AGREEMENT
(Third Round Funding)
THIS AGREEMENT, made and entered into this 30th day of September, 1996, by
and between XXXXXXX X XXXXX, hereinafter referred to as "Lender", and
CASINOVATIONS INCORPORATED, a Washington corporation, (hereinafter referred
to as "Borrower") and XXXXX X. XXXXX, a married person, and XXXXXX X. XXXXX,
a married person (Xxxxx X. Xxxxx and Xxxxxx X Xxxxx hereinafter collectively
referred to as "Grantors"). Lender, Borrower, and Grantors, hereinafter
collectively referred to as "Parties".
WHEREAS, Parties desire to enter into a Third Round Funding contract to lend
money and grant proxies on the terms and conditions provided herein; and
NOW THEREFORE, for valuable consideration the receipt and sufficiency of
which is hereby acknowledged, IT IS AGREED AS FOLLOWS:
1. Lender hereby agrees to lend to Borrower upon request of Borrower and
Borrower hereby borrows from Lender up to the sum of Five Hundred Thousand
and no/100 Dollars ($500,000.00) on terms and conditions contained herein and
on the attached Exhibit "A" Promissory Note Parties acknowledge Lender's
prior Loan to Borrowers of $150,000.00 is paid in full and the Stock Pledge
and Security Agreements between the Parties are fully completed and performed
contracts and Lenders' prior Loan (Exhibit "B") for $300,000.00 has been
fully assigned to Grantors by Lender with full rights and remedies as
provided for in the January 15, 1996 Funding Agreement and Note, except as
otherwise provided for herein.
2. In the event the Exhibit "A" Note has not been fully repaid by Borrower by
December 31, 1997 Borrower grants to Lender, subject to the terms and
conditions of this Agreement and the pre-emptive rights of all Shareholders,
the option to convert Exhibit "A" Loan to Borrower's common voting shares at
$ 82 per share. Said option must be exercised by Lender declaring paid in
full the Exhibit "A' Note and by Lender notifying Borrower in writing of
Lender's intent to exercise the option on or before January 31,1998.
3. Provided that Grantors or their spouses each receive at least $10,000 per
month from borrower (such amounts to be paid first from salaries, second from
accrued salaries and third from interest and/or principal payments on the
Exhibit "B" $300,000 00 Loan due Grantors by Borrower), the Parties agree the
Exhibit "A" Note will be repaid before or concurrent with the $300,000 00
Loan payable by Borrower to Grantor per Exhibit "B" except that the Exhibit
"B", $300,000.00 Loan may be paid as provided above. This provision to pay
Exhibit "B" Note concurrent with or after Exhibit "A" Note shall terminate
January 1, 1998. The Exhibit "A" Note shall be due and payable, without
demand, on December 3 1, 1997 except Note principal and interest due may be
converted to stock in Borrower as provided herein Furthermore, Borrower
agrees to pay 35% of cash proceeds received from equity financing of Borrower
as payment on Note within five (5) days of receipt of cash proceeds by
Borrower.
4. If any legal action or other proceeding is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
from the losing party reasonable attorney's fees and other costs incurred in
connection with that action or proceeding, in addition to any other relief to
which it or they may he entitled.
5 The terms and conditions of this Agreement shall inure to the benefit of,
and shall he binding upon, the Parties hereto, their respective heirs,
personal representatives, successors and assigns.
6. Parties agree to execute any and all documents required by this Agreement
or to effect the intent of this Agreement. Each party has consulted or has
been advised to consult independent legal counsel and has had sufficient time
to do so. Xxxxxxx X Xxxxxxxx, P.C. represents only Borrower.
7. This Agreement may be executed in any number of counterparts and/or by
facsimile (fax) each of which will be deemed to be an original and all of
which together will constitute a single agreement
8. Every provision of this Agreement is subject to and conditioned upon the
pre-emptive rights of all Borrower's shareholders.
