of law; or (iv) easements, reservations, rights-of-law,
restrictions, minor defects or irregularities in title and other similar
charges
or encumbrances affecting real property not having a material adverse effect
on
Grantor’s business or assets.
(b) No
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body, or any person is required for
the
grant by Grantor of the security interest in the Collateral granted hereby
or
for the execution, delivery or performance of the Agreement by
Grantor.
(c) Grantor
will not grant further security interests or allow the imposition of further
liens on the Collateral other than encumbrances in favor of the Secured Parties
and the Permitted Liens without the consent of the Secured Parties holding
a
majority of the Secured Obligations. The previous sentence notwithstanding,
the
Secured Parties agree to release the security interest set forth in this
Agreement in the event that the Grantor determines that any having the
Collateral available as a security interest is desirable for purposes of
any
subsequent financing activities.
SECTION
5. Further
Assurances.
(a) Grantor
agrees that from time to time, Grantor will promptly execute and deliver
all
further instruments and documents, and take all further action, that may
be
necessary or desirable, or that the Secured Parties may reasonably request,
in
order to perfect and protect any security interest granted or purported to
be
granted hereby or to enable the Secured Parties to exercise and enforce their
rights and remedies hereunder with respect to any Collateral.
SECTION
6. Certain
Covenants of Grantor.
Grantor
shall:
(a) not
use
or permit any Collateral to be used unlawfully or in material violation of
any
provision of this Agreement or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral;
(b) notify
the Secured Parties of any change in Grantor’s name, identity or corporate
structure within 30 days of such change;
(c) pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
services, materials and supplies) against, the Collateral, except to the
extent
the validity thereof is being contested in good faith; and
(d) maintain
sole physical custody of the only original of each lease or other item of
chattel paper constituting Collateral.
SECTION
7. Events
of Default.Any
one
or more of the following shall constitute a default or event of default by
Grantor hereunder (each, an “Event of Default”):
(a) failure
of Grantor to observe or perform any material obligation, covenant, condition
or
term of this Agreement, the Notes, or any of the other Loan Documents;
or
(b) any
warranty or representation made or furnished to the Secured Parties by or
on
behalf of Grantor in connection with this Agreement or any of the other Loan
Documents proves to have been false or misleading in any material respect
when
made or furnished; or
(c) any
Event
of Default under the Notes.
SECTION
8. Attorney-in-Fact.
Each
Secured Party hereby appoints _______________ as collateral agent (the
“Collateral Agent”) for the purposes of perfecting the Secured Parties’ security
interests hereunder and for the purposes set forth in this Section 8. Grantor
does hereby irrevocably make, constitute and appoint the Collateral Agent
on
behalf of all of the Secured Parties as its true and lawful attorney-in-fact
(the “Power
of Attorney”),
with
full power and authority to do any and all acts necessary or proper to carry
out
the intent of this Agreement including, without limitation, the right, power
and
authority (a) to enforce all rights of Grantor under and pursuant to any
agreements with respect to the Collateral, all for the sole benefit of the
Secured Parties; (b) to enter into and perform such arrangements as may be
necessary in order to carry out the terms, covenants and conditions of this
Agreement that are required to be observed or performed by Grantor; (c) to
execute such other and further mortgages, pledges and assignments of the
Collateral as the Secured Parties may reasonably require for the purpose
of
perfecting, protecting or maintaining the security interest granted to the
Secured Parties by this Agreement; and (d) to do any and all other things
necessary or proper to carry out the intent of this Agreement, and Grantor
hereby ratifies and confirms that the party reflected above as such
attorney-in-fact or its substitutes does by virtue of this Power of Attorney,
which power is coupled with an interest and is irrevocable, until Grantor
has
paid in full the Secured Obligations and this Agreement is terminated. The
person or entity charged with the foregoing Power of Attorney may be changed
by
the written approval of a majority in interest of the Secured Parties and,
upon
written notice thereof to Grantor, Grantor shall be bound thereby; provided,
however,
that
any such newly appointed Power of Attorney shall be selected from the Secured
Parties party to this Security Agreement.
SECTION
9. Remedies.
If
the
occurrence of any Event of Default shall have occurred and be continuing,
any of
the Secured Parties acting on its own behalf, or the Collateral Agent acting
on
behalf of all of the Secured Parties may exercise in respect of the Collateral,
in addition to all other rights and remedies provided for herein or otherwise
available to them, all the rights and remedies of a secured party on default
under the Uniform Commercial Code in the State of North Carolina (the
“UCC”),
and
also may (a) require Grantor to, and Grantor hereby agrees that it will at
its expense and upon request of any of the Secured Parties or upon the request
of the Collateral Agent forthwith, assemble all or part of the Collateral
as
directed by the Secured Parties and make it available to the Secured Parties
at
a place to be designated by the Secured Parties that is reasonably convenient
to
both parties; (b) peacefully enter onto the property where any Collateral
is located and take possession thereof with or without judicial process;
(c) prior to the disposition of the Collateral, store, process, repair or
recondition the Collateral or otherwise prepare the Collateral for disposition
in any manner to the extent the Secured Parties deem appropriate;
(d) peacefully take possession of any Grantor’s premises or place
custodians in exclusive control thereof, remain on such premises and use
the
same and any of Grantor’s equipment for the purpose of completing any work in
process, taking any actions described in the preceding clause (c) and collecting
any Secured Obligation; and (e) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public
or
private sale, at any of the Secured Parties’ offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or
prices
and upon such other terms as the Secured Parties may deem commercially
reasonable. The Secured Parties may be the purchaser of any or all of the
Collateral at any such sale and the Secured Parties shall be entitled, for
the
purpose of bidding and making settlement or payment of the purchase price
for
all or any portion of the Collateral sold at any such public sale, to use
and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by the Secured Parties at such sale. Grantor
agrees that, to the extent notice of sale shall be required by law, at least
ten
(10) days’ notice to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Secured Parties shall not be obligated to make any sale
of
Collateral regardless of notice of sale having been given. The Secured Parties
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.