9. No Shares have been registered with the Securities and Exchange Commission
under the Securities Act of 1933 as amended, or under the Securities acts of
Washington, Oregon, Nevada, or under any other stale Securities laws. By
acquiring any Shares, the acquiring party represents that such party has
acquired the Shares for investment and that such party will not sell or
otherwise dispose of the Shares without registration or other compliance with
the aforesaid acts and the rules and regulations thereunder.
10 Until $2.4 million in cash or cash equivalents is raised by Borrower,
Grantors agree to grant Lender irrevocable proxies to vote Grantors' common
voting shares in Borrower to the lessor of 1) all Grantors' shares (to
include additional shares received by Grantors), or 2) shares necessary to
give Lender 51 % voting rights in Borrower
11. This agreement is conditioned on Written assignment and delivery of
Exhibit "B" Note by Lender to Borrower and as otherwise provided herein.
12 This agreement is not a waiver of any of Grantor's rights such as provided
in Employment Agreements between Borrower and Xxxxx X. Xxxxx and Xxxxxx X.
Xxxxx.
IN WITNESS WHEREOF, this Agreement is dated as of the day and year first
above mentioned.
XXXXXXX X XXXXX
CASINOVATIONS INCORPORATED
a Washington corporation
By.
XXXXX X. XXXXX
Its President
GRANTORS:
XXXXX X. XXXXX
XXXXX
XXXXXX X. XXXXX
EXHIBIT "A"
PROMISSORY NOTE
Up to $50O,000.00 Spokane, Washington
September 30, 1996 30, 1996
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned, CASINOVATIONS
INCORPORATED, a Washington Corporation ("Borrower"), does hereby promise to
pay to the order of XXXXXXX X. XXXXX ("Lender"), at 000 X.X. Xxxxxxxx, Xxxxx
0000, Xxxxxxxx, Xxxxxx 00000, or at such other place as Lender may from time
to time designate in writing, the principal sum of up to Five Hundred
Thousand and No/l00 Dollars ($500,000.00), together with all interest thereon
and other sums herein referred to. The final principal balance of this Note
shall be determined by adding thereto additional amounts borrowed by Lender,
which amount when added to the initial principal balance shall accrue as
stated below from date borrowed and reduced by principal and interest
payments made thereon.
2. Interest and Payment Terms. The unpaid principal hereof shall bear
interest from the date of this Note until default and after default at the
rate of nine and one-half percent (9.5%) per annum.
This Note shall be due and payable, without demand, on December 31, 1997
except Note principal and interest due may be converted to stock in Borrower
per Agreement of even date. Furthermore, Borrower agrees to pay 35% of cash
proceeds received from equity financing of Borrower as payment on Note within
five (5) days of receipt of cash proceeds by Borrower.
3. Calculation of Interest and Application of Payments. Interest shall be
calculated on a 365 or 366-day year, as applicable, based on actual days
elapsed. Each installment hereunder shall be first applied to the payment of
costs and expenses for which Borrower is liable hereunder, next to the
payment of accrued interest, and lastly to the reduction of principal. This
Note shall continue to bear interest at the Note rate (or at the Default
Rate, as hereinafter defined, if and so long as any default exists hereunder)
until and including the date of collection, and all payments hereunder shall
be calculated by and shall be payable in the lawful money of the United
States which shall be legal tender for public and private debts at the time
of payment.
4. Prepayment. Borrower shall have the right at any time to prepay the whole
or any part of this Note without prepayment premium or fee.
5. Default Rate. If and so long as any default exists under this Note the
interest rate on this Note, and on any judgment obtained for the collection
of this Note, shall be nine and one-half percent 9.5% per annum (the "Default
Rate").
6. Borrower's Right to Cure. Upon an event of default, except as otherwise
provided below, Lender shall not accelerate this debt, make any payments for
which Borrower is primarily liable, or foreclose upon or attach any assets of
Borrower unless it first gives Borrower written notice of such default at
Borrower's address and in the mariner described for notices described herein
below and unless such default is not fully cured within the following
periods:
(a)ten (10) days after such notice is given in the event of any failure to
make a monetary payment;
(b)fifteen (15) days after such notice is given in the event of non monetary
defaults not subject to other provisions of this Section, provided (I) within
five (5) days after such notice is given; Borrower commences its cure and
submits to Lender in writing its plan to cure; and (ii) the cure is
continuously pursued by Borrower with due diligence. If in Lender's sole
judgment such default is not reasonably capable of being cured within fifteen
(15) days, Borrower shall have such additional time as is reasonably
necessary 'to complete the cure, but in no event more than thirty (30) days
after the notice of default is given.
7. Usury. Borrower hereby represents that this loan is for commercial use and
not for personal, family or household purposes. It is the specific intent of
the Borrower and Lender that this Note bear a lawful rate of interest, and if
any court of competent jurisdiction should determine that the rate herein
provided for exceeds that which is statutorily permitted for the type of
transaction evidenced hereby, the interest rate shall be reduced to the
highest rate permitted by applicable law, with any excess interest
theretofore collected being applied against principal or, if such principal
has been fully repaid, returned to Borrower on demand.
8. Construction. This Note shall be governed by and construed in accordance
with the laws of the State of Washington, and all sums referred to herein
shall be calculated by reference to and payable in the lawful currency of the
United States.
9. Addresses for Notices: Etc. All notices, requests, demands, directions and
other communications required under this Note shall be in 'writing (including
telegraphic communication) and mailed by United States mail or facsimile or
delivered by overnight courier or by hand to the applicable party at the
addresses indicated below:
if to Borrower:
Casinovations Incorporated
Suite 107
0000 Xxxx 00xx
Xxxxxxx, Xxxxxxxxxx 00000
if to Lender:
XXXXXXX X. XXXXX
121 X.X. Xxxxxxxx, Suite 1400
Xxxxxxxx, Xxxxxx 00000
or, as to any party, at such other address as shall be designated by such
parry in a written notice to each other party complying as to delivery with
the terms of this Section 9. All such notices, requests, demands, directions
and other communications so mailed or telecopied or delivered shall be
effective when received if sent by mail, when delivered if delivered by
courier or by hand, or when transmitted if sent by facsimile.
10. Counterparts. This Note may be executed in one or more counterparts, all
of which shall together constitute one instrument.
11. Counter Provisions Agreement. This Note is in conjunction with that
certain Agreement of even date by and between Xxxxxxx X. Xxxxx ("Lender") and
Casinovations Incorporated ("Borrower") and Xxxxx X. Xxxxx and Xxxxxx X.
Xxxxx ("Grantors").
BORROWER:
CASINOVATIONS INCORPORATED
By
XXXXX X XXXXX President
EXHIBIT "B"
NOTE
$300,000.00 Spokane, Washington
____________ 1996
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned, Casinovations
INCORPORATED, a Washington corporation ("Borrower"), does hereby promise to
pay to the order of XXXXXXX X. Xxxxx ("Lender"), at 000 X.X. . , Suite 1400,
Xxxxxxxx, Xxxxxx 00000, or at such other place as Lender may from time to
time designate in writing, the principal sum of Three Hundred Thousand and
No/100 Dollars (5300,000.00), together with all interest thereon and other
sums herein referred to.
2. Interest and Pavement Terms. The unpaid principal hereof shall bear
interest from January 15, 1996, until default at the rate of nine and one-
half percent (9.5%) per annum.
This Note shall be due and payable, without demand, on July 15, 1996.
3. Calculation of Interest and Application of Pavements. Interest shall be
calculated on a 365 or 366-day year, as applicable, based on actual days
elapsed. Each installment hereunder shall be first applied to die payment of
costs and expenses for which Borrower is liable hereunder, next to the
payment of accrued interest, and lastly to the reduction of principal. This
Note shall continue to bear interest at the Note rate (or at the Default
Rate, as hereinafter defined, if and so long as any default exists hereunder)
until and including the date of collection, and all payments hereunder shall
be calculated by and shall be payable in the lawful money of the United
States which shall be legal tender for public and private debts at the time
of payment.