It
is
understood that each Secured Party shall have the right to pursue any or
all of
the remedies available hereunder without approval of any other Secured Party,
subject to the application of proceeds set forth in Section 10 below.
SECTION
10. Application
of Proceeds.
All
proceeds received by the Secured Parties in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall be
applied in the following order of priority:
FIRST: to
the
payment of all reasonable costs and expenses of such sale, collection or
other
realization, including reasonable compensation to the agents and counsel
for the
Secured Parties, and all other expenses, liabilities and advances made or
incurred by the Secured Parties in connection therewith;
SECOND: to
the
payment of all other Secured Obligations on a pro rata basis to each Secured
Party based upon the amount of the Notes owned by each such Secured Party
and,
as to obligations arising under the Loan Documents, as provided in such
agreements; and
THIRD: any
balance to Grantor.
SECTION
11. Continuing
Security Interest; Transfer of Obligations;
Termination.
This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until terminated in accordance
with the provisions of this Section or as the parties may otherwise agree,
(b) be binding upon Grantor and its respective successors and assigns, and
(c) inure, together with the rights and remedies of the Secured Parties
hereunder, to the benefit of the Secured Parties and their permitted successors,
transferees and assigns. Grantor acknowledges and agrees that the number
and
amount of the Secured Obligations may fluctuate from time to time hereafter.
Grantor expressly agrees that this Agreement and the security interest in
the
Collateral conveyed to the Secured Parties hereunder shall remain valid and
in
full force and effect, notwithstanding any such fluctuations and future
payments. This Agreement shall terminate, and each Secured Party shall release
its security interest in the Collateral (and shall execute any and all documents
reasonably requested in connection with such release, which obligation shall
survive such termination), upon the earlier of (a) payment in full by or
on
behalf of Grantor of all of the then outstanding Notes issued pursuant to
the
Purchase Agreement, or (b) mutual agreement.
SECTION
12. Amendments;
Etc.
No
amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by Grantor therefrom, shall in
any
event be effective unless the same shall be in writing and signed by the
holders
of Notes representing a majority of the outstanding principal amount of the
Loan
and, in the case of any such amendment or modification, by Grantor. Any such
waiver or consent shall be effective only in the specific instance and for
the
specific purpose for which it was given. Notwithstanding anything to the
contrary in this Section 12, the Company shall be entitled to include additional
Secured Parties as parties to this Agreement pursuant to the addition of
additional purchasers of Notes pursuant to the Purchase Agreement, and to
treat
such parties as “Secured Parties” hereunder, by amending the Schedule of Secured
Parties attached hereto and providing such amended Schedule of Secured Parties
to the other parties to this Agreement.
SECTION
13. Notices.
Any
notice or other communication herein required or permitted to be given shall
be
in writing and shall be deemed to have been given to the address provided
in and
as determined pursuant to the Purchase Agreement.
SECTION
14. Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any of the Secured Parties in the exercise
of
any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right
or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.
SECTION
15. Severability.
In
case
any provision in or obligation under this Agreement shall be invalid, illegal
or
unenforceable in any jurisdiction, the validity, legality and enforceability
of
the remaining provisions or obligations, or of such provision or obligation
in
any other jurisdiction, shall not in any way be affected or impaired
thereby.
SECTION
16. Headings.
Section
and subsection headings in this Agreement are included herein for convenience
of
reference only and shall not constitute a part of this Agreement for any
other
purpose or be given any substantive effect.
SECTION
17. Governing
Law; Terms; Rules of Construction.
THIS
AGREEMENT, THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, AND ALL MATTERS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF
NORTH CAROLINA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE
EXTENT THAT THE UCC PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NORTH CAROLINA.
SECTION
18. Counterparts.
This
Agreement may be executed in one or more counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF,
Grantor
and the Secured Parties have caused this Security Agreement to be duly executed
and delivered by their respective officers thereunto duly authorized as of
the
date first written above.
|
Grantor:
|
||
| |
|
|
| March 24, 2008 | By: | /s/ Xxxxx Xxxxxxxx |
|
Name: Xxxxx Xxxxxxxx |
||
| Title: Chief Executive Officer | ||
Secured
Parties:
/s/
Xxxx
Xxxxxx
Xxxx Xxxxxx
/s/
Xxxxxx Xxxxx
Xxxxxx Xxxxx
/s/
Xxxxx
Xxxxxxxx
Xxxxx Xxxxxxxx
/s/
Xxxxxx Xxxxx
Xxxxxx Xxxxx
{Signature
Page to Security Agreement}
SCHEDULE
OF SECURED PARTIES
|
Xxxx
Xxxxxx
Xxx
Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
|
|
Gehrig
White
[Address]
|
|
Xxxxx
Xxxxxxxx
[Address]
|
|
Xxx
Xxxxx
[Address]
|
EXHIBIT
A
DESCRIPTION
OF COLLATERAL
The
Collateral consists of all of Grantor’s right, title and interest in and to the
following assets:
The
155
PokerPro tables “in the field” owned by PokerTek as of December 31, 2007, and
reasonably related peripherals thereto.