4. Prepayment. Borrower shall have die right at any time to prepay the whole
or any part of this Note without prepayment premium or fee.
5. Default Rate. If and so long as any default exists under this Note or any
of the security granted to secure this Note, the interest rate on this Note,
and on any judgment obtained for the collection of this Note, shall be
increased from the date the default is declared to a rate (the "Default
Rate") equal to five percent (5%) per annum in excess of the Note rate.
Borrower acknowledges that die imposition of the Default Rate will result in
the then effective interest rate in this Note being increased from 9.5% per
annum to 14.5% per annum.
6. Costs of Collection. Borrower promises to pay all costs, expenses and
attorneys' fees incurred by Lender in the exercise of any remedy (with or
without litigation), in any proceeding for the collection of the debt, in any
foreclosure of the Partnership Pledge and Security Agreement or the
realization upon any other security securing this Note, in protecting or
sustaining the lien or priority of said Partnership Pledge and Security
Agreement or said other security, or in any litigation or controversy arising
from or connected with this Note or the Partnership Pledge and Security
Agreement, including any bankruptcy, receivership, injunction or other
proceeding, or any appeal from or petition for review of any of the
foregoing, in which Lender prevails. If a judgment is obtained thereon which
includes an award of attorneys' fees, such attorneys' fees, costs and
expenses shall be in such amount as the court shall deem reasonable. All
collection costs, expenses and attorneys' fees are payable on demand, shall
bear interest at the Default Rate from the date of demand to and including
the date of payment to Lender, and shall be fully secured by the Partnership
Pledge and Security Agreement and other security granted in connection with
this Note.
7. Collateral. This Note is secured by a Partnership Pledge and Security
Agreement relating to certain partnership units owned by Xxxxx X. Xxxxx and
Xxxxxx X. Xxxxx ("Grantors") in Borrower. The Partnership Pledge and Security
Agreement, the Funding Agreement among Grantors, Borrower, Lender and Xxxxx
Forte Partnership pursuant to which this Note is executed, and all other
documents executed in connection with this Note are collectively referred to
hereinafter as the Related Documents. -
8. Defaults: Acceleration. Time is of the essence of this Note. The
occurrence of any of the following shall, without notice, demand or
opportunity to cure, constitute an event of default under this Note and each
of the Related Documents:
(i) Failure of Borrower to make any payment required to be paid by Borrower
under this Note or the Related Documents in strict accordance with the terms
thereof;
(ii) Failure of Borrower to perform any other covenant, agreement or other
obligation contained in this Note or the Related Documents;
(iii) Any warranty, representation, or statement made or furnished to Lender
by or on behalf of Borrower proving to be or having been false in any
material respect when made or furnished;
(iv) The occurrence of any event of default under the Related Documents;
(v) If any assignment by Borrower or any partner of Borrower, or any of them,
for the benefit of creditors shall be made; or
(vi) If Borrower or any partners of Borrower shall voluntarily file a
petition under the Federal Bankruptcy Act, as such Act may from time to time
be amended, or under any similar or successor Federal statute relating to
bankruptcy, insolvency arrangements or reorganizations, or under any state
bankruptcy or insolvency act, or file an answer in an involuntary proceeding
admitting insolvency or inability to pay debts, or if Borrower or any
partners of Borrower shall fail to obtain a vacation or stay of involuntary
proceedings brought for the reorganization, dissolution or liquidation of
Borrower or any partners of Borrower, or if Borrower or any partners of
Borrower shall be adjudged a bankrupt, or upon dissolution, business failure
or discontinuance of Borrower or any partners of Borrower as a going business
(except for labor disputes), or if a trustee or receiver shall be appointed
for Borrower or any partners of Borrower, or Borrower's or any partners of
Borrower's property, or if the partnership interests of Borrower shall become
subject to the jurisdiction of a Federal bankruptcy court, or similar state
court:, or if Borrower or any partners of Borrower shall make an assignment
for the benefit of creditors, or if there is an attachment, execution or
other judicial seizure of any portion of Borrower 5 or any partners of
Borrower's assets and such seizure is not discharged within ten (10) days;
then, upon the occurrence of any such event of default, after expiration of
any applicable notice and cure period, the entire principal sum, with accrued
interest thereon due under this Note, shall, at the option of Lender, become
due and payable forthwith, without further notice. No failure to exercise
such option shall be deemed a waiver on the part of Lender of any right
accruing thereafter.
9. Borrower's Right to Cure. Upon an event of default, except as otherwise
provided below, Lender shall not accelerate this debt, make any payments for
which Borrower is primarily liable, or foreclose upon or attach any assets of
Borrower unless it first gives Borrower written notice of such default at
Borrower's address and in the manner described for notices described in
Section 16 below and unless such default is not fully cured within the
following periods;
(i) three (3) days after such notice is given in the event of any failure to
make a monetary payment;
(ii) fifteen (15) days after such notice is given in the event of nonmonetary
defaults not subject to other provisions of this Section. provided (i) within
five (5) days after such notice is given, Borrower commences its cure and
submits to Lender in writing its plan to cure; and (ii) the cure is
continuously pursued by Borrower with due diligence. If in Lender's sole
judgment such default is not reasonably capable of being cured within fifteen
(15) days, Borrower shall have such additional time as is reasonably
necessary to complete the cure, but in no event more than thirty (30) days
after the notice of default is given, or
(iii) sixty (60) days after the filing of any involuntary petition in
bankruptcy against or for the appointment of a receiver for Borrower (except
for petitions filed by Lender), with the dismissal of such petitions by the
court within such period being deemed to cure such default
Notwithstanding the above provisions, the notice and cure periods provided
for in this Section shall not apply in the following circumstances:
(a) any default of the type described in subsection 8(c), if but only if, as
a result of such default, Lender reasonably determines that the value of all
or a
substantial portion of ~e Pledged Collateral (as described in die Partnership
Pledge and Security Agreement), or Lender's security interest in that Pledged
Collateral, is materially impaired; or
~) if Grantors transfer or encumber all or any portion of their interest in
the Pledged Collateral (as defined in the Partnership Pledge and Security
Agreement) without obtaining any required consent of Lender or as expressly
permitted by this Note or the Partnership Pledge and Security Agreement; or
(c) in any circumstance when a delay in effecting a cure is, in the
reasonable judgment of Lender, likely to result in any Pledged Collateral
being damaged, becoming uninsured or rendered unavailable to Lender or the
value thereof being materially and adversely affected, or lender's ability to
recover its outstanding balance from Borrower being materially affected; or
(d) any default of the same type or nature which occurs more than twice; or
(e) any filing of a voluntary petition in bankruptcy by Borrower or any
partner in Borrower, or for the appointment of a receiver or trustee of all
or a portion of Borrower's property; or
(f) any assignment for the benefit of creditors, fraudulent conveyance, or
other plan or action instituted by Borrower or any partner in Borrower in an
attempt to avoid the satisfaction of any lawful indebtedness
The provisions of this Section shall apply to defaults under all documents
executed as security for this Note, and unless expressly stated to the
contrary in such documents any notice or cure period referred to therein
shall be deemed to incorporate said provisions. If any of said documents are
inconsistent with this Section. this section shall be controlling, unless
said other document expressly provides otherwise. Where additional notice or
cure periods are provided in this or any other such documents or are required
by any other contract or by law, said periods and those contained in this
section shall run concurrently. Nothing in this section shall be construed as
extending the term of this Note or the date upon which a default occurs. and
no decision to forego any remedy for any given default shall be deemed a
waiver on the part of Lender of any right relating to any other default. No
failure to give any notice of any default shall constitute a waiver of such
default or any remedy which may be available in connection therewith. This
section shall be strictly construed, and shall not impair the exercise of any
remedy not referred to above immediately upon default, including, without
limitation, the seeking of any mandatory or prohibitive injunction or
restraining order or appointment of receiver.
10. Usury. Borrower hereby represents that this loan is for commercial use
and not for personal. family or household purposes. It is the specific intent
of the Borrower and Lender that this Note bear a lawful rate of interest, and
if any court of competent jurisdiction should determine that the rate herein
provided for exceeds that which is statutorily permitted for the type of
transaction evidenced hereby, the interest rate shall be reduced to the
highest rare permitted by applicable law, with any excess interest
theretofore collected being applied against principal or, if such principal
has been fully repaid, returned to Borrower on demand.
11. Renewals. Borrower, and all others who may become liable for all or any
part of this obligation, consent to any number of renewals or extensions of
the time of payment hereof and to the release of all or any part of the
security for the payment hereof. Any such renewals, extensions or releases
may be made without notice to any of said parties and without affecting their
liability.
12. Multiple Parties. If Borrower is composed of more than one person or
entity. each of such persons shall be jointly and severally liable for the
indebtedness evidenced hereby. A default on the part of any one person or
entity comprising Borrower or any guarantor of this Note shall be deemed a
default on the part of Borrower hereunder. Any married person comprising
Borrower pledges his or her marital community properties in satisfaction
hereof.
13. Waivers. Borrower hereby waives presentment, demand of payment, notice of
dishonor, protest, and notice of nonpayment, and any and all other notices
and demands whatsoever. No covenant, condition, right or remedy in this Note
may be waived
or modified orally, by course of conduct or previous acceptance or otherwise
unless such waiver or modification is specifically agreed to in writing
executed by the Lender.
14. Construction. This Note shall be governed by and construed in accordance
with the laws of the State of Oregon. and all sums referred to herein shall
be calculated by reference to and payable in the lawful currency of the
United States This Note and all Related Documents executed in connection with
this Note have been reviewed and negotiated by Borrower, Lender and any
guarantors at arms' length with the benefit of or opportunity to seek the
assistance of legal counsel and shall not be construed against either parry.
The titles and captions in this Note are inserted for convenience only and in
no way define, limit, extend, or modify the scope or intent of this Note. In
any case where Lender is permitted to act in its "sole discretion, "sole
option" or the like, Lender shall be entitled to exercise unfettered
discretion and may act without application of principles of law, if any,
requiring good faith or fair dealing or reasonableness in exercising Lender's
options.
15. Partial Invalidity. If any section or provision of this Note is declared
invalid or unenforceable by any court of competent jurisdiction, said
determination shall not affect the validity or enforceability of the
remaining terms hereof. No such determination in one jurisdiction shall
affect any provision of this Note to the extent it is otherwise enforceable
under the laws of any other applicable jurisdiction.
16. Addresses for Notices: Etc. All notices, requests. demands, directions
and other communications required under this Note shall be in writing
(including telegraphic communication) and mailed by United States mail or
facsimile or delivered by overnight courier or by hand to the applicable
party at the addresses indicated below:
if to Borrower:
CASINOVATIONS INCORPORATED
0000 X.00xx Xxxxxx, #000
Xxxxxxx, XX 00000
if to Lender:
XXXXXXX X. XXXXX
121 X.X. Xxxxxxxx, Suite 1400
Xxxxxxxx, Xxxxxx 00000
or, as to any parry, at such other address as shall be designated by such
parry in a written notice to each other party complying as to delivery with
the terms of this Section 16. All such notices, requests, demands, directions
and other communications so mailed or telecopied or delivered shall be
effective when received if sent by mail, when delivered if delivered by
courier or by hand, or when transmitted if sent by facsimile.
17. Replacement of Prior Note. This Note is being executed and delivered by
Borrower to evidence Borrower's assumption of the obligations of Sharps
International Limited Partnership under that certain Promissory Note dated as
of January 15, 1996 (the "Sharps Note"). By accepting this Note, Lender
agrees to destroy the Sharps Note.
18. Counterparts. This Note may be executed in one or more counterparts, all
of which shall together constitute one instrument.
BORROWER:
CASINOVATIONS INCORPORATED,
a Washington Corporation
By:
Title
